GLOBAL VACATION GROUP INC, S-1/A, 1998-07-10

GLOBAL VACATION GROUP INC
S-1/A, 1998-07-10
TRANSPORTATION SERVICES

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<PAGE> 1

As filed with the Securities and Exchange Commission on July 10, 1998

Registration No. 333-52673
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GLOBAL VACATION GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
NEW YORK 4725 13-1894567
(State of Incorporation) (Primary S.I.C. Code Number) (IRS Employer Identification No.)
</TABLE>

1420 NEW YORK AVENUE, N.W., SUITE 550
WASHINGTON, DC 20005
(202) 347-1800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

ROGER H. BALLOU
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GLOBAL VACATION GROUP, INC.
1420 NEW YORK AVENUE, N.W., SUITE 550
WASHINGTON, DC 20005
(202) 347-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

<TABLE>
<S> <C>
DAVID B.H. MARTIN, ESQ. BRENT B. SILER, ESQ.
HOGAN & HARTSON L.L.P. HALE AND DORR LLP
555 13TH STREET, N.W. 1455 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, DC 20004 WASHINGTON, DC 20004
(202) 637-5600 (202) 942-8400
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]

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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.

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<PAGE> 2

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, DATED JULY 10, 1998 LOGO

PROSPECTUS
3,000,000 SHARES

GLOBAL VACATION GROUP, INC.
COMMON STOCK
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All of the 3,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), offered hereby are being offered by Global Vacation Group, Inc.
(the "Company").

Prior to this offering, there has not been a public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $13.00 and $15.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. The Company will apply to list the Common Stock on the
New York Stock Exchange under the symbol "GVG."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
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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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<S> <C> <C> <C>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $ $ $
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Total(3) $ $ $
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</TABLE>

(1) For information regarding indemnification of the several Underwriters,
see "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $2,500,000.

(3) Certain of the Company's shareholders (the "Selling Shareholders") have
granted the Underwriters a 30-day option to purchase up to 450,000
additional shares of Common Stock solely to cover over-allotments, if
any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Selling Shareholders will be $ , $ and $ ,
respectively.

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The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1998, at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
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SALOMON SMITH BARNEY

NATIONSBANC MONTGOMERY SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS

ING BARING FURMAN SELZ

, 1998
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[GRAPHICS -- GATEFOLD SHOWING PRODUCT OFFERINGS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise indicated herein, all information in this Prospectus (i) gives effect
to the conversion of all outstanding shares of Class A Convertible Preferred
Stock (the "Convertible Preferred Stock") into shares of Common Stock (the
"Conversion"), which will occur concurrently with the closing of this offering,
and (ii) assumes no exercise of the Underwriters' over-allotment option. Because
the number of shares to be issued in the Conversion will depend upon the closing
date and the pricing of this offering, all calculations included in this
Prospectus based upon the Conversion, including those indicating the number of
shares of Common Stock to be outstanding after this offering, have been made
assuming the closing date of this offering is July 31, 1998 and assuming an
initial public offering price of $14.00 per share. See "Description of Capital
Stock" and "Underwriting."

As used in this Prospectus, unless the context otherwise requires,
references to "Global Vacation Group" or the "Company" are to the Company and
its subsidiaries. Prospective purchasers should read the Prospectus in its
entirety.

THE COMPANY

The Company believes it is one of the largest U.S. providers of value-added
vacation products and services targeted to higher-income travelers. The Company
assembles air, hotel, rental car and other travel components in bulk and
provides complete vacations to travelers through retail travel distributors,
such as travel agents, and other distribution channels, including the Internet
and affinity groups. The Company provides flexible independent travel programs
for individuals as well as escorted tours and group packages. On a pro forma as
adjusted basis for the year ended December 31, 1997 and for the three months
ended March 31, 1998, the Company had net revenues of $115.2 million and $22.4
million, respectively, derived from a total dollar value of travel products and
services sold of $507.0 million and $101.1 million, respectively. For the same
periods, the Company had pro forma as adjusted net income (loss) of $4.3 million
and ($1.5 million), respectively. More than 90% of the Company's 1997 pro forma
net revenues were derived from sales through retail travel agents and other
travel intermediaries.

The Company intends to achieve the leading market position in selected
high-volume, high-margin travel destinations and will focus initially on the
following markets: (i) Hawaii; (ii) in-bound vacations to the United States for
international travelers; (iii) Florida, the Caribbean and Mexico; (iv) other
U.S. destinations such as California and New York; and (v) out-bound travel by
U.S. travelers to Europe. Based on numbers of travelers reported by independent
industry sources, the Company had approximately a 13% market share of westbound
packaged vacation travel to Hawaii in 1997 and approximately an 8% market share
of packaged trips to the United States by international travelers in 1996. The
Company focuses its marketing efforts on travelers who typically spend more than
$750 per person for a vacation. The Company also provides certain services to
travel suppliers, including outsourced vacation packaging and affinity group
marketing and awards program fulfillment.

The Company intends to market its products and services under two specific
proprietary brands: one for up-scale, customized vacations and another for
popular-priced vacation packages. The Company believes providing expertise and
competitive pricing in multiple destinations through two separate brands will
distinguish its products and services and will provide the Company with a
significant competitive advantage. In addition to serving multiple destinations,
the Company also has achieved a diverse domestic and international customer
base. The Company believes it will be able to use its international scope to
create cross-selling opportunities and expand its relationships with suppliers
of quality travel products and services (primarily airlines, hotel companies and
rental car companies).

1
<PAGE> 5

inventory availability than can be obtained by an individual travel agency or
traveler, (ii) enhancing and simplifying access to travel information across
multiple destinations and (iii) assembling vacation travel components into
convenient packages for ease of planning and booking.

The Company's executive management team, Roger H. Ballou, J. Raymond Lewis
Jr. and Walter S. Berman, has over 60 years of combined management experience in
the travel industry with leading companies such as American Express Travel
Related Services Company, Inc. ("American Express Travel"), Alamo Rent-A-Car,
Inc. ("Alamo"), Certified Vacations, Inc. ("Certified Vacations") and Holiday
Inn Worldwide ("Holiday Inn"). Their experience includes management
responsibility for the acquisition and integration of businesses with a combined
purchase price of over $500 million.

The Company intends to grow through acquisitions by capitalizing upon the
significant consolidation opportunities available in the fragmented packaged
vacation industry. The Company will seek to make acquisitions that complement
its established strengths and are likely to enhance its presence in specific
travel destinations or allow the Company to establish a leading presence in a
new market. The Company believes it will be regarded as an attractive acquiror
by the owners of existing travel businesses.

OPERATING STRATEGY

In providing value-added vacation products and services targeted to
higher-income travelers, the Company pursues an operating strategy that includes
the following elements:

Creating Value-added Vacation Products and Services. The Company focuses
on creating vacation packages that provide added value to higher-income
travelers. The Company believes that, because of its size and expertise in
certain destination markets, it can (i) generally provide better prices and
inventory availability than can be obtained by an individual travel agency or
traveler, (ii) enhance and simplify access to travel information across multiple
destinations and (iii) assemble vacation travel components into convenient
packages for ease of planning and booking.

Establishing National Brand Name Recognition. The Company believes it can
leverage its presence in leading origination and destination markets to develop
nationally recognized proprietary brand names in the packaged vacation industry.
The Company believes offering expertise and competitive pricing through common
brands across multiple destinations will provide greater confidence to travelers
in making their vacation choices and engender consumer loyalty and a pattern of
repeat purchases.

Leveraging Strength in Selected Travel Destinations. The Company believes
it has a leading position in the packaged vacation markets for westbound travel
to Hawaii and for in-bound travel to the United States and intends to achieve
the leading position in these and other high-volume, high-margin vacation
destinations. The Company believes having scale and expertise in selected
destinations gives it access to pricing and inventory that provides the Company
with a significant competitive advantage.

Pursuing Revenue Enhancing Opportunities. Following the Acquisitions (as
defined below), the Company's revenue enhancing strategies include (i) improving
yield management by obtaining greater access to high-margin products and
services, (ii) expanding ancillary products and services, such as city tours and
travel insurance, (iii) securing favorable pricing and inventory availability
through strategic purchasing relationships and (iv) improving cash management,
particularly management of traveler deposits and advance payments.

Improving Operating Efficiencies. The Company seeks to reduce its
operating expenses by (i) capitalizing on enhanced purchasing efficiencies, (ii)
implementing a more effective utilization program of its physical and other
assets, (iii) implementing best practices in its management and business
systems, (iv) enhancing marketing relationships with travel suppliers and other
related parties and (v) outsourcing certain functions where appropriate.

2
<PAGE> 6

Implementing Integrated Information Systems. The Company will seek to
integrate its information systems in order to improve its ability to offer
travelers value-added vacation products and services and to leverage maintenance
and development costs across a broader customer base. In addition, integrated
systems will facilitate the use of common operating platforms, reduce the cost
and time requirements of developing external interfaces and accelerate the
integration of subsequent acquisitions.

GROWTH STRATEGY

To complement its operating strategy, the Company has developed a
multi-faceted growth strategy that includes the following elements:

Generating Internal Growth. The Company intends to grow internally by (i)
implementing an integrated national marketing program, (ii) increasing its
presence in underpenetrated origination markets and (iii) implementing loyalty
programs that stimulate repeat purchases.

Identifying and Consummating Strategic Acquisitions. The Company believes
the packaged vacation industry is fragmented and there are significant
opportunities to make selective acquisitions of packaged vacation providers. The
Company generally will seek to acquire companies that (i) have desirable
destination concentrations, (ii) have demonstrated growth and profitability,
(iii) have an emphasis on customer service, (iv) have an experienced management
team and (v) are likely to add some other strategic value to the Company.

Private Label Branding. In recent years, certain travel and other
companies have sought to leverage their brand names by outsourcing the
development and operation of packaged vacation programs under such brand names.
The Company believes there are significant opportunities to expand its private
label business.

Affinity Group Marketing. The Company will seek access to affinity groups
such as frequent flier programs and bank card reward or loyalty programs for the
direct marketing of its products and services as well as the opportunity to
provide its vacation products and services as rewards in these programs. The
Company has certain proprietary software and extensive operating experience
which it believes provide a significant opportunity to capitalize on this
growing market.

3
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,000,000 shares
Common Stock to be outstanding after the
offering(1) ............................... 14,739,838 shares
Use of proceeds(2)........................... Repayment of debt
Proposed NYSE Symbol......................... GVG
</TABLE>

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(1) Excludes (i) 84,716 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1998 Stock Option Plan (the "Stock Option
Plan") as of July 7, 1998, (ii) shares of Common Stock equal to 7.5% of the
number of shares of Common Stock to be outstanding upon completion of this
offering plus a number of shares of Common Stock equal to $2,475,000
divided by the price per share in this offering, all of which shares will
be issuable upon exercise of options to be granted under the Stock Option
Plan upon completion of this offering (an aggregate of 1,282,269 shares,
assuming the offering is closed on July 31, 1998 at a price of $14.00 per
share), and (iii) additional shares of Common Stock reserved for issuance
under the Stock Option Plan (including up to 195,000 shares to be subject
to options the Company intends to grant concurrently with the closing of
this offering), up to a total number of shares eligible for issuance under
the Stock Option Plan at any time equal to 12% of the then outstanding
shares of Common Stock. See "Management -- Stock Option Plan."

(2) See "Use of Proceeds." The Company will use all of the net proceeds from
this offering to repay debt that was incurred to finance, in part, the
Recapitalization (as defined below) and the Acquisitions. This debt may not
be re-borrowed. Accordingly, the net proceeds of this offering will not
result in any direct availability of funds for operations or capital
expenditures.

RISK FACTORS

See "Risk Factors" for a description of certain risks to be considered
before making an investment in the Common Stock. These risks include, but are
not limited to, risks regarding competition, direct purchases by travelers of
travel services from suppliers through on-line systems such as the Internet, the
absence of combined operating history and historical S Corporation losses,
dependence on travel suppliers, a concentration of the Company's net revenues in
the Hawaiian market, management of growth, integration of operations and
information systems, dependence on technology and Year 2000 issues.

RECENT DEVELOPMENTS

The Company was recapitalized in March 1998 (the "Recapitalization") and
subsequently has acquired the stock or assets of four other vacation providers
(the "Acquisitions"). See "The Recapitalization" and "The Acquired Businesses."
For the three months ended March 31, 1997 and 1998, the Company's net revenues
were $2.4 million and $2.5 million, respectively. During the same periods, the
Company had net losses of $1.5 million and $2.0 million, respectively. See "Risk
Factors -- Absence of Combined Operating History; Historical S Corporation
Losses" and "Risk Factors -- Quarterly Fluctuations; Seasonality."

4
<PAGE> 8

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
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PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1995 1996 1997 1997(1) 1997(2) 1998(2) 1998(1)
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $18,464 $22,259 $24,255 $115,222 $2,425 $2,477 $22,421
Operating expenses............... 13,316 16,025 17,852 96,939 2,820 3,032 22,158
------- ------- ------- -------- ------- ------- -------
Gross profit (loss).......... 5,148 6,234 6,403 18,283 (395) (555) 263
------- ------- ------- -------- ------- ------- -------
General and administrative
expenses(3).................... 5,702 6,905 7,797 10,256 1,129 1,571 2,710
Depreciation and amortization.... 131 154 182 1,594 41 34 405
Goodwill amortization............ -- -- -- 1,891 -- -- 470
Settlement agreement legal
expense........................ -- -- -- 1,184 -- -- 20
------- ------- ------- -------- ------- ------- -------
Income (loss) from operations.... (685) (825) (1,576) 3,358 (1,565) (2,160) (3,342)
------- ------- ------- -------- ------- ------- -------
Other income (expense):
Interest income.............. 521 581 556 4,324 65 74 1,051
Interest expense............. -- -- -- (889) -- (14) (208)
Other, net................... 67 (4) 41 338 -- -- (4)
------- ------- ------- -------- ------- ------- -------
Total other income
(expense).............. 588 577 597 3,773 65 60 839
------- ------- ------- -------- ------- ------- -------
Income (loss) before (provision
for) benefit from income
taxes.......................... (97) (248) (979) 7,131 (1,500) (2,100) (2,503)
(Provision for) benefit from
income taxes................... (106) (122) (124) (2,852) 10 61 1,001
------- ------- ------- -------- ------- ------- -------
Net income (loss)............ (203) (370) (1,103) 4,279 (1,490) (2,039) (1,502)
Preferred dividend............... -- -- -- -- -- (150) --
------- ------- ------- -------- ------- ------- -------
Net income (loss) available to
common shareholders............ $ (203) $ (370) $(1,103) $ 4,279 $(1,490) $(2,189) $(1,502)
======= ======= ======= ======== ======= ======= =======
Pro forma net income (loss) per
common share:
Basic and diluted............ $ 0.29 $ (0.10)
Pro forma weighted average common
shares outstanding:
Basic and diluted............ 14,740 14,740
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------
PRO FORMA
ACTUAL(2) PRO FORMA(1) AS ADJUSTED(1)
--------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities, including
non-current portion....................................... $ 7,069 $ 46,610 $ 46,610
Working capital deficit..................................... (13,660) (33,160) (27,160)
Total assets................................................ 27,401 157,963 157,963
Total debt.................................................. 19,400 45,500 8,940
Shareholders' equity (deficit).............................. (44,045) (43,805) 45,680
</TABLE>

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(1) The summary pro forma as adjusted statement of operations data for each
period presented give effect to (i) the Recapitalization, (ii) the
Acquisitions and the issuance of capital stock in connection therewith,
(iii) reductions in salary and bonuses to the prior owners and key
executives of the Company and the Acquired Businesses (as defined below),
offset in part by expected incremental costs reflecting the Company's new
management structure (the "Compensation Savings"), (iv) the termination of
the Company's status as an S Corporation, (v) the Conversion and (vi) the
sale by the Company of the 3,000,000 shares offered hereby and the use of
the net proceeds therefrom to repay certain indebtedness as described under
"Use of Proceeds" as if all such events had occurred as of January 1, 1997.
The summary pro forma as adjusted statement of operations data does not give
effect to the estimated annual savings from closing redundant acquired
facilities (the "Facilities Savings") estimated to be approximately $3.2
million before provision for income taxes, of which approximately 80% are
expected to be realized in 1999 and 100% are expected to be realized in
subsequent years. Furthermore, the pro forma results do not eliminate
non-recurring settlement agreement legal expense of one of the Acquired
Businesses of approximately $1.2 million and $20,000 before provision for
income taxes for the year ended December 31, 1997 and the three months ended
March 31, 1998, respectively, as such expense is not directly related to the
Acquisition. The summary pro forma and pro forma as adjusted balance sheet
data give effect to each of the items referred to in clauses (i) through
(iv) and (i) through (vi) above, respectively, as well as the accrual for
lease and employee severance payments for the planned closing of redundant
acquired facilities (the "Facilities Accruals" and, collectively with
clauses (i) through (vi) above, the "Pro Forma Adjustments"), as if each had
occurred on March 31, 1998. See "Unaudited Pro Forma Condensed Combined
Financial Statements."

(2) The financial data as of March 31, 1998 and for the three months ended March
31, 1997 and 1998 have been derived from the Company's unaudited financial
statements. In the opinion of the Company's management, these unaudited
financial statements include all adjustments (including only normal,
recurring adjustments) necessary for a fair presentation of such
information. Operating results for interim periods are not necessarily
indicative of the results that might be expected for the entire fiscal year.

(3) General and administrative expenses for the years ended December 31, 1995,
1996 and 1997 and the three months ended March 31, 1997 and 1998 include
salary and bonuses to the prior owners and certain key employees of the
Company of $3.8 million, $4.8 million, $5.8 million, $790,000 and $170,000,
respectively. General and administrative expenses for the three months ended
March 31, 1998 include approximately $1.0 million of expenses incurred in
connection with the Recapitalization.

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<PAGE> 9

RISK FACTORS

The following factors should be considered in addition to other information
included in this Prospectus.

SUBSTANTIAL COMPETITION

The packaged vacation industry is highly competitive and has relatively low
barriers to entry. The Company competes primarily with other vacation providers,
travel agencies and other retail and wholesale distributors of travel products
and services, some of which are larger and have greater brand name recognition
and financial resources than the Company. Competition within the packaged
vacation industry is increasing as certain of the Company's competitors are
expanding their size and financial resources through consolidation. Certain
packaged vacation providers that compete with the Company may have relationships
with travel suppliers that give them preferred access to capacity or more
competitive pricing than is available to the Company. Furthermore, some travel
providers have a strong presence in particular geographic areas, which may make
it difficult for the Company to attract customers in those areas. The Company
also competes with travel suppliers, including some of the Company's travel
suppliers, that sell directly to individual travelers. These suppliers may
restrict the availability of travel products or services or the ability of the
Company to offer such products or services at preferential prices. Consolidation
among travel suppliers has left the remaining suppliers in a stronger position
relative to providers of travel products and services, such as the Company. As a
result of competitive pressures, the Company's revenues and margins may decline.
There can be no assurance that the Company will be able to compete successfully,
and the failure to compete successfully may have a material adverse effect on
the business, financial condition and results of operations of the Company.

