<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997
REGISTRATION NO. 333-28237
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
800 TRAVEL SYSTEMS, INC.
(Name of small business issuer in its charter)
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DELAWARE 4724 59-3343338
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
MARK D. MASTRINI, PRESIDENT
800 TRAVEL SYSTEMS, INC.
4802 GUNN HIGHWAY 4802 GUNN HIGHWAY
TAMPA, FLORIDA 33624 TAMPA, FLORIDA 33624
(813) 908-0404 (813) 908-0404
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of registrant's principal number, including area code, of agent for service)
executive offices)
</TABLE>
---------------------
<TABLE>
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COPIES OF COMMUNICATIONS TO:
VINCENT J. MCGILL RICHARD F. DAHLSON
PHILLIPS NIZER BENJAMIN KRIM & BALLON LLP JACKSON WALKER L.L.P.
666 FIFTH AVENUE 901 MAIN STREET, SUITE 6000
NEW YORK, NEW YORK 10103-0084 DALLAS, TEXAS 75202-3797
TELEPHONE: (212) 977-9700 TELEPHONE: (214) 953-6000
TELECOPIER: (212) 262-5152 TELECOPIER: (214) 953-5822
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value............. 2,127,500(2) $ 5.50 $11,701,250 $ 3,546
- ----------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants........... 2,127,500(3) $ .125 (8) (8)
- ----------------------------------------------------------------------------------------------------------------
Common Stock, Issuable Under
Warrants(4)............................ 2,127,500 $ 8.25 $17,551,875 $ 5,319
- ----------------------------------------------------------------------------------------------------------------
Representative's Common Stock(5)......... 185,000 $ 6.60 $ 1,221,000 $ 370
- ----------------------------------------------------------------------------------------------------------------
Representative's Common Stock Purchase
Warrants(6)............................ 185,000 $ .15 (8) (8)
- ----------------------------------------------------------------------------------------------------------------
Representative's Common Stock Issuable
Under Representative's Common Stock
Purchase Warrants(7)................... 185,000 $ 8.25 $ 1,526,250 $ 462.50
- ----------------------------------------------------------------------------------------------------------------
Common Stock to be sold by the Selling
Shareholders........................... 2,580,534 $ 5.50 $14,192,937 $ 4,300.89
- ----------------------------------------------------------------------------------------------------------------
Total............................ $13,998.39(9)
================================================================================================================
</TABLE>
(Footnotes on page 2)
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<PAGE> 2
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
(2) Includes 277,500 shares of Common Stock issuable pursuant to the
Representative's over-allotment option.
(3) Includes 277,500 Warrants issuable pursuant to the Representative's
over-allotment option.
(4) Represents shares of Common Stock issuable upon exercise of the Warrants
registered hereby together with such additional indeterminate number of
shares as may be issued upon exercise of such Warrants by reason of the
anti-dilution provisions contained therein.
(5) Represents shares of Common Stock issuable upon exercise of the
Representative's Warrant, together with such additional indeterminate number
of shares of Common Stock as may be issued upon exercise of such
Representative's Warrant by reason of the anti-dilution provisions contained
therein.
(6) Represents Common Stock Purchase Warrants issuable upon exercise of the
Representative's Warrant, together with such additional indeterminate number
of Warrants as may be issued upon exercise of such Representative's Warrant.
(7) Represents shares of Common Stock issuable upon exercise of the Common Stock
Purchase Warrants included within the Representative's Warrant, together
with such additional indeterminate number of shares of Common Stock as may
be issued upon exercise of such Warrants by reason of the anti-dilution
provisions contained therein.
(8) Pursuant to Rule 416 of the Securities Act of 1933, as amended, no separate
registration fee is required because the Common Stock underlying the Common
Stock Purchase Warrants is being registered in the same registration
statement.
(9) $14,000 was paid upon filing of the Registration Statement, $100 was paid
immediately prior to the filing hereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THIS REGISTRATION STATEMENT CONTAINS A PROSPECTUS WITH RESPECT TO THE
UNDERWRITTEN OFFERING OF 1,850,000 SHARES OF COMMON STOCK AND 1,850,000 COMMON
STOCK PURCHASE WARRANTS TO BE SOLD BY THE COMPANY, AND A SUPPLEMENTARY
PROSPECTUS WITH RESPECT TO THE SALE OF 1,196,134 SHARES OF COMMON STOCK BEING
REGISTERED ON BEHALF OF THE SELLING STOCKHOLDERS. THE PROSPECTUS SUPPLEMENT HAS
BEEN INCLUDED HEREIN IMMEDIATELY FOLLOWING THE PROSPECTUS.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 12, 1997
800 TRAVEL SYSTEMS, INC.
1,850,000 SHARES OF COMMON STOCK
1,850,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(AND 1,850,000 SHARES OF COMMON STOCK ISSUABLE UNDER THE WARRANTS)
All of the 1,850,000 shares of Common Stock, par value $.01 per share (the
"Common Stock") offered hereby and all of the 1,850,000 Redeemable Common Stock
Purchase Warrants (the "Warrants") offered hereby are being sold by 800 Travel
Systems, Inc., a Delaware corporation (the "Company"). The Common Stock and the
Warrants (collectively, the "Securities") are being offered separately and not
as units, and each is separately transferable. Prior to this Offering, there has
been no public market for the Common Stock and the Warrants. It is estimated
that the initial public offering price will be $5.00 per share for the Common
Stock (the "Share Offering Price") and $.125 per Warrant.
Each Warrant entitles the holder to purchase one share of Common Stock at a
price of $ per share (150% of the Share Offering Price) during the
five-year period commencing on the date of this Prospectus. The Warrants are
redeemable by the Company for $.05 per Warrant on not less than 30 nor more than
60 days written notice if the closing price for the Common Stock for seven
trading days during a 10 consecutive trading day period ending not more than 15
days prior to the date that the notice of redemption is mailed equals or exceeds
$ per share (200% of the Share Offering Price), subject to adjustment
under certain circumstances and provided there is then a current effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the issuance and sale of Common Stock upon
the exercise of the Warrants. Any redemption of the Warrants during the one-year
period commencing on the date of this Prospectus shall require the written
consent of First London Securities Corporation, the representative of the
Underwriters (the "Representative"). See "Description of Securities."
The initial public offering prices of the Common Stock and Warrants and the
exercise price and other terms of the Warrants have been determined through
negotiations between the Company and the Representative and are not related to
the Company's assets, book value, financial condition or other recognized
criteria of value. Although the Company has applied for the inclusion of the
Common Stock and the Warrants on the Nasdaq SmallCap Market under the symbols
"IFLI" and "IFLIW," respectively, there can be no assurance that an active
trading market in the Company's securities will develop or be sustained.
The Registration Statement, of which this Prospectus forms a part, also
covers the offering by selling securityholders (the "Selling Stockholders") of
1,196,134 shares of Common Stock (the "Registered Shares"), which shares are not
being underwritten but which may be sold from time to time pursuant to
arrangements made by the Selling Stockholders. The Selling Stockholders (other
than the Selling Stockholder described in the immediately following sentence)
have agreed with the Representative not to offer, sell or otherwise dispose of
("Sell") their Registered Shares for a period of 30 days after the effectiveness
of this Offering (the "Effective Date") and for an additional period of thirty
(30) days thereafter without the consent of the Representative. The remaining
Selling Stockholder has agreed not to Sell any of his 110,000 Registered Shares
for a period of 15 days after the Effective Date. See "Shares Eligible for
Future Sale." Sales of the Registered Shares or the potential of such sales at
any time, may have an adverse effect on the market prices of the securities
offered hereby. The Company will not receive any of the proceeds from the sale
of the securities by the Selling Stockholders. The Company will bear all
expenses incurred by the Selling Stockholders, other than brokerage fees and
commissions and fees of independent counsel, if any.
---------------------
THESE ARE SPECULATIVE SECURITIES, AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM
THE PUBLIC OFFERING PRICE OF THE COMMON STOCK AND SHOULD BE CONSIDERED ONLY BY
INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 8 AND "DILUTION."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)(3)
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<S> <C> <C> <C>
Per Share of Common Stock................. $ $ $
Per Warrant............................... $ $ $
Total(3).................................. $ $ $
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================================================================================
(1) Does not include additional underwriting compensation to be received by the
Representative in the form of (i) a non-accountable expense allowance equal
to 3% of the gross proceeds of this Offering, of which $30,000 has been paid
to date, and (ii) a warrant issued to the Representative for nominal
consideration (the "Representative's Warrant") to purchase up to 185,000
shares of Common Stock and up to 185,000 Warrants exercisable for a
four-year period commencing one year after the effective date of this
Offering at an exercise price of 120% of the initial offering price of the
Shares and Warrants (in each case subject to adjustment). The Company has
agreed to pay the Representative upon the exercise or redemption of the
Warrants a fee equal to 5% of the gross proceeds received by the Company
from the exercise of the Warrants and 5% of the aggregate redemption price
for Warrants redeemed. The Representative or its designee must be designated
by the Warrant holder as having solicited the Warrant in order to receive
the fee. The Company has agreed to indemnify the Underwriters against
certain liabilities arising under the Securities Act. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $732,435
including the Representative's non-accountable expense allowance. The
Company will bear all expenses incurred by the Selling Stockholders, other
than brokerage fees and commissions and fees of independent counsel, if any.
(3) The Company has granted the Representative an option (the "Representative's
Over-Allotment Option"), exercisable within 45 days from the date of this
Prospectus, to purchase on the same terms as the Securities offered hereby
up to 277,500 additional shares of Common Stock and up to 277,500 additional
Warrants solely to cover over-allotments, if any. If the Representative's
Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
---------------------
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE BEING OFFERED ON A FIRM
COMMITMENT BASIS BY THE UNDERWRITERS, WHEN, AS AND IF DELIVERED TO AND ACCEPTED
BY THE UNDERWRITERS SUBJECT TO PRIOR SALE. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING THE SECURITIES WILL BE MADE AGAINST PAYMENT THEREFOR
AT THE OFFICES OF FIRST LONDON SECURITIES CORPORATION, DALLAS, TEXAS ON OR ABOUT
, 1997.
---------------------
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TRAVEL SYSTEMS 800 FIRST LONDON SECURITIES CORPORATION
</TABLE>
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The date of this Prospectus is , 1997
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement"), pursuant to the Securities Act with respect to the securities
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
THE STATEMENTS CONTAINED IN THIS PROSPECTUS AS TO THE CONTENTS OF ANY CONTRACT
OR OTHER DOCUMENT IDENTIFIED AS EXHIBITS IN THIS PROSPECTUS ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE, REFERENCE IS MADE TO A COPY OF SUCH CONTRACT OR
DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT, EACH STATEMENT BEING
QUALIFIED IN ANY AND ALL RESPECTS BY SUCH REFERENCE. For further information
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and exhibits which may be inspected without charge
at the Commission's principal office at Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549.
Upon consummation of this Offering, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and in accordance therewith will file reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
New York Regional Office, Room 1300, 7 World Trade Center, New York, New York
10048; and at its Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at prescribed rates. The Company's Registration Statement on Form
SB-2 as well as any reports to be filed under the Exchange Act can also be
obtained electronically after the Company has filed such documents with the
Commission through a variety of databases, including among others, the
Commission's Electronic Data Gathering, Analysis And Retrieval ("EDGAR")
program, Knight-Ridder Information, Inc., Federal Filings/Dow Jones and
Lexis/Nexis. Additionally, the Commission maintains a Website (at
http://www.sec.gov) that contains such information regarding the Company.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements, quarterly reports containing unaudited
financial statements and such other reports as the Company deems appropriate or
as may be required by law.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OR
WARRANTS INCLUDING OVER-ALLOTMENT. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) and the pro
forma financial information appearing elsewhere in this Prospectus. The
consummation of the Offering will occur concurrently with, and is a condition
precedent to, the consummation of the merger of The Joseph Stevens Group, Inc.
("Stevens") with and into the Company, with Company as the surviving corporation
(the "Stevens Merger"). See "The Stevens Merger." Unless otherwise noted, all
information in this Prospectus assumes (i) no exercise of the Representative's
over-allotment option and (ii) the consummation of the Stevens Merger and the
issuance of 383,333 shares of Common Stock in connection therewith. Unless the
context otherwise requires, references in this Prospectus to the Company are to
800 Travel Systems, Inc. and to the businesses previously conducted by its
predecessor, 1-800 Low-Air Fare, Inc., and by Stevens.
THE COMPANY
The Company is among the 100 largest independent travel agencies in the
United States. The Company provides lowpriced airline tickets for domestic and
international travel to its customers through its easy-to-remember, toll-free
numbers "1-800-LOW-AIR-FARE" (1-800-569-2473) and "1-800-FLY-4-LESS"
(1-800-359-4537). The Company has approximately 170 reservation agents and
operates 365 days a year out of the Company's reservation centers in Tampa,
Florida and San Diego, California. The Company strives to provide its customers
with the lowest-priced airfare available for a particular travel route at the
time of reservation by utilizing the SABRE travel reservation system developed
by American Airlines, Inc. The SABRE system maintains over 50 million airfares,
including those of all major U.S. and international commercial airlines, and is
updated throughout the day to reflect the airlines' latest ticketing
information. The Company estimates it receives an average of 30,000 calls per
day (including repeat calls from callers unable to be serviced or calling to
confirm reservations) at its reservation centers, of which the Company has the
current capacity to answer only approximately 8,000. The Company has increased
the number of its reservation agents from 13 in 1995 to approximately 170
presently. The Company intends to use approximately $1 million of the proceeds
of this Offering to expedite the training of additional reservation agents. The
Company already has the equipment and infrastructure necessary to answer all the
calls it is currently unable to answer.
The Company's operations generate revenues principally from (i) the
commissions on air travel tickets, (ii) override commissions on air travel
tickets the Company books on Continental, United, Northwest, TWA, Carnival,
America West, America Trans Air, Trans Brazil, Mexicana and Korean airlines,
(iii) segment incentives under its contract with SABRE, (iv) co-op promotions
with other suppliers of travel-related products and services, such as
long-distance telephone companies, car rental companies and hotels, and (v)
service fees that it charges its customers.
The Company markets its services primarily by advertising its various
toll-free numbers in approximately 270 Yellow Pages directories covering a total
population of 133 million people in those standard metropolitan areas in the
continental United States ("SMA's") with populations whose general travel
profiles are attractive to the Company. The Company also maintains a home page
on the World Wide Web (www.lowairfare.com) which enables its customers to access
its customized Turbo SABRE system through their personal computers.
The Company's operating strategy is to (i) strive to provide its customers
with the lowest-priced airfare available for a particular travel route at the
time of reservation, (ii) focus on consumer air travel, which the Company
believes is the most profitable segment of the travel industry, (iii) provide
convenient, quick service to its customers, (iv) maintain low operating costs by
utilizing only two operating facilities, (v) use state-of-the-art technology to
maximize operating efficiencies, (vi) constantly review and update its
relationships with the major airlines and SABRE to obtain favorable commission
structures, and (vii) provide incentives to its sales force through a
performance-based compensation structure. See "Business -- Operating Strategy."
The Company's growth strategy is to (i) grow internally as quickly as
practicable in order to be able to service the approximately 22,000 calls per
day that the Company is not currently able to service, (ii) further penetrate
existing markets and enter new markets by commencing marketing activities and
(iii) make
3
<PAGE> 6
strategic acquisitions of other telemarketing travel companies with existing
customer bases or valuable intellectual property. See "Business -- Growth
Strategy."
The travel industry is one of the world's largest industries, with $3.4
trillion in sales in 1994 according to the World Travel Organization. According
to the Travel Weekly 1996 U.S. travel agency survey (the "Travel Weekly
Survey"), revenues for U.S. travel agencies in 1995 exceeded $100 billion,
representing an increase of almost 100% since 1985 and 9% since 1993. The U.S.
travel agency industry is a highly fragmented industry comprised of numerous
small agencies, but tending towards large volume agencies, according to the
Travel Weekly Survey. In contrast to 1985, when small agencies (those reporting
between $1 million and $5 million in annual sales) were responsible for 62% of
all U.S. travel agency revenues, in 1995 such agencies were responsible for only
41% of all U.S. travel agency revenues, even though they comprised 56% of all
travel agency locations. The Company believes that only one other travel agency
operates in a manner similar to the Company by emphasizing low-cost airfare,
nationally advertising toll-free telephone numbers that spell out their
respective advertising slogans and processing calls on such numbers at
centralized reservation centers. The Company believes that operating in such
manner distinguishes the Company and its competitor from other travel agencies
as "telemarketing travel companies." See "Business -- Industry Overview."
On November 11, 1996, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with The Joseph Stevens Group, Inc. ("Stevens")
and its sole shareholder, which agreement was amended and restated as of May 30,
1997 and further amended as of September 9, 1997. Stevens provides airline
tickets for domestic and international travel to consumers through its
"1-800-FLY-4-LESS" (1-800-359-4537) toll-free number out of its reservation
center in San Diego, California. Pursuant to the Merger Agreement, the parties
agreed that upon the closing of the Offering, Stevens will be merged with and
into the Company, with the Company as the surviving corporation (the "Stevens
Merger"). See "The Stevens Merger."
The Company was incorporated in Delaware in November 1995. The Company's
principal executive offices are located at 4802 Gunn Highway, Suite 140, Tampa,
Florida 33624 and its telephone number is (813) 908-0404.
THE OFFERING
Common Stock Offered....... 1,850,000 shares
Warrants Offered........... 1,850,000 Warrants
Common Stock Outstanding:
Prior to the Offering.... 5,959,709 shares (1)
After the Offering....... 7,638,933 shares (2)
Warrants Outstanding:
Prior to the Offering.... none
After the Offering....... 2,125,000(3)
Estimated Net Proceeds..... $7,800,690(4)
Use of Proceeds............ The Company intends to use the net proceeds of the
Offering to pay the note issued in connection with
the Stevens Merger; train additional reservation
agents; expand its advertising and marketing
campaign; purchase equipment; retire a $250,000
note; redeem 554,109 shares of Common Stock, and
for working capital and general corporate purposes.
The Company will not receive any of the proceeds
from the sale of securities by the Selling
Stockholders.
4
<PAGE> 7
Proposed Trading
Symbols(5):
Nasdaq SmallCap Market:
Common Stock.......... IFLI
Warrants.............. IFLIW
Risk Factors............... The Common Stock and the Warrants offered hereby
are speculative and involve a high degree of risk.
Investors should carefully consider the risk
factors enumerated herein before investing in the
Common Stock and the Warrants. See "Risk Factors"
and "Dilution."
- ---------------
(1) Excludes (i) 250,000 shares issuable pursuant to warrants identical to those
offered hereby exercisable for 250,000 shares of Common Stock issuable in
connection with the Stevens Merger and such additional shares as may be
issued pursuant to make-whole provisions contained in the Merger Agreement,
(ii) 300,000 shares issuable upon exercise of options granted to Perry
Trebatch, (iii) 75,000 shares of Common Stock issuable upon exercise of
stock options granted pursuant to the Company's 1997 Stock Option Plan, (iv)
300,000 shares of Common Stock issuable upon exercise of options issued to
directors and employees of the Company and (v) 25,000 shares issuable upon
exercise of warrants, identical to those offered hereby, to be granted to
the Company's President upon closing of this Offering.
(2) Excludes (i) the items referred to in footnote 1, (ii) the 1,850,000 shares
of Common Stock issuable upon the exercise of the Warrants offered hereby
and (iii) the 370,000 shares of Common Stock issuable upon exercise of the
Representative's Warrant and the Warrants therein.
(3) Excludes warrants exercisable for 300,000 shares issuable to Perry Trebatch
in exchange for options to purchase 300,000 shares of Common Stock currently
held by Mr. Trebatch.
(4) After subtracting the underwriting discounts and commissions and estimated
offering expenses by the Company, including a 3% non-accountable expense
allowance to the Representative.
(5) Nasdaq SmallCap Market symbols do not imply that an established public
trading market will develop for any of these securities, or if developed,
that any such market will be sustained. See "Risk Factors -- Possible
Applicability of Rules Relating to Low-Priced Stock; Possible Failure to
Qualify for Nasdaq SmallCap Market Listing."
5
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS(1) THE COMPANY
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ELEVEN
MONTHS MONTH SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996 1996 1997(2)
------------ ------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Revenues................ $ 622,017 $ 1,090,938 $ 133,970 $ 3,235,777 $ 1,323,468 $3,721,651
Operating Expenses:
Payroll, commissions and
employee benefits..... 790,259 1,115,403 175,604 2,490,770 1,233,507 1,775,614
Telephone............... 165,979 392,869 14,527 539,118 199,808 501,246
Ticket Delivery
Expense............... -- 138,798 17,896 407,579 168,742 327,926
Advertising............. 459,657 333,520 437 137,223 36,391 107,044
General and
Administrative........ 1,053,530 1,156,777 53,869 1,768,058 879,560 1,110,164
Interest Expense........ 46,417 168,857 4,017 1,114,298 540,048 67,453
Other Income.............. -- 41,959 1,782 12,610 5,809 5,368
Net Loss.................. (1,894,425) (2,173,327) (130,598) (3,208,659) (1,728,779) (162,428)
Net Loss per Share........ (.50) (.57) (.03) (.65) (.39) (.03)
Weighted Average Number
of Common Shares
Outstanding............. 3,830,000 3,830,000 3,840,000 4,947,823 4,447,857 5,956,352
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA (UNAUDITED)(3):
Revenues.................................................. $ 4,900,736 $3,721,651
Operating Expenses:
General and Administrative................................ 6,885,270 3,644,917
Interest Expense.......................................... 1,379,226 146,353
Amortization and Depreciation............................. 327,959 177,077
Other Income................................................ 12,610 5,368
Net Loss.................................................... (3,679,109) (241,328)
Net Loss per Share.......................................... (.69) (.04)
Weighted Average Number of Common Shares Outstanding........ 5,331,156 6,339,685
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------------- JUNE 30, JUNE 30, 1997 JUNE 30, 1997 (PRO FORMA AS
1995 1996 1997 (PRO FORMA)(4) (PRO FORMA)(5) ADJUSTED)(6)
----------- ----------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital
(Deficit)............ $ (731,210) $ (199,449) $ (596,811) $(2,149,811) $(4,602,311) $ 3,542,079
Total Assets........... 1,444,298 2,952,522 3,065,519 6,535,184 4,082,684 10,105,374
Long-Term Debt......... 60,000 30,000 30,000 30,000 30,000 30,000
Total Stockholders'
Equity (Deficit)..... 613,882 1,664,218 1,523,040 3,439,705 987,205 8,787,895
</TABLE>
Footnotes On Next Page
6
<PAGE> 9
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(1) On December 1, 1995, the Company acquired certain of the assets and assumed
certain liabilities of 1-800-Low Airfare, Inc. (the "Predecessor Business").
Pro forma results of operations as if the Company had acquired the
Predecessor Business on January 1, 1995 would not be materially different
and, accordingly, are not presented.
(2) Pursuant to the Interim Operating Agreement the Company assumed the
operations of Stevens as of January 1, 1997 and, therefore, the Statement of
Income Data of the Company reflects the combined operations of the Company
and Stevens for the first half of 1997.
(3) The unaudited Pro Forma Statement of Income Data for the year ended December
31, 1996 and the six months ended June 30, 1997, gives pro forma effect to
the Stevens Merger as if the Stevens Merger occurred on January 1, 1996 and
January 1, 1997, respectively.
(4) Balance sheet date gives pro forma effect to the Stevens Merger as if it
occurred on June 30, 1997.
(5) Balance sheet date gives pro forma effect to the item referred to in
footnote 4 and the redemption of an aggregate of 554,109 shares of Common
Stock for an aggregate of $2,452,500.
(6) Balance sheet date gives pro forma effect to the items referred to footnotes
4 and 5 as adjusted to give effect to the consummation of the offering and
the application of the estimated net proceeds as described under "Use of
Proceeds."
7
<PAGE> 10
RISK FACTORS
The securities offered hereby are highly speculative and should be
purchased only by persons who can afford to lose their entire investment in the
Company. In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors in
evaluating an investment in the securities offered hereby.
HISTORY OF OPERATING LOSSES; FUTURE OPERATING RESULTS
Although the Company had net income before taxes of $152,000 in the quarter
ended June 30, 1997, the Company incurred losses and generated negative cash
flows from continuing operations in each of the Company's fiscal years since
inception. For the eleven months ended November 30, 1995, the one month ended
December 31, 1995, the year ended December 31, 1996 and the six months ended
June 30, 1997, the Company's predecessor and the Company incurred losses of
$2,173,327, $130,598, $3,208,659 and $162,428 respectively. There can be no
assurance that the Company will operate profitably in the future or that the
Company will be successful in implementing and executing its operating and
growth strategies. As of December 31, 1996, the Company had negative working
capital and as of June 30, 1997, the Company had a retained deficit of
$3,501,685. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations,"Business" and the Company's Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.
CAPITAL REQUIREMENTS
The Company is dependent upon the proceeds of this Offering and the
anticipated cash flow from operations to complete its current expansion plans.
Should the Company's cash flow from operations fail to meet anticipated levels,
or should its costs and capital expenditures exceed the amounts currently
expected to be required, the Company could be required to seek unanticipated
financing in the future. There can be no assurance that the Company will be able
to raise such capital or financing when needed or on acceptable terms, and
therefore, the Company may be unable to achieve its goals, including anticipated
growth. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and
"Business -- Operating Strategy."
RAPID EXPANSION OF BUSINESS
The Company's operations and business have expanded substantially, with a
large increase in reservation agents and sales in a relatively short period of
time. To properly manage its rapid growth, the Company has been and will be
required to expend significant management and financial resources. There can be
no assurance that the Company's management will be able to manage its growth and
operate a larger organization efficiently or profitably. See "Business-Operating
Strategy."
COMPETITION
The travel agency business is characterized by intense competition. Many of
the Company's competitors, which include local, regional and national travel
agencies, possess significantly greater financial, personnel and other resources
than the Company. Certain of the Company's competitors use a low-price discount
strategy to expand their market share and a number of travel agencies use
toll-free phone lines that compete with the Company's services. If any of the
companies using a discount strategy were to focus their marketing efforts on the
Company's telemarketing niche, the Company's results of operations could be
adversely affected. In addition, the Internet permits consumers to have direct
access to travel providers as well as distribution systems like the SABRE
system, thereby by-passing travel agents. In recent years, airline ticket prices
have decreased primarily as a result of lower costs and greater competition in
the airline industry. The Company's revenues are based upon the number of
tickets it sells and on a percentage of the price of such tickets and are
therefore adversely affected by decreases in the price of airline tickets. The
Company believes that significant price-based competition will continue to exist
in the airline industry and the Company's markets for the foreseeable future.
Any significant decrease in airline ticket prices could adversely affect the
Company's
8
<PAGE> 11
results of operations. The Company may experience increased competition in the
future as its competitors combine to form larger companies. There can be no
assurance that the Company will be competitive with larger travel agencies in
the future or that the Company will maintain its size relative to its
competitors. See "Business -- Competition."
RISKS RELATING TO OVERRIDE COMMISSIONS
The Company is able to offer its customers attractive airfares in large
part due to the favorable override commission arrangements it has obtained for
selling tickets on Continental, United, Northwest, TWA, Carnival, America West,
America Trans Air, Trans Brazil, Mexicana and Korean airlines. For example, the
Company is able to offer attractive fares on TWA because of its override
commission arrangement with a consolidator which sells tickets on TWA at a
discount (the "TWA Discounter"). In 1996 and the first six months of 1997,
approximately 21% and 28%, respectively, of the Company's tickets were sold on
TWA through the TWA Discounter, which accounted for approximately 35% and 37% of
the Company's revenues for such periods, respectively. The Company estimates
that the TWA Discounter will be able to continue selling tickets on TWA only
until the year 2001. Moreover, there can be no assurance that the Company's
agreement with the TWA Discounter will be extended beyond its current expiration
date in February 1998. The Company understands that the report of TWA's
independent auditors included in the annual report for TWA's most recently ended
fiscal year contains a qualification concerning TWA's ability to continue as a
going concern. Any interruptions in the operations of TWA or in its relationship
with the TWA Discounter could have a material adverse effect on the Company. In
addition, the override commission agreements with the other airlines are on a
year-to-year basis. If and when the TWA Discounter is no longer able to sell TWA
tickets, or such agreement otherwise expires, or if the Company is unable to
extend its current override commission arrangements with other carriers or enter
into similar arrangements with similar carriers, the Company could lose its
competitive advantages and its business could be materially adversely affected.
See "Business -- Competition" and "-- Operations."
DEPENDENCE ON TWO CARRIERS FOR SUBSTANTIAL PORTIONS OF REVENUES
During 1996 and the first half of 1997, the Company generated approximately
49% of its revenues from sales of tickets on Continental Airlines (14%) and TWA
(35%). As a result of a combination of their low fares, the Company's favorable
override commissions with respect to tickets sold on them and the Agreement with
the TWA Discounter, the Company is often able to offer the best fares to its
customers on these particular carriers and, consequently, sells a large number
of tickets on them. If Continental, TWA or the TWA Discounter were to
discontinue service, refuse to sell tickets to the Company, impose higher fares
relative to other airlines or terminate the Company's favorable override
commission structures, the Company may not be able to sell as many tickets as it
currently does, or maintain the level of profitability on each sale that it
currently has, and the Company's business and results of operation could be
adversely affected. The Company understands that the report of TWA's independent
auditors included in the annual report for TWA's most recently ended fiscal year
contains a qualification concerning TWA's ability to continue as a going
concern. See "Risk Factors -- Risks Relating to Override Commissions."
CHALLENGES OF BUSINESS INTEGRATION
The full benefits of the combination of the Company and Stevens will
require integration of each company's administrative, finance, sales and
marketing organizations, the coordination of each company's sales and marketing
efforts and the implementation of appropriate operational, financial and
management systems and controls. This will require substantial attention from
the senior management teams of the Company and Stevens, which have limited
experience integrating the operations of companies of the size of the Company
and Stevens and whose members have not previously worked together. The diversion
of management attention, as well as any other difficulties which may be
encountered in the transition and integration process, could have an adverse
impact on the revenue and operating results of the Company. There can be no
assurance that the Company will be able to integrate its operations and those of
Stevens successfully. In addition, the Unaudited Pro Forma Combined Financial
Information contains adjustments
9
<PAGE> 12
relating to the integration of Stevens' operations with those of the Company.
Although these adjustments are based upon available information and certain
assumptions the Company considers reasonable as of the date of this Prospectus,
actual amounts could differ from those set forth therein. Moreover, no assurance
can be given that the anticipated impact of the integration of Stevens upon the
Company's financial condition and results of operations as presented in such pro
forma information will be as presented. See "Unaudited Pro Forma Combined
Financial Information."
RISKS RELATING TO THE AIRLINE INDUSTRY
Developments in the airline industry may result in a decrease in the price
or number of tickets the Company sells. See "Business -- Competition." Concerns
about passenger safety may result in a decrease in passenger air travel and a
consequent decrease in the number of tickets the Company sells. There can be no
assurance that any such developments will not occur or that the Company will not
be adversely affected by any such decrease in the level of passenger air travel.
DEPENDENCE ON SABRE SYSTEM
The Company's ability to quote air travel ticket prices, make reservations
and sell tickets is dependent upon its contractual right to use, and the
performance of the SABRE electronic travel reservation system. In April 1996,
the Company entered into a five-year agreement with The SABRE Group, Inc. to
lease the SABRE system in its Tampa headquarters and in November 1996, entered
into a five-year agreement to lease the SABRE system in its San Diego
reservation center. If the Company were to lose the contractual right to use the
SABRE system through its inability to renew the agreements upon expiration
thereof or through the Company's default under the agreements during the
respective terms thereof, the Company would not be able to conduct operations
until a replacement system was installed and became operational. Only a very
limited number of companies provide reservation systems to the travel agency
industry. There can be no assurance that a replacement system could be obtained
or, if obtained, leased on favorable terms or installed in time to successfully
continue operations.
If the SABRE system were to cease functioning, the Company would not be
able to conduct operations until a replacement system were installed and became
operational. There can be no assurance that a replacement system could be
obtained or, if obtained, installed in time to successfully continue operations.
During any interruption in the operation of SABRE, the Company would lose
revenues. Other travel agencies using other travel reservation systems would not
be subject to such interruption of their operations, and the Company may lose
market share to such competitors. Upon the interruption of the operation of the
SABRE system, the Company could decide to commence operations with another
travel reservation system. See "Business -- SABRE Technology." Such a change in
reservation systems could incur substantial expenses for acquiring the right to
use such system and retraining its reservation agents. In addition, any
impairment of the SABRE system which does not cause it to cease operations
could, nevertheless, adversely affect the quality of the Company's services,
resulting in lost revenues or market share and could require the Company to
subscribe to a different travel reservation system.
DEPENDENCE UPON KEY PERSONNEL
The success of the Company is substantially dependent upon the continuing
services of Mark D. Mastrini, Jerrold B. Sendrow and Biagio Bellizzi, as well as
other key personnel. While the Company has employed a number of executives with
industry experience, the loss of Messrs. Mastrini, Sendrow or Bellizzi could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company does not maintain life insurance policies
on the lives of Messrs. Mastrini, Sendrow or Bellizzi. See "Management."
RISKS RELATING TO INTELLECTUAL PROPERTY
The Company markets its services in the United States under the names,
"1-800-LOW-AIR-FARE,"1-800-FLY-4-LESS" and "1-888-999-VUELA."
"1-800-FLY-4-LESS," to-
10
<PAGE> 13
gether with its logo, is a federally registered service mark in the name of the
Company. The Company has filed an application to register the
"1-800-LOW-AIR-FARE" name and logo and the Spanish language name,
"1-888-999-VUELA," as federal service marks with the U.S. Patent and Trademark
Office. There can be no assurance that such service marks will issue or of the
effect such failure might have on the Company.
CONTROL BY EXISTING STOCKHOLDERS
Following the completion of this Offering, the existing stockholders of the
Company will own in excess of 50% of the outstanding shares of Common Stock. As
a result, these persons and entities effectively will be able to control all
matters requiring approval of the stockholders of the Company, including the
election of the entire Board of Directors. See "Principal Stockholders" and
"Description of Securities."
BENEFITS TO EXISTING SHAREHOLDERS AND AFFILIATES
The consummation of this Offering and the various related transactions
described in this Prospectus will involve certain benefits to existing
shareholders, creditors and affiliates of the Company. The Company will use a
substantial portion of the net proceeds of this Offering to pay indebtedness to
and redeem shares of Common Stock held by existing shareholders, creditors and
affiliates of the Company. Approximately $2,452,500 of the net proceeds will be
used to redeem 554,109 shares of Common Stock held by Michael Cantor (481,609
shares) and Jose Colon (72,500 shares). If the Representative's Over-Allotment
Option is exercised in full, $1,000,000 of the net proceeds will be used to
redeem 250,000 shares held by Perry Trebatch. Approximately $250,000 of the net
proceeds will be used to retire the Company's promissory note to Perry Trebatch
in the principal amount of $250,000. See "Use of Proceeds" and "Certain
Transactions."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") and Amended and Restated Bylaws ("Bylaws") may
be deemed to have anti-takeover effects and may discourage, delay, defer or
prevent a change in control of the Company. These provisions (i) divide the
Company's Board of Directors into three classes, each of which will serve for
different three year periods and (ii) establish certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at annual stockholders' meetings. In
addition, certain provisions of the Delaware General Corporation Law also may be
deemed to have certain anti-takeover effects. See "Description of
Securities -- Anti-takeover Effects of Certain Provisions of the Company's
Certificate of Incorporation and Bylaws."
PREFERRED STOCK
The Certificate authorizes the issuance of 1,000,000 shares of "blank
check" preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without shareholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights that could
materially adversely affect the voting power or other rights of the holders of
Common Stock. In the event of issuance, the preferred stock could be used, under
certain circumstances, as a method of discouraging, delaying, or preventing a
change in control of the Company. Although the Company has no present intention
to issue any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Securities."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 7,638,933 shares of
Common Stock outstanding (7,666,433 if the Representative's over-allotment
option is exercised in full, after giving effect to the redemption of 250,000
shares from Perry Trebatch), of which 1,850,000 shares of Common Stock are being
offered by the Company.
All of the shares (5,959,709) of previously issued and outstanding Common
Stock will become available for resale 90 days after the effectiveness of this
Offering, subject in all events to the provisions of Rule 144
11
<PAGE> 14
under the Securities Act ("Rule 144"). The holders of 50,000 shares have agreed
not to offer, sell or otherwise dispose of ("Sell") such shares for a period of
90 days after the Effective Date; the holders of 713,750 shares have agreed not
to Sell such shares for one year after the Effective Date; the holders of
715,625 shares have agreed not to Sell such shares for 18 months after the
Effective Date; and the holders of 2,334,466 shares (including the officers and
directors of the Company and Vito Balsamo, a former director of the Company)
have agreed not to Sell such shares for 2 years after the Effective Date, except
that each may sell up to 5% of the shares of Common Stock held by him commencing
90 days after the Effective Date, and another 5% of the shares held by him
commencing one year after the Effective Date.
In addition, all of the Selling Stockholders (other than the Selling
Stockholder described in the immediately following sentence) have agreed with
the Representative not to sell their Registered Shares for a period of 30 days
after the Effective Date and for an additional period of thirty (30) days
thereafter without the consent of the Representative. The remaining Selling
Stockholder has agreed not to Sell any of his 110,000 Registered Shares for a
period of 15 days after the Effective Date. In addition, such Selling
Stockholder has agreed that if the Representative exercises the Representative's
Over-Allotment Option in full (in which event 250,000 of his Unregistered Shares
will be redeemed by the Company), he will not sell (i) more than 55,000 of his
Registered Shares during the first 6 months after the Effective Date, (ii) more
than 50,000 of his 120,000 Unregistered Shares during the 6 month period
commencing one year after the Effective Date and (iii) 50,000 of his
Unregistered Shares until the expiration of 18 months from the Effective Date,
with the understanding that such Selling Stockholder may Sell his remaining
20,000 Unregistered Shares at any time, subject to Rule 144. Unless and until
the Representative exercises the Representative's Over-Allotment Option in full,
such Selling Stockholder has agreed not to Sell (i) more than 10,000 Registered
Shares during the first 15-day period following the 15-day lock-up period, or
more than 20,000 Registered Shares in each of the 5 consecutive 30-day periods
thereafter (with unsold allowances carried to future periods), and (ii) 50,000
of his Unregistered Shares for a period of 6 months after the Effective Date,
with the understanding that such Selling Stockholder may Sell the remaining
220,000 Unregistered Shares immediately, subject to Rule 144. See "The Stevens
Merger" for the terms of the lock-up pertaining to the shares to be issued
pursuant to the Merger Agreement. The Representative has no current plans or
understandings to waive, shorten or modify the foregoing lock-up arrangements.
The Company is unable to predict the effect, if any, that sales of the
Registered Shares or sales of shares under Rule 144 (or the potential for such
sales) or otherwise may have on the market price of the Common Stock prevailing
from time to time. Future sales of substantial amounts of Common Stock in the
public market could impair the Company's ability to raise capital through an
offering of securities and may adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale."
ARBITRARY OFFERING PRICE AND EXERCISE PRICE OF WARRANTS
The public offering price of the Common Stock and the Warrants and the
exercise price of the Warrants, as well as the exercise price of the warrants
underlying the Representative's Warrant, have been determined solely by
negotiations between the Company and the Representative. Among the factors
considered in determining these prices were the Company's current financial
condition and prospects and the general condition of the securities market.
However, the public offering price of the Common Stock and the Warrants and the
exercise price of the Warrants and the warrants underlying Representative's
Warrant do not necessarily bear any relationship to the Company's assets, book
value, earnings or any other established criterion of value. See "Underwriting."
DILUTION
Assuming an initial offering price of $5.00 per share, investors purchasing
shares of Common Stock in this offering will experience immediate dilution of
$4.42 per share (89% of the initial public offering price per share). See
"Dilution." The Merger Agreement with Stevens provides for the issuance of
warrants exercisable for 250,000 shares of Common Stock, which warrants have the
same exercise price and are entitled and subject to the same terms and
conditions as the Warrants being offered hereby. The Merger Agreement also
provides that under certain circumstances the Company shall issue additional
shares of Common Stock to the
12
<PAGE> 15
sole shareholder of Stevens on the second anniversary of the closing of the
Offering. If the current market value on such date of the Common Stock issued to
Stevens' sole shareholder on the closing of the Offering (the "IPO Share Value")
is less than $2,571,429 then the Company shall issue to Stevens' sole
shareholder additional shares of Common Stock with a current market value on
such date equal to the difference between the IPO Share Value and $2,571,429.
The IPO Share Value includes the aggregate amount of cash and the fair market
value of any other assets received in connection with the sale of any Common
Stock issued to Stevens' sole shareholder on the Closing. See "The Stevens
Merger."
NECESSITY TO MAINTAIN CURRENT PROSPECTUS AND REGISTRATION STATEMENT
The Company must maintain an effective registration statement on file with
the Commission before any Warrant may be redeemed or exercised. It is possible
that the Company may be unable to cause a registration statement covering the
Common Stock underlying the Warrants to be effective. It is also possible that
the Warrants could be acquired by persons residing in states where the Company
is unable to qualify the Common Stock underlying the Warrants for sale. In
either event, the Warrants may expire, unexercised, which would result in the
holders losing all the value of the Warrants.
STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE WARRANTS
Holders of the Warrants have the right to exercise the Warrants only if the
underlying shares of Common Stock are qualified, registered or exempt from
registration under applicable securities laws of the states in which the various
holders of the Warrants reside. The Company cannot issue shares of Common Stock
to holders of the Warrants in states where such shares are not qualified,
registered or exempt. See "Description of Securities -- Warrants."
LIMITED MARKET FOR THE COMMON STOCK AND WARRANTS
The Company intends to register the Common Stock and Warrants for sale
under the securities laws of only a limited number of states. Consequently,
until the Common Stock and Warrants are registered for sale in other states or
become eligible for exemptions for resales in such states, there will be only a
limited market in which investors will be able to resell Common Stock and
Warrants purchased hereunder.
REDEEMABLE WARRANTS AND IMPACT ON INVESTORS
The Warrants are subject to redemption by the Company in certain
circumstances. The Company's exercise of this right would force a holder of a
Warrant to exercise the Warrant and pay the exercise price at a time when it may
be disadvantageous for the holder to do so, to sell the Warrant at the then
current market price when the holder might otherwise wish to hold the Warrant
for possible additional appreciation, or to accept the redemption price, which
is likely to be substantially less than the market value of the Warrant in the
event of a call for redemption. Holders who do not exercise their Warrants prior
to redemption by the Company will forfeit their right to purchase the shares of
Common Stock underlying the Warrants. The foregoing notwithstanding, the Company
may not redeem the Warrants at any time that a current registration statement
under the Securities Act covering the sale of the shares of Common Stock
issuable upon exercise of the Warrants is not then in effect. See "Description
of Securities -- Warrants." Additionally, in connection with the Stevens Merger,
the Company will issue warrants exercisable for 250,000 shares of Common Stock,
which are exercisable at the same price and subject to the same terms and
conditions as the Warrants.
REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET
Although the Representative has advised the Company that it intends to make
a market in the Common Stock and the Warrants, it will have no legal obligation
to do so. The prices and the liquidity of the Common Stock and the Warrants may
be significantly affected by the degree, if any, of the Representative's
participation in the market. No assurance can be given that any market making
activities of the Representative, if commenced, will be continued. See
"Underwriting."
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<PAGE> 16
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCKS OR "PENNY STOCK";
POSSIBLE FAILURE TO QUALIFY FOR NASDAQ SMALLCAP MARKET LISTING
The Commission has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price (as defined) of less
than $5.00 per share, subject to certain exceptions. While the Company
anticipates that the price at which the shares of Common Stock offered to the
public pursuant to this Offering will be equal to or in excess of $5.00, the
Warrants offered hereby will initially be "penny stocks" and become subject to
rules that impose additional sales practice requirements on broker/dealers who
sell such securities to persons other than established customers and accredited
investors. There can be no assurance that the Common Stock or the Warrants will
trade for $5.00 or more per security after the Offering. Consequently, the
"penny stock" rules may restrict the ability of broker/dealers to sell the
Company's securities and may affect the ability of purchasers in this Offering
to sell the Company's securities in a secondary market.
Although the Company has applied for listing of the Common Stock and the
Warrants on the Nasdaq SmallCap Market, there can be no assurance that such
application will be approved or that a trading market for the Common Stock and
the Warrants will develop or, if developed, will be sustained. Furthermore,
there can be no assurance that the securities purchased by the public hereunder
may be resold at their original offering price or at any other price.
In order to qualify for initial listing on the Nasdaq SmallCap Market, a
company must, among other things, have at least $4,000,000 in net tangible
assets, $5,000,000 "public float," and a minimum bid price for its securities of
$4.00 per share. For continued listing on the Nasdaq SmallCap Market, a company
must maintain $2,000,000 in net tangible assets, and a $1,000,000 market value
of the public float. In addition, continued inclusion requires two market makers
and a minimum bid of $1.00 per share. The failure to meet these maintenance
criteria in the future may result in the discontinuance of the listing of the
Common Stock and Warrants on the Nasdaq SmallCap Market.
If the Company is or becomes unable to meet the listing criteria (either
initially or on a continued basis) of the Nasdaq SmallCap Market and is never
traded or becomes delisted therefrom, trading, if any, in the Common Stock and
the Warrants would thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" or, if then available, the "Electronic Bulletin Board"
administered by the National Association of Securities Dealers, Inc. (the
"NASD"). In such event, the market price of the Common Stock and the Warrants
may be adversely impacted. As a result, an investor may find it difficult to
dispose of or to obtain accurate quotations as to the market value of the Common
Stock and the Warrants.
EXERCISE OF REPRESENTATIVE'S PURCHASE WARRANTS
In connection with this Offering, the Company will sell to the
Representative, for nominal consideration, a Representative's Warrant to
purchase 185,000 shares of Common Stock and 185,000 Warrants from the Company.
The Representative's Warrant will be exercisable for a four-year period
commencing one year from the effective date of this Offering at an exercise
price of 120% of the price at which the Common Stock and Warrants are sold to
the public, subject to adjustment. The Representative's Warrant may have certain
dilutive effects because the holders thereof will be given the opportunity to
profit from a rise in the market price of the underlying shares with a resulting
dilution in the interest of the Company's other shareholders. The terms on which
the Company could obtain additional capital during the life of the
Representative's Warrant may be adversely affected because the holders of the
Representative's Warrant might be expected to exercise them at a time when the
Company would otherwise be able to obtain comparable additional capital in a new
offering of securities at a price per share greater than the exercise price of
the Representative's Warrant.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SECURITIES PRICES
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Immediately prior to this Offering, there were
approximately 100 record owners of the Company's Common Stock. The Company
anticipates that after the Offering, the Company will have over 600 beneficial
owners. Although the Company has applied to list the Common Stock and the
Warrants on the Nasdaq SmallCap
14
<PAGE> 17
Market, there can be no assurance that a regular trading market will develop (or
be sustained, if developed) for the Common Stock or the Warrants upon completion
of this Offering, or that purchasers will be able to resell their Common Stock
or Warrants or otherwise liquidate their investment without considerable delay,
if at all. Recent history relating to the market prices of newly public
companies indicates that, from time to time, there may be significant volatility
in their market price. There can be no assurance that the market price of the
Common Stock or the Warrants will not be volatile as a result of a number of
factors, including the Company's financial results or various matters affecting
the stock market generally.
NO DIVIDENDS
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. The Company currently intends to retain all earnings for
the operation and expansion of its business and does not anticipate paying any
dividends in the foreseeable future. See "Dividend Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act, and Section 21E of the Exchange Act. The
actual results of the Company may differ significantly from the results
discussed in such forward-looking statements. Certain factors that might cause
such differences include, but are not limited to, the factors discussed in this
"Risk Factors" section. The safe harbors contained in Section 27A of the
Securities Act and Section 21E of the Securities Act, which apply to certain
forward-looking statements, are not applicable to this Offering.
15
<PAGE> 18
THE STEVENS MERGER
On November 11, 1996, the Company entered into an Agreement and Plan of
Merger with The Joseph Stevens Group, Inc. ("Stevens") and its sole shareholder,
The Joseph Stevens Group LLC, which Agreement was amended and restated in its
entirety effective May 30, 1997 (as amended, the "Merger Agreement") and further
amended effective September 9, 1997. Stevens provides airline tickets for
domestic and international travel to consumers through its "1-800-FLY-4-LESS"
(1-800-359-4537) toll-free number. Stevens' 50 reservation agents provide
reservations for airline tickets out of its reservation center in San Diego,
California. The principal assets of Stevens are its federally registered service
mark, "1-800-FLY-4-LESS," and the related toll-free telephone number,
"1-800-359-4537," through which customers call its reservation center located in
San Diego, California.
In connection with the Merger, the Company and Stevens entered into an
Interim Operating Agreement pursuant to which the Company has been operating
Stevens' business effective January 1, 1997, until the closing of the Offering.
In connection therewith, Stevens granted to the Company a license to use its
service mark and toll free number, and the Company leased Stevens' equipment and
reservation center for the period from January 1, 1997, until the closing of the
Offering. In anticipation of the consummation of the Merger, the Company
replaced Stevens' former reservation system with the Company's Turbo SABRE
system and the Company's management has taken over the management of the
business previously conducted by Stevens. Upon consummation of the Offering, the
Company's Tampa and San Diego reservation systems will continue to operate with
the Company's Turbo SABRE system and under the Company's management. See
"Business Operations."
The Company entered into the Merger Agreement in order to increase its
market share of the low-airfare business. The Company believes that as a result
of the Merger, it will acquire a valuable set of easy-to-remember toll-free
numbers and Stevens' successful promotional campaign of providing approximately
150 newspapers with the lowest-priced airfares for certain designated routes in
exchange for placement of Stevens' name and toll-free number. Since assuming the
operations of Stevens under the Interim Operating Agreement, the Company has
almost tripled the Company's gross revenues, and increased its gross margins to
14.7% of gross reservations for the six months ended June 30, 1997 compared to
12.5% for the six months ended June 30, 1996.
As a result of the Merger, and with the eventual phase-out of Stevens'
management, the Company will enjoy significant cost savings by operating the San
Diego and Tampa reservation facilities under the Company's single management
team. Another major benefit from the Merger will be the greater ease with which
the Company will attain the maximum commissions from the airlines and SABRE.
Under its agreements with SABRE and the airlines whose tickets it sells, the
Company can earn increased levels of commissions depending upon the Company's
overall sales volumes. All the Company's sales, whether booked through its Tampa
or San Diego reservation centers, will be credited to the Company's consolidated
accounts, and will result in the Company achieving the various milestones faster
because of the greater aggregate sales volume.
Pursuant to the Merger Agreement, upon the closing of the Offering, (i)
Stevens will be merged with and into the Company, with the Company as the
surviving corporation, (ii) the Company will issue an aggregate of 383,333
shares of Common Stock to Stevens' sole stockholder, The Joseph Stevens Group,
LLC ("JSG"), in exchange for all of the outstanding capital stock of Stevens
plus such additional shares of Common Stock as may be issued pursuant to
make-whole provisions contained in the Merger Agreement and (iii) the Company
will issue to Stevens' sole stockholder warrants exercisable for 250,000 shares
of Common Stock, which warrants have the same exercise price and are entitled
and subject to the same terms and conditions as the Warrants being offered
hereby, and in respect to which the Company will be required to file a
registration statement within 180 days of the Effective Date. The Merger
Agreement also provides for the escrow of the Company's cash in the amount of
$46,665 and the issuance by the Company of a promissory note in the amount of
$1,578,335 payable fifteen days after the date of this Prospectus. Upon
consummation of this Offering, such cash and promissory note will be released to
the sole shareholder of Stevens. Pursuant to the Merger Agreement and in
consideration for Steven's Agreement to extend the Closing Date, the Company has
16
<PAGE> 19
paid $121,000 to Stevens. The Merger Agreement also provides that if on the
second anniversary of the date of the closing of this Offering the value of the
portion of the 383,333 shares issued to the Stevens' shareholder, then held by
the Stevens' shareholder, together with the fair market value of any
consideration received in exchange for the shares no longer held by the Stevens'
shareholder, is less than $2,571,429, the Company shall issue to the Stevens'
shareholder such number of shares of the Company's Common Stock, based upon its
then bid price, as is necessary to make-up any such deficiency. The Merger
Agreement provides that Stevens will have no debt or obligations as of the
closing of the Merger other than certain agreed upon ordinary course obligations
and a promissory note (the "JSG Note") not to exceed $650,000 payable to JSG.
The principal balance of the JSG Note will be deducted from and reduce the
principal balance of the $1,578,335 note deliverable by the Company. Further,
the principals of JSG have agreed to indemnify the Company against all
liabilities of Stevens other than the agreed upon ordinary course liabilities.
The sole stockholder of Stevens has agreed, with respect to 300,000 of the
383,333 shares to be received pursuant to the Merger Agreement, that none of
such shares will be sold over-the-counter or over a public exchange within 30
days of the closing of the Merger; that during the following eleven months it
may publicly sell no more than 4,546 shares per month (with any unsold
allowances carried forward to future months); and that during the following
twelve months it may publicly sell no more than 20,833 shares per month (with
any unsold allowances carried forward to future months). The sole stockholder of
Stevens has agreed with respect to the remaining 83,333 shares to be received
pursuant to the Merger Agreement, that none of such shares will be sold within
90 days of the Closing Date and that during the following seven months it may
sell no more than 11,905 shares per month (with any unsold allowance carried
forward to future months).
The equity members of JSG are Joseph Elizondo, Steve Rohrlick and Western
Horizons, Ltd., who are owners, respectively, of 44.3%, 44.3% and 11.4%,
respectively, of the equity interest in JSG. Joseph Stevens & Company, L.P., the
investment banking firm at which the Chairman of the Company's Board of
Directors, Michael Gaggi, is a senior vice president, is not affiliated with or
related to The Joseph Stevens Group, Inc., JSG or any of the equity members of
The Joseph Stevens Group, LLC.
17
<PAGE> 20
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock and Warrants offered hereby (assuming an initial public offering price of
$5.00 per Share and $.125 per Warrant) are estimated to be approximately
$7,800,690 (approximately $9,037,993 million if the Underwriters' over-allotment
option is exercised in full), after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company. The Company
intends to use the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
PERCENT OF
USE DOLLAR AMOUNT NET PROCEEDS
--- ------------- ------------
<S> <C> <C>
Redemption of shares of Common Stock held by Michael
Cantor and Jose Colon................................... $2,452,000 31.43%
Repay note issued in connection with the Stevens Merger... 1,578,000 20.29%
Repay note to Perry Trebatch.............................. 250,000 3.20%
Training reservation agents............................... 1,000,000 12.82%
Advertising............................................... 500,000 6.41%
Property and Equipment.................................... 50,000 .64%
Working Capital........................................... 1,970,690 25.21%
</TABLE>
The Company has agreed that if the Representative's, Over-Allotment Option
is exercised in full it will redeem 250,000 shares of its Common Stock held by
Perry Trebatch for $1,000,000. Consequently, if the Representative's,
Over-Allotment Option is exercised in full, the net proceeds available for use
in the Company's operations will not increase substantially, although the number
of shares outstanding will be reduced by the 250,000 shares redeemed from Mr.
Trebatch.
Approximately $1,578,000 of the net proceeds will be used to retire the
Company's promissory note issued to the sole shareholder of Stevens in
connection with the Merger, bearing interest at the prime rate reported in The
Wall Street Journal as the base rate on corporate loans posted by at least 75%
of the 30 largest banks in the United States, and the principal and accrued and
unpaid interest of which is payable on the 20th day after the closing of the
Offering.
