SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRAVEL SERVICES INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
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TRAVEL SERVICES INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 14, 1999
To the Shareholders of Travel Services International, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders (the
"Annual Meeting") of Travel Services International, Inc., a Florida corporation
(the "Company"), will be held at 9:00 a.m., local time, on Tuesday, September
14, 1999, at the Delray Beach Marriott, 10 North Ocean Boulevard, Delray Beach,
Florida 33483, for the following purposes:
(1) To elect three members to the Company's Board of Directors to
hold office until the Company's 2002 Annual Meeting or until their
successors are duly elected and qualified;
(2) To consider and vote upon a proposal to approve the Company's
Amended and Restated 1999 Long-Term Incentive Plan;
(3) To consider and vote upon a proposal to approve the Company's
Amended and Restated Non-employee Directors' Stock Plan; and
(4) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on August 13,
1999 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
SUZANNE B. BELL
Secretary
Delray Beach, Florida
August 18, 1999
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE ENCOURAGED TO ATTEND THE
MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON AT THE MEETING.
<PAGE>
1999 ANNUAL MEETING OF SHAREHOLDERS
OF
TRAVEL SERVICES INTERNATIONAL, INC.
PROXY STATEMENT
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Travel Services International, Inc., a Florida
corporation (the "Company"), of proxies from the holders of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), for use at the 1999 Annual
Meeting of Shareholders of the Company to be held at 9:00 a.m., local time, on
Tuesday, September 14, 1999, at the Delray Beach Marriott, 10 North Ocean
Boulevard, Delray Beach, Florida 33483, and at any adjournments or postponements
thereof (the "Annual Meeting"), pursuant to the enclosed Notice of Annual
Meeting.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is August 18, 1999. Shareholders
should review the information in this Proxy Statement together with the
Company's Annual Report to Shareholders for the year ended December 31, 1998
which accompanies this Proxy Statement. The Company's principal executive
offices are located at 220 Congress Park Drive, Delray Beach, Florida 33445, and
its telephone number is (561) 266-0860.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in doing so.
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PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) The election of three members to the Company's Board of
Directors to hold office until the Company's 2002 Annual Meeting or
until their successors are duly elected and qualified;
(2) To consider and vote upon a proposal to approve the Company's
Amended and Restated 1999 Long-Term Incentive Plan;
(3) To consider and vote upon a proposal to approve the Company's
Amended and Restated Non-employee Directors' Stock Plan; and
(4) The transaction of such other business as may properly come
before the Annual Meeting and any adjournments or postponements thereof.
If you sign and return the enclosed proxy, the proxies named therein
will have authority to vote your shares of Common Stock at the Annual Meeting as
indicated therein. Unless contrary instructions are indicated on the enclosed
proxy, all shares of Common Stock represented by valid proxies received pursuant
to this solicitation (and which have not been revoked in accordance with the
procedures set forth herein) will be voted (a) for the election of the
respective nominees for director named below, and (b) by the proxies in their
discretion upon any other proposals that may properly come before the meeting.
In the event a shareholder specifies a different choice by means of the enclosed
proxy, such shares will be voted in accordance with the specification(s) so
made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on August 13, 1999
as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. The outstanding
securities of the Company consist of Restricted Voting Common Stock entitled to
four-tenths of a vote on each matter submitted to shareholders for approval at
the Annual Meeting ("Restricted Common Stock"), and non-restricted Common Stock
entitled to one vote on each matter submitted to shareholders for approval at
the Annual Meeting ("non-restricted Common Stock" and, together with the
Restricted Common Stock, the "Common Stock"). As of the Record Date, there were
13,958,086 shares of Common Stock issued and outstanding, all of which are
entitled to be voted at the Annual Meeting, and of which 1,684,463 shares were
shares of Restricted Voting Common Stock and 12,273,623 shares were
non-restricted Common Stock. Shareholders do not have the right to cumulate
their votes for directors.
The attendance, in person or by proxy, of shareholders holding of record
a number of shares entitling them to exercise a majority of the voting power of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. If a quorom is present at the Annual Meeting,
the nominees for directors shall be elected by a plurality of the votes of the
shares present in person or by proxy at the Annual Meeting and entitled to vote
on the election of directors. The affirmative vote the holders of a majority of
the shares of Common Stock represented in person or by proxy at the Annual
Meeting will be required for approval of any other matter that may be submitted
to a
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vote of the shareholders. If less than a majority of the outstanding shares
entitled to vote are represented at the Annual Meeting, a majority of the shares
so represented may adjourn the Annual Meeting to another date, time or place.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter.
Shares represented by proxies reflecting abstentions will be considered
as shares present and entitled to vote for purposes of determining the presence
of a quorum and will be counted as votes cast for purposes of determining the
outcome of any matter submitted to the shareholders for a vote, but will not be
counted as votes "for" or "against" any matter subject to the abstention. The
inspectors of election will treat shares referred to as "broker or nominee
non-votes" (shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote and the
broker or nominee does not have discretionary voting power on a particular
matter) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the outcome of
any matter as to which the proxies reflect broker or nominee non-votes, shares
represented by such proxies will be treated as not present and not entitled to
vote on that subject matter and therefore will not be considered by the
inspectors of election when counting votes cast on the matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters). Accordingly, abstentions and broker non-votes will
not have the same effect as a vote against the election of any director.
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Company's principal executive offices, 220 Congress Park Drive,
Delray Beach, Florida 33445, for a period of ten days prior to the Annual
Meeting and at the Annual Meeting itself for examination by any shareholder.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of August 10, 1999
by: (i) each person known to beneficially own more than 5% of the outstanding
shares of Common Stock; (ii) each of the Company's directors; (iii) the
Company's Chief Executive Officer and four of the Company's other most highly
compensated executive officers whose total annualized salary and bonus in 1998
was $100,000 or more (the Chief Executive Officer and such other executive
officers of the Company are sometimes referred to herein as the "Named Executive
Officers"); and (iv) all executive officers and directors as a group. All
persons listed have sole voting and investment power with respect to their
shares, unless otherwise indicated. The Company is not aware of any beneficial
owner of more than five percent of the outstanding shares of Common Stock of the
Company other than as set forth in the following table.
NAME AND ADDRESS PERCENTAGE
OF BENEFICIAL OWNER (1) SHARES OWNED
- ------------------------------------- --------- -----------
Joseph V. Vittoria (2) 470,000 3.3%
John B. Balson 26,000 *
Jill M. Vales (2) 75,333 *
Maryann Bastnagel (8) 1,000 *
Suzanne B. Bell (2)(3) 52,000 *
John C. DeLano (2) 35,000 *
Robert G. Falcone (4) 174,349 1.2%
Wayne Heller (5) 693,334 5.0%
Imad Khalidi 390,000 2.8%
John W. Przywara 209,445 1.5%
Elan J. Blutinger (6)(7) 308,274 2.2%
D. Fraser Bullock (6) 161,171 1.2%
Tommaso Zanzotto (6) 16,944 *
J&W Heller Corp. 693,334 5.0%
Dresdner RCM Capital Management (9) 1,171,400 8.4%
PAR Capital Management (10) 700,000 5.0%
Cumberland Associates LLC (11) 725,000 5.2%
All Directors and Executive 2,661,850 18.7%
Officers as a Group
(14 persons) (12)
____________________
* Less than 1.0%
(1) Unless indicated otherwise, the address of each beneficial owner is,
c/o Travel Services International, Inc., 220 Congress Park Drive,
Delray Beach, Florida 33445.
(2) Includes the following options that are currently exercisable or
exercisable within the next 60 days: 75,000 shares for Mr. Vittoria;
32,500 shares for Ms. Vales; 22,500 shares for Ms. Bell; and 25,000
shares for Mr. DeLano.
(3) Includes 5,000 shares owned by Ms. Bell's spouse. Ms. Bell disclaims
beneficial ownership of such shares.
(4) Includes 100,000 shares owned by Judith A. Falcone, Mr. Falcone's
spouse.
(5) These shares are held of record by J&W Heller Corp., a corporation of
which Mr. Heller is a 50% shareholder. The remaining 50% of the
ownership of J&W Heller Corp. is held by Judy Heller, Mr. Heller's
spouse.
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(6) Includes 15,000 shares which may be acquired upon the exercise of
exercisable options. Also includes the following shares which are held
in a deferred stock account for the benefit of these directors,
pursuant to the Directors' Plan: 1,581 shares for Mr. Blutinger; 1,343
shares for Mr. Bullock; and 1,702 shares for Mr. Zanzotto.
(7) Excludes 14,130 shares held by trusts for the benefit of Mr.
Blutinger's minor children. Mr. Blutinger disclaims ownership of such
shares.
(8) The address of the shareholder is 3 Bloomingdale Court, Rockville, MD
20852.
(9) The address of the shareholder is 4 Embaracadero Center, Suite 3000,
San Francisco, California 94111. Information is based solely on the
Company's review of the Schedule 13G dated December 31, 1998, as filed
by the shareholder with the Securities and Exchange Commission.
(10) The address of the shareholder is One Financial Center, Suite 1600,
Boston, Massachusetts 02111. Information is based solely on the
Company's review of the Schedule 13G dated March 8, 1999, as filed by
the shareholder with the Securities and Exchange Commission.
(11) The address of the shareholder is 1114 Avenue of the Americas, New
York, New York 10036. Information is based solely in the Company's
review of the Schedule 13G dated March 25, 1999, as filed by the
shareholder with the Securities and Exchange Commission.
(12) Includes 250,000 shares that may be acquired upon the exercise of
options.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS; NOMINEES
The number of directors constituting the Board of Directors is
determined by the Board as provided in the Company's Bylaws. The size of the
Board is currently fixed at nine directors, of which there are currently nine
incumbent directors. The Board of Directors of the Company is divided into three
classes with each class of directors serving staggered three year terms or until
their successors are elected and qualified. At each annual meeting of
shareholders, directors will be elected by the holders of the Common Stock to
succeed those directors whose terms are expiring.
The current classes of the Board of Directors and their terms of office
are as follows:
CLASS DIRECTORS TERM EXPIRES IN:
- ----- --------- ----------------
I Elan J. Blutinger 2001
I D. Fraser Bullock 2001
I Tommaso Zanzotto 2001
II Imad Khalidi 1999
II John W. Przywara 1999
II Joseph V. Vittoria 1999
III John B. Balson 2000
III Robert G. Falcone 2000
III Wayne Heller 2000
Messrs. Imad Khalidi, John W. Przywara and Joseph V. Vittoria have been
nominated by the Company to be reelected as Class II directors at the Annual
Meeting, to hold office until the 2002 annual meeting, and proxies will be voted
for Messrs. Khalidi, Przywara and Vittoria absent contrary instructions. Each of
the nominees for election as a director of the Company is a current member of
the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees
will refuse or be unable to accept election; however, in the event that a
nominee is unwilling or unable to accept election or if any other unforeseen
contingencies should arise, each proxy that does not specifically direct
otherwise will be voted for the remaining nominees, if any, and for such other
person(s) as may be designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES AS DIRECTORS OF THE COMPANY.
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DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth information concerning the Company's
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph V. Vittoria (1) (3)..... 63 Chairman and Chief Executive Officer, Director
John B. Balson................. 57 President and Chief Operating Officer, Director
Jill M. Vales.................. 41 Senior Vice President and Chief Financial Officer
Suzanne B. Bell................ 32 Senior Vice President, General Counsel and
Secretary
John C. DeLano................. 39 Senior Vice President, Operations
Melville W. Robinson........... 43 Vice President, Corporate Development
George Del Pino................ 36 Vice President, Corporate Controller
Robert G. Falcone.............. 57 President-Cruises Inc., Director
Wayne Heller (3)............... 42 President-Cruises Only, Director
Imad Khalidi................... 47 President-Auto Europe, Director
John W. Przywara............... 47 President-D-FW Tours, Director
Elan J. Blutinger (1)(2)....... 43 Director
D. Fraser Bullock (1) (3)...... 43 Director
Tommaso Zanzotto (1) (2)....... 57 Director
Leonard A. Potter.............. 37 Advisory Director
</TABLE>
_________________________________
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Acquisition Committee
JOSEPH V. VITTORIA became Chairman and Chief Executive Officer and a
director of the Company in July 1997. From September 1987 to February 1997, Mr.
Vittoria was the Chairman and Chief Executive Officer of Avis, Inc., a
multinational auto rental company where he was employed for over 26 years. Mr.
Vittoria was responsible for the purchase of Avis, Inc. by creating one of
the world's largest Employee Stock Ownership Plans in 1987. He is a founding
member of the World Travel and Tourism Council, a global organization of the
chief executive officers of companies engaged in all sectors of the travel and
tourism industry. He has been named travel executive of the year several times
by various travel media, including BUSINESS TRAVEL NEWS, TRAVEL WEEKLY, TRAVEL
AGENT TOUR AND TRAVEL NEWS-NORTH AMERICA. Mr. Vittoria serves on the Board of
Directors of Transmedia Europe, Transmedia Asia, Carey International, Inc.,
ResortQuest International, Inc., CD Radio, Inc. and various non-profit
associations.
JOHN B. BALSON became the President and Chief Operating Officer and a
director of the Company in April 1999. Mr. Balson has held senior executive
positions in major marketing services, technology and consumer products
companies. Most recently, from 1995 to 1998, Mr. Balson was the Chief Marketing
and Development Officer of Data Broadcasting, Inc. and, from 1991 to 1999, the
President and Chief Executive Officer of Sandhill Group. Prior to that, he was
President and Chief Operating Officer of two large worldwide advertising
agencies, Kenyon & Eckhardt and D'Arcy, McManus and Masius. Mr. Balson also
served as President of the Forshner Group, Cantel and Lears, Inc.
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JILL M. VALES became Senior Vice President and Chief Financial Officer of
the Company in July 1997. From 1996 to 1997, Ms. Vales served as the Chief
Operating Officer of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., a law firm.
From 1990 until 1996, Ms. Vales held various positions at Certified Vacations,
formerly an affiliate of Alamo Rent-A-Car, including Senior Vice President of
Operations and Chief Financial Officer (1994-1996), Vice President of Finance
and Operations (1992-1994) and Senior Director of Finance and Operations and
Controller (1990-1992). From 1979 to 1990, Ms. Vales held various positions at
KPMG Peat Marwick, specializing in auditing travel companies. Ms. Vales is a
certified public accountant.
SUZANNE B. BELL became Senior Vice President, General Counsel and Secretary
of the Company in July 1997. From July 1996 to July 1997, Ms. Bell was an
attorney at Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. From
September 1991 to July 1996, she was an attorney at Morgan, Lewis & Bockius LLP.
Ms. Bell concentrated her law practice in the areas of mergers and acquisitions
and securities laws, representing both public and private companies.
JOHN C. DELANO became Senior Vice President, Operations, of the Company in
January 1998. Mr. DeLano spent nearly twenty years in the auto rental industry,
and from 1991 to 1997 he served as Managing Director and National Operations
Manager for Avis Australia, where he coordinated the marketing, operations,
human resources, information technology, sales, fleet, accounting and field
management functions. In 1992, while under Mr. DeLano's supervision, Avis
Australia was awarded the prestigious Australian Quality Award (similar to the
Malcolm Baldridge Award in the U.S.) and the 1996 Australian Customer Service
Award.
MELVILLE W. ROBINSON became Vice President, Corporate Development of the
Company in July 1997. From 1994 to July 1997, Mr. Robinson served as the Chief
Financial Officer of Cruises Only, one of the Founding Companies. From 1989
until 1993, Mr. Robinson was the President and Chief Financial Officer of the
Gale Group, a U.S. based consumer products manufacturing firm. From 1986 to
1989, Mr. Robinson was a Managing Director at PNC Merchant Banking Corp., where
he founded and managed the Growth Capital Group. From 1983 to 1986, Mr. Robinson
was the Chief Financial Officer of Drug Emporium Inc., a publicly-traded
discount drugstore chain.