CHANGING INDUSTRY DYNAMICS; NEW METHODS OF DISTRIBUTION

Innovations in on-line technology such as the Internet have increased the
ability of travel suppliers to distribute their travel products and services
directly to travelers. Travelers can now use the Internet to access information
about travel products and services and to purchase such products and services
directly from suppliers, thereby bypassing both vacation providers such as the
Company and retail travel agents through whom the Company receives a substantial
majority of its revenues. In addition, recent erosion of commissions paid by
travel suppliers, particularly airlines, to travel distributors has weakened the
financial condition of many travel agents. Because the Company currently relies
to a large extent on retail travel agencies for access to travelers and
revenues, a shift in consumer purchasing away from travel agencies and toward
direct purchasing from travel suppliers could have an adverse impact on the
Company. Also, although the Company has a strategy to capitalize on the
emergence of the Internet as an alternative distribution channel, there can be
no assurance that such strategy will be successful or will not negatively impact
the Company's relationship with retail travel agents.

ABSENCE OF COMBINED OPERATING HISTORY; HISTORICAL S CORPORATION LOSSES

Following the Recapitalization in March 1998, the Company completed the
four Acquisitions, which account for a substantial majority of the Company's pro
forma revenues for 1997. Although the Company and each of the Acquired
Businesses have been in operation for more than 15 years, they have virtually no
history of combined operations. The pro forma consolidated financial data
included in this Prospectus cover periods when the Company and the Acquired
Businesses were not under common management or control and are not necessarily
indicative of the results that would have been achieved if the Company and the
Acquired Businesses had been operated on an integrated basis or the results that
may be realized on a consolidated basis in the future. See "The Acquired
Businesses."

On a historical basis, the Company had operating losses for the year ended
December 31, 1997 and the three months ended March 31, 1998 of $1.6 million and
$2.2 million, respectively. During these periods, the Company had net losses of
$1.1 million and $2.0 million, respectively. For the year ended December 31,
1997, three of the Acquired Businesses had operating losses ranging from
$216,000 to $1.9 million, but none of the Acquired Businesses had a net loss for
such period. For the three months ended March 31, 1998, each of the Acquired
Businesses had an operating loss, ranging from $287,000 to $840,000, and three
of the Acquired

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<PAGE> 10

Businesses also had net losses during such period, ranging from $248,000 to
$649,000. On a pro forma as adjusted basis for the year ended December 31, 1997
and the three months ended March 31, 1998, the Company had operating income
(loss) of $3.4 million and ($3.3 million), respectively, and net income (loss)
of $4.3 million and ($1.5 million), respectively. See "Risk Factors -- Quarterly
Fluctuations; Seasonality," "Dividend Policy," "Unaudited Pro Forma Condensed
Combined Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements and accompanying notes thereto located elsewhere in this Prospectus.

DEPENDENCE ON TRAVEL SUPPLIERS

The Company is dependent upon travel suppliers for access to their products
and services. Certain travel suppliers, such as American Airlines, Inc.
("American Airlines"), Delta Air Lines, Inc. ("Delta"), United Air Lines, Inc.
("United"), Aloha Airlines, Inc. ("Aloha"), Hawaiian Airlines, Inc. ("Hawaiian
Airlines"), Hyatt Hotels Corporation ("Hyatt"), ITT Sheraton Corporation,
Marriott International, Inc. and Amtrak, offer the Company (i) non-exclusive
pricing that is preferential to published rates, enabling the Company to offer
complete vacations at prices lower than generally would be available to
individual travelers and retail travel agents, (ii) non-exclusive preferential
access to inventory of their travel products and services, enabling the Company
to assemble more desirable vacations for travelers, or (iii) in the case of
certain travel suppliers, both non-exclusive preferential pricing and access to
inventory. The Company's travel suppliers generally can cancel or modify their
agreements with the Company upon relatively short notice. In addition, any
decline in the quality of travel products and services provided by these
suppliers, or a perception by travelers of such a decline, could adversely
affect the Company's reputation. The loss of contracts, changes in the Company's
pricing agreements, commission schedules or incentive override commission
arrangements, more restricted access to travel suppliers' products and services
or less favorable public opinion of certain travel suppliers and resulting low
demand for the products and services of such travel suppliers could have a
material adverse effect on the business, financial condition and results of
operations of the Company.

CONCENTRATION IN HAWAIIAN MARKET

On a pro forma basis for 1997, the Company derived approximately 60% of its
net revenues from products and services associated with vacations to Hawaii. In
addition, approximately 15% of the Company's employees are located in Hawaii to
serve that market exclusively. The market for westbound packaged vacations to
Hawaii has been relatively flat for the last three years, with the Hawaii
Visitors & Convention Bureau estimating that, in each of 1995, 1996 and 1997,
approximately 1.5 million westbound travelers visited Hawaii as part of a
packaged vacation. A downturn in the market for vacations to Hawaii could have a
material adverse effect on the business, financial condition and results of
operations of the Company.

MANAGEMENT OF GROWTH; INTEGRATION OF OPERATIONS

The Company has grown rapidly since March 1998 through the Acquisitions,
and the Company expects to continue to grow in part through additional
acquisitions. The Company's executive management group has been assembled only
recently, and there can be no assurance that the executive management group will
be able to manage effectively the combined entity or implement the Company's
operating and growth strategies. In addition, the rapid pace of acquisitions
has, and will continue to, put pressure on the Company's personnel, computer
systems and other corporate support systems. Any inadequacy of such systems to
manage the increased size and scope of operations resulting from growth or the
inability of the Company to integrate successfully the Acquired Businesses or
future acquisitions could have a material adverse effect on the business,
financial condition and results of operations of the Company. See "-- Dependence
upon Technology; Year 2000 Problem," "Business -- Operating Strategy" and
"Business -- Growth Strategy."

The Company intends to improve its profitability by various means,
including a reduction of redundant operating and overhead costs, increased asset
utilization and enhanced purchasing power. The Company's ability to improve
profitability will be affected by various factors, such as the costs associated
with centralizing its administrative functions and its ability to benefit from
enhanced purchasing power, many of which are beyond the control of the Company.
In addition, the Company's ability to achieve its operating and growth
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<PAGE> 11

goals will depend in large part on its ability to consolidate and integrate
certain administrative functions common to the Company and the Acquired
Businesses. Such consolidation and integration will require substantial
attention from senior management and may disrupt the operations of the Company,
as management attention is diverted from other tasks, and as technological,
practical or personnel issues arise. In addition, although no material capital
expenditures currently are anticipated in connection with such consolidation and
integration, there can be no assurance that such consolidation and integration
will not result in the requirement to make material unanticipated capital
expenditures. There can be no assurance that such consolidation and integration
will be completed or that, if completed, the Company will recognize any economic
benefit. See "-- Integration of Information and Business Systems."

DEPENDENCE ON ACQUISITIONS FOR FUTURE GROWTH

One of the Company's strategies is to increase its revenues and the markets
it serves through acquisitions. There can be no assurance that suitable
candidates for acquisitions can be found or, if suitable candidates are
identified, that acquisitions can be completed on acceptable terms. In this
regard, the Company faces competition from other packaged vacation providers as
well as from travel suppliers and vertically integrated travel companies in its
efforts to identify acquisition targets and complete acquisitions. In addition,
as consolidation in the industry continues, the prices for attractive
acquisition candidates may be bid up to higher levels, and there can be no
assurance that businesses acquired in the future will achieve sales and
profitability that justify the investment therein. The failure of the Company to
acquire additional travel businesses may limit the Company's ability to grow in
the future. See "Business -- Growth Strategy."

Future acquisitions may involve a number of risks that could adversely
affect the business, results of operations and financial condition of the
Company. These could include adverse short-term effects on the Company's
reported operating results such as those caused by severance payments to
employees of acquired companies, difficulties in eliminating duplicative costs,
restructuring charges associated with the acquisitions and other expenses
associated with a change of control, as well as non-recurring acquisition costs.
Acquisitions also may divert management's attention, create difficulties with
retention, hiring and training of key personnel, raise risks associated with
unanticipated problems or legal liabilities and require non-cash accounting
charges associated with the amortization of acquired intangible assets.
Furthermore, although the Company conducts due diligence and generally requires
representations, warranties and indemnifications from the former owners of
acquired companies, there can be no assurance that such owners will have
accurately represented the financial and operating conditions of their companies
or will have the means to satisfy their indemnification obligations. If an
acquired company's financial or operating results were misrepresented, the
acquisition could have a material adverse effect on the business, financial
condition and results of operations of the Company.

INTEGRATION OF INFORMATION AND BUSINESS SYSTEMS

The Company and each of the Acquired Businesses currently operate separate
internal information and business systems. Prior to the acquisition by the
Company of MTI Vacations, Inc. ("MTI"), MTI received information and business
system support on an outsourced basis from Trase-Miller Solutions, Inc. ("Trase-
Miller Solutions"), and Trase-Miller Solutions continues to provide such
services to MTI. In order to migrate the separate support systems which the
Company and the other Acquired Businesses currently operate (other than the
business systems associated with the Company's in-bound business) to a common
platform system, the Company is negotiating to expand the outsourcing agreement
with Trase-Miller Solutions throughout the Company's business. The Company
currently estimates the migration to the Trase-Miller Solutions system will be
accomplished prior to the end of 1999 at a total cost of approximately $1.2
million. Once this migration is complete, the Company's ability to deliver its
products and services and manage its internal systems will depend substantially
on the Trase-Miller Solutions system. There can be no assurance that the Company
will be successful in negotiating the expansion of the Trase-Miller Solutions
outsourcing arrangement, that any such expansion will be negotiated on
competitive or cost-effective terms or that the implementation will be completed
on a timely basis and without unforeseen difficulties. In addition, while the
Company believes that the Trase-Miller Solutions system will provide adequately
for the Company's information and business system requirements, there can be no
assurance that the Trase-Miller Solutions system will in fact meet the Company's
needs. Prior to the company-wide implementation of the Trase-Miller Solutions
system, the operation of multiple separate systems, including the systems of any
businesses hereafter acquired by the

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<PAGE> 12

Company, could adversely affect the Company's ability to monitor and manage its
operations. The failure of the Company to expand the Trase-Miller Solutions
agreement or otherwise to integrate its separate systems, any delays or
difficulties encountered in implementing the Trase-Miller Solutions system or
the failure of the Trase-Miller Solutions system to meet the Company's
information and business system requirements could have a material adverse
effect on the business, financial condition and results of operations of the
Company.

DEPENDENCE ON TECHNOLOGY; YEAR 2000 PROBLEM

The Company's dependence upon information and telecommunications technology
makes the Company particularly sensitive to Year 2000 issues. Because the
Company receives reservations up to a year in advance, the Company must identify
and correct potential Year 2000 problems on a more accelerated basis than
companies in many other industries. While the Company believes that the
Trase-Miller Solutions system, as well as any of the Company's systems not
integrated within the Trase-Miller Solutions system prior to 1999, will be Year
2000 compliant, there can be no assurance that these systems will prevent
disruptions of the Company's operations due to Year 2000 issues. In addition,
the Company's information and telecommunications systems must operate in
conjunction with the systems of other parties, including SABRE, Galileo and
WORLDSPAN, and any Year 2000 problems in these third-party systems could
directly affect the Company's own systems. Finally, travelers who use the
Company's products and services may be exposed to disruptions in their travel as
a result of failures by travel suppliers or other travel businesses to correct
Year 2000 problems in their information and computer systems, and such
disruptions could adversely affect demand for vacation travel generally and may
have a material adverse effect on the business, financial condition and results
of operations of the Company.

DEPENDENCE ON CUSTOMER DEPOSITS AND ADVANCE PAYMENTS

The Company derives substantial income from interest on customer deposits
and advance payments. For 1997 on a pro forma as adjusted basis, the Company had
interest income of $4.3 million (or 60.6% of income before provision for income
taxes), substantially all of which was derived from interest on customer
deposits and advance payments. In addition, the Company's pricing of its
products and services is determined, in part, based upon the interest income
expected to be received from investing these deposits and advance payments. The
Company's investment policy and the terms of the Company's credit facility
restrict the Company to investing these deposits and advance payments only in
investment-grade securities. A failure of these investment securities to perform
at their historical levels could reduce the interest income realized by the
Company, which could have a material adverse effect on the business, financial
condition and results of operations of the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

QUARTERLY FLUCTUATIONS; SEASONALITY

The Company's operating results have fluctuated from period to period and
likely will continue to fluctuate in the future. The travel industry in general
and the Company's operations in particular are highly seasonal. The Company's
net revenues generally are highest in the second and third quarters of the year,
while its expenses generally are highest in the first and fourth quarters. The
Company's quarterly results of

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<PAGE> 13

operations also may be subject to fluctuations as a result of the timing and
cost of acquisitions, fare wars by travel suppliers, changes in relationships
with certain travel suppliers, changes in the mix of services offered by the
Company, extreme weather conditions, general economic conditions or other
factors affecting travel generally. As a result of these and other factors, the
Company's quarterly operating results are subject to fluctuation, and the
Company believes quarter-to-quarter comparisons of its operating results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. In addition, due to all of the foregoing factors, the Company's
operating results in future periods may be below the expectations of securities
analysts and investors. In such event, the market price of the Common Stock
could be materially adversely affected.

RELIANCE ON KEY PERSONNEL

The Company's success will depend, in part, on the continued efforts of
Roger H. Ballou, its Chairman and Chief Executive Officer, J. Raymond Lewis,
Jr., its President and Chief Operating Officer, Walter S. Berman, its Executive
Vice President and Chief Financial Officer, and the senior management of the
Acquired Businesses. Furthermore, the Company's operations likely will depend on
the senior management of companies that may be acquired in the future. If any of
these individuals becomes unwilling or unable to continue in his or her present
role, or if the Company is unable to attract and retain other skilled employees,
its business could be adversely affected. The Company does not maintain key
person life insurance on any of its key personnel. Although the Company has
entered into employment agreements with Messrs. Ballou, Lewis and Berman, they,
like all other key employees, may voluntarily terminate their respective
employment relationships with the Company at any time. See "Management."

GOVERNMENT REGULATION AND TAXATION

Many travel suppliers, particularly airlines, are subject to extensive
regulation by federal, state and foreign governments. In addition, the travel
industry is subject to certain special taxes by federal, state, local and
foreign governments, including hotel bed taxes, car rental taxes, airline excise
taxes and airport taxes and fees. New or different regulatory schemes or changes
in tax policy could have an adverse impact on the travel industry in general and
could have a material adverse effect on the business, financial condition and
results of operations of the Company.

ACQUISITION FINANCING; ADDITIONAL DILUTION

The Company currently intends to finance future acquisitions by using
shares of Common Stock, cash, borrowed funds or a combination thereof. Existing
shareholders will suffer ownership dilution if the Company uses Common Stock as
consideration for future acquisitions. Moreover, the issuance of additional
shares of Common Stock may negatively affect earnings per share and the market
price of the Common Stock. If the Common Stock does not maintain a sufficient
market value, if the price of Common Stock is highly volatile or if potential
acquisition candidates are otherwise unwilling to accept Common Stock as part of
the consideration for the sale of their businesses, the Company may be required
to use more of its cash resources or more borrowed funds in order to execute its
acquisition program. If the Company does not have sufficient cash resources, its
growth could be limited unless it is able to obtain additional capital through
debt or equity offerings. The Company has entered into a credit facility that
will provide a limited source of funds which may be used in connection with
future acquisitions. There can be no assurance that this credit facility will be
sufficient to meet all of the Company's capital requirements to fund
acquisitions or that the Company will be able to obtain additional financing if
and when it is needed or that any such additional financing will be available on
terms it deems acceptable.

ACCOUNTING CHARGES; SIGNIFICANT INTANGIBLE ASSETS

Many business acquisitions must be accounted for under the purchase method
of accounting, and the Company expects that, under current accounting rules, it
will be required for the foreseeable future to account for all acquisitions
under the purchase method. Acquisitions accounted for under the purchase method
are likely to generate goodwill (which, generally, represents the difference
between the purchase price and the fair
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<PAGE> 14

value of the tangible and separately measurable intangible net assets) or other
intangible assets. Consequently, acquisitions of new businesses typically would
result in substantial amortization charges to the Company, which, although
non-cash in nature, could have a significant impact on the Company's reported
operating results. Acquisitions also may involve significant one-time
acquisition-related charges. As a result of the Acquisitions, the Company will
record annual amortization expenses for acquisition-related intangible assets of
$1.9 million. Taking into account the Acquisitions and certain transactions and
other factors arising prior to the time of the Recapitalization, the Company's
pro forma as adjusted balance sheet as of March 31, 1998 includes an amount
designated as goodwill that represents 41.6% of pro forma as adjusted total
assets and 143.8% of pro forma as adjusted total shareholders' equity.

Generally accepted accounting principles require that goodwill and all
other intangible assets be amortized over the period benefited, and the
Company's management has determined that period to be at least 35 years for the
goodwill recorded in connection with the Acquisitions. There can be no assurance
that the Company's management accurately determined the amortization period for
the goodwill recorded in connection with the Acquisitions. If the Company failed
to recognize a separate, material intangible asset having an actual benefit
period of less than 35 years, or if the Company did not give effect to any
accrued shorter benefit periods for certain material portions of the goodwill
recorded in connection with the Acquisitions, then earnings reported in periods
immediately following the Acquisitions will be overstated, and, in later years,
the Company will be burdened by a continuing charge against earnings without an
associated benefit to income which generally would have been factored into the
price paid for the business acquired. Earnings in later years also will be
significantly affected if management determined that the remaining balance of
goodwill at any time was impaired. Management has reviewed with its independent
accountants all of the factors and related cash flows which it considered in
arriving at the amount of goodwill in each of the Acquisitions. Management
concluded that the anticipated future cash flows associated with intangible
assets recognized in the Acquisitions will continue indefinitely, and that there
is no persuasive evidence that any material portion will dissipate over a period
shorter than 35 years. See "The Acquired Businesses," "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview" and
"Business -- Growth Strategy."

VACATION TRAVEL INDUSTRY; GENERAL ECONOMIC CONDITIONS

The Company's results of operations will depend upon factors affecting the
vacation travel industry generally. The Company's revenues and earnings are
especially sensitive to events that affect domestic and international air travel
and the level of car rentals and hotel reservations. A number of factors,
including political instability, armed hostilities, international terrorism,
labor disturbances, a rise in fuel prices or other travel costs, excessive
inflation, currency fluctuations, extreme weather conditions and concerns about
passenger safety could result in a temporary or longer-term overall decline in
demand for packaged vacations. The Company believes price-based competition will
continue for the foreseeable future. The continuation of such competition and
the occurrence of any of the events described above could have a material
adverse effect on the business, financial condition and results of operations of
the Company. In addition, demand for the Company's products and services may be
significantly affected by the general level of economic activity and employment
in the United States and key international markets. Therefore, any significant
economic downturn or recession in the United States or these other markets could
have a material adverse effect on the business, financial condition and results
of operations of the Company.