Approximately $2,452,000 of the net proceeds will be used to redeem shares
of the Company's Common Stock held by two stockholders, Michael Cantor (481,609
shares) and Dr. Jose Colon (72,500 shares). See "Certain Transactions."
Approximately $250,000 of the net proceeds will be used to retire the
Company's promissory note to Perry Trebatch, in the principal amount of
$250,000. The principal and accrued and unpaid interest on such note are payable
on the earlier of November 30, 1997, or the closing of this Offering. The
principal amount of such note currently bears interest at the rate of 18% per
annum. See "Certain Transactions." The Company incurred the above indebtedness
for general working capital purposes. See "Certain Transactions."
Approximately $1,000,000 of the net proceeds will be used to support the
Company's training program for reservation agents. Approximately $500,000 of the
net proceeds will be used for advertising and marketing purposes. The Company
expects that with the proceeds of this Offering it will begin to expand its
marketing programs beyond Yellow Pages Directories into selected print and media
outlets.
Approximately $50,000 of the net proceeds will be used to purchase property
and equipment. Inasmuch as the Company's facilities are currently state-of-the
art, it currently anticipates that it will spend only a small portion of the
Offering proceeds to upgrade its plant and equipment.
The Company expects to use the approximately $1,970,690 balance of the net
proceeds for working capital and general corporate purposes.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-terms
interest-bearing investments. The Company has no current plans for the use of
such proceeds as would be received from the exercise of the Warrants offered
hereby.
18
<PAGE> 21
DIVIDEND POLICY
To date, the Company has neither declared nor paid any dividends on its
Common Stock nor does the Company anticipate that such dividends will be paid in
the foreseeable future. Rather, the Company intends to retain any earnings to
finance the growth and development of its business. Any payment of cash
dividends on its Common Stock in the future will be dependent, among other
things, upon the Company's earnings, financial condition, capital requirements
and other factors which the Board of Directors deems relevant.
19
<PAGE> 22
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company at
June 30, 1997, (ii) the Pro Forma capitalization of the Company as of such date
after giving effect to the Stevens Merger, and (iii) the Pro Forma
capitalization of the Company as of such date after giving effect to the Stevens
Merger and the sale by the Company of 1,850,000 shares of Common Stock and
1,850,000 Warrants offered hereby at an assumed initial public offering price of
$5.00 per share of Common Stock and $0.125 per Warrant (after deduction of the
underwriting discount and estimated offering expenses) and the application of
the net proceeds as described under "Use of Proceeds." This table should be read
in conjunction with Financial Statements of the Company, the Predecessor
Business and Stevens, including notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------- PRO FORMA
PRO PRO AS
ACTUAL(1) FORMA(2) FORMA(3) ADJUSTED(4)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Maturities of long term
debt................................ $ 280,750 $ 1,808,750 $ 1,808,750 $ 30,750
Long-term debt........................ 30,000 30,000 30,000 30,000
----------- ----------- ----------- -----------
Preferred stock -- $100.00 par value;
400 shares authorized, none issued
or outstanding...................... 310,750 1,838,750 1,838,750 60,750
----------- ----------- ----------- -----------
Common stock(5) -- $.01 par value;
10,000,000 shares authorized,
5,959,709 shares issued and
outstanding, 6,343,042 shares issued
and outstanding Pro Forma(2)
5,788,933 shares issued and
outstanding Pro Forma(3), and
7,638,933 shares outstanding Pro
Forma, As Adjusted(4)............... 59,597 63,430 57,889 76,389
Additional Paid-In Capital............ 4,997,424 6,910,256 4,463,297 12,245,487
Stock Subscriptions Receivable........ (32,296) (32,296) (32,296) (32,296)(6)
Retained Deficit...................... (3,501,685) (3,501,685) (3,501,685) (3,501,685)
----------- ----------- ----------- -----------
Total Stockholders'
Equity.................... 1,523,040 3,439,705 987,205 8,787,895
----------- ----------- ----------- -----------
Total Capitalization........ $ 1,833,790 $ 5,278,455 $ 2,825,955 $ 8,848,645
=========== =========== =========== ===========
</TABLE>
- ---------------
(1) Reflects the actual short-term and long-term indebtedness and capitalization
of the Company without giving effect to the Stevens Merger or the Offering
contemplated hereby.
(2) Reflects the pro forma short-term and long-term indebtedness and
capitalization of the Company after giving effect to the consummation of the
Stevens Merger as if it occurred on June 30, 1997.
(3) Reflects the pro forma short-term and long-term indebtedness and
capitalization of the Company after giving effect to the consummation of the
Stevens Merger and the redemption of 554,109 shares of Common Stock for an
aggregate of $2,452,500 as if they occurred on June 30, 1997.
(4) Reflects the pro forma short-term and long-term indebtedness and
capitalization of the Company after giving effect to the Stevens Merger as
adjusted to give effect to the consummation of the Offering and the
application of the estimated net proceeds as described under "Use of
Proceeds."
(5) Excludes (i) 300,000 shares issuable upon exercise of options granted to one
of the Company's lenders, (ii) 75,000 shares of Common Stock issuable upon
exercise of stock options granted pursuant to the Company's 1997 Stock
Option Plan, (iii) 300,000 shares of Common Stock issuable upon exercise of
options issued to directors and employees of the Company, (iv) 1,850,000
shares of Common Stock issuable upon the exercise of the Warrants offered
hereby, (v) 370,000 shares of Common Stock issuable upon exercise of the
Representative's Warrant and the Warrants therein and (vi) 25,000 shares
issuable upon exercise of warrants, identical to those offered hereby, to be
granted to the Company's President upon closing of this Offering.
(6) The amounts set forth as Stock Subscriptions Receivable were paid subsequent
to June 30, 1997.
20
<PAGE> 23
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share after this
Offering constitutes the dilution to investors in this Offering. Net tangible
book value per share is determined by dividing the net tangible book value of
the Company (total tangible assets less total liabilities) by the number of
outstanding shares of Common Stock.
At June 30, 1997, the pro forma net tangible book value of the Company was
$(3,714,791) or $(.64) per share, after giving effect to the consummation of the
Stevens Merger and the issuance of 383,333 shares of Common Stock in connection
therewith and the redemption of 554,109 shares of stock for $2,452,500. Without
taking into account any changes in net tangible book value attributable to
operations after June 30, 1997, other than the issuance and sale by the Company
of 1,850,000 shares of Common Stock offered hereby at an assumed public offering
price of $5.00 per share and 1,850,000 Warrants offered hereby at the assumed
offering price of $.125 per Warrant, and the application of the net proceeds as
described under "Use of Proceeds," the pro forma net tangible book value of the
Company as of June 30, 1997 would have been $4,429,599, or $.58 per share. This
represents an immediate increase in net tangible book value of $1.22 per share
to the existing shareholders and an immediate dilution of $4.42 per share to new
investors (89% of the initial public offering price per share of Common Stock).
The following table illustrates this dilution, on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price of Common Stock....... $5.00
Net tangible book value as of June 30, 1997................. $(.03)
Decrease in pro forma net tangible book value after giving
effect of Steven Merger................................... (.17)
Decrease in pro forma net tangible book value after giving
effect of Stock Redemption................................ (.44)
Increase in net tangible book value attributable to new
investors................................................. 1.22
Pro forma net tangible book value after offering............ .58
-----
Total dilution to new investors................... $4.42
=====
</TABLE>
If the Representative's over-allotment option is exercised in full, the pro
forma net tangible book value of the Company as of June 30, 1997 will be
$5,666,902, or $.72 per share (without giving effect to the redemption of
250,000 shares held by Perry Trebatch for $1.0 million). This represents an
immediate increase in net tangible book value of $1.36 per share to the existing
shareholders and an immediate dilution of $4.28 per share to new investors.
The following table summarizes, as of June 30, 1997, the total number of
shares of Common Stock purchased from the Company, the aggregate consideration
paid and the average price per share paid (assuming an initial public offering
price of $5.00 per share) by the existing shareholders and the new investors.
For purposes of determining the amount paid by existing shareholders there has
been deducted from the $2,845,000 paid by the existing shareholders for their
shares the $2,452,500 to be used to redeem the shares held by Mr. Cantor and Dr.
Colon.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders...................... 5,788,933 76% 392,500 4.0% .07
New Investors.............................. 1,850,000 24% 9,250,000 96.0% $5.00
--------- ---- ---------- ----
Total............................ 7,638,933 100% $9,642,500 100% $1.26
========= ==== ========== ====
</TABLE>
- ---------------
(1) The computation in both of the foregoing tables assume no exercise of the
Representative's Warrant. See "Description of Securities."
If the Underwriters' over-allotment option is exercised in full, the new
investors will have paid $10,637,500 for 2,127,500 shares of Common Stock,
representing 96.4% of the total consideration for 26.9% of the total number of
shares outstanding.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the financial condition and
results of operations of the Company and should be read in conjunction with the
financial statements of the Company and related notes thereto included elsewhere
in this Prospectus.
OVERVIEW
The Company operates as a telemarketing travel agency, providing air
transportation reservation services for domestic and international travel to
customers through its easy to remember, toll-free numbers. The Company strives
to provide its customers with the lowest-priced airfare available for a
particular travel route at the time of reservation by utilizing the SABRE travel
reservation system.
The Company was formed in November 1995 to acquire certain assets of and
assume certain liabilities of 1-800-Low Airfare, Inc. (the "Predecessor
Business"). The acquisition was consummated on December 1, 1995. The Predecessor
Business had commenced operations in 1993. To expand its operations, in November
1996 the Company entered into a Merger Agreement with Stevens and its sole
shareholder. Stevens is one of the largest independent travel agencies in the
United States specializing in the telemarketing of airline tickets. Pursuant to
the Merger Agreement, simultaneously with the closing of this Offering, Stevens
will be merged with and into the Company, with the Company as the surviving
corporation.
The Company's operating revenues presently consist, and for the immediate
future will continue to consist, principally of (i) commissions on air travel
tickets; (ii) override commissions on air travel tickets booked on airlines with
which the Company has override agreements; (iii) segment incentives under the
Company's agreement with SABRE; (iv) co-op promotions with suppliers of travel
related products and services; and (v) service fees charged to customers.
The Company's revenues are a function of the number and price of the
tickets its sells and the percentage of the price of such tickets it retains as
commissions and override commissions, as well as on the service charge imposed
on customers. Although the Company entered into its first override agreement in
December 1995, it only began to achieve the volume necessary to benefit from
these agreements in the third quarter of 1996. The Company entered into an
agreement with the TWA Discounter on March 1, 1996. As a result of its override
agreements and its agreement with the TWA Discounter, the Company is able to
charge its customers a $10 or $20 service charge, depending on the price of the
ticket, while still offering low priced tickets. The Company only began to
impose this service charge in January 1997.
The Company anticipates that as the volume of tickets sold increases and
the proportion of tickets sold which are subject to an override agreement
increases, the percentage of the price of the tickets sold retained by the
Company will increase. Set forth below for the periods indicated are the gross
dollar amounts of reservations booked, revenues and revenues as a percentage of
reservations, the gross dollar amount of expenses, expenses as a percentage of
revenues and net loss as a percentage of revenues.
<TABLE>
<CAPTION>
ELEVEN MONTHS MONTH
ENDED ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31, 1995 DECEMBER 31,
1995 1995 TOTAL % 1996 %
-------------- ------------ ----------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Gross Reservations..... $ 9,647,090 $1,609,426 $11,256,516 -- $23,590,782 --
=========== ========== =========== ===========
Revenues (including
override)............. 1,090,938 133,970 1,224,908 10.9%* 3,235,777 13.7%*
----------- ---------- ----------- -----------
OPERATING EXPENSES.....
Employee Costs........ 1,115,403 175,604 1,291,007 105.4 2,490,770 77.0
Telephone............. 392,869 14,527 407,396 33.3 539,118 16.7
Ticket Delivery....... 138,798 17,896 156,694 12.8 407,579 12.6
Advertising........... 333,520 437 333,957 27.3 137,223 4.2
Interest.............. 168,857 4,017 172,874 14.1 1,114,298 34.4
----------- ---------- ----------- ----- ----------- -----
Total Expenses.... 3,306,224 266,350 3,572,574 291.7 6,457,046 199.6
----------- ---------- ----------- ----- ----------- -----
Other Income........... 41,959 1,782 43,741 3.6 12,610 0.4
----------- ---------- ----------- ----- ----------- -----
188.1 99.2
Net (Loss)............. $(2,173,327) $ (130,598) $(2,303,925) $(3,208,659)
=========== ========== =========== ===== =========== =====
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
1996 % 1997 %
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
Gross Reservations..... $10,571,076 -- $25,293,857 --
=========== ===========
Revenues (including
override)............. 1,323,468 12.5%* 3,721,651 14.7%*
----------- -----------
OPERATING EXPENSES.....
Employee Costs........ 1,233,507 93.2 1,775,614 47.7
Telephone............. 199,808 15.1 501,246 13.5
Ticket Delivery....... 168,742 12.7 327,926 8.8
Advertising........... 36,391 2.7 107,044 2.9
Interest.............. 540,048 40.8 67,453 1.8
----------- ----- ----------- -----
Total Expenses.... 3,058,056 231.0 3,889,447 104.5
----------- ----- ----------- -----
Other Income........... 5,809 -- 5,368 0.1
----------- ----- ----------- -----
131.0 4.4
Net (Loss)............. $(1,728,779) $ (162,428)
=========== ===== =========== =====
</TABLE>
- ---------------
* Revenues as a percentage of gross reservations.
** Expense as a percentage of revenues.
22
<PAGE> 25
The Company's operating expenses include primarily those items necessary to
advertise its services, maintain and staff its travel reservation centers,
including payroll, commissions and benefits; telephone; general and
administrative expenses, including rent and computer maintenance fees; and, to
date, interest, fees and expenses associated with the Company's financing
activities.
RESULTS OF OPERATIONS
For purposes of the discussion below, the results of operations of the
Predecessor Business for the period from January 1, 1995, through November 30,
1995, have been combined with the results of operation for the Company for the
month of December 1995.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues for the year ended December 31, 1996 ("Fiscal '96") increased 164%
to $3,235,777 compared to $1,224,908 for the year ended December 31, 1995
("Fiscal '95"). The increased revenues reflect the growing consumer awareness of
the services provided by the Company and an increase in the volume of calls
handled as a result of the growth in the number of the Company's telephone
reservation agents from approximately 13 as of December 31, 1995, to 76 as of
December 31, 1996. As a percentage of gross reservations, revenues increased
from 10.9% of gross reservations during 1995 to 13.7% of gross reservations
during 1996.
Operating expenses for Fiscal '96 increased 81% to $6,457,046 compared to
$3,572,574 for Fiscal '95. The increase in operating expenses resulted primarily
from an increase in the Company's payroll, commissions and employee benefits
expenses, which increased 93% to $2,490,770 in Fiscal '96 from $1,291,007 in
Fiscal '95. Consistent with the increase in the volume of tickets sold by the
Company, the Company also recorded increases in its telephone and ticket
delivery expenses, though these increases were not proportional with the
increase in the Company's volume. Also contributing significantly to the
increase in the Company's operating expenses was an increase in the Company's
interest expense by 544% to $1,114,298 in Fiscal '96 from $172,874 for Fiscal
'95. A portion ($1,047,093) of the interest expense incurred during Fiscal '96
represents shares issued as compensation for loans made to the Company. Despite
the increase in operating expenses from Fiscal '95 to Fiscal '96, as reflected
in the table on the preceding page, total operating expenses as a percentage of
revenues decreased from Fiscal '95 to Fiscal '96. Further, with the exception of
interest expense, which increased as a result of the Company's need to fund its
growth and as a result of shares issued as a result of the Company's failure to
timely repay outstanding loans, each of the Company's expense items decreased as
a percentage of revenues from Fiscal '95 to Fiscal '96. This decrease reflects
the fact that although certain of the Company's expenses may increase with
revenues, others remain constant over a range of revenues and those which
increase generally do so at a rate less than the rate of increase in revenues.
Because of the financial condition of the Company when it commenced
operations, the Company was unable to attract capital, debt or equity, on
favorable terms. In connection with its acquisition of certain assets of the
Predecessor Business, the Company assumed the debt obligations of the
Predecessor Business to Mr. Trebatch, Mr. Cantor and Dr. Colon. In addition,
after it commenced operations the Company borrowed additional monies from Mr.
Trebatch, Mr. Cantor and Dr. Colon. The terms of such agreements were onerous,
providing for increases in the principal amounts of the loans and the issuance
of substantial numbers of shares of Common Stock to the lenders if the Company
were not to timely pay the amounts due. As a result of such provisions, assuming
repayment of the amounts due Mr. Trebatch out of the proceeds of this Offering
and valuing any shares issued at amounts reflecting their value at the time of
issuance (default), the effective rates of interest received by Mr. Trebatch,
Mr. Cantor and Dr. Colon were 135%, 886% and 312%, respectively.
During 1996 the Company's operating loss was $3,208,659 (including non-cash
charges of $1,811,093 resulting from shares issued to lenders, consultants,
employees and the Company's landlord), as compared to an operating loss of
$2,303,925 for Fiscal '95. The consistency of the Company's operating loss
reflects the fact that while the volume of business increased, the Company's
operating expenses, inclusive of interest charges, increased by an approximately
equal amount.
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Liquidity and Capital Resources
The Company commenced operations in December 1995 upon the acquisition of
certain assets of the Predecessor Business for $1,407,008 of which $10,000 was
paid in cash, $90,000 was paid by the delivery of the Company's Promissory Note;
$720,480 was satisfied through the issuance of 600,400 shares of the Company's
Common Stock and $586,528 was satisfied through the assumption of certain
liabilities of the Predecessor Business. Of the 600,400 Shares issued, 300,000
shares were to be issued to creditors of the Predecessor Business which elected
to convert their claims against the Predecessor Business into stock at the rate
of $10.00 per share. Pursuant to this Agreement, during Fiscal '96 the Company
issued 153,934 shares of Common Stock to creditors of the Predecessor Business
and 146,066 shares of its Common Stock to the Predecessor Business.
To date the Company has financed its operations from capital contributions,
net of related expenses, in the amount of $2,455,902; loans in the amount of
$310,750; and through services provided by certain vendors to be paid out of
future revenues. The Company, including its Predecessor, used $1,293,714 in
operating activities in Fiscal '95 and $1,095,150 for operating activities in
Fiscal '96. The decrease in cash used in operating activities reflects the fact
that a significant portion of the Company's expenses, particularly interest,
incurred during Fiscal '96 was satisfied through the issuance of shares of the
Company's Common Stock. The Company anticipates that it will continue to use
cash in its operating activities for the immediate future.
During Fiscal '96 the Company's capital expenditures were approximately
$371,000 primarily for leasehold improvements. Because the Company's computers
and telephone switching equipment are already in place, the Company does not
anticipate substantial capital expenditures during the current fiscal year.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenue for the 6 months ended June 30, 1997 increased 181% to $3,721,651
compared to $1,323,468 for the six months ended June 30, 1996. The increase in
revenue was the direct result of the increase in gross reservations booked of
139% in the six months ended June 30, 1997 ($25,293,857) as compared to the six
months ended June 30, 1996 ($10,571,076). Approximately $11,058,000 of the gross
reservation increase and $1,627,000 of the increase in revenues is attributable
to the assumption of the operations of Stevens in January 1997. The Company
believes that as a result of the Merger, the Company has significantly increased
its market share of the low-airfare business. In addition, it has acquired a
valuable set of easy-to-remember toll-free numbers and a successful promotional
campaign in which the Company provides approximately 150 newspapers with the
lowest-priced airfares for certain designated route in exchange for placement of
Stevens' name and toll-free number. In addition to the increase in revenue
applicable to increased gross reservations, the commissions and fees earned
increased to 14.7% of gross reservations for the six months ended June 30, 1997
compared to 12.5% for the six months ended June 30, 1996. This 18% increase in
commissions and fee rates is the result of volume incentives provided by the
airlines, which the Company will be able to take advantage of more quickly as a
result of the greater overall sales volumes generated by the Company's two
reservation centers.
Operating expenses for the six months ended June 30, 1997 increased 27% to
$3,889,447 compared to $3,058,056 for the six months ended June 30, 1996.
Operating expenses did not increase proportionate to revenues due to the fact
that many expenses remain constant over broad ranges of revenues (i.e. office
rent, utilities, management wages, etc.) and a new agreement effective September
1996 with its telephone service provider helped the Company control the
telephone expense. Pursuant to the new four-year agreement, subject to the
Company being current in its payments, the telephone service provider granted
the Company a credit of $15,000 towards installation charges and an additional
$180,000 for general charges in the fifth month following the initiation of
service (subject to forfeiture in the event the Company discontinues service in
the second year of the agreement) and will grant the Company a credit of
$180,000 for general charges in the 17th month following initiation of service.
Since the execution and delivery of the Merger Agreement in November 1996, the
Company's management commenced managing Stevens and replaced Stevens' prior
reservation system with a new SABRE system. Upon consummation of the Merger,
Stevens' prior management will be phased out, and the Company anticipates
significant cost savings from consolidating
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operations under one management team. Interest expense declined by $472,595 in
the six months ended June 30, 1997 as compared to the six months ended June 30,
1996, due to the fact that the Company issued a substantial number of shares of
its Common Stock as a result of its failure to timely repay amounts due certain
lenders and no such shares were issued in the first half of 1997.
Despite the increase in operating expenses from the first half of '96 to
the first half of '97, as reflected in the table above, total operating expenses
as a percentage of revenues decreased from 231.0% of revenues during the first
half of '96 to 104.5% of revenues during the first half of '97. This decrease is
largely attributable to the fact that the Company's revenues increased by 181%
during this period while expenses increased by a significantly lesser
percentage.
During the 6 months ended June 30, 1997 the Company's operating loss
declined to $167,796 from $1,734,588 for the 6 months ended June 30, 1996. This
decline was the result of revenue increasing faster than related expenses plus
the decline in the interest expense.
Liquidity and Capital Resources
The Company used $52,913 of cash in operating activities during the six
months ended June 30, 1997 and used $1,163,201 of cash in operating activities
during the six months ended June 30, 1996. The 1996 operating activity use of
cash was financed primarily through sales of common stock from which the Company
realized proceeds of $2,183,550. In subsequent quarters of 1996 the Company
raised an additional $297,854 which was used to finance additional use of cash
in operating activities for the last two quarters of 1996 and the first quarter
of 1997.
During the first half of 1997 the Company's capital expenditures were
$46,703. Because the Company's computers and telephone switching equipment are
already in place, the Company does not anticipate substantial capital
expenditures in the immediate future.
The Company anticipates that approximately $1,970,690 of the net proceeds
of this Offering will be available to be used as working capital. In addition,
approximately $1,000,000 of such net proceeds will be used to train a sufficient
number of people to add approximately 200 additional reservation agents over the
next 24 months, which should enable the Company to increase the number of calls
answered each day by approximately 12,000 and, consequently, the Company's
revenues. In addition the Company intends to use $500,000 to expand its
marketing activities to increase consumer awareness of its services.
If the Representative's Over-Allotment Option is exercised in full, the
Company will use $1,000,000 of the proceeds of this Offering to redeem 250,000
shares held by Perry Trebatch. This would represent a redemption price of $4.00
per share. Mr. Trebatch paid an aggregate of $200,000 ($2.00 per share) for
100,000 of the shares to be redeemed by the Company. The remaining 150,000
shares were issued as compensation for the Company's failure to timely repay
amounts loaned to the Company by Mr. Trebatch. Although the redemption price of
$4.00 per share is less than the initial public offering price of the Common
Stock being offered hereby, the redemption price is significantly higher than
the price deemed to have been paid for these shares.
The Company will use approximately $2,452,500 of the proceeds of this
Offering to redeem 554,109 shares of Common Stock from two individual lenders to
the Company: 481,609 shares from Michael Cantor and 72,500 shares from Jose
Colon. This represents a redemption price of $4.43 per share. All of the shares
held by Mr. Cantor and Dr. Colon were issued by the Company in consideration of
the relief of indebtedness of the Predecessor Business or as consideration for
amounts loaned to the Company. Although the redemption price of $4.43 per share
is less than the initial public offering price of the Common Stock being offered
hereby, the redemption price is significantly higher than the price deemed to
have been paid for these shares.
The Company believes it is in the best interests of the Company and the
investors in this Offering to redeem the shares held by Messrs. Cantor and Colon
and (if the Representative's Over-Allotment Option is exercised in full, by Mr.
Trebatch) for several reasons. In addition to the shares to be redeemed, each of
Mr. Cantor and Dr. Colon claims that under the terms of his agreement he is
entitled to be issued additional shares as a result of this Offering. In
addition to the redemption of their shares, the Company is obtaining from
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each of these individuals a release from any claim he has to additional shares.
Further, the number of shares held by Messrs. Trebatch, Cantor and Colon
represent a significant percentage of the total numbers of shares to be
outstanding upon completion of this Offering. Management and the Representative
believe that the presence of such large blocks of shares available for purchase
could negatively impact upon the trading prices of the Company's securities and,
if purchased by a competitor, could have a disruptive effect on the Company's
management. In addition, because Mr. Cantor and Dr. Colon hold registration
rights with respect to their shares, they could adversely affect the trading
price of the Common Stock and Warrants by exercising such registration rights
and selling such shares to the public. The Company and the Representative
believe that given the opportunity to redeem such shares at a discounted price,
notwithstanding the profits to accrue to Messrs. Trebatch, Cantor and Colon, it
is in the Company's and its shareholders best interest to help reduce the
possibility of a large influx of shares on the market (and a corresponding
decrease in the trading price of the Common Stock and Warrants) or the
possibility of a competitor obtaining a large block of shares and disrupting the
Company's business.
On a pro forma as adjusted basis after giving effect to the Stevens Merger,
the Offering contemplated hereby and the application of the proceeds of this
Offering as set forth under "Use of Proceeds", the Company will have intangible
assets of approximately $4,358,296, including goodwill of $3,965,742. The amount
carried on the Company's Financial Statements as Goodwill represents, primarily,
the amounts paid or the value of the shares of Common Stock issued in connection
with the acquisition of the assets of the Predecessor Business and the Stevens
Merger, in excess of the net fair value of the assets acquired. The ability of
the Company to realize the value of such Goodwill is a function of its ability
to operate profitably the business conducted with the assets acquired. The
Company periodically reviews the amount of Goodwill included in its Financial
Statements to determine whether it is appropriate to write-down all or any
portion of such amount. Any decision to write-down substantially the amount of
Goodwill on the Company's Financial Statements would result in a charge against
the Company's earnings.
If the Company's revenues continue to increase as currently anticipated,
the Company should not require any additional capital beyond that provided by
this Offering to achieve its current business plans. If, however, the Company
were to seek to expand its operations through acquisitions, the Company could
require capital beyond that provided by this Offering. There can be no assurance
that such capital will be available, or, if available, on terms acceptable to
the Company.
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BUSINESS
Unless otherwise noted or the context otherwise requires, references in
this Prospectus to the Company are to 800 Travel Systems, Inc. and to the
businesses previously conducted by its predecessor, 1-800 Low-Air Fare, Inc. and
The Joseph Stevens Group, Inc.
The Company is among the 100 largest independent travel agencies in the
United States. The Company provides low-priced airline tickets for domestic and
international travel to its customers through its easy-to-remember, toll-free
numbers "1-800-LOW-AIR-FARE" (1-800-569-2473) and "1-800-FLY-4-LESS"
(1-800-359-4537). The Company has approximately 170 reservation agents and
operates 365 days a year out of the Company's reservation centers in Tampa,
Florida and San Diego, California. The Company strives to provide its customers
with the lowest-priced airfare available for a particular travel route at the
time of reservation by utilizing the SABRE travel reservation system. The SABRE
system maintains over 50 million airfares, including those of all major U.S. and
international commercial airlines, and is updated throughout the day to reflect
the airlines' latest ticketing information. The Company estimates it receives an
average of 30,000 calls per day (including repeat calls from callers unable to
be serviced or calling to confirm reservations) at its reservation centers, of
which the Company has the current capacity to answer only approximately 8,000.
The Company has increased the number of its reservation agents from 13 in 1995
to approximately 170 presently. The Company intends to use approximately $1
million of the proceeds of this Offering to expedite the training of additional
reservation agents. The Company already has the equipment and infrastructure
necessary to answer all the calls it is currently unable to answer.
The Company's operations generate revenues principally from (i) the
commissions on air travel tickets, (ii) override commissions on air travel
tickets the Company books on Continental, United, Northwest, TWA, Carnival,
America West, America Trans Air, Trans Brazil, Mexicana and Korean airlines,
(iii) segment incentives under its contract with SABRE, (iv) co-op promotions
with other suppliers of travel-related products and services, such as
long-distance telephone companies, car rental companies and hotels, and (v)
service fees that it charges its customers.
The Company markets its services primarily by advertising in approximately
270 Yellow Pages directories covering a total population of over 133 million
people in those standard metropolitan areas in the continental United States
("SMA's") with populations whose general travel profiles are attractive to the
Company. The Company also maintains a home page on the World Wide Web
(www.lowairfare.com) which enables its customers to access its customized Turbo
SABRE system through their personal computers.
INDUSTRY OVERVIEW
The travel industry is one of the world's largest industries, with $3.4
trillion in sales in 1994 according to the World Travel Organization (the
"WTO"). According to the Travel Weekly 1996 U.S. travel agency survey (the
"Travel Weekly Survey"), revenues for U.S. travel agencies in 1995 exceeded $100
billion, representing an increase of almost 100% since 1985 and 9% since 1993.
The Air Transport Association (the "ATA") projects that 800 million U.S.
passengers will purchase airline tickets in the year 2005. The Company believes
that approximately 60% of the U.S. market for air travel is booked through
travel agencies rather than directly through air carriers.
The U.S. travel agency industry is a highly fragmented industry comprised
of numerous small agencies, but tending towards large volume agencies, according
to the Travel Weekly Survey. In contrast to 1985, when small agencies (those
reporting between $1 million and $5 million in annual sales) were responsible
for 62% of all U.S. travel agency revenues, in 1995 such agencies were
responsible for only 41% of all U.S. travel agency revenues.
The Company believes that only one other travel agency operates in a manner
similar to the Company by emphasizing low-cost airfare, nationally advertising
toll-free telephone numbers that spell out their respective advertising slogans
and processing calls on such numbers at centralized reservation centers. The
Company believes that operating in such manner distinguishes the Company and its
competitor from other travel agencies as "telemarketing travel companies."
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OPERATING STRATEGY
The Company's operating strategy is to (i) strive to provide its customers
with the lowest-priced airfare available for a particular travel route at the
time of reservation on those airlines whose tickets the Company sells, (ii)
focus on consumer air travel, which the Company believes is the most profitable
segment of the travel industry, (iii) provide convenient, quick service to its
customers, (iv) maintain low operating costs by utilizing only two operating
facilities, (v) use state-of-the-art technology to maximize operating
efficiencies, (vi) constantly review and update its relationships with major
airlines and SABRE to obtain favorable commission structures, and (vii) provide
incentives to its sales force through a performance-based compensation
structure. The Company believes that this strategy distinguishes it from most
travel agencies in the United States, and that significant internal growth
opportunities exist as (x) customers' demand for low-price air travel remains
unsatisfied through traditional sources and (y) technological developments in
the area of information processing enable increasingly efficient global
distribution of travel information.
Low-Priced Airfare on Major Airlines
The Company strives to provide its customers with the lowest-priced airfare
available for a particular travel route at the time of the reservation on those
airlines whose tickets the Company sells (which includes most major U.S. and
international airlines), using the comprehensive ticket information available on
its customized Turbo SABRE system. The Company's SABRE system provides the
operating reservation agent, within two or three seconds of a request for a
particular route, up to 900 ticket options ranked in order of price. The
reservation agent can then offer ticket options in ascending order of price
until the customer chooses a suitable carrier and departure time. In contrast,
airlines typically quote only their own fares and often quote highest fares
first to avoid selling the lowest-priced tickets. The Company believes that most
travel agents do not offer customers the lowest-priced airfare available because
they either lack the technical capability or prefer to sell more expensive
tickets and earn larger commissions. In contrast, the Company's operating
strategy is based on generating large sales volume rather than on high margins
on individual tickets. The Company's customers generally have one
objective -- lowest-priced airfares. As a result, the Company's strategy allows
it to satisfy its customers' demands for low airfares while obtaining higher
commissions and additional incentives for higher volumes. The Company believes
that its ability to provide low-priced airfare on the airlines whose tickets it
sells (which is almost always lower than the lowest fare published by that
airline) provides a distinct competitive advantage in attracting and retaining
customers.
Sell Tickets of Almost All Major Airlines
The Company sells tickets for a large number of major U.S. and
international airlines. The Company is authorized to sell tickets on behalf of
all major domestic airlines including Continental, United, Northwest, TWA,
American, Alaska, Delta, Midway, Southwest and America West, but not U.S.
Airways. To be authorized to sell tickets on behalf of U.S. Airways a travel
agent that is not a public company must submit financial statements of its
principal shareholders, which the Company is currently unable to do. The Company
anticipates that shortly after the closing of this Offering it will become
authorized to sell tickets of U.S. Airways.
Because of Delta Airlines' pricing and commission policies, the volume of
Delta tickets sold by the Company is not commensurate with Delta's position in
the airline industry. The Company also does not sell tickets on smaller
airlines, whose airfares and commission structures do not enable the Company to
generate a profit on such sales. Where the fares of such airlines are available
on the Company's SABRE system at a lower price, the Company's reservation agents
direct the callers directly to such airlines. The Company constantly monitors
and periodically revisits its existing relationships with individual airlines,
and attempts to establish new relationships with other airlines, as part of its
general strategy of keeping abreast of market conditions and industry trends.
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Focus on Consumer Air Travel
The Company believes that consumer air travel is the most profitable
segment of the travel industry, and that it can compete effectively in this
segment because of its high technology, telemarketing approach to the consumer
air travel business and the resulting efficiencies. The Company considers the
consumer market to include any person who pays for his or her own travel
expense, regardless of the purpose of the travel, as opposed to business
travelers whose employers pay for their travel expenses. However, the Company
does sell to certain customers who purchase air travel for business purposes
which is paid for by their employers.
The Company believes that its reservation agents require substantially less
time to book reservations because (i) all the information they need is
immediately available and the necessary steps can be conducted on their computer
screens, and (ii) the Company's services are focused on air travel, which does
not require research or follow-up work and can be completed in one phone call,
in contrast to the more time-consuming arrangements for hotel and car-rental
reservations. Consequently, the Company believes its average reservation agent
can book an average of $265 in travel plans (i.e. the gross ticket price booked)
for customers per hour, compared to the industry average of $147 gross bookings
per hour. The Company strives to increase this average by rewarding reservation
agents with commissions for weekly sales in excess of various levels. In
addition, the Company believes that the fact that the majority of the most
inexpensive air travel tickets are non-refundable increases the profitability of
the consumer air travel market. Over 90% of the Company's ticket sales are
non-refundable and, as a result, the value of tickets refunded each week is less
than 1% of all tickets sold.
Convenient Service
The Company believes that a significant factor in a customer's decision to
purchase air travel is the convenience of service. The Company believes that the
convenience of its service compares favorably to that of its competitors because
(i) its reservation agents provide immediate and comprehensive information, and
(ii) if purchased early enough, tickets are delivered the next day. The
Company's telemarketing service, coupled with its delivery of tickets by
next-day courier, eliminates the need for customers to visit a travel agency.
The Company offers one source for the lowest-priced airfare available, thus
eliminating the need for the customer to call several air carriers or travel
agents. In addition, the easy-to-remember "1-800-LOW-AIR-FARE" and
"1-800-FLY-4-LESS" names and associated numbers, "1-800-569-2473" and
"1-800-359-4537" facilitate repeat calls from customers who may call on
subsequent occasions from other locations where the area code may be different
or where they may not have access to a Yellow Pages directory. See "Growth
Strategy -- Internal Growth."
Low Operating Costs
The Company seeks to have the lowest margin of operating costs in the
travel agency industry. The Company minimizes its operating costs by processing
all of its customer reservations and purchases through two centralized
facilities, rather than duplicating its financial and management resources at a
number of locations. Since its customers do not physically visit the Company's
reservation centers in Tampa or San Diego, the Company does not need to
construct and maintain the more expensive locations that traditional travel
agents do. Similarly, the Company does not need to incur the expense of
furnishing its reservation facilities to accommodate customers, but rather
maintains functional reservation centers geared toward maximizing the number of
reservation agents that can operate at any one time. The Company also minimizes
its operating costs by basing its marketing strategy on advertising through
Yellow Pages directories in those SMA's with populations whose general travel
profiles are attractive to the Company, which the Company believes is the most
cost-effective method of advertising available. See "-- Marketing." The Company
also minimizes its costs by contracting for employees at its Tampa reservation
center through a professional employee leasing organization. All of the
Company's workers at the Tampa facility (other than management) are retained on
an hourly basis through such services. The Company is responsible for training
and supervising the job performance of worksite employees. The Company has
determined that it is more economical to contract with employee providers than
to employ such hourly workers itself.
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State-of-the-Art Technology
The Company uses state-of-the-art computer technology available to access
all the major U.S. and international air carriers' routes and fares. Each of the
Company's reservation agents operates a SABRE computer terminal and headset. The
Company has significantly customized the Turbo SABRE system specifically for the
Company's specific purposes and uses. As a result, the Company's reservation
agents have fewer procedures to master and therefore are trained and become
proficient on the Company's reservation system more quickly, thus incurring
lower training expenses. In addition, the skills learned by the reservation
agents on the Company's Turbo SABRE system are not transferable to other travel
agencies, resulting in lower reservation agent turnover.
Review and Update Relationships with Airlines
The Company's management constantly reviews and updates its relationship
with the major airlines and SABRE in order to obtain a favorable commission
structure. The Company believes that as a result of such efforts, the Company
has been able to obtain commission structures that are more favorable than those
obtained by travel agents generally. See "-- Operations; Standard Commissions"
and "--; Override Commissions."
Employee Incentives
The Company's reservation agents are organized into teams of approximately
20 reservation agents under one supervisor. The reservation agents earn a base
salary and commission, each of which is dependent upon the volume of sales
generated by an agent within a moving, historic measuring period. The team
supervisors, in turn, are paid based on the average sales of that supervisor's
team. The Company believes that this performance based compensation structure
enables it to retain and constantly motivate the best-performing reservation
agents.
GROWTH STRATEGY
The Company has a three-point growth strategy:
- Internal Growth.
The Company's Tampa and San Diego reservation centers are currently
operating at less than maximum capacity because the Company can add up to
40 reservation agents a month while maintaining the quality of its customer
service and operating efficiencies. Consequently, of the 30,000 calls per
day (including repeat calls from callers unable to be serviced) the Company
estimates it receives on average at both reservation centers, the Company's
approximately 170 reservation agents currently can answer only an average
of approximately 8,000 calls. As a result, the Company believes it can grow
substantially over the next twenty-four months as it adds additional
personnel. The Company's Tampa and the San Diego facilities can accommodate
a combined total of 1,300 reservation agents working in staggered shifts,
or 565 working at any one time. The Company believes that it can achieve
substantial growth by increasing the number of its reservation agents and
consequently increasing its capacity to process the existing demand by
potential customers who call its toll-free numbers daily.
- Marketing.
The Company has already implemented a marketing strategy of focusing
on advertising in Yellow Pages directories in the largest SMA's. The
Company has advertisements of its "1-800-LOW-AIR-FARE" name and
"1-800-569-2473" toll-free number listed in over 236 directories reaching a
population of over 88 million people and has entered into agreements for
advertising in 73 additional directories reaching a population of over 31
million people. The Company has advertisements of its "1-800-FLY-4-LESS"
name and "1-800-359-4537" toll-free number listed in over 115 directories
reaching a population of over 102 million people. The Company intends to
continue its current strategy of advertising in Yellow Pages, but intends
to focus on directories in those
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SMA's with populations whose general travel profiles are attractive to the
Company. Once the Company's ability to satisfy existing customer demand is
addressed, the Company anticipates increasing consumer awareness of its
easy-to-use, low-priced airfare approach to travel reservations through
select print and radio advertising campaigns. See "Business -- Marketing."
- Strategic Acquisitions.
The Company believes that opportunities exist for it to expand its
market share in existing markets through the acquisition of other travel
companies with valuable customer lists and intellectual property. The
Company expects that such acquisitions would involve the purchase of the
relevant names, service marks and telephone numbers, as well as any logos
and other identifying features associated with them. The Stevens Merger is
an example of one such strategic acquisition. See "The Stevens Merger" and
"-- Competition."
SERVICES
The primary service the Company offers to its customers who call its
toll-free numbers or access its Internet home page is a reservation service for
domestic and international flights. The Company strives to provide its customers
with the lowest-priced airfare available for a particular travel route at the
time of the reservation on those airlines whose tickets the Company sells. The
Company's Turbo SABRE system is customized to provide to the reservation agent
within two or three seconds up to 900 ticket options, ranked in order of price.
Once tickets are purchased, they are printed at the Company's Tampa reservation
center and delivered by overnight courier to customers.
The Company offers its reservation services through approximately 170
reservation agents and supervisors located at the Company's reservation centers
in Tampa, Florida and San Diego, California. The reservation centers operate 16
hours a day, 365 days a year. Each reservation agent operates a computer
terminal that accesses the SABRE travel reservation and information system. The
Company adjusts the number of reservation agents serving customers on an hourly
basis. At the peak hours of 11:30 a.m. through 4:30 p.m., Eastern time, the
Company has the most reservation agents working. Currently, the average number
of agents working during such peak hours is 85. During the hours of 1:00 a.m.
through 6:00 a.m., Eastern time, the Company needs the least agents and staffs
an average of 17 reservation agents. It is during the peak hours of 11:30 a.m.
through 4:30 p.m. that the Company is not able to answer all of the calls it
receives.
Personalized Service
The Company's customized Turbo SABRE system enables it to retain in its
files individual travel preferences for its customers, such as seating, special
meals and frequent flier numbers, which are automatically displayed when a
customer's identifying information is input. This tailored information program
personalizes the reservation process as well as reduces the time required to
complete each reservation.
Corporate Customers
While the Company's current customers are predominantly individuals and the
Company's operating strategy targets the consumer market, the Company offers
certain services targeted at corporate customers. These services, however, are
designed to be offered during the processing of a single telephone call, as with
calls from individual customers. The Company's Turbo SABRE system enables it to
program "pop-up-windows" specifying, for each corporate customer, its travel
policy, preferred air carrier vendors, specially negotiated rates, handling
instructions and emergency procedures. The "pop-up-window" for each corporate
customer appears on the terminal screen and guides the reservation agent during
the reservation process.
Repeat Customers
The Company believes that repeat customers are key to its ability to grow.
The Company's "1-800-LOW-AIR-FARE" (1-800-569-2473) number has a rate of repeat
customers (meaning customers who purchase at least one more ticket within a
year) of approximately 38%, and the Company's
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"1-800-FLY-4-LESS" (1-800-359-4537) number has a repeat customer rate of
approximately 50%. The Company believes that while customers are initially
attracted by the low-priced airfares made available by the Company, they become
repeat customers because of their satisfaction not only with the prices but also
the convenience of being able to book their reservations on one relatively brief
toll-free telephone call. The Company believes that it can generate internal
growth by obtaining an even larger portion of the travel business of its
existing customers and consequently increasing its repeat customer business.
OPERATIONS
The Company's operations generate revenues principally from (i) the
commissions on air travel tickets, (ii) override commissions on air travel
tickets the Company books on Continental, United, Northwest, TWA, Carnival,
America West, America Trans Air, Trans Brazil, Mexicana and Korean airlines,
(iii) segment incentives under the SABRE contract, (iv) co-op promotions with
other suppliers of travel-related products and services, such as long-distance
telephone companies, car rental companies and hotels, and (v) service fees of
$10 or $20 that it charges per ticket. The Company also earns a $5 shipping and
handling fee (net of expenses) for delivering tickets to its customers.
Standard Commissions
In accordance with industry practice, the Company receives a commission of
approximately 9.25% of the price of full-fare tickets and 11% for excursion
tickets that it sells on air carriers for which the Company is authorized to
sell air travel tickets. The Company is an authorized agent of all air carriers
whose fares are quoted on SABRE, other than U.S. Airways. Most major U.S.
airlines impose caps on such commissions of $25 dollars for one-way air travel
tickets and $50 dollars for round-trip tickets. In 1996, such commissions
accounted for more than 70% of the Company's gross revenues. The Company does
not earn basic commissions on the 25% of airline tickets purchased from
consolidators. See "-- Agreements with Consolidators."
From time to time, most of the major U.S. air carriers informally waive the
commission cap for the Company and other large travel agencies. Such waivers
generally apply to sales of tickets for travel on selected routes and are
granted to provide an incentive to increase sales for those routes. In addition,
the Company obtains higher commissions through the payment of override
commissions in excess of the standard 9.25% and 11% commissions pursuant to
agreements with most of the major U.S. airlines. Due to such override
commissions and waivers of the commission cap and the Company's strategy of
selling tickets on airlines with which it has override commission arrangements,
the Company is rarely subject to the commission cap. See "-- Override
Commissions."
Override Commissions
The Company has entered into agreements with Continental, United,
Northwest, the TWA Discounter, Carnival, America West, America Trans Air, Trans
Brazil, Mexicana and Korean airlines for the payment of override commissions
above the standard commissions the Company receives. Under such agreements,
additional commissions are generally awarded if the volume of ticket sales
surpasses certain agreed upon thresholds based upon ticket sales as reported by
the Airlines Reporting Corporation (the "ARC"), a corporation owned and
established by the airlines to provide reporting, settlement and related
services in connection with the sale of transportation by travel agencies in the
U.S. Override commissions are generally paid quarterly and, depending upon the
specific agreement with the air carrier, may be paid directly by check from the
air carrier to the Company, by means of net payments by the Company to ARC with
respect to amounts owed to the air carrier, or through ARC by means of a credit
memo in favor of the Company. In 1996, override commissions accounted for
approximately 15% of the Company's gross revenues.
The Stevens Merger will enable the Company to obtain greater override
commissions, since the volume of combined sales of the previously separate
entities will be used to determine whether and when the agreed-to thresholds
have been met.
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Segment Incentives under SABRE Contract
The Company earns additional revenue from SABRE for each segment of air
travel that it sells. A segment of air travel is non-stop air travel between two
destinations. For each segment of air travel it sells, the Company receives $.50
from SABRE. In 1996, SABRE segment incentives accounted for less than 1% of the
Company's gross revenues.
Service Fee; Shipping and Handling
The Company also charges the customer a service fee per airline ticket sold
of $10 for tickets less than $250 and $20 for tickets equal to or greater than
$250. These fees are already calculated into the cost of the ticket when quoted
to the caller. Because of the Company's override commission structure, the price
of the ticket (even inclusive of the service charge) is still generally lower
than the lowest-priced published fare quoted by the airlines. The Company also
earns $5.00 (net of expenses) from the shipping and handling fee it charges to
its customers.
Agreements with Consolidators
The Company also sells air travel tickets offered by consolidators.
Consolidators purchase large number of tickets directly from various air
carriers for resale to the public. When the Company sells such tickets, the
reservation is generally not booked through SABRE or settled through ARC, and
the Company is paid its commission directly from the consolidator. The Company
has entered into an agreement with a consolidator that sells tickets on TWA at a
discount (the "TWA Discounter") pursuant to which it (i) solicits customers to
purchase tickets for air travel on TWA at discounted fares from the TWA
Discounter and (ii) solicits businesses to enter into agreements for the
purchase of air travel on TWA from the TWA Discounter (the "TWA Agreement"). The
TWA Agreement expires in February 1998 and is terminable before such date on 15
days' prior written notice by either party. The Company receives a 15%
commission on each air travel ticket solicited by the Company or pursuant to an
agreement solicited by the Company. Air travel tickets sold by the Company
pursuant to the TWA Agreement, unlike sales from most other consolidators, are
booked through SABRE and settled through ARC; however, the Company receives its
commission directly from the TWA Discounter monthly. In 1996, commissions
received under the TWA Agreement accounted for approximately 20% of the
Company's gross revenues, and commissions received from other consolidators
accounted for approximately 5% of the Company's gross revenues. The Company
anticipates that its current arrangement with the TWA Discounter will expire in
2001, when the TWA Discounter will no longer be able to sell tickets on TWA;
there can be no assurance, however, that the Company's TWA Agreement will be
extended beyond its scheduled expiration date in February 1998. See "Risk
Factors -- Risks Relating to Override Commissions."
World Wide Web Home Page
In anticipation of future technological innovations and consumer demand for
directly accessing information and making purchases on-line, the Company has
launched its home page at www.lowairfare.com on the World Wide Web, which
enables customers to access the Company's customized Turbo SABRE system through
their personal computers. The Company believes that consumers who prefer to
purchase travel and travel-related products and services on-line will choose to
access the Company's customized Turbo SABRE system over other options. Through
the Company's home page on the Internet, customers can access the Company's
customized Turbo SABRE system, view all information on the system, make
reservations and pay for their tickets by providing their major credit card
number for payment. In this process, the customer operates the Turbo SABRE
system in place of the reservation agent. As with purchases by telephone,
tickets are issued at the Tampa facility and delivered by overnight courier.
Commissions that the Company earns on transactions conducted through its Web
page are split equally with American Airlines.
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Processing Reservations and Sales
Each call that is processed by a reservation agent is handled in the
following manner. First, a customer generally requests information about the
airfare for a particular route. The reservation agent enters the relevant
parameters into the Turbo SABRE system and initiates a search. Each search takes
approximately two to three seconds to appear on the operator's monitor. The
reservation agent then quotes the airfares as they appear on the terminal
screen, in increasing order of price. A customer may request the most
inexpensive airfare of all or the most inexpensive airfare of a particular
carrier or type of carrier.
The Company estimates that an average of approximately one in 10 callers
who get through purchases an air travel ticket. If the customer decides to
purchase a ticket, the reservation agent requests and records certain standard
information such as name, address and telephone number. The Company only accepts
major credit cards for purchases by telephone. The Company does accept cash
payments from "walk-ins" to its Tampa facility (i.e. individuals who visit the
reservation center), although such sales constitute less than 1% of its total
sales. After a customer tells the reservation agent his or her credit card
number, the reservation agent executes a command causing the credit card number
to be verified with the credit card issuer, via the SABRE central information
system. As a result, once approval is received electronically by the reservation
agent at the Turbo SABRE terminal, the sale is complete and the credit card
payment is settled in accordance with the procedures described below under
"-- Settlement of Accounts." After each sale is completed, instructions are
automatically transmitted via the Turbo SABRE system from the reservation
agent's terminal to the Tampa facility's ticket printing area. Tickets are
printed along with an itinerary of the customer's travel arrangements. Tickets
are printed on stock forms provided by ARC. ARC requires the Company and other
travel agencies to implement various security measures in order to prevent theft
of such stock. In addition, each air carrier that authorizes the Company to
issue its tickets provides metal plates on which the Company's SABRE ticket
printing machines print such carrier's tickets. Once printed, tickets and
itineraries are placed inside a ticket envelope and a Federal Express package.
Federal Express personnel pick up all such packages each evening, six days a
week, and deliver them by Federal Express' standard next-morning delivery.
Refunds, Chargebacks and the SABRE Credit Card Authorization Guarantee
With the exception of sales to "walk-in" customers at the Tampa facility
(which account for less than 1% of sales), all of the Company's sales are paid
for by credit card. Once a sale is closed as described above under
" -- Reservation and Sale Sequence," it is subject only to refund or chargeback.
Because the majority of the most inexpensive air travel tickets are
non-refundable, only 5% of the tickets the Company sells are refundable, and the
Company processes only an average of $1,000 worth of refunds a week, or .01% of
sales. The Company recoups some of its costs associated with processing such
refunds by imposing a $50 charge on each refund.
Chargebacks similarly account for a small part of the Company's sales. A
chargeback results from a customer who refuses to pay for a charge on his or her
credit card statement. In such an instance, the Company generally must either
return its commission to the relevant credit card issuer or seek recourse
directly against the customer. Approximately 1% of the tickets sold by the
Company result in chargebacks.
None of the Company's credit card sales are subject to refusal by the
relevant credit card issuer to remit payment to the Company. Since
authorizations of credit card charges are effected electronically through the
SABRE system, SABRE offers its subscribers a guarantee of such authorizations
for a fee of $.50 per authorization. The Company pays this fee for all
authorizations, and in return, SABRE pays the Company the amount of any
commission or other payment refused by the relevant credit card issuer.
Airlines Reporting Corporation
All of the Company's sales of air travel tickets that are offered directly
by air carriers are settled through the Airlines Reporting Corporation ("ARC").
Such sales account for approximately 75% of the Company's sales.
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For sales settled through ARC, all commissions and other amounts owed to
the Company are also settled through ARC according to ARC's procedures, except
that override commissions may also be paid directly by check or wire transfer
from the relevant air carrier to the Company. See "-- Override Commissions." The
only sales of air travel that are not generally settled through ARC are air
travel tickets offered by consolidators; however, some sales of air travel
tickets by the Company that are offered by consolidators are settled through
ARC. See "-- Agreements with Consolidators." For sales of air travel offered by
consolidators, all commissions and other amounts owed to the Company are
generally paid directly by check or wire transfer directory from the relevant
consolidator to the Company.
As an ARC-affiliated travel agency, the Company is subject to all rules and
procedures imposed by ARC. ARC screens applications of new travel agencies,
initiates collection procedures against travel agencies in default of payment,
provides ticket stock to the travel agencies and facilitates payment between
travel agencies and airlines. Tickets purchased from the Company are reported
through ARC in accordance with the Company's Standard Ticket and Area Settlement
Plan ("ASP"). The ASP encompasses distribution and control of ARC air travel
tickets and other ARC traffic documents and processing and settlement services
in connection with the sale or issuance of such documents by the Company. ARC
administers the Company's ASP on behalf of ARC carriers.
Settlement of Accounts
Pursuant to ARC guidelines, the Company is required to submit weekly sales
reports to ARC each Tuesday with supporting documents for the week ended on the
prior Sunday. On the eighth day after the Company has submitted its sales report
to ARC (the second Wednesday thereafter), the Company's accounts are drafted by
ARC via its settlement bank (the "designated area bank") for amounts owed to
carrier airlines for tickets purchased, and the Company's accounts are credited
by ARC, via the designated area bank, for commissions owed to the Company. On
the same day, the designated area bank submits a draft to the Company's own bank
account for any remaining amount due and provides the collected funds and
related documents to the appropriate carrier. The designated area bank provides
each carrier with a record of its own sales activity and sends all credit card
charges to the appropriate credit card issuer or a merchant processor with an
accompanying computer generated invoice. The credit card issuer or a merchant
processor then pays each carrier directly for such billings minus the applicable
commission of the credit card issuer.
In connection with the settlement of the Company's accounts through ARC, if
there are insufficient funds in the Company's account to make the necessary
payments when due, the Company has 24 hours to make funds available. If such
funds are not made available within such 24-hour period, the Company becomes a
"defaulted agent." Pursuant to the terms of the Company's agreement with ARC,
ARC may terminate the Company immediately. The Company then has ten days to
appeal such termination to a special arbitration panel. If the agent is
terminated, ARC repossesses all ticket stock and plates from the Company, and
takes steps necessary to liquidate the surety bond in the amount of $20,000 that
the Company was required to post in order to become an ARC affiliate. Any
proceeds from liquidation of the surety bond are divided on a pro rata basis
among all ARC member airlines with which the Company had debts outstanding.
Toll-Free Telephone Numbers
The Company has contractual rights customary to the industry to use each of
the three toll-free numbers through which customers call its reservation
centers. In addition, if the Company for any reason fails to pay its monthly fee
for such number, the Company believes that it will have a cure period to pay all
amounts outstanding. Should the Company not make such payments and consequently
lose the right to use such number, the Company expects that a "cooling-off"
period of up to between 4 to 8 months will be imposed, during which no other
party may use such number.