GEORGE DEL PINO became Corporate Controller of the Company in August 1997,
and was promoted to Vice President and Corporate Controller in July 1998. From
1996 to 1997, Mr. Del Pino served as Controller of G.L. Homes of Florida, one of
Florida's largest real estate developers/homebuilding companies. From 1992 to
1996, Mr. Del Pino held various positions at Certified Vacations, including
Senior Director of Product Development (1995-1996), Director of Corporate
Accounting and Controller (1993-1995), and Chief Financial Officer and Treasurer
of The Travel Difference (a subsidiary of Certified Vacations) (1992-1993). From
1985 to 1992, Mr. Del Pino held various positions at KPMG, specializing in
auditing travel companies. Mr. Del Pino is a certified public accountant.
ROBERT G. FALCONE became a director of the Company in July 1997. Mr. Falcone
has served as the Chairman and Chief Executive Officer of Cruises Inc. since its
founding in 1982. Mr. Falcone is a member of the National Association of Cruise
Only Agencies ("NACOA"), the Airline Reporting Corporation ("ARC"), the Travel
Council of the World (Environmental Group), the American Society of Travel
Agents ("ASTA"), Cruise Lines International Association ("CLIA") and is the
co-founder of the Society of Elite Agents, a trade association of leading cruise
specialists ("SEA").
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WAYNE HELLER became a director of the Company in July 1997. Mr. Heller has
served as the Chief Executive Officer of Cruises Only since its founding in 1985
and was previously employed with Norwegian Caribbean Cruise Lines from 1980 to
1984. Mr. Heller is a member of ASTA, NACOA and CLIA.
IMAD KHALIDI became a director of the Company in July 1997. Mr. Khalidi has
been President of Auto Europe since 1992. In 1990, he joined Auto Europe as
Executive Vice President of Marketing and Sales. From 1983 to 1990, Mr. Khalidi
served as an International Travel Trade Manager and an International Licensee
Manager with Europcar International S.A., an auto rental company in France. Mr.
Khalidi is a member of the Association of Retail Travel Agencies ("ARTA"), ASTA
and CLIA.
JOHN W. PRZYWARA became a director of the Company in July 1997. Mr. Przywara
has served as President of D-FW Tours since its founding in 1978. Mr. Przywara
is a member of the ARC, CLIA and IATAN.
ELAN J. BLUTINGER has been a director of the Company since October 1996. Mr.
Blutinger is a Managing Director of Alpine Consolidated LLC, a consolidator of
highly fragmented businesses. From 1987 to 1995, he was the Chief Executive
Officer of Shoppers Express, Inc., an electronic retailing service, which he
founded. From 1983 to 1986, Mr. Blutinger was the Chairman and Chief Executive
Officer of DSI, a wholesale distributor for the personal computer industry until
its acquisition in 1986 by Independent Distribution Incorporated. Mr. Blutinger
is also a director and co-founder of ResortQuest International, Inc.
D. FRASER BULLOCK has been a director of the Company since October 1996. In
May 1999, Mr. Bullock became the Chief Operating Officer and Chief Financial
Officer of the Salt Lake Olympic Organizing Committee. He is also a Managing
Director of Alpine Consolidated LLC. Mr. Bullock served as the President and
Chief Operating Officer of VISA Interactive, a wholly-owned subsidiary of VISA
International from its inception in 1994 to 1996. In 1993, Mr. Bullock became
the President and Chief Operating Officer of U.S. Order, Inc., a provider of
remote electronic transaction processing, until it was acquired by VISA
International in 1994. Mr. Bullock was a founding partner of Bain Capital, a
Manager of Bain and Company, and a founder of MediVision, Inc., a consolidation
of eye surgery centers. Mr. Bullock is also a director and co-founder of
ResortQuest International, Inc.
TOMMASO ZANZOTTO became a director of the Company in July 1997. Mr. Zanzotto
is the President of Toscana Ville E Castelli, a real estate development company
which owns and operates residential and commercial properties in the lodging and
hotel industry. From 1994 to 1996, he was the Chairman and Chief Executive
Officer of Hilton International. From 1969 to 1993, Mr. Zanzotto held various
positions with American Express Travel Related Services including President
International, American Express Financial and Travel Services (1990-1993);
President, American Express Corporate Card Division (1987-1990); President,
American Express Travelers Cheques (Europe, Africa, Middle East). Mr. Zanzotto
is a member of the World Travel and Tourism Council, and a Governor of the
Transportation and Travel Committee of the World Economic Summit. Mr. Zanzotto
is also a director of Compass International Services Corporation.
LEONARD A. POTTER served as a director of the Company from its formation
until May 1997. After the initial public offering in July 1997, he became an
Advisory Director to the Board. Mr. Potter is a co-founder and Managing Director
of Capstone Partners, LLC, a venture firm specializing in consolidation
transactions. Capstone Partners, LLC was a co-founder of Staffmark, Inc. and
ResortQuest International, Inc. Prior to forming Capstone Partners, LLC in April
1996, Mr. Potter was an attorney at Morgan, Lewis & Bockius LLP for more than
five years practicing in the areas of mergers and acquisitions and securities
law. While at Morgan, Lewis & Bockius he represented a number of public
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companies in connection with their creation and subsequent implementation of
consolidation strategies similar to the Company's, including U.S. Office
Products, F.Y.I. Incorporated and Cotelligent Group.
BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee, a
Compensation Committee and an Acquisition Committee, and may establish other
committees from time to time as the Board may determine.
The Advisory Director attends meetings of the Board of Directors,
consults with officers and directors of the Company and provides guidance (but
not direction) concerning management and operation of the Company's business.
The Advisory Director is not a director of the Company and accordingly will not
have a right to vote as a director.
The Audit Committee consists of four members, three of whom are
independent directors. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and the results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, reviews recommendations
regarding the Company's accounting methods and the adequacy of its systems of
internal accounting controls, and reviews and approves financial press releases
and reports.
The Compensation Committee consists of two members, each of whom is a
"disinterested director," as defined in the rules promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act, and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code. The
Compensation Committee reviews and determines compensation for the Company's
executive officers, administers the Company's 1997 Long-Term Incentive Plan (the
"Incentive Plan") and makes recommendations to the Board of Directors with
respect to the Company's compensation policies.
The Acquisition Committee consists of three fixed members and one
floating member. The floating member changes based upon the business segment to
which an acquisition relates. The Acquisition Committee has the authority to
review and approve acquisitions with a purchase price of $10 million or less,
provided that if the acquisition relates to a new line of business for the
Company, then the acquisition must be reviewed and approved by the full Board of
Directors.
The Board of Directors does not have any other committees at this time,
although additional committees may be formed in the future. All officers serve
at the discretion of the Board of Directors, subject to the terms and conditions
of such officers' employment agreements with the Company.
During 1998, the Company's Board of Directors held eight meetings and
took a number of other actions by written consent. During 1998, each director
attended at least 75 percent of the aggregate of (i) the number of meetings of
the Board of Directors held during the period he served on the Board, and (ii)
the number of meetings of committees of the Board of Directors held during the
period he served on such committees.
10
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and owners of more than 10% of the
Company's common stock to file reports of ownership on Form 3 and changes of
ownership on Form 4 or Form 5 with the Securities and Exchange Commission and
The Nasdaq Stock Market. Such persons are also required to furnish the Company
with a copy of all such forms filed.
Based solely on its review of copies of such reports or written
representations from or on behalf of certain reporting persons, the Company
believes that, during the year ended December 31, 1998, all Section 16(a) filing
requirements applicable to such persons were satisfied.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid to the
Named Executive Officers with respect to the years ended December 31, 1997 and
1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ----------
OTHER
ANNUAL SECURITIES
COMPEN- UNDERLYING ALL OTHER
SALARY(1) BONUS SATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) ($) ($) ($) (#) ($)
- --------------------------- ------ --------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Vittoria 1997 84,615 86,000 -- 100,000 --
CEO 1998 200,000 --(2) -- 250,000 --
Jill M. Vales 1997 63,462 32,000 -- 50,000 24,000(3)
Sr. VP/CFO 1998 150,000 85,300 30,000 --
Maryann Bastnagel 1997 63,462 48,500 -- 110,000 8,172(5)
Sr. VP/CIO(4) 1998 150,000 85,300 -- 40,000 19,850(5)
Suzanne B. Bell 1997 52,885 27,000 -- 25,000 --
Sr. VP/General Counsel 1998 125,000 71,100 40,000 --
John C. DeLano 1997 -- -- -- -- --
Sr. VP Operations 1998 113,077 64,300 100,000 --
</TABLE>
- -------------------
(1) With the exception of Mr. DeLano who commenced employment with the Company
in January 1998, each of the Named Executive Officers commenced employment
with the Company upon consummation of the initial public offering (July 28,
1997). Annual salaries for 1997 were as follows: $200,000 for Mr. Vittoria;
$150,000 for each of Ms. Vales and Ms. Bastnagel; and $125,000 for Ms. Bell.
(2) Mr. Vittoria chose to forego his bonus earned in 1998 in order to make funds
available for payments to other executives of the Company.
(3) Consists of consulting fees paid in 1997 prior to the consummation of the
Company's initial public offering.
(4) Effective April 28, 1999, Ms. Bastnagel resigned from her positions with the
Company.
(5) Consists of relocation expenses paid during the year.
12
<PAGE>
The following table sets forth the stock options granted to the Named
Executive Officers during the year ended December 31, 1998:
STOCK OPTION GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE(1)
------------------------------------------------------------ ------------------
NUMBER OF
SECURITIES
UNDERLYING %OF TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES OR BASE GRANT DATE
NAME (#) IN FISCAL YEAR PRICE ($/SH) EXPIRATION DATE PRESENT VALUE ($)
- -------------------- ---------- ----------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Joseph V. Vittoria 100,000 10.9 33.75 7/01/08 1,978,000
150,000 16.4 50.00 12/28/08 1,915,000
Jill M. Vales 30,000 3.3 13.563 9/30/08 238,000
Maryann Bastnagel 40,000 4.4 13.563 9/30/08 318,000
Suzanne B. Bell 40,000 4.4 13.563 9/30/08 310,000
John C. DeLano 75,000 8.2 20.75 1/19/08 912,000
25,000 2.7 13.563 9/30/08 199,000
</TABLE>
____________________
(1) Calculated using the Black-Scholes valuation method.
Each of the options set forth in the table above will vest in equal
installments on each of the first through fourth anniversaries of the grant
date.
The following table sets forth the stock options exercised by the Named
Executive Officers during the year ended December 31, 1998:
STOCK OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END AT FISCAL YEAR-
SHARES (#) END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------- ---------- -------- -------------- -------------------
<S> <C> <C> <C> <C>
Maryann Bastnagel 10,000 $118,875 17,500/122,500 $288,750/$2,038,730
</TABLE>
DIRECTOR COMPENSATION
Directors who are also employees of the Company or one of its
subsidiaries do not receive additional compensation for serving as directors.
Each director who is not an employee of the Company or one of its subsidiaries
receives a fee of $2,000 for attendance at each Board of Directors' meeting and
$1,000 for each committee meeting. Directors are also reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof incurred in their capacity as directors.
13
<PAGE>
The Company's 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which was adopted by the Board of Directors and approved by the
Company's shareholders in 1997, provides for: (i) the automatic grant to each
non-employee director and Advisory Director (referred to herein as a
"Participant" or "Non-Employee Director") serving at the commencement of the
initial public offering of an option to purchase 10,000 shares of Common Stock
or such other securities as may be substituted for such shares of Common Stock
of the Company as stipulated in the Directors' Plan (each a "Share"); and
thereafter (ii) the automatic grant to each Participant of an option to purchase
10,000 Shares upon such person's initial election as a director or appointment
as an Advisory Director. In addition, the Directors' Plan provides for an
automatic annual grant to each Participant of an option to purchase 5,000 Shares
at each annual meeting of shareholders following the Offering; provided,
however, that if the first annual meeting of shareholders following a person's
initial election as a non-employee director or appointment by the Board as an
Advisory Director is within three months of the date of such election or
appointment, such person will not be granted an option to purchase 5,000 Shares
at such annual meeting. These options will have an exercise price per Share
equal to the fair market value of a Share at the date of grant. Options granted
under the Directors' Plan will expire at the earlier of 10 years from the date
of grant or one year after termination of service as a director or advisor, and
options will be immediately exercisable. In addition, the Directors' Plan
permits Participants to elect to receive, in lieu of cash directors' fees,
Shares or credits representing "Deferred Shares" that may be settled at future
dates, as elected by the Participants. The number of Shares or Deferred Shares
received will be equal to the number of Shares which, at the date the fees would
otherwise be payable, will have an aggregate fair market value equal to the
amount of such fees. The Company has reserved 100,000 shares of Common Stock for
use in connection with the Directors' Plan. Messrs. Blutinger, Bullock, Zanzotto
and Potter each received options to purchase 10,000 shares upon consummation of
the initial public offering and 5,000 Shares following the 1998 Annual Meeting
of Shareholders.
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
The Company was initially incorporated in Delaware in April 1996,
however, it did not conduct operations or generate revenue and did not pay any
of its executive officers compensation as employees until July 1997. During
1998, its most highly compensated executive officers were Messrs. Vittoria and
DeLano and Ms. Vales, Ms. Bastnagel and Ms. Bell.
Mr. Vittoria has entered into an employment agreement with the Company
providing for an annual base salary of $200,000. Ms. Vales, Ms. Bastnagel, Ms.
Bell and Mr. DeLano each have entered into an employment agreement with the
Company providing for an annual base salary of $150,000, $150,000, $125,000 and
$120,000, respectively. Each of these agreements is for a term of three years,
commencing July 28, 1997 for Mr. Vittoria, Ms. Vales, Ms. Bastnagel and Ms.
Bell, and January 19, 1998 for Mr. DeLano. In addition, certain executive
officers of the operating companies, including Messrs. Falcone, Heller, Khalidi
and Przywara, members of the Board of Directors, have entered into employment
agreements effective July 28, 1997. Mr. Falcone's employment agreement is for a
term of five years; Mr. Heller's, Mr. Khalidi's and Mr. Przywara's employment
agreements are for a term of three years (in each case, the "Initial Term").
Unless terminated or not renewed by the Company or the employee, the term will
continue thereafter on a year-to-year basis on the same terms and conditions
existing at the time of renewal. Each employment agreement contains a covenant
not to compete (the "Covenant") with the Company for a period of two years
immediately following termination of employment or, in the case of a termination
by the Company without cause in the absence of a change in control, for a period
of one year following termination of employment. Under this Covenant, the
executive officer is prohibited from: (i) engaging in any travel service
business in direct competition with the Company within defined geographic areas
in which the Company or its subsidiaries does business;
14
<PAGE>
(ii) enticing a managerial employee of the Company away from the Company; (iii)
calling upon any person or entity which is, or has been, within one year prior
to the date of termination, a customer of the Company; or (iv) calling upon a
prospective acquisition candidate which the employee knew was approached or
analyzed by the Company, for the purpose of acquiring the entity. The Covenant
may be enforced by injunctions or restraining orders and shall be construed in
accordance with the changing activities, business and location of the Company.
Each agreement with respect to the acquisition by the Company of an Operating
Company also contains a similar covenant prohibiting sellers from competing with
the Company for periods following the consummation of the respective
acquisition.
Each of these employment agreements provides that, in the event of a
termination of employment by the Company without cause during the Initial Term
the employee will be entitled to receive from the Company an amount equal to his
or her then current salary for the remainder of the Initial Term or for one
year, whichever is greater. In the event of a termination of employment without
cause after the Initial Term of the employment agreement, the employee will be
entitled to receive an amount equal to his or her then current salary for one
year. In either case, payment is due in one lump sum on the effective date of
termination. In the event of a change in control of the Company (as defined in
the agreement) during the Initial Term, if the employee is not given at least
five days' notice of such change in control and the successor's intent to be
bound by such employment agreement, the employee may elect to terminate his or
her employment and receive in one lump sum three times the amount he or she
would receive pursuant to a termination without cause during the Initial Term.