VOTING CONTROL BY EXISTING MANAGEMENT AND SHAREHOLDERS

Thayer Equity Investors III, L.P. ("Thayer") and its affiliates own and
control a substantial majority of the Common Stock of the Company. Upon
completion of this offering, Thayer and its affiliates will own beneficially
64.7% of the outstanding shares of Common Stock. As a result, Thayer and its
affiliates will be able to exercise control over the Company's affairs and will
be able to elect the entire Board of Directors and control the disposition of
any matter submitted to a vote of shareholders. In addition, the Company's
executive officers and directors, and entities affiliated with them, including
Thayer and its affiliates, will own beneficially

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<PAGE> 15

shares of Common Stock representing 69.7% of the total voting power of the
Common Stock after this offering. See "Management," "Certain Transactions" and
"Principal Shareholders."

NO PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF TRADING PRICE

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price per share of the Common
Stock will be determined by negotiations among the Company and the
representatives of the Underwriters and may not be indicative of the market
price that will prevail after the closing of the offering. See "Underwriting"
for factors to be considered in determining the initial public offering price
per share. The Company will apply to list the Common Stock on the New York Stock
Exchange ("NYSE"); however, there can be no assurance that an active trading
market will develop and be sustained after this offering.

The market price of the Common Stock may fluctuate substantially due to a
variety of factors, including quarterly fluctuations in results of operations,
adverse circumstances affecting the travel industry generally, announcements of
new products or services by competitors, changes in earnings estimates by
securities analysts, changes in accounting principles, sales of Common Stock by
existing holders, loss of key personnel and other factors. In addition, stock
markets generally are subject to extreme price and volume fluctuations. This
volatility has often had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Any such litigation instigated against
the Company could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
business, results of operations and financial condition of the Company.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS AGREEMENT

Sales of substantial amounts of Common Stock in the public market following
this offering could adversely affect the prevailing market price of the Common
Stock and the Company's ability to raise capital in the future. Upon completion
of this offering, the Company will have a total of 14,739,838 shares of Common
Stock outstanding, of which the 3,000,000 shares offered hereby will be freely
tradable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), by persons other than "affiliates" of the Company, as defined
under the Securities Act. The remaining 11,739,838 shares of Common Stock
outstanding will be "restricted securities" as that term is defined by Rule 144
promulgated under the Securities Act. Of these shares, approximately 740,238
shares may be eligible for sale in the public market immediately after this
offering pursuant to Rule 144(k) under the Securities Act, subject to 180-day
Lock-up Agreements as described below (the "Lock-up Agreements"). The remaining
10,999,600 shares will become eligible for sale in the public market from time
to time, subject to Lock-up Agreements. See "Shares Eligible for Future Sale."

The Company, its executive officers and directors and each of its existing
shareholders, who will hold an aggregate of 11,739,838 shares of Common Stock
after this offering, have agreed that, until 180 days following the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., sell, offer to sell, solicit any offer to buy, contract to sell, grant any
option to purchase (other than under the Stock Option Plan), or otherwise
transfer or dispose of any shares of Common Stock, or any securities convertible
into, or exercisable or exchangeable for, Common Stock. Smith Barney Inc. may
release shares subject to these Lock-up Agreements in whole or in part in its
sole discretion without notice.

Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 under the Securities Act the
shares of Common Stock issuable under the Stock Option Plan. Of the 1,768,780
shares to be issuable under the Stock Option Plan upon completion of this
offering, 84,716 shares were subject to outstanding options as of July 7, 1998
and 1,282,269 additional shares will be subject to options to be granted
concurrently with the closing of this offering, assuming the closing date of
this offering is July 31, 1998 and assuming the price per share in this offering
is $14.00. In addition, the Company intends to grant options concurrently with
the closing of this offering to purchase up to

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<PAGE> 16

195,000 shares of Common Stock. At any time a number of shares equal to 12% of
the then outstanding shares of Common Stock will be reserved for issuance under
the Stock Option Plan.

Upon completion of this offering, the holders of approximately 11,739,838
shares of Common Stock will be entitled to certain registration rights with
respect to such shares. If such holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, such sales could have an adverse effect on the trading price of the
Common Stock. In addition, if the Company is required, pursuant to such
registration rights, to include shares held by such persons in a registration
statement that the Company files to raise additional capital, the inclusion of
such shares could have an adverse effect on the Company's ability to raise
needed capital. See "Management -- Stock Option Plan," "Certain Transactions"
and "Shares Eligible for Future Sale."

BENEFITS OF OFFERING TO CERTAIN SHAREHOLDERS

The existing shareholders of the Company will benefit from the creation of
a public market for the Common Stock held by them after the closing of the
offering. Upon the closing of this offering, the existing shareholders will hold
shares of Common Stock having an aggregate value of $164.4 million, based on an
assumed initial public offering price of $14.00 per share. These shareholders
include Thayer and TC Co-Investors, LLC ("TC Co-Investors"), an affiliate of
Thayer, which together will own beneficially approximately 64.7% of the
Company's outstanding Common Stock upon completion of this offering. Thayer is a
Delaware limited partnership whose sole general partner is TC Equity Partners,
LLC, a Delaware limited liability company ("TC Equity Partners"). TC Equity
Partners beneficially owns, and has sole voting and investment power with
respect to, the shares of Common Stock held of record by Thayer. TC Co-Investors
is a Delaware limited liability company whose managing member is TC Management
LLC ("TC Management"). TC Management beneficially owns, and has sole voting and
investment power with respect to, the shares of Common Stock held of record by
TC Co-Investors. Frederic V. Malek, Dr. Paul G. Stern and Carl J. Rickertsen are
the members of TC Management and the principal members of TC Equity Partners.
See "Certain Transactions" and "Principal Shareholders."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price per share of Common Stock is
substantially higher than the pro forma net tangible book value per share of the
Common Stock. Purchasers of shares of Common Stock in the offering will
experience immediate and substantial dilution of $15.42 in the pro forma net
tangible book value per share of Common Stock. To the extent outstanding options
to purchase Common Stock are exercised, there may be further dilution. See
"Dilution."

NO DIVIDENDS

The Company does not expect to pay cash dividends on Common Stock in the
foreseeable future. In addition, under its credit agreement, the Company is
prohibited from paying dividends on its shares of capital stock other than
dividends payable solely in shares of Common Stock. See "Dividend Policy."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS

The Company's charter and bylaws, as well as New York corporate law,
contain certain provisions that could have the effect of delaying, deferring or
preventing a change in control of the Company. These provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. Certain of these provisions provide for a staggered board and
allow the Company to issue, without shareholder approval, preferred stock having
rights senior to those of the Common Stock. Other provisions impose various
procedural and other requirements that could make it difficult for shareholders
to effect certain corporate actions. See "Management" and "Description of
Capital Stock."

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FORWARD-LOOKING INFORMATION

The matters discussed in this Prospectus include forward-looking statements
that involve risks or uncertainties. While forward-looking statements are
sometimes presented with numerical specificity, they are based on various
assumptions made by management regarding future circumstances over many of which
the Company has little or no control. A number of important factors, including
those identified above under this caption "Risk Factors" as well as factors
discussed elsewhere in this Prospectus, could cause the Company's actual results
to differ materially from those in forward-looking statements or financial
information. Actual results may differ from forward-looking results for a number
of reasons, including the following: (i) changes in general economic conditions
and other factors that affect demand for travel products or services; (ii)
changes in the vacation travel industry; (iii) changes in the Company's
relationships with travel suppliers; (iv) competitive factors (including changes
in travel distribution methods); and (v) the success of the Company's operating
and growth strategies (including the ability to integrate acquisitions into
Company operations, the ability of acquired companies to achieve satisfactory
operating results and the ability of the Company to manage the transition to an
integrated information platform). Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected.

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THE COMPANY

The Company was formed in 1959 under the name Allied Bus Corp. and, prior
to the Recapitalization and the Acquisitions, had grown to become one of the
largest providers of vacations for in-bound travelers to the United States. In
March 1998, the Company effected the Recapitalization and changed its name to
Global Vacation Group, Inc. Following the Recapitalization, the Company
completed the Acquisitions, through which it became a leading provider of
vacations to Hawaii as well as a provider of vacations to Florida (including
Disney World) and to the Caribbean, Mexico, Europe and other U.S. destinations.

The Company maintains its executive offices at 1420 New York Avenue, N.W.,
Suite 550, Washington, DC 20005, (202) 347-1800.

THE RECAPITALIZATION

In March 1998, the Company effected the Recapitalization pursuant to an
agreement among the Company, Thayer, Allied Tours Holding Corp. ("Allied
Holding") and the shareholders of Allied Holding. Prior to the Recapitalization,
the Company had 100 shares of issued and outstanding capital stock, all of which
were owned by Allied Holding. In the Recapitalization, the Company redeemed an
aggregate of 34 shares of capital stock from Allied Holding for an aggregate
consideration of $14.7 million, and Thayer purchased 57 shares of the Company's
capital stock (or approximately 86.4% of the then remaining outstanding shares)
from Allied Holding for $24.7 million. The redemption price was paid in cash of
$10.7 million and a $4.0 million 120-day promissory note bearing interest at 8%.
The cash portion of the redemption was financed with borrowings under a new
$65.0 million bank credit facility (the "Credit Facility"). In connection with
the Recapitalization, the Company recognized expenses of $1.0 million for
nonrecurring transaction costs.

In the Recapitalization, each of the 66 shares of the Company's capital
stock then outstanding (57 held by Thayer and nine held by Allied Holding) was
converted into 52,912.62 shares of Common Stock and 390.34 shares of Convertible
Preferred Stock. The conversion into the Convertible Preferred Stock was
accounted for as a noncash dividend and the conversion into Common Stock was
accounted for as a stock split. Holders of Convertible Preferred Stock are
entitled to dividends to be paid in additional shares of Convertible Preferred
Stock at a rate of 15% per annum. Effective as of the closing date of this
offering, all shares of Convertible Preferred Stock then outstanding will be
converted into shares of Common Stock. See "Capitalization" and "Description of
Capital Stock."

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THE ACQUIRED BUSINESSES

Since March 1998, the Company has acquired Haddon Holidays, Inc.
("Haddon"), Classic Custom Vacations, Inc. ("Classic") and Globetrotters, Inc.
("Globetrotters") and substantially all of the assets of MTI (collectively, the
"Acquired Businesses"). The combined purchase price for the Acquired Businesses
was $63.1 million, including the issuance of shares of Convertible Preferred
Stock and Common Stock valued at $2.9 million and direct acquisition costs but
excluding $1.5 million of Facilities Accruals. The Company financed these
acquisitions with proceeds from the issuance of additional shares of capital
stock and from borrowings under the Credit Facility.

The acquisition of each of the Acquired Businesses was accounted for as a
purchase for financial reporting purposes. The Company allocated the excess of
the purchase price over the fair value of net tangible assets acquired primarily
to goodwill and covenants not to compete. The total amount allocated to
intangible assets related to the Acquired Businesses was approximately $65.7
million. The Company will amortize amounts allocated to goodwill over 35 years
for financial reporting purposes and amounts allocated to covenants not to
compete over the term of the covenants. As a result of the Acquisitions, the
Company will record annual amortization expenses for acquisition-related
intangible assets of $1.9 million.

Haddon. In March 1998, the Company purchased all of the outstanding
capital stock of Haddon, a vacation provider based in Mount Laurel, New Jersey
that provides air, hotel and ground transportation packages for travelers to
Hawaii. The Company paid a purchase price of $8.0 million, including direct
acquisition costs.

Classic. In April 1998, the Company purchased all of the outstanding
capital stock of Classic, a vacation provider based in San Jose, California that
provides brand name, customized vacations primarily for the Hawaii market. The
Company paid a purchase price of $18.5 million, including direct acquisition
costs.

MTI. In May 1998, the Company acquired substantially all of the assets of
MTI, a packaged vacation provider based in Oak Brook, Illinois that (i) provides
vacations for travelers to Hawaii, (ii) provides Amtrak-sponsored vacations,
(iii) operates the reservation system associated with packaged vacations
sponsored by Hyatt and (iv) provides credit card reward fulfillment programs.
The Company paid a purchase price of $27.2 million, including direct acquisition
costs.

Globetrotters. Also in May 1998, the Company purchased all of the
outstanding capital stock of Globetrotters, a vacation provider based in
Cambridge, Massachusetts that provides brand name, popular-priced vacations
primarily for the Florida, Mexico and Caribbean markets. The Company paid a
purchase price of $5.8 million, including direct acquisition costs.

16
<PAGE> 20

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby, after deducting estimated underwriting discounts
and commissions and expenses, are estimated to be approximately $36.6 million,
assuming an initial public offering price of $14.00 per share. The Company will
not receive any proceeds from the sale of shares of Common Stock by the Selling
Shareholders upon the exercise of the Underwriters' over-allotment option. The
Company will use the net proceeds from this offering to repay the $4.0 million
promissory note issued to Allied Holding in connection with the Recapitalization
and other indebtedness incurred by the Company under the Credit Facility in
connection with the Recapitalization and the Acquisitions. The promissory note
issued to Allied Holding in the Recapitalization is due on July 25, 1998 and
bears interest at a rate of 8% per annum. At July 7, 1998, the outstanding
balance of term loans under the Credit Facility was $38.5 million, bearing
interest at a weighted average rate of 7.4% per annum. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

Prior to the Recapitalization in March 1998, the Company operated as a
corporation exempt from entity-level taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"). As a result, all of the Company's
earnings were distributed to its shareholders (who also were employees of the
Company) as bonus compensation or as distributions on capital stock. The
shareholders of the Company received an aggregate of $5.2 million as bonus
compensation or S Corporation distributions in 1996 and $5.3 million as bonus
compensation or S Corporation distributions in 1997. In 1998, prior to the
Recapitalization (at which time the Company terminated its status as an S
Corporation under the Code), the shareholders of the Company received an
aggregate of $5.0 million as bonus compensation or distributions. See
"Management -- Executive Compensation."

The Company does not anticipate declaring and paying cash dividends on the
Common Stock in the foreseeable future. In addition, under the Credit Facility,
the Company is prohibited from paying dividends on its shares of capital stock
other than dividends payable solely in shares of Common Stock.

17
<PAGE> 21

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company as of March 31, 1998 (i) on an actual basis, (ii) on a pro forma
basis to give effect to the Pro Forma Adjustments other than the Conversion and
the sale by the Company of 3,000,000 shares of Common Stock offered hereby and
(iii) on a pro forma as adjusted basis to give effect to the Pro Forma
Adjustments including the Conversion and the sale of the 3,000,000 shares of
Common Stock being offered hereby, at an assumed initial public offering price
of $14.00 per share, and the application of the net proceeds therefrom to repay
certain indebtedness as described under "Use of Proceeds." The information in
this table should be read in conjunction with "Selected Financial Data,"
"Unaudited Pro Forma Condensed Combined Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and accompanying notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and note payable.......... $ 6,000 $ 6,000 $ --
======== ======== ========
Long-term debt, net of current portion...................... $ 13,400 $ 39,500 $ 8,940
-------- -------- --------
Class A Convertible Preferred Stock, $1,000 par value:
100,000 shares authorized; 27,864.64 shares issued
and outstanding (actual); 52,775.64 shares issued
and outstanding (pro forma); no shares issued and
outstanding (pro forma as adjusted)(1)............ 28,015 52,925 --
-------- -------- --------
Shareholders' equity (deficit):
Preferred Stock, $.01 par value:
6,000,000 shares authorized; no shares issued and
outstanding (actual, pro forma and pro forma as
adjusted)(2)...................................... -- -- --
Common Stock, $.01 par value:
60,000,000 shares authorized; 7,505,126 shares
issued and outstanding (actual); 7,797,926 shares
issued and outstanding (pro forma); 14,739,838
shares issued and outstanding (pro forma as
adjusted)(2)(3)................................... 75 78 147
Additional paid-in capital.............................. 3,249 3,486 92,902
Retained deficit........................................ (47,369) (47,369) (47,369)
-------- -------- --------
Total shareholders' equity (deficit)............... (44,045) (43,805) 45,680
-------- -------- --------
Total capitalization........................... $ 3,370 $ 54,620 $ 54,620
======== ======== ========
</TABLE>

- ---------------

(1) In connection with the Recapitalization, the Company amended and restated
its certificate of incorporation to authorize two classes of capital stock:
Common Stock with a par value of $.01 per share and Convertible Preferred
Stock with a par value of $1,000 per share, at which time the 66 shares of
capital stock then outstanding were converted into 3,492,237 shares of
Common Stock and 25,762 shares of Convertible Preferred Stock. The
conversion into Common Stock has been reflected as a stock split and all
share and per share amounts have been restated to reflect this stock split.
The conversion into Convertible Preferred Stock has been reflected as a
non-cash dividend and was recorded at the liquidation value of $1,000 per
share. The Convertible Preferred Stock carries a liquidation preference
equal to $1,000 per share plus any accrued but unpaid dividends (15% per
annum). The Company is required to redeem all outstanding shares of
Convertible Preferred Stock on December 31, 2003. All outstanding shares of
Convertible Preferred Stock will be converted as of the closing date of this
offering into Common Stock at a rate equal to the liquidation preference,
plus any accrued but unpaid dividends, divided by the price per share in
this offering.

(2) Reflects amendments to the Company's certificate of incorporation (the
"Amended Certificate") which occurred after March 31, 1998.

(3) See Note (R) to Notes to Unaudited Pro Forma Condensed Combined Financial
Statements. Excludes shares of Common Stock issuable upon exercise of
options granted or to be granted as outlined below:

<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Options outstanding at December 31, 1997.................... -- --
Options granted prior to March 31, 1998..................... 84,716 $ 0.82
Options to be granted concurrently with this offering....... 1,282,269 $14.00
---------
Options to be outstanding upon completion of this
offering.................................................. 1,366,985
=========
</TABLE>

"Options to be granted concurrently with this offering" above reflects the
Company's commitment to issue concurrently with the closing of this offering
(i) options to purchase a number of shares of Common Stock equal to 7.5% of
the number of shares of Common Stock to be outstanding upon completion of
this offering (an aggregate of 1,105,485 shares, assuming the closing date
of this offering is July 31, 1998 and assuming the price per share in this
offering is $14.00) plus (ii) options to purchase a number of shares of
Common Stock with an aggregate value of $2,475,000 (an aggregate of 176,784
shares, assuming the price per share in this offering is $14.00), all of
which options will have an exercise price equal to the price per share in
this offering. Also excludes additional shares of Common Stock reserved for
future issuance under the Stock Option Plan (including up to 195,000 shares
to be subject to options the Company intends to grant concurrently with the
closing of this Offering), up to a total number of shares eligible for
issuance under the Stock Option Plan at any time equal to 12% of the then
outstanding shares of Common Stock. See "Management -- Stock Option Plan"
and "Description of Capital Stock."