MARKETING
The Company markets its services primarily to individual customers who pay
for their own tickets. The Company focuses its marketing efforts on placing
advertisements listing its three easy-to-remember names
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and toll-free telephone numbers in Yellow Pages directories in those SMA's with
populations whose general travel profiles are attractive to the Company.
In order to evaluate the Company's media alternatives, the Company reviewed
several marketing tests conducted during 1994 and the first quarter of 1995 in
the New York market (cable TV, radio, newspaper, billboard and Yellow Pages
advertising). Based on that review, the Company concluded that Yellow Pages
directories generated the most calls and are the most cost-effective advertising
medium. There are over 7,000 Yellow Pages directories published by the Baby Bell
companies and approximately 5,000 directories published independently. The
Company believes that consumers use the Yellow Pages when they are ready to
purchase a good or service and that a high percentage respond by calling the
businesses listed in the directory they consult.
Given the broad distribution of Yellow Pages directories in metropolitan
areas and other large markets, the Company's strategy is to place advertisements
in directories of the largest SMA's, thereby reaching the greatest number of
consumers with each advertisement. The Company currently has advertisements of
its "1-800-LOW-AIR-FARE" name and "1-800-569-2473" toll-free number listed in
over 236 directories reaching a population of over 88 million people and has
entered into agreements for advertisement in 73 additional directories reaching
a population of over 31 million people in the next three months. The Company has
advertisements of its "1-800-FLY-4-LESS" name and "1-800-359-4537" toll-free
number listed in over 115 directories reaching a population of over 102 million
people. The Company also has advertisements of its "1-888-999-VUELA" name and
"1-888-999-8835" toll-free number listed in over 21 directories reaching a
population of over 13 million people. The monthly cost incurred by the Company
as of December 1996 to advertise in Yellow Pages directories was approximately
$14,000.
The Company's "1-800-FLY-4-LESS" name and number also appear (free of
charge to the Company) in approximately 150 newspapers nationwide reaching a
population of over 100 million people as part of a promotion campaign in which
the Company provides such newspapers with the lowest-priced fares for selected
routes. In addition, the Company advertises its "1-888-999-VUELA" name and
number in the Spanish language radio and television markets of south Florida.
SABRE TECHNOLOGY
Global distribution systems are the principal means of air travel
distribution in the United States and a growing means of air travel distribution
internationally. The Company has chosen the SABRE system, which it believes is
the best such system available. A typical SABRE transaction -- consisting of an
information request by a subscriber, a search in SABRE and a response to the
subscriber -- averages less than two seconds in elapsed time. SABRE's "one-stop
shopping" capabilities permit the Company to locate, price, compare and purchase
the travel and travel-related products and services that best satisfy the
traveler's requirements. SABRE was named the "World's Leading Computer
Reservations System" for the third year in a row at the 1996 World Travel
Awards.
General
SABRE is the largest global distribution system for electronic travel in
the United States. SABRE was first developed in the 1960's and was one of the
world's first electronic airline reservation systems. SABRE evolved from
American Airlines' internal reservation system into a global distribution system
when SABRE's content was expanded to include additional airlines and other
travel providers. Computer reservation terminals were placed in travel agencies
beginning in 1976, and consumer direct access to SABRE became available through
computer on-line services in 1985 and on the Internet in 1996. Other global
distribution systems include Amadeus/System One, Covia and Worldspan.
Amadeus/System One is owned by Air France, Continental Airlines, Iberia and
Lufthansa. Covia, formerly known as Galileo/Apollo, is owned by United Airlines,
British Airways, Swissair, KLM Royal Dutch and USAir, among others, and the
Canadian affiliate of Galileo/Apollo is owned by Air Canada. Worldspan is owned
by Delta, Northwest and TWA and is affiliated with ABACUS, an Asian global
distribution system. Each offers similar products and services.
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The SABRE system is able to perform high-volume, high-reliability,
real-time transactions processing 24 hours a day, 365 days a year, thus enabling
the creation of an efficient electronic marketplace for the sale and purchase of
travel. The SABRE system maintains over 50 million airfares (updated throughout
the day), processes an average of 93 million requests for information per day.
Such frequent updates of airfares are essential for the Company to be able to
strive to provide its customers with the lowest-priced airfares. Through SABRE,
reservations may be booked on all major U.S. and international airlines, but
generally not on charter companies or certain small airlines or on air travel
offered for resale by consolidators. Consolidators purchase large numbers of
tickets directly from air carriers for resale to the public. In certain cases,
however, the tickets they sell may be booked through SABRE. See
"Operations -- Agreements with Consolidators." In addition to providing
information to subscribers about airlines and other travel providers and their
products and services, SABRE also allows travel agency subscribers to print
airline tickets, boarding passes and itineraries and purchase travel insurance
or book theater tickets or limousines. Additionally, SABRE provides subscribers
with travel information on matters such as currency, health and visa
requirements, weather and sightseeing.
Through SABRE, subscribers -- principally travel agencies but also business
travel departments and individual consumers -- can access information on, and
book reservations with, airlines and other providers ("associates") of travel
and travel-related products and services. In 1995, more than 600 associates
displayed information about their travel and travel-related products and
services through SABRE, and American Airlines has estimated that $40 billion in
travel and travel-related products and services were reserved through SABRE in
1995. SABRE subscribers are able to book reservations with more than 350
airlines and to make reservations with more than 55 car rental companies and
more than 190 hotel companies covering approximately 30,000 hotel properties
worldwide. During 1995, more airline bookings in the United States were made
through SABRE than through any other global distribution system. American
Airlines has estimated that in 1995 over 40% of all airline bookings made
through travel agencies in the United States were made through SABRE.
Turbo SABRE
Because travel agencies have differing needs, based on, among other things,
volume and location, the SABRE interface has been modified to meet the specific
needs of different categories of travel agents. Travel agents can choose SABRE
interfaces that range from simple text-based systems to feature-laden graphical
interfaces. The Company has taken advantage of these options by choosing the
Turbo SABRE system, an advanced point-of-sale interface that allows for screen
customization and reservations/sales process structuring and eliminates
SABRE-specific commands, thereby reducing keystrokes and training requirements
for high-volume travel companies that need high levels of functionality. Turbo
SABRE also provides data other than SABRE, such as back office hosts and local
area network (LAN) databases.
The Company has added a number of programs written and developed
exclusively for the Company to its Turbo SABRE system. They include programs
that generate "pop-up" windows to supply frequently requested or used
information, as well as programs to alert reservation agents, supervisors and
customer service agents using the system to errors frequently made by system
operators. The Company believes that these customized features enhance the speed
and efficiency of its operations and give it a competitive advantage over its
competitors.
SABRE Agreements
In April 1996, the Company renewed the agreement pursuant to which it
subscribes to the SABRE system at its Tampa headquarters for a five-year term.
In November 1996, the Company also executed a five-year subscriber agreement
pursuant to which it subscribes to the SABRE system at its San Diego reservation
center. Under these agreements, SABRE provides the Company with the hardware,
software, technical support and other services the Company needs to access SABRE
in return for leasing fees. These fees are reduced by the "segment incentives"
that the Company is credited with for each flight segment it books (at both its
Tampa and San Diego facilities) through the SABRE system. To the extent that the
segment incentives earned by the Company exceed the fees payable by it to
American during each quarter, the Company receives such excess in cash.
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In 1997, American also provided the Company with a lump sum cash
promotional support, and has agreed to pay the Company additional productivity
cash advances during each year of the agreement, subject to the Company booking
a minimum number of flight segments and the exact amount of which will depend
upon the number of such flight segments. American also extended to the Company
lines of credit toward the payment of charges incurred in connection with the
lease of the Turbo SABRE system.
INTELLECTUAL PROPERTY
The Company markets its services in the United States under the names,
"1-800-LOW-AIR-FARE," "1-800-FLY-4-LESS" and "1-888-999-VUELA."
"1-800-FLY-4-LESS," together with its logo, is a federally registered service
mark in the name of the Company. The Company has filed an application to
register the "1-800-LOW-AIR-FARE" name and logo as a federal service mark with
the U.S. Patent and Trademark Office. It has also filed an application to
register the Spanish language name, "1-888-999-VUELA," and related logo as a
federal service mark with the U.S. Department of Commerce.
COMPETITION
The travel agency industry is highly fragmented and characterized by
intense competition. The Company competes with a variety of other providers of
travel and travel-related products and services. Its principal competitors are
(i) other telemarketing travel companies, (ii) traditional travel agencies,
(iii) air carrier vendors, and (iv) various online services available on the
Internet. The Company's competitors who are telemarketing travel companies and
traditional travel agencies have access to the same technology that the Company
uses and also to other global distribution systems of electronic travel. See
"-- SABRE Technology." Although distribution through travel agents continues to
be the primary method of travel distribution, new channels of distribution are
developing directly to businesses and consumers through computer on-line
services, the Internet and private networks. In addition, individual consumers
have access to other versions of SABRE technology and also to other global
distribution systems of electronic travel permitting consumer-direct travel
distribution via personal computer, cable television and other media. The
Company faces competition in these channels not only from its principal
competitors but also from possible new entrants in the sale of travel products
and services and from travel providers that distribute their products and
services directly. For example, in July 1996, American Express Co. and Microsoft
Corp. announced an on-line travel booking service for corporations, which they
have scheduled for release in the first half of 1997. The Company expects that
this on-line travel booking service, while only in the developmental stage, will
eventually directly compete with the Company. In addition, the Internet permits
consumers to have direct access to travel providers, thereby by-passing both
travel agents and global distribution systems such as SABRE. Further, some of
the Company's competitors have significantly greater financial or marketing
resources than the Company. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements
than the Company.
During periods of recession in the travel industry, the Company's
competitive advantages with respect to quick, convenient processing of
reservations and purchases of lowest-priced airfare may be of reduced
importance. The Company's position in a recession may be more difficult than
some of its competitors, since the Company targets the consumer market which may
be the most adversely affected. See "Risk Factors -- Risks Relating to the
Airline Industry."
The Company believes that its ability to compete depends upon a number of
factors, including price, reliability, name and toll-free number recognition and
speed of price quotations and reservations. There can be no assurance that the
Company will be able to continue to compete successfully with respect to these
or other factors.
EMPLOYEES
At July 15, 1997, the Company had approximately 147 full-time worksite
employees at its Tampa headquarters and 75 full-time worksite employees at its
San Diego reservation center. Of such employees, 3 served in management, 172
were reservation agents or supervisors, 6 were involved in sales and marketing
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and 41 served in various clerical and other administrative capacities. All of
the Company's reservation agents, supervisors and other worksite employees at
the Tampa reservation center are provided through a professional employee
leasing organization (the "Employee Provider").
In November 1995, the Company entered into an agreement with a Payroll
Transfers Interstate, Inc (the "Employee Provider"), pursuant to which the
Employee Provider leases all of the Company's workers at the Tampa facility to
the Company. The Employee Provider is responsible for its employees' benefits.
The Company provides all necessary training and pays the Employee Provider an
amount equal to 11.71% of the gross payroll of the employees provided by the
Employee Provider. The services agreement between the Company and the Employee
Provider may be terminated on 30 days' prior written notice.
PROPERTIES
The Company's corporate headquarters are located at its 33,000 square foot
reservation center in Tampa, Florida. The Company also operates Stevens' 10,000
square foot reservation center in San Diego California. See "The Stevens
Merger." The Company leases these properties from unaffiliated third parties and
believes that its existing facilities are adequate for its current needs. The
Company currently pays approximately $14,300 per month for its Tampa
headquarters and approximately $7,000 per month for its San Diego reservation
center.
LITIGATION
The Company may be involved from time to time in routine litigation
incidental to its business. However, the Company believes that it is not a party
to any material pending litigation which is likely to have a significant
negative impact on the business, income, assets or operation of the Company.
SUBSIDIARY
In connection with its private placements conducted during 1996 the Company
formed a wholly-owned subsidiary, LAF Financial Services, Inc. ("LAF"), to act
as placement agent. The Company has no plans of conducting business through LAF
in the future and has begun to liquidate this Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and certain
information concerning them, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark D. Mastrini....... 33 President, Chief Operating Officer and Director
Jerrold B. Sendrow..... 52 Chief Financial Officer, Vice President -- Finance,
Treasurer, Secretary and Director
Biagio Bellizzi........ 57 Vice President -- Marketing
Pasquale Guadagno...... 39 Director
Michael Gaggi.......... 35 Chairman of the Board
</TABLE>
Mr. Mastrini has served as the Company's Chief Operating Officer since
January 1996, and as the Company's President since January 1997. Prior to
joining the Company, from October 1992 until October 1996, Mr. Mastrini was the
founder and owner of One on One Consulting, a consulting firm in Pueblo,
Colorado. From September 1992 until October 1994, Mr. Mastrini was owner of
X-Press Printing, a printing business in Pueblo, Colorado. From October 1993
until December 1996, he was the owner and editor of Pueblo West Eagle Monthly
Magazine. From May 1991 until June 1992, Mr. Mastrini was Vice President of
Sales and Marketing at the Braniff Airlines in Dallas, Texas, an airline which
subsequently filed for protection under Chapter 11 of the Bankruptcy Code in the
Bankruptcy Court in the Eastern District of New York in July 1992.
Mr. Sendrow has served as the Company's Chief Financial Officer, Vice
President-Finance, Treasurer and Secretary since the incorporation of the
Company in November 1995. From June 1994 through November 1995, Mr. Sendrow was
employed by 1-800 Low-Air Fare, Inc., the Company's predecessor, in the same
capacities. From March 1993 through June 1994, Mr. Sendrow was employed by MSW
Columbia Travel Group, Inc. as vice president-finance. From December 1984
through March 1993, Mr. Sendrow was employed by Pisa Brothers, Inc. as
controller. Mr. Sendrow has over 22 years experience in the travel industry.
Mr. Bellizzi has served as the Company's Vice President-Operations since
its incorporation as 800 Travel Systems, Inc. in November 1995. From June 1995
through November 1995, Mr. Bellizzi was employed by 1-800 Low-Air Fare, Inc.,
the Company's predecessor, as vice president-operations. From 1991 through June
1995, Mr. Bellizzi was employed by Thomas Cook Travel, Inc. as Director-Leisure
Marketing from 1993 until 1995 and as Director -- Retail Offices from 1991 to
1993. Mr. Bellizzi has over 30 years experience in the travel industry.
Mr. Guadagno has served as a director of the Company since its
incorporation as 800 Travel Systems, Inc. in November 1995. Mr. Guadagno has
been a Senior Vice-President at M.S. Farrell, Inc., an investment banking firm,
since December 1996. From 1993 until November 1996, Mr. Guadagno was Senior Vice
President of Euro-Atlantic Securities, Inc., an investment banking firm in Boca
Raton, Florida. From 1990 through 1993, Mr. Guadagno was employed as a Senior
Vice President by Smith-Barney in New York City.
Mr. Gaggi has served as a director of the Company since its incorporation
as 800 Travel Systems, Inc. in November 1995. Mr. Gaggi is a senior vice
president at Joseph Stevens & Company, L.P., an investment banking firm in New
York City, and has held that position since 1994. From 1993 until 1994, Mr.
Gaggi was employed as a vice president by Barington Capital. Mr. Gaggi has been
a principal director of Upscale Eyeglass Boutiques Myoptics since 1990. Joseph
Stevens & Company, L.P. is not affiliated with or related to The Joseph Stevens
Group, Inc., the travel agency acquired by the Company in the Steven Merger, or
its sole stockholder, The Joseph Stevens Group, LLC or any of its equity
members.
DIRECTOR COMPENSATION
As compensation for services, after completion of this Offering
non-employee directors will be paid $2,000 per month and will be reimbursed for
all expenses incurred in participating in Board Meetings. In
40
<PAGE> 43
addition, Michael Gaggi, will enter into a Consulting Agreement which will
provide for a fee of $5,000 per month.
During 1996 the Company paid personal expenses of certain directors
aggregating approximately $100,000. Of such amount $65,750 was paid on behalf of
Michael Gaggi for transportation, lodging, entertainment and long-distance
telephone expenses and $34,250 was paid on behalf of Mr. Balsamo, a former
director of the Company. Mr. Gaggi and Mr. Balsamo have agreed to repay such
$100,000, together with interest from September 1, 1997 at the rate of 7% per
annum, in eight equal quarterly installments commencing March 31, 1998. For
services rendered, the Company issued options to purchase 100,000 shares of
Common Stock, exercisable at $1.00 per share, to each of Messrs. Gaggi and
Guadagno. In addition, certain directors have received commissions in connection
with private placement of the Company's securities. See "Certain Transactions."
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or payable in respect
of the year ended December 31, 1996 to the Company's executive officers who
earned over $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------------------
-------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS($)(1) OPTIONS/SARS COMPENSATION
------------------ ------- ------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark Mastrini.......................... $70,200 $120,000(1)
President and Chief Operating Officer
Lucien Bittar.......................... $91,093
Former Chief Operating Officer
</TABLE>
- ---------------
(1) Represents 100,000 shares of Common Stock, valued at $1.20 per share.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Mastrini, Sendrow and Bellizzi. Each of the employment agreements will commence
on the closing of this Offering and terminates on September 30, 2000. Pursuant
to their respective agreements each of Messrs. Mastrini, Sendrow and Bellizzi
has agreed to donate his entire working time and attention to the business of
the Company. In addition, each of these individuals has agreed not to compete
with the business of the Company for a period of ninety days following the
termination of his employment with the Company.
Pursuant to his agreement, Mr. Mastrini is entitled to receive a base
salary initially at the rate of $125,000 per year. The base salary is to
increase by 5% plus the annual increase in the consumer price index on each of
July 1, 1998 and 1999. In addition to his base salary, Mr. Mastrini is to
receive medical and disability insurance comparable to that provided to the
Company's employees generally and a car allowance of $500 per month. As
additional compensation for his services, the Company agreed to issue 150,000
shares of Common Stock to Mr. Mastrini, inclusive of 100,000 shares to be issued
to him if he remains in the employ of the Company through the second anniversary
of the closing of this Offering. In addition to his shares, the Company has
agreed to issue to Mr. Mastrini options, exercisable at $5.00 per share, to
purchase 50,000 shares of Common Stock, and upon completion of this Offering to
issue to Mr. Mastrini warrants, identical to the Warrants offered hereby, to
purchase 25,000 shares of Common Stock.
Pursuant to his agreement Mr. Sendrow is entitled to receive a base salary
initially at the rate of $77,000 per year. Mr. Sendrow's base salary increases
by 5% plus the annual increase in the consumer price index on each of July 1,
1998 and 1999. In addition to his base salary Mr. Sendrow is to receive medical
and disability insurance comparable to that provided to the Company's employees
generally and a car allowance of $350 per month. As additional consideration for
his services, the Company issued options, exercisable at $5.00 per share, to
purchase 12,500 shares of the Company's Common Stock.
41
<PAGE> 44
Pursuant to his agreement, Mr. Bellizzi is entitled to receive a base
salary initially at the rate of $50,000 per year, subject to a discretionary
increase based upon the Board of Directors review of his performance at the end
of this year. Mr. Bellizzi's base salary increases by 5% plus the annual
increase in the consumer price index on each of July 1, 1998 and 1999. In
addition to his base salary, Mr. Bellizzi is to receive medical and disability
insurance comparable to that provided to the Company's employees generally. As
additional for his services, the Company issued options, exercisable at $5.00
per share, to purchase 12,500 shares of the Company's Common Stock.
CONSULTANT
Lucien Bittar has been a consultant to the Company since January 1997, and
receives a consulting fee at the rate of $6,000 per month. Mr. Bittar served as
the Company's President and a director from its incorporation as 800 Travel
Systems, Inc. in November 1995 until January 1997. Mr. Bittar served as the
Vice-Chairman of the Board from April 1996 until February 1997. From August 1994
through November 1995, Mr. Bittar was president and a director of 1-800 Low-Air
Fare, Inc., the Company's predecessor. Mr. Bittar founded Filigree, Inc., a
travel consulting company, in May 1989 and served as its president and chief
executive officer from that time until he joined 1-800 Low-Air Fare, Inc. in
August 1994. Prior to 1989, Mr. Bittar was employed by Thomas Cook Travel, Inc.
During that time he served as executive vice president responsible for all
United States operations and a member of the Board of Directors. Mr. Bittar
currently owns 200,000 shares of Common Stock.
ADDITIONAL SERVICE PROVIDER
Scot Spencer was engaged by the Company pursuant to a Services Agreement in
November 1995 to assist the Company in locating sources of financing. Mr.
Spencer's agreement, which by its terms expired on December 31, 1996, provided
for a weekly fee of $2,500. Since the expiration of the agreement, the Company
has paid Mr. Spencer a fee of $3,000 per week for services rendered with respect
to the Company's financing arrangements, including services rendered with
respect to this Offering. In addition, the Company had paid various expenses
incurred by Mr. Spencer in performing services on behalf of the Company. Mr.
Spencer resigned from his position with the Company as of September 19, 1997.
The Company does not intend to renew Mr. Spencer's engagement thereafter
although the Company may engage Mr. Spencer in the future. Mr. Spencer currently
owns 70,000 shares of Common Stock. In May 1996, in a proceeding captioned
United States of America v. Scot Spencer, U.S. District Court, E.D.N.Y., Mr.
Spencer was convicted of one count of bankruptcy fraud and one count of
conspiracy to commit bankruptcy fraud as a result of his activities in
connection with Braniff Airlines and sentenced to 51 months in jail. Mr. Spencer
has appealed his conviction and his sentence has been suspended pending the
outcome of his appeal. From 1988 through 1989 Mr. Spencer served as a consultant
to the corporate parent of Braniff Airlines, which filed for bankruptcy
protection under Chapter 11 of the Bankruptcy Code in 1989 in the U.S.
Bankruptcy Court, Central District of Florida. From 1990 to June 30, 1991 Mr.
Spencer served as president of Braniff Airlines which subsequently filed for
bankruptcy in the Bankruptcy Court, Eastern District of New York, in July 1992
at which time it permanently ceased operations.
PROMOTER
Vito Balsamo, a former director of the Company, may be considered a
promoter of the Company. Mr. Balsamo currently holds the position of Senior Vice
President of Joseph Stevens & Company, L.P., the investment banking firm with
which Mr. Gaggi is affiliated, a position he has held since 1994. Before joining
Joseph Stevens & Company Mr. Balsamo served as Vice President of Barington
Capital (September 1993 -- 1994) and as account executive with Thomas James and
Company (September 1992 -- September 1993).
ENGAGEMENT OF EMPLOYEES AND OTHERS
The Board of Directors has determined that the engagement of any
individual, employee or others whose compensation is reasonably anticipated to
exceed $50,000 per annum, inclusive of reimbursable expenses, will require
approval of a majority of the Board.
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<PAGE> 45
STOCK OPTION PLAN
Under the Company's 1997 Stock Option Plan (the "Stock Option Plan"),
250,000 shares of Common Stock have been reserved for issuance upon exercise of
stock options. The Stock Option Plan is designed as a means to attract, retain
and motivate qualified and competent persons who are key to the Company and its
subsidiaries, including employees, officers and directors, and upon whose
efforts and judgment the success of the Company is largely dependent, through
the encouragement of stock ownership in the Company by such persons. For
purposes of this discussion, the term director includes directors of the Company
and directors of any of its subsidiaries.
The Compensation Committee of the Board of Directors or, in the absence of
the appointment of a Committee, the Board of Directors (collectively referred to
herein as the "Compensation Committee") administers and interprets the Stock
Option Plan and is authorized to grant options thereunder to all eligible
employees, officers and directors of the Company. The Stock Option Plan provides
for the granting of both incentive stock options and nonqualified stock options.
Options are granted under the Stock Option Plan on such terms and at such prices
as determined by the Compensation Committee, except that the per share exercise
price of incentive stock options cannot be less than the fair market value of
the Common Stock on the date of grant. Each option is exercisable after the
period or periods specified in the option agreement, but no option may be
exercisable after the expiration of ten years from the date of grant. Incentive
stock options granted to an individual who owns (or is deemed to own) at least
10% of the total combined voting power of all classes of stock of the Company
must have an exercise price of at least 110% of the fair market value of the
Common Stock on the date of grant and a term of no more than five years.
No incentive stock option, and unless the Compensation Committee's prior
written consent is obtained (which consent may be obtained at the time an Option
is granted) and the transaction does not violate the requirements of Rule 16b-3
promulgated under the Exchange Act no nonqualified stock option, may be
transferred other than by will or the laws of descent and distribution. Each
option may be exercisable during the optionee's lifetime only by the optionee,
or in the case of a nonqualified stock option that has been transferred with the
Compensation Committee's prior written consent, only by the transferee consented
to by the Compensation Committee. Unless the Compensation Committee's prior
written consent is obtained (which consent may be obtained at the time an Option
is granted) and the transaction does not violate the requirements of Rule 16b-3
promulgated under the Exchange Act, no shares of Common Stock acquired by an
officer, as that term is defined under Rule 16b-3, of the Company or director
pursuant to the exercise of an option may be transferred prior to the expiration
of the six-month period following the date on which the option was granted.
The Stock Option Plan also authorizes the Company to make or guarantee
loans to optionees to enable them to exercise their options. Such loans must (i)
provide for recourse to the optionee, (ii) bear interest at a rate no less than
the prime rate of interest, and (iii) be secured by the shares of Common Stock
purchased. The Board of Directors has the authority to amend or terminate the
Stock Option Plan, provided that no such action may substantially impair any
outstanding option without the written consent of the holder, and provided
further that certain amendments of the Stock Option Plan are subject to
shareholder approval. Unless terminated sooner, the Stock Option Plan will
continue in effect until all options granted thereunder have expired or been
exercised, provided that no options may be granted after 10 years from the date
the Board of Directors adopted the Stock Option Plan.
As of August 25, 1997, the Company had outstanding options to purchase an
aggregate of 75,000 shares of Common Stock under the Plan at a weighted average
exercise price of $5.00 per share.
LOCK-UP AGREEMENTS
Each of the officers and directors of the Company, as well as Vito Balsamo,
a former director of the Company, has agreed not to sell any of the shares of
Common Stock or Warrants currently held by him for a period of two years from
the Effective Date, except that each may sell up to 5% of the shares of Common
Stock held by him commencing 90 days after the Effective Date, and another 5% of
his the shares held by him commencing one year after the Effective Date. In
addition, Mr. Bittar, a former officer and director of the Company, has agreed
not to sell any of his shares of Common Stock for a period of 90 days after the
Effective Date, and no more than 25% of his shares of Common Stock for a period
of two years after the Effective Date.
43
<PAGE> 46
CERTAIN TRANSACTIONS
The Company commenced operations in November 1995, upon the Company's
purchase of certain assets and assumption of certain liabilities of 1-800
Low-Air Fare, Inc., a Delaware corporation, and its wholly-owned subsidiary S.
Travel, Inc., a Delaware corporation (collectively, the "Predecessor Business"),
pursuant to an Asset Purchase Agreement dated November 13, 1995 (the "Asset
Purchase Agreement"). Under the Asset Purchase Agreement, the Company acquired
all rights to the tradename "1-800 Low Air Fare" and the telephone number
corresponding thereto, together with certain furniture, fixtures, equipment and
other assets including the Predecessor Business' SABRE Subscription Agreement.
In exchange, the Company paid the Predecessor Business $100,000, and assumed
certain of its liabilities. Additionally, the Company agreed to issue 600,400
shares of its Common Stock, including 300,000 shares to be issued to the
creditors of the Predecessor Business in exchange for forgiveness of the debt of
the Predecessor Business, at the exchange rate of $10 of debt for each share of
Common Stock. The creditors of the Predecessor Business elected to convert
$1,664,340 of such indebtedness for 166,434 shares of Common Stock. The
remaining 133,566 shares were issued to S. Travel, Inc.
In 1996, the Company issued 100,000 shares of Common Stock to Mark D.
Mastrini, the Company's Chief Operating Officer, as part of his compensation. In
connection with this issuance the Company accrued compensation expense of
$120,000. The Company has also agreed to issue 50,000 shares to Mr. Mastrini if
he remains in the employ of the Company for a period of two years from the
closing of this Offering. In addition, pursuant to the terms of his Employment
Agreement, the Company agreed to grant to Mr. Mastrini options to purchase
50,000 shares of Common Stock, exercisable at $5.00 per share and warrants,
identical to those offered hereby, to purchase 25,000 shares.
In 1995, in connection with the initial capitalization of the Company, the
Company issued 100,000 shares of Common Stock to Jerrold B. Sendrow, the
Company's Chief Financial Officer, for which he paid $1,000. The Company did not
accrue any compensation expense in connection with this transaction. In
addition, in 1997 the Company agreed to grant to Mr. Sendrow options to purchase
25,000 shares of Common Stock, exercisable at $5.00 per share.
In 1995, in connection with the initial capitalization of the Company, the
Company agreed to issue 50,000 shares of Common Stock to Biagio Bellizzi, the
Company's Vice-President, Marketing for which he paid $500.00 The Company did
not accrue any compensation expense in connection with this transaction. In
addition, in 1997 the Company granted to Mr. Bellizzi options to purchase 12,500
shares of Common Stock, exercisable at $5.00 per share. The Company did not
accrue any compensation expense in connection with the grant of such options to
Mr. Bellizzi or in connection with the options granted to Messrs. Mastrini and
Sendrow set forth in the two preceding paragraphs.
Perry Trebatch, who beneficially owns more than 5% of the Company's
outstanding capital stock, has purchased shares of the Company's Common Stock
and loaned money to the Company on various occasions.
In August 1995, Mr. Trebatch loaned $200,000 to the Predecessor Business
for which he received notes bearing interest at the rate of 10% per annum. The
obligation under these notes was assumed by the Company in connection with the
acquisition of the assets of the Predecessor Business. In addition to its
agreement to pay the principal and interest accrued, the Company issued 200,000
shares of its Common Stock to Mr. Trebatch in consideration for his agreement to
allow the Company to assume this loan. Such shares were valued at $2.20 per
share for purposes of determining the purchase price of the Predecessor
Business. As a result of the Company's failure to timely repay these notes, in
1996, the principal amount thereof was increased to $300,000 and the Company
accrued interest expense of $100,000. As a result of the Company's failure to
timely repay a portion of the principal amount of these notes, at the time a
partial principal payment was made, the remaining principal balance of $200,000
was increased to $250,000 and the Company accrued interest expense of $50,000.
In April 1996, Mr. Trebatch purchased 100,000 shares of Common Stock at a price
of $2.00 per share. In January 1997, Mr. Trebatch was issued 60,000 shares in
consideration of his agreement to extend the due date of the Company's notes in
respect of which the Company accrued interest expense of $120,000. Taking into
account the value of the shares received by Mr. Trebatch for his loans and
44
<PAGE> 47
the increase in principal resulting from the Company's failure to timely repay
amounts due, Mr. Trebatch has received interest on all amounts loaned to the
Company at an effective rate of 135% per annum.
The Company has agreed that, if the Representative's Over-Allotment Option
is exercised in full, it will redeem 250,000 shares of Common Stock held by Mr.
Trebatch for $1,000,000. The Company also agreed to register for sale in this
Registration Statement 110,000 of the remaining shares of Common Stock held by
Mr. Trebatch and granted to him options to purchase 300,000 shares of Common
Stock at an exercise price of equal to 110% of the initial public offering price
of the shares in respect of which the Company accrued an interest expense of
$37,500. At the election of Mr. Trebatch at any time prior to the first
anniversary of the date of this Prospectus, such options may be exchanged for
300,000 Warrants. In addition, notwithstanding the registration of the 110,000
shares of Common Stock, Mr. Trebatch has agreed not to Sell any of his 110,000
Registered Shares for a period of 15 days after the Effective Date. In addition,
Mr. Trebatch has agreed that if the Representative exercises the
Representative's Over-Allotment Option in full (in which event 250,000 of his
Unregistered Shares will be redeemed by the Company), he will not Sell (i)
55,000 of his Registered Shares for a period of 6 months after the Effective
Date, (ii) 50,000 of his 120,000 Unregistered Shares for a period of 1 year
after the Effective Date, and (iii) 50,000 of his Unregistered Shares for a
period of 18 months after the Effective Date, with the understanding that he may
Sell his remaining 20,000 Unregistered Shares at any time, subject to Rule 144.
Unless and until the Representative exercises the Representative's
Over-Allotment Option in full, Mr. Trebatch has agreed not to Sell (i) more than
10,000 Registered Shares during the first 15-day period following the 15-day
lock-up period, or more than 20,000 Registered Shares in each of the 5
consecutive 30-day periods thereafter (with unsold allowances carried to future
periods), and (ii) 50,000 of his Unregistered Shares for a period of 6 months
after the Effective Date, with the understanding that Mr. Trebatch may Sell the
remaining 220,000 Unregistered Shares immediately, subject to Rule 144.
Michael Cantor, who beneficially owns more than 5% of the Company's
outstanding capital stock, has purchased shares of the Company's Common Stock
and loaned money to the Company on various occasions.
In October 1995, Mr. Cantor loaned the Predecessor Business $100,000. This
obligation was assumed by the Company in connection with the acquisition of the
assets of the Predecessor Business. As a result of the Company's failure to
timely repay this amount, in June 1996 Mr. Cantor was issued 220,600 shares of
Common Stock in respect of which the Company accrued interest expense of
$551,500. In January 1996, Mr. Cantor loaned the Company $100,000. In addition
to interest at the rate of 10% per annum, the Company issued Mr. Cantor 10,000
shares of Common Stock in consideration of this loan in respect of which the
Company accrued interest expense of $12,000. Taking into account the value of
the shares received by Mr. Cantor as consideration for his loans to the Company
and as a consequence of the Company's failure to timely repay amounts due, Mr.
Cantor has received interest on all amounts loaned to the Company at an
effective rate of 886% per annum.
The terms of Mr. Cantor's agreements with the Company contain certain
anti-dilution provisions which he claims require that the Company issue to him
138,000 shares upon completion of this Offering and additional shares in the
event that the Company issues any additional shares during the 90-day period
commencing upon completion of this Offering. In satisfaction of its obligations
under these provisions the Company has agreed to redeem from Mr. Cantor the
481,609 shares of the Common Stock he currently holds for $2,133,750 or
approximately $4.43 per share.
In connection with the acquisition of the assets of the Predecessor
Business, Dr. Jose Colon (a shareholder who is not an officer, director,
promoter, or affiliate of the Company), was issued 40,000 shares of Common
Stock. In January 1996, in connection with a loan made by Dr. Colon, the Company
issued 2,500 shares of Common Stock to Dr. Colon, valued at $1.20 per share in
connection with which it accrued interest expense of $3,000. In July 1996, as a
result of its failure to timely repay this loan the Company issued 30,000 shares
of Common Stock to Dr. Colon, in respect of which the Company accrued interest
expense of $75,000. Taking into account the value of the shares received by Dr.
Colon as consideration for his loans to the Company and as a consequence of the
Company's failure to repay amounts due, Dr. Colon has received interest on all
amounts loaned by the Company at an effective rate of 312% per annum.
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<PAGE> 48
The terms of Mr. Colon's agreements with the Company contain certain
anti-dilution provisions which he contends require that the Company issue to him
12,500 shares upon completion of this Offering and additional shares if the
Company should issue any additional shares during the 90-day period commencing
upon completion of this Offering. In satisfaction of its obligations under these
provisions the Company has agreed to redeem from Dr. Colon the 72,500 shares of
the Company's Common Stock he currently holds for $318,750 or approximately
$4.43 per share, and has also agreed to issue additional shares to Mr. Colon if
the Warrants offered hereby are exercised or the Company issues additional
shares not contemplated hereby within 90 days of the completion of this
Offering.
In 1996 the Company sold and issued 1,387,500 shares of Common Stock to
investors in a private placement conducted through various broker-dealers
retained by the Company. The Common Stock was sold at an average price per share
of $2.22. The individuals set forth below were paid the following commissions in
connection with the Company's securities in the private placement: (i) Pasquale
Guadagno (Director) -- $45,000; (ii) Mark D. Mastrini (President, Chief
Operating Officer and Director) -- $2,000; (iii) Jerrold B. Sendrow
(Vice-President -- Finance, Chief Financial Officer, Treasurer and
Secretary) -- $2,000; (iv) Scot Spencer (service provider to the
Company) -- $231,000; (v) Mark M. Goodman an unaffiliated broker -- $40,000; and
(vi) Mario Giovanelli an unaffiliated broker -- $20,000. The offering was made
in reliance on Section 4(2) of the Securities Act and Regulation D promulgated
thereunder, as an offering only to "accredited investors" (as such term is
defined in Rule 501 of the Securities Act) without general solicitation or
advertisements. The Company also paid Mr. Guadagno $10,000 in connection with
the issuance of shares to one of the Company's lenders.
In 1996, the Company issued options to purchase 100,000 shares of Common
Stock at $1.00 per share to each of Messrs. Gaggi and Guadagno (each a director
of the Company) and to Mr. Vito Balsamo, a former director of the Company.
The Company believes that each of the foregoing transactions was completed
on terms at least as favorable to the Company as those which would have been
obtained from an unaffiliated party, and intends to conduct all future
transactions with directors, officers and affiliates of the Company on an
arms-length basis.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by (a) each person who beneficially owns
more than five percent of the Company's outstanding Common Stock, (b) each
executive officer who owns beneficially any shares, and (c) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING(2)
BENEFICIALLY ---------------------------------
NAME AND ADDRESS(1) OWNED(1) BEFORE OFFERING AFTER OFFERING
------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Michael Gaggi(3)(4).............................. 670,000 11.1% 8.7%
Pasquale Guadagno(4)............................. 829,900 13.7% 10.7%
Vito Balsamo(4).................................. 809,566 13.4% 10.5%
Mark D. Mastrini(5).............................. 125,000 2.1% 1.6%
Jerrold B. Sendrow(6)............................ 112,500 1.9% 1.5%
Biagio Bellizzi(6)............................... 62,500 1.0% .8%
Michael Cantor(7)................................ 481,609 7.6% -0-%
Perry Trebatch(8)................................ 480,000 8.1% 6.3%
Mees Pierson (Bahamas) Ltd.(9)................... 425,000 7.1% 5.6%
Officers and Directors as a Group(10) (5
persons)....................................... 1,799,900 29.2% 23.0%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 4802 Gunn Highway, Suite 140, Tampa, Florida 33624.
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<PAGE> 49
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares.
(3) Does not include 2,500 shares owned beneficially by Rose Gaggi, Mr. Gaggi's
mother, as to which shares Mr. Gaggi disclaims beneficial ownership.
(4) Includes 100,000 shares purchasable pursuant to options immediately
exercisable at a price of $1.00 per share.
(5) Includes 25,000 shares purchasable pursuant to options immediately
exercisable at a price of $5.00 per share.
(6) Includes 12,500 shares purchasable pursuant to options immediately
exercisable at a price of $5.00 per share.
(7) The percentage indicated in the "After Offering" column gives effect to the
redemption of all 481,609 shares held by Mr. Cantor. See "Risk
Factors -- Benefits to Existing Shareholders and Affiliates," "Use of
Proceeds" and "Certain Transactions."
(8) The percentage indicated in the "After Offering" column assumes no sale of
(i) the 110,000 shares being registered in the offering by the Selling
Stockholders covered by the Prospectus Supplement which is part of the
Registration Statement of which this Prospectus is a part or (ii) the
250,000 shares to be redeemed if the Representative's Over-Allotment Option
is exercised in full. See "Risk Factors -- Benefits to Existing
Shareholders and Affiliates," "Use of Proceeds" and "Certain Transactions."
(9) The beneficial owners of the shares registered under this name are Clive
Knowles and Sonia Gallanos.
(10) Includes 350,000 shares purchasable pursuant to the options referred to in
footnotes 4, 5 and 6.
CONCURRENT OFFERING
The Registration Statement of which this Prospectus forms a part also
includes the Prospectus Supplement with respect to an offering by the Selling
Stockholders. The 1,196,134 Registered Shares are being registered, at the
Company's expense (except for legal fees and expenses for counsels to the
Selling Stockholders), under the Securities Act and are expected to become
tradeable on or about the date of this Prospectus, subject to lock-up agreements
pursuant to which certain of the Registered Shares may not be sold for varying
periods after the date of this Prospectus without the Representative's prior
consent. See "Shares Eligible for Future Sale." The Company will not receive any
proceeds from the sale of the Registered Shares. Sales of Registered Shares or
even the potential of such sales could have an adverse effect on the market
prices of the Shares and the Warrants.
Except with respect to Perry Trebatch, a stockholder of the Company, there
are no material relationships between any holders of the Registered Shares and
the Company, nor have any such material relationships existed within the past
three years. See "Principal Stockholders" and "Certain Transactions and Other
Matters. The Company has been informed by the Representative that there are no
agreements between the Representatives and any Selling Stockholders. See "Shares
Eligible for Future Sales."
The Selling Stockholders may from time to time sell all or a portion of
their shares of Common stock in the over-the-counter market or on any national
securities exchange or automated interdealer quotation system on which the
Common Stock may hereafter be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The shares of Common Stock may be sold directly or
through brokers or dealers or in a distribution by one or more underwriters on a
firm commitment or best efforts basis. The methods by which the shares of Common
Stock may be sold include (i) a block trade (which may involve crosses) in which
the broker or dealer engaged will attempt to sell the shares of Common Stock as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (ii) purchases by a broker or dealer as principal
and resales by such broker dealer for its account pursuant to this Prospectus
and the accompanying Prospectus Supplement, (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchasers or to or
through marketmakers, (iv) transactions in put or call options or other rights
(whether exchange-listed or otherwise) established after the effectiveness of
the Registration Statement of which this Prospectus is a part and
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<PAGE> 50
(v) privately negotiated transactions. In addition, any of the shares of Common
Stock that qualify for sale pursuant to Rule 144 under the Securities Act may be
sold in transactions complying with such Rule, rather than pursuant to this
Prospectus and the accompanying Prospectus Supplement.
In the case of the sales of the shares of Common Stock effected to or
through broker-dealers, such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the shares of Common Stock, sold by or through such broker-
dealers, or both. The Company has advised the Selling Stockholders that the
anti-manipulative Regulation M under the Exchange Act may apply to their sales
in the market and has informed them of the need for delivery of copies of this
Prospectus and the accompanying Prospectus Supplement. The Company is not aware
as of the date of this Prospectus of any agreements between any of the Selling
Stockholders and any broker-dealers with respect to the sale of the shares of
Common Stock. The Selling Stockholders and any broker-dealers or agents
participating in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any commissions
received by any such broker-dealers or agents and profit on any resale of shares
of Common Stock may be deemed to be underwriting commissions under the
Securities Act. The commissions received by a broker-dealer or agent may be in
excess of customary compensation. The Company will receive no part of the
proceeds from the sale of any of the shares of Common Stock by the Selling
Stockholders.
The Company will pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares of Common Stock offered by
the Selling Stockholders, including without limitation all registration and
filing fees, listing fees, printing expenses, fees and disbursements of counsel
and accountants for the Company. Each Selling Stockholder will pay all brokerage
fees and commissions, if any, incurred in connection with the sale of the shares
of Common Stock owned by the Selling Stockholder. In addition, the Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
There is no assurance that any of the Selling Stockholders will sell any or
all of the shares Common Stock offered by them.
DESCRIPTION OF SECURITIES
As of the date hereof, the authorized capital stock of the Company consists
of (i) 20,000,000 shares of Common Stock, par value $.01 per share, 5,959,709
shares of which are issued and outstanding, and (ii) 1,000,000 shares of
Preferred Stock, of which none are outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws of the Company, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of stockholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities. Except as disclosed
herein, there are no conversion rights or redemption or sinking fund provisions
with respect to the Common Stock. All outstanding shares of Common Stock are,
and the shares of Common Stock offered hereby will be when issued, fully paid
and nonassessable.
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<PAGE> 51
PREFERRED STOCK
The Board of Directors is authorized, without any action of the
stockholders, to provide for the issuance of one or more series of Preferred
Stock and to fix the designation, preferences, powers and relative,
participating, optional and other rights, qualifications, limitations and
restrictions thereof including, without limitation, the dividend rate, voting
rights, conversion rights, redemption price and liquidation preference per
series of Preferred Stock. Any series of Preferred Stock so issued may rank
senior to the Common Stock with respect to the payment of dividends or amounts
to be distributed upon liquidation, dissolution or winding up. There are no
agreements or understandings for the issuance of Preferred Stock, and the Board
of Directors has no present intent to issue any Preferred Stock. The existence
of authorized but unissued Preferred Stock may enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, the Board of
Directors were to determine that a takeover proposal is not in the Company's
best interests, the Board of Directors could cause shares of Preferred Stock to
be issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed
acquiror or insurgent stockholder or stockholder group. The issuance of shares
of Preferred Stock pursuant to the Board of Directors' authority described above
could decrease the amount of earnings and assets available for distribution to
holders of Common Stock and adversely affect the rights and powers, including
voting rights, of such holders and may have the effect of delaying, deferring or
preventing a change in control of the Company.
WARRANTS
The Warrants will be issued in registered form pursuant to an agreement
dated the date of this Prospectus (the "Warrant Agreement"), between the Company
and Continental Stock Transfer Corporation, as Warrant Agent (the "Warrant
Agent"). The following discussion of certain terms and provisions of the
Warrants is qualified in its entirety by reference to the Warrant Agreement. A
form of the certificate representing the Warrants which form a part of the
Warrant Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
Each of the Warrants entitles the registered holder to purchase one share
of Common Stock. The Warrants are exercisable at a price equal to 150% of the
Share Offering Price (which exercise price has been arbitrarily determined by
the Company and the Representative) subject to certain adjustments. The Warrants
are entitled to the benefit of adjustments in their exercise prices and in the
number of shares of Common Stock or other securities deliverable upon the
exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.
The Warrants may be exercised at any time and continuing thereafter until
the close of five years from the date hereof, unless such period is extended by
the Company. After the expiration date, Warrant holders shall have no further
rights. Warrants may be exercised by surrendering the certificate evidencing
such Warrant, with the form of election to purchase on the reverse side of such
certificate properly completed and executed, together with payment of the
exercise price and any transfer tax, to the Warrant Agent. If less than all of
the Warrants evidenced by a warrant certificate are exercised, a new certificate
will be issued for the remaining number of Warrants. Payment of the exercise
price may be made by cash, bank draft or official bank or certified check equal
to the exercise price.
Warrant holders do not have any voting or any other rights as shareholders
of the Company. The Company has the right at any time to redeem the Warrants, at
a price of $.05 per Warrant, by written notice to the registered holders
thereof, mailed not less than 30 nor more than 60 days prior to the Redemption
Date. The Company may exercise this right only if the closing bid price for the
Common Stock for seven trading days during a 10 consecutive trading day period
ending no more than 15 days prior to the date that the notice of redemption is
given, equals or exceeds $ per share, subject to adjustment. If the
Company exercises its right to call Warrants for redemption, such Warrants may
still be exercised until the close of business on the day immediately preceding
the Redemption Date. If any Warrant called for redemption is not exercised by
such time, it will cease to be exercisable, and the holder thereof will be
entitled only to the
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<PAGE> 52
repurchase price. Notice of redemption will be mailed to all holders of Warrants
of record at least 30 days, but not more than 60 days, before the Redemption
Date. The foregoing notwithstanding, the Company may not call the Warrants at
any time that a current registration statement under the Securities Act is not
then in effect. Any redemption of the Warrants during the one-year period
commencing on the date of this Prospectus shall require the written consent of
the Representative.
The Warrant Agreement permits the Company and the Warrant Agent without the
consent of Warrant holders, to supplement or amend the Warrant Agreement in
order to cure any ambiguity, manifest error or other mistake, or to address
other matters or questions arising thereafter that the Company and the Warrant
Agent deem necessary or desirable and that do not adversely affect the interest
of any Warrant holder. The Company and the Warrant Agent may also supplement or
amend the Warrant Agreement in any other respect with the written consent of
holders of not less than a majority in the number of the Warrants then
outstanding; however, no such supplement or amendment may (i) make any
modification of the terms upon which the Warrants are exercisable or may be
redeemed; or (ii) reduce the percentage interest of the holders of the Warrants
without the consent of each Warrant holder affected thereby.
In order for the holder to exercise a Warrant, there must be an effective
registration statement, with a current prospectus on file with the Commission
covering the shares of Common Stock underlying the Warrants, and the issuance of
such shares to the holder must be registered, qualified or exempt under the laws
of the state in which the holder resides. If required, the Company will file a
new registration statement with the Commission with respect to the securities
underlying the Warrants prior to the exercise of such Warrants and will deliver
a prospectus with respect to such securities to all holders thereof as required
by Section 10(a)(3) of the Securities Act. See "Risk Factors -- Necessity to
Maintain Current Prospectus" and "State Blue Sky Registration Required to
Exercise Warrants."
In connection with the Stevens Merger, on the Effective Date, the Company
will issue warrants exercisable for 250,000 shares to Joseph Stevens Group,
Inc., exercisable at the same price and entitled and subject to the same terms
and conditions as the Warrants described above.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law prevents an "interested
stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved either the transaction in which
the interested stockholder became an interested stockholder or the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding stock held by directors who are
also officers of the corporation or by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer); or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and authorized at a meeting of the stockholders by the affirmative vote of the
holders of two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S BYLAWS
Certain provisions of the Certificate and Bylaws of the Company summarized
in the following paragraphs may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
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CLASSIFIED BOARD OF DIRECTORS
The Certificate provides for the Board of Directors to be divided into
three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
This provision, when coupled with the provisions of the Certificate and Bylaws
authorizing only the Board of Directors to fill vacant directorships, will make
it more difficult for a stockholder to remove incumbent directors and
simultaneously gain control of the Board of Directors by filling the vacancies
created by such removal with its own nominees.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The Company's Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder, to be timely, must be received no later than the
close of business on the day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. The Bylaws also
specify certain requirements for a stockholder's notice to be in proper written
form. These provisions may preclude some stockholders from bringing matters
before the stockholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting and may be deemed to
have an anti-takeover effect in that they may delay, defer or prevent the
Company from taking actions, including the election of new directors, that a
stockholder might consider in the Company's best interests.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS AND INDEMNIFICATION.
The Company's Certificate of Incorporation eliminates, to the fullest
extent now or hereafter permitted by Delaware law, liability of a director to
the Company or its stockholders for monetary damages for a breach of such
Director's fiduciary duty as a Director. The Delaware General Corporation Law
presently permits such limitation of a Director's liability except where a
Director (i) breaches his or her duty of loyalty to the Company or its
stockholders, (ii) fails to act in good faith or engages in intentional
misconduct or a knowing violation of law, (iii) authorizes payment of an
unlawful dividend or stock repurchase, or (iv) obtains an improper personal
benefit.
This provision is intended to afford Directors additional protection, and
limit their potential liability, from suits alleging a breach of the duty of
care by a Director. The Company believes this provision will assist it in
maintaining and securing the services of Directors who are not employees of the
company. As a result of the inclusion of such a provision, stockholders may be
unable to recover monetary damages against Directors for actions taken by them
that constitute negligence or gross negligence or that are in violation of their
fiduciary duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to stockholders for any particular case, stockholders may
not have any effective remedy against the challenged conduct. The Company's
Bylaws also provide that Directors and officers shall be indemnified against
liabilities arising from their service as Directors or officers to the fullest
extent permitted by law, which generally requires that the individual act in
good faith and in a manner he or she reasonably believes to be in or not opposed
to the Company's best interests.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer agent and registrar for the Common Stock, and the Warrant
Agent for the Warrants is Continental Stock Transfer & Trust Company.
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<PAGE> 54
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon the closing of this Offering, the Company will have 7,638,933 shares
of Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option). Of these shares, the 1,850,000 shares being offered by
the Company hereby and the 1,196,134 shares being offered by the selling
Stockholders pursuant to the Prospectus Supplement which is a part of the
Registration Statement of which this Prospectus is a part (the "Registered
Shares") will be freely tradeable without restriction (except as to affiliates
of the Company) or registration under the Securities Act, subject to the
restrictions on the sale of the Registered Shares described below. The remaining
outstanding shares of Common Stock will be "restricted shares" as defined in
Rule 144 under the Securities Act.
All of the shares of previously issued and outstanding Common Stock will
become available for resale 90 days after the effectiveness of this Offering,
subject in all events to the provisions of Rule 144 under the Securities Act
("Rule 144"). The holders of 50,000 shares have agreed not to offer, sell or
otherwise dispose of ("Sell") such shares for a period of 90 days after the
Effective Date; the holders of 713,750 shares have agreed not to Sell such
shares for one year after the Effective Date; the holders of 715,625 shares have
agreed not to Sell such shares for 18 months after the Effective Date; and the
holders of 2,334,466 shares, including the officers and directors of the
Company, and Vito Balsamo, a former director of the Company, have agreed not to
Sell such shares for 2 years after the Effective Date, except that each may sell
up to 5% of the shares of Common Stock held by him commencing 90 days after the
Effective Date, and another 5% of the shares held by him commencing one year
after the Effective Date.
All of the Selling Stockholders (other than the Selling Stockholder
described in the immediately following sentence) have agreed with the
Representative not to sell their Registered Shares for a period of 30 days after
the Effective Date and for an additional period of thirty (30) days thereafter
without the consent of the Representative. The remaining Selling Stockholder has
agreed not to Sell any of his 110,000 Registered Shares for a period of 15 days
after the Effective Date. In addition, such Selling Stockholder has agreed that
if the Representative exercises the Representative's Over-Allotment Option in
full (in which event 250,000 of his Unregistered Shares will be redeemed by the
Company), he will not Sell (i) more than 55,000 of his Registered Shares for a
period of 6 months after the Effective Date, (ii) more than 50,000 of his
120,000 Unregistered Shares during the six month period commencing 1 year after
the Effective Date, and (iii) 50,000 of his Unregistered Shares until the
expiration of 18 months after the Effective Date, with the understanding that
such Selling Stockholder may Sell his remaining 20,000 Unregistered Shares at
any time, subject to Rule 144. Unless and until the Representative exercises the
Representative's Over-Allotment Option in full, such Selling Stockholder has
agreed not to Sell (i) more than 10,000 Registered Shares during the first
15-day period following the 15-day lock-up period, or more than 20,000
Registered Shares in each of the 5 consecutive 30-day periods thereafter (with
unsold allowances carried to future periods), and (ii) 50,000 of his
Unregistered Shares for a period of 6 months after the Effective Date, with the
understanding that such Selling Stockholder may Sell the remaining 220,000
Unregistered Shares immediately, subject to Rule 144. The sole stockholder of
Stevens has agreed with respect to 300,000 of the 383,333 shares to be received
pursuant to the Merger Agreement, that none of such shares will be sold
over-the-counter or over a public exchange within 30 days of the closing of the
Merger; that during the following eleven months it may publicly sell no more
than 4,546 shares per month (with any unsold allowances carried forward to
future months) and that during the following twelve months it may publicly sell
no more than 20,833 shares per month (with any unsold allowances carried forward
to future months). The sole stockholder of Stevens has agreed with respect to
the remaining 83,333 shares to be received pursuant to the Merger Agreement,
that more of such shares will be sold within 90 days of the Closing Date and
that during the following seven months it will sell no more than 11,905 shares
per month (with any unsold allowances carried forward to future months). The
Representative has no current plans or understandings to waive, shorten or
modify the foregoing lock-up arrangements.
The Company has also agreed that, without the prior written consent of the
Underwriters, it will not offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or
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exercisable or exchangeable for Common Stock, for a period of 180 days after the
effective date of this Prospectus, subject to certain limited exceptions. See
"Underwriting."