The employment agreements of Messrs. Falcone, Heller, Khalidi and Przywara also
state, that in the event of a termination without cause by the Company or a
change in control, the employee may elect to waive the right to receive
severance compensation and, in such event, the noncompetition provisions of the
employment agreement will not apply. In the event the employee is given at least
five days' notice of such change in control, the employee may elect to terminate
his or her employment agreement and receive in one lump sum two times the amount
he or she would receive pursuant to a termination without cause during the
Initial Term. In such an event, the noncompetition provisions of the employment
agreement would apply for two years from the effective date of termination.
On October 31, 1998, Michael Moriarty resigned from his position as
President and Chief Operating Officer of the Company. Mr. Moriarty continued to
assist the Company and was paid his salary for such efforts through the end of
1998, at which time his employment with the Company was terminated (without
severance compensation). Mr. Vittoria, with the assistance of other officers of
the Company and without adjustment to his existing employment agreement or his
compensation, assumed additional duties with respect to the Company's operations
and investor relations. Effective April 12, 1999, the Company appointed John B.
Balson to the positions of President and Chief Operating Officer. On April 28,
1999, Ms. Bastnagel resigned from her position as Senior Vice President and
Chief Information Officer of the Company. During her tenure with the Company,
Ms. Bastnagel focused her efforts on the creation of a unique software
development program that management believes will provide the Company with
improved effectiveness of the marketing programs and sales efforts in its call
centers and Internet sites. Pursuant to a separation agreement with the Company,
Ms. Bastnagel received a $75,000 severance payment, representing six months
salary, and payment of all accrued vacation time.
15
<PAGE>
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of the
Company's directors and executive officers. The indemnification agreements
require, among other things, that the Company indemnify its directors and
executive officers to the fullest extent permitted by law, and advance to the
directors and executive officers all related expenses, subject to reimbursement
if it is subsequently determined that indemnification is not permitted. The
Company must also indemnify and advance all expenses incurred by directors and
executive officers seeking to enforce their rights under the Company's
directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by provisions in the Charter and Bylaws, it provides greater assurance
to directors and executive officers that indemnification will be available,
because, as a contract, it cannot be modified unilaterally in the future by the
Board of Directors or by the shareholders to eliminate the rights it provides.
The Company has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided in such statute. In general, Florida law permits a Florida corporation
to indemnify its directors, officers, employees and agents, and persons serving
at the corporation's request in such capacities for another enterprise, against
liabilities arising from conduct that such persons reasonably believed to be in,
or not opposed to, the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for or
assenting to an unlawful distribution; and (d) willful misconduct or a conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
Article Seven of the Company's articles of incorporation (the "Florida
Articles") states that: "A director shall not be personally liable to the
Corporation or the holders of shares of capital stock or any other person for
monetary damages for any statement, vote, decision, act or failure to act, for
which such liability is precluded or otherwise eliminated under Section 607.0831
or otherwise under the Florida Business Corporation Act. If the Florida Business
Corporation Act is hereafter amended to authorize the further or broader
elimination or limitation of the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Florida Business Corporation Act, as so amended.
No repeal or modification of this Article VII shall adversely affect any right
of or protection afforded to a director of the Corporation existing immediately
prior to such repeal or modification. Article Eight of the Company's Florida
Articles states that: "The Corporation shall indemnify and may advance expenses
to, and may purchase and maintain insurance on behalf of, its officers and
directors to the fullest extent permitted by law as now or hereafter in effect.
Without limiting the generality of the foregoing, the Bylaws may provide for
indemnification and advancement of expenses to officers, directors, employees
and agents on such terms and conditions as the Board may from time to time deem
appropriate or advisable." In addition, the Company's Bylaws
16
<PAGE>
further provide that the Company shall indemnify its officers, directors,
advisory directors and employees to the fullest extent permitted by law.
Since the Company was reincorporated under the laws of the State of
Florida on December 31, 1998, the Company intends to amend the indemnification
agreements or enter into new indemnification agreements with each of its
executive officers, its advisory director and directors which indemnifies such
person to the fullest extent permitted by its Florida Articles, its Bylaws and
under the Florida Business Corporation Act. The Company also maintains directors
and officers liability insurance.
LONG-TERM INCENTIVE PLAN
In May 1997, the Board of Directors and the Company's shareholders
approved the Incentive Plan, which was later amended and restated effective July
28, 1998 (as amended and restated, the "Incentive Plan"). The purpose of the
Incentive Plan is to provide officers, employees, directors who are also
employees, consultants and independent contractors of the Company or any of its
subsidiaries, with additional incentives by increasing their ownership interests
in the Company. Individual awards under the Incentive Plan may take the form of
one or more of: (i) either incentive stock options ("ISOs") or non-qualified
stock options ("NQSOs"); (ii) stock appreciation rights ("SARs"); (iii)
restricted or deferred stock; (iv) dividend equivalents; and (v) other awards
not otherwise provided for, the value of which is based in whole or in part upon
the value of the Common Stock. The Compensation Committee of the Board of
Directors administers the Incentive Plan and generally selects the individuals
who will receive awards and the terms and conditions of those awards. The number
of shares available for use in connection with the Incentive Plan may not exceed
15% of the aggregate number of shares of Common Stock outstanding prior to the
date of grant.
As of December 31, 1998, 2,006,545 shares were reserved for use in
connection with the Incentive Plan, of which 1,666,228 shares had been granted
and were outstanding. Shares of Common Stock which are attributable to awards
which have expired, terminated or been canceled or forfeited are available for
issuance or use in connection with future awards. All options, except for
certain premium-priced options granted to the Chief Executive Officer, have been
granted with exercise prices equal to the fair market value at the time of
grant. In December 1998, the Compensation Committee of the Board of Directors
granted Mr. Vittoria "premium-priced" options to purchase 150,000 shares at an
exercise price of $50, which price was in excess of the fair market value of the
Common Stock on the grant date. The vesting of these options will occur over
four years, subject to acceleration based upon thresholds of $50, $75 and $100
for the share price of the Common Stock. Subsequent to 1998, Mr. Vittoria was
granted options for an additional 125,000 shares. Such options were granted at
the fair market value on the date of grant and will vest at the rate of 25% per
year.
The Incentive Plan will remain in effect until terminated by the Board
of Directors. The Incentive Plan may be amended by the Board of Directors
without the consent of the shareholders of the Company, except that any
amendment, although effective when made, will be subject to shareholder approval
if required by any Federal or state law or regulation or by the rules of any
stock exchange or automated quotation system on which the Common Stock may then
be listed or quoted.
17
<PAGE>
401(K) PLAN
The Company established a 401(k) Plan effective July 1, 1998. Similar
plans existing at certain operating companies are either being suspended or
rolled into the Company's 401(k) Plan. All employees of the Company, meeting
certain minimum eligibility requirements, are eligible to participate in the
401(k) Plan. The 401(k) Plan provides that each participant may contribute up to
20% of his or her pre-tax gross compensation (but not greater than a statutorily
prescribed annual limit). The percentage elected by certain highly compensated
participants may be required to be lower. The 401(k) Plan permits, but does not
require, additional contributions to the 401(k) Plan by the Company. All amounts
contributed by employee participants in conformance with the 401(k) Plan
requirements and earnings on such contributions are fully vested at all times.
For the year ended December 31, 1998, the Company made an aggregate matching
contribution to the 401(k) Plan and to similar plans at certain operating
companies of $283,000, of which $210,000 was for the 401(k) Plan, based on a
match of 25% of employee contributions, up to a maximum of 6% of compensation.
The Board of Directors will determine on an annual basis whether a matching
contribution will be made and, if so, at what level of contribution.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Compensation Committee was composed of Tommaso Zanzotto
and Elan Blutinger. None of the members of the Compensation Committee was an
officer or an employee of the Company or any of its subsidiaries in 1998, was
formerly an officer of the Company or any of its subsidiaries, other than Mr.
Blutinger, who was an officer of the Company prior to the Company's initial
public offering, or had any relationship requiring disclosure by the Company
under the section Certain Relationships And Related Transactions.
18
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has the authority to determine the
compensation of the Company's executive officers and the executive officers of
the Company's subsidiaries, and to administer the Company's Amended and Restated
Long-Term Incentive Plan (the "Incentive Plan"). The Compensation Committee was
originally constituted on August 11, 1997, and was reaffirmed on July 29, 1998.
The Committee currently consists of two outside directors who are not officers
or employees of the Company. In general, the goals of the Compensation Committee
are to enable the Company to (1) recruit, develop and retain highly motivated
and qualified managers; (2) maximize financial performance, balancing
appropriately the short and long term goals of the Company; and (3) align the
interests of Company management with those of its shareholders through the use
of stock options and incentives tied to increases in shareholder value.
Our executive compensation strategy is for executives to receive a
salary at a level somewhat below industry averages, while being eligible for
bonuses based on performance and stock option grants. We believe that lower base
salary levels in combination with performance based bonuses provide our
executives the potential to earn in excess of competitive industry compensation
if subjective and/or objective performance goals for our company are achieved.
We also intend to continue to grant our executives and other key employees stock
options at the current market value of our stock. The options have no monetary
value to the executives unless the market price of our common stock increases
above the exercise price. We anticipate that future option grants will be based
on a subjective analysis of various performance criteria, primarily earnings per
share and operating profits, although future grants may not directly be tied to
any one factor.
During 1998, the executive officers were compensated pursuant to
employment agreements that, in most instances, were entered into in connection
with the Company's initial public offering and prior to the appointment of the
Compensation Committee. Accordingly, the Compensation Committee did not
determine the 1998 salaries of such executive officers. Compensation for other
officers who were engaged by the Company after the initial public offering was
determined based upon market considerations and the skills and background of the
individuals. Factors relating to motivation and retention were also considered.
In addition to compensation through base salaries, the Compensation
Committee has the authority to issue performance-based bonuses. Bonuses paid to
the executive in 1998 were determined in accordance with our Incentive Bonus
Plan and were tied to performance-based targets, including earnings per share,
operating income, individual performance and contributions to the Company. All
bonuses were paid in cash. In the future, such bonus payments may, in the
discretion of the Compensation Committee, be made in cash or stock options.
The Compensation Committee is also responsible for the approval of the
grant of stock options to employees, the number of shares subject to each such
option and the terms and conditions of such options, consistent with the
Incentive Plan. The Compensation Committee seeks to use the Incentive Plan as a
means to motivate the Company's management, employees and key personnel. In
addition to year-end performance bonuses, determinations of option grants may be
made during the year, either in connection with new acquisitions, additional
equity offerings by the Company, or the addition of new key personnel, as
appropriate in furtherance of the Company's objectives. Such objectives may
include, among other things, recognition of past qualitative performance,
incentives to continue the growth and profits of the Company's business and
incentives to accept employment opportunities with the Company.
19
<PAGE>
To facilitate the Compensation Committee's achievement of its goals, the
Committee has engaged an outside consulting firm to evaluate the compensation
structure and make recommendations to the Committee.
Section 162(m) of the Internal Revenue Code generally limits the tax
deduction to public companies for compensation over $1 million paid to a
corporation's chief executive officer and the four next most highly compensated
executive officers, except to the extent that any such excess compensation is
paid pursuant to a performance-based or stock option plan that has been approved
by shareholders. The Compensation Committee will study the potential impact of
Section 162(m) and will, to the extent it deems appropriate, take reasonable
steps to minimize or eliminate any potential impact of Section 162(m) on the
Company, while at the same time preserving the objective of providing
appropriate incentive awards. The Compensation Committee believes that there are
no current executive compensation programs or outstanding awards that would be
impacted by Section 162(m).
COMPENSATION COMMITTEE
ELAN J. BLUTINGER
TOMMASO ZANZOTTO
20
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
shareholder return for the period from July 22, 1997 (the date on which the
Company's common stock commenced trading on the Nasdaq Stock Market) to December
31, 1998 (assuming reinvestment of dividends, if any) among the Company, the
Standard & Poor's 500 Index and the Russell 2000 Index. The Company does not
believe that it can reasonably identify a peer group or published industry or
line-of-business index for comparison to the Company. Therefore, the Russell
2000 Index has been used by the Company for comparison purposes because it
represents growth companies with market capitalizations similar to the Company.
COMPARISON OF SEVENTEEN MONTH CUMULATIVE TOTAL RETURN*
AMONG TRAVEL SERVICES INTERNATIONAL, INC., THE STANDARD
& POOR'S 500 INDEX AND THE RUSSELL 2000 INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
<TABLE>
<CAPTION>
7/22/97 9/97 12/97 3/98 6/98 9/98 12/98
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRAVEL SERVICES INTERNATIONAL, INC. $100 $148 $170 $238 $235 $97 $218
STANDARD & POOR'S 500 $100 $107 $111 $126 $130 $117 $142
RUSSELL 2000 $100 $115 $111 $122 $119 $95 $110
</TABLE>
* Assumes $100 invested on 7/22/97 in stock or on 6/30/97 in index -
including reinvestment of dividends. Fiscal year ending December 31.
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION, INITIAL PUBLIC OFFERING AND FOUNDING COMPANY ACQUISITIONS
Included in assets at December 31, 1998 is a note receivable from Imad
Khalidi, a director of the Company, with an outstanding balance of $131,000,
which bears interest at 6% and is due upon demand.
The Company leases office space from the brother of Robert G. Falcone, a
director of the Company, under a lease which expires February 28, 2006. Payments
were $191,000, $201,000 and $213,000 in 1996, 1997, and 1998, respectively.
COMPANY POLICY
Following the initial public offering in July 1997, any transactions
with officers, directors and affiliates are approved by a majority of the Board
of Directors, including a majority of the disinterested members of the Board of
Directors.
22
<PAGE>
PROPOSAL TO ADOPT AN AMENDED AND RESTATED
1999 LONG-TERM INCENTIVE PLAN
(PROPOSAL NO. 2)
GENERAL
On May 9, 1997, the Board of Directors of the Company adopted the 1997
Long-Term Incentive Plan. The plan was also approved by the shareholders of the
Company on May 9, 1997. The plan was later amended and restated, with the
approval of the Compensation Committee of the Board of Directors (the
"Committee") on April 27, 1998 and the shareholders on July 28, 1998 (as so
amended and restated, the "Incentive Plan"). Individual awards under the
Incentive Plan may take the form of one or more of: (i) either incentive stock
options ("ISO's") or non-qualified stock options ("NQSOs"); (ii) stock
appreciation rights ("SARSs"); (iii) restricted or deferred stock; (iv) dividend
equivalents; and (v) other awards not otherwise provided for, the value of which
is based in whole or in part upon the value of the Common Stock. Such awards,
together with any other right or interest granted to a participant under the
Incentive Plan, are termed "Awards." Awards may be granted to officers and
employees of the Company or any of its subsidiaries, including any director who
is also an employee, consultants and independent contractors of the Company or
any of its subsidiaries. Under the Incentive Plan, the maximum number of common
shares subject to outstanding Awards, determined immediately after the grant of
any Award, cannot exceed 15% of the aggregate number of shares of Common Stock
outstanding. The Compensation Committee of the Board of Directors administers
the Incentive Plan and generally selects the individuals who will receive Awards
and the terms and conditions of those Awards.
On August 3, 1999, the Compensation Committee of the Company's Board of
Directors authorized an increase in the total number of shares that may be
subject to Awards to 18% of the aggregate number of shares of Common Stock
outstanding. The Compensation Committee believes that such increase is necessary
to have sufficient shares available for Awards as the Company continues to grow
through acquisitions and internally, primarily in the areas of Internet and
technology development. As of July 31, 1999, 2,093,712 shares were available for
Awards under the Plan, of which Awards for 1,826,834 shares were outstanding on
such date. Shares of Common Stock which are attributable to Awards which have
expired, terminated or been canceled or forfeited are available for issuance or
use in connection with future awards.