18
<PAGE> 22

DILUTION

The pro forma net tangible book deficit of the Company at March 31, 1998
was ($57.5 million), or ($4.90) per share of Common Stock. Pro forma net
tangible book deficit per share is determined by dividing the pro forma net
tangible book deficit (total pro forma tangible assets less total pro forma
liabilities) of the Company by the number of shares of Common Stock outstanding
on a pro forma basis after giving effect to the Acquisitions completed after
March 31, 1998 and the other Pro Forma Adjustments (other than for this
offering). Without taking into account any changes in the pro forma net tangible
book deficit of the Company, other than to give effect to the sale of the shares
of Common Stock offered hereby (assuming an initial public offering price of
$14.00 per share) and the application of the net proceeds therefrom to repay
certain indebtedness as described under "Use of Proceeds," the pro forma as
adjusted net tangible book deficit of the Company at March 31, 1998 would have
been ($21.0 million), or ($1.42) per share of Common Stock. This represents an
immediate increase in pro forma net tangible book value of $3.48 per share to
existing shareholders and an immediate dilution in pro forma net tangible book
value of $15.42 per share to new investors purchasing shares in this offering.
The following table illustrates this per share dilution.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ............ $14.00
Pro forma net tangible book deficit per share at March
31, 1998.............................................. $(4.90)
Increase per share attributable to new investors....... 3.48
------
Pro forma as adjusted net tangible book deficit per share
after the offering ....................................... (1.42)
------
Dilution per share to new investors......................... $15.42
======
</TABLE>

The following table summarizes, as of July 7, 1998, after giving effect to
the Conversion and this offering (assuming the closing date of this offering is
July 31, 1998 and assuming the price per share in this offering is $14.00), the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing shareholders and by the new investors in this offering (based upon an
assumed initial public offering price of $14.00 per share, before deducting
underwriting discounts and commissions and offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders .... 11,739,838 79.6% $ 61,579,022 59.5% $ 5.25
New investors ............ 3,000,000 20.4 42,000,000 40.5 $14.00
---------- ------ ------------ ------
Total........... 14,739,838 100.0% $103,579,022 100.0%
========== ====== ============ ======
</TABLE>

The foregoing table assumes no exercise of the Underwriters' over-allotment
option and no exercise of stock options. At July 7, 1998, there were options
outstanding under the Stock Option Plan to purchase 84,716 shares of Common
Stock at an exercise price of $0.82 per share. The Company also has reserved (i)
shares of Common Stock equal to 7.5% of the number of shares of Common Stock
outstanding upon completion of this offering plus shares of Common Stock with an
aggregate value of $2,475,000, all of which shares will be issuable upon
exercise of options to be granted under the Stock Option Plan upon completion of
this offering (an aggregate of 1,282,269 shares, assuming the closing date of
this offering is July 31, 1998 and assuming the price per share in this offering
is $14.00) and each of which options will have an exercise price per share equal
to the initial public offering price per share, and (ii) additional shares of
Common Stock reserved for future issuance under the Stock Option Plan (including
up to 195,000 shares to be subject to options the Company intends to grant
concurrently with the closing of this offering), up to a total number of shares
eligible for issuance under the Stock Option Plan at any time equal to 12% of
the then outstanding shares of Common Stock. To the extent any of these options
are exercised, there will be future dilution to new investors. See
"Management -- Stock Option Plan" and "Shares Eligible for Future Sale."

19
<PAGE> 23

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Condensed Combined Balance Sheet gives
effect to: (i) the Acquisitions completed after March 31, 1998 (Classic, MTI and
Globetrotters), (ii) the accrual for lease and employee severance payments for
the planned closing of redundant acquired facilities (the "Facilities
Accruals"), (iii) the termination of the Company's S Corporation status, (iv)
the Conversion and (v) the sale by the Company of the shares offered hereby and
the application of the net proceeds therefrom to repay indebtedness as described
under "Use of Proceeds," as if all such events had occurred as of March 31,
1998. The Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1997 and the three month period ended March 31, 1998
give effect to each of the items referred to in clauses (i) through (v) above,
as well as the Haddon Acquisition and reductions in salary and bonuses to the
prior owners and key executives of the Company and the Acquired Businesses,
offset in part by expected incremental costs reflecting the Company's new
management structure (the "Compensation Savings"), as if it had occurred on
January 1, 1997. See "The Recapitalization," "The Acquired Businesses" and "Use
of Proceeds."

Each of the Acquisitions has been accounted for by the purchase method. In
each case, the purchase price has been allocated on a preliminary basis to the
assets acquired or to be acquired based on the estimated fair values of such
assets.

The Company has preliminarily analyzed the savings it expects to realize by
combining certain operational and general and administrative functions. To the
extent the owners and certain key employees of the Company and the Acquired
Businesses have agreed prospectively to reductions in salary and bonuses, these
reductions have been reflected in the Unaudited Pro Forma Condensed Combined
Statements of Operations. The Company has also analyzed and quantified the
estimated savings from closing redundant acquired facilities (the "Facilities
Savings") and estimates these savings to be approximately $3.2 million annually
before provision for income taxes, of which approximately 80% are expected to be
realized in 1999 and 100% are expected to be realized in subsequent years;
however, these savings have not been reflected in the Unaudited Pro Forma
Condensed Combined Statements of Operations as they will be realized subsequent
to the closing of the Acquisitions. Furthermore, the Unaudited Pro Forma
Condensed Combined Statements of Operations for 1997 do not eliminate
approximately $1.2 million and $20,000 before provision for income taxes in 1997
and the three months ended March 31, 1998, respectively, of settlement agreement
legal expenses incurred by Classic prior to its acquisition which are not
expected to recur in future periods.

The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. In the opinion of management, all adjustments have been made
that are necessary to present fairly the pro forma data. The unaudited pro forma
financial information does not purport to represent what the Company's financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates and are not necessarily representative of
the Company's financial position or results of operations for any future period.
Because all entities were not under common control or management, historical
consolidated results may not be comparable to, or indicative of, future
performance. The Unaudited Pro Forma Condensed Combined Financial Statements
should be read in conjunction with the historical financial statements and notes
thereto included elsewhere in this Prospectus.

20
<PAGE> 24

GLOBAL VACATION GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------- PRO FORMA OFFERING
COMPANY CLASSIC MTI GLOBETROTTERS ADJUSTMENTS PRO FORMA ADJUSTMENTS(A)
-------- ------- ------- ------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents and
marketable securities............. $ 7,069 $19,240 $ 8,940 $2,804 $ 8,557(B) $ 46,610 $ --
Trade and other receivables, net of
allowance......................... 8,431 2,126 1,143 2,763 4,440(C) 18,903 --
Prepaid expenses and other current
assets............................ 871 3,997 3,110 2,692 -- 10,670 --
-------- ------- ------- ------ ------- -------- --------
Total current assets.............. 16,371 25,363 13,193 8,259 12,997 76,183 --
Investments, net of current portion... -- 24,423 9,295 -- (24,423)(B) 9,295 --
Property and equipment, net........... 556 3,101 1,561 176 (710)(D) 4,684 --
Intangibles........................... 10,455 -- -- -- 56,204(E) 66,659 --
Other assets.......................... 19 894 178 956 (905)(C) 1,142 --
-------- ------- ------- ------ ------- -------- --------
Total assets.................... $ 27,401 $53,781 $24,227 $9,391 $43,163 $157,963 $ --
======== ======= ======= ====== ======= ======== ========
Current liabilities:
Accounts payable and accrued
expenses.......................... $ 18,942 $16,336 $ 8,880 $3,035 $ 832(F) $ 48,025 $ --
Customer deposits................... 5,089 25,123 18,222 6,884 -- 55,318 --
Note payable and current portion of
long-term debt.................... 6,000 -- -- -- -- 6,000 (6,000)
-------- ------- ------- ------ ------- -------- --------
Total current liabilities......... 30,031 41,459 27,102 9,919 832 109,343 (6,000)
Long-term debt, net of current
portion............................. 13,400 11,596 -- -- 14,504(G) 39,500 (30,560)
-------- ------- ------- ------ ------- -------- --------
Total liabilities............... 43,431 53,055 27,102 9,919 15,336 148,843 (36,560)
Class A Convertible Preferred Stock... 28,015 -- -- -- 24,910(H) 52,925 (52,925)
Shareholders' equity (deficit):
Common stock........................ 75 1,705 -- 1 (1,703)(H) 78 69
Additional paid-in capital.......... 3,249 -- -- -- 237(H) 3,486 89,416
Retained deficit.................... (47,369) (979) (2,875) (529) 4,383(H) (47,369) --
-------- ------- ------- ------ ------- -------- --------
Total shareholders' equity
(deficit)....................... (44,045) 726 (2,875) (528) 2,917 (43,805) 89,485
-------- ------- ------- ------ ------- -------- --------
Total liabilities and
shareholders' equity.......... $ 27,401 $53,781 $24,227 $9,391 $43,163 $157,963 $ --
======== ======= ======= ====== ======= ======== ========

PRO FORMA
AS ADJUSTED
-----------
<S> <C>
Current assets:
Cash, cash equivalents and
marketable securities............. $ 46,610
Trade and other receivables, net of
allowance......................... 18,903
Prepaid expenses and other current
assets............................ 10,670
--------
Total current assets.............. 76,183
Investments, net of current portion... 9,295
Property and equipment, net........... 4,684
Intangibles........................... 66,659
Other assets.......................... 1,142
--------
Total assets.................... $157,963
========
Current liabilities:
Accounts payable and accrued
expenses.......................... $ 48,025
Customer deposits................... 55,318
Note payable and current portion of
long-term debt.................... --
--------
Total current liabilities......... 103,343
Long-term debt, net of current
portion............................. 8,940
--------
Total liabilities............... 112,283
Class A Convertible Preferred Stock... --
Shareholders' equity (deficit):
Common stock........................ 147
Additional paid-in capital.......... 92,902
Retained deficit.................... (47,369)
--------
Total shareholders' equity
(deficit)....................... 45,680
--------
Total liabilities and
shareholders' equity.......... $157,963
========
</TABLE>

The accompanying notes are an integral part of these
Unaudited Pro Forma Condensed Combined Financial Statements.

21
<PAGE> 25

GLOBAL VACATION GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- PRO FORMA OFFERING
COMPANY HADDON CLASSIC MTI GLOBETROTTERS ADJUSTMENTS PRO FORMA ADJUSTMENTS
------- ------ ------- ------- ------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. $24,255 $7,138 $42,870 $29,194 $13,982 $(2,217)(I) $115,222 $ --
Operating expenses........ 17,852 5,306 38,154 25,782 13,200 (3,355)(J) 96,939 --
------- ------ ------- ------- ------- ------- -------- ------
Gross profit.......... 6,403 1,832 4,716 3,412 782 1,138 18,283 --
------- ------ ------- ------- ------- ------- -------- ------
General and administrative
expenses................ 7,797 1,953 4,449 1,643 860 (6,446)(K) 10,256 --
Depreciation and
amortization............ 182 95 1,020 528 250 (481)(L) 1,594 --
Goodwill amortization..... -- -- -- -- -- 1,891(M) 1,891 --
Settlement agreement legal
expense................. -- -- 1,184 -- -- -- 1,184 --
------- ------ ------- ------- ------- ------- -------- ------
Income (loss) from
operations.......... (1,576) (216) (1,937) 1,241 (328) 6,174 3,358 --
------- ------ ------- ------- ------- ------- -------- ------
Other income (expense):
Interest income......... 556 351 3,225 1,086 211 (1,105)(N) 4,324 --
Interest expense........ -- -- (440) -- (60) (2,841)(O) (3,341) 2,452(P)
Other, net.............. 41 (47) 137 -- 207 -- 338 --
------- ------ ------- ------- ------- ------- -------- ------
Total other income
(expense)........... 597 304 2,922 1,086 358 (3,946) 1,321 2,452
------- ------ ------- ------- ------- ------- -------- ------
Income (loss) before
provision for income
taxes................. (979) 88 985 2,327 30 2,228 4,679 2,452
Provision for income
taxes................... (124) -- (50) -- (14) (1,591)(Q) (1,871) (981)(Q)
------- ------ ------- ------- ------- ------- -------- ------
Net income (loss)..... $(1,103) $ 88 $ 935 $ 2,327 $ 16 $ 637 $ 2,808 $1,471
======= ====== ======= ======= ======= ======= ======== ======
Pro forma net income per
common share:
Basic and diluted....... $ 0.36
Pro forma weighted average
common shares
outstanding:
Basic and diluted....... 7,798(R)

PRO FORMA
AS ADJUSTED
-----------
<S> <C>
Net revenues.............. $115,222
Operating expenses........ 96,939
--------
Gross profit.......... 18,283
--------
General and administrative
expenses................ 10,256
Depreciation and
amortization............ 1,594
Goodwill amortization..... 1,891
Settlement agreement legal
expense................. 1,184
--------
Income (loss) from
operations.......... 3,358
--------
Other income (expense):
Interest income......... 4,324
Interest expense........ (889)
Other, net.............. 338
--------
Total other income
(expense)........... 3,773
--------
Income (loss) before
provision for income
taxes................. 7,131
Provision for income
taxes................... (2,852)
--------
Net income (loss)..... $ 4,279
========
Pro forma net income per
common share:
Basic and diluted....... $ 0.29
Pro forma weighted average
common shares
outstanding:
Basic and diluted....... 14,740(R)
</TABLE>

The accompanying notes are an integral part of these
Unaudited Pro Forma Condensed Combined Financial Statements.

22
<PAGE> 26

GLOBAL VACATION GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- PRO FORMA OFFERING
COMPANY HADDON CLASSIC MTI GLOBETROTTERS ADJUSTMENTS PRO FORMA ADJUSTMENTS
-------- ------ ------- ------ ------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. $ 2,477 $1,427 $10,681 $5,899 $1,937 $ -- $22,421 $ --
Operating expenses........ 3,032 1,265 10,030 5,717 2,100 14 (J) 22,158 --
-------- ------ ------- ------ ------ ------- ------- -----
Gross profit (loss)... (555) 162 651 182 (163) (14) 263 --
-------- ------ ------- ------ ------ ------- ------- -----
General and administrative
expenses................ 1,571 850 929 893 100 (1,633)(K) 2,710 --
Depreciation and
amortization............ 34 31 271 129 24 (84)(L) 405 --
Goodwill amortization..... -- -- -- -- -- 470 (M) 470 --
Settlement agreement legal
expense................. -- -- 20 -- -- -- 20 --
-------- ------ ------- ------ ------ ------- ------- -----
Income (loss) from
operations.......... (2,160) (719) (569) (840) (287) 1,233 (3,342) --
-------- ------ ------- ------ ------ ------- ------- -----
Other income (expense):
Interest income......... 74 70 898 304 44 (339)(N) 1,051 --
Interest expense........ (14) -- (99) -- (4) (728)(O) (845) 637(P)
Other, net.............. -- -- (4) -- -- -- (4) --
-------- ------ ------- ------ ------ ------- ------- -----
Total other income
(expense)........... 60 70 795 304 40 (1,067) 202 637
-------- ------ ------- ------ ------ ------- ------- -----
Income (loss) before
(provision for)
benefit from
income taxes...... (2,100) (649) 226 (536) (247) 166 (3,140) 637
(Provision for) benefit
from income taxes....... 61 -- (5) -- (1) 1,138 (Q) 1,257 (256)(Q)
-------- ------ ------- ------ ------ ------- ------- -----
Net income
(loss).......... $ (2,039) $ (649) $ 221 $ (536) $ (248) $ 1,304 $(1,883) $ 381
======== ====== ======= ====== ====== ======= ======= =====
Pro forma net loss per
common share:
Basic and diluted....... $ (0.24)
Pro forma weighted average
common shares
outstanding:
Basic and diluted....... 7,798 (R)

PRO FORMA
AS ADJUSTED
-----------
<S> <C>
Net revenues.............. $22,421
Operating expenses........ 22,158
-------
Gross profit (loss)... 263
-------
General and administrative
expenses................ 2,710
Depreciation and
amortization............ 405
Goodwill amortization..... 470
Settlement agreement legal
expense................. 20
-------
Income (loss) from
operations.......... (3,342)
-------
Other income (expense):
Interest income......... 1,051
Interest expense........ (208)
Other, net.............. (4)
-------
Total other income
(expense)........... 839
-------
Income (loss) before
(provision for)
benefit from
income taxes...... (2,503)
(Provision for) benefit
from income taxes....... 1,001
-------
Net income
(loss).......... $(1,502)
=======
Pro forma net loss per
common share:
Basic and diluted....... $ (0.10)
Pro forma weighted average
common shares
outstanding:
Basic and diluted....... 14,740 (R)
</TABLE>

The accompanying notes are an integral part of these
Unaudited Pro Forma Condensed Combined Financial Statements.

23
<PAGE> 27

GLOBAL VACATION GROUP, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS

(A) Gives effect to (i) the estimated net proceeds of $36.6 million from the
sale by the Company of the shares offered hereby, (ii) the use of $36.6
million of net proceeds to repay certain indebtedness and (iii) the
Conversion.

(B) Reflects the sale of certain marketable securities with a carrying value of
$24.4 million at March 31, 1998 and the transfer of related debt
obligations of $11.6 million at March 31, 1998 acquired in the Classic
acquisition to certain shareholders of Classic immediately subsequent to
the acquisition. The net proceeds to the Company from this sale consisted
of cash of $6.8 million, which was reinvested in short-term securities, and
$5.5 million due under a note receivable. The note receivable bears
interest at a rate of 9% and is due in April 2000. The pro forma adjustment
to cash, cash equivalents and marketable securities reflects the net
proceeds of $6.8 million described above plus additional borrowings of $3.1
million under the Credit Facility for working capital purposes, less the
use of $1.3 million of cash on hand in connection with the Globetrotters
acquisition.

(C) Reflects the $5.5 million due pursuant to a note receivable discussed in
(B) above, net of $2.0 million in receivables due from parties related to
the prior owners of Globetrotters which were forgiven immediately prior to
the acquisition of Globetrotters, of which approximately $1.1 million is
included in trade and other receivables and $905,000 is included in other
assets on the Globetrotters balance sheet.

(D) Reflects acquired property and equipment at its estimated fair value after
giving consideration to plans to dispose property and equipment in the next
year.

(E) Reflects the estimated intangibles, substantially all of which will be
allocated to goodwill, resulting from the Acquisitions, as follows (in
thousands):

<TABLE>
<S> <C>
Classic................................................... $19,278
MTI....................................................... 30,095
Globetrotters............................................. 6,831
-------
Total........................................... $56,204
=======
</TABLE>

(F) Reflects $832,000 of Facilities Accruals consisting of accrued costs for
closing redundant acquired facilities ($268,000), planned severance
payments to employees upon closing such facilities ($314,000) and other
reorganization costs ($250,000).

(G) Reflects additional borrowings under the Credit Facility to finance the
Acquisitions and working capital, net of the transfer of the Classic debt
obligations discussed in (B), as follows (in thousands):

<TABLE>
<S> <C>
Classic................................................... $ 13,100
MTI....................................................... 11,100
Globetrotters............................................. 1,900
--------
26,100
Classic transfer (see (B) above).......................... (11,596)
--------
$ 14,504
========
</TABLE>

(H) Reflects the issuance of Convertible Preferred Stock valued at $22.7
million pursuant to the Company's equity purchase agreement and the
issuance of Convertible Preferred Stock valued at $2.2 million together
with Common Stock valued at $240,000 to the former shareholders of MTI to
finance the Acquisitions and the elimination of historical equity amounts
for the Acquired Businesses.