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted shares from the Company
or any "affiliate" of the Company, as that term is defined under the Securities
Act, the acquiror or subsequent holder is entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the then outstanding shares of the Company's Common Stock (approximately 78,000
shares immediately after this Offering) or the average weekly trading volume of
the Company's Common Stock on all exchanges and/or reported through the
automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain manner of sales
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the later of the
date of acquisition of restricted shares from the Company or from any affiliate
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an affiliate of the Company at any time during the 90 days preceding a
sale, such person would be entitled to sell such shares in the public market
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
Since there has been no public market for shares of Common Stock of the
Company, the Company is unable to predict the effect that sales made under Rule
144, pursuant to future registration statements, or otherwise, may have on any
then prevailing market price for shares of the Common Stock. Nevertheless, sales
of a substantial amount of the Common Stock in the public market, or the
perception that such sales could occur, could adversely affect market prices.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for whom First London Securities Corporation is acting
as Representative, have severally agreed to purchase from the Company 1,850,000
shares of Common Stock ("Shares") and 1,850,000 Warrants (collectively, the
"Securities"). The number of Shares and Warrants which each Underwriter has
agreed to purchase is set forth opposite its name.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME OF UNDERWRITER SHARES WARRANTS
------------------- --------- ---------
<S> <C> <C>
First London Securities Corporation.........................
--------- ---------
Total.....................................................
========= =========
</TABLE>
The Securities are offered by the Underwriters subject to prior sale, when,
as and if delivered to and accepted by the Underwriters and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriters are committed to purchase all Securities offered by this
Prospectus, if any are purchased.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities offered hereby to the public at the
offering price set forth on the cover page of this Prospectus. The
Representative has advised the Company that the Underwriters propose to offer
the Securities through members of the NASD, and may allow a concession, in their
discretion, to certain dealers who are members of the NASD and who agree to sell
the Securities in conformity with the NASD Conduct Rules. Such concessions shall
not exceed the amount of the underwriting discount that the Underwriters are to
receive.
The Company has granted to the Representative an option, exercisable for 45
days from the date of this Prospectus, to purchase up to an additional 277,500
Shares and an additional 277,500 Warrants at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus (the "Over-
Allotment Option"). The Representative may exercise the Over-Allotment Option
solely to cover over-allotments in the sale of the Securities being offered by
this Prospectus.
Officers and directors of the Company may introduce the Representative to
persons to consider the Offering and purchase Securities either through the
Representative, other Underwriters, or through participating dealers. In this
connection, officers and directors will not receive any commissions or any other
compensation.
The Company has agreed to pay the Representative a commission of 10% of the
gross proceeds of the offering (the "Underwriting Discount"), including the
gross proceeds from the sale of the Over-Allotment Option, if exercised. In
addition, the Company has agreed to pay to the Representative a non-accountable
expense allowance of three percent (3%) of the gross proceeds of this Offering,
including proceeds from any Securities purchased pursuant to the Over-Allotment
Option. The Representative's expenses in excess of the non-accountable expense
allowance will be paid by the Representative. To the extent that the expenses of
the Representative are less than the amount of the non-accountable expense
allowance received, such excess shall be deemed to be additional compensation to
the Representative. The Company has also agreed to pay the Representative upon
the exercise or redemption of the Warrants a fee equal to 5% of the gross
proceeds received by the Company from the exercise of the Warrants and 5% of the
aggregate redemption price for the Warrants redeemed. Such fee will be paid to
the Representative no earlier than 12 months after the effective date of this
Offering. Additionally, the Representative or its designee must be designated in
writing by the Warrant holders as having solicited the Warrant in order to
receive the fee and such fee shall not be paid with respect Warrants held in a
discretionary account without prior specific written approval of such exercise
by the discretionary account holder. See "Description of Securities." The
Representative has informed the Company that it does not expect sales to
discretionary accounts to exceed 5% of the total number of Securities offered by
the Company hereby. Additionally, the Representative shall have the right for
two years to nominate an Advisory Director to the Company's Board of Directors.
The Advisory Director will have the same privileges as a normal director,
including equal compensation, but will not have the right to vote on Board
issues.
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<PAGE> 57
At the closing of this Offering, the Company will issue to the
Representative or persons related to the Representative, for nominal
consideration, a Representative's Warrant to purchase up to 185,000 Shares and
185,000 Warrants ("Underlying Warrants"). The Representative's Warrant will be
exercisable for a four-year period commencing one year from the effective date
of this Offering at an exercise price of 120% of the price at which the Common
Stock and Warrants are sold to the public, subject to adjustment. Each
Underlying Warrant will be exercisable for a four-year period commencing one
year from the effective date of this Prospectus to purchase one share of Common
Stock at an exercise price of $ per share of Common Stock (150% of the
Offering Price of the Common Stock). The Representative's Warrant will not be
transferable for one year from the date of this Prospectus, except (i) to
officers of the Representative, other Underwriters, and officers and partners
thereof; (ii) by will; or (iii) by operation of law.
The Representative's Warrant contains provisions providing for appropriate
adjustment in the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
Representative's Warrant contain net issuance provisions permitting the holders
thereof to elect to exercise the Representative's Warrant in whole or in part
and instruct the Company to withhold from the securities issuable upon exercise,
a number of securities, valued at the current fair market value on the date of
exercise, to pay the exercise price. Such net exercise provision has the effect
of requiring the Company to issue shares of Common Stock without a corresponding
increase in capital. A net exercise of the Representative's Warrant will have
the same dilutive effect on the interests of the Company's shareholders as will
a cash exercise. The Representative's Warrant does not entitle the holders
thereof to any rights as a shareholder of the Company until such
Representative's Warrant is exercised and shares of Common Stock are purchased
thereunder.
The Company has also agreed that, without the prior written consent of the
Underwriters, it will not offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a period of 180 days after the effective date
of this Prospectus, subject to certain limited exceptions.
The Company has agreed to indemnify the Underwriters against any costs or
liabilities incurred by the Underwriters by reasons of misstatements or
omissions to state material facts in connection with the statements made in the
Registration Statement and the Prospectus. The Underwriters have in turn agreed
to indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Prospectus, based on information relating to the Underwriters and furnished in
writing by the Underwriters. To the extent that this section may purport to
provide exculpation from possible liabilities arising from the federal
securities laws, in the opinion of the Commission, such indemnification is
contrary to public policy and therefore unenforceable.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement which are filed as exhibits to the Registration
Statement. See "Available Information."
DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Common Stock
or Warrants. The public offering price of the Common Stock and the Warrants and
the exercise price of the Warrants, as well as the exercise price of the
warrants underlying the Representative's Warrant, have been determined solely by
negotiations between the Company and the Representative. Among the factors
considered in determining these prices were the Company's current financial
condition and prospects and the general condition of the securities market.
However, the public offering price of the Common Stock and the Warrants and the
exercise price of the Warrants and the warrants underlying Representative's
Warrant do not necessarily bear any relationship to the Company's assets, book
value, earnings or any other established criterion of value. See "Risk Factors."
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<PAGE> 58
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Phillips Nizer Benjamin Krim & Ballon LLP, New York, New York.
Certain legal matters with respect to the Securities offered hereby will be
passed upon for the Underwriters by Jackson Walker L.L.P., Dallas, Texas.
EXPERTS
The audited Financial Statements and schedules of the Company included in
this Prospectus and elsewhere in the Registration Statement have been audited by
Killman, Murrell & Company, P.C., independent certified public accountants,
except with respect to the Statement of Operations, Statement of Stockholders'
Equity (Deficit) and Statement of Cash Flows for the year ended December 31,
1994, which have been audited by Feldman Radin & Co., P.C., certified public
accountants ("Feldman"), as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of such firms as experts in
accounting and auditing in giving said reports. Effective on or about August 15,
1995 the Company dismissed Feldman as the Company's principal independent
accountants. The decision to change independent accountants was made in
connection with the Company's relocation of its headquarters from New York City
to Tampa, Florida, and was recommended by the Company's Board of Directors. In
connection with audits of the financial statements of the Company for the year
ended December 31, 1994 and during the interim period through their date of
dismissal, there were no disagreements with Feldman on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures which, if not resolved to Feldman's satisfaction, would have caused
them to make reference to the matter in their report. The report of Feldman on
the Company's financial statements for the year ended December 31, 1994 did not
contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles. Further,
during this period, there were no events of the type required to be reported
pursuant to Item 304(a)(1)(iv)(B) of Regulation S-B.
The audited Financial Statements and Schedules of Stevens included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Accetta and Olmsted, Accountancy Corporation, certified public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of such firms as experts in accounting and auditing
in giving said reports.
56
<PAGE> 59
800 TRAVEL SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants (800
Travel Systems, Inc.) -- Killman, Murrell & Co., P.C...... F-2
Report of Independent Certified Public Accountants (1-800
Low Airfare, Inc.) -- Killman, Murrell & Co., P.C......... F-3
Report of Independent Certified Public Accountants (1-800
Low Airfare, Inc.) -- Feldman, Radin & Co., P.C........... F-4
Balance Sheets as of December 31, 1995 and 1996 and June 30,
1997 (Unaudited).......................................... F-5
Statements of Operations for the Fiscal Year Ended December
31, 1994, Eleven Months Ended November 30, 1995, One Month
Ended December 31, 1995, Fiscal Year Ended December 31,
1996, and Six Months Ended June 30, 1996 and 1997
(Unaudited)............................................... F-6
Statements of Stockholders' Equity (Deficit) for Fiscal Year
Ended December 31, 1994, Eleven Months Ended November 30,
1995, One Month Ended December 31, 1995, Fiscal Year Ended
December 31, 1996, and Six Months Ended June 30, 1997
(Unaudited)............................................... F-7
Statements of Cash Flows for the Fiscal Year Ended December
31, 1994, Eleven Months Ended November 30, 1995, One Month
Ended December 31, 1995, Fiscal Year Ended December 31,
1996, and Six Months Ended June 30, 1996 and 1997
(Unaudited)............................................... F-8
Notes to Financial Statements............................... F-9
Pro forma Condensed Combined Financial Information.......... F-18
Pro Forma Balance Sheets as of December 31, 1996............ F-20
Notes to the Pro Forma Balance Sheet........................ F-21
Pro Forma Statement of Operations for the Year Ended
December 31, 1996......................................... F-22
Notes to the Pro Forma Statement of Operations.............. F-23
Pro Forma Balance Sheets as of June 30, 1997................ F-24
Notes to the Pro Forma Balance Sheet........................ F-25
Pro Forma Statement of Operations for the Six Months Ended
June 30, 1997............................................. F-26
Notes to the Pro Forma Statement of Operations.............. F-27
</TABLE>
F-1
<PAGE> 60
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
800 Travel Systems, Inc.
Tampa, Florida
We have audited the accompanying balance sheets of 800 Travel Systems. Inc.
as of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1996 and the
one month ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 800 Travel Systems, Inc. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the year ended December 31, 1996 and the one month ended December 31, 1995,
in conformity with generally accepted accounting principles.
KILLMAN, MURRELL & COMPANY, P.C.
/s/ KILLMAN, MURRELL & COMPANY, P.C.
------------------------------------
Certified Public Accountants
Dallas, Texas
April 20, 1997
F-2
<PAGE> 61
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
800 Travel Systems, Inc.
Tampa, Florida
We have audited the accompanying consolidated statements of operations,
stockholders' (deficit) and cash flows of 1-800-Low Airfare, Inc. and Subsidiary
(Predecessor Business) for the eleven months ended November 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of 1-800-Low Airfare, Inc. and
Subsidiary's operations and changes in its stockholders' (deficit) and its cash
flows for the eleven months ended November 30, 1995, in conformity with
generally accepted accounting principles.
KILLMAN, MURRELL & COMPANY, P.C.
/s/ KILLMAN, MURRELL & COMPANY, P.C.
------------------------------------
Certified Public Accountants
Dallas, Texas
April 20, 1997
F-3
<PAGE> 62
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
1-800-Low Airfare, Inc.
We have audited the accompanying consolidated statement of operations,
changes in stockholders' deficit and cash flows of 1-800-Low-Airfare, Inc. and
Subsidiary for the year ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of consolidated operations and
consolidated cash flows of 1-800-Low-Airfare, Inc., and Subsidiary for the year
ended December 31, 1994 in conformity with generally accepted accounting
principles.
FELDMAN, RADIN & CO., P.C.
/s/ FELDMAN RADIN & CO., P.C.
------------------------------------
Certified Public Accountants
New York, New York
June 2, 1995
F-4
<PAGE> 63
800 TRAVEL SYSTEMS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
-----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 19,593 $ 588,960 $ 145,644
Commissions Receivable.................................... 19,613 118,390 478,978
Receivable from AT&T...................................... -- 213,980 90,000
Prepaids.................................................. -- 28,804 20,079
---------- ---------- ----------
TOTAL CURRENT ASSETS.............................. 39,206 950,134 734,701
---------- ---------- ----------
LEASEHOLD IMPROVEMENTS AND EQUIPMENT -- NOTE 3.............. 32,418 403,964 450,667
Less Accumulated Depreciation............................. (733) (39,734) (71,527)
---------- ---------- ----------
Net Leasehold Improvements and Equipment.......... 31,685 364,230 379,140
---------- ---------- ----------
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
Less accumulated amortization of $3,725, $48,425 and
$70,775, respectively -- Note 2........................... 1,113,786 1,069,086 1,046,736
---------- ---------- ----------
DEFERRED OFFERING COSTS..................................... 25,502 50,000 343,700
---------- ---------- ----------
OTHER ASSETS
Trademarks, net of accumulated amortization of $1,111,
$15,276 and $22,446, respectively...................... 198,889 199,724 192,554
Related Party Receivables................................. 9,000 109,000 109,000
Bonds and Security Deposits............................... 26,230 31,007 36,347
Merger Deposits and Deferred Acquisition Costs -- Note
10..................................................... -- 99,341 149,341
Prepaid Rent-- Note 5..................................... -- 80,000 74,000
---------- ---------- ----------
TOTAL OTHER ASSETS................................ 234,119 519,072 561,242
---------- ---------- ----------
TOTAL ASSETS...................................... $1,444,298 $2,952,522 $3,065,519
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-Term Debt -- Related
Parties -- Note 4...................................... $ 431,750 $ 280,750 $ 280,750
Accounts Payable.......................................... 96,056 641,592 770,218
Accrued Liabilities....................................... 242,610 227,241 280,544
TOTAL CURRENT LIABILITIES......................... 770,416 1,149,583 1,331,512
DEFERRED RENT............................................... -- 108,721 180,967
LONG-TERM DEBT -- Excluding Current Installments -- Note
4......................................................... 60,000 30,000 30,000
---------- ---------- ----------
TOTAL LIABILITIES................................. 830,416 1,288,304 1,542,479
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES -- Notes 7 and 10
STOCKHOLDERS' EQUITY -- NOTE 5
Preferred Stock, $100.00 par value, 400 shares authorized;
none issued............................................ -- -- --
Common stock, $.01 par value, 10,000,000 shares
authorized; 3,550,000, 5,951,209 and 5,959,709 shares
issued and outstanding, respectively................... 35,500 59,512 59,597
Additional Paid-in-Capital................................ 741,276 4,976,259 4,997,424
Stock Subscriptions Receivable............................ (32,296) (32,296) (32,296)
Retained Deficit.......................................... (130,598) (3,339,257) (3,501,685)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY........................ 613,882 1,664,218 1,523,040
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $1,444,298 $2,952,522 $3,065,519
========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE> 64
800 TRAVEL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS
--------------------------- THE COMPANY
ELEVEN -------------------------------------------------------
MONTHS ONE MONTH SIX MONTHS ENDED
YEAR ENDED ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, NOVEMBER 30, DECEMBER 31, DECEMBER 31, -------------------------
1994 1995 1995 1996 1996 1997
------------ ------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Commissions..................... $ 622,017 $ 898,479 $ 115,986 $ 2,814,237 $1,153,531 $3,000,192
Ticket Delivery Income.......... -- 192,459 17,984 421,540 169,937 721,459
----------- ----------- ---------- ----------- ----------- ----------
Total Revenues............ 622,017 1,090,938 133,970 3,235,777 1,323,468 3,721,651
----------- ----------- ---------- ----------- ----------- ----------
OPERATING EXPENSES
Payroll, commissions and
employee benefits............. 790,859 1,115,403 175,604 2,490,770 1,233,507 1,775,614
Telephone....................... 165,979 392,869 14,527 539,118 199,808 501,246
Ticket delivery expense......... -- 138,798 17,896 407,579 168,742 327,926
Advertising..................... 459,657 333,520 437 137,223 36,391 107,044
General and administrative --
Note 7........................ 1,053,530 1,156,777 53,869 1,768,058 879,560 1,110,164
Interest expense................ 46,417 168,857 4,017 1,114,298 540,048 67,453
----------- ----------- ---------- ----------- ----------- ----------
TOTAL OPERATING
EXPENSES................ 2,516,442 3,306,224 266,350 6,457,046 3,058,056 3,889,447
----------- ----------- ---------- ----------- ----------- ----------
(LOSS) BEFORE OTHER INCOME........ (1,894,425) (2,215,286) (132,380) (3,221,269) (1,734,588) (167,796)
OTHER INCOME...................... -- 41,959 1,782 12,610 5,809 5,368
----------- ----------- ---------- ----------- ----------- ----------
NET (LOSS)........................ $(1,894,425) $(2,173,327) $ (130,598) $(3,208,659) $(1,728,779) $ (162,428)
=========== =========== ========== =========== =========== ==========
Weighted Average Number of Common
Shares Outstanding.............. 3,830,000 3,830,000 3,840,000 4,947,823 4,447,857 5,956,352
=========== =========== ========== =========== =========== ==========
(Loss) Per Common Share........... $ (.50) $ (.57) $ (.03) $ (.65) $ (.39) $ (.03)
=========== =========== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-6
<PAGE> 65
800 TRAVEL SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCK
------------------ PAID-IN SUBSCRIPTIONS
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
--------- ------- ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR BUSINESS
BALANCE, JANUARY 1, 1994............ 751,702 $ 752 $ 205,748 $ -- $ (39,210) $ 167,290
Issuance of common stock.......... 248,298 248 194,252 -- -- 194,500
Distribution (Note 5)............. -- -- -- -- (93,500) (93,500)
Net Loss, year ended December 31,
1994............................ -- -- -- -- (1,894,425) (1,894,425)
--------- ------- ---------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1994.......... 1,000,000 1,000 400,000 -- (2,027,135) (1,626,135)
Net loss, eleven months ended
November 30, 1995............... -- -- -- -- (2,173,327) (2,173,327)
--------- ------- ---------- -------- ----------- -----------
BALANCE, NOVEMBER 30, 1995.......... 1,000,000 $ 1,000 $ 400,000 $ -- $(4,200,462) $(3,799,462)
========= ======= ========== ======== =========== ===========
THE COMPANY
Issuance of common stock -- Note
5............................... 3,229,600 $32,296 $ -- $(32,296) $ -- $ --
Issuance of common stock in
connection with debt -- Note
8............................... 20,000 200 23,800 -- -- 24,000
Purchase of predecessor -- Note
2............................... 300,400 3,004 717,476 -- -- 720,480
Net loss, one month ended Decem-
ber 31, 1995.................... -- -- -- -- (130,598) (130,598)
--------- ------- ---------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1995.......... 3,550,000 35,500 741,276 (32,296) (130,598) 613,882
Sale of common stock -- net of ex-
penses of $389,098 -- Note 5.... 1,387,500 13,875 2,442,027 -- -- 2,455,902
Issuance of common stock in
connection with debt issuance
and services rendered -- Note
5............................... 1,013,709 10,137 1,458,581 -- -- 1,468,718
Issuance of options and warrants
for services and interest....... -- -- 334,375 -- -- 334,375
Net loss, year ended December 31,
1996............................ -- -- -- -- (3,208,659) (3,208,659)
--------- ------- ---------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1996.......... 5,951,209 59,512 4,976,259 (32,296) (3,339,257) 1,664,218
Issuance of common stock in
connection with debt issuance
and services -- Note 5.......... 8,500 85 21,165 -- -- 21,250
Net loss, six months ended June
30, 1997 (unaudited)............ -- -- -- -- (162,428) (162,428)
--------- ------- ---------- -------- ----------- -----------
BALANCE, JUNE 30, 1997
(UNAUDITED)....................... 5,959,709 $59,597 $4,997,424 $(32,296) $(3,501,685) $ 1,523,040
========= ======= ========== ======== =========== ===========
</TABLE>
F-7
<PAGE> 66
800 TRAVEL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS THE COMPANY
---------------------------- -------------------------------------------------------
ELEVEN MONTHS ONE MONTH SIX MONTHS ENDED
YEAR ENDED ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, NOVEMBER 30, DECEMBER 31, DECEMBER 31, -------------------------
1994 1995 1995 1996 1996 1997
------------ ------------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss)........................... $(1,894,425) $(2,173,327) $(130,598) $(3,208,659) $(1,728,779) $(162,428)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and Amortization...... 9,606 6,752 5,569 97,866 34,790 61,313
Stock, options and warrants issued
for expenses and debt
redemption....................... -- -- -- 1,803,093 171,000 21,250
Prepaid Rent Amortization.......... -- -- -- 8,000 -- 6,000
Changes in operating assets and
liabilities, net of effects of
acquisition:
(Increase) decrease in
receivables.................... (10,782) 8,793 (17,764) (312,757) (283,419) (236,608)
(Increase) decrease in prepaids
and other assets............... (18,701) (8,055) -- (21,581) (11,365) 3,385
Decrease in deferred financing
fees........................... -- 92,833 -- -- -- --
Increase in related party
receivables.................... -- -- (5,000) (100,000) (100,000) --
Increase (Decrease) in deferred
rent liability................. -- (59,929) -- 108,721 -- 72,246
Increase (Decrease) in accounts
payable and accrued expenses... 815,967 909,874 77,138 530,167 754,572 181,929
----------- ----------- --------- ----------- ----------- ---------
NET CASH USED IN OPERATING
ACTIVITIES................... (1,098,335) (1,223,059) (70,655) (1,095,150) (1,163,201) (52,913)
----------- ----------- --------- ----------- ----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of leasehold improvements
and equipment...................... (22,846) (7,963) -- (371,546) (112,010) (46,703)
Purchase of Trademark................ -- -- -- (15,000) (15,000) --
Merger deposits and deferred
acquisition costs.................. -- -- -- (99,341) -- (50,000)
----------- ----------- --------- ----------- ----------- ---------
NET CASH FLOW USED BY INVESTING
ACTIVITIES................... (22,846) (7,963) -- (485,887) (127,010) (96,703)
----------- ----------- --------- ----------- ----------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Deferred offering cost............... $ (97,833) $ -- $ (25,502) $ (50,000) $ -- $(293,700)
Proceeds from borrowings, net........ -- 1,202,250 125,750 -- -- --
Principal payments on debt........... (18,944) -- -- (281,000) (151,000) --
Issuance of common stock............. 194,500 -- -- 2,481,404 2,183,550 --
Proceeds from private placement,
net................................ 1,000,000 -- -- -- -- --
Acquisition of Predecessor
Business........................... -- -- (10,000) -- -- --
Capital distribution................. (93,500) -- -- -- -- --
----------- ----------- --------- ----------- ----------- ---------
NET CASH FLOW FROM FINANCING
ACTIVITIES................... 984,223 1,202,250 90,248 2,150,404 2,032,550 (293,700)
----------- ----------- --------- ----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH........ (136,958) (28,772) 19,593 569,367 742,339 (443,316)
CASH AT THE BEGINNING OF PERIOD........ 169,795 32,837 -- 19,593 19,593 588,960
----------- ----------- --------- ----------- ----------- ---------
CASH AT THE END OF PERIOD.............. $ 32,837 $ 4,065 $ 19,593 $ 588,960 $ 761,932 $ 145,644
=========== =========== ========= =========== =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest Expense................... $ 46,417 $ 168,857 $ 4,017 $ 67,205 $ 31,048 $ 61,453
=========== =========== ========= =========== =========== =========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-8
<PAGE> 67
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
DECEMBER 31, 1996 AND 1995
NOTE 1: BUSINESS AND BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
800 Travel Systems, Inc. (the "Company") is a telemarketing travel company
which provides air transportation reservation services. The Company was formed
in November 1995 to acquire certain of the assets and assume certain liabilities
of 1-800-Low Airfare, Inc. (the Predecessor Business), which occurred December
1, 1995.
The Company, and the Predecessor Business strive to furnish the lowest air
fare available at the time of reservation within the parameters provided by a
customer.
The Company incorporated LAF Financial Services, Inc. ("LAF") on January
16, 1996, in the State of Delaware. At December 31, 1996, LAF had not issued any
stock and had conducted no business activities.
LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment is stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line method over the
estimated useful lives of the respective assets, five to ten years.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS
The excess of cost over fair value of net assets acquired is amortized over
a period of twenty-five (25) years. The Company periodically reviews the
carrying amount of this asset and evaluates its recoverability based upon future
estimated operating cash flows.
TRADEMARKS
The cost of the trademarks is being amortized using the straight-line
method over their useful estimated lives of fifteen (15) years.
REVENUE RECOGNITION
Commission revenues are recognized when travel services are ticketed.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of common
shares outstanding, as adjusted for the effects of the application of Securities
and Exchange Commission Staff Accounting Bulletin (SAB) No. 83 and unissued
shares in connection with the purchase of the Predecessor Business (at December
31, 1994 and November 30, 1995).
At December 31, 1996 the Company had issued stock options for 300,000
shares of stock and stock warrants for 275,000 shares of stock, the earnings per
share computation did not include the exercise of the stock options and warrants
due to the antidilutive effect.
The pro forma effect of the proposed redemption of 554,109 shares of common
stock on the (loss) per share amounts are reflected on the pro forma statements
of operations for the year ended December 31, 1996 and the six months ended June
30, 1997, set forth on pages F-26 and F-31, respectively.
F-9
<PAGE> 68
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
TAXES ON INCOME
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" which utilizes an
asset and liability approach in determining income tax expense.
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standard Board issued Statement
No. 123, "Accounting for Stock Based Compensation." Statement No. 123
established a fair value method for accounting for stock-based compensation
plans either through recognition or disclosure. The Company has recognized in
the accompanying statements of operations the fair value amounts applicable to
stock-based compensation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from estimated
amounts.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current presentation.
NOTE 2: ACQUISITION
The Company acquired certain of the assets, assumed certain liabilities and
assumed all operations of the Predecessor Business effective December 1, 1995.
The $820,480 purchase price consisted of $10,000 in cash, $90,000 in notes
payable and 600,400 shares of the Company's common stock (valued at $1.20 per
share). The Company, acting on behalf of the Predecessor Business, agreed to
issue 300,000 of the shares of common stock to those remaining creditors of the
Predecessor Business who elected to convert their claim into stock at the rate
of $10 per share. In 1996, the Creditors representing 153,934 shares of common
stock have converted their claim into stock and 146,066 shares have been issued
to the Predecessor Business. The Company assumed $536,253 of liabilities
pursuant to the purchase agreement and has subsequently agreed to assume certain
additional liabilities aggregating $50,275. Costs in excess of net assets
acquired aggregated $1,117,511.
The following summarizes the Predecessor Business's balance sheet at
November 30, 1995 and those assets acquired and liabilities assumed by the
Company from the Predecessor Business:
F-10
<PAGE> 69
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
1-800 LOW AIRFARE, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
NOVEMBER 30, 1995
ASSETS
<TABLE>
<CAPTION>
NET ASSETS ACQUIRED
AND
PREDECESSOR NET LIABILITIES ASSUMED
BUSINESS BY THE COMPANY
----------- -----------------------
<S> <C> <C>
Current Assets...................................... $ 12,429 $ 5,850
Equipment, net of accumulated depreciation of
$11,472........................................... 32,418 32,418
Deposits............................................ 51,229 51,229
----------- ----------
Total Assets.............................. $ 96,076 $ 89,497
=========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities................................. $ 1,693,788 $ 286,528
Notes Payable....................................... 2,201,750 300,000
Stockholders' (Deficit) Common Stock................ 1,000 --
----------- ----------
Paid in Capital................................ 400,000 --
Deficit........................................ (4,200,462) --
----------- ----------
Total Liabilities and Stockholders'
(Deficit)............................... $ 96,076 $ 586,528
=========== ==========
Excess of Liabilities over Assets Acquired.......... 497,031
Shares issued to Predecessor Business to satisfy its
trade creditors (300,000 shares at $1.20)......... 360,000
Shares issued to satisfy claims of certain note
holders (300,400 shares at $1.20)................. 360,480
Cash Payment........................................ 10,000
Notes Payable issued to Predecessor Stockholders.... 90,000
----------
1,317,511
Less Cost Allocated to Trademarks................... 200,000
----------
Cost in Excess of Assets Acquired................. $1,117,511
==========
</TABLE>
NOTE 2: ACQUISITION (CONTINUED)
During the acquisition negotiations, the holders of certain notes payable
in the Predecessor Business settled for 300,400 shares of common stock, which
was given a settlement value of $1.20 per share. The $1.20 per share was also
used to determine the number of shares to be issued to the Predecessor Business
to settle claims with its trade creditors.
Proforma results of operations as if the Company had acquired the
Predecessor Business on January 1, 1995 would not have been materially different
than the results of operations of the Predecessor for the eleven months ended
November 30, 1995 and accordingly, are not presented.
F-11
<PAGE> 70
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
NOTE 3: LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment by major classification are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold Improvements.............................. $ -- $155,885 $155,885
Telephone Equipment................................. -- 147,133 155,100
Furniture and Fixtures.............................. 18,734 78,106 78,106
Computer Equipment.................................. 7,703 14,858 14,858
Office Equipment.................................... 5,981 7,982 7,982
Sabre Equipment..................................... -- -- 38,736
------- -------- --------
32,418 403,964 450,667
Less Accumulated Depreciation..................... (733) (39,734) (71,527)
Total Leasehold Improvements and
Equipment............................... $31,685 $364,230 $379,140
======= ======== ========
</TABLE>
NOTE 4: NOTES PAYABLE - RELATED PARTIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
10% purchase money notes, payable in three annual
installments of $30,000 plus interest, due
November 1998, unsecured......................... $ 90,000 $ 60,000 $ 60,000
10% note payable, principal and interest due March
14, 1996, less unamortized discount of $29,000
attributable to issuance of 20,000 shares of
common stock in 1995............................. 21,000 --
10% note payable, interest and principal due July
1, 1997.......................................... -- 250,000 250,000
10% note payable, interest and principal due
February 28, 1996................................ 100,000 -- --
10% note payable, interest and principal due on
demand........................................... 80,000 -- --
10% note payable, interest and principal due
December 31, 1996................................ 100,000 -- --
10% note payable, interest and principal due
December 31, 1996................................ 100,000 -- --
Other.............................................. 750 750 750
-------- -------- --------
491,750 310,750 310,750
Less current maturities.................. 431,750 280,750 280,750
-------- -------- --------
$ 60,000 $ 30,000 $ 30,000
======== ======== ========
</TABLE>
Approximate maturities of notes payable-related parties at December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $280,750
1998........................................................ 30,000
--------
$310,750
========
</TABLE>
F-12
<PAGE> 71
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
In July 1997, the 10% note payable in the amount of $250,000 was extended
to November 30, 1997 and the interest rate was increased to 18%.
NOTE 5: STOCKHOLDERS' EQUITY
In connection with the initial capitalization of the Company 3,229,600
shares of common stock were issued in exchange for subscriptions receivable of
$32,296 (par value). The $32,296 had not been paid as of December 31, 1996.
During February 1996, the Company initiated a private placement of shares
of common stock. As of December 31, 1996, a total of 1,387,500 shares of common
stock had been sold and issued. These shares carry certain resale restrictions.
The total sales price of these shares was $2,845,000. Sales commissions
amounting to $360,000 were paid to related parties.
In February 1996, the Company issued 20,000 shares valued at $50,000 as a
rollover of a past due note payable.
During 1996, the Company issued 100,000 shares of stock to an officer of
the Company as a bonus. An expense of $120,000 has been recognized in connection
this transaction.
A total of 180,000 shares have been issued in 1996, for consulting services
for which an expense of $336,000 has been recognized.
A total of 12,500 shares have been issued in connection with loans
obtained. The value of $15,000 was amortized as additional interest expense over
the term of the loans.
During 1996, the Company issued 40,000 shares of common stock, valued at
$100,000, to its landlord in connection with a lease. This amount will be
amortized as additional rent expense at the rate of $1,000 per month. The
$92,000 unamortized balance is included in prepaid expenses and other assets in
the accompanying December 31, 1996 balance sheet.
In connection with late penalties for past due loans, two related party
creditors received during 1996, 361,209 shares of common stock valued at
$847,718.
In 1996, the Company issued 275,000 warrants to purchase 275,000 shares of
the Company's common stock at a price of 110% of the public offering price. The
warrants can be exercised beginning on the first anniversary date of the public
offering. The fair value of the warrants was twelve and one half cents ($.125)
per warrant (aggregate fair value $34,375). The warrants were issued as
incentive to extend a certain note payable; therefore, the fair value was
recognized as interest expense in 1996.
In 1996, the Company issued options to purchase 300,000 shares of its
common stock at a price of $1.00 per share. These options can be exercised
beginning one year from date of grant. The fair value of the common stock at the
date of issuance of the options was $2.00 per share; therefore, the accompanying
statement of operations for the year ended December 31, 1996, recognized a
consulting expense of $300,000 applicable to the difference between the option
exercise price and the fair value of the shares at the date of the grant of the
option.
In 1997, the Company issued 8,500 shares of its common stock valued at
$21,250 for services.
In May 1995, the Predecessor Business completed a Bridge Financing of units
for a total of $800,000, in promissory notes and common stock purchase warrants.
Each unit consisted of a $25,000 12% promissory note and warrants to purchase
6,250 shares of common stock at an exercise price of $5.00. In connection with
this financing, various placement agents received an aggregate total of $90,000
in commissions and warrants to purchase 37,500 shares of stock.
F-13
<PAGE> 72
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
In April 1994, the Predecessor Business purchased all of the rights, title
and interest in the telephone number 1-800-LOW-AIRFARE from a principal
shareholder. The purchase price was $250,000 of which $93,500 was paid and
accounted for as a dividend, with payment of the remaining balance contingent on
the completion of a private placement of equity securities which did not occur.
NOTE 6: INCOME TAXES
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
--------- --------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards.......................... $ 779,000 $ 44,300
Less valuation allowance.................................. (779,000) (44,300)
--------- --------
Net Deferred Tax Asset............................ $ -- $ --
========= ========
</TABLE>
At December 31, 1996 and 1995, the Company has a tax net operating loss
carryforward of approximately $2,423,000 and $132,000 respectively, to offset
future taxable income. The tax net operating loss carryforwards begin to expire
in 2010. Realization of any portion of the deferred tax asset resulting from the
Company's net operating loss carryforward is not considered more likely than
not. Accordingly, a valuation allowance has been established for the full amount
of the deferred tax asset.
NOTE 7: COMMITMENTS AND CONTINGENCIES
The minimum future office rental commitment for leases approximates the
following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C> <C>
1997............................................................... $ 180,183
1998............................................................... 196,877
1999............................................................... 196,877
2000............................................................... 213,571
2001............................................................... 213,571
Thereafter......................................................... 1,218,102
----------
$2,219,181
==========
</TABLE>
Rent expense totaled approximately $109,000, $109,000, $5,000, $170,000 and
$117,757 for the year ended December 31, 1994, the eleven months ended November
30, 1995, the one month ended December 31, 1995, the year ended December 31,
1996, and the six months ended June 30, 1997, respectively.
The Company entered into a services agreement with a stockholder. The
agreement expired on December 31, 1996, and required $3,000 payments per week
plus expenses. This stockholder was paid services fees amounting to $152,700, a
common stock bonus of 150,000 shares of common stock (fair market value of
$300,000), commissions for sale of stock of $221,000, plus expenses of $199,853
for the year ended December 31, 1996, and $12,000 in services fees for the one
month ended December 31, 1995. For the six month period ended June 30, 1997, the
same stockholder was paid $84,800 as services fees, plus expenses of $136,393.
This stockholder also received from the Predecessor Business services fees
totaling $26,000 for the eleven months ended November 30, 1995. Additionally,
certain stockholders received fees of $5,000, $3,500 and $37,900 for consulting
services rendered during the one month ended December 31, 1995, the eleven
months ended November 30, 1995 and the year ended December 31, 1994,
respectively.
F-14
<PAGE> 73
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
The Predecessor Business is a defendant in various law suits. The Company
has not contractually assumed any of the potential liabilities from the
Predecessor Business' lawsuits and in management's opinion will not be affected
by the outcome of these legal proceedings.
The Company is dependent on two (2) airlines for approximately forty-five
percent (45%) of its revenues, and the Company's ability to quote air travel
ticket prices, make reservations and sell tickets is dependent upon the
performance of Sabre electronic travel reservation system.
NOTE 8: SUPPLEMENTAL CASH FLOW INFORMATION
For the one month ended December 31, 1995:
1) In connection for the acquisition of the asset and assumption of
certain liabilities of the predecessor business, the Company issued a note
payable of $90,000 and 300,400 shares of stock valued at $720,480 (an
additional 300,000 shares was issued in 1996). The Company acquired assets
totaling $89,499 and assumed liabilities of $586,825. Costs in excess of
net assets acquired, aggregated $1,317,511.
2) The Company issued 20,000 shares of common stock valued at $24,000
in connection with the placement of debt.
3) A stock subscription receivable of $31,796 for the initial
capitalization of the Company was issued.
For the year ended December 31, 1996:
1) The Company issued 20,000 shares of common stock valued at $50,000
for a note payable.
2) The Company issued 12,500 shares of common stock for past due
interest totaling $15,000 on two notes payable.
3) There were 40,000 shares of common stock issued to JFJ Realty as
prepaid rent of $100,000.
4) Various creditors of the Predecessor Business and the Predecessor
Business were issued 300,000 shares of common stock.
5) The Company issued 361,209 shares of common stock valued at
$847,718 for two past due notes payable.
6) The Company issued 100,000 shares of common stock with a value of
$120,000 as a bonus to the Company's President.
7) Two shareholders were issued 180,000 shares of common stock valued
at $336,000 for consulting services.
8) The Company issued 300,000 stock options with a fair value of $1.00
for services.
9) The Company issued 275,000 warrants with a fair value of $.125 in
recognition of a loan extension.
F-15
<PAGE> 74
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
For the six months ended June 30, 1997:
1) The Company issued 8,500 shares of common stock valued at $21,250
for services.
NOTE 9: FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including commissions
receivable, accounts payable, and debt approximated fair value due to the
relatively short maturity.
NOTE 10: MERGER AGREEMENT
In November, 1996, Company entered into a merger agreement with the Joseph
Stevens Group, Inc. ("Stevens"). The agreement calls for all of the capital
stock of Stevens to be exchanged for shares of the Company's common stock and a
note payable of $1,578,000 (subject to adjustment for assumed liabilities). The
merger will become effective on the effective date of the Company's planned
initial public offering. The Company has made an escrow payment of $46,665 to
the seller in connection with the anticipated merger. In addition the Company
has incurred costs and expenses associated with the merger of $52,676 which were
deferred at December 31, 1996 and June 30, 1997, and made an advance payment on
the note payable of $50,000. The "IPO" deadline, included in the merger
agreement, was extended to October 31, 1997, and the Company agreed to pay an
extension fee of $25,000 payable fifteen (15) days after execution of the "First
Amendment to Amended and Restated Agreement and Plan of Merger". If the $25,000
is not paid during the fifteen day period, the amount increases to $50,000.
Upon the effective date, the Company shall issue to the Selling Shareholder
the greater of (i) 383,333 shares of the company's stock or (ii) that number of
shares of the common stock having an aggregate value of $1,916,665 using the
initial public offering price in calculating the per share value of the company
stock. If, on the second anniversary date of the public offering, the value of
the Company's shares then held by the Selling Shareholder, together with the
aggregate amount of cash and the fair market value of any assets or properties
received by the Selling Shareholder in connection with the sale prior to the
second anniversary of the closing date of all or any of the shares received in
the merger, is less than $2,571,000, then the Company shall issue to the Selling
Shareholder, on the second anniversary of the public offering closing,
additional shares of the Company, using the price of the Company's common stock
on the second anniversary of the public offering closing and an appropriate
number of additional common shares of the Company shall be issued to the Selling
Shareholder based upon such price in order to make up any such deficiency.
As part of the merger agreement, the Company entered into an operating
agreement with Stevens, whereby, the Company assumed all operations of Stevens
as of January 1, 1997, and assumed any economic gains or losses from these
operating activities. The financial statement for the six months ended June 30,
1997, include the operations of Stevens from January 1, 1997 to June 30, 1997.
The following summarizes the operations for Stevens for the six month period
ended June 30, 1997 (unaudited):
<TABLE>
<S> <C>
Revenues.................................................... $1,626,903
Operating Expense........................................... 1,129,702
Operating Income............................................ $ 497,201
</TABLE>
F-16
<PAGE> 75
800 TRAVEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
NOTE 11: GROSS RESERVATIONS
For the various periods presented in the statements of operations, the
gross dollar amounts for reservations of airline tickets were as follows:
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ ------
<S> <C>
Six Months ended June 30,
1997...................................................... $25,293,857
===========
1996...................................................... $10,571,076
===========
Year ended December 31, 1996................................ $23,590,782
===========
One month ended December 31, 1995........................... $ 1,609,426
===========
Eleven months ended November 30, 1995....................... $ 9,647,090
===========
Year ended December 31, 1994................................ $ 5,924,310
===========
</TABLE>
NOTE 12: INTERIM FINANCIAL DATA (UNAUDITED)
The balance sheet of June 30, 1997, and the statements of operations and
cash flows for the six month period ended June 30, 1997 and 1996, and the
statement of stockholders' equity for the six month period ended June 30, 1997,
are unaudited. The June 30, 1997 statements of operations include the operations
of the Joseph Stevens Group, Inc. for the period January 1, 1997 to June 30,
1997. In the opinion of management, these statements have been prepared on the
same basis as the audited financial statements and includes all adjustments,
consisting only of normal recurring adjustments necessary to state fairly the
information set forth therein. The data disclosed in the notes to financial
statements for these periods are unaudited. Operating results for the six months
ended June 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
The following summarizes the results of operations for each of the quarters
in the six months ended June 30, 1996 and 1997 ('000 omitted):
<TABLE>
<CAPTION>
1996 1997
------------------------------ ------------------------------
MARCH 31, JUNE 30, TOTAL MARCH 31, JUNE 30, TOTAL
--------- -------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 364 $ 959 $ 1,323 $ 1,639 $2,083 $ 3,722
Operating Expenses............ 1,539 1,519 3,058 1,957 1,933 3,890
(Loss) Income Before Other
Income...................... (1,175) (560) (1,735) (318) 150 (168)
Other Income.................. -- 6 6 3 2 5
Net (Loss) Income............. (1,175) (554) (1,729) (315) 152 (163)
</TABLE>
F-17
<PAGE> 76
800 TRAVEL SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
In November 1996, 800 Travel Systems, Inc. ("Travel") entered into a merger
agreement whereby all of the outstanding shares of the Joseph Stevens Group,
Inc. ("Group"), a provider of travel ticketing services and telemarketing
services, will be exchanged for a note in the amount of $1,578,000 and 383,333
shares of Travel. The acquisition of Group will be accounted for by Travel as a
purchase whereby the basis for accounting for Group's assets and liabilities
will be based upon their fair market values at the date of the acquisition
(expected to be the date of the initial public offering of Travel).
The unaudited Pro Forma Condensed Combined Statement of Operations (Pro
Forma Statement of Operations) for the year ended December 31, 1996 and the six
months ended June 30, 1997, gives pro forma effect to the acquisition of Group
(and other adjustments as described in the accompanying notes) as if it had
occurred on January 1, 1996 and 1997, respectively. The Pro Forma Statements of
Operations are based on the historical results of operations of Travel and Group
for the year ended December 31, 1996 and the six months ended June 30, 1997. The
Pro Forma Condensed Combined Balance Sheets as of December 31, 1996 and June 30,
1997 (Pro Forma Balance Sheet) gives pro forma effect to the acquisition of
Group as if it had occurred on those dates. The Pro Forma Statements of
Operations and the Pro Forma Balance Sheets and the accompanying notes (Pro
Forma Financial Information) should be read in conjunction with and are
qualified by the historical financial statements of Travel included in its Form
SB-2 as of September 10, 1997, and the historical financial statements of Group
and notes thereto appearing elsewhere herein.
The Pro Forma Information is intended for informational purposes only and
is not necessarily indicative of the future financial position or results of
operations of Travel after the acquisition of Group, or the financial position
or the results of operations of Travel that would have actually occurred had the
acquisition of Group been effected as of the date or for the period presented.
F-18
<PAGE> 77
(This page intentionally left blank)
F-19
<PAGE> 78
800 TRAVEL SYSTEMS, INC.
PRO FORMA BALANCE SHEETS
DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
800 TRAVEL PRO FORMA
JOSEPH STEVENS PRO FORMA SYSTEMS, INC. ADJUSTMENTS-
800 TRAVEL GROUP, ADJUSTMENTS- ON A PRO STOCK
SYSTEMS, INC. INC.(A) ACQUISITION FORMA BASIS REDEMPTION
------------- -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash.................................... $ 588,960 $ 116,268 (116,268)(G) $ 588,960 $(2,452,500)(H)
Trade Commissions Receivable............ 118,390 151,761 (151,761)(G) 118,390 --
Receivable from AT&T.................... 213,980 -- -- 213,980 --
Prepaids................................ 28,804 62,790 (62,790)(G) 28,804 --
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS.............. 950,134 330,819 (330,819) 950,134 (2,452,500)
----------- ----------- ----------- ----------- -----------
LEASEHOLD IMPROVEMENTS AND EQUIPMENT..... 403,964 690,725 (190,725)(C) 903,964 --
Less Accumulated Depreciation........... (39,734) (321,580) 321,580(D) (39,734) --
----------- ----------- ----------- ----------- -----------
Net Leasehold Improvements and
Equipment............................. 364,230 369,145 130,855 864,230 --
----------- ----------- ----------- ----------- -----------
EXCESS OF COST OVER FAIR VALUE OF NET
ASSETS ACQUIRED......................... 1,069,086 -- 2,919,006(B) 3,988,092 --
----------- ----------- ----------- ----------- -----------
DEFERRED OFFERING COSTS.................. 50,000 -- -- 50,000 --
----------- ----------- ----------- ----------- -----------
OTHER ASSETS
Related Party Receivables............... 109,000 -- -- 109,000 --
Bonds and Security Deposits............. 31,007 28,640 (28,640)(G) 31,007 --
Merger Deposits and Deferred Acquisition
Costs................................. 99,341 -- (99,341)(F) -- --
Prepaid Rent............................ 80,000 -- -- 80,000 --
Trademarks.............................. 199,724 158,600 41,400(E) 399,724 --
----------- ----------- ----------- ----------- -----------
TOTAL OTHER ASSETS................ 519,072 187,240 (86,581) 619,731 --
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS...................... $ 2,952,522 $ 887,204 $ 2,632,461 $ 6,472,187 $(2,452,500)
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current Maturities of Long-Term Debt.... $ 280,750 $ 779,995(G) $ (779,995)(G) $ 1,858,750 $ --
1,578,000(B)
Accounts Payable and Accrued Expenses... 868,833 362,257 (362,257)(G) 893,833 --
25,000(B)
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES......... 1,149,583 1,142,252 460,748 2,752,583 --
DEFERRED RENT............................ 108,721 -- -- 108,721 --
LONG-TERM DEBT -
Excluding Current Installments.......... 30,000 1,054,195 (1,054,195)(G) 30,000 --
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES................. 1,288,304 2,196,447 (593,447) 2,891,304 --
----------- ----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock......................... -- -- -- -- --
Common Stock............................ 59,512 88,000 (88,000)(G) 63,345 (5,541)(H)
3,833(B)
Additional Paid-in-Capital.............. 4,976,259 369,312 (369,312)(G) 6,889,091 (2,446,959)(H)
1,912,832(B)
Stock Subscriptions Receivable.......... (32,296) -- -- (32,296) --
Retained Deficit........................ (3,339,257) (1,766,555) 1,766,555(G) (3,339,257) --
----------- ----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)........................ 1,664,218 (1,309,243) 3,225,908 3,580,883 (2,452,500)
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)... $ 2,952,522 $ 887,204 $ 2,632,461 $ 6,472,187 $(2,452,500)
=========== =========== =========== =========== ===========
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS- PRO FORMA
TOTAL STOCK SALE TOTAL
----------- ------------ -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash.................................... $(1,863,540) $ 6,022,690(I) $ 4,159,150
Trade Commissions Receivable............ 118,390 -- 118,390
Receivable from AT&T.................... 213,980 -- 213,980
Prepaids................................ 28,804 -- 28,804
----------- ----------- -----------
TOTAL CURRENT ASSETS.............. (1,502,366) 6,022,690 4,520,324
----------- ----------- -----------
LEASEHOLD IMPROVEMENTS AND EQUIPMENT..... 903,964 -- 903,964
Less Accumulated Depreciation........... (39,734) -- (39,734)
----------- ----------- -----------
Net Leasehold Improvements and
Equipment............................. 864,230 -- 864,230
----------- ----------- -----------
EXCESS OF COST OVER FAIR VALUE OF NET
ASSETS ACQUIRED......................... 3,988,092 -- 3,988,092
----------- ----------- -----------
DEFERRED OFFERING COSTS.................. 50,000 (50,000)(I) --
----------- ----------- -----------
OTHER ASSETS
Related Party Receivables............... 109,000 -- 109,000
Bonds and Security Deposits............. 31,007 -- 31,007
Merger Deposits and Deferred Acquisition
Costs................................. -- -- --
Prepaid Rent............................ 80,000 -- 80,000
Trademarks.............................. 399,724 -- 399,724
----------- ----------- -----------
TOTAL OTHER ASSETS................ 619,731 -- 619,731
----------- ----------- -----------
TOTAL ASSETS...................... $ 4,019,687 $ 5,972,690 $ 9,992,377
=========== =========== ===========
LI
CURRENT LIABILITIES
Current Maturities of Long-Term Debt.... $ 1,858,750 $(1,828,000)(I) $ 30,750
Accounts Payable and Accrued Expenses... 893,833 -- 893,833
----------- ----------- -----------
TOTAL CURRENT LIABILITIES......... 2,752,583 (1,828,000) 924,583
DEFERRED RENT............................ 108,721 -- 108,721
LONG-TERM DEBT -
Excluding Current Installments.......... 30,000 -- 30,000
----------- ----------- -----------
TOTAL LIABILITIES................. 2,891,304 (1,828,000) 1,063,304
----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock......................... -- -- --
Common Stock............................ 57,804 18,500(I) 76,304
Additional Paid-in-Capital.............. 4,442,132 7,782,190(I) 12,224,322
Stock Subscriptions Receivable.......... (32,296) -- (32,296)
Retained Deficit........................ (3,339,257) -- (3,339,257)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)........................ 1,128,383 7,800,690 8,929,073
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)... $ 4,019,687 $ 5,972,690 $ 9,992,377
=========== =========== ===========
</TABLE>
F-20
<PAGE> 79
800 TRAVEL SYSTEMS, INC.
NOTES TO THE PRO FORMA BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
(A) Represents the historical balance sheet information of Group.
(B) Adjusts the assets acquired and liabilities assumed in the acquisition of
Group to reflect the allocation of the estimated purchase price. The
resulting goodwill was calculated as follows:
<TABLE>
<S> <C>
Estimated purchase price:
Amount paid by Note....................................... $1,578,000
Issuance of 383,333 shares of Travel with a fair market
value at the date of acquisition of $5.00 per share.... 1,916,665
Merger deposits and deferred acquisition costs............ 99,341
----------
3,594,006
Less assets acquired:
Equipment................................................. (500,000)
Trademarks................................................ (200,000)
Plus liabilities assumed:
Current liability -- extension fee........................ 25,000
Long-term debt............................................ --
----------
Goodwill.......................................... $2,919,006
==========
</TABLE>
Goodwill will be amortized ratably over twenty-five (25) years.
(C) Adjust Group's leasehold improvements and equipment to their fair market
value of $500,000.
(D) Adjustment to eliminate historical accumulated depreciation.
(E) Adjust Group's trade mark to its $200,000 fair market value. The trade mark
will be amortized over a period of fifteen (15) years.
(F) Eliminate direct costs of acquisition ($52,676) and merger deposit
($46,665).
(G) Adjustment to eliminate assets not acquired and liabilities not assumed from
Group.
(H) Adjustment to reflect Travel's commitment to redeem 554,109 shares of its
common stock for a total redemption value of $2,452,500.
(I) Adjustment to reflect the sale of 1,850,000 shares of common stock at a
price of $5.00 plus sale of 1,850,000 warrants at $.125. The offering costs
will approximate $1,680,560. This pro forma adjustment does not include
proceeds from the sale of underwriters' overallotment shares and warrants.
F-21
<PAGE> 80
800 TRAVEL SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
800 TRAVEL
JOSEPH STEVENS SYSTEMS, INC.
800 TRAVEL GROUP, PRO FORMA ON A PRO
SYSTEMS, INC. INC.(A) ADJUSTMENTS FORMA BASIS
------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES................................... $ 3,235,777 $1,664,959 $ -- $ 4,900,736
----------- ---------- --------- -----------
OPERATING EXPENSES
General and Administrative............... 5,244,882 1,640,388 -- 6,885,270
Interest Expense......................... 1,114,298 107,128 157,800(C) 1,379,226
Amortization and Depreciation............ 97,866 113,268 116,825(B) 327,959
----------- ---------- --------- -----------
TOTAL OPERATING EXPENSES......... 6,457,046 1,860,784 274,625 8,592,455
----------- ---------- --------- -----------
(LOSS) BEFORE OTHER INCOME................. (3,221,269) (195,825) (274,625) (3,691,719)
OTHER INCOME............................... 12,610 -- -- 12,610
----------- ---------- --------- -----------
NET (LOSS)................................. $(3,208,659) $ (195,825) $(274,625) $(3,679,109)
=========== ========== ========= ===========
Weighted Average Number of Common Shares
Outstanding.............................. 4,947,823 N/A N/A 5,331,156(D)
=========== ========== ========= ===========
(Loss) Per Common Share.................... $ (.65) N/A N/A $ (.69)
=========== ========== ========= ===========
Supplemental (loss) per common share,
reflecting redemption of 554,109 shares:
Number of shares outstanding............. 4,393,714(E) 4,777,047(E)
=========== ===========
(Loss) per common share.................. $ (.73) $ (.77)
=========== ===========
</TABLE>
F-22
<PAGE> 81
800 TRAVEL SYSTEMS, INC.
NOTES TO THE PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(A) Represents the historical income statement information of Group.
(B) Represent the amortization of goodwill on a straight line basis over 25
years, amortization of trade mark over fifteen (15) years and depreciation
of assets over five (5) years.
(C) Accrue interest on note payable at ten percent (10%).
(D) Adjusted to reflect the issuance of the 383,333 shares issued in the
acquisition of Group as if it occurred in the beginning of fiscal year 1996.
(E) Outstanding number of shares reduced to reflect the redemption of 554,109
shares as of January 1, 1996.