The proposed amendment to increase the number of shares available for
Awards under the Plan, is subject to shareholder approval. Shareholder approval
of the Plan is required (i) in order for the Plan to be eligible under the "plan
lender" exemption from the margin requirements of Regulation G promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii)
by the rules of the Nasdaq Stock Market. The Incentive Plan, as so amended, is
referred to as the Amended and Restated 1999 Long-Term Incentive Plan or the
"Plan."
The price at which the Company's options are granted under the Plan is
equal to or in excess of the fair market value of the stock at the date of
grant. Generally, options granted under the Plan may remain outstanding and
vested options may be exercised at any time up to three months after the person
to whom such options were granted is no longer employed or retained by the
Company. Options granted under the Plan have maximum terms of not more than 10
years.
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<PAGE>
AWARDS GRANTED UNDER THE PLAN
Substantially all of the options outstanding under the Plan vest at the
rate of 25% per year over four years, with a term not to exceed ten years from
the date of its grant. In addition, an aggregate of 10,500 shares of restricted
stock have been awarded under the Plan to two individuals. As of the date of
this Proxy Statement, 4,000 of such shares of restricted stock have vested,
2,000 of such shares have expired, and 4,500 of such shares remain outstanding.
No Awards other than non-qualified options and restricted stock have been
granted under the Plan.
The Company believes that Awards granted under the Plan will be awarded
primarily to those persons who possess a capacity to contribute significantly to
the successful performance of the Company, including its subsidiaries. Because
persons to whom discretionary grants of Awards are to be made are to be
determined from time to time by the Compensation Committee or the Board in their
discretion, it is impossible at this time to indicate the precise number, name
or position of persons who will hereafter receive such Awards or the number of
shares for which Awards will be granted.
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<PAGE>
The table below indicates, as of July 30, 1999, with respect to Awards
granted under the Incentive Plan (i) the number of options held by the persons
and groups indicated, and (ii) the value of such options as of such date (using
the closing price per share of Common Stock on July 30, 1999 of $14.125, as
reported on the Nasdaq Stock Market):
<TABLE>
<CAPTION>
VALUE OF OPTIONS AT
JULY 30, 1999 (1)
EXERCISABLE (E)
OPTION GRANTEES NUMBER OF OPTIONS UNEXERCISABLE (U)
- ---------------------------------------- ----------------- -----------------
<S> <C> <C>
Joseph V. Vittoria 475,000 $6,000 (E)
Chairman and Chief Executive Officer $178,000 (U)
Michael J. Moriarty 0 $0 (E)
President and Chief Operating $0 (U)
Officer
Jill M. Vales 80,000 $3,000 (E)
Senior Vice President and Chief $20,000 (U)
Financial Officer
Maryann Bastnagel 0 $0 (E)
Senior Vice President and Chief $0 (U)
Information Officer
Suzanne B. Bell 65,000 $2,000 (E)
Senior Vice President, General $24,000 (U)
Counsel and Secretary
Imad Khalidi 0 $0 (E)
CEO-Auto Europe $0 (U)
All current executive officers as a 1,105,000 $16,000 (E)
group (7 persons) $1,086,000 (U)
All current directors who are not 0 $0 (E)
executive officers as a group (7 $0 (U)
persons)
All employees as a group, other than 715,372 $17,000 (E)
executive officers (383 persons) $201,000 (U)
</TABLE>
____________________
(1) For purposes of this table, the value of each option equals the amount,
if any, by which the closing market price of a share of Common Stock on
July 30, 1999 ($14.125) exceeds the option's exercise price. The value
is determined without regard to whether the option is currently
exercisable or not.
DESCRIPTION OF PLAN
Set forth below is a brief description of the material terms of the
Plan. Reference is made to the complete text of the Plan attached as Exhibit A
and the description contained herein is qualified in its entirety by such
reference.
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<PAGE>
The Plan authorizes the grant of options to purchase shares of the
Company's Common Stock and grants of certain other awards relating to Common
Stock, to employees, employee-directors and consultants of the Company and any
subsidiary corporation. In addition to options, stock appreciation rights
("SARs"), including limited SARs, restricted stock, deferred stock, Common Stock
granted as a bonus or in lieu of other awards, and other stock-based awards may
be granted under the Plan (collectively "Awards"). The Plan is neither subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended, nor qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code").
ELIGIBILITY. Executive officers and other key employees of the Company
and its subsidiaries, including any director or officer who is also an employee,
and persons who provide consulting or other services to the Company or its
subsidiaries, are eligible to be granted Awards under the Plan. In addition,
persons who have been offered employment by the Company or its subsidiaries, and
persons employed by an entity that the Committee expects to become a subsidiary
of the Company are eligible to be granted Awards under the Plan. No member of
the Committee may receive Awards under the Plan. The Company estimates that,
currently, approximately 500 individuals are eligible to receive Awards under
the Plan.
PURPOSE. The purpose of the Plan is to advance the interests of the
Company and its shareholders by providing a means to attract, retain, and reward
eligible employees and consultants of the Company and its subsidiaries and to
enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's shareholders.
ADMINISTRATION. The Board has designated the Committee or such other
committee as may be designated by the Board to administer the Plan provided,
however, that, to the extent necessary to comply with Rule 16b-3 (as promulgated
by the SEC under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act")), the Committee will consist of two or more directors, each of
whom is a "non-employee director" within the meaning of Rule 16b-3. Subject to
the express provisions of the Plan, the Committee has full authority, among
other things, (i) to select participants to whom Awards will be granted, and
(ii) to determine the type and number of Awards to be granted to each
participant, the number of shares of Stock to which an Award will relate, and
all other terms and conditions of Awards and matters relating to Awards
(including forfeiture conditions and terms of any mandatory or elective
deferral). In addition, the Committee may prescribe the form of Award
agreements, adopt rules and regulations under the Plan, interpret the Plan and
Award agreements, and make all other decisions under the Plan.
LIMITATION ON AWARDS. The number of shares of Common Stock that may be
subject to outstanding Awards granted under the Plan, determined immediately
after the grant of any Award, may not exceed 18% of the total number of shares
of outstanding Common Stock on the date of the grant. Subject to the adjustment
due to certain events (see "Changes in Common Stock" below), the number of
shares that may be delivered upon the exercise of ISOs (as defined in "Options"
below) may not exceed 100,000 shares, and the number of shares that may be
delivered as restricted stock and deferred stock may not exceed 100,000 shares.
In addition, subject to adjustment as noted above, (i) Awards relating to no
more than 250,000 shares of Common Stock may be granted to any one individual in
any calendar year, and (ii) with respect to Awards that may be settled in cash
(in whole or in part), no participant may be paid during any calendar year cash
amounts relating to such Awards that exceed the greater of the fair market value
of 250,000 shares of Common Stock at the date of grant or the date of settlement
of Award.
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<PAGE>
OPTIONS. Options granted under the Plan are either incentive stock
options ("ISOs") intended to meet the requirements of Section 422 of the Code,
or Non-Qualified Stock Options ("NQSOs"), which are not intended to meet such
requirements. ISOs may be subject to certain special tax treatment (see "Federal
Income Tax Consequences" below). The terms of each option are determined by the
Compensation Committee, not inconsistent with the terms of the Plan, and are set
forth in a grant certificate or agreement which evidences the grant of an
option. In general, options are subject to the following terms and conditions:
o With respect to a grant of ISOs and NQSOs, the exercise price of such
option is determined by the Committee in its discretion at the time of the
grant, provided, however, the exercise price of such options must not be
less than the fair market value of the Common Stock on the date of grant.
o The time or times at which an option shall become exercisable are
determined by the Committee.
o The Committee will determine the option term. Options are generally
exercisable for a period of three months following a participant's
termination of employment, but only to the extent such options were
exercisable as of the date of such termination. If, however, the Committee
determines that such termination is for cause, then all outstanding options
will immediately terminate.
o Options that are ISOs will be subject to such additional terms as may be
necessary in order to qualify as ISOs.
o The Committee will determine the methods by which the exercise price for an
option may be paid or deemed to be paid, the form of such payment,
including, without limitation, cash, stock, other Awards or awards granted
under other Company plans or other property (including notes or other
contractual obligations of participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements, to the extent
permitted by applicable law), and the methods by which stock will be
delivered or deemed to be delivered to participants.
OTHER AWARDS. The following briefly describes the general terms of other
types of Awards that may be granted under the Plan:
o SARS. SARs entitle the participant to receive the excess of the fair market
value of a share on the date of exercise or other specified date over the
grant price of the SAR. The grant price of an SAR is determined by the
Committee; such prices generally may not be less than 100% of the fair
market value of the stock at the date of grant. The maximum term, methods
of exercise and settlement and other terms of SARs will be determined by
the Committee. In addition, "Limited SARs" may also be granted, which are
exercisable only in the event of a "change in control", on such terms as
the Committee may determine.
o RESTRICTED STOCK. Restricted stock is an Award of shares which may not be
transferred and which may be forfeited in the event of certain terminations
of employment prior to the end of a restriction period. The restriction
period is established by the Committee. Such an Award would entitle the
participant to all of the rights of a shareholder of the issuer, including
the right to vote the shares and the right to receive any dividends
thereon, unless otherwise determined by the Committee.
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<PAGE>
o DEFERRED SHARES. An award of Deferred Shares confers upon a participant the
right to receive shares at the end of a specified deferral period, subject
to possible forfeiture of the Award in the event of certain terminations of
employment prior to the end of a specified restriction period (which need
not be the same as the deferral period). Deferred stock Awards carry no
voting or dividend rights or other rights associated with stock ownership,
although dividend equivalents may be granted to provide for payments
equivalent to dividends.
o OTHER STOCK-BASED AWARDS, BONUS STOCK, AND AWARDS IN LIEU OF CASH
Obligations. The Plan authorizes the Committee to grant Awards that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to Common Stock. The Committee determines the
terms and conditions of such Awards, including consideration to be paid to
exercise Awards in the nature of purchase rights, the period during which
Awards will be outstanding, and forfeiture conditions and restrictions on
Awards. In addition, the Committee is authorized to grant shares as a bonus
free of restrictions, or to grant shares or other Awards in lieu of issuer
obligations to pay cash or deliver other property under other plans or
compensatory arrangements, subject to such terms as the Committee may
specify.
FAIR MARKET VALUE. For purposes of the Plan, fair market value means,
generally, the fair market value of stock, Awards, or other property determined
by such methods or procedures as are established from time to time by the
Committee, provided that (i) if the Common Stock is listed on a national
securities exchange or quoted in an interdealer quotation system, the fair
market value of the stock on a given date will be based upon the last sales
price or, if unavailable, the average of the closing bid and asked prices per
share of the stock on such date (or, if there was no trading or quotation in the
Stock on such date, on the next preceding date on which there was trading or
quotation) as reported in the Wall Street Journal (or other reporting service
approved by the Committee), (ii) the fair market value of Common Stock subject
to options granted effective upon commencement of an initial public offering of
the Common Stock is the initial public offering price of the shares so issued
and sold in the initial public offering, as set forth in the first final
prospectus used in such offering (the provisions of clause (i) notwithstanding),
and (iii) the fair market value of Common Stock prior to the date of the initial
public offering will be as determined by the Board.
CHANGE IN CONTROL. The Committee may, in its sole discretion, grant
Awards which provide that all conditions and restrictions relating to the
continued performance of services or the achievement of performance objectives
with respect to the exercisability or full enjoyment of an Award immediately
lapse upon a "change in control" (as such term may be defined by the Committee
in its sole discretion).
NON-TRANSFERABILITY. Awards granted under the Plan are generally
nontransferable, except by will or the laws of descent and distribution or to a
beneficiary in the event of a participant's death and, if the Award carries a
right to exercise, such right may be exercised only by the participant or his
guardian or legal representative. Notwithstanding the foregoing, the Committee
may, in its discretion, authorize all or a portion of the Award (other than an
ISO) to be granted to a participant to be on terms which permit transfer by such
participant to (i) the spouse, children or grandchildren of such participant
("Immediate Family Members"), (ii) a trust or trusts for exclusive benefit of
such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, (y) the Award agreement pursuant to which
such Awards are granted must be approved by the Committee and must expressly
provide for such transferability and (z) subsequent transfers of transferred
Awards shall be prohibited except those occurring by laws of descent and
distribution. Following transfer, any such Awards shall generally continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer.
28
<PAGE>
WITHHOLDING TAXES. The Company may withhold from any remuneration
otherwise payable to a participant, or require as a condition to delivery of any
shares of Common Stock pursuant to an Award that the participant remit to the
Company, an amount sufficient to satisfy any applicable tax withholding
requirements. The Committee may permit any withholding obligation to be
satisfied through the withholding of shares that would otherwise be issued in
connection with a grant or Award, or delivery of previously acquired shares of
Common Stock.
CHANGES IN COMMON STOCK. The Committee is authorized to adjust the
number and kind of shares (i) available under the Plan, (ii) subject to the
annual per-person limitation under the Plan, and (iii) subject to outstanding
Awards (including adjustments to exercise prices of options and other affected
terms of Awards) in the event that a dividend or other distribution (whether in
cash, Common Stock, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event affects the
Common Stock such that an adjustment is appropriate in order to prevent dilution
or enlargement of the rights of participants under the Plan. The Committee is
also authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or to changes in applicable laws, regulations,
or accounting principles.
AMENDMENTS TO THE PLAN AND OUTSTANDING AWARDS. The Board may amend or
terminate the Plan or the Committee's authority to grant Awards without the
consent of shareholders or participants, except shareholder approval must be
obtained if required by law or regulation or under the rules of any stock
exchange or automated quotation system on which the Common Stock is then listed
or quoted, and the Board may, in its discretion, seek shareholder approval in
any circumstance in which it deems such approval advisable. In a similar manner,
the Committee may waive any conditions or rights under, or amend or terminate,
any Award previously granted and any Award agreement. In either case, however,
no amendment or termination of the Plan or an Award may materially impair the
rights of a participant under an outstanding Award without the consent of such
participant.
OTHER PLAN PROVISIONS. No participant will have any rights of a
shareholder with respect to any shares of Common Stock covered by an option
until such participant has exercised the option, paid the option exercise price
and been issued such shares. The grant of an Award under the Plan shall not be
construed as conferring upon any participant a right to remain in the employ of
the Company or restrict the right of the Company to terminate the employee.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of the federal income tax
consequences of options granted under the Plan. It does not purport to be
complete. In particular, this general description does not discuss the
applicability of the income tax laws of any state or foreign country. The
following tax analysis is intended to summarize certain relevant income tax
consequences of the Plans in effect as of the date of this Proxy Statement.
Legislation may be enacted and regulations may be issued in the future which
create different tax consequences. In view of the individual nature of tax
consequences, individuals are urged to consult their own tax advisors regarding
the application of the tax laws to their particular situations.
29
<PAGE>
OPTIONS. There are no federal income tax consequences to participants or
the Company upon the grant of an option under the Plan. Generally, upon the
exercise of an NQSO, a participant will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock at
the time of exercise over the exercise price of the option, and the Company
generally will be entitled to a corresponding federal income tax deduction. Upon
the sale of shares acquired by exercise of an option, the participant generally
will realize a capital gain or loss, but the Company is not entitled to any tax
deduction in connection with such sale. At present, capital gain on the sale of
property held for over 12 months is taxable at a maximum rate of 20% and capital
gain on the sale of a property held for one year or less is taxable at ordinary
income rates.
Participants will not be subject to federal income taxation upon the
exercise of ISOs granted under the Plans, and the Company will not be entitled
to a federal income tax deduction by reason of such exercise. However, the
amount by which the fair market value of the shares at the time of exercise
exceeds the exercise price is a tax adjustment item for purposes of calculating
the participant's alternative minimum taxable income. A sale of shares acquired
by exercise of an ISO that does not occur within one year after the exercise or
within two years after the date of grant generally will result in the
recognition of capital gain or loss in the amount of the difference between the
amount realized on the sale and the exercise price, and the Company will not be
entitled to any tax deduction in connection with such sale.