(I) The historical results of operations for MTI for the year ended December
31, 1997 include the results of operations for certain travel products and
services which were discontinued in 1997. The results of operations for
these product lines and services were as follows and have been eliminated
in the

24
<PAGE> 28
GLOBAL VACATION GROUP, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)

accompanying unaudited pro forma condensed combined statement of operations
for the year ended December 31, 1997 (in thousands):

<TABLE>
<S> <C>
Net revenues................................................ $ 2,217
Operating expenses.......................................... 3,147
General and administrative expenses......................... 293
Depreciation and amortization............................... 144
Interest income............................................. 82
Interest expense............................................ --
Other income................................................ --
-------
Net loss............................................... $(1,285)
=======
</TABLE>

(J) Reflects a reduction in operating expenses of $3.1 million associated with
discontinued product lines as discussed in (I) for the year ended December
31, 1997, as well as a reduction of $192,000 and $48,000 of excess rental
payments made to prior owners for the year ended December 31, 1997 and for
the three months ended March 31, 1998, respectively. Also reflects
specifically identified and quantified cost savings of $416,000 and
$38,000, offset by $400,000 and $100,000 in estimated incremental computer
costs required to operate certain reservation systems at the contracted
rate, for the year ended December 31, 1997 and for the three months ended
March 31, 1998, respectively.

(K) Reflects a reduction in general and administrative expenses of $293,000 for
the year ended December 31, 1997 associated with discontinued product lines
as noted in (I). In addition, reflects the Compensation Savings of $6.2
million and $568,000 for the year ended December 31, 1997 and for the three
months ended March 31, 1998, respectively. Also reflects transaction costs
of approximately $1.0 million for the three months ended March 31, 1998
related to the Recapitalization.

(L) Reflects a reduction in depreciation and amortization of $144,000 for the
year ended December 31, 1997 associated with discontinued product lines as
discussed in (I). In addition, reflects the reduction of historical
depreciation and amortization of $337,000 and $84,000 for the year ended
December 31,1997 and for the three months ended March 31, 1998,
respectively, on equipment discussed in (D).

(M) Reflects the amortization of goodwill assuming a 35-year estimated life.
See "Risk Factors -- Accounting Charges; Significant Intangible Assets."

(N) Reflects a reduction in interest income of $82,000 for the year ended
December 31, 1997 associated with discontinued product lines as noted in
(I). In addition, reflects the incremental reduction of interest income of
$1.0 million and $339,000 for the year ended December 31, 1997 and for the
three months ended March 31, 1998, respectively, related to the sale of
marketable securities as discussed in (B).

(O) Reflects the incremental interest expense of $3.1 million and $785,000 for
the year ended December 31, 1997 and for the three months ended March 31,
1998, respectively, assuming the amounts outstanding under the Credit
Facility and the note payable were drawn on January 1, 1997, at an interest
rate of 7.4%, offset by the reduction in interest expense of $440,000 and
$99,000 for the year ended December 31, 1997 and for the three months ended
March 31, 1998, respectively, for the transfer of Classic debt obligations
as discussed in (B). Adjustment also includes approximately $167,000 and
$42,000 for the year ended December 31, 1997 and for the three months ended
March 31, 1998, respectively, in amortization of deferred financing costs
under the Credit Facility.

(P) Reflects the incremental reduction in interest expense related to the
repayment of outstanding debt with a portion of the proceeds from this
offering.

25
<PAGE> 29
GLOBAL VACATION GROUP, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)

(Q) Reflects the incremental provision for federal and state income taxes
relating to the historical income tax provisions for the Acquired
Businesses and the termination of the Company's status as an S Corporation.

(R) Pro forma and pro forma as adjusted weighted average common shares
outstanding consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
SHARES
----------
<S> <C> <C>
Common shares outstanding as of March 31, 1998...... 7,505,126
Common shares issued in connection with the
Acquisitions completed after March 31, 1998....... 292,800
Convertible Preferred Stock:
Outstanding as of March 31, 1998.................. $ 28,015
Issued in connection with the Acquisitions
completed after March 31, 1998................. 24,910
Dividend accretion from March 31, 1998 through
July 31, 1998.................................. 2,261
----------
Total as of July 31, 1998................. $ 55,186
Conversion of Convertible Preferred Stock at assumed
offering price of $14.00 per share................ 3,941,912
----------
Pro forma weighted average common shares............ 11,739,838
Common shares issued in offering.................... 3,000,000
----------
Pro forma as adjusted weighted average common
shares............................................ 14,739,838
==========
</TABLE>

If the closing date of this offering occurs after July 31, 1998, the number
of shares of Common Stock to be issued in the Conversion, assuming an
initial public offering price of $14.00, would increase by approximately
46,475 shares per month thereafter.

Following this offering, the Company's authorized capital stock will
consist of 60,000,000 shares of Common Stock, of which there will be
14,739,838 shares issued and outstanding, and 6,000,000 shares of
undesignated preferred stock, par value $0.01 per share, of which there
will be no shares issued and outstanding.

26
<PAGE> 30

SELECTED FINANCIAL DATA

The selected financial data as of December 31, 1996 and 1997 and for the
years ended December 31, 1995, 1996 and 1997 were derived from the financial
statements of the Company audited by Arthur Andersen LLP included elsewhere in
this Prospectus. The selected financial data as of December 31, 1993, 1994 and
1995 and for the years ended December 31, 1993 and 1994 were derived from
unaudited financial statements of the Company not included in this Prospectus
which, in the opinion of management, have been prepared in a manner consistent
with the audited financial statements. The selected financial data as of March
31, 1998 and for the three months ended March 31, 1997 and 1998 have been
derived from the Company's unaudited interim financial statements included
elsewhere in this Prospectus which, in the opinion of the Company's management,
include all adjustments (consisting only of normal, recurring adjustments)
necessary for a fair presentation of such information. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full year or for any future period. The selected
pro forma as adjusted statement of operations data give effect to the Pro Forma
Adjustments including the sale by the Company of the 3,000,000 shares offered
hereby and the use of the net proceeds therefrom to repay certain indebtedness,
as described under "Use of Proceeds," as if all such events had occurred as of
January 1, 1997. The selected pro forma balance sheet data give effect to each
of the above, excluding the Conversion and the sale by the Company of the
3,000,000 shares offered hereby, as if it had occurred on March 31, 1998. The
selected pro forma as adjusted balance sheet data give effect to each of the
above as if it had occurred on March 31, 1998. The selected pro forma and pro
forma as adjusted financial data are not necessarily indicative of the results
of operations and financial position of the Company had such transactions
occurred on the dates specified and are not necessarily indicative of the
results of operations for any future period. The information in this table
should be read in conjunction with "Unaudited Pro Forma Condensed Combined
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements and
accompanying notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1993 1994 1995 1996 1997 1997(1)
----------- ----------- ------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $16,683 $13,098 $18,464 $22,259 $24,255 $115,222
Operating expenses................ 10,622 8,414 13,316 16,025 17,852 96,939
------- ------- ------- ------- ------- --------
Gross profit (loss)........... 6,061 4,684 5,148 6,234 6,403 18,283
------- ------- ------- ------- ------- --------
General and administrative
expenses(2)..................... 3,289 4,758 5,702 6,905 7,797 10,256
Depreciation and amortization..... 160 166 131 154 182 1,594
Goodwill amortization............. -- -- -- -- -- 1,891
Settlement agreement legal
expense......................... -- -- -- -- -- 1,184
------- ------- ------- ------- ------- --------
Income (loss) from
operations.................. 2,612 (240) (685) (825) (1,576) 3,358
------- ------- ------- ------- ------- --------
Other income (expense):
Interest income............... 305 445 521 581 556 4,324
Interest expense.............. -- -- -- -- -- (889)
Other income (expense)........ (129) -- 67 (4) 41 338
------- ------- ------- ------- ------- --------
Total other income
(expense)............... 176 445 588 577 597 3,773
------- ------- ------- ------- ------- --------
Income (loss) before (provision
for) benefit from income
taxes........................... 2,788 205 (97) (248) (979) 7,131
(Provision for) benefit from
income taxes.................... (137) (87) (106) (122) (124) (2,852)
------- ------- ------- ------- ------- --------
Net income (loss)............. 2,651 118 (203) (370) (1,103) 4,279
Preferred dividends............... -- -- -- -- -- --
------- ------- ------- ------- ------- --------
Net income (loss) available to
common shareholders............. $ 2,651 $ 118 $ (203) $ (370) $(1,103) $ 4,279
======= ======= ======= ======= ======= ========
Pro forma net income (loss) per
common share:
Basic and diluted............. $ 0.29
Pro forma weighted average common
shares outstanding:
Basic and diluted............. 14,740

<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
PRO FORMA
AS ADJUSTED
1997 1998 1998(1)
------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $ 2,425 $ 2,477 $22,421
Operating expenses................ 2,820 3,032 22,158
------- ------- -------
Gross profit (loss)........... (395) (555) 263
------- ------- -------
General and administrative
expenses(2)..................... 1,129 1,571 2,710
Depreciation and amortization..... 41 34 405
Goodwill amortization............. -- -- 470
Settlement agreement legal
expense......................... -- -- 20
------- ------- -------
Income (loss) from
operations.................. (1,565) (2,160) (3,342)
------- ------- -------
Other income (expense):
Interest income............... 65 74 1,051
Interest expense.............. -- (14) (208)
Other income (expense)........ -- -- (4)
------- ------- -------
Total other income
(expense)............... 65 60 839
------- ------- -------
Income (loss) before (provision
for) benefit from income
taxes........................... (1,500) (2,100) (2,503)
(Provision for) benefit from
income taxes.................... 10 61 1,001
------- ------- -------
Net income (loss)............. (1,490) (2,039) (1,502)
Preferred dividends............... -- (150) --
------- ------- -------
Net income (loss) available to
common shareholders............. $(1,490) $(2,189) $(1,502)
======= ======= =======
Pro forma net income (loss) per
common share:
Basic and diluted............. $ (0.10)
Pro forma weighted average common
shares outstanding:
Basic and diluted............. 14,740
</TABLE>

27
<PAGE> 31

<TABLE>
<CAPTION>
MARCH 31, 1998
DECEMBER 31, ---------------------------------
------------------------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- ----------- --------- ------- ------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
marketable securities,
including non-current
portion..................... $ 6,782 $ 6,571 $ 7,896 $ 8,256 $ 7,909 $ 7,069 $ 46,610 $ 46,610
Working capital (deficit)..... 5,190 3,563 2,710 1,256 (78) (13,660) (33,160) (27,160)
Total assets.................. 13,310 13,819 17,713 19,677 19,375 27,401 157,963 157,963
Total debt.................... -- -- -- -- -- 19,400 45,500 8,940
Shareholders' equity
(deficit)................... 5,788 4,118 3,151 1,673 358 (44,045) (43,805) 45,680
</TABLE>

- ---------------
(1) The pro forma as adjusted statement of operations data does not give effect
to the estimated annual savings from closing redundant acquired facilities
estimated to be approximately $3.2 million before provision for income
taxes, of which approximately 80% are expected to be realized in 1999 and
100% are expected to be realized in subsequent years. Additionally, the pro
forma results do not eliminate nonrecurring settlement agreement legal
expense of one of the Acquired Businesses of $1.2 million and $20,000 before
taxes for the year ended December 31, 1997 and the three months ended March
31, 1998, respectively, as such expenses are not directly related to the
Acquisition.
(2) General and administrative expenses for the years ended December 31, 1993,
1994, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998
include salary and bonuses to the prior owners and certain key employees of
the Company of $2.4 million, $3.1 million, $3.8 million, $4.8 million, $5.8
million, $790,000 and $170,000, respectively. General and administrative
expenses for the three months ended March 31, 1998 include approximately
$1.0 million of expenses incurred in connection with the Recapitalization.

28
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements and related notes thereto and "Selected Financial Data" and
"Unaudited Pro Forma Condensed Combined Financial Statements" included elsewhere
in this Prospectus.

OVERVIEW

The Company believes it is one of the largest U.S. providers of value-added
vacation products and services targeted to higher-income travelers. The
Company's revenue is derived primarily from the sale of travel-related products
and services, including airline tickets, hotel accommodations, auto rentals and
other related products and services. The Company assembles air, hotel, rental
car and other travel components in bulk and provides complete vacations to
travelers through retail travel distributors, such as travel agents, and other
distribution channels, including the Internet and affinity groups.

Net revenues include commissions and markups on travel products and
services, volume bonuses received from travel suppliers, cancellation fees and
other ancillary fees such as travel insurance premiums and are recognized upon
the commencement of travel. For 1997 and the three months ended March 31, 1998,
the Company recognized $24.3 million and $2.5 million, respectively, in net
revenues and $1.1 million and $2.0 million, respectively, in net losses derived
from a total dollar value of travel products and services of $125.9 million and
$17.2 million, respectively. On a pro forma as adjusted basis for 1997 and the
three months ended March 31, 1998, the Company had net revenues of $115.2
million and $22.4 million, respectively, and net income (loss) of $4.3 million
and ($1.5 million), respectively, derived from a total dollar value of travel
products and services of $507.0 million and $101.1 million, respectively.

Operating expenses include travel agent commissions, salaries,
telecommunications, advertising and other costs associated with the selling and
processing of travel reservations, products and services. Commission payments to
travel agents are typically based on a percentage of the price paid for the
travel product or service, but in certain circumstances are fixed dollar
amounts. Reservations agents are compensated either on an hourly basis, a
commission basis or a combination of the two. The Company's telephone costs
primarily relate to the cost of incoming calls on toll-free numbers. General and
administrative expenses consist primarily of compensation and benefits to
administrative and other non-sales personnel, fees for professional services,
depreciation of equipment and other general office expenses.

The Company and each of the Acquired Businesses historically were operated
as independent, privately owned entities and had elected to be taxed under the
provisions of Subchapter S of the Code, which influenced the historical level of
owners' compensation. The owners and key employees of the Company and the
Acquired Businesses have agreed to certain reductions in their salary, bonuses
and benefits in connection with the Acquisitions which result in annual savings
of $7.8 million. On a pro forma basis for 1997 and the three months ended March
31, 1998, the compensation differential, net of compensation expense associated
with the new management team, was $6.2 million and $568,000, respectively, and
has been reflected as a pro forma adjustment in the Unaudited Pro Forma
Condensed Combined Statements of Operations. The Unaudited Pro Forma Condensed
Combined Statements of Operations includes a provision for income taxes as if
the Company were taxed as a C Corporation.

In connection with the Recapitalization and the Acquisitions, the Company
is restructuring certain operations of the Acquired Businesses. The Company's
objective is to realize certain savings from the combination of the Acquired
Businesses as a result of consolidating certain operating expenses such as

29
<PAGE> 33

telecommunications, advertising and promotional programs and from consolidating
or outsourcing certain administrative functions, including technology and
software development, insurance, employee benefits and other administrative
expenses. The Company has accrued certain costs of restructuring the Acquired
Businesses totaling approximately $1.5 million related to closing redundant
acquired facilities and making severance payments to terminated employees
following the Acquisitions. The Company anticipates that the annual savings
associated with the closing of these redundant acquired facilities will be
approximately $3.2 million before provision for income taxes, of which
approximately 80% are expected to be realized in 1999 and 100% are expected to
be realized in subsequent years; however, these anticipated savings have not
been reflected in the Unaudited Pro Forma Condensed Combined Statements of
Operations.

The Company derives a significant portion of its pre-tax income from
interest earned on funds related to customer deposits and prepayments for
vacation products. Generally, the Company requires a deposit within one week of
making a travel reservation. Reservations are typically made two to three months
prior to departure. Additionally, for packaged tours, the Company generally
requires that the entire cost of the vacation be paid in full 45 to 60 days
before departure, unless reservations are made closer to departure. While terms
vary, the Company generally pays for the vacation components after the
customer's departure. In the period between receipt of a deposit or prepayment
and the payment of related expenses, these funds are invested in cash and
investment-grade securities. This cycle is typical in the packaged tour industry
and earnings generated on deposits and prepayments are integral to the Company's
operating model and pricing strategies. For 1997 on a pro forma as adjusted
basis, the Company had interest income of $4.3 million (or 60.6% of income
before provision for income taxes), substantially all of which was derived from
interest on customer deposits and advance payments.

PRO FORMA RESULTS OF OPERATIONS

Management believes that period-to-period comparisons of the Company's
historical financial results are not necessarily meaningful and should not be
relied upon as an indication of future performance given the pro forma impact of
the Acquired Businesses on the Company's financial results.

The following table summarizes the Company's historical and pro forma as
adjusted results of operations as a percentage of net revenues for 1997 and the
three months ended March 31, 1998. The pro forma as adjusted results of
operations give effect to the Pro Forma Adjustments and the sale of shares by
the Company in this offering and the application of the net proceeds therefrom
to repay indebtedness, as if such events had occurred as of January 1, 1997.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------- --------------------
PRO FORMA PRO FORMA
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Net revenues................................... 100.0% 100.0% 100.0% 100.0%
Operating expenses............................. 73.6 84.1 122.4 98.8
----- ----- ------ ------
Gross profit (loss)....................... 26.4 15.9 (22.4) 1.2
----- ----- ------ ------
General and administrative expenses............ 32.1 8.9 63.4 12.1
Depreciation and amortization.................. 0.8 1.4 1.4 1.8
Amortization of goodwill....................... -- 1.6 -- 2.1
Settlement agreement legal expense............. -- 1.0 -- 0.1
----- ----- ------ ------
Income (loss) from operations............. (6.5) 3.0 (87.2) (14.9)
----- ----- ------ ------
Interest income................................ 2.3 3.8 3.0 4.7
Interest expense............................... -- (0.8) (0.6) (0.9)
Other income (expense)......................... 0.2 0.3 -- --
----- ----- ------ ------
Income (loss) before (provision for) benefit
from income taxes............................ (4.0) 6.3 (84.8) (11.1)
(Provision for) benefit from income taxes...... (0.5) (2.5) 2.5 4.5
----- ----- ------ ------
Net income (loss)......................... (4.5)% 3.8% (82.3)% (6.6)%
===== ===== ====== ======
</TABLE>

30
<PAGE> 34

Pro forma net revenues for 1997 and the quarter ended March 31, 1998 were
$115.2 million and $22.4 million, respectively, which reflects the combined net
revenues of the Company and the Acquired Businesses for each period, less $2.2
million in 1997 of historical net revenues for product lines discontinued by MTI
prior to its acquisition.

Pro forma operating expenses for 1997 and the quarter ended March 31, 1998
were $96.9 million and $22.2 million, respectively, or 84.1% and 98.8%,
respectively, of pro forma net revenues. Pro forma operating expenses for the
Acquired Businesses represent a relatively higher percentage of net revenues for
1997 as compared to historical results for the Company. This is due principally
to the different distribution channels and associated costs utilized by the
Company and the Acquired Businesses. The Acquired Businesses rely primarily on
travel agent distribution networks that result in a commission cost reflected in
increased operating expenses. Unlike the Acquired Businesses, the Company
distributes its products primarily to other wholesalers on a net basis. The
Company's net revenues generally are highest in the second and third quarters of
the year, while its expenses generally are highest in the first and fourth
quarters. The impact of seasonality is more pronounced with respect to the
Company's in-bound U.S. business than with respect to the Company's other
business because international travel to the United States is heavily
concentrated in the summer months.