F-23
<PAGE> 82
800 TRAVEL SYSTEMS, INC.
PRO FORMA BALANCE SHEETS
JUNE 30, 1997
ASSETS
<TABLE>
<CAPTION>
800 TRAVEL PRO FORMA
JOSEPH STEVENS PRO FORMA SYSTEMS, INC. ADJUSTMENTS-
800 TRAVEL GROUP, ADJUSTMENTS- ON A PRO STOCK PRO FORMA
SYSTEMS, INC. INC.(A) ACQUISITION FORMA BASIS REDEMPTION TOTAL
------------- -------------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash............................. $ 145,644 $ -- $ -- $ 145,644 $(2,452,500)(D) $(2,306,856)
Trade Commissions Receivable..... 478,978 -- -- 478,978 -- 478,978
Receivable from AT&T............. 90,000 -- -- 90,000 -- 90,000
Prepaids......................... 20,079 -- -- 20,079 -- 20,079
----------- --------- ---------- ----------- ----------- -----------
TOTAL CURRENT ASSETS....... 734,701 -- -- 734,701 (2,452,500) (1,717,799)
----------- --------- ---------- ----------- ----------- -----------
LEASEHOLD IMPROVEMENTS AND
EQUIPMENT........................ 450,667 690,725 (190,725)(B) 950,667 -- 950,667
Less Accumulated Depreciation.... (71,527) (321,580) 321,580(B) (71,527) -- (71,527)
----------- --------- ---------- ----------- ----------- -----------
Net Leasehold Improvements
and Equipment............. 379,140 369,145 130,855 879,140 -- 879,140
----------- --------- ---------- ----------- ----------- -----------
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED.............. 1,046,736 -- 2,919,006(C) 3,965,742 -- 3,965,742
----------- --------- ---------- ----------- ----------- -----------
DEFERRED OFFERING COSTS........... 343,700 -- -- 343,700 -- 343,700
----------- --------- ---------- ----------- ----------- -----------
OTHER ASSETS
Related Party Receivables........ 109,000 -- -- 109,000 -- 109,000
Bonds and Security Deposits...... 36,347 -- -- 36,347 -- 36,347
Merger Deposits and Deferred
Acquisition Costs.............. 149,341 -- (149,341)(C) -- -- --
Prepaid Rent..................... 74,000 -- -- 74,000 -- 74,000
Trademarks....................... 192,554 158,600 41,400(B) 392,554 -- 392,554
----------- --------- ---------- ----------- ----------- -----------
TOTAL OTHER ASSETS......... 561,242 158,600 (107,941) 611,901 -- 611,901
----------- --------- ---------- ----------- ----------- -----------
TOTAL ASSETS............... $ 3,065,519 $ 527,745 $2,941,920 $ 6,535,184 $(2,452,500) $ 4,082,684
=========== ========= ========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current Maturities of Long-Term
Debt........................... $ 280,750 $ -- $1,578,000(C) $ 1,808,750 $ -- $ 1,808,750
(50,000)(C)
Accounts Payable and Accrued
Expenses....................... 1,050,762 -- 25,000(F) 1,075,762 -- 1,075,762
----------- --------- ---------- ----------- ----------- -----------
TOTAL CURRENT
LIABILITIES............... 1,331,512 -- 1,553,000 2,884,512 -- 2,884,512
DEFERRED RENT..................... 180,967 -- -- 180,967 -- 180,967
LONG-TERM DEBT --
Excluding Current Installments... 30,000 -- -- 30,000 -- 30,000
----------- --------- ---------- ----------- ----------- -----------
TOTAL LIABILITIES.......... 1,542,479 -- 1,553,000 3,095,479 -- 3,095,479
----------- --------- ---------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock.................. -- -- -- -- -- --
Common Stock..................... 59,597 -- 3,833(C) 63,430 (5,541)(D) 57,889
Additional Paid-in-Capital....... 4,997,424 -- 1,912,832(C) 6,910,256 (2,446,959)(D) 4,463,297
Stock Subscriptions Receivable... (32,296) -- -- (32,296) -- (32,296)
Retained Deficit................. (3,501,685) -- -- (3,501,685) -- (3,501,685)
----------- --------- ---------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)................. 1,523,040 -- 1,916,665 3,439,705 (2,452,500) 987,205
----------- --------- ---------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)................. $ 3,065,519 $ -- $3,469,665 $ 6,535,184 $(2,452,500) $ 4,082,684
=========== ========= ========== =========== =========== ===========
<CAPTION>
PRO FORMA
ADJUSTMENTS- PRO FORMA
STOCK SALE TOTAL
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash............................. $ 6,366,390(E) $ 4,059,534
Trade Commissions Receivable..... -- 478,978
Receivable from AT&T............. -- 90,000
Prepaids......................... -- 20,079
----------- -----------
TOTAL CURRENT ASSETS....... 6,366,390 4,648,591
----------- -----------
LEASEHOLD IMPROVEMENTS AND
EQUIPMENT........................ -- 950,667
Less Accumulated Depreciation.... -- (71,527)
----------- -----------
Net Leasehold Improvements
and Equipment............. -- 879,140
----------- -----------
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED.............. -- 3,965,742
----------- -----------
DEFERRED OFFERING COSTS........... (343,700)(E) --
----------- -----------
OTHER ASSETS
Related Party Receivables........ -- 109,000
Bonds and Security Deposits...... -- 36,347
Merger Deposits and Deferred
Acquisition Costs.............. -- --
Prepaid Rent..................... -- 74,000
Trademarks....................... -- 392,554
----------- -----------
TOTAL OTHER ASSETS......... -- 611,901
----------- -----------
TOTAL ASSETS............... $ 6,022,690 $10,105,374
=========== ===========
CURRENT LIABILITIES
Current Maturities of Long-Term
Debt........................... $(1,778,000) $ 30,750
Accounts Payable and Accrued
Expenses....................... -- 1,075,762
----------- -----------
TOTAL CURRENT
LIABILITIES............... (1,778,000) 1,106,512
DEFERRED RENT..................... -- 180,967
LONG-TERM DEBT --
Excluding Current Installments... -- 30,000
----------- -----------
TOTAL LIABILITIES.......... (1,778,000) 1,317,479
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock.................. -- --
Common Stock..................... 18,500(E) 76,389
Additional Paid-in-Capital....... 7,782,190(E) 12,245,487
Stock Subscriptions Receivable... -- (32,296)
Retained Deficit................. -- (3,501,685)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)................. 7,800,690 8,787,895
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)................. $ 6,022,690 $10,105,374
=========== ===========
</TABLE>
F-24
<PAGE> 83
800 TRAVEL SYSTEMS, INC.
NOTES TO THE PRO FORMA BALANCE SHEET
(UNAUDITED)
JUNE 30, 1997
(A) Group sold to Travel its leasehold improvements and equipment and its
trademarks for 383,333 shares of common stock of Travel (valued at $5.00 per
share) and a note for $1,578,000. A complete historical balance of Group has
been previously disclosed at December 31, 1996.
(B) Adjustment to record purchase value as follows:
<TABLE>
<S> <C>
Leasehold Improvements and Equipment........................ $500,000
Trademarks.................................................. 200,000
--------
$700,000
========
</TABLE>
(C) Adjustment to recognize cost of acquisition and applicable goodwill.
Included in the merger deposits was a $50,000 advance payment on the future
note payable.
(D) Adjustment to recognize redemption of 554,109 shares of common stock of
Travel prior to public offering for $2,452,500.
(E) Adjustment to reflect the sale of 1,850,000 shares of common stock at a
price of $5.00 plus sale of 1,850,000 warrants at $.125. The offering cost
will approximate $1,680,560. This pro forma adjustment does not include
proceeds from the sale of underwriters' overallotment shares and warrants.
(F) Company agreed to pay Group's owners a $25,000 extension fee.
F-25
<PAGE> 84
800 TRAVEL SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA 800 TRAVEL
ADJUSTMENTS FOR SYSTEMS, INC.
800 TRAVEL JOSEPH STEVENS ON A PRO
SYSTEMS, INC. GROUP, INC.(A) FORMA BASIS
------------- --------------- -------------
<S> <C> <C> <C>
REVENUES............................................. $3,721,651 $ -- $3,721,651
---------- -------- ----------
OPERATING EXPENSES
General and Administrative......................... 3,644,917 -- 3,644,917
Interest Expense................................... 67,453 78,900(B) 146,353
Amortization and Depreciation...................... 61,313 -- 61,313
Amortization and Depreciation Expense
Applicable to Joseph Stevens Group, Inc.
Assets........................................ 115,764 --(C) 115,764
---------- -------- ----------
TOTAL OPERATING EXPENSES................... 3,889,447 78,900 3,968,347
---------- -------- ----------
(LOSS) BEFORE OTHER INCOME........................... (167,796) (78,900) (246,696)
OTHER INCOME......................................... 5,368 -- 5,368
---------- -------- ----------
NET (LOSS)........................................... $ (162,428) $(78,900) $ (241,328)
========== ======== ==========
Weighted Average Number of
Common Shares Outstanding.......................... 5,956,352 N/A 6,339,685(D)
========== ======== ==========
(Loss) Per Common Share.............................. $ (.03) N/A $ (.04)
========== ======== ==========
Supplemental (loss) per common share,
reflecting redemption of 554,109 shares:
Number of shares........................... 5,402,243(E) 5,785,576(E)
========== ==========
(Loss) per common share.................... $ (.03) $ (.04)
========== ==========
</TABLE>
F-26
<PAGE> 85
800 TRAVEL SYSTEMS, INC.
NOTES TO THE PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1997
(A) Group's operations were merged into Travel during the six month period ended
June 30, 1997; therefore, no statement of operations is available for Group.
(B) Adjustment to recognize interest on purchase note at the rate of ten
percent (10%).
(C) The June 30, 1997 statement of operations included the following provision
for amortization and depreciation applicable to the Joseph Stevens
operations:
<TABLE>
<CAPTION>
JUNE 30,
1997
DESCRIPTION COST LIFE EXPENSE
----------- ---------- -------- --------
<S> <C> <C> <C>
Equipment......................................... $ 500,000 5 Years $ 50,000
Trademarks........................................ $ 200,000 15 Years 6,666
Goodwill.......................................... $2,919,006 25 Years 59,080
--------
$115,746
========
</TABLE>
(D) Balance includes the 383,333 shares of Travel's common stock to be issued
when Group purchase is completed.
(E) Outstanding number of shares reduced to reflect the redemption of 554,109
shares as of January 1, 1997.
F-27
<PAGE> 86
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Stevens Merger.................... 16
Use of Proceeds....................... 18
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 27
Management............................ 40
Certain Transactions.................. 44
Principal Stockholders................ 46
Concurrent Offering................... 47
Description of Securities............. 48
Shares Eligible for Future Sale....... 52
Underwriting.......................... 54
Legal Matters......................... 56
Experts............................... 56
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
800 TRAVEL
SYSTEMS, INC.
1,850,000 SHARES OF
COMMON STOCK
AND
1,850,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
--------------------
PROSPECTUS
--------------------
800 TRAVEL SYSTEMS FIRST LONDON
SECURITIES CORPORATION
, 1997
======================================================
<PAGE> 87
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1997)
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1997
800 TRAVEL SYSTEMS, INC.
1,196,134 SHARES OF COMMON STOCK
This Prospectus supplement relates to the offer and sale by certain selling
securityholders ("Selling Stockholders") named herein under "Selling
Stockholders" of up to 1,196,134 shares of common stock, $.01 par value per
share ("Common Stock"), of 800 Travel Systems, Inc. (the "Company").
The Company will not receive any of the proceeds from the sale of
securities by the Selling Stockholders. All expenses of registration incurred in
connection with this Offering are being borne by the Company, but all selling
and other expenses incurred by Selling Stockholders will be borne by the Selling
Stockholders. None of the shares of Common Stock has been registered prior to
the filing of the Registration Statement of which this Prospectus is a part. The
outstanding shares of Common Stock were originally issued by the Company in
private transactions. See "Selling Stockholders."
The Selling Stockholders may from time to time sell all or a portion of
their shares of Common Stock in the over-the-counter market or on any national
securities exchange or automated interdealer quotation system on which the
Common Stock may hereafter be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The shares of Common Stock may be sold directly or
through brokers or dealers or in a distribution by one or more underwriters on a
firm commitment or best efforts basis. Each Selling Stockholder and any agent or
broker-dealer participating in the distribution of the Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). Any commissions received by and any profit on
the resale of the shares of Common Stock may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Registration Statement, of which this Prospectus forms a part, also
covers the offering by the Company of 1,850,000 shares of Common Stock and
1,850,000 Redeemable Common Stock Purchase Warrants (in each case without giving
effect to the Representative's Over-Allotment Option) being sold by the Company.
Brokers or dealers effecting transactions in the shares of Common Stock on
behalf of the Selling Stockholders should confirm the registration thereof under
the securities laws of the state in which such transactions occur or the
existence of an exemption from registration.
The Company has filed applications for listing of the Common Stock on the
Nasdaq Small Cap Market System ("NASDAQ"). No assurance can be given that the
applications will be approved. There is no current established market for the
Common Stock.
SEE "RISK FACTORS" ON PAGE 8 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus Supplement is , 1997.
<PAGE> 88
USE OF PROCEEDS
The Company will not receive any of the proceeds from sales of any of the
shares of Common Stock by the Selling Stockholders.
SELLING STOCKHOLDERS
The Prospectus Supplement relates to the offer and sale from time to time
by certain stockholders of the Company of up to 1,196,134 outstanding shares of
Common Stock.
TRANSFER RESTRICTIONS
The Holders of the Common Stock offered hereby (the "Registered Shares"),
other than Mr. Perry Trebatch, have agreed with the representative of the
underwriters of the offering of the Company's securities (the "Representative")
not to offer, sell or otherwise dispose of ("Sell") such Registered Shares for a
period of 30 days after the Effective Date and for an additional period of
thirty (30) days thereafter without the consent of the Representative. Mr. Perry
Trebatch has agreed not to Sell any of his 110,000 Registered Shares for a
period of 15 days after the Effective Date. In addition, Mr. Trebatch has agreed
that if the Representative exercises the Representative's Over-allotment Option
in full (in which event 250,000 of his Unregistered Shares will be redeemed by
the Company), he will not Sell (i) more than 55,000 of his Registered Shares
during the first 6 months after the Effective Date, (ii) more than 50,000 of his
120,000 Unregistered Shares during the six month period commencing 1 year after
the Effective Date, and (iii) 50,000 of his Unregistered Shares until the
expiration of a period of 18 months after the Effective Date, with the
understanding that Mr. Trebatch may Sell his remaining 20,000 Unregistered
Shares at any time, subject to Rule 144. Unless and until the Representative
exercises the Representative's Over-allotment Option in full, Mr. Trebatch has
agreed not to Sell (i) more than 10,000 Registered Shares during the first
15-day period following the 15-day lock-up period, or more than 20,000
Registered Shares in each of the 5 consecutive 30-day periods thereafter (with
unsold allowances carried to future periods), and (ii) 50,000 of his
Unregistered Shares for a period of 6 months after the Effective Date, with the
understanding that Mr. Trebatch may Sell the remaining 250,000 Unregistered
Shares immediately, subject to Rule 144. In addition, The Joseph Stevens Group,
Inc. has agreed with respect to 300,000 of its shares not to Sell more than
4,546 shares per month during the 11-month period following the first month
following the Effective Date (with unsold allowances carried forward to future
months) and not to sell more than 20,833 shares per month during the 12-month
period thereafter (with unsold allowances carried forward to future months) and
with respect to its remaining 83,333 shares that none of such shares will be
sold during the 90 days following the Effective Date and that during the
following seven months it will sell no more than 11,905 shares per month (with
any unsold allowances carried forward to future months). The Representative has
no current plans or understandings to waive, shorten or modify the foregoing
lock-up arrangements. The Company will (i) amend this Prospectus Supplement if
these arrangements are waived for 10% or more of the shares of the Selling
Stockholders, and (ii) sticker this Prospectus Supplement if these arrangements
are waived for between 5% and 10% of the shares of the Selling Stockholders.
S-2
<PAGE> 89
IDENTITY AND OWNERSHIP OF SELLING STOCKHOLDERS
The following table provides certain information with respect to the
Selling Stockholders; and the number of shares of Common Stock owned, offered
and to be owned after the offering by each Selling Stockholder, subject to
certain transfer restrictions. See "-- Transfer Restrictions."
<TABLE>
<CAPTION>
MAXIMUM NUMBER
OF SHARES OF SHARES OF
SHARES OF COMMON COMMON STOCK TO COMMON STOCK
STOCK OWNED BE SOLD IN THE TO BE OWNED AFTER
SELLING STOCKHOLDERS BEFORE OFFERING OFFERING THE OFFERING(1)
-------------------- ---------------- --------------- -----------------
<S> <C> <C> <C>
Albert Wardi.............................. 42,000 42,000 0
Steven Clarke............................. 40,000 40,000 0
Silver Ltd................................ 20,000 20,000 0
Perry Trebatch(2)......................... 480,000 110,000 370,000
Thomas J. Stalzer......................... 25,000 25,000 0
Gaetano Grasso............................ 49,568 49,568 0
Jerry Dowell.............................. 20,000 20,000 0
Scot Spencer.............................. 70,000 70,000 0
Kay Mahoney............................... 20,000 20,000 0
SGII Corp................................. 20,000 20,000 0
Adam Spencer.............................. 9,566 9,566 0
Audrey Spencer............................ 10,000 10,000 0
George Spencer............................ 310,000 310,000 0
The Joseph Stevens Group(3)............... 383,333 300,000 83,333
Eng-chye Low.............................. 20,000 20,000 0
Charles H. Roeske......................... 20,000 20,000 0
Roger Nitler.............................. 20,000 20,000 0
Khaldid Alami............................. 20,000 20,000 0
Brian Robinson............................ 20,000 20,000 0
Donald Gross.............................. 50,000 50,000 0
</TABLE>
- ---------------
(1) Assumes all shares registered herewith are sold by each Selling Stockholder.
The referenced offering is not the underwritten public offering covered by
the accompanying Prospectus.
(2) Immediately prior to the closing of this Offering, Mr. Trebatch will own
480,000 shares of Common Stock. If the Representative exercises the Over
allotment option in full, the Company will repurchase 250,000 shares of Mr.
Trebatch's shares. See "Risk Factors -- Benefits to Existing Shareholders
and Affiliates," "Use of Proceeds" and "Certain Transactions." Of the
remaining 230,000 shares, 110,000 shares are being registered hereby.
(3) The 383,333 shares are being issued simultaneously with the consummation of
this offering -- See "The Stevens Merger." The sole stockholder of The
Joseph Stevens Group, Inc. is The Joseph Stevens Group, LLC ("JSG"). The
equity members of JSG are Joseph Elizondo, Steve Rohrlick and Western
Horizons, Ltd., who are owners, respectively, of 44.3%, 44.3% and 11.4%,
respectively, of the equity interest in JSG.
OUTSTANDING COMMON STOCK.
Immediately after the effective date of this Prospectus Supplement, the
Company will have issued and outstanding 7,638,933 shares of Common Stock,
assuming no redemption of the shares held by Mr. Trebatch. See "Capitalization."
S-3
<PAGE> 90
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell all or a portion of
their shares of Common stock in the over-the-counter market or on any national
securities exchange or automated interdealer quotation system on which the
Common Stock may hereafter be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The shares of Common Stock may be sold directly or
through brokers or dealers or in a distribution by one or more underwriters on a
firm commitment or best efforts basis. The methods by which the shares of Common
Stock may be sold include (i) a block trade (which may involve crosses) in which
the broker or dealer engaged will attempt to sell the shares of Common Stock as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (ii) purchases by a broker or dealer as principal
and resales by such broker dealer for its account pursuant to this Prospectus
Supplement and the accompanying Prospectus, (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchasers or sales
to or through marketmakers, (iv) transactions in put or call options or other
rights (whether exchange-listed or otherwise) established after the
effectiveness of the Registration Statement of which this Prospectus is a part
and (v) privately negotiated transactions. In addition, any of the shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold in transactions complying with such Rule, rather than pursuant to
this Prospectus Supplement and the accompanying Prospectus.
In the case of the sales of the shares of Common Stock effected to or
through broker-dealers, such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the shares of Common Stock, sold by or through such broker-
dealers, or both. The Company has advised the Selling Stockholders that the
anti-manipulative Regulation M under the Exchange Act may apply to their sales
in the market and has informed them of the need for delivery of copies of this
Prospectus Supplement and the accompanying Prospectus. The Company is not aware
as of the date of this Prospectus Supplement of any agreements between any of
the Selling Stockholders and any broker-dealers with respect to the sale of the
shares of Common Stock. The Selling Stockholders and any broker-dealers or
agents participating in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any commissions
received by any such broker-dealers or agents and the profit on any resale of
shares of Common Stock may be deemed to be underwriting commissions under the
Securities Act. The commissions received by a broker-dealer or agent may be in
excess of customary compensation. The Company will receive no part of the
proceeds from the sale of any of the shares of Common Stock by the Selling
Stockholders.
The Company will pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares of Common Stock offered by
the Selling Stockholders, including without limitation all registration and
filing fees, listing fees, printing expenses, fees and disbursements of counsel
and accountants for the Company. Each Selling Stockholder will pay all brokerage
fees and commissions, if any, incurred in connection with the sale of the shares
of Common Stock owned by the Selling Stockholder. In addition, the Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
There is no assurance that any of the Selling Stockholders will sell any or
all of the shares Common Stock offered by them.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Phillips Nizer Benjamin Krim & Ballon LLP, New York, New
York.
S-4
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 145 of the Delaware General
Corporations Law to indemnify its directors and officers to the extent provided
in such statute. The Registrant's Amended and Restated Certificate of
Incorporation provides that the Registrant shall indemnify its executive
officers and directors to the fullest extent permitted by law either now or
hereafter. The Registrant has also entered into an agreement with each of its
directors and certain of its officers wherein it has agreed to indemnify each of
them to the fullest extent permitted by law.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this Offering, including
certain liabilities under the Securities Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 14,000
NASD filing fee............................................. 5,200
NASDAQ listing fee.......................................... 10,000
Printing and engraving expenses............................. 150,000
Accounting fees and expenses................................ 75,000
Legal fees and expenses..................................... 150,000
Fees and expenses (including legal fees) for qualifications
under state securities laws............................... 35,000
Registrar and Transfer Agent's fees and expenses............ 2,000
Miscellaneous............................................... 8,800
--------
Total............................................. $448,000
========
</TABLE>
All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the NASDAQ listing fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the initial capitalization of the Company, the Company
issued 3,229,600 shares of Common Stock to the officers and directors of the
Company in exchange for subscriptions receivable of $32,296 (par value). The
offering was made in reliance on Section 4(2) of the Securities Act as a
transaction not involving any public offering.
In December 1995, in connection with the purchase of assets of 1-800
Low-Airfare, Inc. and its wholly-owned subsidiary S. Travel, Inc. (collectively,
the "Predecessor Business") and the assumption by the Company of certain of its
liabilities, the Company agreed to issue an aggregate of 300,000 shares of
Common Stock to creditors of the Predecessor Business who chose to convert debt
held by them at the rate of $10.00 of such debt in the Predecessor Business per
share of the Company's Common Stock. Approximately 50 creditors of the
Predecessor Business elected to convert $1,664,340 of such indebtedness for
166,434 shares of Common Stock. The remaining 133,566 shares were issued to S.
Travel, Inc. The offering was made in
II-1
<PAGE> 92
reliance on Section 4(2) of the Securities Act as a transaction not involving
any public offering to investors believed by the Company to be sophisticated
business-persons and investors.
During 1996 the Company issued an aggregate of 713,709 shares of Common
Stock to employees, consultants, third party service providers, its landlord and
lenders in satisfaction of amounts due for services rendered, rent and as
penalties for failure to timely repay amounts loaned to the Company. Of such
713,709 shares, 100,000 were issued to the Company's President and 150,000 were
issued to the Company's services provider.
In December 1995 the Company issued 20,000 shares of Common Stock to a
lender in satisfaction of debt outstanding.
In 1996 the Company sold and issued 1,387,500 shares of Common Stock to
investors in a private placement conducted through various broker-dealers
retained by the Company. The Common Stock was sold at an average price per share
of $2.22. The individuals set forth below were paid the following commissions in
connection with their placement of the Company's securities in the private
placement: (i) Pasquale Guadagno (Director) -- $45,000; (ii) Mark D. Mastrini
(President, Chief Operating Officer and Director) -- $2,000; (iii) Jerrold B.
Sendrow (Vice-President-Finance, Chief Financial Officer, Treasurer and
Secretary) -- $2,000; (iv) Scot Spencer (service provider to the
Company) -- $231,000; (v) Mark M. Goodman an unaffiliated third party $40,000;
and (vi) Mario Giovanelli an unaffiliated third party $20,000. The offering was
made in reliance on Section 4(2) of the Securities Act and Regulation D
promulgated thereunder, as an offering only to accredited investors. The Company
also paid Mr. Guadagno $10,000 in connection with the issuance of shares to one
of the Company's lenders.
During 1997 the Company issued 8,500 to third party vendors for services
rendered.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 -- Proposed form of Underwriting Agreement(3)
1.2 -- Agreement Among Underwriters(3)
1.3 -- Selected Dealer Agreement(3)
1.4 -- Representative's Warrant Agreement(5)
2.1 -- Asset Purchase Agreement dated as of November 13, 1995
among 1-800 Low-Air Fare, Inc., S. Travel, Inc. and the
Company(2)
2.2 -- Amended and Restated Agreement and Plan of Merger dated
November 11, 1996 among the Company, Joseph Stevens
Group, Inc. and Joseph Stevens Group, LLC(3)
2.3 -- Amended and Restated Interim Operating Agreement between
the Company and Joseph Stevens Group, Inc.(3)
2.4 -- Form of Indemnity and Release Agreement among the
Company, Joseph Stevens Group, Inc., Joseph Stevens
Group, LLC, Steve Rohrlick, Joe Elizondo, MOHS, Inc. and
WH/JSG LLC (Exhibit C to the Merger Agreement listed as
Exhibit 2.2 herein)(5)
2.5 -- Form of Mutual Release Agreement (Exhibit D to the Merger
Agreement listed as Exhibit 2.2 herein)(5)
2.6 -- Form of Promissory Note from Joseph Stevens Group, Inc.
to Joseph Stevens Group, LLC (Exhibit E to the Merger
Agreement listed as Exhibit 2.2 herein)(5)
2.7 -- Form of Escrow Agreement by and among the Company, Joseph
Stevens Group, Inc. and Vincent, Berg, Stalzer, Menendez,
P.C. (Exhibit F to the Merger Agreement listed as Exhibit
2.2 herein)(5)
</TABLE>
II-2
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2.8 -- First Amendment dated September 9, 1997 to Amended and
Restated Agreement and Plan of Merger(5)
3.1 -- Proposed form of Registrant's Amended and Restated
Certificate of Incorporation(3)(5)
3.2 -- Proposed form of Registrant's Amended and Restated
Bylaws(3)(5)
4.1 -- Specimen Common Stock certificate(5)
4.2 -- Specimen Warrant Certificate and Form of Warrant
Agreement(3)
5.1 -- Opinion of Phillips Nizer Benjamin Krim & Ballon LLP as
to the validity of the Common Stock being registered(5)
10.1 -- Form of Registrant's 1997 Stock Option Plan(2)
10.2 -- Promissory Note of the Company dated November 7, 1995 in
the amount of $30,000 to the order of S. Travel, Inc. due
and payable November 7, 1997(2)
10.3 -- Promissory Note of the Company dated November 7, 1995 in
the amount of $30,000 to the order of S. Travel, Inc. due
and payable November 7, 1998(2)
10.4 -- Redemption Agreement between the Company and Michael
Cantor(2)
10.5 -- Form of Redemption Agreement between the Company and Jose
Colon(3)
10.6 -- Agreement between the Company and Perry Trebatch(2)
10.7 -- Lease dated February 10, 1996 by and between JFJ Real
Estate Limited Partnership and the Company(2)
10.8 -- Airlines Reporting Corporation ("ARC") Agent Reporting
Agreement(2)
10.9 -- Letter dated March 6, 1996 from ARC approving change of
ownership(2)
10.10 -- Subscriber Service Agreement dated November 27, 1995
between the Company and Payroll Transfers Interstate,
Inc.(2)
10.11 -- Form of Employment Agreement between the Company and Mark
D. Mastrini(2)(5)
10.12 -- Form of Employment Agreement between the Company and
Jerrold B. Sendrow(2)(5)
10.13 -- Form of Employment Agreement between the Company and
Biagio Bellizzi(2)(5)
10.14 -- Form of Consulting Agreement between the Company and
Lucien Bittar(3)
10.15 -- Agreement dated as of March 1, 1997 by and between the
Company and Global Discount Travel Services(3)
10.16* -- SABRE Subscriber Agreement dated as of January 28, 1994
by and between S. Travel, Inc., (the Company's
predecessor entity), and American Airlines, Inc.(3)(4)
10.17* -- Amendment No. 1 to SABRE Subscriber Agreement dated
February 14, 1994 by and between 1-800 Low-Air Fare
Travel (predecessor entity of the Company), and American
Airlines, Inc.(3)(4)
10.18* -- Suspension of Service Agreement dated April 3, 1996 by
and between the Company and American Airlines, Inc.(3)(4)
10.19* -- Amendment to SABRE Subscriber Agreement dated July 19,
1996 by and between the Company, and American Airlines,
Inc.(3)(4)
10.20* -- SABRE Subscriber Agreement dated November 20, 1996 by and
between the Company and The SABRE Group, Inc.(3)(4)
10.21* -- Cluster Amendment to SABRE Subscriber Agreement dated
November 20, 1996 by and between the Company and The
SABRE Group, Inc.(3)(4)
</TABLE>
II-3
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------------------------- ------------------------------------------------------------------------------------------
<C> <S>
10.22 -- Lease Agreement effective November 27, 1995 between the Company and Roque De La Fuente
Alexander Revocable Trust No. 1, and addendum thereto dated June 27, 1995(3)
10.23 -- Form of Promissory Note in the amount of $50,000 issued by Michael Gaggi to the
Company(5)
10.24 -- Form of Promissory Note in the amount of $9,000 issued by Lucien Bittar to the
Company(5)
10.25 -- Form of Promissory Note in the amount of $50,000 issued by Vito Balsamo to the
Company(5)
10.26 -- Form of Registration Rights Agreement by and among the Company and Michael Gaggi and
Pasquale Guadagno(5)
10.27 -- Amended Release and Redemption Agreement, dated September 4, 1997, between the Company
and Michael Cantor (amending the agreement listed as Exhibit 10.4 above)(5)
10.28 -- Amended Release and Redemption Agreement, dated September 4, 1997, between the Company
and Jose Colon (amending the agreement listed as Exhibit 10.5 above)(5)
10.29 -- Form of Amendment to Agreement, dated September , 1997, between the Company and Perry
Trebatch (amending the agreement listed as Exhibit 10.6 above)(5)
11.1 -- Statement regarding computation of per share earnings(1)
12.1 -- Statement regarding computation of ratios(1)
21.1 -- Subsidiaries of the Registrant(2)
23.1 -- Consent of Phillips Nizer Benjamin Krim & Ballon LLP (included in its opinion filed as
Exhibit 5.1)
23.2 -- Consent of Killman, Murrell & Company(5)
23.3 -- Consent of Acetta and Olmstead, Accountancy Corporation(2)
23.4 -- Consent of Feldman Radin & Co., P.C.(2)(5)
23.5 -- Consent of Feldman Radin & Co., P.C. regarding termination of engagement(3)(5)
24.1 -- Reference is made to the Signatures section of the Registration Statement filed on June
2, 1997 for the Power of Attorney contained therein
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Filed on June 2, 1997.
(3) Filed on July 24, 1997
(4) Refiled on August 22, 1997
(5) Filed herewith
* Portions of this exhibit are the subject of a confidential treatment
request.
II-4
<PAGE> 95
(b) Financial Statement Schedules:
The following supplemental schedules can be found on the indicated pages
of this Registration Statement.
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
ITEM 28. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any additional or changed material information
with respect to the plan of distribution not previously disclosed in the
registration statement; and
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 96
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida on September 12, 1997.
800 TRAVEL SYSTEMS, INC.
By: /s/ MARK D. MASTRINI
----------------------------------
Mark D. Mastrini, President
Chief Operating Officer and
Director
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARK D. MASTRINI President, Chief Operating September 12, 1997
- ----------------------------------------------------- Officer and Director
Mark D. Mastrini
/s/ JERROLD B. SENDROW Vice President -- Finance, September 12, 1997
- ----------------------------------------------------- Treasurer, Secretary and
Jerrold B. Sendrow Director (principal
accounting officer)
* Director September 12, 1997
- -----------------------------------------------------
Pasquale Guadagno
* Chairman of the Board September 12, 1997
- -----------------------------------------------------
Michael Gaggi
*By: /s/ JERROLD B. SENDROW
------------------------------------------------
Jerrold B. Sendrow
Attorney-in-Fact
</TABLE>
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<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 -- Proposed form of Underwriting Agreement(3)
1.2 -- Agreement Among Underwriters(3)
1.3 -- Selected Dealer Agreement(3)
1.4 -- Representative's Warrant Agreement(5)
2.1 -- Asset Purchase Agreement dated as of November 13, 1995
among 1-800 Low-Air Fare, Inc., S. Travel, Inc. and the
Company(2)
2.2 -- Amended and Restated Agreement and Plan of Merger dated
November 11, 1996 among the Company, Joseph Stevens
Group, Inc. and Joseph Stevens Group, LLC(3)
2.3 -- Amended and Restated Interim Operating Agreement between
the Company and Joseph Stevens Group, Inc.(3)
2.4 -- Form of Indemnity and Release Agreement among the
Company, Joseph Stevens Group, Inc., Joseph Stevens
Group, LLC, Steve Rohrlick, Joe Elizondo, MOHS, Inc. and
WH/JSG LLC (Exhibit C to the Merger Agreement listed as
Exhibit 2.2 herein)(5)
2.5 -- Form of Mutual Release Agreement (Exhibit D to the Merger
Agreement listed as Exhibit 2.2 herein)(5)
2.6 -- Form of Promissory Note from Joseph Stevens Group, Inc.
to Joseph Stevens Group, LLC (Exhibit E to the Merger
Agreement listed as Exhibit 2.2 herein)(5)
2.7 -- Form of Escrow Agreement by and among the Company, Joseph
Stevens Group, Inc. and Vincent, Berg, Stalzer, Menendez,
P.C. (Exhibit F to the Merger Agreement listed as Exhibit
2.2 herein)(5)
2.8 -- First Amendment dated September 9, 1997 to Amended and
Restated Agreement and Plan of Merger(5)
3.1 -- Proposed form of Registrant's Amended and Restated
Certificate of Incorporation(3)(5)
3.2 -- Proposed form of Registrant's Amended and Restated
Bylaws(3)(5)
4.1 -- Specimen Common Stock certificate(5)
4.2 -- Specimen Warrant Certificate and Form of Warrant
Agreement(3)
5.1 -- Opinion of Phillips Nizer Benjamin Krim & Ballon LLP as
to the validity of the Common Stock being registered(5)
10.1 -- Form of Registrant's 1997 Stock Option Plan(2)
10.2 -- Promissory Note of the Company dated November 7, 1995 in
the amount of $30,000 to the order of S. Travel, Inc. due
and payable November 7, 1997(2)
10.3 -- Promissory Note of the Company dated November 7, 1995 in
the amount of $30,000 to the order of S. Travel, Inc. due
and payable November 7, 1998(2)
10.4 -- Redemption Agreement between the Company and Michael
Cantor(2)
10.5 -- Form of Redemption Agreement between the Company and Jose
Colon(3)
10.6 -- Agreement between the Company and Perry Trebatch(2)
10.7 -- Lease dated February 10, 1996 by and between JFJ Real
Estate Limited Partnership and the Company(2)
10.8 -- Airlines Reporting Corporation ("ARC") Agent Reporting
Agreement(2)
10.9 -- Letter dated March 6, 1996 from ARC approving change of
ownership(2)
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.10 -- Subscriber Service Agreement dated November 27, 1995
between the Company and Payroll Transfers Interstate,
Inc.(2)
10.11 -- Form of Employment Agreement between the Company and Mark
D. Mastrini(2)(5)
10.12 -- Form of Employment Agreement between the Company and
Jerrold B. Sendrow(2)(5)
10.13 -- Form of Employment Agreement between the Company and
Biagio Bellizzi(2)(5)
10.14 -- Form of Consulting Agreement between the Company and
Lucien Bittar(3)
10.15 -- Agreement dated as of March 1, 1997 by and between the
Company and Global Discount Travel Services(3)
10.16* -- SABRE Subscriber Agreement dated as of January 28, 1994
by and between S. Travel, Inc., (the Company's
predecessor entity), and American Airlines, Inc.(3)(4)
10.17* -- Amendment No. 1 to SABRE Subscriber Agreement dated
February 14, 1994 by and between 1-800 Low-Air Fare
Travel (predecessor entity of the Company), and American
Airlines, Inc.(3)(4)
10.18* -- Suspension of Service Agreement dated April 3, 1996 by
and between the Company and American Airlines, Inc.(3)(4)
10.19* -- Amendment to SABRE Subscriber Agreement dated July 19,
1996 by and between the Company, and American Airlines,
Inc.(3)(4)
10.20* -- SABRE Subscriber Agreement dated November 20, 1996 by and
between the Company and The SABRE Group, Inc.(3)(4)
10.21* -- Cluster Amendment to SABRE Subscriber Agreement dated
November 20, 1996 by and between the Company and The
SABRE Group, Inc.(3)(4)
10.22 -- Lease Agreement effective November 27, 1995 between the
Company and Roque De La Fuente Alexander Revocable Trust
No. 1, and addendum thereto dated June 27, 1995(3)
10.23 -- Form of Promissory Note in the amount of $50,000 issued
by Michael Gaggi to the Company(5)
10.24 -- Form of Promissory Note in the amount of $9,000 issued by
Lucien Bittar to the Company(5)
10.25 -- Form of Promissory Note in the amount of $50,000 issued
by Vito Balsamo to the Company(5)
10.26 -- Form of Registration Rights Agreement by and among the
Company and Michael Gaggi and Pasquale Guadagno(5)
10.27 -- Amended Release and Redemption Agreement, dated September
4, 1997, between the Company and Michael Cantor (amending
the agreement listed as Exhibit 10.4 above)(5)
10.28 -- Amended Release and Redemption Agreement, dated September
4, 1997, between the Company and Jose Colon (amending the
agreement listed as Exhibit 10.5 above)(5)
10.29 -- Form of Amendment to Agreement, dated September , 1997,
between the Company and Perry Trebatch (amending the
agreement listed as Exhibit 10.6 above)(5)
11.1 -- Statement regarding computation of per share earnings(1)
12.1 -- Statement regarding computation of ratios(1)
21.1 -- Subsidiaries of the Registrant(2)
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
23.1 -- Consent of Phillips Nizer Benjamin Krim & Ballon LLP
(included in its opinion filed as Exhibit 5.1)
23.2 -- Consent of Killman, Murrell & Company(5)
23.3 -- Consent of Acetta and Olmstead, Accountancy
Corporation(2)
23.4 -- Consent of Feldman Radin & Co., P.C.(2)(5)
23.5 -- Consent of Feldman Radin & Co., P.C. regarding
termination of engagement(3)(5)
24.1 -- Reference is made to the Signatures section of the
Registration Statement filed on June 2, 1997 for the
Power of Attorney contained therein
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Filed on June 2, 1997.
(3) Filed on July 24, 1997
(4) Refiled on August 22, 1997
(5) Filed herewith
* Portions of this exhibit are the subject of a confidential treatment
request.
<PAGE> 1
EXHIBIT 1.4
REPRESENTATIVE'S WARRANT AGREEMENT
REPRESENTATIVE'S WARRANT AGREEMENT (the "Representative's Warrant
Agreement" or "Agreement"), dated as of ____________________, 1997, between 800
TRAVEL SYSTEMS, INC. (the "Company"), and FIRST LONDON SECURITIES CORPORATION
(the "Representative").
W I T N E S S E T H:
WHEREAS, the Representative has agreed, pursuant to that certain
underwriting agreement dated as of the date hereof by and between the Company
and the Representative (the "Underwriting Agreement"), to act as the
representative of the Underwriters in connection with the Company's proposed
public offering (the "Public Offering") of 1,850,000 shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), at $5.00 per share
(the "Common Stock IPO Price") and 1,850,000 Redeemable Common Stock Purchase
Warrants (the "Public Warrants") at $.125 per warrant (the "Warrant IPO
Price"); and
WHEREAS, the Company proposes to issue to the Representative and/or
persons related to the Representative as those persons are defined in Rule 2710
of the NASD Conduct Rules (the "Holder"), 185,000 warrants ("Common Stock
Representative Warrants") to purchase 185,000 shares of Common Stock (the
"Shares") and 185,000 warrants ("Warrant Representative Warrants") to purchase
185,000 Common Stock Purchase Warrants (the "Underlying Warrants") exercisable
to purchase 185,000 shares of Common Stock (the "Underlying Warrant Shares").
The "Common Stock Representative Warrants" and the "Warrant Representative
Warrants" are collectively referred to as the "Warrants". The "Shares", the
"Underlying Warrants" and the "Underlying Warrant Shares" are collectively
referred to as the "Warrant Securities"; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the holders ("Holders") in consideration for, and
as part of the compensation in connection with, the Representative acting as
representative pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of ONE HUNDRED DOLLARS AND NO CENTS ($100.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant and Period.
The Public Offering has been registered under a Registration Statement
on Form SB-2 (File No. 333-28237) (the "Registration Statement") and declared
effective by the Securities and Exchange Commission (the "SEC" or "Commission")
on __________________, 1997 (the "Effective Date"). This Agreement, relating
to the purchase of the Warrants, is entered into pursuant to the
<PAGE> 2
Underwriting Agreement between the Company and the Representative, as
representative of the Underwriters, in connection with the Public Offering.
Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the four year period commencing
_____________, 1998 (one year from the Effective Date) (the "Purchase Date")
and expiring at 5:00 New York Time on ___________, 2002, (four years after the
Purchase Date) (the "Expiration Time"), up to 185,000 Shares at an initial
exercise price (subject to adjustment as provided in Article 8) of $6.00 per
share (120% of the Common Stock IPO Price) (the "Share Exercise Price") and up
to 185,000 Underlying Warrants at an initial exercise price (subject to
adjustment as provided in Article 8) of $.15 per warrant (120% of the Warrant
IPO Price) (the "Underlying Warrant Exercise Price"), subject to the terms and
conditions of this Agreement. Each Underlying Warrant is exercisable to
purchase one Underlying Warrant Share at an initial exercise price (subject to
adjustment as provided in Article 8) at $7.50 per share (150% of the Common
Stock IPO Price) (the "Underlying Warrant Share Exercise Price") during the
four year period commencing on the Purchase Date and ending on the Expiration
Time.
Except as specifically otherwise provided herein, the Shares, the
Underlying Warrants and the Underlying Warrant Shares constituting the Warrant
Securities shall bear the same terms and conditions as such securities
described under the caption "Description of Securities" in the Registration
Statement, and as designated in the Company's Articles of Incorporation and any
amendments thereto, and the Underlying Warrants shall be governed by the terms
of the Warrant Agreement executed in connection with the Public Offering (the
"Warrant Agreement"), except as provided herein, and the Holders shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Shares, the Underlying Warrants, and the Underlying Warrant Shares, as
more fully described in paragraph Article 7 of this Representative's Warrant
Agreement. In the event of any extension of the expiration date or reduction
of the exercise price of the Public Warrants, the same such changes to the
Underlying Warrants shall be simultaneously effected, except that the
Underlying Warrants shall expire no later than five years from the Effective
Date.
2. Warrant Certificates.
The warrant certificates (the "Warrant Certificate") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in the
form of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Full Exercise.
(a) A Holder may effect a cash exercise of any of the Common Stock
Representative Warrants or the Warrant Representative Warrants and the
Underlying Warrants by surrendering the Warrant Certificate, together with a
Subscription in the form of Exhibit 1 attached thereto, duly
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<PAGE> 3
executed by such Holder to the Company, at any time prior to the Expiration
Time, at the Company's principal office, accompanied by payment in cash or by
certified or official bank check payable to the order of the Company in the
amount of the aggregate purchase price of such Warrant Securities, subject to
any adjustments provided for in this Agreement. The aggregate purchase price
hereunder for each Holder shall be equal to the exercise price for such Warrant
Securities as set forth in Article 6 multiplied by the number of Underlying
Warrants, Underlying Warrant Shares or Shares, as applicable, that are the
subject of each Holder's Warrant (as adjusted as hereinafter provided).
(b) A Holder may effect a cashless exercise of the Common Stock
Representative Warrants or the Underlying Warrants, as applicable, by
delivering the Warrant Certificate to the Company together with a Subscription
in the form of Exhibit 2 attached thereto, duly executed by such Holder, in
which case no payment of cash will be required. Upon such cashless exercise,
the number of Shares or Underlying Warrant Shares to be purchased by each
Holder shall be determined by dividing: (i) the number obtained by multiplying
the number of Shares or Underlying Warrant Shares, as the case may be, that are
the subject of each Holder's Warrant Certificate by the sum of (1) Share
Exercise Price or the Underlying Warrant Share Exercise Price, as the case may
be, plus (2) the amount, if any, by which the then Market Value (as
hereinafter defined) exceeds the Share Exercise Price or the Underlying Warrant
Share Exercise Price, as applicable; by (ii) the Share Exercise Price or the
Underlying Warrant Share Exercise Price, as applicable. In no event shall the
Company be obligated to issue any fractional securities and, at the time it
causes a certificate or certificates to be issued, it shall pay the Holder in
lieu of any fractional securities or shares to which such Holder would
otherwise be entitled, by Company check, in an amount equal to such fraction
multiplied by the Market Value. The Market Value shall be determined on a per
share basis as of the close of the business day preceding the exercise, which
determination shall be made as follows: (x) if the Common Stock is listed for
trading on a national or regional stock exchange or is included on the Nasdaq
National Market or Small-Cap Market, the average closing sale price quoted on
such exchange or the Nasdaq National Market or Small-Cap Market that is
published in The Wall Street Journal for the ten trading days immediately
preceding the date of exercise, or if no trade of the Common Stock shall have
been reported during such period, the last sale price so quoted for the next
day prior thereto on which a trade in the Common Stock was so reported; or (y)
if the Common Stock is not so listed, admitted to trading or included, the
average of the closing highest reported bid and lowest reported ask price as
quoted on the National Association of Securities Dealer's OTC Bulletin Board or
in the "pink sheets" published by the National Daily Quotation Bureau for the
first day immediately preceding the date of exercise on which the Common Stock
is traded.
3.2 Partial Exercise.
The Warrant Securities referred to in Section 3.1 above also may be
exercised from time to time in part by surrendering the Warrant Certificate in
the manner specified in Section 3.1, except that with respect to a cash
exercise, the purchase price payable with respect to such exercise shall be
equal to the number of Warrant Securities being purchased hereunder multiplied
by the exercise price for such Warrant Security, subject to any adjustments
provided for in this Agreement. Upon any such partial exercise, the Company,
at its expense, will forthwith issue to the Holder hereof a
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<PAGE> 4
new Warrant Certificate or Warrants of like tenor calling in the aggregate for
the number of securities (as constituted as of the date hereof) for which the
Warrant Certificate shall not have been exercised, issued in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct.
4. Issuance of Certificates.
Upon the exercise of the Warrants or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock or other securities, as
applicable, shall be made forthwith (and in any event within three business
days thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance thereof,
and such certificates shall (subject to the provisions of Articles 5 and 7) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock or other securities, as applicable, shall be executed on behalf
of the Company by the manual or facsimile signature of the then present
Chairman or Vice Chairman of the Board of Directors or Chairman or Vice
Chairman of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the then present Secretary or
Assistant Secretary of the Company. Warrant Certificates shall be dated the
date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction On Transfer of Warrants.
The Holder of a Warrant Certificate, by acceptance thereof, covenants
and agrees that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, except (a) to
officers of the Representative or to officers and partners of the other
Underwriters or Selected Dealers participating in the Public Offering; (b) by
will; or (c) by operation of law.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Prices.
The initial Share Exercise Price of each Common Stock Representative
Warrant shall be $6.00 per share (120% of the Common Stock IPO Price) . The
initial Underlying Warrant Exercise Price of each Warrant Representative
Warrant shall be $.15 per Underlying Warrant (120% of the Warrant IPO Price).
The initial Underlying Warrant Share Exercise Price of each Underlying
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<PAGE> 5
Warrant shall be $7.50 per share (150% of the Common Stock IPO Price). The
adjusted exercise price of any Warrant Security shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Article 8. The Warrant
Representative Warrants and the Underlying Warrants are exercisable during the
four year period commencing on the Purchase Date.
6.2 Exercise Price.
The term "exercise price" herein shall mean the initial exercise price
or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933.
The Shares, the Underlying Warrants and the Underlying Warrants Shares
(collectively the "Registrable Securities") have been registered under the
Securities Act of 1933, as amended (the "Act"). Upon exercise, in part or in
whole, of the Warrants, certificates representing the Shares, the Underlying
Warrants or the Underlying Warrants Shares, as the case may be, shall bear the
following legend in the event there is no current registration statement
effective with the Commission at such time as to such securities:
The securities represented by this certificate may not be offered or
sold except pursuant to (i) an effective registration statement under
the Securities Act of 1933, as amended (the "Act"), (ii) to the extent
applicable, Rule 144 under the Act (or any similar rule under such Act
relating to the disposition of securities) , or (iii) an opinion of
counsel, if such opinion shall be reasonably satisfactory to counsel
to the issuer, that an exemption from registration under such Act and
applicable state securities laws is available.
7.2 Piggyback Registration.
If, at any time commencing after the Effective Date of the Public
Offering and expiring seven (7) years thereafter, the Company prepares and
files a post-effective amendment to the Registration Statement, or a new
registration statement, under the Act, or files a Notification on Form 1-A or
otherwise registers securities under the Act, or files a similar disclosure
document with the Commission (collectively the "Registration Documents") as to
any of its securities under the Act (other than under a registration statement
pursuant to Form S-8 or Form S-4 or small business issue equivalent), it will
give written notice by registered mail, at least 30 days prior to the filing of
each such Registration Document, to the Representative and to all other Holders
of the Registrable Securities of its intention to do so. If the Representative
or other Holders of the Registrable Securities notify the Company within 20
days after receipt of any such notice of its or their desire to include any
such Registrable Securities in such proposed Registration Documents, the
Company
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<PAGE> 6
shall afford the Representative and such Holders of such Registrable Securities
the opportunity to have any Registrable Securities registered under such
Registration Documents or any other available Registration Document.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of
any such securities shall have been made) to elect not to file any such
proposed registration statement, or to withdraw the same after the filing but
prior to the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing one year after the Effective Date of
the Public Offering, and expiring four years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which is in addition to the registration
rights under Section 7.2), exercisable by written notice to the Company, to
have the Company prepare and file with the Commission at the sole expense of
the Company, on one occasion, a registration statement and/or such other
documents, including a prospectus, and/or any other appropriate disclosure
document as may be reasonably necessary in the opinion of both counsel for the
Company and counsel for the Representative and Holders, in order to comply with
the provisions of the Act, so as to permit a public offering and sale of their
respective Registrable Securities for nine consecutive months (or such longer
period of time as permitted by the Act) by such Holders and any other Holders
of any of the Registrable Securities who notify the Company within ten days
after being given notice from the Company of such request (a "Demand
Registration"). A Demand Registration shall not be counted as a Demand
Registration hereunder until such Demand Registration has been declared
effective by the SEC and maintained continuously effective for a period of at
least nine months or such shorter period when all Registrable Securities
included therein have been sold in accordance with such Demand Registration,
provided that a Demand Registration shall be counted as a Demand Registration
hereunder if the Company ceases its efforts in respect of such Demand
Registration at the request of the majority Holders making the demand for a
reason other than a material and adverse change in the business, assets,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing one year after the
Effective Date of the Public Offering, and expiring four years thereafter, the
Holders of any Registrable Securities representing more than 50% of such
securities shall have the right, exercisable by written request to the Company,
to have the Company prepare and file, on one occasion, with the Commission a
registration statement or any other appropriate disclosure document so as to
permit a public offering and sale for nine consecutive
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<PAGE> 7
months (or such longer period of time as permitted by the Act) by any such
Holder of Registrable Securities; provided, however, that the provisions of
Section 7.4(b) shall not apply to any such registration request and
registration and all costs incident thereto shall be at the expense of the
Holder or Holders participating in the offering pro-rata.
(d) Any written request by the Holders made pursuant to this
Section 7.3 shall:
(i) Specify the number of Registrable Securities which
the Holders intend to offer and sell and the minimum price at which
the Holders intend to offer and sell such securities;
(ii) State the intention of the Holders to offer such
securities for sale;
(iii) Describe the intended method of distribution of such
securities; and
(iv) Contain an undertaking on the part of the Holders to
provide all such information and materials concerning the Holders and
take all such action as may be reasonably required to permit the
Company to comply with all applicable requirements of the Commission
and to obtain acceleration of the effective date of the registration
statement.
(e) In the event the Company receives from the Holders of any
Registrable Securities representing more than 50% of such securities at that
time outstanding, a request that the Company effect a registration on Form S-3
with respect to the Registrable Securities and if Form S-3 is available for
such offering, the Company shall, as soon as practicable, effect such
registration as would permit or facilitate the sale and distribution of the
Registrable Securities as are specified in the request. All expenses incurred
in connection with a registration requested pursuant to this Subsection (e)
shall be borne by the Company. Registrations effected pursuant to this
Subsection (e) shall not be counted as registrations pursuant to Sections 7.3
(a) and 7.3 (c).
7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or 7.3, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within 45 days of receipt of any demand pursuant to Section 7.3, and
shall use its best efforts to have any such registration statement declared
effective at the earliest practicable time. The Company will promptly notify
each seller of such Registrable Securities, and confirm such advice in writing,
(i) when such registration statement becomes effective, (ii) when any post-
effective amendment to such registration statement becomes effective, and (iii)
of any request by the SEC for any amendment or supplement to such registration
statement or any prospectus relating thereto or for additional information.
The Company shall furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each
such amendment and supplement thereto (in each
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<PAGE> 8
case including each preliminary prospectus and summary prospectus) in
conformity with the requirements of the Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if
any, and fees and expenses of Holder's counsel and the Holder's pro-rata
portion of the selling discount or commissions), fees and expenses in
connection with all registration statements filed pursuant to Sections 7.2 and
7.3(a) including, without limitation, the Company's legal and accounting fees,
printing expenses, blue sky fees and expenses. The Holder will pay all costs,
fees and expenses in connection with any registration statement filed pursuant
to Section 7.3(c). If the Company shall fail to comply with the provisions of
Section 7.3(a), the Company shall, in addition to any other equitable or other
relief available to the Holder, be liable for any or all special and
consequential damages sustained by the Holder requesting registration of their
Registrable Securities.
(c) The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be reasonably necessary to keep such
registration statement effective for at least nine months (or such longer
period as permitted by the Act), and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the seller or sellers of Registrable Securities set forth in
such registration statement. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such registration statement, the Company
will promptly notify each seller of such Registrable Securities and will use
all reasonable efforts to prevent the issuance of any such stop order or to
obtain the withdrawal thereof as soon as possible. The Company will use its
good faith reasonable efforts and take all reasonably necessary action which
may be required in qualifying or registering the Registrable Securities
included in a registration statement for offering and sale under the securities
or blue sky laws of such states as reasonably are required by the Holder,
provided that the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. The Company shall use its
good faith reasonable efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any state thereof
as may be reasonably necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder of the Registrable
Securities to be sold pursuant to any registration statement and each person,
if any, who controls such Holders within the meaning of Section 15 of the Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from such registration statement but
only to the same extent and with the same effect as the
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<PAGE> 9
provisions pursuant to which the Company has agreed to indemnify the
Representative as contained in the Underwriting Agreement.