If such sale occurs within one year from the date of exercise of the ISO
or within two years from the date of the ISO grant (a "disqualifying
disposition"), the participant generally will recognize ordinary compensation
income equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise of the options over the exercise price, or (ii)
the excess of the amount realized on the sale of the shares over the exercise
price. In the case of a disqualifying disposition where a loss, if sustained,
would not be recognized (i.e., a gift), the participant will recognize ordinary
income equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price. Any amount realized on a disqualifying
disposition in excess of the amount treated as ordinary compensation income (or
any loss realized) will be a capital gain (or loss). The Company generally will
be entitled to a tax deduction on a disqualifying disposition corresponding to
the ordinary compensation income recognized by the participant.
If a participant were to pay the exercise price of either an NQSO or an
ISO by surrender of shares, the participant would not realize additional gain or
loss because of the surrender, but (i) the number of new shares received equal
to the number of shares surrendered will retain the existing tax basis and
holding period of the surrendered shares; (ii) if the option so exercised is an
NQSO, the amount of both the ordinary compensation income to be recognized by
the participant and the deduction to be taken by the Company will be equal to
the fair market value of the additional shares received (less any cash paid upon
such exercise), and the participant's tax basis in these additional shares will
be equal to their fair market value; (iii) if the option so exercised is an ISO,
the additional shares received will have a tax basis of zero unless cash was
paid to complete such exercise, in which case the participant's tax basis in the
additional shares received will be equal to the cash paid by the participant
upon such exercise; and (iv) the participant's holding period for the additional
shares received will begin on the day after the date of exercise for capital
gain purposes (regardless of the type of option being exercised) and will begin
upon the date of transfer of the additional shares to the participant for
purposes of the ISO period requirements. If, in exercising an ISO, a participant
were to surrender shares received upon exercise of an ISO before the applicable
incentive stock option holding period for such shares has been satisfied, the
surrender of such shares will be treated as a disqualifying disposition, and the
rules
30
<PAGE>
governing such dispositions, as described above, will apply to determine the
amount of the participant's income and the Company's deduction.
TAX CONSEQUENCES OF OTHER AWARDS. With respect to Awards other than
options, the tax consequences are as follows: The tax treatment of SARs
generally is the same as that of NQSOs (with the participant treated as paying
no exercise price). With respect to Awards that may be settled either in cash or
Common Stock or other property that is not restricted as to transferability or
not subject to a substantial risk of forfeiture, the participant must generally
recognize ordinary income equal to the cash or the fair market value of stock or
other property actually received. The Company will be entitled to a deduction
for the same amount. With respect to Awards involving Common Stock or other
property that is restricted as to transferability and subject to a substantial
risk of forfeiture, the participant must generally recognize ordinary income
equal to the fair market value of the shares or other property received at the
first time the shares or other property become transferable or not subject to a
substantial risk of forfeiture, whichever occurs earlier. The Company will be
entitled to a deduction in an amount equal to the ordinary income recognized by
the participant. A participant may elect to be taxed at the time of receipt of
shares or other property rather than upon lapse of restrictions on
transferability or the substantial risk of forfeiture by making an "83(b)
election" within 30 days of receipt, but if the participant subsequently
forfeits such shares or property he would not be entitled to any tax deduction,
including as a capital loss, for the value of the shares or property on which he
previously paid tax.
IMPORTANCE OF CONSULTING TAX ADVISER. The information set forth above is
a summary only and does not purport to be complete. In addition, the information
is based upon current federal income tax rules and therefore is subject to
change when those rules change. Moreover, because the tax consequences to any
optionee may depend on his or her particular situation, each optionee should
consult his or her tax adviser as to the Federal, state, local and other tax
consequences of the grant or exercise of an option or the disposition of Common
Stock acquired on exercise of an option.
SECURITIES ACT REGISTRATION; RESTRICTIONS ON RESALE
The Company has registered 1,650,000 shares of Common Stock available
for issuance under the Plan pursuant to a Registration Statement on Form S-8
filed with the Securities and Exchange Commission.
The federal securities laws prohibit sales of shares of Common Stock by
persons who possess material, non-public, adverse information about the Company.
Therefore, shares acquired under the Plan should not be resold by a participant
or other person who possesses such information. The Company from time to time
notifies employees who may have access to material, non-public information that
such persons should refrain from transactions involving Company stock for a
specified period. During such a period, a participant may be required to not
sell Common Stock or otherwise engage in transactions under the Plan, even if he
or she does not in fact possess material, non-public information regarding the
Company.
In addition, affiliates (as such term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act")) may resell the shares
acquired by them to the public only pursuant to Rule 144 or other applicable
exemptions from the registration requirements of the Securities Act, or pursuant
to a registration statement under the Securities Act (if any). Compliance with
Rule 144 for an affiliate's resales requires, among other things, that, at the
time of any offer or sale, certain information regarding the Company be on file
with the SEC and up to date; that the affiliate's shares be sold only through a
broker or to a market maker; that the amount of sales by the affiliate in any
three-month period
31
<PAGE>
under Rule 144 be limited as prescribed in the Rule; and that sales in excess of
certain minimum amounts be reported through the filing of a Form 144 with the
SEC. Because shares acquired under the Plan will generally not be considered to
be "restricted securities" for purposes of Rule 144, the one-year holding period
imposed by Rule 144(d) will generally not apply to resales of shares acquired
under the Plan.
Directors and officers of the Company are also subject to potential
short-swing profits liability under Section 16(b) of the Exchange Act with
respect to purchases and sales of shares of Common Stock. The Company intends
that grants of Awards under the Plans will be exempt from Section 16(b) by
virtue of Rule 16b-3 under the Exchange Act, and an exercise of an Award at a
time that the exercise price is not greater than the fair market value of Common
Stock will be exempt under Rule 16b-6(b). Under current SEC rules, sales of
shares in the open market will in most cases not be exempt, although the grant
and exercise of an option under the Plan in most cases will be exempt.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDED AND
RESTATED 1999 LONG-TERM INCENTIVE PLAN.
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PROPOSAL TO ADOPT AN AMENDED AND RESTATED
NON-EMPLOYEE DIRECTORS' STOCK PLAN
(PROPOSAL NO. 3)
GENERAL
On May 14, 1997, the Board of Directors of the Company adopted the
Directors' Plan. The Directors' Plan was also approved by the shareholders of
the Company on May 14, 1997. The Directors' Plan provides for: (i) the automatic
grant to each Participant serving at the commencement of the initial public
offering of an option to purchase 10,000 Shares; and thereafter (ii) the
automatic grant to each Participant of an option to purchase 10,000 Shares upon
such person's initial election as a director or appointment as an Advisory
Director. In addition, the Directors' Plan provides for an automatic annual
grant to each Participant of an option to purchase 5,000 Shares at each annual
meeting of shareholders following the Offering; provided, however, that if the
first annual meeting of shareholders following a person's initial election as a
non-employee director or appointment by the Board as an Advisory Director is
within three months of the date of such election or appointment, such person
will not be granted an option to purchase 5,000 Shares at such annual meeting.
These options will have an exercise price per Share equal to the fair market
value of a Share at the date of grant. Options granted under the Directors' Plan
will expire at the earlier of 10 years from the date of grant or one year after
termination of service as a director or advisor, and options will be immediately
exercisable. In addition, the Directors' Plan permits Participants to elect to
receive, in lieu of cash directors' fees, Shares or credits representing
"Deferred Shares" that may be settled at future dates, as elected by the
Participants. The number of Shares or Deferred Shares received will be equal to
the number of Shares which, at the date the fees would otherwise be payable,
will have an aggregate fair market value equal to the amount of such fees.
The Company has reserved 100,000 shares of Common Stock for use in
connection with the Directors' Plan. On August 3, 1999, the Company's Board of
Directors authorized an increase in the total number of Shares that my be
reserved and available for issuance under the Directors' Plan to 200,000 shares
of Common Stock. The Board believes that such increase is necessary to have
sufficient Shares available to grant to Participants in order to continue to
attract and retain highly qualified persons to serve as non-employee directors.
The proposed amendment to increase the number of Shares available for grants
under the Directors' Plan is subject to shareholder approval. The Directors'
Plan, as so amended is referred to hereinafter as the Amended and Restated
Directors' Stock Plan or the "Directors' Plan."
Shareholder approval of the Directors' Plan is required (i) in order for
the Directors' Plan to be eligible under the "plan lender" exemption from the
margin requirements of Regulation G promulgated under the Exchange Act, and (ii)
by the rules of the Nasdaq Stock Market.
AWARDS GRANTED UNDER THE DIRECTORS' PLAN
Messrs. Blutinger, Bullock, Zanzotto and Potter each received options to
purchase 10,000 Shares upon consummation of the initial public offering, at an
exercise price of $14.00 per Share. During 1998, following the 1998 Annual
Meeting of Shareholders, each of Messrs. Blutinger, Bullock, Zanzotto and Potter
were granted options under the Directors' Plan to purchase 5,000 Shares each, at
an exercise price of $31.125 per Share. In addition, as compensation for
attendance at meetings of the Board of Directors or committees thereof, an
aggregate of 5,601 shares of Common Stock have been awarded under the Directors'
Plan to Messrs. Blutinger, Bullock, Zanzotto and Potter, with a value per share
ranging from
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<PAGE>
$8.625 to $35.25. All options and Shares granted under the Directors' Plan have
been issued at the fair market value of the Common Stock at the date of the
grant.
DESCRIPTION OF THE DIRECTORS' PLAN
Set forth below is a brief description of the material terms of the
Directors' Plan. Reference is made to the Complete text of the Amended and
Restated Directors' Stock Plan attached as Exhibit B and the description
contained herein is qualified in its entirety by such reference.
ELIGIBILITY. Only Non-Employee Directors (as defined above) are eligible
to be granted options or to be paid fees in the form of Common Stock or Deferred
Shares pursuant to the Directors' Plan.
PURPOSE. The purpose of the Directors' Plan is to promote ownership by
the Participant of a greater proprietary interest in the Company, thereby
aligning such Participant's interests more closely with the interests of
shareholders of the Company, and to assist the Company in attracting and
retaining highly qualified persons to serve as directors.
ADMINISTRATION. The Directors' Plan is administered by the Board of
Directors of the Company. Any action by the Company's Board of Directors
relating to the Directors' Plan will be taken only if, in addition to any other
required vote, such action is approved by the affirmative vote of a majority of
the directors who are not then eligible to participate in the Directors' Plan.
SHARES RESERVED UNDER THE DIRECTORS' PLAN. A total of 200,000 shares of
Common Stock are reserved and available for issuance under the Directors' Plan,
subject to adjustment as described below. Such shares may be authorized and
unissued shares, treasury shares or shares acquired in the market for the
account of the Participant. For purposes of the Directors' Plan, Shares that may
be purchased upon exercise of an option or delivered in settlement of Deferred
Shares will not be considered to be available after such option has been granted
or Deferred Shares credited, except for purposes of issuance in connection with
such option or Deferred Share; provided, however, that if any option granted
under the Directors' Plan expires for any reason without having been exercised
in full, the Shares subject to the unexercised portion of such option will again
be available for issuance under the Directors' Plan. The aggregate number and
kind of shares issuable under the Directors' Plan, the number and kind of shares
subject to each automatic option grant, the number and kind of shares subject to
outstanding options and the exercise price thereof, the kind of shares to be
issued in payment of fees and the number and kind of shares to be issued in
settlement of Deferred Shares will be appropriately adjusted in the event of a
recapitalization, reorganization, merger, consolidation, spin-off, combination,
repurchase, exchange of shares or other securities of the Company, stock split,
stock dividend, certain other extraordinary dividends, liquidation, dissolution,
or other similar corporate transaction or event affecting Common Stock, in order
to prevent dilution or enlargement of the Participant's rights under the
Directors' Plan.
OPTIONS. The terms of each option are determined by the Compensation
Committee, not inconsistent with the terms of the Directors' Plan, and are set
forth in a grant certificate or agreement which evidences the grant of an
option. In general, options are subject to the following terms and conditions:
o Options are non-qualified stock options having an exercise price equal tO
100% of the fair market value of the Common Stock at the date of grant of
the option. Non-Employee Directors are not required to pay any cash
consideration at the time of grant of options.
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o Options will expire at the earliest of (i) ten years after the date of
GRANT or (ii) one year after the date the Participant ceases to serve as a
director of the Company for any reason.
o Options are exercisable immediately upon their grant.
o Upon exercise of an option, the exercise price must be paid in full iN CASH
(including by check) or by delivery of shares of Common Stock already owned
by the participant having an aggregate fair market value at the date of
exercise equal to the exercise price being paid, or by a combination of
cash and Shares.
PAYMENT OF NON-EMPLOYEE DIRECTORS FEES IN THE FORM OF COMMON STOCK OR
DEFERRED SHARES. The Directors' Plan permits a Participant to elect to be paid
directors fees otherwise payable in cash in the form of shares of Common Stock
or "Deferred Shares". The interest of each Participant in any fees paid in the
form of Shares or Deferred Shares (and any deferral account relating thereto) at
all times will be nonforfeitable.
o PAYMENT IN COMMON STOCK. A Participant who elects to be paid fees in thE
FORM of shares of Common Stock will be issued, as of the date the fees
otherwise would have been paid, a number of shares having an aggregate fair
market value at that date equal to the amount of such fees then payable. If
the Shares are to be credited to an account maintained by the Participant
and to the extent reasonably practicable without requiring actual issuance
of fractional Shares, the Company will cause fractional Shares to be
credited to the Participant's account. If fractional Shares are not so
credited, any part of the Participant's fees not paid in the form of whole
Shares will be payable in cash to the Participant.
o PAYMENT IN DEFERRED SHARES. Deferred Shares represent unfunded obligatiONS
OF the Company to deliver Shares to the Participant at a specified future
date or dates, which may include dates after termination of service as a
non-employee director. If a Participant elects to receive fees in the form
of Deferred Shares, the Company will credit to such Participant's deferral
account, at the date the fees would otherwise be payable, a number of
shares of Deferred Shares determined by dividing the amount of such fees
then payable by the fair market value of a share of Common Stock at such
date. The amount of Deferred Shares so credited shall include fractional
Shares calculated to at least three decimal places. The Company will settle
the Participant's deferral account by delivering to the Participant (or his
or her beneficiary) a number of shares of Common Stock equal to the number
of whole shares of Deferred Shares then credited to his or her deferral
account (or a specified portion in the event of installment settlement),
together with cash in lieu of any fractional Share remaining. Whenever
dividends are declared and paid or distributions made with respect to
Shares, a Participant to whom Deferred Shares are then credited to his or
her deferral account will receive, as dividend equivalents, an amount equal
in value to the per-share amount of the dividend paid or value of the
property distributed multiplied by the number of shares of Deferred Shares
(including any fractional share) credited to such account as of the record
date for such dividend or distribution. Such dividend equivalents will be
credited as a number of additional shares of Deferred Shares determined by
dividing the aggregate value of such dividend equivalents by the fair
market value of a Share at the payment date of the dividend or
distribution.
o ELECTIONS. Elections to be paid fees otherwise payable in cash in the fORM
OF shares of Common Stock or Deferred Shares will be subject to the
following rules and procedures (subject to such limitations and changes as
may be specified from time to time by counsel to the Company):
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o Election forms must be returned to the Secretary of the Company no
later than December 31 of the year preceding the year for which fees
are to be paid in Common Stock or Deferred Shares. However, any newly
elected or appointed Non-Employee Director may file an election for
any year not later than 30 days after the date the Non-Employee
Director first became a Non-Employee Director.
o After December 31, elections made for the following year are
irrevocable. Elections made in one year will automatically continue
for each succeeding year unless changed or revoked by the Non-Employee
Director before December 31 of the preceding year.
o Election forms must specify the percentage of fees payable for a year
to be paid as Common Stock or Deferred Shares.
o Election forms must specify the period of deferral for Deferred
Shares.