Pro forma general and administrative expenses for 1997 and the quarter
ended March 31, 1998 were $10.3 million and $2.7 million, respectively, or 8.9%
and 12.1%, respectively, of pro forma net revenues. As a percentage of net
revenues, pro forma general and administrative expenses were substantially lower
than the Company's historical general and administrative expenses due to the pro
forma elimination of $6.4 million and $1.6 million in 1997 and the three months
ended March 31, 1998, respectively, representing the difference between
contracted reductions in compensation to previous owners and management and
contracted compensation for the Company's new management team, as well as the
$1.0 million in expenses incurred in the first three months of 1998 in
connection with the Recapitalization.

Pro forma depreciation and amortization (other than amortization of
goodwill) for 1997 and the quarter ended March 31, 1998 was $1.6 million and
$405,000, respectively, or 1.4% and 1.8%, respectively, of pro forma net
revenues. In addition, pro forma amortization of goodwill for 1997 and the
quarter ended March 31, 1998 was $1.9 million and $470,000, respectively, or
1.6% and 2.1%, respectively, of pro forma net revenues.

Pro forma as adjusted interest income for 1997 and the quarter ended March
31, 1998 was $4.3 million and $1.1 million, respectively, or 3.8% and 4.7%,
respectively, of pro forma net revenues. The increases as a percentage of net
revenue from historical to pro forma is a result of the Acquired Businesses
obtaining larger amounts of customer deposits and advance payments than did the
Company.

Pro forma as adjusted interest expense for 1997 and the quarter ended March
31, 1998 was $889,000 and $208,000, respectively, as a result of borrowings
under the Credit Facility to finance, in part, the Recapitalization and the
Acquisitions.

The pro forma as adjusted (provision for) benefit from income taxes for
1997 and the quarter ended March 31, 1998 would have been ($2.9 million) and
$1.0 million, respectively, at an assumed tax rate of 40.0%, reflecting a
termination of the Company's S Corporation status.

Pro forma as adjusted net income (loss) for 1997 and the quarter ended
March 31, 1998 was $4.3 million and ($1.5 million), respectively, or 3.8%, and
(6.6%), respectively, of pro forma net revenue. The pro forma results for 1997
and the three months ended March 31, 1998 do not reflect the Facilities Savings,
which are anticipated to be $3.2 million before provision for income taxes
annually, of which approximately 80% are expected to be realized in 1999 and
100% are expected to be realized in subsequent years.

31
<PAGE> 35

HISTORICAL RESULTS OF OPERATIONS

THE COMPANY

The following table sets forth certain operating data for the Company as a
percentage of net revenues.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- ------------------
1995 1996 1997 1997 1998
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses............................... 72.1 72.0 73.6 116.3 122.4
----- ----- ----- ------ ------
Gross profit (loss)......................... 27.9 28.0 26.4 (16.3) (22.4)
General and administrative expenses.............. 30.9 31.0 32.1 46.6 63.4
Depreciation and amortization.................... 0.7 0.7 0.8 1.7 1.4
----- ----- ----- ------ ------
Loss from operations........................ (3.7) (3.7) (6.5) (64.6) (87.2)
----- ----- ----- ------ ------
Interest income.................................. 2.8 2.6 2.3 2.7 3.0
Other............................................ 0.4 (0.0) 0.2 -- (0.6)
----- ----- ----- ------ ------
Loss before (provision for) benefit from taxes... (0.5) (1.1) (4.0) (61.9) (84.8)
(Provision for) benefit from income taxes........ (0.6) (0.5) (0.5) 0.4 2.5
----- ----- ----- ------ ------
Net loss....................................... (1.1)% (1.6)% (4.5)% (61.5)% (82.3)%
===== ===== ===== ====== ======
</TABLE>

Net Revenues. Net revenues increased from $18.5 million in 1995 to $22.3
million in 1996 and to $24.3 million in 1997, representing increases of 20.6%
and 9.0%, respectively. The growth in net revenues was primarily generated by
increased travel volume. Net revenues increased slightly from $2.4 million for
the three months ended March 31, 1997 to $2.5 million for the three months ended
March 31, 1998, representing an increase of 2.1%.

Operating expenses. Operating expenses increased from $13.3 million in
1995 to $16.0 million in 1996 and to $17.9 million in 1997, representing
increases of 20.3% and 11.4%, respectively. As a percentage of net revenues,
operating expenses decreased from 72.1% in 1995 to 72.0% in 1996, and increased
to 73.6% in 1997. The increase in operating expenses as a percentage of net
revenues in 1997 over 1996 and 1995 was due primarily to increases in salaries.
Operating expenses increased from $2.8 million for the three months ended March
31, 1997 to $3.0 million for the three months ended March 31, 1998, representing
an increase of 7.5%. As a percentage of net revenues, operating expenses
increased from 116.3% for the three months ended March 31, 1997 to 122.4% for
the three months ended March 31, 1998. The increase in operating expenses was
primarily due to higher commission rates to intermediaries.

General and administrative expenses. General and administrative expenses
increased from $5.7 million in 1995 to $6.9 million in 1996 and to $7.8 million
in 1997, representing increases of 21.1% and 12.9%, respectively. General and
administrative expenses included salary and bonuses paid to shareholders which
totaled $3.8 million in 1995, $4.8 million in 1996 and $5.8 million in 1997.
Excluding compensation and bonuses paid to shareholders, general and
administrative expenses would have been $1.9 million in 1995, $2.1 million in
1996 and $2.0 million in 1997. General and administrative expenses increased
from $1.1 million for the three months ended March 31, 1997 to $1.6 million for
the three months ended March 31, 1998, representing an increase of 39.1%.
General and administrative expenses included salary and bonuses paid to
shareholders which totaled $790,000 for the three months ended March 31, 1997
and $170,000 for the three months ended March 31, 1998. General and
administrative expenses for the three months ended March 31, 1998 also included
approximately $1.0 million of transaction expenses related to the
Recapitalization. Excluding compensation and bonuses paid to shareholders and
Recapitalization transaction expenses, general and administrative expenses would
have been $339,000 for the three months ended March 31, 1997 and $376,000 for
the three months ended March 31, 1998.

Net loss. Changes in the net loss between years was largely affected by
the factors discussed above, because depreciation and amortization expense and
interest income were relatively unchanged. The increase in

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<PAGE> 36

the net loss in 1997 as compared to 1996 was attributable largely to the $1.0
million increase in compensation and bonuses to shareholders in 1997 without a
corresponding increase in gross profits over 1996. The increase in net loss for
the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997 was attributable largely to the $1.0 million in transaction
expenses related to the Recapitalization.

THE ACQUIRED BUSINESSES

The combined results of operations of the Acquired Businesses for the
periods presented do not represent combined results of operations presented in
accordance with generally accepted accounting principles, but are only a
summation of the revenues, operating expenses and general and administrative
expenses of the individual businesses on a historical basis. The combined
results also exclude the effect of pro forma adjustments and may not be
comparable to, and may not be indicative of, the Company's post-combination
results.

The following table sets forth the combined results of operations of the
Acquired Businesses on a historical basis and as a percentage of net revenues
for the period indicated.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------- THREE MONTHS ENDED
1996 1997 MARCH 31, 1998
--------------- --------------- ----------------

<S> <C> <C> <C> <C> <C> <C>
Net revenues............... $89,719 100.0% $93,184 100.0% $19,944 100.0%
Operating expenses......... 79,914 89.1 82,442 88.5 19,056 95.5
------- ----- ------- ----- ------- -----
Gross profit............... $ 9,805 10.9% $10,742 11.5% $ 888 4.5%
======= ===== ======= ===== ======= =====
</TABLE>

Combined net revenues for the Acquired Businesses increased approximately
$3.5 million, or 3.9%, from $89.7 million in 1996 to $93.2 million in 1997. This
increase is due primarily to an increase of $4.5 million from Classic offset by
a decrease in net revenues of approximately $914,000 at MTI. The decrease in net
revenue at MTI in 1997 is due in part to discontinued product lines.

Combined operating expenses for the Acquired Businesses increased $2.5
million, or 3.2%, from $79.9 million in 1996 to $82.4 million in 1997, but
decreased as a percentage of net revenues from 89.1% of net revenues in 1996 to
88.5% in 1997.

Combined operating results for the first quarter of 1998 reflect a lower
gross profit percentage than for the years ended 1997 or 1996 due to the
seasonality of the travel business. Net revenues traditionally are lowest and
operating expenses are highest in the first and fourth quarters of the year. See
"Risk Factors -- Quarterly Fluctuations; Seasonality."

LIQUIDITY AND CAPITAL RESOURCES

The Company receives advance payments and deposits prior to commencement of
travel. The Company's pricing of its products and services is determined, in
part, based upon the amount and timing of advance payments received. A number of
states have regulations with respect to the management of customer deposits made
in advance of travel. The Company believes it is in compliance with all
applicable regulations relating to customer deposits. Although each of the
Acquired Businesses has operated with different investment strategies, the
Company will manage cash and investments on a centralized basis. The Company's
investment policy and the Credit Facility restrict investments to
investment-grade securities.

In March 1998, the Company entered into the Credit Facility with a
commercial bank. Under the Credit Facility, the Company may borrow up to $65.0
million. Of this amount, up to $10.0 million may be in the form of revolving
loans, including letters of credit of up to $5.0 million, and the remaining
$55.0 million may be in the form of term loans which may not be reborrowed once
repaid. The Company's obligations under the Credit Facility are secured by
substantially all of the Company's assets and the Company is subject to certain
restrictive covenants.

The Company has borrowed funds under the Credit Facility to complete the
Recapitalization and the Acquisitions and has drawn letters of credit under the
Credit Facility to post with certain of its suppliers. See

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<PAGE> 37

"The Recapitalization" and "The Acquired Businesses." As of July 7, 1998, the
Company had outstanding under the Credit Facility (i) term loans in the
aggregate amount of $38.5 million at a weighted average interest rate of 7.4%,
(ii) no revolving loans and (iii) letters of credit in the aggregate amount of
$1.4 million with commitment fees of 1.75%. At such date, the Company had $13.5
million in credit available for term loans and $8.6 million for revolving loans
(up to $3.6 million of which may be for letters of credit) under the Credit
Facility. The Company expects to repay $32.6 million of the then outstanding
term loans using a portion of the proceeds of this offering, assuming an initial
public offering price of $14.00 per share. See "Use of Proceeds."

Net cash used in operating activities was $2.2 million in 1997 as compared
to $1.7 million in cash provided by operating activities in 1996. This change
reflects an increase in bonuses paid to shareholders of $1.0 million during 1997
and a decrease in accounts payable in 1997 as compared to the increase in 1996
over 1995 payables. The net cash used in 1997 operating activities was provided
by net borrowings from shareholders of $2.2 million in 1997 as reflected in cash
provided by financing activities.

Net cash provided by operating activities for the three months ended March
31, 1998 was $1.2 million as compared to $1.8 million net cash used in operating
activities in the first quarter of 1997. The improvement of approximately $3.0
million in cash flows reflects a $2.8 million decrease in accounts receivable
during the first quarter of 1998 as compared to a decrease of $1.0 million in
the first quarter of 1997 and the increase in accounts payable and accrued
expenses of $277,000 in the first quarter of 1998 as compared to a decrease in
accounts payable and accrued expenses of $1.5 million in 1997, offset by the
increase in the net loss in the first quarter of 1998.

The Company made capital expenditures of $170,000 in 1997 and $111,000 in
the three months ended March 31, 1998 and the Acquired Businesses made combined
capital expenditures of $1.7 million in 1997 and $410,000 in the three months
ended March 31, 1998.

The Company intends to pursue attractive acquisition opportunities. The
timing, size or success of any acquisition effort and the associated potential
capital commitments cannot be predicted. The Company expects to fund future
acquisitions primarily through a combination of issuance of equity or debt, cash
flow from operations and borrowings under the Credit Facility.

The Company anticipates its cash flow from operations combined with
available borrowings under the Credit Facility will provide cash sufficient to
meet the Company's capital needs for at least the next 12 months.

BUSINESS SYSTEMS; YEAR 2000

The Company and each of the Acquired Businesses currently operate separate
internal information and business systems. Prior to the acquisition of MTI by
the Company, MTI received information and business system support on an
outsourced basis from Trase-Miller Solutions, and Trase-Miller Solutions
continues to provide such services to MTI. In order to migrate the separate
support systems which the Company and the other Acquired Businesses currently
operate (other than the business systems associated with the Company's in-bound
business) to a common platform system, the Company is negotiating to expand its
outsourcing agreement with Trase-Miller Solutions throughout the Company's
business. The Company currently estimates the migration to the Trase-Miller
Solutions system will be accomplished prior to the end of 1999 at a total cost
of approximately $1.2 million. Once this migration is complete, the Company's
ability to deliver its products and services and manage its internal systems
will depend substantially on the Trase-Miller Solutions system. There can be no
assurance that the Company will be successful in negotiating the expansion of
the Trase-Miller Solutions outsourcing arrangement, that any such expansion will
be negotiated on competitive or cost-effective terms or that the implementation
will be completed on a timely basis and without unforeseen difficulties. In
addition, while the Company believes the Trase-Miller Solutions system will
provide adequately for the Company's information and business system
requirements, there can be no assurance that the Trase-Miller Solutions system
will in fact meet the Company's needs. Prior to the company-wide implementation
of the Trase-Miller Solutions system, the operation of multiple separate
systems, including the systems of any businesses hereafter acquired by the
Company, could adversely affect the Company's ability to monitor and manage its
operations. The failure of the Company to expand the Trase-Miller Solutions
agreement or

34
<PAGE> 38

otherwise integrate its separate business systems, any delays or difficulties
encountered in implementing the Trase-Miller Solutions system or the failure of
the Trase-Miller Solutions system to meet the Company's information and business
system requirements could have a material adverse effect on the business,
financial condition and results of operations of the Company.

The Company's business is dependent upon a number of different
information and telecommunications technologies to access information and
manage reservation systems, including handling a high volume of telephone calls
on a daily basis. Rapid changes in these technologies may require greater than
anticipated capital expenditures to improve or upgrade the level of customer
service. In addition, the Company is dependent upon certain third party
vendors, including central reservation system operators such as SABRE, Galileo
and WORLDSPAN, for access to certain information and will depend on such
vendors in the future for electronic distribution of vacation products to
retail travel agents and other travel intermediaries. The Company's dependence
upon information and telecommunications technology makes the Company
particularly sensitive to Year 2000 issues. Because the Company receives
reservations up to a year in advance, the Company must identify and correct
potential Year 2000 problems on a more accelerated basis than companies in many
other industries. While the Company believes that the Trase-Miller Solutions
system as well as any of the Company's systems not integrated within the
Trase-Miller Solutions system prior to 1999 will be Year 2000 compliant, there
can be no assurance that these systems will prevent disruptions of the
Company's operations due to Year 2000 issues. In addition, the Company's
information and telecommunications systems must operate in conjunction with the
systems of other parties, including SABRE, Galileo and WORLDSPAN, and any Year
2000 problems in these third-party systems could directly affect the Company's
own systems. Finally, travelers who use the Company's products and services may
be exposed to disruptions in their travel as a result of failures by travel
suppliers or other travel businesses to correct Year 2000 problems in their
information and computer systems. See "Risk Factors -- Integration of
Information and Business Systems" and "Risk Factors -- Dependence Upon
Technology; Year 2000 Problem."

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<PAGE> 39

BUSINESS

GENERAL

The Company believes it is one of the largest U.S. providers of value-added
vacation products and services targeted to higher-income travelers. The Company
assembles air, hotel, rental car and other travel components in bulk and
provides complete vacations to travelers through retail travel distributors,
such as travel agents, and other distribution channels, including the Internet
and affinity groups. The Company provides flexible independent travel programs
for individuals as well as escorted tours and group packages. On a pro forma as
adjusted basis for the year ended December 31, 1997, and the three months ended
March 31, 1998, the Company had net revenues of $115.2 million and $22.4
million, respectively, derived from a total dollar value of travel products and
services sold of $507.0 million and $101.1 million, respectively. For the same
periods, the Company had pro forma as adjusted net income (loss) of $4.3 million
and ($1.5 million), respectively. More than 90% of the Company's 1997 pro forma
net revenues were derived from sales through retail travel agents and other
travel intermediaries.

The Company intends to achieve the leading market position in selected
high-volume, high-margin travel destinations and will focus initially on the
following markets: (i) Hawaii; (ii) in-bound vacations to the United States for
international travelers; (iii) Florida, the Caribbean and Mexico; (iv) other
U.S. destinations such as California and New York; and (v) out-bound travel by
U.S. travelers to Europe. The Company focuses its marketing efforts on travelers
who typically spend more than $750 per person for a vacation. The Company also
provides certain services to travel suppliers, including outsourced vacation
packaging and affinity group marketing and awards program fulfillment.

In addition, the Company believes the shift to on-line systems such as the
Internet will enable it to realize savings in operating expenses. The Company
further believes its value-added approach and expertise will allow it to compete
effectively with travel suppliers on the Internet by (i) generally providing
better prices and inventory availability from travel suppliers than can be
obtained by an individual travel agency or traveler, (ii) enhancing and
simplifying access to travel information across multiple destinations and (iii)
assembling vacation travel components into convenient packages for ease of
planning and booking.

The Company's executive management team, Messrs. Ballou, Lewis and Berman,
has over 60 years of combined management experience in the travel industry with
leading companies such as American Express Travel, Alamo, Certified Vacations
and Holiday Inn. Their experience includes management responsibility for the
acquisition and integration of businesses with a combined purchase price of over
$500 million.

Since March 1998, the Company has completed four acquisitions. The Company
intends to continue to grow through acquisitions by capitalizing upon the
significant consolidation opportunities available in the fragmented packaged
vacation industry. The Company will seek to make acquisitions that complement
its established strengths and are likely to enhance its presence in specific
travel destinations or allow the Company to establish a leading presence in a
new market. The Company believes it will be regarded as an attractive acquiror
by the owners of existing travel businesses.

INDUSTRY OVERVIEW

Tourism is one of the world's largest industries. The Company participates
in two segments of the tourism industry: (i) in-bound vacation travel to North
American destinations by foreign travelers and (ii) vacation

36
<PAGE> 40

travel by U.S. travelers. According to the Travel Industry Association of
America ("TIA"), Americans spent a total of $380 billion on all types of
domestic travel and a total of $25.9 billion on all types of travel to Europe in
1996. Also according to TIA, 70% of the domestic trips taken by U.S. travelers
in 1996 were for personal or vacation travel, and management believes that
approximately 70% of the trips taken by U.S. travelers to Europe were for
personal or vacation travel. According to a survey by the U.S. Department of
Commerce, there were 9.9 million U.S. tourists visiting Europe in 1997, an 11.7%
increase from 1996. In addition, TIA, in conjunction with the International
Trade Administration, estimates that there were 46.5 million international
visitors to the United States in 1996 who spent an aggregate of $90.5 billion on
such trips. According to TIA, 5.4 million of those international travelers were
on packaged trips. Also according to TIA, the total amount spent by
international travelers to the United States grew by 246% between 1986 and 1996.