(e) If requested by the Company prior to the filing of any
registration statement covering the Registrable Securities, each of the Holders
of the Registrable Securities to be sold pursuant to a registration statement,
and their successors and assigns, shall severally, and not jointly, indemnify
the Company, its officers and directors and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from written information
furnished by such Holder, or their successors or assigns, for specific
inclusion in such registration statement to the same extent and with the same
effect as the provisions contained in the Underwriting Agreement pursuant to
which the Representative has agreed to indemnify the Company, except that the
maximum amount which may be recovered from each Holder pursuant to this
paragraph or otherwise shall be limited to the amount of net proceeds received
by the Holder from the sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holders to exercise their Warrants or Underlying Warrants prior
to the filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Registrable Securities to be included in any registration
statement filed pursuant to Section 7.3 without the prior written consent of
the Holders of the Registrable Securities representing a majority of such
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the Underwriting Agreement) , and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the Underwriting Agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and
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<PAGE> 10
all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. ("NASD"). Such investigation
shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times and as often as any
such Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to
Section 7.3, the Company, if requested, shall enter into an Underwriting
Agreement with the managing underwriter, reasonably satisfactory to the
Company, selected for such underwriting by Holders holding a majority of the
Registrable Securities requested to be included in such underwriting. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders, if required by the underwriter to be parties to any underwriting
agreement relating to an underwritten sale of their Registrable Securities,
may, at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters shall
also be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders and their
intended methods of distribution.
(k) Notwithstanding the provisions of Section 7.2 or Section 7.3
of this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to Section 7.2 or Section 7.3
if, within 30 days after its receipt of a request to register such Registrable
Securities (i) counsel for the Company delivers an opinion to the Holders
requesting registration of such Registrable Securities, in form and substance
satisfactory to counsel to such Holder, to the effect that the entire number of
Registrable Securities proposed to be sold by such Holder may otherwise be
sold, in the manner proposed by such Holder, without registration under the
Securities Act, or (ii) the SEC shall have issued a no-action position, in form
and substance satisfactory to counsel for the Holder requesting registration of
such Registrable Securities, to the effect that the entire number of
Registrable Securities proposed to be sold by such Holder may be sold by it, in
the manner proposed by such Holder, without registration under the Securities
Act.
(l) After completion of the Public Offering, the Company shall
not, directly or indirectly, enter into any merger, business combination or
consolidation in which (i) the Company shall not be the surviving corporation
and (ii) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would
be entitled to receive in exchange for Registrable Securities under any such
merger, business
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combination or consolidation, provided that to the extent such securities to be
received are convertible into shares of Common Stock of the issuer thereof,
then any such shares of Common Stock as are issued or issuable upon conversion
of said convertible securities shall also be included within the definition of
"Registrable Securities".
8. Adjustments to Exercise Price and Number of Securities.
8.1 Adjustment for Dividends, Subdivisions, Combinations or
Reclassification.
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into
a greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the Share Exercise Price, the Underlying Warrant Exercise Price and
the number of Warrants in effect immediately prior to such action shall be
adjusted so that the Holder thereafter upon the exercise hereof shall be
entitled to receive the number and kind of shares of the Company which such
Holder would have owned immediately following such action had this warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
Section shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this Section, the Holder
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company (whose determination
shall be conclusive) shall determine the allocation of the adjusted Share
Exercise Price and Underlying Warrant Exercise Price between or among shares of
such class of capital stock.
Immediately upon any adjustment of the exercise price of any Warrant
pursuant to this Section, the Company shall send written notice thereof to the
Holder of Warrant Certificates (by first class mail, postage prepaid), which
notice shall state the exercise price of such Warrant resulting from such
adjustment, and any increase or decrease in the number of Warrant Securities to
be acquired upon exercise of the Warrants, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
8.2 Adjustment For Reorganization, Merger or Consolidation.
In case of any reorganization of the Company or consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of
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shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such reorganization, consolidation, merger,
conveyance, sale or transfer. Such supplemental Warrant agreement shall
provide for adjustments which shall be identical to the adjustments provided in
Section 8.1 and such registration rights and other rights as provided in this
Agreement. The Company shall not effect any such consolidation, merger, or
similar transaction as contemplated by this Section 8.2, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing, receiving, or leasing such assets or other appropriate
corporation or entity shall assume, by written instrument executed and
delivered to the Holders, the obligation to deliver to the Holders, such shares
of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase, and to perform the other
obligations of the Company under this Agreement. The above provision of this
Subsection shall similarly apply to successive consolidations or successively
whenever any event listed above shall occur.
8.3 Dividends and Other Distributions.
In the event that the Company shall at any time prior to the exercise
of all of the Warrants and Underlying Warrants distribute to its stockholders
any assets, property, rights, evidences of indebtedness, securities (other than
a distribution made as a cash dividend payable out of earnings or out of any
earned surplus legally available for dividends under the laws of the
jurisdictions of incorporation of the Company), whether issued by the Company
or by another, the Holders of the unexercised Warrants shall thereafter be
entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such distribution as if the Warrants had been exercised
immediately prior to such distribution. At the time of any such distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this subsection or an adjustment to the exercise price of
such Warrants, which shall be effective as of the day following the record date
for such distribution.
8.4 Adjustment in Number of Securities.
Upon each adjustment of the exercise price of Warrants pursuant to the
provisions of this Article 8, the number of securities issuable upon the
exercise of each Warrant and Underlying Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the exercise price in
effect immediately prior to such adjustment by the number of securities
issuable upon exercise of the Warrants and the Underlying Warrants immediately
prior to such adjustment and dividing the product so obtained by the adjusted
exercise price.
12
<PAGE> 13
8.5 No Adjustment of Exercise Price in Certain Cases.
No adjustment of the exercise price of any Warrant shall be made if
the amount of said adjustment would be less than $.05 per security; provided,
however, that in any such case any adjustment that would otherwise be required
then to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least $.05 per security.
8.6 Accountant's Certificate of Adjustment.
In each case of an adjustment or readjustment of the Share Exercise
Price, Underlying Warrant Exercise Price or the number of any securities
issuable upon exercise of the Warrants or the Underlying Warrants, the Company,
at its expense, shall cause independent certified public accountants of
recognized standing selected by the Company (who may be the independent
certified public accountants then auditing the books of the Company) to compute
such adjustment or readjustment in accordance herewith and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to any Holder of the
Warrants or the Underlying Warrants, as the case may be, at the Holder's
address as shown on the Company's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based including, but not limited to, a statement
of (i) the Share Exercise Price or the Underlying Warrant Share Exercise Price
at the time in effect, and (ii) the number of additional securities and the
type and amount, if any, of other property which at the time would be received
upon exercise of the Warrants or Underlying Warrants, as the case may be.
8.7 Adjustment of Underlying Warrant Exercise Price.
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
Share Exercise Price and the number of Underlying Warrant Shares shall be
automatically adjusted in accordance with the Warrant Agreement between the
Company and the Company's transfer agent, upon occurrence of any of the events
relating to adjustments described therein. Thereafter, the Underlying Warrants
shall be exercisable at such adjusted Underlying Warrant Share Exercise Price
for such adjusted number of Underlying Warrant Shares or other securities,
properties or rights.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
13
<PAGE> 14
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interest.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding
any fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof paying cash equal to such
fractional interest multiplied by the current value of a share of Common Stock.
11. Reservation and Listing.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Underlying Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable
upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants or the Underlying Warrants, and payment of the
exercise price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants and Underlying Warrants shall be outstanding, the Company
shall use its best efforts to cause all shares of Common Stock issuable upon
the exercise of the Warrants and the Underlying Warrants to be listed and
quoted (subject to official notice of issuance) on all securities exchanges and
systems on which the Common Stock and/or the Public Warrants may then be listed
and/or quoted, including Nasdaq.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holders of the Warrants or the Underlying Warrants the right to vote
or to consent or to receive notice as a stockholder in respect of any meetings
of stockholders, for the election of directors or any other
14
<PAGE> 15
matter, or as having any rights whatsoever as a stockholder of the Company.
If, however, at any time prior to the expiration of the Warrants and the
Underlying Warrants and their exercise, any of the following events shall
occur:
(a) The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) A dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least 15 days prior to the date fixed as a record date of the
date of closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notices shall specify such record date
or the date of closing the transfer books, as the case may be. Failure to give
such notice or any defect therein shall not affect the validity of any action
taken in connection with the declaration or payment of any such dividend, or
the issuance of any convertible or exchangeable securities, or subscription
rights, options or warrants, or any proposed dissolution, liquidation, winding
up or sale.
13. Underlying Warrants.
The form of the certificate representing the Underlying Warrants (and
the form of election to purchase shares of Common Stock upon the exercise of
the Underlying Warrants and the form of assignment printed on the reverse
thereof) shall be substantially as set forth in the exhibits to the Warrant
Agreement. Subject to the terms of this Agreement, one Underlying Warrant
shall evidence the right to initially purchase one fully paid and nonassessable
share of Common Stock at an initial purchase price of $7.50 during the four
year period commencing on the Purchase Date and ending at the Effective Time,
at which time the Underlying Warrants Share shall expire. The Underlying
Warrant Share Exercise Price and the number of Underlying Warrant Shares
issuable upon the exercise of the Underlying Warrants are subject to
adjustment, whether or not the Warrants have been exercised and the Underlying
Warrants have been issued, in the manner and upon the occurrence of the events
set forth in the Warrant Agreement, which is hereby incorporated herein by
reference and made a part hereof as if set forth in its entirety herein.
Subject to the provisions of this Agreement and upon issuance of the Underlying
Warrants, each registered holder of such
15
<PAGE> 16
Underlying Warrant shall have the right to purchase from the Company (and the
Company shall issue to such registered holders) up to the number of fully paid
and nonassessable shares of Common Stock (subject to adjustment as provided in
the Warrant Agreement) set forth in such Warrant Certificate, free and clear of
all preemptive rights of stockholders, provided that such registered Holder
complies with the terms governing exercise of the Underlying Warrant set forth
in the Warrant Agreement, and pays the applicable Underlying Warrant Share
Exercise Price, determined in accordance with the terms of the Warrant
Agreement. Upon exercise of the Underlying Warrants, the Company shall
forthwith issue to the registered holder of any such Underlying Warrant in his
name or in such name as may be directed by him, certificates for the number of
shares of Common Stock so purchased. Except as otherwise provided herein and
in this Agreement, the Underlying Warrants shall be governed in all respects by
the terms of the Warrant Agreement. The Underlying Warrants shall be
transferable in the manner provided in the Warrant Agreement, and upon any such
transfer, a new Underlying Warrant certificate shall be issued promptly to the
transferee. The Company covenants to send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all notices required
by the Warrant Agreement to be sent to holders of Underlying Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when personally
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable
Securities, to the address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to the address set forth below or to such
other address as the Company may designate by notice to the Holders.
800 Travel Systems, Inc.
4802 Gunn Highway
Tampa, Florida 33624
Attention: President
With a copy to: Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Vincent J. McGill
16
<PAGE> 17
15. Entire Agreement: Modification.
This Agreement (and the Underwriting Agreement and Warrant Agreement
to the extent applicable) contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and the terms and provisions
of this Agreement may not be modified, waived or amended except in a writing
executed by the Company and the Holders of at least a majority of Registrable
Securities (based on underlying numbers of shares of Common Stock). Notice of
any modification, waiver or amendment shall be promptly provided to any Holder
not consenting to such modification, waiver or amendment.
16. Successors.
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at 5:00 New York Time
on___________________, 2002. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination.
18. Governing Law; Submission to Jurisdiction.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Texas and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Representative and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the State District court in Dallas, County,
Texas or the United States District Court for the Northern District of Texas,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the
Representative and the Holders (at the option of the party bringing such
action, proceeding or claim) may be served by transmitting a copy thereof, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 14 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim.
17
<PAGE> 18
19. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
20. Captions.
The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representative and any other
registered Holder of the Warrant Certificates or Registrable Securities any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Representative and any other Holder of the Warrant Certificates or Registrable
Securities.
22. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
800 TRAVEL SYSTEMS, INC.
By:
-------------------------------------------
Mark D. Mastrini, President
Attest:
- -------------------------
, Secretary
- --------------
FIRST LONDON SECURITIES CORPORATION
By:
-------------------------------------------
Douglas R. Nichols, President
18
<PAGE> 19
EXHIBIT A
<PAGE> 20
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M, NEW YORK TIME ON ______, 2002
NO. W-______
___________ Common Stock ___________ Warrant
Representative Representative
Warrants Warrants
or
___________ Underlying
Warrants
This Warrant Certificate certifies that ___________________, or
registered assigns, is the registered holder (the "Holder") of _____________
Common Stock Representative Warrant, ________ Warrant Representative Warrants
and _________________ Underlying Warrants of 800 Travel Systems, Inc. (the
"Company"). Each Common Stock Representative Warrant permits the Holder to
purchase initially, at any time from _________, 1998 (the "Purchase Date")
until 5:00 p.m. New York Time on ______________, 2002 (the "Expiration Time"),
one share of the Company's Common Stock at the initial exercise price, subject
to adjustment in certain events (the "Share Exercise Price"), of $6.00 per
share (120% of the Common Stock IPO Price). Each Warrant Representative
Warrant permits the Holder to purchase initially, at any time from the Purchase
Date until the Expiration Time, one Underlying Warrant at the initial exercise
price, subject to adjustment in certain events, of $.15 per Underlying Warrant
(120% of the Warrant IPO Price) (the "Underlying Warrant Exercise Price").
Each Underlying Warrant permits the Holder thereof to purchase, at any time
from the Purchase Date until the Expiration Time, one share of the Company's
<PAGE> 21
Common Stock at the initial exercise price, subject to adjustment in certain
events, of $7.50 per share.
Any exercise of Common Stock Representative Warrants, Warrant
Representative Warrants, or Underlying Warrants shall be effected by surrender
of this Warrant Certificate and payment of the exercise price thereof at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Representative's Warrant Agreement dated as of
_______________________, 1997, between the Company and First London Securities
Corporation (the "Representative's Warrant Agreement"). Payment of the exercise
price shall be made by certified check or official bank check in New York
Clearing House funds payable to the order of the Company in the event there is
no cashless exercise pursuant to Section 3.1(b) of the Representative's Warrant
Agreement. The Common Stock Representative Warrants, the Warrant
Representative Warrants, and the Underlying Warrants are collectively referred
to as "Warrants".
No Warrant may be exercised after the Expiration Time, at which time
all Warrants evidenced hereby, unless exercised prior thereto, hereby shall
thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Representative's Warrant
Agreement, which Representative's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation or rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Representative's Warrant Agreement provides that upon the
occurrence of certain events, the exercise price, the type and the number of
the Company's securities issuable thereupon may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the exercise price
and the number or type of securities, as the case may be, issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Representative's
Warrant Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferees in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Representative's Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
2
<PAGE> 22
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the Holder, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Representative's Warrant Agreement shall have the meanings assigned to them in
the Representative's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of __________, 1997
800 TRAVEL SYSTEMS, INC.
By:
-------------------------------------------
Mark D. Mastrini, President
(Seal)
Attest:
- --------------------------
, Secretary
- ----------------
3
<PAGE> 23
EXHIBIT 1
FORM OF SUBSCRIPTION (CASH EXERCISE)
(To be signed only upon exercise of Warrant)
TO: 800 Travel Systems, Inc.
4802 Gunn Highway
Tampa, Florida 33624
The undersigned, the Holder of Warrant Certificate number ____ (the
"Warrant"), representing ______________ Common Stock Representative Warrants,
__________ Warrant Representative Warrants and _______________ Underlying
Warrants of 800 Travel Systems, Inc. (the "Company"), which Warrant Certificate
is being delivered herewith, hereby irrevocably elects to exercise the purchase
right provided by the Warrant Certificate for, and to purchase thereunder,
_____________ Shares, _____________ Underlying Warrants __________ underlying
Warrant Shares of the Company, and herewith makes payment of $____________
therefor, and requests that the certificates for such securities be issued in
the name of, and delivered to, ____________ _____________________________ whose
address is ____________________________________, all in accordance with the
Representative's Warrant Agreement and the Warrant Certificate.
Dated:____________________________
-------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant
Certificate)
-------------------------------------
-------------------------------------
(Address)
4
<PAGE> 24
EXHIBIT 2
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
TO: 800 Travel Systems, Inc.
4802 Gunn Highway
Tampa, Florida 33624
The undersigned, the Holder of Warrant Certificate number ____ (the
"Warrant"), representing ___________ Common Stock Representative Warrants and
_________________ Underlying Warrants of 800 Travel Systems, Inc. (the
"Company"), which Warrant is being delivered herewith, hereby irrevocably
elects the cashless exercise of the purchase right provided by the
Representative's Warrant Agreement and the Warrant Certificate for, and to
purchase thereunder, shares of the Company Common Stock in accordance with the
formula provided at Article 3 of the Representative's Warrant Agreement. The
undersigned requests that the certificates for such shares be issued in the
name of, and delivered to,
_____________________________________________________ whose address is,
______________________________________________________________ all in
accordance with the Warrant Certificate.
Dated:____________________________
-------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant
Certificate)
-------------------------------------
-------------------------------------
(Address)
5
<PAGE> 25
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________________________
hereby sells, assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
________________________________________________ Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, and full
power of substitution.
Dated: Signature:
-------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the fact of the Warrant
Certificate)
-------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
6
<PAGE> 1
EXHIBIT 2.4
EXHIBIT C TO MERGER AGREEMENT
INDEMNITY AND RELEASE AGREEMENT
THIS INDEMNITY AND RELEASE AGREEMENT ("this Agreement") is made and
entered into this _____ day of __________, 1996 among each of the persons and
entities identified on the signatures page(s) hereto (collectively, the
"Owners"); THE JOSEPH STEVENS GROUP, INC. (the "Company") a California
corporation; and TRAVEL SYSTEMS, INC. ("Travel Systems"), a Delaware
corporation.
Background Statement
A. The Owners own all of the outstanding membership interests of
The Joseph Stevens Group, LLC. ("JSG"), a California limited liability company
formed on November 6, 1996.
B. JSG owns all of the issued and outstanding capital stock of
the Company.
C. The Company, with the prior approval and consent of JSG and
Owners, has or is prepared to enter into an agreement with Travel Systems (the
"Merger Agreement," by this reference made a part hereof), pursuant to which
the Company will be merged with and into Travel Systems in exchange for certain
shares of Travel Systems' stock and other consideration (the "Merger").
D. Prior to the closing of the Merger, Travel Systems will
operate the Company's business under the terms of an Interim Operating
Agreement (the "Interim Agreement," by this reference made a part hereof) among
the parties hereto and JSG.
E. The Merger will benefit each of the Owners.
F. To induce Travel Systems to enter into the Merger Agreement
and to consummate the Merger, the Owners are willing to indemnify and release
Travel Systems, all as hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the premises, and the
covenants and agreements set forth in this, the Merger Agreement and the other
agreements contemplated thereby, the Owners hereby agree as follows:
INDEMNIFICATION
A. Indemnification by Owners. Subject to the procedures and
limitations set forth in this Agreement, Owners jointly and
1
<PAGE> 2
severally agree to indemnify and save harmless Travel Systems and its agents
and representatives from and against any and all Net Economic Loss (herein
defined) incurred by Travel Systems or any of the other indemnified persons or
entities arising after the closing of the Merger Agreement (the "Closing") out
of (i) the breach of any representation or warranty made by JSG in the Merger
Agreement or in any instrument or documents required to be delivered by JSG to
Travel Systems pursuant to the Merger Agreement, (ii) JSG's failure to duly
perform any covenant or agreement to be performed by JSG under the Merger
Agreement or under any instrument or document required to be delivered by JSG
to Travel Systems pursuant to the Merger Agreement, and (iii) any liabilities
or obligations, contingent or otherwise, of the Company which exist at the
Closing and which are based upon any act, state of facts or condition which
occurred or existed before the Closing, known or unknown, due or payable,
except to the extent such liabilities and/or obligations are specifically
assumed by Travel Systems under the Merger Agreement.
B. Net Economic Loss Defined. As used in this Agreement, the
term "Net Economic Loss" means the amount of any loss, liability, damage, cost
or expense (including reasonably attorneys' fees) incurred by Travel Systems or
any of the other indemnified persons or entities arising out of the matters or
circumstances referred to in Section 1 hereof, less the amount of the economic
benefit (if any) received by Travel Systems in connection with such loss,
liability, damage, cost or expense (including without limitation benefits
obtained under federal, state and local tax laws, amounts recovered under
insurance policies net of deductibles and incidental expenses and premium
increases resulting therefrom, recovery or potential recovery by setoffs or
counterclaims, and other economic benefits). The amount of any such economic
benefit received by Travel Systems after the calculation of Net Economic Loss
shall be subtracted from any amount payable by Owners under this Agreement or
shall be payable to Owners in reimbursement for amounts already paid by Owners
under this Agreement. In determining the amount of such economic benefit, due
consideration shall be given to, among other things, appropriate discount for
timing factors. The indemnity provided for in this Agreement shall be in
addition to, and not in lieu of, the indemnity provided by JSG under the Merger
Agreement. Travel Systems may pursue its rights hereunder regardless of
whether it has taken action to enforce the indemnity provided under the Merger
Agreement.
C. Indemnity Claims by Travel Systems or Others.
(a) Notice of Claim. If any matter shall arise which, in
the opinion of Travel Systems or any of the other indemnified persons or
entities, constitutes or may give rise to a Net Economic Loss subject to
indemnification by Owners as provided herein (an "Indemnity Claim"), Travel
Systems shall give written
2
<PAGE> 3
notice (the "Notice of Claim") of such Indemnity Claim to Owners, setting forth
the relevant facts and circumstances of each Indemnity Claim in reasonable
detail and the amount of indemnity sought from Owners with respect thereto, and
shall give continuing notice promptly thereafter as to developments coming to
Travel Systems' attention materially affecting any matter relating to such
Indemnity Claim.
(b) Mitigation of Loss. Travel Systems shall use
reasonable efforts to mitigate its Net Economic Loss in connection with any
Indemnity Claim, to the same extent as would a reasonable and prudent person to
whom no indemnity were available. This Section 6.3(b) shall not apply with
respect to a Third Party Claim (hereinafter defined) for which Owners did not
elect to assume the defense as provided in the following subsection (c).
(c) Third Party Claims. If any Indemnity Claim is based
upon any claim, demand, suit or action of any third party against Travel
Systems or any of the other indemnified persons or entities or the Assets (a
"Third Party Claim"), then Travel Systems, at the time it gives Owners the
Notice of Claim with respect to such Third Party Claim shall offer to Owners
the option to have Owners assume the defense of the Third Party Claim, which
option may be exercised by Owners by written notice to Travel Systems within
fifteen (15) days after Travel Systems gives written notice to Owners thereof.
If Owners so exercises the option, then Owners shall at its own expense assume
the defense of the Third Party Claim, shall upon the final determination
thereof fully discharge at their own expense all liability of Travel Systems
and the other indemnified persons and entities with respect to the Third Party
Claim, and shall be entitled, in their sole discretion and at their sole
expense but without any liability of Travel Systems or any of the other
indemnified persons or entities therefor, to compromise or settle the Third
Party Claim upon terms acceptable to Owners. From the time Owners so assumes
such defense and while such defense is pursued diligently and in good faith,
Owners shall have no further liability for attorneys' fees or other costs of
defense thereafter incurred by Travel Systems and the other indemnified persons
and entities in connection with such Third Party Claim. If Owners does not
exercise the option to defend such Third Party Claim, then Travel Systems or
any of the other indemnified persons or entities shall undertake to defend such
Third Party Claim itself. Travel Systems and/or the other persons and entities
indemnified hereunder shall conduct such defense as would a reasonable and
prudent person to whom no indemnity were available, shall permit Owners (at
Owners's expense) to participate in (but not control) such defense, and shall
not settle or compromise such Third Party Claim without Owners's consent (but
such consent shall not of itself establish Owners's indemnity liability
therefor).
3
<PAGE> 4
MUTUAL RELEASES
D. Release by Owners. Each of Owners, individually and on behalf
of their respective heirs, personal representatives, agents, successors and
assigns, hereby release the Company, its successors and assigns, of and from
any and all rights, claims, demands, damages, actions, and causes of action, of
any nature whatsoever, whether arising at law or in equity, which Owners or any
of them may have had, may now have, or may hereafter have, against the Company
by reason of any matter, cause, document, agreement, instrument, stock option,
act, omission, happening or thing, from the beginning of time to and including
the Effective Date (as defined in the Interim Agreement), and, upon the advice
of legal counsel, the parties expressly waive all rights under California Civil
Code Section 1542, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
It is intended by Owners by this Agreement to forever remise,
acquit, waive, release and forever discharge the Company and its successors and
assigns of and from any and all claims, demands for losses, injuries and
damages, rights known or unknown, direct or indirect, from the above-described
matters, and from any other matter occurring prior to the Effective Date, it
being understood that all rights which any Owner or any person who claims by,
through or under any Owner may have against the Company as of the Effective
Date, shall be forever released, remised and acquitted, and Owners and all such
persons shall be forever barred from bringing or asserting the same in their
own name or names, jointly with or through any person, natural or corporate,
for or upon or by reason of any matter, cause, document, agreement, instrument,
stock option, act, omission, happening or thing whatsoever, from the beginning
of time through and including the Effective Date (as defined in the Interim
Agreement).
E. Release by the Company. The Company, individually and on
behalf of their successors and assigns, hereby releases the Owners, their
agents and representatives, of and from any and all rights, claims, demands,
damages, actions, and causes of action, of any nature whatsoever, whether
arising at law or in equity, which the Company may have had, may now have, or
may hereafter have, against the Owners, or any of them, by reason of any
matter, cause, document, agreement, instrument, stock option, act, omission,
happening or thing, from the beginning of time to and including the Effective
Date (as defined in the Interim Agreement), and, upon the advice of legal
counsel, the parties
4
<PAGE> 5
expressly waive all rights under California Civil Code Section 1542, which
provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
It is intended by the Company to forever remise, acquit,
waive, release and forever discharge the Owners of and from any and all claims,
demands for losses, injuries and damages, rights known or unknown, direct or
indirect, from the above-described matters, and from any other matter occurring
on or prior to the Effective Date (as defined in the Interim Agreement), it
being understood that all rights which the Company or any person who claims by,
through or under the Company may have against the Owners as of the the
Effective Date (as defined in the Interim Agreement), shall be forever
released, remised and acquitted, and the Company and all such persons shall be
forever barred from bringing or asserting the same in their own name or names,
jointly with or through any person, natural or corporate, for or upon or by
reason of any matter, cause, document, agreement, instrument, stock option,
act, omission, happening or thing whatsoever, from the beginning of time
through and including the Effective Date (as defined in the Interim Agreement).
MISCELLANEOUS
F. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
represents the entire agreement among the parties hereto with respect to the
subject matter hereof; may not be modified or amended except pursuant to the
written agreement of the parties hereto; may be executed in multiple
counterparts; and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Any notice given hereunder
shall be given in the manner specified for notices in the Merger Agreement. If
a party commences or is made a party to an action or proceeding to enforce or
interpret the terms of this Agreement, or to obtain a declaration of rights
under this Agreement, the prevailing party in such action or proceeding shall
be entitled to recover from the other party all attorneys' fees, costs and
expenses incurred in connection with such action or proceeding or any appeal or
enforcement of such action or proceeding.
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement, this
_____ day of __________, 1996.
"Owners"
Steve Rohrlick
Address: P.O. Box 989
La Jolla, CA 92038
SONOVA BEACH, INC., a Nevada
corporation
By:
--------------------------------
Its:
Address: P.O. Box 989
La Jolla, CA 92038
Joe Elizondo
Address: P.O. Box 9909
San Diego, CA 92109
MOHS, INC., a California
corporation
By:
--------------------------------
Its:
Address: P.O. Box 9909
San Diego, CA 92109
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE> 7
WH/JSG LLC, a California
limited liability company
By:
--------------------------------
Western Horizons, Inc.,
a British Virgin Islands
corporation, Member
By:
--------------------------------
Joe Elizondo
Its:
Address: P.O. Box 9909
San Diego, CA 92109
TRAVEL SYSTEMS, INC.
By:
--------------------------------
Its:
Address: 4802 Gunn Highway
Suite 140
Tampa, Florida 33624
THE JOSEPH STEVENS GROUP, INC.
By:
--------------------------------
Its:
Address: 5440 Morehouse Drive
Suite 2000
San Diego, CA 92121 11270
7
<PAGE> 1
EXHIBIT 2.5
EXHIBIT D TO MERGER AGREEMENT
MUTUAL RELEASE AGREEMENT
A.
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
individually and on behalf of his/its heirs, personal representatives, agents,
successors and assigns, jointly and severally (individually and collectively
for purposes of this Section A., the "Releasor"), for and in consideration of
the sum of Ten Dollars ($10.00) cash in hand paid to the Releasor and other
good and valuable consideration, including, without limitation, the entry by
800 Travel Systems, Inc. ("Travel Systems"), a Delaware corporation, into that
certain Agreement and Plan of Merger (the "Merger Agreement") with The Joseph
Stevens Group, LLC, and The Joseph Stevens Group, Inc., dated November 11,
1996, the receipt and sufficiency of which are hereby jointly and severally
acknowledged by the Releasor, does hereby and by these presents, and for anyone
claiming by, through or under the Releasor, fully remise, release, acquit and
forever discharge The Joseph Stevens Group, Inc. ("Stevens"), a California
corporation, its successors and assigns, of and from any and all rights,
claims, demands, damages, actions, and causes of action, of any kind or nature
whatsoever, whether arising at law, by contract or in equity, which the
Releasor may have had, may now have, or may hereafter have, against Stevens by
reason of any matter, cause, document, agreement, instrument, stock option,
act, omission, happening or thing, from the beginning of time to and including
the Effective Date (as defined in that certain Interim Operating Agreement
dated November 11, 1996 among 800 Travel Systems, Inc., The Joseph Stevens
Group, Inc., and The Joseph Stevens Group, LLC, the "Interim Agreement") and,
upon the advice of counsel, the parties expressly waive all rights under
California Civil Code Section 1542, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
It is intended by Releasor that, pursuant to this Release,
Releasor shall forever remise, acquit, waive, release and forever discharge
Stevens of and from any and all claims, demands for losses, injuries and
damages, rights, known or unknown, direct or indirect, from the above-described
matters, and from any other matter occurring prior to the Effective Date, it
being understood that all rights which Releasor or any person
<PAGE> 2
who claims by, through and under him or it may have against Stevens as of the
Effective Date, shall be forever released, remised and acquitted, and Releasor
and such persons shall be forever barred from bringing or asserting the same in
their own name or names, jointly with or through any person, natural or
corporate, for or upon or by reason of any matter, cause, document, agreement,
instrument, stock option, act, omission, happening or thing whatsoever, from
the beginning of time to and including the Effective Date of the Interim
Agreement and, upon the advice of counsel, the parties expressly waive all
rights under California Civil Code Section 1542, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
B.
The Joseph Stevens Group, Inc. individually and on behalf of
its successors and assigns, (individually and collectively, the "Releasor"),
for and in consideration of the sum of Ten Dollars ($10.00) cash in hand paid
to the Releasor and other good and valuable consideration, the receipt and
sufficiency of which are hereby jointly and severally acknowledged by the
Releasor, does hereby and by these presents, and for anyone claiming by,
through or under the Releasor, fully remise, release, acquit and forever
discharge the undersigned parties (the "Undersigned"), and their respective
successors and assigns, of and from any and all rights, claims, demands,
damages, actions, and causes of action, of any kind or nature whatsoever,
whether arising at law, by contract or in equity, which the Releasor may have
had, may now have, or may hereafter have, against the Undersigned by reason of
any matter, cause, document, agreement, instrument, stock option, act,
omission, happening or thing, from the beginning of time to and including the
Effective Date of the Interim Agreement and, upon the advice of counsel, the
parties expressly waive all rights under California Civil Code Section 1542,
which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
It is intended by Releasor that, pursuant to this Release,
Releasor shall forever remise, acquit, waive, release and forever discharge the
Undersigned of and from any and all
2
<PAGE> 3
claims, demands for losses, injuries and damages, rights, known or unknown,
direct or indirect, from the above-described matters, and from any other matter
occurring prior to the Effective Date, it being understood that all rights
which Releasor or any person who claims by, through and under him or it may
have against the Undersigned as of the Effective Date, shall be forever
released, remised and acquitted, and Releasor and such persons shall be forever
barred from bringing or asserting the same in their own name or names, jointly
with or through any person, natural or corporate, for or upon or by reason of
any matter, cause, document, agreement, instrument, stock option, act,
omission, happening or thing whatsoever, from the beginning of time to and
including the Effective Date of the Interim Agreement and, upon the advice of
counsel, the parties expressly waive all rights under California Civil Code
Section 1542, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have
materially affected his settlement with the debtor.
C.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, represents the
entire agreement among the parties hereto with respect to the subject matter
hereof; may not be modified or amended except pursuant to the written agreement
of the parties hereto; may be executed in multiple counterparts; and shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Any notice given hereunder shall be given
in the manner specified for notices in the Merger Agreement. If a party
commences or is made a party to an action or proceeding to enforce or interpret
the terms of this Agreement, or to obtain a declaration of rights under this
Agreement, the prevailing party in such action or proceeding shall be entitled
to recover from the other party all attorneys' fees, costs and expenses
incurred in connection with such action or proceeding or any appeal or
enforcement of such action or proceeding.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Release
Agreement, this _____ day of __________, 1997.
"The Undersigned"
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
Name:
Address:
-----------------------
-----------------------
-----------------------
Facsimile:
THE JOSEPH STEVENS GROUP, INC.
By:
-------------------------------
Its:
---------------------------
4
<PAGE> 1
EXHIBIT 2.6
EXHIBIT E TO MERGER AGREEMENT
PROMISSORY NOTE
$__________ ________________, 1997
San Diego, California
FOR VALUE RECEIVED, the undersigned, THE JOSEPH STEVENS GROUP, INC., a
California corporation (hereinafter referred to as ("Maker"), promises to pay
to the order of) JOSEPH STEVENS GROUP, GROUP, LLC., a California limited
liability company (together with any subsequent holder(s) hereof, being
hereinafter referred to collectively as "Holder"), pursuant to the terms
hereinafter set forth, at 5440 Morehouse Drive, Suite 2000, San Diego,
California 92121, or at such other place as Holder may designate to Maker in
writing from time to time, the principal sum of ____________________
(__________), together with interest thereon at the rate hereinafter set forth,
in lawful money of the United States of America.
The entire principal balance hereof, and all accrued interest
hereunder, shall be due and payable on the closing date of the initial public
offering of the common stock of 800 Travel Systems, Inc. a Delaware Corporation
("Travel Systems").
Interest on the amount from time to time outstanding hereunder shall
accrue at a fluctuating per annum rate of interest equal to the "Prime Rate,"
as hereinafter defined. Interest shall be computed on the daily outstanding
principal balance hereunder on a 365-day year simple interest basis.
There is no cure period that will be applicable to the payment of
principal, interest, or other amount now or hereafter due under this Note.
As used herein, the term "Prime Rate.' shall mean the rate from time
to time published in The Wall Street Journal as the Prime Rate under the column
"Money Rates," and set forth as "Prime Rate: X percent. The base rate on
corporate loans posted by at least 75% of the nations 30 largest banks," or in
such other column as the name thereof may change from time to time. If at any
time, or from time to time, the Prime Rate increases or decreases, then the
rate of interest hereunder shall be correspondingly increased or decreased
effective on the day on which any such increase or decrease of the Prime Rate
is published in The Wall Street Journal. In the event that The Wall Street
Journal, during the term hereof, shall abolish or abandon the practice of
publishing such Prime Rate, or should the same become unascertainable, Holder
shall designate a comparable reference rate which shall be deemed to be the
"Prime Rate."
1
<PAGE> 2
It is the intention of Maker and Holder to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law, then, in that event, notwithstanding
anything to the contrary in any agreement entered into in connection with this
Note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is taken, reserved, contracted
for, charged or received under this Note or under any of the other aforesaid
agreements or otherwise in connection with this Note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited on this Note by the holder hereof (or, if this
Note shall have been paid in full, refunded to Maker); and (ii) in the event
that maturity of this Note is accelerated by reason of an election by the
holder hereof resulting from any default hereunder or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be canceled automatically as of the date of such acceleration
or prepayment and, if thereforeto prepaid, shall be credited on this Note (or
if this Note shall have been paid in full, refunded to Maker). In determining
whether the amount of interest charged and paid might otherwise exceed the
limit prescribed by law, Maker and Holder intend and agree that interest shall
be computed upon the assumption that this Note will be paid according to the
agreed terms.
As of the date hereof, the Prime Rate is __________ percent (____%)
and, consequently, the rate of interest hereunder as of the date hereof is
percent (____%).
Unless otherwise specified below, this Note shall be construed under
and governed by the internal laws of the State of Florida (and applicable
federal law).
This Note may be prepaid in whole or in part at any time or from time
to time, without penalty, premium or fee.
The happening of any of the following events or conditions, whether
voluntarily or involuntarily, shall constitute an "Event of Default" under this
Note:
(i) Maker shall fail to pay, when due, any payment of principal or
interest hereunder; or
(ii) Maker shall cease to operate as a going concern, shall
liquidate or initiate dissolution proceedings; or
(iii) The appointment of a receiver for all or any part of the
property of, assignment for the benefit of
2
<PAGE> 3
creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Maker.
Upon and after the occurrence of an Event of Default, Holder shall
have the right at any time to declare all or any portion of the amounts due
hereunder to be due and payable immediately, without presentment, demand,
protest, notice of protest, or other notice of dishonor of any kind, all of
which are hereby expressly waived by Maker.
Time is of the essence of this Note. In the event this Note, or any
part thereof, is collected by or through an attorney-at-law, Maker agrees to
pay all costs of collection including, but not limited reasonable attorney's
fees actually incurred by Holder.
Presentment for payment, demand, protest and notice of demand, protest
and non-payment and all other notices are hereby waived by Maker. No failure to
demand payment of the debt evidenced hereby for any reason whatsoever, no
acceptance of any partial payment, nor any indulgences granted from time to
time shall be construed (i) as a novation of this Note or as a reinstatement of
the indebtedness evidenced hereby or as a waiver of such right to demand
payment or of the right of Holder thereafter to insist upon strict compliance
with the terms of this Note, or (ii) to prevent the exercise of such demand for
payment or any other right granted hereunder or by the laws of the State of
Florida; and Maker hereby expressly waives the benefit of any statute or rule
of law or equity now provided, or which may hereafter be provided, which would
produce a result contrary to or in conflict with the foregoing. No extension of
the time for the payment of this Note or any installment due hereunder, made by
agreement with any person now or hereafter liable for the payment of this Note
shall operate to release, discharge, modify, change or affect the original
liability of Maker under this Note, either in whole or in part unless Holder
agrees otherwise in writing. This Note may not be changed orally, but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
This Note is secured by that certain Security and Pledge Agreement of
even date among Maker, Holder and 800 Travel Systems, Inc. ("Travel Systems"),
a Delaware corporation.
Notwithstanding any provisions to the contrary herein contained, it is
agreed and understood that this Note, and the amounts now or hereafter due
hereunder, are subject to the offset rights as described in Article XV of that
certain Amended and Restated Agreement and Plan of Merger dated November 11,
1996 among Maker, Holder and Travel Systems.
3
<PAGE> 4
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective heirs, successors, legal representatives and assigns,
whether by voluntary action of the parties or by operation of law.
This Note has been executed by Maker and delivered originally in
escrow pursuant to the terms of that certain Amended and Restated Agreement and
Plan of Merger of even date herewith between Holder, Maker, and Travel
Systems, and the terms of the Escrow Agreement (as therein defined). The
release of this Note from escrow, and Maker's obligations hereunder, are
specifically subject to the terms of such Agreement and the Escrow Agreement.
IN WITNESS WHEREOF, Maker has executed this Note under seal as of the
date first above written.
THE JOSEPH STEVENS GROUP, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
------------------------------------
4
<PAGE> 1
EXHIBIT 2.7
EXHIBIT F TO MERGER AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into this
_____ day of __________, 1996, among JOSEPH STEVENS GROUP, INC., a California
corporation ("JSG"); 800 TRAVEL SYSTEMS, INC., a Delaware corporation ("Travel
Systems"), and VINCENT, BERG, STALZER & MENENDEZ, P.C., a Georgia professional
corporation (the "Escrow Agent").
Background Statement
A. JSG and Travel Systems are parties to certain Asset Purchase
Agreement (the "Purchase Agreement," by this reference made a part hereof) of
even date herewith pursuant to which JSG agreed to sell to Travel Systems, and
Travel Systems agreed to purchase from JSG, certain assets used in connection
with the business operations of JSG, all as provided therein.
B. JSG and Travel Systems wish to have the Escrow Agent hold and
disburse certain funds and documents to be delivered by the parties at the
closing of the transactions contemplated by the Purchase Agreement, all as set
forth therein and herein.
C. The Escrow Agent is willing to perform the duties and
responsibilities of the Escrow Agent as set forth herein, all on the terms and
conditions hereinafter set forth.
D. Capitalized terms used, but not defined, herein shall have the
same meanings ascribed to them in the Purchase Agreement.
<PAGE> 2
Agreement
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, each
intending to be legally bound hereby, agree as follows:
1. Delivery and Receipt of Escrow Items.
Prior to or simultaneously with the execution of this Agreement by the
parties hereto, the Escrow Agent has received:
(a) From Travel Systems, the following items:
(i) The Note (signed, but not dated, by Travel
Systems); and
(ii) The Certificate (signed, but not dated, by
Travel Systems); and
(b) From JSG, the Bill of Sale (signed, but not dated, by
JSG) (the items described in this Section 1 are referred to herein as the
"Escrow Items"). The Escrow Agent hereby agrees to hold and disburse the
Escrow Items in accordance with, and subject to, the terms and conditions of
this Agreement.
2. Terms and Conditions of Disbursement.
(a) At the Closing of the Purchase Agreement, and upon
written instructions from JSG and Travel Systems, the Escrow Agent shall:
(i) Date and deliver the Note and the Certificate
to JSG; and
(ii) Date and deliver the Bill of Sale to Travel
Systems; and
2
<PAGE> 3
(iii) Deliver any and all of the Consents received
by the Escrow Agent to Travel Systems.
(The items described in clauses (i) and (ii) shall be dated as of the date on
which such items are tendered for delivery by the Escrow Agent to the intended
recipient thereof).
(b) If the Closing does not occur by April 15, 1997, then
the Escrow Agent shall:
(i) Return to JSG the Bill of Sale (undated) and
any and all consents received by the Escrow
Agent; and
(ii) Return to Travel Systems the Note (undated)
and the Certificate (undated).
3. Written Assurances. Notwithstanding any provision to the
contrary herein contained, the Escrow Agent may, but need not, request as a
condition to the delivery of all or any of the Escrow Items the written
assurances of JSG and Travel Systems that they each agree that the proposed
delivery by the Escrow Agent of all or any of the Escrow Items is in accordance
with this Agreement. At such time as all of the Escrow Items have been
delivered as provided herein, this Agreement shall be deemed terminated and the
Escrow Agent shall thereupon be relieved from any further liability or
responsibility hereunder.
4. Liabilities of Escrow Agent.
(a) The Escrow Agent shall have no duties or
responsibilities other than those expressly set forth herein. The Escrow Agent
shall be under no liability to anyone by reason of
3
<PAGE> 4
any failure on the part of any party (other than the Escrow Agent for
performance of duties and responsibilities specifically set forth herein) or
any maker, guarantor, endorser or other signatory of any document to perform
such party's obligation under any such document.
(b) The Escrow Agent shall not be liable for any action
taken or omitted by it, except for gross negligence or willful misconduct, and
the Escrow Agent may reasonably rely upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Escrow Agent), statement, instrument, report or other paper or document which
is reasonably believed by the Escrow Agent to be genuine and to be signed or
presented by the proper person or persons. The Escrow Agent shall not be bound
by any notice or demand, or any waiver, modification, termination or rescission
of this Agreement, unless the Escrow Agent agrees thereto in writing.
5. Indemnification. JSG and Travel Systems jointly and severally
hereby agree to indemnify and hold harmless the Escrow Agent and its
shareholders, directors, officers, employees and agents against any and all
costs, losses, claims, damages, liabilities, expenses, including reasonable
costs of investigation, court costs, and attorney's fees, and disbursements,
which may be imposed upon the Escrow Agent and/or any of the other indemnified
persons or entities in connection with this Agreement or any matter or event
related thereto, including any litigation arising from this Agreement or
involving the subject matter
4
<PAGE> 5
hereof, and all such costs, expenses and disbursements shall be for the account
of an shall be borne and paid by JSG and Travel Systems as a condition to
termination of this Agreement.
6. Disputes.
(a) In the event of any disagreement among any of the
parties to this Agreement, or among them or any other person resulting in
adverse claims and demands being made in connection with or from any property
involved herein or affected hereby, the Escrow Agent shall be entitled to
refuse to comply with any such claims or demands as long as such disagreement
may continue, and in so refusing, shall make no delivery or other disposition
of any property then held by it under this Agreement, and in so doing the
Escrow Agent shall be entitled to continue to refrain from acting until (a) the
right of adverse claimants shall have been finally settled by binding
arbitration or finally adjudicated in a court assuming and having jurisdiction
of the property involved herein or affected hereby or (b) all differences shall
have been adjusted by agreement and the Escrow Agent shall have been notified
in writing of such agreement signed by the parties hereto.
(b) In the event of such disagreement, Escrow Agent may,
but need not, tender into the registry or custody of any court of competent
jurisdiction all money or property in its hands under the terms of this
Agreement, together with such legal proceedings as it deems appropriate, and
thereupon to be discharged from all further duties under this Agreement.
5
<PAGE> 6
7. Notices. All notices (and copies thereof), demands and other
instruments required or permitted to be given pursuant to this Agreement are to
be in writing and delivered by hand or by overnight express service or by
certified or registered mail addressed to each party hereto at the following
respective addresses (which addresses may be changed upon written notice to the
other parties hereto):
Escrow Agent: Vincent, Berg, Stalzer & Menendez, P.C.
3399 Peachtree Road
Suite 1400
Atlanta, Georgia 30326
JSG: Joseph Stevens Group, Inc.
5440 Morehouse Drive
Suite 2000
San Diego, California 92121
Travel Systems: 800 Travel Systems, Inc.
4802 Gunn Highway
Suite 140
Tampa, Florida 33624
Any notice, demand, or other instrument shall be deemed to be given and
effective hereunder on the fourth (4th) business day after dispatch (assuming
proper postage attached) or upon actual receipt by the addressee, whichever
first occurs.
8. Successors. The terms "JSG," "Travel Systems," and the
"Escrow Agent" shall be deemed to include the assigns and successors in
interest of said parties, and in such event, said assigns or successors in
interest shall be substituted as a party hereto.
9. Legal Action. The Escrow Agent shall have no obligation to
take any legal action in connection with this Escrow Agreement or towards its
enforcement or to appear in, prosecute
6
<PAGE> 7
or defend any action or legal proceeding which would or might involve it in any
cost, expense, loss or liability unless satisfactory security and indemnity
shall be furnished.
10. Binding Effect. This Escrow Agreement contains the entire
understanding between and among the parties hereto with respect to the subject
matter hereof, and shall be binding upon and inure to the benefit of such
parties, their respective heirs, successors in interest and legal
representatives.
11. Governing Law. This Escrow Agreement is being delivered in
and shall be governed by and construed and enforced in accordance with the laws
of the State of Georgia.
IN WITNESS WHEREOF, the undersigned have executed this Agreement, all
on the day and year first above written.
JSG:
JOSEPH STEVENS GROUP, INC.
By:
-------------------------------
Its:
---------------------------
TRAVEL SYSTEMS:
800 TRAVEL SYSTEMS, INC.
By:
-------------------------------
Its:
---------------------------
The Escrow Agent:
VINCENT, BERG, STALZER &
MENENDEZ, P.C.
By:
-------------------------------
Its:
---------------------------
7
<PAGE> 1
EXHIBIT 2.8
FIRST AMENDMENT TO
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER ("this Amendment") is made and entered into as of September 8, 1997,
among THE JOSEPH STEVENS GROUP, LLC (the "Selling Shareholder"), THE JOSEPH
STEVENS GROUP, INC. ("Stevens"), and 800 TRAVEL SYSTEMS, INC. ("Travel
Systems").
Background Statement
(A) The parties hereto are parties to that certain Amended and
Restated Agreement and Plan of Merger dated as of November 11, 1996, pursuant
to which Stevens will merge with and into Travel Systems, all in accordance
with, and subject to, the terms and conditions therein set forth (the "Merger
Agreement");
(B) The parties now wish to amend the Merger Agreement as set forth
in this Amendment; and
(C) All capitalized terms used in this Amendment shall have the
same meanings ascribed to them in the Merger Agreement, unless otherwise
indicated herein.
Agreement
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, each
intending to be legally bound hereby, agree as follows:
1. Amendments to Article III. The parties hereby amend the
provisions of Paragraph 2 of Article III of the Merger Agreement as follows:
First, by changing the number "300,000" to "383,333" and by changing the number
"$1,500,000" to "$1,916,665," so that, after
<PAGE> 2
such changes, the provisions of said Paragraph 2 shall read as follows;
2. Number of Shares to be Issued. At the Effective Time, the parties
agree that Travel System shall issue and deliver to the Selling
Shareholder the greater of (i) 383,333 shares of Travel Stock or (ii) that
number of shares of Travel Stock having an aggregate value of $1,916,665,
using the IPO Opening Price (defined in Article IX below) in calculating
the per share value of the Travel Stock at the Effective Time (as
applicable, the "Initial Travel Shares").
2. Amendment to Article VIII. The parties hereby amend the provisions
of Paragraph 4 of Article VIII of the Merger Agreement by deleting therefrom
the dates and amounts appearing under the columns entitled "Payment Date" and
"Amount" and inserting therein (in lieu of such deleted dates and amounts) the
following:
<TABLE>
<CAPTION>
Payment Date Amount
------------ -------
<S> <C>
May 30, 1997 $50,000
June 13, 1997 $10,000
September ___,1997 $36,000
-------
Total $96,000
=======
</TABLE>
Delivery of the September 1997 payment will be made via Federal
Express for actual delivery to the Selling Shareholder on the next business day
after the specified due date. Of such $96,000 amount, $75,000 shall reduce the
amount of the note described in Article XV of the Merger Agreement as therein
set forth.
3. Amendments to Article IX. The parties hereby amend the provisions
of Paragraph l(b) of Article IX of the Merger Agreement by changing the date
"August 31" (which appears on the sixth and the tenth lines thereof) to
"October 31," and by adding the
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<PAGE> 3
following new Paragraph 1(c) at the end of said Paragraph 1(b) and immediately
before Paragraph 2 of the Merger Agreement:
(c) Extension Fee. In consideration for extending the IPO
Deadline to October 31, 1997, Travel Systems hereby agrees to pay to
the Selling Shareholder a one-time fee in the amount of $25,000, such
amount to be paid by Travel Systems to the Selling Shareholder on or
before September 24, 1997, if such fee is not paid by Travel Systems on
or before September 24, 1997, then the amount of such fee shall
increase automatically to $50,000 and such fee shall be due and
payable to the Selling Shareholder on September 25, 1997. Delivery of
the September 24, 1997 payment will be made via FedEx for actual
delivery on September 25, 1997. Such payment shall not reduce the
amount of the note described in Article XV of the Merger Agreement.
4. Amendment to Article XII.
The parties hereby further amend the Merger Agreement by deleting
therefrom the provisions of Paragraph 3 of Article XII thereof and substituting
in lieu thereof the following provisions:
3. Transfer Restrictions.
(a) The Selling Shareholder hereby agrees that a block
of 300,000 shares of the Initial Travel Shares (together with any shares
over 383,333 shares issued under the provisions of Article III, Section
2(ii) hereof, the "First Block") shall be subject to the following
transfer restrictions (which restrictions shall be expressly set forth
in a legend on each certificate representing all or any part of the
First Block of the Initial Travel Shares):
(i) During the first 30-day period immediately
following the closing date of the Merger (the
"First Month"), all shares comprising the First
Block shall be non-transferable;
(ii) During the consecutive 11-month period
immediately following the expiration of the
First Month (the "First Year"), the Selling
Shareholder may sell, transfer or convey up to
4,546 shares of the First Block per month in
bonafide arm's length transactions for cash only
(and if,
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<PAGE> 4
during any such month, the actual number of such shares sold,
transferred or conveyed by the Selling Shareholder is less than
4,546, the difference thereof may be carried forward and added
to the minimum number of shares of the First Block that may be
sold by the Selling Shareholder in any subsequent month,
without regard to the restrictions set forth herein);
(iii) During the consecutive 12-month period immediately following
the expiration of the First Year (the "Second Year"), the
Selling Shareholder may sell, transfer or convey up to 20,833
shares of the First Block per month in bonafide arm's length
transactions for cash only (and if, during any such month, the
actual number of such shares sold, transferred or conveyed by
the Selling Shareholder is less than 20,833, the difference
thereof may be carried-forward and added to the minimum number
of shares of the First Block that may be sold by the Selling
Shareholder in any subsequent month, without regard to the
restrictions set forth herein); and
(iv) There shall be no transfer restrictions imposed upon the
shares comprising the First Block under the terms hereof after
the expiration the Second Year.
Provided, however, that if any shares over 383,333 shares are issued under
the provisions of Article III, Section 2(ii) hereof, then 17% of such
additional shares may be sold in equal monthly installments over the
11-month period described above in Article XII, Section 3(a)(ii) as therein
provided, and 83% of such additional shares may be sold in equal monthly
installments over the 12-month period described above in Article XII,
Section 3(a)(iii) as therein provided. Provided, further, however, that
trades of shares comprising the First Block not effectuated on an exchange
shall not be subject to the limitations of this Article XII, Section 3(a),
so long as such shares are subject to the same limitations set forth herein
while in the hands of any transferee(s) of such shares, and each such
transferee agrees with Travel Systems to be bound thereby, pursuant to a
written acknowledgment (on a form prescribed by Travel Systems) executed
and delivered by such transferee to Travel System concurrently with or
prior to such transfer.
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<PAGE> 5
Provided, further, however, that the Selling Shareholder may exceed the
volume transfer restrictions imposed under this Section with, and only
with, the prior written consent of Travel Systems, which consent may not
be unreasonably withheld. The parties hereto, in determining the
reasonableness of a consent, shall examine average daily trading
volumes and price fluctuations created by certain volume trades. Travel
Systems shall use its best efforts to remove a legend from stock
certificates to facilitate the expeditious sale of stock under this
Article XIII, Section 3(a).
(b) The Selling Shareholder hereby further agrees that a block
of 83,333 shares of the Initial Travel Shares (the "Second Block") shall
be subject to the following transfer restrictions (which restrictions
shall be expressly set forth in a legend on each certificate
representing all or any part of the Second Block of the Initial Travel
Shares):
(i) During the first 90-day period immediately following the
closing date of the Merger (the "90-Day Period"), all
shares comprising the Second Block shall be
non-transferable;
(ii) Subject to subpart (iv) below of this Section, during the
consecutive seven-month period immediately following the
expiration of the 90-Day Period, the Selling Shareholder
may sell, transfer or convey up to 11,905 shares of the
Second Block per month (and if, during amy such month, the
actual number of such shares sold, transferred or conveyed
by the Selling Shareholder is less than 11,905, the
difference thereof may be carried forward and added to the
minimum number of shares of the Second Block that may be
sold by the Selling Shareholder in any subsequent month,
without regard to the restrictions set forth herein);
(iii) Subject to subpart (iv) below of this Section, there shall
be no transfer restrictions imposed upon the shares
comprising the Second Block under the terms hereof after
the expiration of the seven-month period described above
in Article XII, Section 3(b) (ii); and
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<PAGE> 6
(iv) The Selling Shareholder hereby agrees that the sale
on any exchange of any or all of the shares comprising
the Second Block shall be brokered exclusively by and
through Joseph Steven & Co., New York, New York, at
its customary rates and charges for similar
transactions.