FAIR MARKET VALUE. For purposes of the Directors' Plan, fair market
value per share as of any given date generally means the last sales price of a
share of Common Stock reported in THE WALL STREET JOURNAL for such date (or, if
no trading or quotation occurred on such date, the next preceding date on which
there wads trading or quotation), provided that the "fair market value" of a
share subject to options granted effective on the date on which the Company
commences an initial public offering will be the price of the shares so issued
and sold, as set forth in the first final prospectus used in such initial public
offering.
NON-TRANSFERABILITY. Unless otherwise permitted by the Board of
Directors of the Company, options, Deferred Shares, and any other rights under
the Directors' Plan generally will not be transferable by a Participant
otherwise than by will or by the laws of descent and distribution or to a
designated beneficiary in the event of death, and are exercisable during the
Non-Employee Director's lifetime only by the Non-Employee Director or his or her
guardian or legal representative. Notwithstanding the foregoing, the
Compensation Committee may, in its discretion, authorize all or a portion of the
options, Deferred Shares or other right under the Directors' Plan granted to a
Non-Employee Director to be on terms which permit transfer by such Non-Employee
Director to (i) the spouse, children or grandchildren of such Non-Employee
Director ("Immediate Family Members"), (ii) a trust or trusts for exclusive
benefit of such Immediate Family Members, or (iii) a partnership in which such
Immediate Family Members are the only partners, provided that (x) there may be
no consideration for any such transfer, (y) the option, Deferred Shares or other
right agreement pursuant to which such awards are granted must be approved by
the Board and must expressly provide for such transferability, and (z)
subsequent transfers of transferred options, Deferred Shares or other rights
shall be prohibited except those occurring by laws of descent and distribution.
Following transfer, any such awards shall continue to be subject to the same
terms and conditions as were applicable immediately prior to the transfer,
provided, that for purposes of the Directors' Plan, the term Participant shall
be deemed to refer to the transferee. Options, Deferred Shares, and any other
right under the Directors' Plan may not be pledged, mortgaged, hypothecated or
otherwise encumbered, and shall not be subject to the claims of creditors.
COMPLIANCE WITH LAWS AND OBLIGATIONS. Under the Directors' Plan, the
Company is not obligated to issue or deliver Common Stock in connection with an
option exercise, in payment of Non-
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Employee Directors' fees, or in settlement of Deferred Shares, or take any other
action, until the Company is satisfied that any and all laws, regulations, and
other obligations of the Company, including the federal and state securities
laws, have been satisfied in full.
AMENDMENTS TO THE DIRECTORS' PLAN AND OUTSTANDING AWARDS. The Board of
Directors of the Company may amend, alter, suspend, discontinue or terminate the
Directors' Plan or the authority to automatically grant options or to issue
Common Stock or Deferred Shares under the Directors' Plan without the consent of
shareholders, except shareholder approval must be obtained if required by law or
regulation or under applicable stock exchange rules, and the Board of Directors
of the Company may otherwise seek shareholder approval in its discretion. No
action of the Board of Directors of the Company may, however, materially impair
the rights of a Non-Employee Director with respect to an outstanding option or
outstanding Deferred Shares without the consent of such Non-Employee Director.
The Directors' Plan will terminate at such time as no shares remain available
for issuance under the Directors' Plan and the Company and Non-Employee
Directors have no further rights or obligations under the Directors' Plan,
unless the Directors' Plan is terminated earlier by the Board of Directors of
the Company.
OTHER PLAN PROVISIONS. The grant of an option under the Directors' Plan
shall not be construed as conferring upon any Non-Employee Director (i) a right
to continue to serve as a Non-Employee Director of the Company or (ii) any
rights of a shareholder of the Company unless and until Shares are in fact
issued to such Non-Employee Director, or in the case of an option, such option
is validly exercised in accordance with the provisions and terms of the
Directors' Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of the federal income tax
consequences of options granted under the Directors' Plan. It does not purport
to be complete. In particular, this general description does not discuss the
applicability of the income tax laws of any state or foreign country. The
following tax analysis is intended to summarize certain relevant income tax
consequences of the Directors' Plans in effect as of the date of this Proxy
Statement. Legislation may be enacted and regulations may be issued in the
future which create different tax consequences. In view of the individual nature
of tax consequences, individuals are urged to consult their own tax advisors
regarding the application of the tax laws to their particular situations.
OPTIONS. The grant of an option will create no tax consequences for the
Non-Employee Director or the Company. Upon exercise of an option, the
Non-Employee Director generally will recognize ordinary income equal to the fair
market value of the Common Stock acquired on the date of exercise minus the
exercise price, and the Company will be entitled to a deduction equal to the
amount recognized as ordinary income by the Non-Employee Director. A sale of
shares acquired upon the exercise of an option generally will result in capital
gain or loss measured by the difference between the sale price and the
Non-Employee Director's tax basis in the shares sold (the tax basis generally
will equal the exercise price plus the amount recognized as ordinary income). At
present, capital gain on the sale of property held for over 12 months is taxable
at a maximum rate of 20% and capital gain on the sale of a property held for one
year or less is taxable at ordinary income rates.
Payment of the exercise price of an option by delivery of previously
acquired shares of Common Stock generally will not result in recognition of
additional ordinary income by the Non-Employee Director. In such case, the
Non-Employee Director's tax basis and capital gains holding period in each
delivered share will carry over to a share acquired upon exercise of the option.
Thus, such a delivery will
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not be a disposition that triggers capital gains or other taxation. The
Non-Employee Director's tax basis in each option share received in excess of the
number of shares delivered will be equal to the fair market value of such
shares, which amount will be taxable as ordinary income to the optionee.
TAX CONSEQUENCES OF OTHER AWARDS. If a Non-Employee Director is paid
fees in the form of Common Stock, he or she will recognize ordinary income equal
to the fair market value of the Common Stock at the date of payment of the fees.
If a Non-Employee Director is paid fees in the form of Deferred Shares, he or
she generally will recognize ordinary income when Common Stock is issued to the
Non-Employee Director in settlement of the Deferred Shares in an amount equal to
the fair market value of the Common Stock acquired at that date of settlement.
The Non-Employee Director's tax basis in shares paid to him in payment of fees
or in settlement of Deferred Shares generally will equal the amount recognized
by the Non-Employee Director as ordinary income in connection with the
acquisition of such shares. Generally, the Company will be entitled to a tax
deduction which, if taken by the Company in the year ordinary income is
recognized by the Non-Employee Director, should be equal to the amount of
ordinary income recognized by the Non-Employee Director. There will be no tax
consequences to the Company from a Non-Employee Director's sale of shares
acquired in payment of fees or settlement of Deferred Shares under the
Directors' Plan. A later sale of such shares will generally result in a capital
gain or loss to the Non-Employee Director.
IMPORTANCE OF CONSULTING TAX ADVISER. The information set forth above is
a summary only and does not purport to be complete. In addition, the information
is based upon current federal income tax rules and therefore is subject to
change when those rules change. Moreover, because the tax consequences to any
optionee may depend on his or her particular situation, each optionee should
consult his or her tax adviser as to the Federal, state, local and other tax
consequences of the grant or exercise of an option or the disposition of Common
Stock acquired on exercise of an option.
SECURITIES ACT REGISTRATION; RESTRICTIONS ON RESALE
The Company has registered 100,000 shares of Common Stock available for
issuance under the Directors' Plan pursuant to a Registration Statement on Form
S-8 filed with the Securities and Exchange Commission.
The federal securities laws prohibit sales of shares of Common Stock by
persons who possess material, non-public, adverse information about the Company.
Therefore, shares acquired under the Directors' Plan should not be resold by a
Non-Employee Director or other person who possesses such information. The
Company from time to time notifies employees who may have access to material,
non-public information that such persons should refrain from transactions
involving Company stock for a specified period. During such a period, a
Non-Employee Director may be required to not sell Common Stock or otherwise
engage in transactions under the Directors' Plan, even if he or she does not in
fact possess material, non-public information regarding the Company.
In addition, affiliates (as such term is defined in Rule 144 under the
Securities Act may resell the shares acquired by them to the public only
pursuant to Rule 144 or other applicable exemptions from the registration
requirements of the Securities Act, or pursuant to a registration statement
under the Securities Act (if any). Generally, a Non-Employee Director of the
Company will be considered to be an affiliate. Compliance with Rule 144 for an
affiliate's resales requires, among other things, that, at the time of any offer
or sale, certain information regarding the Company be on file with the SEC and
up to date; that the affiliate's shares be sold only through a broker or to a
market maker; that the amount of sales by the affiliate in any three-month
period under Rule 144 be limited as prescribed in the Rule; and
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that proposed sales in excess of certain minimum amounts be reported through the
filing of a Form 144 with the SEC. Because shares acquired under the Directors'
Plan will generally not be considered to be "restricted securities" for purposes
of Rule 144, the one-year holding period imposed by Rule 144(d) will not apply
to resales of Shares acquired under the Directors' Plan. The Company's transfer
agent may in some cases require the Company's counsel to give an opinion that
all of the requirements of Rule 144 are being complied with by the affiliate
selling the shares.
Non-Employee Directors are also subject to potential short-swing profits
liability under Section 16(b) of the Exchange Act with respect to purchases and
sales of shares of Common Stock. The Company intends that grants of options and
the payment of Common Stock and Deferred Shares in lieu of cash fees under the
Directors' Plan will be exempt from Section 16(b) by virtue of Rule 16b-3 under
the Exchange Act, and an exercise of an option be exempt under both Rule 16b-3
and Rule 16b-6(b). Under current SEC rules, sales of Shares in the open market
will in most cases not be exempt, although the grant and exercise of an option
under the Directors' Plan in most cases will be exempt.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDED AND
RESTATED DIRECTORS' STOCK PLAN.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent public accountants, served
as the Company's independent public accountants for the calendar year ended
December 31, 1998. The Board of Directors, on the recommendation of the
Company's Audit Committee, has selected Arthur Andersen LLP as the Company's
independent public accountants for the 1999 calendar year. One or more
representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting. Such representatives will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions from shareholders.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's Annual Meeting of Shareholders to be
held in 2000 must deliver a proposal in writing to the Company's principal
executive offices no later then April 21, 2000. Such proposals also will need to
comply with Securities and Exchange Commission regulations regarding the
inclusion of shareholder proposals in company sponsored proxy materials.
AVAILABILITY OF FORM 10-K ANNUAL REPORT
A copy of the Company's Annual Report, including its report on Form 10-K
for the year ended December 31, 1998, as filed with the Securities and Exchange
Commission, is being mailed to shareholders simultaneously with this Proxy
Statement.
By Order of the Board of Directors,
JOSEPH V. VITTORIA
Chairman of the Board and
Chief Executive Officer
Delray Beach, Florida
August 18, 1999
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EXHIBIT A
TRAVEL SERVICES INTERNATIONAL, INC.
AMENDED AND RESTATED 1999 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the Amended and Restated 1999 Long-Term
Incentive Plan (the "Plan") of Travel Services International, Inc., a Florida
corporation (the "Company"), is to advance the interests of the Company and its
shareholders by providing a means to attract, retain and reward executive
officers, employee directors and other key employees and consultants of and
service providers to the Company and its subsidiaries (including consultants and
others providing services of substantial value) and to enable such persons to
acquire or increase a proprietary interest in the Company, thereby promoting a
closer identity of interests between such persons and the Company's
shareholders.
2. DEFINITIONS. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards are set forth in Section 6 of the Plan. Such awards, together
with any other right or interest granted to a Participant under the Plan, are
termed "Awards." For purposes of the Plan, the following additional terms shall
be defined as set forth below:
(a) "Award Agreement" means any written agreement, contract,
notice or other instrument or document evidencing an Award.
(b) "Beneficiary" shall mean the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations thereto.
(e) "Committee" means the Compensation Committee of the Board, or
such other Board committee as may be designated by the Board to administer the
Plan; PROVIDED, HOWEVER, that, to the extent necessary to comply with Rule
16b-3, the Committee shall consist of two or more directors, each of whom is a
"non-employee director" within the meaning of Rule 16b-3.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include rules thereunder and successor provisions and rules
thereto.
(g) "Fair Market Value" means, with respect to Stock, Awards, or
other property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, PROVIDED, HOWEVER, that (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair
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Market Value of such Stock on a given date shall be based upon the last sales
price or, if unavailable, the average of the closing bid and asked prices per
share of the Stock on such date (or, if there was no trading or quotation in the
Stock on such date, on the next preceding date on which there was trading or
quotation) as reported in the WALL STREET JOURNAL (or other reporting service
approved by the Committee), (ii) the "Fair Market Value" of Stock subject to
Options granted effective upon commencement of the Initial Public Offering shall
be the Initial Public Offering price of the shares so issued and sold in the
Initial Public Offering, as set forth in the first final prospectus used in such
offering (the provisions of clause (i) notwithstanding) and (iii) the "Fair
Market Value" of Stock prior to the date of the Initial Public Offering shall be
as determined by the Board of Directors.
(h) "Initial Public Offering" shall mean an initial public
offering of shares of Stock in a firm commitment underwriting registered with
the Securities and Exchange Commission in compliance with the provisions of the
Securities Act of 1933, as amended.
(i) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(j) "Participant" means a person who, at a time when eligible
under Section 5 hereof, has been granted an Award under the Plan.
(k) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(l) "Stock" means the Common Stock, $.01 par value, of the
Company and such other securities as may be substituted for Stock or such other
securities pursuant to Section 4.
3. ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select persons to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to
each such person;
(iii) to determine the number of Awards to be granted, the number
of shares of Stock to which an Award will relate, the terms and
conditions of any Award granted under the Plan (including, but not
limited to, any exercise price, grant price or purchase price, any
restriction or condition, any schedule for lapse of restrictions or
conditions relating to transferability or forfeiture, vesting,
exercisability or settlement of an Award, and waivers or accelerations
thereof, performance conditions relating to an Award (including
performance conditions relating to Awards not intended to be governed by
Section 7(f) and waivers and modifications thereof), based in each case
on such considerations as the Committee shall determine), and all other
matters to be determined in connection with an Award;
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(iv) to determine whether, to what extent and under what
circumstances an Award may be settled, or the exercise price of an Award
may be paid, in cash, Stock, other Awards, or other property, or an
Award may be cancelled, forfeited, or surrendered;
(v) to determine whether, to what extent and under what
circumstances cash, Stock, other Awards or other property payable with
respect to an Award will be deferred either automatically, at the
election of the Committee or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need
not be identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary
or advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan and
any Award, rules and regulations, Award Agreement or other instrument
hereunder; and
(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Unless authority
is specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, subsidiaries of the Company, Participants, any
person claiming any rights under the Plan from or through any Participant and
shareholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
by modified by the Committee (subject to Section 8(e)). The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to Participants
not subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, to the extent permitted under Rule 16b-3, if
applicable, and other applicable law.
(c) LIMITATION OF LIABILITY. Each member of the Committee shall
be entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be
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fully indemnified and protected by the Company with respect to any such action,
determination or interpretation.
4. STOCK SUBJECT TO PLAN.
(a) AMOUNT OF STOCK RESERVED. The total amount of Stock that may
be subject to outstanding awards, determined immediately after the grant of any
Award, shall not exceed 18% of the total number of shares of Stock outstanding
at the time of such grant. Notwithstanding the foregoing, the number of shares
that may be delivered upon the exercise of ISOs shall not exceed 100,000,
subject in each case to adjustment as provided in Section 4(c), and the number
of shares that may be delivered as Restricted Stock and Deferred Stock (other
than pursuant to an Award granted under Section 7(f)) shall not in the aggregate
exceed 100,000, PROVIDED, HOWEVER, that shares subject to ISOs, Restricted Stock
or Deferred Stock Awards shall not be deemed delivered if such Awards are
forfeited, expire or otherwise terminate without delivery of shares to the
Participant. If an Award valued by reference to Stock may only be settled in
cash, the number of shares to which such Award relates shall be deemed to be
Stock subject to such Award for purposes of this Section 4(a). Any shares of
Stock delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued shares, treasury shares or shares acquired in the market
for a Participant's Account.