Travel suppliers use packaged vacation providers such as the Company to
sell their capacity more efficiently and support their yield management. At the
same time, management believes that purchasing travel products and services from
packaged vacation providers can lower costs, simplify booking and result in
higher commissions for retail travel agents. As a result of the approximately
one-third erosion in stated commissions from airlines for U.S. domestic travel
over the past three years, the Company believes travel agents are seeking to
establish relationships with packaged vacation providers that will offer better
customer service, competitive prices and attractive commission structures.
According to statistics published in the Travel Industry World Yearbook -- The
Big Picture, 90% of packaged tours in 1996 were sold through retail travel
agents.

The growth of travel sales through the Internet has created another channel
for packaged vacation providers to sell products and services to travelers.
According to Jupiter Communications, an independent research firm, on-line
travel bookings were $276 million in 1996 and $827 million in 1997. Airline
tickets accounted for 85% of all on-line travel sales in 1997, but such sales
are expected to account for only 73% of such sales by the year 2002 as other
travel products and services, including packaged vacations, become more readily
available on the Internet.

The U.S. packaged vacation industry is fragmented, with more than 1,600
packaged vacation providers. The Company believes many of these businesses
generally have made only small investments in technology to improve operating
efficiency and face significant investment requirements to meet current
information technology demands, including Year 2000 compliance issues.
Furthermore, most of these companies lack the scale necessary to obtain
preferential pricing and capacity from travel suppliers and to establish a
nationally recognized brand name.

OPERATING STRATEGY

In providing value-added vacation products and services targeted to
higher-income travelers, the Company pursues an operating strategy that includes
the following elements:

Creating Value-added Vacation Products and Services. The Company focuses
on creating vacations that provide added value to higher-income travelers. The
Company believes a strategy based on packaging the products and services of a
wide range of well-known travel suppliers at competitive prices will result in
sales growth from both new customers and repeat buyers. The Company also
believes that, because of its size and expertise in certain selected destination
markets, it can (i) generally provide better prices and inventory availability
than can be obtained by an individual travel agency or traveler, (ii) enhance
and simplify access to travel information across multiple destinations and (iii)
assemble vacation travel components into convenient packages for ease of
planning and booking, all of which result in the creation of value-added
packaged vacation products and services. The Company intends to implement
comprehensive quality assurance monitoring programs to ensure that the products
and services packaged together will meet traveler expectations.

Establishing National Brand Name Recognition. The Company believes it can
leverage its presence in leading origination and destination markets to develop
nationally recognized proprietary brand names in the packaged vacation industry.
As a result of fragmentation in the packaged vacation industry, the Company
believes there are few, if any, companies with national brand name recognition.
Over time, the Company intends to market its products and services under two
specific proprietary brands: one for up-scale, customized vacations and another
for popular-priced vacation packages. The Company believes offering expertise
and

37
<PAGE> 41

competitive pricing through common brands across multiple destinations will
provide greater confidence to travelers in making their vacation choices and
engender consumer loyalty and a pattern of repeat purchases. The Company also
will seek opportunities to market its products and services through travel
suppliers and other companies that have established private label brand names.

Leveraging Strength in Selected Travel Destinations. The Company intends
to achieve the leading position in several selected high-volume, high-margin
vacation destinations. The Company believes it currently has a leading position
in the packaged vacation markets to Hawaii and for in-bound travel to the United
States and also has a significant presence in the markets for packaged vacations
to Florida, the Caribbean and Mexico. By leveraging this current expertise and
through future acquisitions, the Company intends to increase its market position
and cross-selling opportunities to achieve the leading market presence in other
destinations such as Europe. The Company believes having scale and expertise in
selected destinations gives it access to pricing and inventory that provides the
Company with a significant competitive advantage.

Pursuing Revenue Enhancing Opportunities. Following the Acquisitions and
the resulting increase in the Company's size, the Company believes it enjoys
certain revenue enhancing opportunities that were not previously available to it
or the Acquired Businesses. Specifically, the Company's revenue enhancing
strategies include (i) improving yield management by obtaining greater access to
high-margin products and services, (ii) expanding ancillary products and
services, such as city tours and travel insurance, (iii) securing favorable
pricing and inventory availability through strategic purchasing relationships
and (iv) improving cash management, particularly management of traveler deposits
and advance payments.

Improving Operating Efficiencies. The Company seeks to reduce its
operating expenses by (i) capitalizing on enhanced purchasing efficiencies
resulting from combining operations such as telecommunications systems, credit
card agreements and brochure production and distribution, (ii) implementing a
more effective utilization program of its physical and other assets,
particularly by eliminating redundant facilities, reducing overhead expenses,
combining certain other functions such as 24-hour toll-free number services,
product development and data processing and centralizing accounting, insurance,
financial management, human resources and legal support, (iii) implementing best
practices in its management and business systems, particularly through the use
of on-line systems that will produce cost savings as travel agents and
individual travelers use such systems to purchase the Company's products and
services, (iv) enhancing marketing relationships with travel suppliers and other
related parties and (v) utilizing outsource providers where appropriate. The
Company believes successful implementation of these strategies will enable
operational management to devote more time to sales, service and customer
satisfaction.

Implementing Integrated Information Systems. The Company will seek to
integrate its information systems to improve its ability to offer travelers
value-added vacation products and services and to leverage maintenance and
development costs across a broader customer base. In addition, integrated
systems will facilitate the use of common operating platforms, and reduce the
cost and time requirements of developing external interfaces such as interfaces
to global distribution systems (including SABRE, Galileo and WORLDSPAN) and
supplier systems (including reservations and inventory control), and accelerate
the integration of subsequent acquisitions. The Company currently is negotiating
to expand MTI's relationship with Trase-Miller Solutions, a leading supplier of
information and technology systems for the packaged vacation industry, to
encompass software, hardware and service bureau processing across the Company.
Expansion of the MTI Agreement with Trase-Miller Solutions system will enable
the Company to migrate to an integrated enterprise system that is flexible and
scaleable.

GROWTH STRATEGY

To complement its operating strategy, the Company has developed a
multi-faceted growth strategy that includes the following elements:

Generating Internal Growth. The Company intends to expand its presence in
existing markets by capitalizing on the breadth of its products and services,
its size, its geographic scope and its existing customer base. The Company
intends to grow internally by (i) implementing an integrated national marketing
program,

38
<PAGE> 42

(ii) increasing its presence in under-penetrated origination markets and (iii)
implementing loyalty programs that stimulate repeat purchases.

Identifying and Consummating Strategic Acquisitions. The Company believes
there are significant opportunities to make selective acquisitions in the
fragmented U.S. packaged vacation industry. The Company generally will seek to
acquire companies that (i) have desirable destination concentrations, (ii) have
demonstrated growth and profitability, (iii) have an emphasis on customer
service, (iv) have an experienced management team and (v) are likely to add some
other strategic value to the Company (such as a relationship with a particular
travel supplier). The Company believes it will be regarded as an attractive
acquiror because of (a) the historical performance of the Company and the
Acquired Businesses, as well as the experience and reputation of its management
team, (b) its ability to offer liquidity to the owners of acquired companies
through the receipt of Common Stock or cash, (c) the Company's leading presence
in several high-volume, high-margin travel destinations, (d) the growth
opportunities available through cross-selling within the Company's markets and
(e) the ability of management and employees of an acquired company to
participate in the Company's growth through potential stock ownership and career
advancement opportunities.

Enhancing Strategic Relationships with Travel Suppliers and Travel
Agents. By enhancing strategic supplier relationships, the Company will
strengthen its ability to provide vacation products and services and to offer
prices and inventory that generally would not be available to travelers on their
own or through travel agents. The Company selectively implements integrated,
cooperative marketing programs with certain targeted travel suppliers. In
addition, by broadening its range of products and services to include additional
destinations, the Company believes it will achieve enhanced loyalty among the
travel agent community. The Company intends to expand upon its existing
relationships with leading travel agencies through cooperative marketing efforts
as well as sales agent training programs, trade shows and performance
incentives. The Company will employ a dedicated sales force to maintain and
expand these relationships.

Enhancing Distribution Channels. The Company seeks to capitalize on the
opportunities presented by the direct selling of vacation products and services
to travelers (disintermediation) and the emergence of alternative distribution
channels (e.g., the Internet and affinity groups) while still supporting and
leveraging its strong relationships with existing retail travel agents. Through
the use of the Internet and as a result of expanded relationships with affinity
groups, the Company believes it will penetrate a significant portion of the
vacation travel market that currently books directly with travel suppliers. The
Company believes its value-added vacation products and services will allow it to
compete effectively with travel suppliers by (i) generally providing better
prices and inventory availability than can be obtained by an individual travel
agency or traveler, (ii) enhancing and simplifying access to travel information
across multiple destinations and (iii) assembling vacation travel components
into convenient packages for ease of planning and booking.

Private Label Branding. In recent years, certain travel and non-travel
related companies have sought to leverage their brand names by outsourcing the
development and operation of vacation programs under such brand names. The
Company believes there are significant opportunities to expand its existing
private label business and that the Company is particularly well-positioned to
obtain additional business as a result of the extensive industry contacts of its
management team, the breadth of its destination offerings, its reputation for
quality and its financial stability. Additional benefits of the private label
business include (i) access to additional customers, (ii) enhanced visibility in
the market through association with other well-recognized brands and (iii)
reduced advertising and marketing costs through sharing arrangements with other
brand name companies.

Affinity Group Marketing. The Company will seek access to affinity groups
such as frequent flier programs and bank card reward or loyalty programs for the
direct marketing of its products and services as well as the opportunity to
provide its vacation products and services as rewards in these programs. The
Company has certain proprietary software and extensive operating experience,
which it believes provide a significant opportunity to capitalize on this
growing market.

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<PAGE> 43

KEY DESTINATION MARKETS

Hawaii. The market for westbound packaged vacations to Hawaii has been
relatively flat for the last three years, with the Hawaii Visitors & Convention
Bureau estimating that, in each of 1995, 1996 and 1997, approximately 1.5
million westbound travelers visited Hawaii as part of a packaged vacation.

The Company is one of the leading providers of vacations in Hawaii for
travelers from the continental United States and has over 15 years of experience
in the Hawaii travel market. Based on a total of 1.5 million westbound travelers
to Hawaii traveling on packaged vacations, as reported by the Hawaii Visitors &
Convention Bureau, the Company had approximately a 13% market share of westbound
packaged vacation travel to Hawaii in 1997. The Company has relationships with
major airlines, such as United, Delta and Hawaiian for travel to Hawaii, and
Hawaiian and Aloha for air travel within Hawaii, all of which provide the
Company with preferential access to prices that generally are better than
published fares and to capacity for air travel to Hawaii, as well as marketing
support. In addition, the Company utilizes a staff of over 100 employees on
location in Hawaii to provide destination management for its Hawaii packaged
vacations products and services. The Company believes its extensive experience
and established reputation in this market as well as its airline relationships
give it a significant competitive advantage over other providers of vacations to
Hawaii. The Company believes the Hawaii travel market will continue to present
growth opportunities in the future and to represent a significant portion of its
revenues.

In-bound to the United States. According to TIA, in conjunction with the
International Trade Administration, 46.5 million in-bound travelers to the
United States spent $90.5 billion on travel to and within the United States in
1996, making the United States the most popular tourist destination worldwide.
According to TIA, 5.4 million of those international travelers were on packaged
trips. Also according to TIA, the total amount spent by international travelers
to the United States grew by 246% between 1986 and 1996.

The Company is among the largest packaged vacation providers for in-bound
travelers to the United States. Based on a total of 5.4 million trips to the
United States by international visitors booked in package form, as reported by
TIA, the Company had approximately an 8% market share of packaged trips to the
United States by international travelers in 1996. The Company's customers for
these products and services primarily are international travel distributors who
send travelers to the United States. The Company believes its broad customer
base among European and other international travel distributors and its status
as one of a limited number of designated providers of vacations for in-bound
travelers to the various Disney properties in Florida and California represents
a significant competitive advantage.

Florida, the Caribbean and Mexico. In 1996, according to the Florida
Tourism Industry Marketing Corporation, approximately 43 million U.S. residents
traveled to Florida and approximately 10% of these travelers booked their travel
in package form. TIA has reported that approximately 6.4 million U.S. travelers
visited Caribbean destinations during 1996 and approximately 19.6 million U.S.
travelers visited Mexico during 1996. Approximately 29% of these Caribbean trips
were arranged in package form.

The Company has an established presence in the markets for travel to
Florida, the Caribbean and Mexico. The Company has over 15 years of experience
in these markets and has established key strategic relationships, including as
one of a limited number of designated providers for American Airlines in the
Caribbean. The Company also acts as one of a limited number of designated
providers for Disney World. The Company believes its extensive experience and
established reputation in these markets as well as its supplier relationships
give it a significant competitive advantage over other providers of vacations to
these destinations.

Other U.S. Destinations. The Company offers products and services to a
number of other destinations in the United States in addition to Hawaii and
Florida. The Company is the exclusive provider of vacation products and services
for Amtrak. The Company believes it has significant purchasing power for
destinations throughout the United States due to the volume of U.S. travel
products and services it purchases for both in-bound and domestic travelers. As
a result, the Company is able to create and effectively market products and
services in demand by travelers, including weekend trips and excursions such as
"theater packages" in New York.

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<PAGE> 44

Europe. According to TIA, Americans spent a total of $25.9 billion on all
types of travel to Europe in 1996. According to a survey by the U.S. Department
of Commerce, there were 9.9 million U.S. tourists visiting Europe in 1997, an
11.7% increase from 1996. The Company has an established presence in the market
for travel by U.S. residents to Europe. The Company intends to increase its
presence in this market by cross-selling within its existing customer base, by
leveraging its relationships with travel distributors to create demand for the
Company's brand name products and services and by leveraging its existing
relationships with suppliers to obtain preferential pricing and access to
capacity for European destinations.

PRODUCTS AND SERVICES

The Company focuses on specific destinations in order to become a leading
provider of value-added vacation products and services while at the same time
providing travel suppliers with efficient and cost effective distribution of
their capacity. The Company has expertise in and access to the products and
services of a broad range of travel suppliers. Based on customer research, the
Company designs its products and services to offer travelers a wider choice than
that of an individual supplier. The Company assembles travel products and
services in bulk and combines them to create customized vacations for individual
travelers. The Company creates demand for its products through integrated
marketing programs and handles all reservations, payment processing and supplier
processing interfaces. The Company has developed the in-depth knowledge of these
products and services that a retail travel agent, which acts as a broker or
reseller of the entire spectrum of travel products and services, is unlikely to
acquire.

The Company focuses on ensuring customer satisfaction and cultivating
consumer loyalty to its products and services. The Company has quality control
mechanisms, such as destination management programs, in place to provide
customer support and monitor the quality of the individual travel components and
overall customer satisfaction.

The Company is the exclusive provider of certain private label vacation
products and services for Amtrak and Hyatt. The Company believes there are
significant opportunities to expand its business by assembling packaged
vacations on behalf of other companies which seek to leverage their brand names.
The benefits of capitalizing on such opportunities include (i) access to the
customers, (ii) enhanced visibility in the market through association with other
well-recognized brands and (iii) reduced advertising and marketing costs through
sharing arrangements.

The Company also manages bank card reward and other affinity group
marketing programs for several companies, including The Chase Manhattan Bank
N.A. and U.S. Bancorp. The Company has certain proprietary software and
extensive operating experience it believes provide a significant opportunity to
capitalize on this growing market. The Company intends to increase its presence
in this market by proactively marketing its services to affinity group sponsors.
The Company believes access to affinity groups provides unique opportunities for
the direct marketing of its products and services to targeted travelers.

SALES AND MARKETING

The Company pursues a fully integrated sales and marketing effort in
support of its proprietary travel products and services as well as the private
label products and services the Company manages and markets for other companies.
The Company directs its marketing toward retail distributors and other
intermediaries as well as to travelers directly. By employing a multi-faceted
marketing approach targeted both to travel distributors and to individual
travelers, the Company believes it will increase the demand for its products and
services. In addition, the Company will integrate its own marketing efforts with
the marketing support it receives from certain travel suppliers with whom the
Company has an established relationship. The Company believes it will be able to
leverage its national presence and established marketing and sales experience
and strength into a competitive advantage. The Company will seek to identify and
cultivate new customers and create cross-selling opportunities within its
existing customer base.

A substantial majority of the Company's products and services are sold
through a broad network of retail travel agencies, including independent firms
and agencies affiliated with travel consortia or national accounts. The Company
typically offers retail travel agencies a base commission on the sale of Company
products with

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<PAGE> 45

the opportunity to earn additional override commissions on sales above
negotiated threshold amounts. In addition to supplying travel agents with
brochures and merchandising materials, the Company intends to leverage its
relationships through targeted marketing efforts including travel agent
training, trade shows, cooperative advertising and performance incentives. These
efforts also will include strategic distribution and favorable vendor
arrangements (both exclusive and non-exclusive) with other travel
intermediaries, national accounts and travel agency consortia. The Company will
employ a dedicated sales force to maintain and expand these relationships.

In the market for in-bound travel to the United States by international
travelers, the Company's marketing focuses on foreign travel distributors who
market vacation products and services directly to travelers. The Company has
developed numerous important relationships with major travel distributors in
Europe and in certain other key international origination markets. The Company's
marketing efforts with these distributors include direct sales efforts,
brochures, trade advertising and trade shows in addition to effective account
management of existing, long-standing relationships.

The Company will pursue marketing opportunities in other distribution
channels as well. The Company intends to develop marketing programs aimed at
travelers who purchase travel products and services through affinity groups, and
the Company will pursue strategic relationships with the owners of
non-travel-related consumer brands that represent a consumer base the Company
wishes to target. Finally, to reach travelers who prefer to purchase leisure and
travel products and services on the Internet, the Company currently is
developing an Internet strategy, which will include developing relationships
with Internet companies to market the Company's products and services on their
web sites or provide links to the Company's web sites, as well as offering an
Internet booking capability.

BUSINESS AND INFORMATION SYSTEMS

The Company believes the successful application of common business and
information systems will be important to its ability to create operating
efficiencies and establish a competitive advantage. By migrating the systems of
Acquired Businesses to a shared system, the Company will be able to spread
maintenance and development costs across a broader customer base, facilitate the
use of common operating platforms and reduce the costs and time requirements of
developing external interfaces. In addition, it is likely that application of
system solutions will become increasingly important to enable the Company to
integrate customer identification and profiling capabilities with reservation
and operational business systems. This combination will enable the Company to
leverage each customer encounter into a basis for generating repeat business and
establishing a long-term relationship.

Recognizing the importance of the rapid integration of information systems
to its strategy, the Company has selected Trase-Miller Solutions, a leading
supplier of information and technology systems for the packaged vacation
industry, to serve as an outsource provider for the Company's technology
requirements. The Company currently is negotiating to expand MTI's outsourcing
relationship with Trase-Miller Solutions to encompass software, hardware and
service bureau processing across the Company. The Company expects to use the
Trase-Miller Solutions system as the primary platform for processing
reservations and for servicing its other business requirements, including
financial analysis, management reporting and communication. The Company expects
to negotiate certain safeguards into its relationship with Trase-Miller
Solutions, including performance measurements and monitoring (i.e., Year 2000
compliance), emergency back-up procedures and systems and appropriate remedies
for system failures.