Provided, however, that trades of shares comprising the Second Block
not effectuated on an exchange shall not be subject to the limitations
of this Article XII, Section 3(b), so long as such shares are subject
to the same limitations set forth herein while in the hands of any
transferee(s) of such shares, and each such transferee agrees with
Travel Systems to be bound thereby, pursuant to a written
acknowledgment (on a form prescribed by Travel Systems) executed and
delivered by such transferee to Travel Systems concurrently with or
prior to such transfer. Provided, further, however, that the Selling
Shareholder may exceed the volume transfer limitations imposed under
this Section with, and only with, the prior written consent of Travel
Systems, which consent may be granted or denied in the sole and
absolute discretion of Travel Systems.
5. Amendment to Article XVI.
The parties hereby amend the provisions of Paragraph 4 of Article XVI
of the Merger Agreement by changing the name of the law firm of "Goode &
Peterson, PLC" to "Goode, Peterson & Weintraub, PLC."
6. Miscellaneous. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, both substantive and
remedial, without giving effect to the principles of conflicts of law and
choice of law thereof. The parties hereby ratify and confirm the Merger
Agreement in all respects, except as otherwise specifically amended hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment,
all as of the day and year first above written.
THE JOSEPH STEVENS GROUP, LLC
By:
------------------------------------
Its:
--------------------------------
THE JOSEPH STEVENS GROUP, INC.
By:
------------------------------------
Its:
--------------------------------
800 TRAVEL SYSTEMS, INC.
By: MARK MASTRINI
------------------------------------
Its: President
-------------------------------
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
800 TRAVEL SYSTEMS, INC.
800 Travel Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
1. The Corporation was originally incorporated under the
name "800 Travel Systems, Inc." and the original Certificate of Incorporation
of the Corporation was filed with the Secretary of State of the State of
Delaware on November 13, 1995.
2. Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware, this Amended and Restated Certificate
of Incorporation restates and integrates and amends the provisions of the
Certificate of Incorporation of the Corporation and has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation is
hereby amended and restated to read in its entirety as follows:
FIRST: NAME.
The name of the corporation is 800 Travel Systems, Inc.
(hereinafter referred to as the "Corporation").
SECOND: ADDRESS.
The address of the Corporation's registered office in the
State of Delaware is 32 Loockerman Square, Suite L-100, Dover, Kent County,
Delaware 19901. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: PURPOSE.
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: CAPITALIZATION.
SECTION 1. Authorized Capital. The total number of shares of
all classes of capital stock which the Corporation shall have authority to
issue is 21,000,000, of which 20,000,000 shares shall be common stock of the
par value of $.01 per share (the "Common Stock") and 1,000,000 shares shall be
preferred stock of the par value of $.01 per share (the "Preferred Stock").
<PAGE> 2
SECTION 2. Preferred Stock. The Board of Directors is
expressly authorized to provide for the issue of all or any shares of the
Preferred Stock, in one or more series, and to fix for each such series such
voting powers, full or limited, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereon as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series (a "Preferred Stock Designation") and as
may be permitted by the General Corporation Law of Delaware. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), voting together as a single
class, without a separate vote of the holders of the Preferred Stock, or any
series thereof, unless a vote of any such holders is required pursuant to any
Preferred Stock Designation.
SECTION 3. Common Stock. Except as otherwise required by law
or as otherwise provided in any Preferred Stock Designation, the holders of the
Common Stock shall exclusively posses all voting power and each share of Common
Stock shall have one vote.
SECTION 4. Preemptive Right. No holder of Common Stock shall
have any preemptive right to purchase or subscribe for any part of any issue of
stock or of securities of the Corporation convertible into stock of any class
whatsoever, whether now or hereafter authorized.
FIFTH: BOARD OF DIRECTORS.
SECTION 1. Number. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The number of directors of the initial Board of Directors shall be
[ ]. The number of directors thereafter shall be fixed from time to time
by the Board of Directors pursuant to the By-Laws.
SECTION 2. Classification. The Board of Directors shall be
divided into three classes, as nearly equal in number as the then total number
of directors constituting the whole board permits, with the term of office of
one class expiring each year. At the next election of directors, whether by
shareholders, directors or the incorporator of the Corporation, directors of
the first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting and the
directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Subject to the foregoing, at
each annual meeting of stockholders, the successors to the class of directors
whose term shall then expire shall be elected to hold office for a term
expiring at the third succeeding annual meeting and each director so elected
shall hold office until his successor is elected and qualified, or until his
earlier resignation or removal.
<PAGE> 3
If the number of directors is changed, any increase or
decrease in the number of directors shall be apportioned among the three
classes so as to make all classes as nearly equal in number as possible, and
the Board of Directors shall decide which class shall contain an unequal number
of directors.
SECTION 3. Vacancies. Newly created directorships resulting
from death, resignation, retirement, disqualification, removal from office or
other cause, may be filled by a majority vote of the remaining directors then
in office, although less than a quorum, or by the sole remaining director, and
each director so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which he or she has
been elected expires and until such director's successor shall have been duly
elected and qualified. No decrease in the authorized number of directors shall
shorten the term of any incumbent director.
SECTION 4. Removal. A director may be removed with or
without cause by the holders of a majority of the outstanding shares of all
classes of capital stock of the Corporation entitled to vote in the election of
directors, considered for this purpose as one class.
SIXTH: LIABILITY OF DIRECTORS.
No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that to the extent required by the provisions of
Section 102(b)(7) of the General Corporation Law of the State of Delaware or
any successor statute, or any other laws of the State of Delaware,this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware hereafter is amended to
authorize the further elimination or limitation on personal liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended. Any repeal or modification of this Article Sixth by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
SEVENTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
SECTION 1. Indemnification. The Corporation shall indemnify
each person who was or is made a party or is threatened to be made a party to
or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of which he or she is the legal representative, is or was a director or
officer, or had agreed to serve as a director or officer, of the Corporation or
is or was serving or has agreed to serve at the
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request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, or by reason of any
act alleged to have been taken or omitted in such capacity, whether the basis
of such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or alleged action in any other capacity while
serving as a director, officer, employee or agent, to the maximum extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all cost, expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred by such
person or on his or her behalf in connection with such proceeding and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators. The right to indemnification conferred in this
Article Seventh shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided that, if the General Corporation
Law of the State of Delaware so requires, the payment of such expenses incurred
by a director or officer in advance of the final disposition of a proceeding
shall be made only upon receipt by the Corporation of an undertaking by or on
behalf of such person to repay all amounts so advanced if it shall ultimately
be determined that such person is not entitled to be indemnified by the
Corporation as authorized in this Article Seventh or otherwise. The
termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not meet any standard of conduct for
indemnification imposed by the General Corporation Law.
SECTION 2. Indemnification for Costs, Charges and Expenses
for Successful Party. Notwithstanding the other provisions of this Article
Seventh, to the extent that a director or officer of the Corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 1 of this Article Seventh, or in the defense
of any claim, issue or matter therein, he shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 3. Determination of Right to Indemnification. Any
amounts payable pursuant to the indemnification provisions of Section 1 and 2
of this Article Seventh (unless ordered by a court) shall be paid by the
Corporation unless a determination is made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable,
by a quorum of disinterested directors who so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders, that indemnification
of the director or officer is not proper in the circumstances because he has
not met the applicable standards of conduct set forth in the General
Corporation Law.
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SECTION 4. Advance of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees) incurred by a person referred
to in Section 1 of this Article Seventh in defending a civil or criminal
proceeding (including investigations by any government agency and all costs,
charges and expenses incurred in preparing for any threatened proceeding) shall
be paid by the Corporation in advance of the final disposition of such
proceeding; provided, however, that the payment of such costs, charges and
expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer) in advance of the final disposition of
such proceeding shall be made only upon receipt of an undertaking by or on
behalf of the director or officer to repay all amounts so advanced in the event
that it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the Corporation as authorized in this Article
Seventh. No security shall be required for such undertaking and such
undertaking shall be accepted without reference to the recipient's financial
ability to make repayment. The Board of Directors may, in the manner set forth
above, and subject to the approval of such director or officer, authorize the
Corporation's counsel to represent such person, in any proceeding, whether or
not the Corporation is a party to such proceeding.
SECTION 5. Procedure for Indemnification. Any
indemnification under Section 1 or advance of costs, charges and expenses under
Section 4 of this Article Seventh shall be made promptly, and in any event
within 60 days, upon the written request of the director or officer directed to
the Secretary of the Corporation. The right to indemnification or advances as
granted by this Article Seventh shall be enforceable by the director or officer
in any court of competent jurisdiction if the Corporation denies such request,
in whole or in part, or if no disposition thereof is made within 60 days. Such
person's costs and expenses incurred in connection with successfully
establishing his right to indemnification or advances, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation. It shall be
a defense to any such proceeding (other than a proceeding brought to enforce a
claim for the advance of costs, charges and expenses under Section 4 of this
Article Seventh where the required undertaking, if any, has not been received
by the Corporation) that the claimant has not met the standard of conduct, if
any, set forth in the General Corporation Law, but the burden of proving that
such standard of conduct has not been met shall be on the Corporation. Neither
the failure of the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) to have made a determination
prior to the commencement of such proceeding that indemnification of the
claimant is proper in the circumstances because he has met the applicable
standard of conduct, if any, set forth in the General Corporation Law, nor the
fact that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the proceeding or create a presumption that the claimant has not met
the applicable standard of conduct.
SECTION 6. Other Rights; Continuation of Right of
Indemnification. The indemnification provided by this Article Seventh shall
not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his
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official capacity and as to action in another capacity while holding office,
and shall continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the estate, heirs, executors and
administrators of such person. All rights to indemnification under this
Article Seventh shall be deemed to be a contract between the Corporation and
each director and officer of the Corporation who serves or served in such
capacity at any time while this Article Seventh is in effect. No amendment or
repeal of this Article Seventh or of any relevant provisions of the Delaware
General Corporation Law or any other applicable laws shall adversely affect or
deny to any director or officer any rights to indemnification which such person
may have, or change or release any obligations of the Corporation, under this
Article Seventh with respect to any costs, charges, expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement which arise
out of a proceeding based in whole or substantial part on any act or failure to
act, actual or alleged, which takes place before or while this Article Seventh
is in effect. The provisions of this Section 6 shall apply to any such action,
suit or proceeding whenever commenced, including any such proceeding commenced
after any amendment or repeal of this Article Seventh. The right to
indemnification and advancement of expenses conferred on any person by this
Article Seventh shall not limit the Corporation from providing any other
indemnification permitted by law.
SECTION 7. Definitions. For purposes of this Article
Seventh:
a. "the Corporation" includes any constituent
corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate
existence continued, would have had power and authority to
indemnify its directors or officers, so that any person who is
or was a director or officer of such constituent corporation,
or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the
provisions of this Article Seventh with respect to the
resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate
existence had continued;
b. "other enterprises" includes employee benefit
plans, including but not limited to any employee benefit plan
of the Corporation;
c. "serving at the request of the Corporation"
includes, but is not limited to, any service which imposes
duties on, or involves services by, a director or officer of
the Corporation with respect to an employee benefit plan, its
participants, or beneficiaries, including acting as a
fiduciary thereof;
d. "fines" shall include any penalties and any
excise or similar taxes assessed on a person with respect to
an employee benefit plan;
e. a person who acted in good faith and in a manner
he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit
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plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation" as referred to in
Section 145 of the General Corporation Law of the State of
Delaware;
f. service as a partner, trustee or member of
management or similar committee of a partnership or joint
venture, or as a director, officer, employee or agent of a
corporation which is a partner, trustee or joint venturer,
shall be considered service as a director, officer, employee
or agent of the partnership, joint venture, trust or other
enterprise.
SECTION 8. Saving Clause. If this Article Seventh or any
portion hereof shall be invalidated on any ground by a court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director
and officer of the Corporation as to costs, charges and expenses (including
attorneys' fees) judgments, fines and amounts paid in settlement with respect
to any proceeding, whether civil, criminal, administrative or investigative,
including a proceeding by or in the right of the Corporation, to the full
extent permitted by any applicable portion of this Article Seventh that shall
not have been invalidated and to the full extent permitted by applicable law.
SECTION 9. Indemnification of Other Persons. If authorized
by the Board of Directors, the Corporation may indemnify and advance expenses
to any other person whom it has the power to indemnify under Section 145 of the
General Corporation Law to the fullest extent permitted by such statute.
SECTION 10. Insurance. The Corporation may purchase and
maintain insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person pursuant to the General Corporation Law of the State of
Delaware.
EIGHTH: ARRANGEMENTS WITH CREDITORS.
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
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Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: AMENDMENT OF CERTIFICATE OF INCORPORATION.
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned have executed this Amended
and Restated Certificate of Incorporation on behalf of the Corporation and
hereby affirm that the statements made herein are true under the penalties of
perjury, this day of 1997.
---------------------------
Mark D. Mastrini
President
8
<PAGE> 1
EXHIBIT 3.2
800 TRAVEL SYSTEMS, INC.
(a Delaware corporation)
------------------------------------
AMENDED AND RESTATED BY-LAWS
------------------------------------
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation
within the State of Delaware shall be located at the principal place of
business in said state of the corporation or individual acting as the
Corporation's registered agent in Delaware.
1.2 Other Offices. The Corporation may also have offices and
places of business at such other places, within and without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
2.1 Record Date. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose
of any other lawful action, the directors may fix, in advance, a record date,
which shall not be more than 60 days nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. If no record
date is fixed, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held; the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed; and the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at any
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
<PAGE> 2
2.2 Meaning of Certain Terms. As used herein in respect of the right
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the Certificate of Incorporation, as
from time to time amended and/or restated and in effect (the "Certificate of
Incorporation"), confers such rights where there are two or more classes or
series of shares of stock or upon which or upon whom the General Corporation
Law confers such rights notwithstanding that the Certificate of Incorporation,
may provide for more than one class or series of shares of stock, one or more
of which are limited or denied such rights thereunder; provided, however, that
no such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the Certificate of Incorporation,
except as any provision of law may otherwise require.
2.3 Stockholder Meetings.
2.3.1 Time. The annual meeting of stockholders for the
election of directors shall be held on the date and at the time fixed, from
time to time, by the directors, provided that the first annual meeting shall
held on a date within thirteen months after the organization of the
Corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed, from time to time, by
the directors or by the stockholders holding at least twenty- five percent
(25%), by voting power, of the Corporation's outstanding capital stock.
2.3.2 Place. Annual meetings and special meetings shall
be held at such place, within or without the State of Delaware, as the
directors may, from time to time, fix. Whenever the directors shall fail to
fix such place, the meeting shall be held at the registered office of the
Corporation in the State of Delaware.
2.3.3 Call. Annual meetings and special meetings may be
called by the directors or by any officer instructed by the directors to call
the meeting.
2.3.4 Notice or Waiver of Notice. Written notice of all
meetings shall be given, stating the place, date, and hour of the meeting and
stating the place within the city or other municipality or community at which
the list of stockholders of the Corporation may be examined. The notice of an
annual meeting shall state that the meeting is called for the election of
directors and for the transaction of other business which may properly come
before the meeting, and shall, if any other action which could be taken at a
special meeting is to be taken at such annual meeting, state the purpose or
purposes. The notice of a special meeting shall in all instances state the
<PAGE> 3
purpose or purposes for which the meeting is called. The notice of any meeting
shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the General Corporation Law. Except as
otherwise provided by the General Corporation Law, a copy of the notice of any
meeting shall be given, personally or by mail, not less than 10 days nor more
than 60 days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder of
record entitled to vote at such meeting at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the Corporation. Notice by mail shall be deemed to be given when deposited,
with postage thereon prepaid, in the United States Mail. Notice need not be
given to any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
2.3.5 Stockholder List. The officer or agent who has
charge of the stock ledger of the Corporation shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city or other municipality or community where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present. The stock ledger shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by this section or the books of the
Corporation, or to vote at any meeting of stockholders.
2.3.6 Conduct of Meeting. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting: the Chairman of the Board, if any; the
Vice- Chairman of the Board, if any; a Co-Chief Executive Officer; the
President; a Vice-President; or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
2.3.7 Proxy Representation. Every stockholder may
authorize another person or persons to act for him by proxy in all matters in
which a stockholder is entitled to participate, whether by waiving notice of
any meeting, voting or participating at a meeting, or expressing
3
<PAGE> 4
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon
after three years from its date unless such proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and, if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally.
2.3.8 Inspectors. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election to act
at the meeting or any adjournment thereof. If an inspector or inspectors are
not appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by appointment made
by the directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, if any, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors, if
any, shall make a report in writing of any challenge, question or matter
determined by him or them and execute a certificate of any fact found by him or
them.
2.3.9 Quorum. The holders of a majority of the issued
and outstanding shares of stock of the Corporation entitled to vote,
represented in person or by proxy, shall be necessary to and shall constitute a
quorum at a meeting of stockholders for the transaction of any business. If,
however, such quorum is not present or represented at any meeting of
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed. Notwithstanding the
foregoing, if after any such adjournment the Board of Directors shall fix a new
record date for the adjourned meeting, or if the adjournment is for more than
thirty (30) days, a notice of such adjourned meeting shall be given as provided
in Section 2.3.4 of these By-Laws.
2.3.10 Voting. Each share of stock shall entitle the
holder thereof to one vote. In the election of directors, a plurality of the
votes cast shall elect. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the Certificate of
Incorporation.
4
<PAGE> 5
ARTICLE III
DIRECTORS
3.1 Functions and Definition. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors of the Corporation. The Board of Directors shall have the authority
to fix the compensation of the members thereof. The use of the phrase "whole
board" herein refers to the total number of directors which the Corporation
would have if there were no vacancies.
3.2 Qualifications and Number. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the whole Board of Directors
shall be fixed from time to time by action of the directors. The number of
directors may be increased or decreased by action of the Board of Directors.
3.3 Nomination, Classification, Election, Term Removal and
Vacancies. The nomination, classification, election, term and removal of
directors and the filling of newly created directorships and vacancies in the
Board of Directors shall be governed by the Certificate of Incorporation. Any
director may resign at any time upon written notice to the Corporation.
Directors who are elected at an annual meeting of stockholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office for the term prescribed in the Certificate of
Incorporation and until their successors are elected and qualified or until
their earlier resignation or removal. In the interim between annual meetings
of stockholders or of special meetings of stockholders called for the election
of directors and/or for the removal of one or more directors and for the
filling of any vacancy in that connection, newly created directorships and any
vacancies in the Board of Directors, including unfilled vacancies resulting
from the removal of directors for cause or without cause, may be filled by the
vote of a majority of the remaining directors then in office, although less
than a quorum, or by the sole remaining director.
3.4 Meetings.
3.4.1 Time. Meetings shall be held at such time as the
Board shall fix, except that the first meeting of a newly elected Board shall
be held as soon after its election as the directors may conveniently assemble.
3.4.2 Place. Meetings shall be held at such place
within or without the State of Delaware as shall be fixed by the Board.
3.4.3 Call. No call shall be required for regular
meetings for which the time and place have been fixed. Special meetings may be
called by or at the direction of the Chairman
5
<PAGE> 6
of the Board, if any, the President, if any, or the Chief Executive Officer, or
by a majority of the directors in office.
3.4.4 Notice or Actual or Constructive Waiver. No
notice shall be required for regular meetings for which the time and place have
been fixed. Written, oral, or any other mode of notice of the time and place
shall be given for special meetings in sufficient time for the convenient
assembly of a majority of the directors thereat. Notice need not be given to
any director or to any member of a committee of directors who submits a written
waiver of notice signed by him before or after the time stated therein.
Attendance of any such person at a meeting shall constitute a waiver of notice
of such meeting, except when he attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
directors need be specified in any written waiver of notice.
3.4.5 Quorum and Action. A majority of the whole Board
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided, that such majority shall constitute at least one-third of the
whole Board. A majority of the directors present, whether or not a quorum is
present, may adjourn a meeting to another time and place. Except as herein
otherwise provided the vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board. The quorum
and voting provisions herein stated shall not be construed as conflicting with
any provisions of these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors. In the event of any conflict between the quorum and
voting provisions contained herein and the General Corporation Law, the
provisions of the General Corporation Law shall govern.
3.4.6 Telephone Participation. Any member or members of
the Board of Directors or of any committee designated by the Board, may
participate in a meeting of the Board, or any such committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
3.4.7 Chairman of the Meeting. The Chairman of the
Board, if any and if present and acting, shall preside at all meetings.
Otherwise, the Chief Executive Officer or the President, if present and acting,
or any other director chosen by the Board, shall preside.
3.5 Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from
6
<PAGE> 7
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board, shall have and may exercise the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it.
3.6 Written Action. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE IV
OFFICERS
4.1 Officers. The officers of the Corporation shall consist of a
[Chief Executive Officer,] a President, a Chairman of the Board, a Secretary, a
Chief Financial Officer, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers with
such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman of the Board, if
any, need be a director. Any number of offices may be held by the same person,
as the directors may determine.
4.2 Term of Office. Unless otherwise provided in the resolution
choosing him, each officer shall be chosen for a term which shall continue
until the meeting of the Board of Directors following the next annual meeting
of stockholders and until his successor shall have been chosen and qualified.
4.3 Duties. The officers of the Corporation shall each have such
powers and duties as are set forth in these By-Laws and as generally pertain to
their respective offices, and as from time to time may be conferred upon them
by the Board of Directors. The Chairman of the Board of Directors, if there be
a Chairman, shall preside at all meetings of the Board of Directors and shall
have such other powers and duties as may from time to time be assigned by the
Board of Directors. The Chief Executive Officer shall have the general
management and superintendence of the affairs of the Corporation, subject to
the direction of the Board of Directors. He shall preside at all meetings of
the shareholders and, in the absence or disability of the Chairman of the Board
of Directors, or if there be no Chairman, shall preside at all meetings of the
Board of Directors. The President shall be responsible for the general
management of the day to day affairs of the Corporation, subject to directions
of the Chief Executive Officer or, in the absence of a
7
<PAGE> 8
Chief Executive Officer, the Board of Directors. In the absence or disability
of the Chief Executive Officer, the President shall preside at all meetings of
the shareholders. The Secretary shall keep the minutes of meetings of the
Board of Directors and of the shareholders; shall be the custodian of the
records and of the seal of the Corporation; shall attend to all correspondence
and shall perform other duties incidental to such office. The Treasurer shall
have care and custody of the funds and securities of the Corporation; shall
keep complete and accurate books of account and financial records of the
Corporation; shall render financial reports to the Board of Directors and the
shareholders and shall perform other duties incidental to such office. The
Vice-President or Vice-Presidents, the Assistant Secretary or Assistant
Secretaries, the Assistant Treasurer or Assistant Treasurers shall, in the
order of their respective seniorities, in the absence or disability of the
President, Secretary or Treasurer, respectively, perform the duties of such
officer and shall generally assist the President, Secretary or Treasurer,
respectively.
4.4 Delegation of Duties. Unless otherwise ordered by the Board
of Directors, the President, or, in the event of his inability to act, the
Vice-President designated by the Board of Directors to act in the absence of
the President, shall have full power and authority on behalf of the Corporation
to attend and to act and to vote at any meetings of security holders of
corporations in which the Corporation may hold securities, and at such meetings
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities, and which as the owner thereof the Corporation
might have possessed and exercised, if present. The Board of Directors by
resolution from time to time may confer like powers upon any other person or
persons.
ARTICLE V
STOCK CERTIFICATES
5.1 Certificates Representing Stock.
5.1.1 Signatures. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of, the Corporation by the Chairman of the Board of Directors, if any, or by
the Chief Executive Officer or President and by the Chief Financial Officer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation certifying the number of shares owned by him in the Corporation.
Any and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
5.1.2 Issuance in Series. Whenever the Corporation
shall be authorized to issue more than one class of stock or more than one
series of any class of stock, and whenever the Corporation shall issue any
shares of its stock as partly paid stock, the certificates representing shares
of any such class or series or of any such partly paid stock shall set forth
thereon the
8
<PAGE> 9
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such
shares.
5.1.3 Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate
theretofore issued by it, alleged to have been lost, stolen, or destroyed, and
the Board of Directors may require the owner of any lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
5.2 Stock Transfers. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the Corporation shall be made
only on the stock ledger of the Corporation by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
ARTICLE VI
GENERAL PROVISIONS
6.1 Corporate Seal. The corporate seal shall be in such form as
the Board of Directors shall prescribe.
6.2 Fiscal Year. The fiscal year of the Corporation shall be
fixed, and shall be subject to change, by the Board of Directors.
6.3 Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
in any manner and for any purpose authorized by the Board of Directors or a
committee thereof.
6.4 Time Periods. In applying any provision of these By-Laws
which requires that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of
days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
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<PAGE> 10
ARTICLE VII
CONTROL OVER BY-LAWS
7.1 Subject to the provisions of the General Corporation Law, the
power to make, amend, alter or repeal these By-Laws and to adopt new By-Laws
may be exercised by the Board of Directors or by the stockholders.
10
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
800 TRAVEL [LOGO] SYSTEMS. INC.
A DELAWARE CORPORATION
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 282506 10 4
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES, $.01 PAR VALUE, OF THE COMMON STOCK OF
================================800 TRAVEL SYSTEMS, INC.========================
transferable on the books of the Corporation by the holder hereof in person or
by a duly authorized attorney, upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated:
/s/ JERROLD B. SENDROW COUNTERSIGNED:
Secretary CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By TRANSFER AGENT
[SEAL] AUTHORIZED OFFICER
/s/ MARK D. MASTRINI
President
<PAGE> 2
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors
and not as tenants Act
in common ------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
--------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares
----------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
--------------------------------------------------------------------
to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated
---------------------------------
-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
SIGNATURE(S) GUARANTEED:
---------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 14Ad-15.
<PAGE> 1
EXHIBIT 5.1
___________________, 1997
800 Travel Systems, Inc.
4802 Gunn Highway
Tampa, Florida 33624
Re: 800 Travel Systems, Inc.
Registration Statement on Form SB-2
Registration Number 333-28237
Ladies and Gentlemen:
We refer to the above-captioned registration statement on Form
SB-2 (the "Registration Statement") filed under the Securities Act of 1933, as
amended (the "1933 Act"), by 800 Travel Systems, Inc., a Delaware corporation
(the "Company"), with the Securities and Exchange Commission, relating to (i) a
proposed public offering by the Company of up 1,800,000 shares (the "Shares")
of its Common Stock, par value $.01 per share (the "Common Stock"), 1,800,000
Redeemable Common Stock Purchase Warrants (the "Warrants") and 1,800,000 shares
of Common Stock issuable under the Warrants (the "Warrant Shares"); and (ii)
the registration on behalf of certain of the Company's shareholders (the
"Selling Shareholders") of up to 1,276,134 shares of Common Stock (the
"Shareholders Shares").
Terms used herein that are defined in the Registration
Statement and not otherwise defined herein shall have the meanings ascribed to
them in the Registration Statement.
We have examined the originals or photocopies or certified
copies of such records of the Company, certificates of officers of the Company
and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion
<PAGE> 2
hereinafter expressed. In such examination, we have assumed the genuineness of
all signatures (except for those of representatives of the Company), the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified copies or photocopies
and the authenticity of the originals of such latter documents.
Based on our examination mentioned above and such other
investigation as we have deemed necessary, we are of the opinion that the
Shares and Warrants to be sold by the Company (and the Warrant Shares issuable
under the Warrants), and the Shareholders Shares to be sold by the Selling
Shareholders, each of which is to be sold pursuant to the Registration
Statement and in accordance with the terms of the Underwriting Agreement filed
as an exhibit to the Registration Statement (and, in the case of the Warrant
Shares, which will be issued upon exercise as set forth in the Warrant
Agreement filed as an exhibit to the Registration Statement), will, upon
issuance, assuming payment of the purchase price or exercise price therefor, as
the case may be, and effectiveness of the Registration Statement (and, in the
case of the Warrant Shares, assuming exercise as provided in the Warrant
Agreement), be duly authorized, legally and validly issued, fully-paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the references to our firm under "Legal
Matters" in the related Prospectus. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
PHILLIPS, NIZER, BENJAMIN,
KRIM & BALLON LLP
By:
-------------------------------------
A Partner
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of the 1st day of September, 1997 by and
between 800 Travel Systems, Inc., a Delaware corporation ("Company") with an
office at 4802 Gunn Highway, Tampa, Florida 33624 and Mark D. Mastrini
("Employee") an individual residing at [address].
WHEREAS, Company desires to employ Employee in the capacity and under
the terms set forth below and Employee desires to be employed by Company in
that capacity and on those terms;
NOW, THEREFORE, it is agreed as follows:
1. Employment; Position; Duties.
(a) Company hereby employs Employee, and Employee hereby
accepts employment by Company, on the terms and conditions set forth in this
Agreement. During the Term of this Agreement (as defined below) Employee shall
serve as the President and Chief Operating Officer of the Company, subject to
the direction of the Board of Directors of the Company (the "Board"), and in
connection therewith shall perform his duties in accordance with the
instructions and policies of the Board. If elected, Employee agrees to serve
as a member of the Board.
(b) The duties of Employee shall be those customarily
associated with the offices of President and Chief Operating Officer including
the supervision and direction of the Company's business operations and its
senior management personnel.
(c) During the Term, Employee shall devote his entire
working time and attention to the business and affairs of the Company and shall
use his best efforts to promote the business of the Company. During the term
of his employment hereunder, Employee shall have no interest in or perform any
material service for any other business entity whether or not competitive with
Company, except that the aforesaid prohibition against ownership shall not
apply to either inactive investments in public companies whose stock is traded
on a national securities exchange or actively traded over the counter or
passive investments in entities not competitive with Company.
(d) Employee will report to the Board and will provide the
Board with such written reports relating to the Company's business as it may
request.
2. Term.
(a) The term of Employee's employment (the "Term") shall be
for a period of approximately three years commencing on the Effective Date (as
hereinafter defined) and ending,
<PAGE> 2
notwithstanding the Effective Date, on September 30, 2000. The "Effective
Date" means the date on which the currently contemplated initial public
offering of common stock of Company (the "IPO") is consummated. Anything
contained herein to the contrary notwithstanding, Employee acknowledges that
this Agreement is being entered into in contemplation of the aforesaid IPO and
that, if such IPO does not become effective, for any reason whatsoever, this
Agreement shall be of no force or effect.
(b) In the event that Employee continues in the full-time
employ of Company after the end of the Term, such continued employment shall be
on a year-to-year basis subject to the terms and conditions hereof. As used in
this Agreement, the "First Contract Year" means the period commencing on the
Effective Date and ending on September 30, 1998; the "Second Contract Year"
means the one-year period immediately following the First Contract Year; and
the "Third Contract Year" means the one-year period immediately following the
Second Contract Year. Each subsequent October 1st occurring during the period
in which Employee is employed by the Company shall be deemed to commence a new
contract year.
3. Compensation; Benefits.
(a) In consideration of the services to be rendered by
Employee hereunder, Company shall pay Employee the following compensation:
(i) in the First Contract Year a base salary at the
rate of $125,000 per annum;
(ii) in the Second Contract Year the Employee shall
be paid a base salary equal to $125,000 plus an amount equal to $125,000 times
(the percentage increase in the Consumer Price Index from August 1, 1997 to
August 1, 1998 plus 5%). Thus, if the percentage increase in the CPI was 5%,
commencing October 1, 1998, Employee's salary would be $137,500 ($125,000 +
($125,000 x .10));
(iii) in the Third Contract Year the Employee shall be
paid a base salary equal to his salary rate for the Second Contract Year plus
an amount equal to his salary rate for the Second Contract Year times the
percentage increase in the Consumer Price Index from August 1, 1998 to August
1, 1999 plus 5%.
(b) Company shall reimburse Employee promptly upon
presentation of receipts or other satisfactory documentation for all reasonable
expenses incurred by him in the furtherance of and in connection with his
employment hereunder.
(c) Company shall provide Employee with such medical and
disability insurance as it makes available to its
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<PAGE> 3
executives generally on substantially the same terms and conditions as such
insurance is made available to other executives.
(d) In recognition of Employee's need for a car to perform
services required of him by the Company, the Company shall pay to Employee a
car allowance of $500 per month.
(e) Employee shall be entitled to two (2) weeks vacation in
each calendar year during the Term, such vacation to be taken at times not
inconvenient to Company.
(f) As additional consideration for Employee's execution and
delivery of this Agreement, the Company has issued to Employee 100,000 shares
of its Common Stock. Of such 100,000 shares, 50,000 shall be deemed vested as
of the date hereof and 50,000 shall vest as of 18 months from the Effective
Date (except that in the event of the Company's constructive termination (as
defined below), the remaining 50,000 shares shall vest as of the date of the
Company's constructive termination). Thus, if Employee shall leave the employ
of the Company for any reason (other than as a result of the Company's
constructive termination) prior to the expiration of 18 months from the
Effective Date, he shall return to the Company 50,000 of the 100,000 shares
previously issued to him. If Employee shall remain in the employ of the
Company, on the second anniversary of the Effective Date the Company shall
issue to him 50,000 shares of its Common Stock. The Employee agrees not to
sell or otherwise transfer 90,000 of the 100,000 shares previously issued to
him prior to the second anniversary of the Effective Date without the prior
written consent of the Company. Upon request, the Employee shall enter into a
"lock-up" agreement with the underwriter of the IPO confirming his agreement
not to transfer any of his shares prior to the second anniversary of the
Effective Date without the consent of the underwriter. Employee shall be
released from the transfer restriction contained in this paragraph upon
termination of this Agreement.
(g) Pursuant to the terms of the Company's Stock Option Plan
(the "Plan") the Company shall grant to Employee options to purchase 50,000
shares of the Company's Common Stock at a price of $5.00 per share. The right
to exercise such options shall vest as to 25,000 shares on the first
anniversary of the Effective Date and as to the remaining 25,000 shares on the
second anniversary of the Effective Date (except that in the event of the
Company's constructive termination, the right to exercise options with respect
to any unvested shares shall vest immediately as of the date of the Company's
constructive termination). The terms and conditions of such options to be
fully set forth in a Stock Option Agreement to be issued in accordance with the
Plan.
(h) No later than ninety (90) days after the second
anniversary of the Effective Date the Company shall register for sale under the
Securities Act of 1933 the shares referenced in
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<PAGE> 4
subparagraph (f) and the shares underlying the options referenced in
subparagraph (g).
(i) Upon the Effective Date the Company shall issue to the
Employee 25,000 Warrants identical to the Warrants to be issued as part of the
contemplated public offering.
4. Termination.
(a) This Agreement may be terminated by Company for cause
(as defined below) immediately upon written notice thereof to Employee. Upon
termination for cause, Company shall not be obligated to make any further
payment to Employee under this Agreement, but the provisions of paragraph 6
shall survive any such termination. For the purposes of this Agreement, the
phrase "for cause" shall mean Employee's (i) conviction of the willful
violation of any law, rule or regulation, other than minor violations (which,
through lapse of time or otherwise, is not subject to appeal); (ii) acts with
respect to the property of the Company which constitute larceny, fraud, theft,
embezzlement or the acceptance of a bribe or kick back; (iii) willful
misconduct as an employee of Company; (iv) willful misrepresentation of a
material matter to the Board; or (v) reckless disregard of his responsibilities
under this Agreement.
(b) If as a result of Employee's incapacity due to physical
or mental illness, he shall have been absent from his duties with Company on a
continuous basis for more than ninety days or for more than ninety working days
during any nine month period, Company may upon thirty days prior written
notice, terminate Employee's employment for "disability". Upon any such
termination, except as otherwise required by law, Employee's rights to receive
salary or other compensation or benefits hereunder shall terminate as of the
date set forth in such notice.
(c) This Agreement shall terminate automatically upon
Employee's death.
(d) In the event that Employee remains employed by the
Company for the full Term of this Agreement but Company determines that it does
not intend to offer to employ Employee on substantially the same or better
terms after the end of the Term, the Company shall, not less than 45 days prior
to the end of the Term, provide written notice to Employee of such
determination. Notwithstanding the provisions of paragraph 1(c) of this
Agreement, after receipt of such a notice, for the duration of the Term,
Employee shall be permitted to devote a reasonable amount of his working time
and attention to making arrangements for his employment after the Term,
however, nothing contained herein shall diminish Employee's continuing
obligation, during the balance of the Term, to use his best efforts to promote
the business of the Company.
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<PAGE> 5
(e) This Agreement may be terminated by Employee for the Company's
constructive termination (defined below) immediately upon written notice
thereof to the Company. Upon such constructive termination, Employee shall no
longer be obligated to render services hereunder, but the provisions of
paragraph 6 shall survive any such termination, and the (i) Employee shall be
entitled to continue to receive the compensation and benefits he is entitled to
receive under subparagraphs 3(a), (c) and (d) during the remainder of the Term
and (ii) the Common Stock referred to in subparagraph 3(f) and the options
referred to in subparagraph 3(f) shall vest immediately as of the date of the
Company's constructive termination. For the purposes of this Agreement, the
phrase the Company's "constructive termination" (or similar phrase) shall mean
termination because of the Company's (i) material diminution of Employee's
duties or assignments in a manner materially inconsistent with the duties set
forth in this Agreement, (ii) material breach of this Agreement to the material
detriment of Employee, provided that Company shall have failed to cure such
breach within a reasonable time after receipt of written notice thereof from
Employee; provided, however, that no constructive termination shall be deemed
to have occurred in any of the foregoing events if the Company shall have taken
such action for cause as described in subparagraph 4(a) above.
5. No Conflicting Agreement. Employee represents and warrants
that he is not subject to any employment agreement, restrictive covenant,
agreement or contract which might limit the performance of his duties and
responsibilities hereunder. Employee further represents and warrants that he
has made no commitment of any kind whatsoever inconsistent with the provisions
of this Agreement and that he is under no disability of any kind which would
prevent him from entering into this Agreement and performing all of his
obligations hereunder.
6. Non-Competition; Confidentiality.
(a) Employee covenants and agrees with Company that he will
not, directly or indirectly:
(i) while he is in Company's employ and at any time
after the termination of his employment hereunder, disclose or use or otherwise
exploit for his own benefit or the benefit of any other person (other than for
the benefit of Company) any Confidential Information (as hereinafter defined)
disclosed to Employee or of which Employee becomes aware by reason of his
employment with Company;
(ii) while he is in Company's employ and through the
period ending two years after the termination of his employment hereunder,
solicit or divert or appropriate to any Competing Business (as hereinafter
defined), directly or indirectly, or attempt to solicit or divert or
appropriate to any
-5-
<PAGE> 6
such Competing Business, any person or entity who was a customer or client of
Company at any time during the last six months of Employee's employment
hereunder;
(iii) while he is in Company's employ and through the
period ending two years after the termination of his employment hereunder,
employ or attempt to employ or assist anyone else in employing any person who,
at any time within the period commencing six months prior to the date of the
termination of Employee's employment by Company and ending one year after the
date of such termination, was, is or shall be an employee of Company (whether
or not such employment is full time or is pursuant to a written contract with
Company); and
(iv) while he is in Company's employ and through the
period ending ninety days after his employment hereunder, as an individual or
as agent, employee, partner, officer, director, owner or independent contractor
of any person or entity, engage in any Competing Business, directly or
indirectly.
(b) Employee agrees that upon the termination of his
employment (whether voluntarily or involuntarily) he will not take with him or
retain without the Company's written authorization, and will promptly deliver
to Company, originals and all copies of all papers, files or other documents
containing any Confidential Information and all other property belonging to
Company.
(c) For purposes of this Paragraph, the term "Competing
Business" means any business located within the United States providing
services substantially similar to those provided by the Company from time to
time. The term "Confidential Information" means any and all data and
information relating to the business of the Company (whether constituting a
trade secret or not) which is or has been disclosed to Employee or of which
Employee becomes aware as a consequence of or through his relationship with the
Company and which has value to the Company and is not generally known by its
competitors. Confidential Information shall not include any data or
information that has been voluntarily disclosed to the public by Company
(except where such public disclosure has been made by Employee without
authorization) or that has been independently developed and disclosed by
others, or that otherwise enters the public domain through lawful means.
If a court of competent jurisdiction determines that any
of the provisions related to the right of Employee to compete with Company upon
termination of his employment or to use information made know to him during the
course of his employment by Company are not enforceable because of their length
or territorial scope, Company and Employee agree that such court may limit the
term or scope of such provision to such extent as is necessary to
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<PAGE> 7
render it enforceable and that such provision, as so revised, shall be
enforceable.
(d) Employee acknowledges that irreparable loss and injury
would result to Company upon the breach of any of the covenants contained in
this paragraph 6 and that damages arising out of such breach would be difficult
to ascertain. Employee agrees that, in addition to all other remedies
available at law or at equity, Company may petition and obtain from a court of
law or equity both temporary and permanent injunctive relief to prevent a
breach by Employee of any covenant contained in this Paragraph 6 and that in
any action or proceeding brought to enforce any provision of this Paragraph 6,
the prevailing party shall be entitled to recover from the non-prevailing party
the former's reasonable costs of enforcement, including legal fees.
7. Severance. In the event that any provision (or any portion of
any provision) of this Agreement shall be held to be void or unenforceable, the
remaining provisions of this Agreement (and the balance of any provisions held
void or unenforceable in part only) shall continue in full force and effect,
unless dependent upon an unenforceable or void provision.
8. Resignation. Upon the termination of his employment for any
reason Employee shall be deemed to resign as an officer and director of Company
and its affiliates, if then so acting.
9. Assignment; Successors. This Agreement may not be assigned by
Employee, but may be assigned by Company to any successor in interest to its
business. This Agreement shall inure to the benefit of and shall be binding
upon Company, its successors and assigns, and Employee, his heirs, legal
representatives, executors and assigns.
10. Complete Agreement; Governing Law. This Agreement contains the
full and complete understanding and agreement of the parties and supersedes all
prior agreements and understanding between the parties with respect to the
subject matter hereof. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to agreements
made and wholly performed within said State, and may not be modified, amended,
terminated or discharged orally.
11. Waiver; Estoppel. No waiver by either party of any breach of
any provision of this Agreement shall be deemed a waiver of any preceding or
succeeding breach of such provision or of a other provision herein contained.
12. Indemnification. The Company and each of its subsidiaries for
whom Employee is an officer or director shall indemnify and hold harmless
Employee in his capacity as an officer and/or director and/or agent to the
fullest extent permissible
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<PAGE> 8
under the law of the state of incorporation or formation of such entity whether
or not the Company is then a corporation. Such indemnification shall include
the advancement to Employee of reasonable fees and expenses (including
attorneys' fees) for his defense of any civil, criminal, administrative or
investigative action, suit or proceeding brought against him in his capacity as
an officer, director or agent and such indemnification obligation shall survive
the termination of this Agreement.
13. Notices. Any notices hereunder shall be in writing and
delivered at the addresses set forth above, or to such other address or
addresses as may hereafter be furnished in writing by one party to the other,
by certified mail, return receipt requested, or by telecopier. All such
notices shall be deemed effective upon receipt.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
-----------------------------------
Mark D. Mastrini
800 TRAVEL SYSTEMS, INC.
By:
--------------------------------
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<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of the 1st day of September, 1997 by
and between 800 Travel Systems, Inc., a Delaware corporation ("Company") with
an office at 4802 Gunn Highway, Tampa, Florida 33624 and Jerrold B. Sendrow
("Employee") an individual residing at [address].
WHEREAS, Company desires to employ Employee in the capacity
and under the terms set forth below and Employee desires to be employed by
Company in that capacity and on those terms;
NOW, THEREFORE, it is agreed as follows:
1. Employment; Position; Duties.
(a) Company hereby employs Employee, and Employee
hereby accepts employment by Company, on the terms and conditions set forth in
this Agreement. Employee shall initially serve as the Chief Financial Officer
of Company, subject to the direction of the Chief Operating Officer of the
Company. Employee has been advised that the Company may elect to engage
another individual to serve as the Chief Financial Officer of the Company, in
which event Employee shall serve as a Vice President-Controller of the Company.
If elected, Employee agrees to serve as a member of the Board of Directors of
the Company (the "Board").
(b) The duties of Employee initially shall be
those customarily associated with the offices of Chief Financial Officer
including having control over the financial accounts of the Company, subject to
the policies of the Company as determined by the Board. If the Company shall
engage a new Chief Financial Officer, the duties of Employee shall be
commensurate with the office of a Vice President-Controller.
(c) During the Term, Employee shall devote his
entire working time and attention to the business and affairs of the Company
and shall use his best efforts to promote the business of the Company. During
the term of his employment hereunder, Employee shall have no interest in or
perform any material service for any other business entity whether or not
competitive with Company, except that the aforesaid prohibition against
ownership shall not apply to either inactive investments in public companies
whose stock is traded on a national securities exchange or actively traded over
the counter or passive investments in entities not competitive with Company.
(d) Employee will report to the Chief Operating
Officer and will provide him with such written reports relating to the
Company's business as he may request.
<PAGE> 2
2. Term. The term of Employee's employment (the "Term")
shall be for a period of approximately three years commencing on the Effective
Date (as hereinafter defined) and ending, notwithstanding the Effective Date,
on September 30, 2000. The "Effective Date" means the date on which the
currently contemplated initial public offering of common stock of Company (the
IPO) is consummated. Anything contained herein to the contrary
notwithstanding, Employee acknowledges that this Agreement is being entered
into in contemplation of the aforesaid IPO and that, if such IPO does not
become effective, for any reason whatsoever, this Agreement shall be of no
force or effect.
In the event that Employee continues in the full-time
employ of Company after the end of the Term, such continued employment shall be
on a year-to-year basis subject to the terms and conditions hereof. As used in
this Agreement, the "First Contract Year" means the period commencing on the
Effective Date and ending on September 30, 1998; the "Second Contract Year"
means the one-year period immediately following the First Contract Year; and
the "Third Contract Year" means the one-year period immediately following the
Second Contract Year. Each subsequent October 1st occurring during the period
in which Employee is employed by the Company shall be deemed to commence a new
contract year.
3. Compensation; Benefits.
(a) In consideration of the services to be
rendered by Employee hereunder, Company shall pay Employee the following
compensation:
(i) in the First Contract Year a base
salary at the rate of $77,000 per annum;
(ii) in the Second Contract Year the
Employee shall be paid a base salary equal to $77,000 plus an amount equal to
$77,000 times (the percentage increase in the Consumer Price Index from August
1, 1997 to August 1, 1998 plus 5%). Thus, if the percentage increase in the
CPI was 5%, commencing October 1, 1998, Employee's salary would be $84,700
($77,000 + ($77,000 x .10));
(iii) in the Third Contract Year the Employee
shall be paid a base salary equal to his salary rate for the Second Contract
Year plus an amount equal to his salary rate for the Second Contract Year times
the percentage increase in the Consumer Price Index from August 1, 1998 to
August 1, 1999 plus 5%.
(b) Company shall reimburse Employee promptly
upon presentation of receipts or other satisfactory documentation for all
reasonable expenses incurred by him in the furtherance of and in connection
with his employment hereunder.
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<PAGE> 3
(c) Company shall provide Employee with such
medical and disability insurance as it makes available to its executives
generally on substantially the same terms and conditions as such insurance is
made available to other executives.
(d) In recognition of Employee's need for a car
to perform services required of him by the Company, the Company shall pay to
Employee a car allowance of $350 per month.
(e) Employee shall be entitled to two (2) weeks
vacation in each calendar year during the Term, such vacation to be taken at
times not inconvenient to Company.
(f) As additional consideration for Employee's
execution and delivery of this Agreement, the Company has issued to Employee
100,000 shares of its Common Stock. The Employee agrees not to sell or
otherwise transfer 90,000 of such shares prior to the second anniversary of the
Effective Date without the prior written consent of the Company. Upon request,
the Employee shall enter into a "lock-up" agreement with the underwriter of the
IPO confirming his agreement not to transfer 90,000 of his shares prior to the
second anniversary of the Effective Date without the consent of the
underwriter. Employee shall be released from the transfer restriction
contained in this paragraph upon termination of this Agreement.
(g) Pursuant to the term of the Company's Stock
Option Plan (the "Plan") the Company shall grant to Employee options to
purchase 12,500 shares of the Company's Common Stock at a price of $5.00 per
share. The right to exercise such options shall vest in equal increments on
September 1, 1998, and September 1, 1999. The terms and conditions of such
options to be fully set forth in a Stock Option Agreement to be issued in
accordance with the Plan.
(h) Prior to the second anniversary of the
Effective Date the Company shall register for sale under the Securities Act of
1933, as amended, the shares referenced in subparagraph (f) and the shares
underlying the options referenced in subparagraph (g).
4. Termination.
(a) This Agreement may be terminated by Company
for cause (as defined below) immediately upon written notice thereof to
Employee. Upon termination for cause, Company shall not be obligated to make
any further payment to Employee under this Agreement, but the provisions of
paragraph 6 shall survive any such termination. For the purposes of this
Agreement, the phrase "for cause" shall mean Employee's (i) conviction of the
willful violation of any law, rule or regulation, other than minor violations
(which, through lapse of time or otherwise, is not subject to appeal); (ii)
acts with respect to the property of the
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<PAGE> 4
Company which constitute larceny, fraud, theft, embezzlement or the acceptance
of a bribe or kick back; (iii) willful misconduct as an employee of Company;
(iv) willful misrepresentation of a material matter to the Board; or (v)
reckless disregard of his responsibilities under this Agreement.
(b) If as a result of Employee's incapacity due
to physical or mental illness, he shall have been absent from his duties with
Company on a continuous basis for more than ninety days or for more than ninety
working days during any nine month period, Company may upon thirty days prior
written notice, terminate Employee's employment for "disability". Upon any
such termination, except as otherwise required by law, Employee's rights to
receive salary or other compensation or benefits hereunder shall terminate as
of the date set forth in such notice.
(c) This Agreement shall terminate automatically
upon Employee's death.
(d) In the event that Employee remains employed
by the Company for the full Term of this Agreement but Company determines that
it does not intend to offer to employ Employee on substantially the same or
better terms after the end of the Term, the Company shall, not less than 45
days prior to the end of the Term, provide written notice to Employee of such
determination. Notwithstanding the provisions of paragraph 1(c) of this
Agreement, after receipt of such a notice, for the duration of the Term,
Employee shall be permitted to devote a reasonable amount of his working time
and attention to making arrangements for his employment after the Term,
however, nothing contained herein shall diminish Employee's continuing
obligation, during the balance of the Term, to use his best efforts to promote
the business of the Company.
5. No Conflicting Agreement. Employee represents and
warrants that he is not subject to any employment agreement, restrictive
covenant, agreement or contract which might limit the performance of his duties
and responsibilities hereunder. Employee further represents and warrants that
he has made no commitment of any kind whatsoever inconsistent with the
provisions of this Agreement and that he is under no disability of any kind
which would prevent him from entering into this Agreement and performing all of
his obligations hereunder.
6. Non-Competition; Confidentiality.
(a) Employee covenants and agrees with Company that
he will not, directly or indirectly:
(i) while he is in Company's employ and
at any time after the termination of his employment hereunder, disclose or use
or otherwise exploit for his own benefit or the benefit of any
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<PAGE> 5
other person (other than for the benefit of Company) any Confidential
Information (as hereinafter defined) disclosed to Employee or of which Employee
becomes aware by reason of his employment with Company;
(ii) while he is in Company's employ and
through the period ending two years after the termination of his employment
hereunder, solicit or divert or appropriate to any Competing Business (as
hereinafter defined), directly or indirectly, or attempt to solicit or divert
or appropriate to any such Competing Business, any person or entity who was a
customer or client of Company at any time during the last six months of
Employee's employment hereunder;
(iii) while he is in Company's employ and
through the period ending two years after the termination of his employment
hereunder, employ or attempt to employ or assist anyone else in employing any
person who, at any time within the period commencing six months prior to the
date of the termination of Employee's employment by Company and ending one year
after the date of such termination, was, is or shall be an employee of Company
(whether or not such employment is full time or is pursuant to a written
contract with Company); and
(iv) while he is in Company's employ and
through the period ending ninety days after his employment hereunder, as an
individual or as agent, employee, partner, officer, director, owner or
independent contractor of any person or entity, engage in any Competing
Business, directly or indirectly.
(b) Employee agrees that upon the termination of
his employment (whether voluntarily or involuntarily) he will not take with him
or retain without the Company's written authorization, and will promptly
deliver to Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to Company.
(c) For purposes of this Paragraph, the term
"Competing Business" means any business located within the United States
providing services substantially similar to those provided by the Company from
time to time. The term "Confidential Information" means any and all data and
information relating to the business of the Company (whether constituting a
trade secret or not) which is or has been disclosed to Employee or of which
Employee becomes aware as a consequence of or through his relationship with the
Company and which has value to the Company and is not generally known by its
competitors. Confidential Information shall not include any data or
information that has been voluntarily disclosed to the public by Company
(except where such public disclosure has been made by Employee without
authorization)
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<PAGE> 6
or that has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means.
If a court of competent jurisdiction determines that
any of the provisions related to the right of Employee to compete with Company
upon termination of his employment or to use information made know to him
during the course of his employment by Company are not enforceable because of
their length or territorial scope, Company and Employee agree that such court
may limit the term or scope of such provision to such extent as is necessary to
render it enforceable and that such provision, as so revised, shall be
enforceable.
(d) Employee acknowledges that irreparable loss
and injury would result to Company upon the breach of any of the covenants
contained in this paragraph 6 and that damages arising out of such breach would
be difficult to ascertain. Employee agrees that, in addition to all other
remedies available at law or at equity, Company may petition and obtain from a
court of law or equity both temporary and permanent injunctive relief to
prevent a breach by Employee of any covenant contained in this Paragraph 6 and
that in any action or proceeding brought to enforce any provision of this
Paragraph 6, the prevailing party shall be entitled to recover from the
non-prevailing party the former's reasonable costs of enforcement, including
legal fees.
7. Severance. In the event that any provision (or any
portion of any provision) of this Agreement shall be held to be void or
unenforceable, the remaining provisions of this Agreement (and the balance of
any provisions held void or unenforceable in part only) shall continue in full
force and effect, unless dependent upon an unenforceable or void provision.
8. Resignation. Upon the termination of his employment
for any reason Employee shall be deemed to resign as an officer and director of
Company and its affiliates, if then so acting.
9. Assignment; Successors. This Agreement may not be
assigned by Employee, but may be assigned by Company to any successor in
interest to its business. This Agreement shall inure to the benefit of and
shall be binding upon Company, its successors and assigns, and Employee, his
heirs, legal representatives, executors and assigns.
10. Complete Agreement; Governing Law. This Agreement
contains the full and complete understanding and agreement of the parties and
supersedes all prior agreements and understanding between the parties with
respect to the subject matter hereof. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
agreements made and wholly performed within said State, and may not be
modified, amended, terminated or discharged orally.
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<PAGE> 7
11. Waiver; Estoppel. No waiver by either party of any
breach of any provision of this Agreement shall be deemed a waiver of any
preceding or succeeding breach of such provision or of a other provision herein
contained.
12. Notices. Any notices hereunder shall be in
writing and delivered at the addresses set forth above, or to such other
address or addresses as may hereafter be furnished in writing by one party to
the other, by certified mail, return receipt requested, or by telecopier. All
such notices shall be deemed effective upon receipt.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
---------------------------------
Jerrold B. Sendrow
800 TRAVEL SYSTEMS, INC.
By:
------------------------------
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<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of the 1st day of September, 1997 by
and between 800 Travel Systems, Inc., a Delaware corporation ("Company") with
an office at 4802 Gunn Highway, Tampa, Florida 33624 and Biagio Bellizzi
("Employee") an individual residing at [address].