(b) ANNUAL PER-PARTICIPANT LIMITATIONS. During any calendar
year, no Participant may be granted Awards that may be settled by delivery of
more than 250,000 shares of Stock, subject to adjustment as provided in Section
4(c). In addition, with respect to Awards that may be settled in cash (in whole
or in part), no Participant may be paid during any calendar year cash amounts
relating to such Awards that exceed the greater of the Fair Market Value of the
number of shares of Stock set forth in the preceding sentence at the date of
grant or the date of settlement of Award. This provision sets forth two separate
limitations, so that Awards that may be settled solely by delivery of Stock will
not operate to reduce the amount of cash-only Awards, and vice versa;
nevertheless, Awards that may be settled in Stock or cash must not exceed either
limitation.
(c) ADJUSTMENTS. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Stock or
other property), recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase or exchange of Stock or
other securities, liquidation, dissolution, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock reserved and
available for Awards under Section 4(a), including shares reserved for the ISOs
and Restricted and Deferred Stock, (ii) the number and kind of shares of Stock
specified in the Annual Per-Participant Limitations under Section 4(b), (iii)
the number and kind of shares of outstanding Restricted Stock or other
outstanding Award in connection with which shares have been issued, (iv) the
number and kind of shares that may be issued in respect of other outstanding
Awards and (v) the exercise price, grant price or purchase price relating to any
Award (or, if deemed appropriate, the Committee may make provision for a cash
payment with respect to any outstanding Award). In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Company or any subsidiary or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles. The foregoing notwithstanding, no adjustments
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shall be authorized under this Section 4(c) with respect to ISOs or SARs in
tandem therewith to the extent that such authority would cause the Plan to fail
to comply with Section 422(b)(1) of the Code, and no such adjustment shall be
authorized with respect to Options, SARs or other Awards subject to Section 7(f)
to the extent that such authority would cause such Awards to fail to qualify as
"qualified performance-based compensation" under Section 162(m)(4)(C) of the
Code.
5. ELIGIBILITY. Executive officers and other key employees of the
Company and its subsidiaries, including any director or officer who is also such
an employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are eligible
to be granted Awards under the Plan. In addition, a person who has been offered
employment by the Company or its subsidiaries is eligible to be granted an Award
under the Plan, provided that such Award shall be cancelled if such person fails
to commence such employment, and no payment of value may be made in connection
with such Award until such person has commenced such employment. The foregoing
notwithstanding, no member of the Committee shall be eligible to be granted
Awards under the Plan.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of employment
or service of the Participant. Except as provided in Section 6(f), 6(h), or
7(a), or to the extent required to comply with requirements of the Delaware
General Corporation Law that lawful consideration be paid for Stock, only
services may be required as consideration for the grant (but not the exercise)
of any Award.
(b) OPTIONS. The Committee is authorized to grant Options
(including "reload" options automatically granted to offset specified exercises
of Options) on the following terms and conditions ("Options"):
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
PROVIDED, HOWEVER, that, except as provided in Section 7(a), such
exercise price shall be not less than the Fair Market Value of a share
on the date of grant of such Option.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part, the methods by which such exercise price may be paid or deemed to
be paid, the form of such payment, including, without limitation, cash,
Stock, other Awards or awards granted under other Company plans or other
property (including notes or other contractual obligations of
Participants to make payment on a deferred basis, such as through
"cashless exercise" arrangements, to the extent permitted by applicable
law), and the methods by which Stock will be delivered or deemed to be
delivered to Participants.
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(iii) ISOS. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the effective date of the Plan.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs shall be interpreted, amended, or altered, nor
shall any discretion or authority granted under the Plan be exercised,
so as to disqualify either the Plan or any ISO under Section 422 of the
Code, unless requested by the affected Participant.
(iv) TERMINATION OF EMPLOYMENT. Unless otherwise determined by
the Committee, upon termination of a Participant's employment with the
Company and its subsidiaries, such Participant may exercise any Options
during the three-month period following such termination of employment,
but only to the extent such Option was exercisable immediately prior to
such termination of employment. Notwithstanding the foregoing, if the
Committee determines that such termination is for cause, all Options
held by the Participant shall terminate as of the termination of
employment.
(c) STOCK APPRECIATION RIGHTS. The Committee is authorized to
grant SARs on the following terms and conditions ("SARs"):
(i) RIGHT TO PAYMENT. An SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess
of (A) the Fair Market Value of one share of Stock on the date of
exercise (or, if the Committee shall so determine in the case of any
such right other than one related to an ISO, the Fair Market Value of
one share at any time during a specified period before or after the date
of exercise), over (B) the grant price of the SAR as determined by the
Committee as of the date of grant of the SAR, which, except as provided
in Section 7(a), shall be not less than the Fair Market Value of one
share of Stock on the date of grant.
(ii) OTHER TERMS. The Committee shall determine the time or times
at which an SAR may be exercised in whole or in part, the method of
exercise, method of settlement, form of consideration payable in
settlement, method by which Stock will be delivered or deemed to be
delivered to Participants, whether or not an SAR shall be in tandem with
any other Award, and any other terms and conditions of any SAR. Limited
SARs that may only be exercised upon the occurrence of a Change in
Control may be granted on such terms, not inconsistent with this Section
6(c), as the Committee may determine. Limited SARs may be either
freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock on the following terms and conditions ("Restricted Stock"):
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as
the Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such
installments, or otherwise, as the Committee may determine. Except to
the extent restricted under the terms of the Plan and any Award
Agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder
including, without limitation, the right to vote Restricted Stock or the
right to receive dividends thereon.
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(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined
under criteria established by the Committee) during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company; PROVIDED,
HOWEVER, that the Committee may provide, by rule or regulation or in any
Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will
be waived in whole or in part in the event of termination resulting from
specified causes.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the name
of the Participant, such certificates may bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, the Company may retain physical possession of the
certificate, and the Participant shall have delivered a stock power to
the Company, endorsed in blank, relating to the Restricted Stock.
(iv) DIVIDENDS. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of
such dividends, or the payment of such dividends shall be deferred
and/or the amount or value thereof automatically reinvested in
additional Restricted Stock, other Awards, or other investment vehicles,
as the Committee shall determine or permit the Participant to elect.
Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has
been distributed, unless otherwise determined by the Committee.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred
Stock subject to the following terms and conditions ("Deferred Stock"):
(i) AWARD AND RESTRICTIONS. Delivery of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred
Stock by the Committee (or, if permitted by the Committee, as elected by
the Participant). In addition, Deferred Stock shall be subject to such
restrictions as the Committee may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier specified
times, separately or in combination, in installments or otherwise, as
the Committee may determine.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined
under criteria established by the Committee) during the applicable
deferral period or portion thereof to which forfeiture conditions apply
(as provided in the Award Agreement evidencing the Deferred Stock), all
Deferred Stock that is at that time subject to such forfeiture
conditions shall be forfeited; PROVIDED, HOWEVER, that the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock will be waived in whole or in part
in the event of termination resulting from specified causes.
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(f) BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements. Stock or Awards granted hereunder shall be subject to
such other terms as shall be determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents entitling the Participant to receive cash, Stock, other
Awards or other property equal in value to dividends paid with respect to a
specified number of shares of Stock ("Dividend Equivalents"). Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant such other Awards that may
be denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries ("Other Stock Based Awards"). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with or in substitution for
any other Award granted under the Plan or any award granted under any other plan
of the Company, any subsidiary or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive payment
from the Company or any subsidiary. Awards granted in addition to or in tandem
with other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards.
(b) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee; PROVIDED, HOWEVER, that in no
event shall the term of any ISO or an SAR granted in tandem therewith exceed a
period of ten years from the date of its grant (or such shorter period as may be
applicable under Section 422 of the Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company or a
subsidiary upon the grant, exercise or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single
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payment or transfer, in installments or on a deferred basis. Such payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents in respect of installment or deferred payments
denominated in Stock.
(d) LOAN PROVISIONS. With the consent of the Committee, and
subject at all times to, and only to the extent, if any, permitted under and in
accordance with, laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make, guarantee or arrange
for a loan or loans to a Participant with respect to the exercise of any Option
or other payment in connection with any Award, including the payment by a
Participant of any or all federal, state or local income or other taxes due in
connection with any Award. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms and provisions of any such loan or loans, including
the interest rate to be charged in respect of any such loan or loans, whether
the loan or loans are to be with or without recourse against the borrower, the
terms on which the loan is to be repaid and conditions, if any, under which the
loan or loans may be forgiven.
(e) PERFORMANCE-BASED AWARDS. The Committee may, in its
discretion, designate any Award the exercisability or settlement of which is
subject to the achievement of performance conditions as a performance-based
Award subject to this Section 7(e), in order to qualify such Award as "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. The performance objectives for an Award subject to this
Section 7(e) shall consist of one or more business criteria and a targeted level
or levels of performance with respect to such criteria, as specified by the
Committee but subject to this Section 7(e). Performance objectives shall be
objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of
the Code. Business criteria used by the Committee in establishing performance
objectives for Awards subject to this Section 7(e) shall be selected exclusively
from among the following:
(1) Annual return on capital;
(2) Annual earnings per share or share price appreciation;
(3) Annual cash flow provided by operations;
(4) Changes in annual revenues; and/or
(5) Strategic business criteria, consisting of one or more
objectives based on meeting specified revenue, market
penetration, geographic business expansion goals, cost
targets, and goals relating to acquisitions or
divestitures.
The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Awards shall be measured over a period of not less than one
year nor more than five years, as the Committee may specify. Performance
objectives may differ for such Awards to different Participants. The Committee
shall specify the weighting to be given to each performance objective for
purposes of determining the final amount payable with respect to any such Award.
The Committee may, in its discretion, reduce the
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amount of a payout otherwise to be made in connection with an Award subject to
this Section 7(e), but may not exercise discretion to increase such amount, and
the Committee may consider other performance criteria in exercising such
discretion. All determinations by the Committee as to the achievement of
performance objectives shall be in writing. The Committee may not delegate any
responsibility with respect to an Award subject to this Section 7(e).
(f) ACCELERATION UPON A CHANGE OF CONTROL. Pursuant to the terms
of an individual Award Agreement, the Committee, may in its sole discretion,
grant Awards which provide for adjustment (as determined by the Committee, in
its sole discretion) in the event of a "change of control" (as such term may be
defined by the Committee, in its sole discretion).
8. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company shall not
be obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system or
any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.
(b) LIMITATIONS ON TRANSFERABILITY. Awards and other rights
under the Plan will not be transferable by a Participant except by will or the
laws of descent and distribution or to a Beneficiary in the event of the
Participant's death, and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative. Notwithstanding the foregoing, the Committee may, in its
discretion, authorize all or a portion of the Award (other than an ISO) to be
granted to a Participant to be on terms which permit transfer by such
Participant to (i) the spouse, children or grandchildren of such Participant
("Immediate Family Members"), (ii) a trust or trusts for exclusive benefit of
such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, (y) the Award agreement pursuant to which
such Awards are granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Awards shall be prohibited except those
occurring by laws of descent and distribution. Following transfer, any such
Awards shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of the
Plan, the term Participant shall be deemed to refer to the transferee. The
events of termination of employment set forth in Section 6 hereof shall continue
to be applied with respect to the original Participant, following which the
options shall be exercisable by the transferee only to the extent and for the
periods specified in Section 6. Awards and other rights under the Plan may not
be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be
subject to the claims of creditors.
(c) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee or
other person the right to be retained in the employ or service of the Company or
any of its subsidiaries, nor shall it interfere in any way with the
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right of the Company or any of its subsidiaries to terminate any employee's
employment or other person's service at any time.
(d) TAXES. The Company and any subsidiary is authorized to
withhold from any Award granted or to be settled, any delivery of Stock in
connection with an Award, any other payment relating to an Award or any payroll
or other payment to a Participant amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of shareholders or Participants,
except that any such action shall be subject to the approval of the Company's
shareholders at or before the next annual meeting of shareholders for which the
record date is after such Board action if such shareholder approval is required
by any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to shareholders for approval; PROVIDED, HOWEVER, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under any Award theretofore granted to
him. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and any Award
Agreement relating thereto; PROVIDED, HOWEVER, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award.
(f) NO RIGHTS TO AWARDS; NO SHAREHOLDER RIGHTS. No Participant or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Participants and employees. No
Award shall confer on any Participant any of the rights of a shareholder of the
Company unless and until Stock is duly issued or transferred and delivered to
the Participant in accordance with the terms of the Award or, in the case of an
Option, the Option is duly exercised.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor of
the Company; PROVIDED, HOWEVER, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Stock, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
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(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) COMPLIANCE WITH CODE SECTION 162(M). It is the intent of the
Company that employee Options, SARs and other Awards designated as Awards
subject to Section 7(e) shall constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m). Accordingly, if any
provision of the Plan or any Award Agreement relating to such an Award does not
comply or is inconsistent with the requirements of Code Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon attainment
of the performance objectives.
(k) GOVERNING LAW. The validity, construction and effect of the
Plan, any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of Florida,
without giving effect to principles of conflicts of laws, and applicable federal
law.
(l) EFFECTIVE DATE; PLAN TERMINATION. The Company's 1997
Long-Term Incentive Plan initially became effective as of May 9, 1997. The 1997
Long-Term Incentive Plan was later amended and restated, with the approval of
the Compensation Committee of the Board of Directors of the Company on April 27,
1998 and the shareholders on July 28, 1998. As amended and restated hereby, the
Plan shall become effective as of August 3, 1999, the date of its adoption by
the Board, subject to shareholder approval, and shall continue in effect until
terminated by the Board.
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EXHIBIT B
TRAVEL SERVICES INTERNATIONAL, INC.
AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. PURPOSE. The purpose of this Amended and Restated Non-Employee
Directors' Stock Plan (the "Plan") of TRAVEL SERVICES INTERNATIONAL, INC., a
Florida corporation (the "Company"), is to advance the interests of the Company
and its shareholders by providing a means to attract and retain highly qualified
persons to serve as non-employee directors and advisory directors of the Company
and to enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's shareholders.
2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations thereto.
(b) "Deferred Share" means a credit to a Participant's deferral
account under Section 7 which represents the right to receive one Share upon
settlement of the deferral account. Deferral accounts, and Deferred Shares
credited thereto, are maintained solely as bookkeeping entries by the Company
evidencing unfunded obligations of the Company.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act shall be deemed to
include rules thereunder and successor provisions and rules thereto.
(d) "Fair Market Value" of a Share on a given date means the last
sales price or, if last sales information is generally unavailable, the average
of the closing bid and asked prices per Share on such date (or, if there was no
trading or quotation in the stock on such date, on the next preceding date on
which there was trading or quotation) as reported in the WALL STREET JOURNAL;
PROVIDED, HOWEVER, that the "Fair Market Value" of a Share subject to Options
granted effective on the date on which the Company commences an Initial Public
Offering shall be the price of the shares so issued and sold, as set forth in
the first final prospectus used in such Initial Public Offering.
(e) "Initial Public Offering" means an initial public offering of
shares in a firm commitment underwriting register with the Securities and
Exchange Commission in compliance with the provisions of the Securities Act of
1933, as amended.
(f) "Option" means the right, granted to a director under Section
6, to purchase a specified number of Shares at the specified exercise price for
a specified period of time under the Plan. All Options will be non-qualified
stock options.
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(g) "Participant" means a person who, as a non-employee director
or advisory director of the Company, has been granted an Option or Deferred
Shares which remain outstanding or who has elected to be paid fees in the form
of Shares or Deferred Shares under the Plan.
(h) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(i) "Share" means a share of common stock, $.01 par value, of the
Company and such other securities as may be substituted for such Share or such
other securities pursuant to Section 8.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 8, the total number of Shares reserved and available for issuance under
the Plan is 200,000. Such Shares may be authorized but unissued Shares, treasury
Shares, or Shares acquired in the market for the account of the Participant. For
purposes of the Plan, Shares that may be purchased upon exercise of an Option or
delivered in settlement of Deferred Shares will not be considered to be
available after such Option has been granted or Deferred Share credited, except
for purposes of issuance in connection with such Option or Deferred Share;
PROVIDED, HOWEVER, that, if an Option expires for any reason without having been
exercised in full, the Shares subject to the unexercised portion of such Option
will again be available for issuance under the Plan.
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Board of Directors of the Company; PROVIDED, HOWEVER, that any action by the
Board relating to the Plan will be taken only if, in addition to any other
required vote, such action is approved by the affirmative vote of a majority of
the directors who are not then eligible to participate in the Plan.
5. ELIGIBILITY. Each director or advisory director of the Company who,
on any date on which an Option is to be granted under Section 6 or on which fees
are to be paid which could be received in the form of Shares or deferred in the
form of Deferred Shares under Section 7, is not an employee of the Company or
any subsidiary of the Company will be eligible, at such date, to be granted an
Option under Section 6 or receive fees in the form of Shares or defer fees in
the form of Deferred Shares under Section 7. No person other than those
specified in this Section 5 will be eligible to participate in the Plan.
6. OPTIONS. An Option to purchase 10,000 Shares, subject to adjustment
as provided in Section 8, will be automatically granted, (i) at the commencement
of the Initial Public Offering, to each person who is serving as a director or
advisory director of the Company at that time or who becomes a director or
advisory director of the Company at that time and who is eligible under Section
5 at that time, and thereafter (ii) at the effective date of initial election to
the Board of Directors, to each person so elected or appointed who is eligible
under Section 5 at that date. In addition, an Option to purchase 5,000 Shares,
subject to adjustment as provided in Section 8, will be automatically granted,
at the close of business of each annual meeting of shareholders of the Company,
to each member of the Board of Directors or advisory director who is eligible
under Section 5 at the close of business of such annual meeting. Notwithstanding
the foregoing, any person who was automatically granted an Option
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to purchase 10,000 Shares at the effective date of initial election or to the
Board of Directors or appointment as an advisory director shall not be
automatically granted an Option to purchase 5,000 shares at the first annual
meeting of shareholders following such initial election if such annual meeting
takes place within three months of the effective date of such person's initial
election to the Board of Directors.
(a) EXERCISE PRICE. The exercise price per Share purchasable upon
exercise of an Option will be equal to 100% of the Fair Market Value of a Share
on the date of grant of the Option.
(b) OPTION EXPIRATION. A Participant's Option will expire at the
earlier of (i) 10 years after the date of grant or (ii) one year after the date
the Participant ceases to serve as a director of the Company for any reason.
(c) EXERCISABILITY. Each Option may be exercised commencing
immediately upon its grant.
(d) METHOD OF EXERCISE. A Participant may exercise an Option, in
whole or in part, at such time as it is exercisable and prior to its expiration,
by giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of Shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
Shares already owned by the Participant (except for Shares acquired from the
Company by exercise of an option less than six months before the date of
surrender) having a Fair Market Value at the time of exercise equal to the
exercise price, or by a combination of cash and Shares.
7. RECEIPT OF SHARES OR DEFERRED SHARES IN LIEU OF FEES. Each director
or advisory director of the Company may elect to be paid fees, in his or her
capacity as a director or advisory director (including annual retainer fees for
service on the Board, fees for service on a Board committee, fees for service as
chairman of a Board committee, and any other fees paid to directors) in the form
of Shares or Deferred Shares in lieu of cash payment of such fees, if such
director is eligible to do so under Section 5 at the date any such fee is
otherwise payable. If so elected, payment of fees in the form of Shares or
Deferred Shares shall be made in accordance with this Section 7.
(a) ELECTIONS. Each director or advisory director who elects to
be paid fees for a given calendar year in the form of Shares or to defer such
payment of fees in the form of Deferred Shares for such year must file an
irrevocable written election with the Secretary of the Company no later than
December 31 of the year preceding such calendar year; PROVIDED, that any newly
elected or appointed director may file an election for any year not later than
30 days after the date such person first became a director or advisory director,
and a director may file an election for the year in which the Plan became
effective not later than 30 days after the date of effectiveness. An election by
a director or advisory director shall be deemed to be continuing and therefore
applicable to subsequent Plan years unless the director or advisory director
revokes or changes such election by filing a new election form by the due date
for such form specified in this Section 7(a). The election must specify the
following:
(i) A percentage of fees to be received in the form of
Shares or deferred in the form of Deferred Shares under the Plan; and
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(ii) In the case of a deferral, the period or periods
during which settlement of Deferred Shares will be deferred (subject to such
limitations as may be specified by counsel to the Company). Certain elections
may not result in receipt of Shares or deferral of fees as Deferred Shares for a
six-month period, as provided in Section 7(g).
(b) PAYMENT OF FEES IN THE FORM OF SHARES. At any date on which
fees are payable to a Participant who has elected to receive such fees in the
form of Shares, the Company will issue to such Participant, or to a designated
third party for the account of such Participant, a number of Shares having an
aggregate Fair Market Value at that date equal to the fees, or as nearly as
possible equal to the fees (but in no event greater than the fees), that would
have been payable at such date but for the Participant's election to receive
Shares in lieu thereof. If the Shares are to be credited to an account
maintained by the Participant and to the extent reasonably practicable without
requiring the actual issuance of fractional Shares, the Company shall cause
fractional Shares to be credited to the Participant's account. If fractional
Shares are not so credited, any part of the Participant's fees not paid in the
form of whole Shares will be payable in cash to the Participant (either paid
separately or included in a subsequent payment of fees, including a subsequent
payment of fees subject to an election under this Section 7).
(c) DEFERRAL OF FEES IN THE FORM OF DEFERRED SHARES. The Company
will establish a deferral account for each Participant who elects to defer fees
in the form of Deferred Shares under this Section 7. At any date on which fees
are payable to a Participant who has elected to defer fees in the form of
Deferred Shares, the Company will credit such Participant's deferral account
with a number of Deferred Shares equal to the number of Shares having an
aggregate Fair Market Value at that date equal to the fees that otherwise would
have been payable at such date but for the Participant's election to defer
receipt of such fees in the form of Deferred Shares. The amount of Deferred
Shares so credited shall include fractional Shares calculated to at least three
decimal places.
(d) CREDITING OF DIVIDEND EQUIVALENTS. Whenever dividends are
paid or distributions made with respect to Shares, a Participant to whom
Deferred Shares are then credited in a deferral account shall be entitled to
receive, as dividend equivalents, an amount equal in value to the amount of the
dividend paid or property distributed on a single Share multiplied by the number
of Deferred Shares (including any fractional Share) credited to his or her
deferral account as of the record date for such dividend or distribution. Such
dividend equivalents shall be credited to the Participant's deferral account as
a number of Deferred Shares determined by dividing the aggregate value of such
dividend equivalents by the Fair Market Value of a Share at the payment date of
the dividend or distribution.
(e) SETTLEMENT OF DEFERRED SHARES. The Company will settle the
Participant's deferral account by delivering to the Participant (or his or her
beneficiary) a number of Shares equal to the number of whole Deferred Shares
then credited to his or her deferral account (or a specified portion in the
event of any partial settlement), together with cash in lieu of any fractional
Share remaining at a time that less than one whole Deferred Share is credited to
such deferral account. Such settlement shall be made at the time or times
specified in the Participant's election filed in accordance with Section 7(a);
PROVIDED, HOWEVER, that a Participant may further defer settlement of Deferred
Shares if counsel to the
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Company determines that such further deferral likely would be effective under
applicable federal income tax laws and regulations.
(f) NONFORFEITABILITY. The interest of each Participant in any
fees paid in the form of Shares or Deferred Shares (and any deferral account
relating thereto) at all times will be nonforfeitable.
8. ADJUSTMENT PROVISIONS.
(a) CORPORATE TRANSACTIONS AND EVENTS. In the event any dividend
or other distribution (whether in the form of cash, Shares or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of Shares or other
securities of the Company, extraordinary dividend (whether in the form of cash,
Shares, or other property), liquidation, dissolution, or other similar corporate
transaction or event affects the Shares such that an adjustment is appropriate
in order to prevent dilution or enlargement of each Participant's rights under
the Plan, then an adjustment shall be made, in a manner that is proportionate to
the change to the Shares and otherwise equitable, in (i) the number and kind of
Shares remaining reserved and available for issuance under Section 3, (ii) the
number and kind of Shares to be subject to each automatic grant of an Option
under Section 6, (iii) the number and kind of Shares issuable upon exercise of
outstanding Options, and/or the exercise price per Share thereof (provided that
no fractional Shares will be issued upon exercise of any Option), (iv) the kind
of Shares to be issued in lieu of fees under Section 7, and (v) the number and
kind of Shares to be issued upon settlement of Deferred Shares under Section 7.
In addition, the Board of Directors is authorized to make such adjustments in
recognition of unusual or non-recurring events (including, without limitation,
events described in the preceding sentence) affecting the Company or any
subsidiary or the financial statements of the Company or any subsidiary, or in
response to changes in applicable laws, regulations or accounting principles.
The foregoing notwithstanding, no adjustment may be made hereunder except as
will be necessary to maintain the proportionate interest of the Participant
under the Plan and to preserve, without exceeding, the value of outstanding
Options and potential grants of Options and the value of outstanding Deferred
Shares.
(b) INSUFFICIENT NUMBER OF SHARES. If at any date an insufficient
number of Shares are available under the Plan for the automatic grant of Options
or the receipt of fees in the form of Shares or deferral of fees in the form of
Deferred Shares at that date, Options will first be automatically granted
proportionately to each eligible director, to the extent Shares are then
available (provided that no fractional Shares will be issued upon exercise of
any Option) and otherwise as provided under Section 6, and then, if any Shares
remain available, fees shall be paid in the form of Shares or deferred in the
form of Deferred Shares proportionately among directors then eligible to
participate to the extent Shares are then available and otherwise as provided
under Section 7.
9. CHANGES TO THE PLAN. The Board of Directors may amend, alter,
suspend, discontinue, or terminate the Plan or authority to grant Options or pay
fees in the form of Shares or Deferred Shares under the Plan without the consent
of shareholders or Participants, except that any amendment or alteration will be
subject to the approval of the Company's shareholders at or before the next
annual meeting of shareholders for which the record date is after the date of
such Board action if such shareholder approval is required by any federal or
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state law or regulation or the rules of any stock exchange or automated
quotation system as then in effect, and the Board may otherwise determine to
submit other such amendments or alterations to shareholders for approval;
PROVIDED, HOWEVER, that, without the consent of an affected Participant, no such
action may materially impair the rights of such Participant with respect to any
previously granted Option or any previous payment of fees in the form of Shares
or Deferred Shares.
10. GENERAL PROVISIONS.
(a) AGREEMENTS. Options, Deferred Shares, and any other right or
obligation under the Plan may be evidenced by agreements or other documents
executed by the Company and the Participant incorporating the terms and
conditions set forth in the Plan, together with such other terms and conditions
not inconsistent with the Plan, as the Board of Directors may from time to time
approve.
(b) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be
obligated to issue or deliver Shares in connection with any Option, in payment
of any directors' fees, or in settlement of Deferred Shares in a transaction
subject to the registration requirements of the Securities Act of 1933, as
amended, or any other federal or state securities law, any requirement under any
listing agreement between the Company and any stock exchange or automated
quotation system, or any other law, regulation, or contractual obligation of the
Company, until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing Shares issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations,
and other obligations of the Company, including any requirement that a legend or
legends be placed thereon.
(c) LIMITATIONS ON TRANSFERABILITY. Options, Deferred Shares, and
any other right under the Plan will not be transferable by a Participant except
by will or the laws of descent and distribution or to a Beneficiary in the event
of the Participant's death, and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative. Notwithstanding the foregoing, the Committee may, in its
discretion, authorize all or a portion of the Options, Deferred Shares or other
right under the Plan granted to a Participant to be on terms which permit
transfer by such Participant to (i) the spouse, children or grandchildren of
such Participant ("Immediate Family Members"), (ii) a trust or trusts for
exclusive benefit of such Immediate Family Members, or (iii) a partnership in
which such Immediate Family Members are the only partners, provided that (x)
there may be no consideration for any such transfer, (y) the Option, Deferred
Share or other right agreement pursuant to which such awards are granted must be
approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of transferred
Options, Deferred Shares or other rights shall be prohibited except those
occurring by laws of descent and distribution. Following transfer, any such
awards shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of the
Plan, the term Participant shall be deemed to refer to the transferee. Options,
Deferred Shares, and any other right under the Plan may not be pledged,
mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the
claims of creditors.
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(d) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in the
Plan or any agreement hereunder will confer upon any Participant any right to
continue to serve as a director or advisory director of the Company.
(e) NO SHAREHOLDER RIGHTS CONFERRED. Nothing contained in the
Plan or any agreement hereunder will confer upon any Participant (or any person
or entity claiming rights by or through a Participant) any rights of a
shareholder of the Company unless and until Shares are in fact issued to such
Participant (or person) or, in the case an Option, such Option is validly
exercised in accordance with Section 6.
(f) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board of Directors nor its submission to the shareholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for directors as it may deem
desirable.
(g) GOVERNING LAW. The validity, construction, and effect of the
Plan and any agreement hereunder will be determined in accordance with the laws
of the State of Florida, without giving effect to principles of conflicts of
laws, and applicable federal law.
(h) SHAREHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION.
The Company's Non-Employee Directors' Stock Plan was adopted by the Board and
approved by the Company's shareholders on May 14, 1997. The Plan will be
effective as of the date of its adoption by the Board, subject to shareholder
approval, and, unless earlier terminated by action of the Board of Directors,
shall terminate at such time as no Shares remain available for issuance under
the Plan and the Company and Participants have no further rights or obligations
under the Plan.
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TRAVEL SERVICES INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a shareholder of TRAVEL SERVICES INTERNATIONAL, INC., a
Florida corporation (the "Company"), hereby appoints Joseph V. Vittoria and
Suzanne B. Bell, and each of them, as proxies for the undersigned, each with
full power of substitution, and hereby authorizes them to represent and to vote,
as designated on the reverse side, all of the shares of Common Stock of the
Company that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at the Delray Beach Marriott, 10 North
Ocean Boulevard, Delray Beach, Florida 33483, on September 14, 1999 at 9:00
a.m., local time, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
ALL THE DIRECTOR NOMINEES LISTED IN PROPOSAL 1 AND FOR THE APPROVAL OF EACH OF
PROPOSALS 2 AND 3.
(SEE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED IN PROPOSAL 1 AND FOR THE APPROVAL OF EACH OF PROPOSALS
2 AND 3.
1. ELECTION OF DIRECTORS
NOMINEES: IMAD KHALIDI JOHN W. PRZYWARA JOSEPH V. VITTORIA
[ ] VOTE FOR all nominees listed, [ ] WITHHOLD AUTHORITY TO
(except as marked to the contrary below) VOTE for all nominees
(INSTRUCTION: To withhold authority to
vote for any individual nominee, write
that nominee's name on the space
provided below.)
-----------------------------------
2. Vote for the proposal to approve the Amended and Restated 1999 Long-Term
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Vote for the proposal to approve the Amended and Restated Non-employee
Directors' Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Upon such other matters as may properly come before such Annual Meeting
or any adjournments or postponements thereof. In their discretion, the
proxies are authorized to vote in their discretion upon such other
business as may properly come before the Annual Meeting and any
adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE PROPOSALS.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting and Proxy Statement for the 1999 Annual Meeting, and (2) the Company's
1998 Annual Report to Shareholders.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
(Signature) ________________ (Signature, if held jointly) __________________
Dated ________, 1999
IMPORTANT: Please sign exactly as your name appears hereon and mail it
promptly even though you now plan to attend the meeting. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. When shares are held by joint tenants, both should sign.
If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