WHEREAS, Company desires to employ Employee in the capacity
and under the terms set forth below and Employee desires to be employed by
Company in that capacity and on those terms;
NOW, THEREFORE, it is agreed as follows:
1. Employment; Position; Duties.
(a) Company hereby employs Employee, and Employee
hereby accepts employment by Company, on the terms and conditions set forth in
this Agreement. During the Term of this Agreement (as defined below) Employee
shall serve as the Vice President-Marketing of the Company, subject to the
direction of the Chief Operating Officer of the Company, and in connection
therewith shall perform his duties in accordance with the instructions and
policies of the Chief Operating Officer.
(b) The duties of Employee shall be those
customarily associated with a director of marketing of a company engaged in
operations similar to those of the Company as more fully determined by the
Board of Directors of the Company (the "Board").
(c) During the Term, Employee shall devote his
entire working time and attention to the business and affairs of the Company
and shall use his best efforts to promote the business of the Company. During
the term of his employment hereunder, Employee shall have no interest in or
perform any material service for any other business entity whether or not
competitive with Company, except that the aforesaid prohibition against
ownership shall not apply to either inactive investments in public companies
whose stock is traded on a national securities exchange or actively traded over
the counter or passive investments in entities not competitive with Company.
(d) Employee will report to the Chief Operating
Officer and will provide him with such written reports relating to the
Company's business as he may request.
2. Term. The term of Employee's employment (the "Term")
shall be for a period of approximately three years commencing on the Effective
Date (as hereinafter defined) and ending, notwithstanding the Effective Date,
on September 30, 2000. The "Effective Date" means the date on which the
currently contemplated initial public offering of common stock of Company
<PAGE> 2
(the IPO) is consummated. Anything contained herein to the contrary
notwithstanding, Employee acknowledges that this Agreement is being entered
into in contemplation of the aforesaid IPO and that, if such IPO does not
become effective, for any reason whatsoever, this Agreement shall be of no
force or effect.
In the event that Employee continues in the full-time
employ of Company after the end of the Term, such continued employment shall be
on a year-to-year basis subject to the terms and conditions hereof. As used in
this Agreement, the "First Contract Year" means the period commencing on the
Effective Date and ending on September 30, 1998 the "Second Contract Year"
means the one-year period immediately following the First Contract Year; and
the "Third Contract Year" means the one-year period immediately following the
Second Contract Year. Each subsequent October 1st occurring during the period
in which Employee is employed by the Company shall be deemed to commence a new
contract year.
3. Compensation; Benefits.
(a) In consideration of the services to be
rendered by Employee hereunder, Company shall pay Employee the following
compensation:
(i) in the First Contract Year a base
salary at the rate of $50,000 per annum;
(ii) in the Second Contract Year the
Employee shall be paid a base salary equal to $50,000 plus an amount equal to
$50,000 times (the percentage increase in the Consumer Price Index from August
1, 1997 to August 1, 1998 plus 5%). Thus, if the percentage increase in the
CPI was 5%, commencing October 1, 1998, Employee's salary would be $55,000
($50,000 + ($50,000 x .10));
(iii) in the Third Contract Year the Employee
shall be paid a base salary equal to his salary rate for the Second Contract
Year plus an amount equal to his salary rate for the Second Contract Year times
the percentage increase in the Consumer Price Index from August 1, 1998 to
August 1, 1999 plus 5%.
Notwithstanding the foregoing, at the end of 1997 the Chairman
of the Board of Directors shall review Employee's performance to determine if
it is appropriate to increase his base salary.
(b) Company shall reimburse Employee promptly
upon presentation of receipts or other satisfactory documentation for all
reasonable expenses incurred by him in the furtherance of and in connection
with his employment hereunder.
(c) Company shall provide Employee with such
medical and disability insurance as it makes available to its executives
generally on substantially the same terms and conditions as such insurance is
made available to other executives.
<PAGE> 3
(d) Employee shall be entitled to twice (2) weeks
vacation in each calendar year during the Term, such vacation to be taken at
times not inconvenient to Company.
(e) As additional consideration for Employee's
execution and delivery of this Agreement, the Company has issued to Employee
50,000 shares of its Common Stock. The Employee agrees not to sell or
otherwise transfer 45,000 of such shares prior to the second anniversary of the
Effective Date without the prior written consent of the Company. Upon request,
the Employee shall enter into a "lock-up" agreement with the underwriter of the
IPO confirming his agreement not to transfer any of his shares prior to the
second anniversary of the Effective Date without the consent of the
underwriter. Employee shall be released from the transfer restriction
contained in this paragraph upon termination of this Agreement.
(f) Pursuant to the terms of the Company's Stock
Option Plan (the "Plan") the Company shall grant to Employee options to
purchase 12,500 shares of the Company's Common Stock at a price of $5.00 per
share. The right to exercise such options shall vest in equal increments on
September 1, 1998, and September 1, 1999. The terms and conditions of such
options to be fully set forth in a Stock Option Agreement to be issued in
accordance with the Plan.
(g) No later than ninety (90) days after the
second anniversary of the Effective Date the Company shall register for sale
under the Securities Act of 1933, as amended, the shares referenced in
subparagraph (e) and the shares underlying the options referenced in
subparagraph (f).
4. Termination.
(a) This Agreement may be terminated by Company
for cause (as defined below) immediately upon written notice thereof to
Employee. Upon termination for cause, Company shall not be obligated to make
any further payment to Employee under this Agreement, but the provisions of
paragraph 6 shall survive any such termination. For the purposes of this
Agreement, the phrase "for cause" shall mean Employee's (i) conviction of the
willful violation of any law, rule or regulation, other than minor violations
(which, through lapse of time or otherwise, is not subject to appeal); (ii)
acts with respect to the property of the Company which constitute larceny,
fraud, theft, embezzlement or the acceptance of a bribe or kick back; (iii)
willful misconduct as an employee of Company; (iv) willful misrepresentation of
a material matter to the Board; or (v) reckless disregard of his
responsibilities under this Agreement.
(b) If as a result of Employee's incapacity due
to physical or mental illness, he shall have been absent from his
-3-
<PAGE> 4
duties with Company on a continuous basis for more than ninety days or for more
than ninety working days during any nine month period, Company may upon thirty
days prior written notice, terminate Employee's employment for "disability".
Upon any such termination, except as otherwise required by law, Employee's
rights to receive salary or other compensation or benefits hereunder shall
terminate as of the date set forth in such notice.
(c) This Agreement shall terminate automatically
upon Employee's death.
(d) In the event that Employee remains employed
by the Company for the full Term of this Agreement but Company determines that
it does not intend to offer to employ Employee on substantially the same or
better terms after the end of the Term, the Company shall, not less than 45
days prior to the end of the Term, provide written notice to Employee of such
determination. Notwithstanding the provisions of paragraph 1(c) of this
Agreement, after receipt of such a notice, for the duration of the Term,
Employee shall be permitted to devote a reasonable amount of his working time
and attention to making arrangements for his employment after the Term,
however, nothing contained herein shall diminish Employee's continuing
obligation, during the balance of the Term, to use his best efforts to promote
the business of the Company.
5. No Conflicting Agreement. Employee represents and
warrants that he is not subject to any employment agreement, restrictive
covenant, agreement or contract which might limit the performance of his duties
and responsibilities hereunder. Employee further represents and warrants that
he has made no commitment of any kind whatsoever inconsistent with the
provisions of this Agreement and that he is under no disability of any kind
which would prevent him from entering into this Agreement and performing all of
his obligations hereunder.
6. Non-Competition; Confidentiality.
(a) Employee covenants and agrees with Company that
he will not, directly or indirectly:
(i) while he is in Company's employ and
at any time after the termination of his employment hereunder, disclose or use
or otherwise exploit for his own benefit or the benefit of any other person
(other than for the benefit of Company) any Confidential Information (as
hereinafter defined) disclosed to Employee or of which Employee becomes aware
by reason of his employment with Company;
(ii) while he is in Company's employ and
through the period ending two years after the termination of his employment
hereunder, solicit or divert or appropriate to any
-4-
<PAGE> 5
Competing Business (as hereinafter defined), directly or indirectly, or attempt
to solicit or divert or appropriate to any such Competing Business, any person
or entity who was a customer or client of Company at any time during the last
six months of Employee's employment hereunder;
(iii) while he is in Company's employ and
through the period ending two years after the termination of his employment
hereunder, employ or attempt to employ or assist anyone else in employing any
person who, at any time within the period commencing six months prior to the
date of the termination of Employee's employment by Company and ending one year
after the date of such termination, was, is or shall be an employee of Company
(whether or not such employment is full time or is pursuant to a written
contract with Company); and
(iv) while he is in Company's employ and
through the period ending ninety days after his employment hereunder, as an
individual or as agent, employee, partner, officer, director, owner or
independent contractor of any person or entity, engage in any Competing
Business, directly or indirectly.
(b) Employee agrees that upon the termination of
his employment (whether voluntarily or involuntarily) he will not take with him
or retain without the Company's written authorization, and will promptly
deliver to Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to Company.
(c) For purposes of this Paragraph, the term
"Competing Business" means any business located within the United States
providing services substantially similar to those provided by the Company from
time to time. The term "Confidential Information" means any and all data and
information relating to the business of the Company (whether constituting a
trade secret or not) which is or has been disclosed to Employee or of which
Employee becomes aware as a consequence of or through his relationship with the
Company and which has value to the Company and is not generally known by its
competitors. Confidential Information shall not include any data or
information that has been voluntarily disclosed to the public by Company
(except where such public disclosure has been made by Employee without
authorization) or that has been independently developed and disclosed by
others, or that otherwise enters the public domain through lawful means. If
a court of competent jurisdiction determines that any of the provisions related
to the right of Employee to compete with Company upon termination of his
employment or to use information made know to him during the course of his
employment by Company are not enforceable because of their length or
territorial scope, Company and Employee agree that such court may limit the
term or scope of such provision to such extent as is necessary to
-5-
<PAGE> 6
render it enforceable and that such provision, as so revised, shall be
enforceable.
(d) Employee acknowledges that irreparable loss
and injury would result to Company upon the breach of any of the covenants
contained in this paragraph 6 and that damages arising out of such breach would
be difficult to ascertain. Employee agrees that, in addition to all other
remedies available at law or at equity, Company may petition and obtain from a
court of law or equity both temporary and permanent injunctive relief to
prevent a breach by Employee of any covenant contained in this Paragraph 6 and
that in any action or proceeding brought to enforce any provision of this
Paragraph 6, the prevailing party shall be entitled to recover from the non-
prevailing party the former's reasonable costs of enforcement, including legal
fees.
7. Severance. In the event that any provision (or any
portion of any provision) of this Agreement shall be held to be void or
unenforceable, the remaining provisions of this Agreement (and the balance of
any provisions held void or unenforceable in part only) shall continue in full
force and effect, unless dependent upon an unenforceable or void provision.
8. Resignation. Upon the termination of his employment
for any reason Employee shall be deemed to resign as an officer and director of
Company and its affiliates, if then so acting.
9. Assignment; Successors. This Agreement may not be
assigned by Employee, but may be assigned by Company to any successor in
interest to its business. This Agreement shall inure to the benefit of and
shall be binding upon Company, its successors and assigns, and Employee, his
heirs, legal representatives, executors and assigns.
10. Complete Agreement; Governing Law. This Agreement
contains the full and complete understanding and agreement of the parties and
supersedes all prior agreements and understanding between the parties with
respect to the subject matter hereof. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
agreements made and wholly performed within said State, and may not be
modified, amended, terminated or discharged orally.
11. Waiver; Estoppel. No waiver by either party of any
breach of any provision of this Agreement shall be deemed a waiver of any
preceding or succeeding breach of such provision or of a other provision herein
contained.
12. Notices. Any notices hereunder shall be in
writing and delivered at the addresses set forth above, or to such other
address or addresses as may hereafter be furnished in writing by one party to
the other, by certified mail, return receipt
-6-
<PAGE> 7
requested, or by telecopier. All such notices shall be deemed effective upon
receipt.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
------------------------------
Biagio Bellizzi
800 TRAVEL SYSTEMS, INC.
By:
----------------------------
-7-
<PAGE> 1
Exhibit 10.23
PROMISSORY NOTE
$50,000.00 Dated: August __, 1997
MICHAEL GAGGI, an individual whose address is c/o Joseph Stevens &
Company, L.P., 33 Maiden Lane, New York, New York 11038 (the "Borrower"), for
value received, hereby promises to pay to 800 TRAVEL SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Delaware,
with an address at 4802 Gunn Highway, Tampa, Florida 33624 (the "Holder"), the
principal amount of FIFTY THOUSAND DOLLARS ($50,000.00), together with interest
thereon, beginning on September 1, 1997, at the rate of seven percent (7.0%)
per annum. The first payment of interest only shall be due on December 31,
1997. Thereafter, the principal amount of this Note, together with interest
thereon, shall be paid in eight (8) consecutive quarterly installments
commencing March 31, 1998. The Borrower may prepay any and all amounts
outstanding under this Note, together with unpaid interest thereon, at any time
without any premium.
All payments of principal and interest shall be payable by check or in
cash to Holder (or to such payee as Holder may designate) at the Holder's
address (or such other place or places that the Holder may direct in writing);
provided, however, that at any time following the consummation of the Holder's
initial public offering of its equity securities, all outstanding amounts of
principal and interest on this Note may be paid with shares of the Holder's
Common Stock, par value $.01 per share (the "Common Stock"), having a value
equal to the aggregate amount then due (based on the average closing price of
the Common Stock during the 5 trading-day period immediately preceding the date
of repayment)
An "Event of Default" shall be deemed to occur if any one or more of
the following shall happen (for any reason whatsoever and whether such
happening shall be voluntary or involuntary):
(a) if default be made in the punctual payment of the principal
and interest on this Note when and as the same shall become
due and payable, and should such default continue for a period
of thirty (30) days after notice as authorized by this Note or
otherwise; or
(b) if the Borrower admits in writing his inability to pay his
debts as they become due; or
(c) if a receiver is appointed for all or any part of the property
of, or an assignment is made for the benefit of creditors by,
or any proceeding
<PAGE> 2
under any bankruptcy or insolvency laws is commenced by or
against, the Borrower.
If an Event of Default occurs and is continuing then, at the option of
the Holder, exercised by written notice to the Borrower, the principal of this
Note shall forthwith become due and payable, together with the interest accrued
hereon. If an Event of Default specified in clauses (b) or (c) occurs at any
time, such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Holder.
No failure on the part of the Holder to exercise any of its rights
hereunder shall be deemed a waiver of such rights or of any default. Any
notice required to be given hereunder shall be given by registered mail to the
Holder or the Borrower, as the case may be, at his or its address set forth
above, unless and until a party receives written notice of a change in address
from the other party.
The Borrower and any other person or entity at any time liable for the
payment of any or all of the indebtedness evidenced by this Note hereby waives
presentment for payment, demand, notice of non-payment of this Note, protest or
notice of protest, and consents to the extension at any time by the Holder or
other holder hereof, without notice of the time of payment of any part or the
whole of the indebtedness evidenced hereby.
This Note shall be governed by and construed in accordance with the
laws of the State of New York without reference to the conflict of laws
principles thereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed and
to be dated as of the day and year first above written.
_________________________________
Michael Gaggi
<PAGE> 1
Exhibit 10.24
PROMISSORY NOTE
$9,000.00 Dated: August __, 1997
LUCIEN BITTAR, an individual whose address is 1300 Gulf Boulevard
#501, Indian Rocks Beach, Florida 33635 (the "Borrower"), for value received,
hereby promises to pay to 800 TRAVEL SYSTEMS, INC., a corporation organized and
existing under the laws of the State of Delaware, with an address at 4802 Gunn
Highway, Tampa, Florida 33624 (the "Holder"), the principal amount of NINE
THOUSAND DOLLARS ($9,000.00), together with interest thereon, beginning on
September 1, 1997, at the rate of seven percent (7.0%) per annum. The first
payment of interest only shall be due on December 31, 1997. Thereafter, the
principal amount of this Note, together with interest thereon, shall be paid in
eight (8) consecutive quarterly installments commencing March 31, 1998. The
Borrower may prepay any and all amounts outstanding under this Note, together
with unpaid interest thereon, at any time without any premium.
All payments of principal and interest shall be payable by check or in
cash to Holder (or to such payee as Holder may designate) at the Holder's
address (or such other place or places that the Holder may direct in writing);
provided, however, that at any time following the consummation of the Holder's
initial public offering of its equity securities, all outstanding amounts of
principal and interest on this Note may be paid with shares of the Holder's
Common Stock, par value $.01 per share (the "Common Stock"), having a value
equal to the aggregate amount then due (based on the average closing price of
the Common Stock during the 5 trading-day period immediately preceding the date
of repayment)
An "Event of Default" shall be deemed to occur if any one or more of
the following shall happen (for any reason whatsoever and whether such
happening shall be voluntary or involuntary):
(a) if default be made in the punctual payment of the principal
and interest on this Note when and as the same shall become
due and payable, and should such default continue for a period
of thirty (30) days after notice as authorized by this Note or
otherwise; or
(b) if the Borrower admits in writing his inability to pay his
debts as they become due; or
(c) if a receiver is appointed for all or any part of the property
of, or an assignment is made for the benefit of creditors by,
or any proceeding
<PAGE> 2
under any bankruptcy or insolvency laws is commenced by or
against, the Borrower.
If an Event of Default occurs and is continuing then, at the option of
the Holder, exercised by written notice to the Borrower, the principal of this
Note shall forthwith become due and payable, together with the interest accrued
hereon. If an Event of Default specified in clauses (b) or (c) occurs at any
time, such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Holder.
No failure on the part of the Holder to exercise any of its rights
hereunder shall be deemed a waiver of such rights or of any default. Any
notice required to be given hereunder shall be given by registered mail to the
Holder or the Borrower, as the case may be, at his or its address set forth
above, unless and until a party receives written notice of a change in address
from the other party.
The Borrower and any other person or entity at any time liable for the
payment of any or all of the indebtedness evidenced by this Note hereby waives
presentment for payment, demand, notice of non-payment of this Note, protest or
notice of protest, and consents to the extension at any time by the Holder or
other holder hereof, without notice of the time of payment of any part or the
whole of the indebtedness evidenced hereby.
This Note shall be governed by and construed in accordance with the
laws of the State of New York without reference to the conflict of laws
principles thereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed and
to be dated as of the day and year first above written.
_________________________________
Lucien Bittar
<PAGE> 1
Exhibit 10.25
PROMISSORY NOTE
$50,000.00 Dated: August __, 1997
VITO BALSAMO, an individual whose address is c/o Joseph Stevens &
Company, L.P., 33 Maiden Lane, New York, New York 11038 (the "Borrower"), for
value received, hereby promises to pay to 800 TRAVEL SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Delaware,
with an address at 4802 Gunn Highway, Tampa, Florida 33624 (the "Holder"), the
principal amount of FIFTY THOUSAND DOLLARS ($50,000.00), together with interest
thereon, beginning on September 1, 1997, at the rate of seven percent (7.0%)
per annum. The first payment of interest only shall be due on December 31,
1997. Thereafter, the principal amount of this Note, together with interest
thereon, shall be paid in eight (8) consecutive quarterly installments
commencing March 31, 1998. The Borrower may prepay any and all amounts
outstanding under this Note, together with unpaid interest thereon, at any time
without any premium.
All payments of principal and interest shall be payable by check or in
cash to Holder (or to such payee as Holder may designate) at the Holder's
address (or such other place or places that the Holder may direct in writing);
provided, however, that at any time following the consummation of the Holder's
initial public offering of its equity securities, all outstanding amounts of
principal and interest on this Note may be paid with shares of the Holder's
Common Stock, par value $.01 per share (the "Common Stock"), having a value
equal to the aggregate amount then due (based on the average closing price of
the Common Stock during the 5 trading-day period immediately preceding the date
of repayment)
An "Event of Default" shall be deemed to occur if any one or more of
the following shall happen (for any reason whatsoever and whether such
happening shall be voluntary or involuntary):
(a) if default be made in the punctual payment of the principal
and interest on this Note when and as the same shall become
due and payable, and should such default continue for a period
of thirty (30) days after notice as authorized by this Note or
otherwise; or
(b) if the Borrower admits in writing his inability to pay his
debts as they become due; or
(c) if a receiver is appointed for all or any part of the property
of, or an assignment is made for the benefit of creditors by,
or any proceeding
<PAGE> 2
under any bankruptcy or insolvency laws is commenced by or
against, the Borrower.
If an Event of Default occurs and is continuing then, at the option of
the Holder, exercised by written notice to the Borrower, the principal of this
Note shall forthwith become due and payable, together with the interest accrued
hereon. If an Event of Default specified in clauses (b) or (c) occurs at any
time, such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Holder.
No failure on the part of the Holder to exercise any of its rights
hereunder shall be deemed a waiver of such rights or of any default. Any
notice required to be given hereunder shall be given by registered mail to the
Holder or the Borrower, as the case may be, at his or its address set forth
above, unless and until a party receives written notice of a change in address
from the other party.
The Borrower and any other person or entity at any time liable for the
payment of any or all of the indebtedness evidenced by this Note hereby waives
presentment for payment, demand, notice of non-payment of this Note, protest or
notice of protest, and consents to the extension at any time by the Holder or
other holder hereof, without notice of the time of payment of any part or the
whole of the indebtedness evidenced hereby.
This Note shall be governed by and construed in accordance with the
laws of the State of New York without reference to the conflict of laws
principles thereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed and
to be dated as of the day and year first above written.
_________________________________
Vito Balsamo
<PAGE> 1
Exhibit 10.26
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made as of this 1st
day of September, 1997, by and between 800 Travel Systems, Inc., a Delaware
corporation (the "Company"), and each of the parties which are signatories
hereto (collectively, the "Holders").
W I T N E S S E T H:
The Company has requested that the Holders enter into a Lock-up
Agreement with the representative of the underwriters of the Company's proposed
public offering whereby the Holders shall be prevented from selling their
shares of common stock in the Company for up to two years. As a condition to
the execution and delivery of the Lock-up Agreements the Holders have requested
and the Company has agreed to enter into this agreement providing for the
registration of the shares of common stock of the Company held by the Holders.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
"Holder" or "Holders" shall mean any holder of the Registrable
Securities.
The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registrable Securities" shall mean the shares of common stock
of the Company held by each Holder as indicated on the signature page hereto
(the "Shares") and any securities issued in respect of the Shares upon any
stock split, stock dividend, merger, consolidation, recapitalization or similar
event.
<PAGE> 2
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 2 or 3 hereof, including, without
limitation, any registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
reasonable fees and expenses (not to exceed $5,000) of one counsel for all the
selling Holders and other holders of the Company's securities and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included under Registration Expenses).
2. REGISTRATION. If at any time after the second anniversary of
the closing of the Company's contemplated public offering, the Company shall
receive a request from the Holders of Shares representing more than 3% of the
common stock then outstanding and having a fair market in excess of $500,000,
the Company shall give prompt notice of such request to the Holders of all of
the Shares and thereupon use reasonable efforts to register for sale under the
Securities Act of 1933, as amended, all Shares which the Company is requested
to register. The Company shall keep the registration statement with respect to
the Shares (the "Registration Statement") effective, or shall file such post-
effective amendments or subsequent Registration Statements as are necessary to
enable the Holders to distribute the Registrable Securities, until nine months
years from the effective date thereof. The Company will be entitled to impose
limited blackout periods during which the Holders will not be able to sell
pursuant to Registration Statements, if it determines, in its reasonable
judgment after consultation with Company's counsel, that such sales would
require the premature announcement of any material financing, acquisition,
corporate reorganization or other material corporate transaction or development
involving the Company if, in the Company's reasonable determination, such
announcement would be materially detrimental to the interests of the Company
and its stockholders. The postponement or interruption will be for the minimum
period reasonably required to avoid such premature disclosure and the aforesaid
nine months shall be extended for a period equal to such blackout periods.
3. "PIGGYBACK" REGISTRATION; UNDERWRITING.
(a) If two years after the closing of the Company's initial
public offering, the Company shall determine to register any of its securities
either for its own account or the account of a securityholder or
securityholders exercising their respective demand registration rights (other
than a registration relating solely to employee benefit plans, a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales), then the Company
will:
(i) promptly give to each Holder written notice
thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
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<PAGE> 3
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Holder within
thirty (30) days after receipt of the written notice from the Company
described in clause (i) above, except as set forth in Section 3(b)
below. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise the Holders by written notice. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company distributing its securities for its own account through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of this Section 3, if the representative of the underwriters advises
the Company in writing that, in its opinion, inclusion of the Registrable
Securities in the underwriting would materially and adversely affect the
underwriting, the representative may (subject to the allocation priority set
forth below), limit the number of Registrable Securities to be included in the
registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares that are entitled
to be included in the registration and underwriting shall be allocated first to
the Company for securities being sold for its account and then in the following
manner:
(i) the securities requested to be registered by
other persons (other than the Holders as defined herein who by virtue
of agreements with the Company are entitled to include their
securities in any such registration (collectively, "Other
Stockholders") shall be excluded from such registration and
underwriting to the extent required by such limitation in proportion,
as nearly as practicable, to the respective amounts of securities
which they had requested to be registered, and
(ii) if a limitation on the number of shares is still
required, the securities being sold for the account of the Holders
shall be excluded from such registration and underwriting to the
extent required by such limitation in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities and
other securities which they had requested to be included in such
registration.
If any Holder of Registrable Securities or Other Stockholder who has requested
inclusion in such registration as provided above disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the underwriter and the other Holders. The securities so
withdrawn shall also be withdrawn from registration.
(c) Notwithstanding the foregoing, in the event that the
Company gives the notice provided for in Section 3(a)(i) above and any Holder
elects not to participate in the offering described in such notice, or fails to
provide the notice of intent to participate within the time prescribed
therefor, then such Holder shall not sell, assign, mortgage, transfer, pledge,
create a security interest in or lien upon, encumber, give, place in trust,
hypothecate or otherwise in any manner dispose of any of the Registrable
Securities then held by such Holder for a period commencing on the date of the
aforesaid notice from the Company until thirty (30) days following the
effectiveness of the registration statement relating to the offering.
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<PAGE> 4
4. EXPENSES AND PROCEDURE OF REGISTRATION.
(a) The Company shall bear all Registration Expenses and
the selling securityholders shall bear all Selling Expenses (in proportion, as
nearly as practicable, to the securities of each securityholder being
registered) incurred in connection with any registration, qualification or
compliance pursuant to the provisions of Section 2 or 3.
(b) In the case of each registration effected by the
Company pursuant to this Agreement (other than those effected pursuant to
Section 2), the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
(i) Keep such registration effective for a period
of six months or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of securities covered by such registration
statement;
(iii) Furnish such number of prospectuses and other
documents incident thereto, including any term sheet or any amendment
of or supplement to the prospectus, as a Holder from time to time may
reasonably request;
(iv) Cause all such Registrable Securities to be
listed on each, if any, securities exchange on which similar
securities issued by the Company are then listed; and
(v) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission.
5. INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors and partners, and each person controlling such Holder, with
respect to which registration, qualification or compliance has been effected
pursuant to this Section 5, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or
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<PAGE> 5
compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal
and any other expenses as they are reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
it are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its directors
and officers and each underwriter, if any, of the Company's securities covered
by such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other Holder and each of their officers, directors
and partners, and each person controlling such Holder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice in writing to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
5. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
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<PAGE> 6
(d) If the indemnification provided for in this Section 5
is unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the shareholders offering
securities in the offering (the "Selling Shareholders") on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and the
Selling Shareholders on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Selling Shareholders and the
parties' relevant intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Selling
Shareholders agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were based solely upon the number of entities
from whom contribution was requested or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 5(d). The amount paid or payable by an Indemnified Party as a result
of the losses, claims, damages and liabilities referred to above in this
Section 5(d) shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
6. INFORMATION BY HOLDER. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing and
as shall be necessary or desirable in connection with any registration,
qualification or compliance referred to in this Agreement.
7. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted to the Holders by the Company
under Sections 2 or 3 may be transferred or assigned, provided that the Company
is given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the Registrable Securities with respect to which such
registration rights are being transferred or assigned, and provided further
that the transferee or assignee of such rights assumes the obligations of the
Holders under this Agreement.
8. TERMINATION. The Company's obligations under Sections 2 and 3
of this Agreement shall terminate on the third anniversary of the date hereof.
9. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof. No amendment, alteration or modification of this
Agreement shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument executed by the Company and
the Holders of at least majority of the Registrable Securities. No waiver of
any provision of this Agreement shall be valid unless it is expressed in a
written instrument duly executed by the party or parties making such waiver.
The failure of any party to insist, in any
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<PAGE> 7
one or more instances, on performance of any of the terms and conditions of
this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term,
covenant or condition but the obligation of any party with respect thereto
shall continue in full force and effect.
10. SPECIFIC PERFORMANCE. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, all parties hereto shall have the right to specific performance of
the obligations of the other parties under this Agreement, and if any party
hereto shall institute an action or proceeding to enforce the provisions
hereof, any person (including the Company) against whom such action or
proceeding is brought hereby waives the claim or defense therein that such
party has an adequate remedy at law, and such person shall not urge in any such
action or proceeding the claim or defense that such remedy at law exists.
11. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, return receipt requested, or transmitted by facsimile
(receipt confirmed by telephone) or delivered either by hand, by messenger or
by nationally recognized overnight courier, addressed:
(a) if to the holders of the Registrable Securities, to
such other address as they shall have furnished to the Company in
writing,
and
(b) if to the Company, to the following address, or at
such other address as the Company shall have furnished to the holders
of the Registrable Securities and each such other holder in writing,
800 Travel Systems, Inc.
4802 Gunn Highway
Tampa, Florida 33624
Attn: President
Fax: (813) 908-0080
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Vincent J. McGill, Esq.
Fax: (212) 262-5152
Alternatively, to such other address as a party hereto supplies to
each other party in writing.
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<PAGE> 8
12. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective transferees, successors and assigns of the parties hereto,
whether so expressed or not.
13. GOVERNING LAW. This Agreement is to be governed by and
interpreted under the laws of the State of New York giving effect to the
principles of conflicts of laws thereof.
14. TITLES AND SUBTITLES. The titles of the sections of this
Agreement are for the convenience of reference only and are not to be
considered in construing this Agreement.
15. SEVERABILITY. The invalidity or unenforceability of any
provisions of this Agreement shall not be deemed to affect the validity or
enforceability of any other provision of this Agreement.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
17. TERMINATION. This Agreement shall terminate six years from
the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
800 TRAVEL SYSTEMS, INC.
By:___________________________________
Mark Mastrini, President
HOLDERS
______________________________________
Name:
No. of Shares:__________________________
______________________________________
Name:
No. of Shares:__________________________
-8-
<PAGE> 1
EXHIBIT 10.27
RELEASE AND REDEMPTION AGREEMENT
This AGREEMENT (this "Agreement") is made and entered into as of this
4th day of September, 1997, by and between 800 TRAVEL SYSTEMS, INC., a Delaware
corporation with an address at Suite 140, 4802 Gunn Highway, Tampa, Florida
33624 (the "Company"), and MICHAEL CANTOR, an individual with an address at
1160 South Ocean Boulevard, Manalapan, Florida 33462 (the "Shareholder").
R E C I T A L S
WHEREAS, the Shareholder is currently the beneficial and record holder
of 481,609 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and the Shareholder maintains that upon completion of the
contemplated public offering of shares of the Company's Common Stock (the
"IPO") he shall be entitled to receive additional shares of Common Stock;
WHEREAS a dispute has arisen between the Company and the Shareholder
regarding the Shareholder's right to receive additional shares of Common Stock
upon completion of the IPO; and
WHEREAS, the Company and the Shareholder mutually desire to resolve
such disputes as exist or may exist regarding the rights of Shareholder by
having the Company redeem all, and not less than all, of the shares of Common
Stock currently held by the Shareholder on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and other good and valuable considerations hereinafter contained, the
parties hereto agree as follows:
1. Redemption and Redemption Price. Subject to the conditions
set forth in paragraph 4 of this Agreement, at the Closing (as hereinafter
defined) the Company shall redeem from the Shareholder all, but not less than
all, of the 481,609 Shares of Common Stock currently held by Shareholder (the
"Shares") at an aggregate redemption price (the "Redemption Price") of
$2,133,750 or Four Dollars and Forty-Three Cents ($4.43) per share.
2. Closing.
A. Date, Time and Place. Subject to the provisions of
paragraphs 4(a) and 5 of this Agreement, the closing of the redemption
contemplated by this Agreement (the "Closing") shall take place at the offices
of Phillips Nizer Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New
York 10103 and shall occur simultaneously with the closing of the IPO.
Pursuant to a letter agreement dated July 22, 1997 by and among the Company,
the Shareholder and Jose Colon (the "Letter Agreement"), the closing of the IPO
and the Closing hereunder shall occur at the same place, and the Shareholder is
entitled to attend the closing of the IPO.
<PAGE> 2
B. Deliveries. At the Closing: (i) the Shareholder shall
sell, transfer and deliver the Shares to the Company, surrender and deliver to
the Company all certificates representing the Shares or any portion of the
Shares, together with stock powers separate from certificates, duly endorsed in
blank by the Shareholder, and deliver to the Company the certificate required
by paragraph 4(d) hereof; and (ii) the Company shall pay to the Shareholder the
Redemption Price, in full, in lawful money of the United States of America, by
causing a wire transfer of the Redemption Price to be delivered by the clearing
agent for the representative for the underwriters to such bank account as shall
be designated by the Shareholder for such purpose, and shall deliver to the
Shareholder the certificate required by paragraph 4(c) hereof.
3. Representation and Warranties.
(a) The Company represents and warrants to the Shareholder
that:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) The Company has full corporate power and
authority and has taken all corporate action necessary to authorize, execute
and deliver this Agreement and to consummate the transaction contemplated
hereby; and this Agreement has been duly executed and delivered by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency, moratorium
and similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought;
(iii) Neither the execution and delivery of this
Agreement, nor the consummation of the transaction contemplated hereby, does or
will violate any provision of the Company's Certificate of Incorporation or By-
laws, or violate or result in the breach of any agreement or any federal or
state law, rule, regulation, judgment, decree or order of any governmental
authority or court to which the Company is subject or by which it is bound;
(iv) The capital of the Company is, and at the
Closing will be, in excess of the Redemption Price, and the payment of the
Redemption Price will not impair the Company's capital; and
(v) The Shares have been duly authorized and
validly issued to the Shareholder and are non-assessable.
(b) The Shareholder represents and warrants to the Company
that:
(i) He is the sole beneficial and record holder of
the Shares, and has not granted or sold any options or other rights to purchase
any of the Shares to any individual, person or entity, other than to the
Company under this Agreement;
2
<PAGE> 3
(ii) The Shares are not subject to any liens or other
encumbrances, and at the Closing will be delivered free and clear of the same;
(iii) Neither the execution and delivery of this
Agreement nor the consummation of the transaction contemplated hereby does or
will violate or result in the breach of any agreement or any federal or state
law, rule, regulation, judgment, order or decree of any governmental authority
or court to which the Shareholder is subject or by which he is bound;
(iv) This Agreement has been duly executed and
delivered by the Shareholder and is a valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as may be limited
by bankruptcy, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought.
4. Conditions to Closing. The obligations of the parties to
consummate the transaction contemplated by this Agreement shall be subject to
satisfaction, on or before the Closing, of each of the following conditions
unless waived in writing by the party to be so satisfied:
(a) The IPO shall have been consummated and closed and the
Company shall have wired the Redemption Price to the Shareholder;
(b) The representations and warranties of each of the
Company and the Shareholder contained herein shall be true and accurate in all
material respects as of the date when made and at and as of the Closing as
though made at and as of such date;
(c) The Company shall have furnished to the Shareholder a
certificate of the Company's President to the effect that: (i) the IPO has been
consummated, and (ii) all representations and warranties of the Company
contained in this Agreement are true and accurate in all material respects at
and as of the Closing;
(d) The Shareholder shall have furnished to the Company
his certificate to the effect that all representations and warranties of the
Shareholder contained in this Agreement are true and accurate in all material
respects at and as of the Closing; and
(e) The Company and the Shareholder shall have each
delivered to the other a General Release in form and substance reasonably
satisfactory to each.
5. Termination. Anything contained in this Agreement to the
contrary notwithstanding, in the event the IPO has not been consummated and
closed on or before December 31, 1997, then either party may, upon not less
than two (2) weeks' prior written notice, terminate this Agreement.
3
<PAGE> 4
6. Notices. Any notice given or required to be given pursuant to
this Agreement shall be in writing and shall be deemed given three (3) days
after being deposited in the U.S. Mail, by postage prepaid certified mail,
return- receipt requested, addressed to the parties at the respective address
first above written or such other address as may be established by written
notice given in accordance with the provisions of this paragraph 6, with copies
if to Stockholder, to:
Singer & Zamansky LLP
40 Exchange Place
20th Floor
New York, New York 10005
Attention: Gregory Sichenzia, Esq.
and to:
Ronald Cantor, Esq.
c/o the Cantor Companies
Orchard Plaza
Suite 8
1610 Route 35 South
Oakhurst, New Jersey 07755
and, if the to Company, to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Vincent J. McGill, Esq.
7. Miscellaneous.
(a) Entire Agreement. Other than the Letter Agreement,
this Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior such agreements whether written
or oral, and may not be amended or otherwise modified except by a subsequent
written instrument duly executed by the parties hereto. Without limiting the
generality of the foregoing this Agreement supersedes the Stock Redemption
Agreement between the parties entered into on the 18th day of July, 1987.
(b) No Waiver. No delay or failure by either party to
exercise any right hereunder, and no partial or single exercise of any such
right, shall constitute a waiver of that right or any other right, unless
expressly waived in writing.
4
<PAGE> 5
(c) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to the conflict of laws provisions thereof.
(d) Binding Effect. The provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors, representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
800 TRAVEL SYSTEMS, INC.
By:
---------------------------
---------------------------
MICHAEL CANTOR
5
<PAGE> 1
EXHIBIT 10.28
RELEASE AND REDEMPTION AGREEMENT
This AGREEMENT (this "Agreement") is made and entered into as of this
4th day of September, 1997, by and between 800 TRAVEL SYSTEMS, INC., a Delaware
corporation with an address at Suite 140, 4802 Gunn Highway, Tampa, Florida
33624 (the "Company"), and JOSE COLON, an individual who has an address at
Llewellyn Park, 80 Glen Avenue, West Orange, New Jersey 07052 (the
"Shareholder").
R E C I T A L S
WHEREAS, the Shareholder is currently the beneficial and record holder
of 72,500 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and the Shareholder maintains that upon completion of the
contemplated public offering of shares of the Company's Common Stock (the
"IPO") he shall be entitled to receive additional shares of Common Stock;
WHEREAS a dispute has arisen between the Company and the Shareholder
regarding the Shareholder's right to receive additional shares of Common Stock
upon completion of the IPO; and
WHEREAS, the Company and the Shareholder mutually desire to resolve
such disputes as exist or may exist regarding the rights of Shareholder by
having the Company redeem all, and not less than all, of the shares of Common
Stock currently held by the Shareholder on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and other good and valuable considerations hereinafter contained, the
parties hereto agree as follows:
1. Redemption and Redemption Price. Subject to the conditions
set forth in paragraph 4 of this Agreement, at the Closing (as hereinafter
defined) the Company shall redeem from the Shareholder all, but not less than
all, of the 72,500 Shares of Common Stock currently held by Shareholder (the
"Shares") at an aggregate redemption price (the "Redemption Price") of $321,175
or Four Dollars and Forty-Three Cents ($4.43) per share.
2. Closing.
A. Date, Time and Place. Subject to the provisions of
paragraphs 4(a) and 5 of this Agreement, the closing of the redemption
contemplated by this Agreement (the "Closing") shall take place at the offices
of Phillips Nizer Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New
York 10103 and shall occur simultaneously with the closing of the IPO.
Pursuant to a letter agreement dated July 22, 1997 by and among the Company,
the Shareholder and Michael Cantor (the "Letter Agreement"), the closing of the
IPO and the Closing hereunder shall occur at the same place, and the
Shareholder is entitled to attend the closing of the IPO.
<PAGE> 2
B. Deliveries. At the Closing: (i) the Shareholder shall
sell, transfer and deliver the Shares to the Company, surrender and deliver to
the Company all certificates representing the Shares or any portion of the
Shares, together with stock powers separate from certificates, duly endorsed in
blank by the Shareholder, and deliver to the Company the certificate required
by paragraph 4(d) hereof; and (ii) the Company shall pay to the Shareholder the
Redemption Price, in full, in lawful money of the United States of America, by
causing a wire transfer of the Redemption Price to be delivered by the clearing
agent for the representative for the underwriters to such bank account as shall
be designated by the Shareholder for such purpose, and shall deliver to the
Shareholder the certificate required by paragraph 4(c) hereof.
3. Representation and Warranties.
(a) The Company represents and warrants to the
Shareholder that:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) The Company has full corporate power and
authority and has taken all corporate action necessary to authorize, execute
and deliver this Agreement and to consummate the transaction contemplated
hereby; and this Agreement has been duly executed and delivered by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency, moratorium
and similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought;
(iii) Neither the execution and delivery of this
Agreement, nor the consummation of the transaction contemplated hereby, does or
will violate any provision of the Company's Certificate of Incorporation or By-
laws, or violate or result in the breach of any agreement or any federal or
state law, rule, regulation, judgment, decree or order of any governmental
authority or court to which the Company is subject or by which it is bound;
(iv) The capital of the Company is, and at the
Closing will be, in excess of the Redemption Price, and the payment of the
Redemption Price will not impair the Company's capital; and
(v) The Shares have been duly authorized and
validly issued to the Shareholder and are non-assessable.
(b) The Shareholder represents and warrants to the
Company that:
(i) He is the sole beneficial and record holder
of the Shares, and has not granted or sold any options or other rights to
purchase any of the Shares to any individual, person or entity, other than to
the Company under this Agreement;
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(ii) The Shares are not subject to any liens or
other encumbrances, and at the Closing will be delivered free and clear of the
same;
(iii) Neither the execution and delivery of this
Agreement nor the consummation of the transaction contemplated hereby does or
will violate or result in the breach of any agreement or any federal or state
law, rule, regulation, judgment, order or decree of any governmental authority
or court to which the Shareholder is subject or by which he is bound;
(iv) This Agreement has been duly executed and
delivered by the Shareholder and is a valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as may be limited
by bankruptcy, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought.
4. Conditions to Closing. The obligations of the parties to
consummate the transaction contemplated by this Agreement shall be subject to
satisfaction, on or before the Closing, of each of the following conditions
unless waived in writing by the party to be so satisfied:
(a) The IPO shall have been consummated and closed and
the Company shall have wired the Redemption Price to the Shareholder;
(b) The representations and warranties of each of the
Company and the Shareholder contained herein shall be true and accurate in all
material respects as of the date when made and at and as of the Closing as
though made at and as of such date;
(c) The Company shall have furnished to the Shareholder a
certificate of the Company's President to the effect that: (i) the IPO has been
consummated, and (ii) all representations and warranties of the Company
contained in this Agreement are true and accurate in all material respects at
and as of the Closing;
(d) The Shareholder shall have furnished to the Company
his certificate to the effect that all representations and warranties of the
Shareholder contained in this Agreement are true and accurate in all material
respects at and as of the Closing; and
(e) The Company and the Shareholder shall have each
delivered to the other a General Release in form and substance reasonably
satisfactory to each.
5. Termination. Anything contained in this Agreement to the
contrary notwithstanding, in the event the IPO has not been consummated and
closed on or before December 31, 1997, then either party may, upon not less
than two (2) weeks' prior written notice, terminate this Agreement.
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6. Notices. Any notice given or required to be given pursuant to
this Agreement shall be in writing and shall be deemed given three (3) days
after being deposited in the U.S. Mail, by postage prepaid certified mail,
return- receipt requested, addressed to the parties at the respective address
first above written or such other address as may be established by written
notice given in accordance with the provisions of this paragraph 6, with copies
if to Stockholder, to:
Singer & Zamansky LLP
40 Exchange Place
20th Floor
New York, New York 10005
Attention: Gregory Sichenzia, Esq.
and to:
Michael Cantor
1160 South Ocean Boulevard
Manalapan, Florida 33462
and to:
Ronald Cantor, Esq.
c/o the Cantor Companies
Orchard Plaza
Suite 8
1610 Route 35 South
Oakhurst, New Jersey 07755
and, if the to Company, to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Vincent J. McGill, Esq.
7. Miscellaneous.
(a) Entire Agreement. Other than the Letter Agreement,
this Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior such agreements whether written
or oral, and may not be amended or otherwise modified
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<PAGE> 5
except by a subsequent written instrument duly executed by the parties hereto.
Without limiting the generality of the foregoing this Agreement supersedes the
Stock Redemption Agreement between the parties entered into on the 18th day of
July, 1987.
(b) No Waiver. No delay or failure by either party to
exercise any right hereunder, and no partial or single exercise of any such
right, shall constitute a waiver of that right or any other right, unless
expressly waived in writing.
(c) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to the conflict of laws provisions thereof.
(d) Binding Effect. The provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors, representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
800 TRAVEL SYSTEMS, INC.
By:
-------------------------------------
----------------------------------------
JOSE COLON
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EXHIBIT 10.29
AMENDMENT TO AGREEMENT
This AMENDMENT to AGREEMENT (this "Amendment") is entered into as of
the ___ day of August, 1997, by and between 800 TRAVEL SYSTEMS, INC., a
Delaware corporation with an address at 4802 Gunn Highway, Suite 140, Tampa,
Florida 33624 (the "Company"), and PERRY TREBATCH, an individual with an
address at 32 Nassau Drive, Great Neck, New York 11021 ("Stockholder").
R E C I T A L S
On June 2, 1997, the Company filed a registration statement on Form
SB-2 (as such document may hereinafter be amended or supplemented, the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") with respect to the proposed initial public offering of its securities
(the "IPO"), which the Company currently contemplates completing with First
London Securities Corporation as the representative of the underwriters (First
London Securities Corporation or its replacement being referred to herein as
the "Representative").
On May 30, 1997, Stockholder and the Company entered into an agreement
(the "Agreement") with respect to (i) the registration of and restriction on
sale imposed on shares of the common stock, par value $.01 per share, of the
Company (the "Common Stock") held by Stockholder (the "Shares"); (ii) the
issuance by the Company to Stockholder of warrants to purchase 300,000 shares
of Common Stock (the "Warrants"); and (iii) the repayment of certain
indebtedness owing from the Company to Stockholder.
Stockholder and the Company now wish to amend certain provisions of the
Agreement.
NOW, THEREFORE, in consideration of the premises hereof and the
consideration set forth herein, the parties hereto agree to amend the Agreement
as follows:
A. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the same respective meanings herein as in the Agreement.
B. Section 1.1. The Agreement is hereby amended by deleting Section
1.1 thereof in its entirety and inserting the following new Section 1.1 in lieu
thereof:
"SECTION 1.1. Purchase of Certain Shares. In the event that the
Representative exercises the entire over-allotment option with
respect to the IPO (the "Over-allotment Option"), then, within five
(5) business days after the closing of the sale of the Company's
securities pursuant to the Over-allotment Option, the Company shall
redeem from Stockholder 250,000 Shares at a redemption price of $4.00
per Share payable by wire transfer of immediately available funds. It
is specifically understood and agreed that the Company shall have no
obligation to Stockholder to redeem any Shares in the event that the
Representative does not exercise its Over-allotment Option in full."
<PAGE> 2
C. Section 1.2. The Agreement is hereby amended by deleting Section
1.2 thereof in its entirety and inserting the following new Section 1.2 in lieu
thereof:
"SECTION 1.2. Registration of Certain Shares. In connection with the
IPO, the Company shall exercise its best efforts to cause 110,000
Shares (which shall include the 60,000 Shares issued to Stockholder on
January 22, 1997) to be registered for sale pursuant to the
Registration Statement (the Shares so registered being referred to
herein as the "Registered Shares"); provided, however, that
Stockholder shall not, directly or indirectly, sell, offer to sell,
grant an option for the sale of, assign, transfer, pledge,
hypothecate, or otherwise encumber or dispose of (collectively,
"Sell") any of the Shares so registered for a period of 15 days from
the date of the closing of the IPO (the "IPO Closing")."
D. Section 1.3. The Agreement is hereby amended by deleting Section
1.3 thereof in its entirety and inserting the following new Section 1.3 in lieu
thereof:
"SECTION 1.3. Sale of Remaining Shares.
(a) In the event that the Representative exercises the
Over-allotment Option in full, the Company and Stockholder
hereby agree that:
(i) Stockholder shall not Sell fifty percent (50%) of the
Registered Shares (55,000 Registered Shares) for a
period of six (6) months after the IPO Closing, it
being understood that Stockholder may Sell the
remaining fifty percent (50%) of the Registered
Shares immediately upon registration, subject only to
the 15-day lock-up provision in Section 1.2; and
(ii) Stockholder shall not Sell 50,000 of the 120,000
Shares not being redeemed pursuant to Section 1.1. or
registered pursuant to Section 1.2 (the "Unregistered
Shares") for a period of one (1) year after the IPO
Closing, and shall not Sell another 50,000 of the
Unregistered Shares for a period of 18 months after
the IPO Closing, it being understood and agreed that
Stockholder may Sell the remaining 20,000
Unregistered Shares at any time, pursuant to and in
accordance with the limitations set forth in Rule 144
under the Securities Act of 1933, as amended, or any
successor rule then in effect ("Rule 144")."
(b) Unless and until the Representative exercises the
Over-allotment Option in full (in which case Stockholder's
right to Sell its Shares shall be governed by Section 1.3(a)
above), the Company and Stockholder hereby agree that:
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(i) Stockholder shall be permitted to Sell not more than
10,000 Registered Shares during the first 15-day
period following the 15-day lock-up period referred
to in Section 1.2 and 20,000 Registered Shares in
each of the five (5) consecutive 30-day periods
thereafter, it being acknowledged and understood that
the Company has no discretion over the timing of the
Representative's exercise of the Over-Allotment
Option within the 45 days granted to it; provided,
that if Stockholder does not Sell all of the
Registered Shares which may be sold by him during any
15- or 30-day period, such Registered Shares may be
added to those which may be Sold during a subsequent
30-day period. By way of illustration, and not of
limitation, if the Representative exercises its
Over-Allotment Option on the 44th day after the IPO
Closing, Stockholder will have been permitted to Sell
only 10,000 Registered Shares in the 15-day period
following the 15-day lock-up period (ending on the
30th day after the IPO Closing) and an additional
20,000 shares in the subsequent 30-day period (ending
on the 60th day after the IPO Closing); but, as a
result of the exercise of the Over-Allotment Option
in full, from and after the 44th day after the IPO
Closing, Stockholder's right to Sell will be
determined pursuant to Section 1.3(a)(i) above;
(ii) with respect to the Private Placement Shares,
Stockholder shall comply with the "lock-up"
provisions provided for in the Subscription Agreement
pursuant to which they were purchased, such that
Stockholder shall not Sell 50,000 of such Private
Placement Shares for a period of six (6) months after
the IPO Closing, it being understood that Stockholder
may Sell the remaining 50,000 Private Placement
Shares immediately pursuant to and in accordance with
the limitations set forth in Rule 144.
Stockholder shall be permitted to Sell any Shares whose sale
is not restricted pursuant to the foregoing clauses (i) or
(ii) pursuant to and in accordance with the limitations set
forth in Rule 144.
(c) The Company will respond promptly and in good faith to any
request from Stockholder for the removal of legends from the
certificates representing any Shares to permit their sale as
provided herein."
E. Section 3.1. The Agreement is hereby amended by deleting Section
3.1 thereof in its entirety and inserting the following new Section 3.1 in lieu
thereof:
"SECTION 3.1. Extension of Maturity. The Company acknowledges and
agrees that it is indebted to Stockholder in the aggregate principal
amount of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Indebtedness"). Within two (2) business days after the execution and
delivery of this Amendment, the Company shall pay to Stockholder by
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<PAGE> 4
check sent via FedEx (or similar nationally-recognized overnight
courier service) to the address set forth above, all amounts of
interest currently due or past due in respect of the Indebtedness,
with interest thereon calculated at twelve (12%) percent per annum
through May 31, 1997 and eighteen percent (18%) per annum thereafter.
Notwithstanding anything to the contrary set forth in the notes
evidencing the amounts due Stockholder (the "Promissory Notes"),
Stockholder agrees to extend the maturity date of each of the
Promissory Notes to the earlier to occur of (i) November 30, 1997 or
(ii) the IPO Closing (the "New Maturity Date"), and change the rate of
interest due thereunder to eighteen percent (18.0%), which shall be
payable monthly. In addition, the Promissory Notes are hereby
amended, if required, to provide that the failure of the Maker to pay
any principal amount when due shall also constitute an Event of
Default thereunder. All amounts of principal and interest due under
the Promissory Notes shall be payable on the New Maturity Date.
Except as provided in this Article III, all other terms and conditions
of the Promissory Notes shall remain in full force and effect."
F. Section 3.2. The Agreement is hereby amended by deleting Section
3.2 thereof in its entirety and inserting the following new Section 3.2 in lieu
thereof:
"SECTION 3.2. Default. In the event that the Company shall fail to
pay when due any of its obligations under the Promissory Notes on the
New Maturity Date, the Security Agreement attached as Exhibit B to the
Agreement creating a lien on the Company's telephone system in favor
of Stockholder shall become effective and enforceable as of the date
of such default. The Security Agreement, along with the UCC-1
Financing Statements referred to therein, are being executed
simultaneously with the execution and delivery of this Amendment and
delivered to Brown Raysman Millstein Felder & Steiner LLP, as escrow
agent pursuant to and in accordance with the terms of the escrow
agreement attached hereto as Exhibit 1."
G. Execution and Delivery of the Warrant. Simultaneously with the
execution and delivery of this Amendment, the Company shall deliver to
Stockholder the signed Warrant.
H. No Other Amendments. Except as specifically amended hereby, the
Agreement and all of the provisions thereof shall continue in full force and
effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
800 TRAVEL SYSTEMS, INC.
By:
------------------------------------
---------------------------------------
PERRY TREBATCH
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Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form
SB-2, Amendment No. 3, of 800 Travel Systems, Inc. (the "Company") of our
report dated April 20, 1997 on the balance sheets of the Company as of December
31, 1996 and 1995 and the related statements of operations, stockholder's
equity and cash flows for the year ended December 31, 1996 and the one month
ended December 31, 1995, and on the consolidated statements of operations,
stockholders' (deficit) and cash flows of the Company and Subsidiary
(Predecessor Business) for the eleven months ended November 30, 1995. We also
consent to the reference to our Firm under the caption "Experts" in the
Prospectus which is part of the Registration Statement.
KILLMAN, MURRELL & COMPANY, P.C.
Certified Public Accountants
Dallas, Texas
September 11, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form SB-2 of
800 Travel Systems, Inc. of our report dated June 2, 1995 on the consolidated
statement of operations, changes in stockholders' deficit and cash flows for
the year ended December 31, 1994 1-800-Low-Airfare, Inc. and Subsidiary. We
also consent to the reference to our Firm under the caption "Experts" in the
Prospectus which is part of the Registration Statement.
FELDMAN RADIN & CO., P.C.
/s/ Feldman, Radin & Co., P.C.
Certified Public Accountants
New York, New York
September 10, 1997
<PAGE> 1
EXHIBIT 23.5
[LETTERHEAD OF FELDMAN RADIN & CO., P.C.]
September 10, 1997
Securities and Exchange Commission
Office of Chief Accountant
Washington, D.C. 30549
Gentlemen:
We have read the disclosure under Experts in the Registration Statement on
Form SB-2 of 800 Travel Systems, Inc. to be filed approximately September 10,
1997 relating to our firm and agree with such statement.
Very truly yours,
/s/ FELDMAN RADIN & CO., P.C.
Certified Public Accountants