The Company believes that this arrangement will offer a number of
advantages, which include (i) allowing the Company to focus on its core
competencies of creating and marketing value-added vacation packages, (ii)
leveraging third party investments in rapidly evolving technology, (iii)
shortening the required time to develop and implement a shared technology
platform, (iv) containing the costs of such development and implementation and
(v) developing the ability to market and arrange vacations through electronic
distribution systems (including SABRE, Galileo and WORLDSPAN) as well as through
the Internet.

The Company will employ a chief information officer to manage its
outsourced operations as well as to administer, install and maintain the
Company's own network and custom development requirements. Prior to

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<PAGE> 46

the achievement of full systems integration, which is expected in 1999, the
Company will operate on several separate systems.

COMPETITION

The Company competes with a variety of other providers of travel and
travel-related products and services. Its principal competitors are other
vacation providers, travel agencies and other retail and wholesale distributors
of travel products and services, some of which are larger and have greater name
recognition and financial resources than the Company. Certain packaged vacation
providers that compete with the Company may have relationships with travel
suppliers that give them preferred access to capacity or more competitive
pricing than is available to the Company. Other travel providers have a presence
in particular travel destinations that is stronger than that of the Company. The
Company also competes with travel suppliers, including some of the Company's
travel suppliers, that sell directly to individual travelers. The Company
believes it competes for customers based upon the quality of the travel products
and services delivered, price, specialized knowledge, reputation and
convenience. The Company believes it is well-positioned to compete on these
bases. See "Risk Factors -- Substantial Competition and Industry Consolidation"
and "Risk Factors -- Changing Industry Dynamics; New Methods of Distribution."

FACILITIES

The Company's headquarters are located in Washington, D.C. As of June 15,
1998, the Company's other principal facilities consist of leased offices, of
which the largest are located in Cambridge, MA, Mount Laurel, NJ, New York, NY,
Oak Brook, IL and San Jose, CA. The Company believes these facilities are
adequate to meet its anticipated needs.

EMPLOYEES

The Company employs approximately 770 people, a majority of whom are
located at the Company's principal offices and on location in Hawaii.
Approximately 380 of the Company's employees serve as reservation staff and the
remainder serve in customer service and operations, sales and marketing,
information systems and management and administration. The Company believes it
enjoys good relations with its employees, none of whom are covered by any
collective bargaining agreements.

LEGAL PROCEEDINGS

The Company is not involved in any legal proceedings other than various
legal actions arising in the ordinary course of business. The Company believes
none of these actions will have a material adverse effect on its business,
financial condition and results of operations.

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<PAGE> 47

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Set forth below is certain information concerning the executive officers,
directors and director nominees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
---- --- -------------------------
<S> <C> <C>
Roger H. Ballou................ 47 Chairman and Chief Executive Officer
J. Raymond Lewis, Jr........... 53 President and Chief Operating Officer
Walter S. Berman............... 55 Executive Vice President and Chief Financial Officer
Frederic V. Malek.............. 61 Director
Carl J. Rickertsen............. 38 Director
James M. Sullivan.............. 54 Director Nominee
</TABLE>

Roger H. Ballou has served as Chairman and Chief Executive Officer of the
Company since March 1998. Immediately prior to joining the Company, Mr. Ballou
served as a Senior Advisor to Thayer. Between May 1995 and September 1997, Mr.
Ballou served as Vice Chairman and Chief Marketing Officer and then as President
and Chief Operating Officer of Alamo. For more than 16 years prior to joining
Alamo, Mr. Ballou held several executive positions with American Express Travel,
serving most recently as President -- Travel Services Group. Mr. Ballou
currently serves as Chairman of the National Tourism Organization, a travel
industry organization chartered by the U.S. Congress, as a member (and past
Chairman) of the Board of Directors of TIA and as a member of the Board of
Directors of the National Academy Foundation. From 1995 through 1997, he served
as Chairman of the Government Affairs Council, the leading travel industry
federal government lobbying arm. Mr. Ballou also is a member of the Board of
Directors of American Medical Security, Inc.

J. Raymond Lewis, Jr. has served as President and Chief Operating Officer
of the Company since March 1998. From September 1996 until January 1998, Mr.
Lewis served as President of Certified Vacations, Inc., a large packaged
vacation provider headquartered in Florida. From January 1992 through August
1996, Mr. Lewis was Executive Vice President, Worldwide Sales and Marketing and
a director and member of the Executive Committee of Holiday Inn. Mr. Lewis held
several executive-level marketing positions with Holiday Inn between 1985 and
1992.

Walter S. Berman has served as Executive Vice President and Chief Financial
Officer of the Company since April 1998. From September 1996 until March 1998,
Mr. Berman served as an outside consultant to International Business Machines,
Inc. ("IBM") to provide advice and assistance to IBM's chief financial officer
in several reengineering initiatives in the areas of tax strategy, utilization
of capital and risk management. Between 1965 and 1996, Mr. Berman held several
positions with American Express Travel, most recently as Executive Vice
President and Chief Financial Officer. Mr. Berman also served as Treasurer of
American Express Corporation, the parent company of American Express Travel, in
1995 through 1996.

Frederic V. Malek has served as chairman of Thayer Capital Partners, an
affiliate of Thayer ("Thayer Capital") since 1993. Mr. Malek is also a member of
TC Equity Partners and TC Management, which are, respectively, the sole general
partner and managing agent of Thayer. Prior to 1993, Mr. Malek was president of
Marriott Hotels and Resorts from 1980 to 1988, and president and vice chairman
of Northwest Airlines from 1989 to 1991. During 1992, Mr. Malek was the Campaign
Manager of the Bush-Quayle campaign. Mr. Malek currently serves on the boards of
directors of Automatic Data Processing Corporation, American Management Systems,
Inc., FPL Group, Inc., Choice Hotels, Inc., Manor Care, Inc., CB Commercial Real
Estate Group, Inc., Northwest Airlines, Colorado Prime, Inc. and PaineWebber
Mutual Funds.

Carl J. Rickertsen is a member of TC Equity Partners and TC Management.
Since September 1994, Mr. Rickertsen also has served as a partner in Thayer
Capital. Mr. Rickertsen acted as a private financial consultant from 1993
through August 1994, and was a partner at Hancock Park Associates, a private
equity investment firm based in Los Angeles, from 1989 to 1993. Before joining
Hancock Park Associates,

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<PAGE> 48

Mr. Rickertsen was an associate at Brentwood Associates from 1987 to 1989, and
worked in the high technology group at Morgan Stanley & Co., Inc. from 1983 to
1985. Mr. Rickertsen currently serves as a director of MLC Holdings, Inc. and
Colorado Prime, Inc. and as Chairman of the Board of Software AG Systems, Inc.

James M. Sullivan is Executive Vice President of Development for the
Lodging Group of Marriott International, Inc. ("Marriott"). Since 1986, he has
held several positions with Marriott (and its predecessor, Marriott Corp.),
including Vice President of Mergers and Acquisitions. From 1983 to 1986, Mr.
Sullivan was Chairman, President and Chief Executive Officer of Tenley
Enterprises, Inc., a privately held company operating 105 restaurants. Prior to
1983, he held senior management positions with Marriott Corp., Harrah's
Entertainment, Inc., Holiday Inns, Inc., Kentucky Fried Chicken Corp. and
Heublein, Inc. He also was employed as a senior auditor with Arthur Andersen &
Co. Mr. Sullivan currently serves on the board of directors of Integra
LifeSciences Corporation.

Prior to the closing of this offering, the Company expects to appoint one
additional independent director to the Board of Directors. Following the
offering the Board of Directors will be divided into three classes serving
staggered three-year terms. At each annual meeting of the shareholders of the
Company, the successors to the class of directors whose terms expire at such
meeting will be elected to hold office for a term expiring at the third
succeeding annual meeting of shareholders after their election.

The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. There are no family relationships between any of the
directors or executive officers of the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

Following the offering, the Board of Directors will establish an audit
committee and a compensation committee. The audit committee will consist solely
of independent directors and will be responsible for making recommendations
concerning the engagement of independent public accountants, reviewing the plans
and results of such engagement with the independent public accountants,
reviewing the independence of the independent public accountants, considering
the range of audit and non-audit fees and reviewing the adequacy of the
Company's internal accounting controls. The compensation committee will be
responsible for determining compensation for the Company's executive officers
and administering the Company's stock plans. See "-- Compensation Committee
Interlocks and Insider Participation."

DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS

The Company has no present plans to pay cash compensation to directors. The
Company intends to reimburse directors for certain out-of-pocket expenses
incurred in connection with attendance and meetings of the Board of Directors or
committees thereof. In addition, the Company may issue options to the directors
under the Stock Option Plan, which options would vest and become exercisable
over time, subject to acceleration in the event of a change of control of the
Company.

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<PAGE> 49

EXECUTIVE COMPENSATION

The Company's current executive management team was put in place in March
1998 following the Recapitalization. For information regarding the compensation
of the new executive management team, see "-- Employment Contracts and Related
Matters."

The following table sets forth information with respect to the compensation
received during 1997 by the former chief executive officer of the Company and
each other former executive officer of the Company whose annual salary and bonus
compensation for 1997 exceeded $100,000 (the "Former Executive Officers"). No
options to acquire securities of the Company were granted to, held by or
exercised by the Former Executive Officers during 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1997 ANNUAL
COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION SALARY BONUS(1)
--------------------------- -------- ----------
<S> <C> <C>
Stanley Fisher(2)
President.............................................. $328,436 $3,000,000
Michael Fisher(2)
Executive Vice President............................... 198,524 1,000,000
Gregory Fisher(2)
Executive Vice President............................... 153,720 1,000,000
</TABLE>

- ---------------

(1) Prior to the Recapitalization in March 1998, the Company operated as a
corporation exempt from entity-level taxation under Subchapter S of the
Code. As a result, all of the Company's earnings were distributed to its
shareholders (who also were employees of the Company) as bonus compensation
or as distributions on capital stock. See "Dividend Policy."

(2) Mr. Stanley Fisher is no longer an employee of the Company and has entered
into a consulting agreement with the Company. Each of Messrs. Michael Fisher
and Gregory Fisher has entered into an employment agreement with the
Company. See "Certain Transactions."

EMPLOYMENT CONTRACTS AND RELATED MATTERS

The Company has entered into Senior Management Agreements (each a "Senior
Management Agreement") with each of Messrs. Ballou, Lewis and Berman (each a
"Senior Executive"). Each Senior Management Agreement provides for a term of
three years with automatic one-year extensions at the end of any term provided
that neither the Company nor the applicable Senior Executive provides notice of
termination within 60 days of the end of the term. Each Senior Executive
initially will receive an annual base salary of $200,000, subject to increase
following annual review by the Board of Directors. Each of the Senior Executives
also will be eligible to receive an annual bonus in an amount not to exceed 100%
of his annual base salary for such year, as determined by the Board of Directors
based upon the Company's achievement of budgetary and other objectives set by
the Board of Directors. In addition, upon completion of this offering, each of
the Senior Executives will receive options to purchase 2.5% of the number of
shares of Common Stock outstanding immediately following the closing of this
offering (368,495 shares each, assuming the closing date of this offering is
July 31, 1998 and assuming the price per share in this offering is $14.00) at an
exercise price equal to the initial public offering price pursuant to the Option
Grant. These options will be granted under the Stock Option Plan and will vest
over four years.

In the event a Senior Executive's employment is terminated during the term
of his Senior Management Agreement by the Company without cause or by such
Senior Executive for good reason (each as defined in the applicable Senior
Management Agreement), then such Senior Executive will be entitled for 12 months
to monthly severance payments equal to one-twelfth of his base salary and bonus
for the previous year. If a Senior Executive is terminated by the Company based
upon a failure by the Company to achieve certain performance goals, then he will
be entitled to such monthly severance payments for three months. Under the terms
of the Senior Management Agreements, each of the Senior Executives has agreed to
preserve the

46
<PAGE> 50

confidentiality and the proprietary nature of all information relating to the
Company and its business. Each Senior Executive also has agreed to certain
non-competition and non-solicitation provisions which will be in effect during
the term of his Senior Management Agreement and for one year thereafter.

In connection with the Senior Management Agreements, each of the Senior
Executives purchased restricted shares of Common Stock and Convertible Preferred
Stock. See "Certain Transactions."

STOCK OPTION PLAN

The Company has adopted the Stock Option Plan to assist the Company and its
affiliates in attracting and retaining qualified employees, directors,
consultants and advisors (collectively, the "Eligible Individuals") and to
promote the identification of their interests with those of the shareholders of
the Company. The Stock Option Plan provides that at any time a number of shares
equal to 12% of the number of then outstanding shares of Common Stock will be
reserved for issuance to Eligible Individuals pursuant to grants of stock
options. Unless sooner terminated by the Company's Board of Directors, the Stock
Option Plan will terminate on March 29, 2008. Options granted under the Stock
Option Plan may be either incentive or non-incentive options under Section 422
of the Internal Revenue Code of 1986, as amended. Options granted under the
Stock Option Plan typically vest over time, subject to acceleration in the event
of a change of control of the Company. No option granted under the Stock Option
Plan is exercisable after the tenth anniversary of the option's date of grant.

As of July 7, 1998, the Company had granted options to purchase 84,716
shares of Common Stock at an exercise price equal to $0.82. Concurrently with
the closing of this offering, the Company will issue (i) options under the Stock
Option Plan to purchase a number of shares equal to 7.5% of the number of shares
of Common Stock to be outstanding upon completion of this offering (an aggregate
1,105,485 shares, assuming the closing date of this offering is July 31, 1998
and assuming the price per share in this offering is $14.00) plus (ii) options
under the Stock Option Plan to purchase a number of shares of Common Stock with
an aggregate value of $2,475,000 (an aggregate of 176,784 shares, assuming the
price per share in this offering is $14.00), all of which options will have an
exercise price equal to the price per share in this offering. In addition, the
Company intends to grant additional options concurrently with the closing of
this offering to purchase up to 195,000 shares of Common Stock. Any options so
granted will have an exercise price equal to the price per share in the
offering.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the offering, the Company had no separate compensation committee
or other board committee performing equivalent functions with respect to
determining compensation for the Company's executives, and those functions were
performed by the Company's Board of Directors which included Mr. Ballou, the
Company's Chief Executive Officer. See "Certain Transactions" for a description
of certain relationships and transactions between the Company and its directors
and executive officers.

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<PAGE> 51

CERTAIN TRANSACTIONS

TRANSACTIONS WITH THAYER, SENIOR EXECUTIVES AND DIRECTORS

Thayer is a Delaware limited partnership whose sole general partner is TC
Equity Partners. TC Equity Partners beneficially owns, and has sole voting and
investment power with respect to, the shares of Common Stock held of record by
Thayer. TC Co-Investors is a Delaware limited liability company whose managing
member is TC Management. TC Management beneficially owns, and has sole voting
and investment power with respect to, the shares of Common Stock held of record
by TC Co-Investors. Frederic V. Malek, Dr. Paul G. Stern and Carl J. Rickertsen
are the members of TC Management and the principal members of TC Equity
Partners. Messrs. Malek and Rickertsen (i) may receive certain benefits from
cash payments made to Thayer or its affiliates and (ii) may be deemed to be the
beneficial owners of the shares of Common Stock held by each of Thayer and TC
Co-Investors.

The Recapitalization. In connection with the Recapitalization, Thayer
purchased a majority of Allied Holding's interest in the Company and
subsequently received 3,016,023 shares of Common Stock valued at $0.82 per share
and 22,249 shares of Convertible Preferred Stock valued at $1,000 per share, for
a total equity interest in the Company valued at $24.7 million, which was the
amount paid by Thayer to Allied Holding for such interest. In addition, the
Company paid Thayer $425,000 for certain financial and management services
provided by Thayer to the Company in connection with the Recapitalization.
Thayer, as a holder of Convertible Preferred Stock, is entitled to dividends on
the shares of Convertible Preferred Stock issued to it in the Recapitalization.
These dividends accrue daily and will be paid in additional shares of
Convertible Preferred Stock at a rate of 15% per annum.

Thayer Purchase Agreement. On March 30, 1998, the Company entered into an
Equity Purchase Agreement (the "Thayer Purchase Agreement") with Thayer, TC
Co-Investors and 16 other individuals or entities whereby the Company agreed to
sell to Thayer a total of 3,083,977 shares of Common Stock at a purchase price
of $0.82 per share and 22,751 shares of Convertible Preferred Stock at a
purchase price of $1,000 per share. Between March 30, 1998 and May 5, 1998,
Thayer purchased 3,083,977 shares of Common Stock and 22,751 shares of
Convertible Preferred Stock at those respective prices per share and paid the
Company cash in an aggregate amount of $25.3 million. On March 30, 1998 in
connection with the Thayer Purchase Agreement, TC Co-Investors purchased 49,292
shares of Common Stock at a purchase price of $0.82 per share and 363.64 shares
of Convertible Preferred Stock at a purchase price of $1,000 per share for an
aggregate consideration of $404,044. Thayer, TC Co-Investors and these other
purchasers, as holders of Convertible Preferred Stock, are entitled to dividends
on the shares of Convertible Preferred Stock purchased by them pursuant to the
Thayer Purchase Agreement similar to the dividend rights discussed above.

Senior Management Agreements and Related Transactions. On March 30, 1998,
in connection with the Senior Management Agreements, the Company sold to the
Senior Executives a total of (i) 701,500 shares of Common Stock at a purchase
price of $0.82 per share (414,800 to Mr. Ballou, 115,900 to Mr. Lewis and
170,800 to Mr. Berman) and (ii) 425 shares of Convertible Preferred Stock at a
purchase price of $1,000 per share (60 to Mr. Ballou, 105 to Mr. Lewis and 260
to Mr. Berman), for an aggregate consideration of $1.0 million paid in cash.
Under the Senior Management Agreements, upon the termination of a Senior
Executive's employment with the Company for any reason, the Company has the
right to repurchase any or all of the shares originally issued to such Senior
Executive under his Senior Management Agreement which have not yet vested
(including shares issued to him in connection with the Conversion). The
repurchase price for any unvested shares of Common Stock so repurchased will be
the Senior Executive's original cost for such shares, or $0.82 per share. In the
event the Company does not purchase all of a Senior Executive's unvested shares
of Common Stock subject to repurchase upon termination of his employment, Thayer
may purchase any such shares of Common Stock not purchased by the Company at the
same purchase price.

For each Senior Executive, all of the shares of Convertible Preferred Stock
and a portion (15.0% for Mr. Ballou, 24.0% for Mr. Lewis and 31.2% for Mr.
Berman) of the shares of Common Stock were vested immediately, and a portion
(52.3% for Mr. Ballou, 46.8% for Mr. Lewis and 42.3% for Mr. Berman) of the
shares of Common Stock will vest over four years from the date of the
Recapitalization, subject to accelerated

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<PAGE> 52

vesting under certain circumstances. The remaining shares of Common Stock sold
to the Senior Executives in connection with the Senior Management Agreements
will vest on April 1, 2005, subject to accelerated vesting upon Thayer's
achievement of certain rates of return on its investment in the Company. All of
the unvested shares are subject to accelerated vesting upon a change of control
of the Company. The Senior Executives, as holders of Convertible Preferred
Stock, are entitled to dividends on the shares of Convertible Preferred Stock
purchased by them pursuant to the Senior Management Agreements similar to
dividend rights discussed above.

In addition, upon completion of this offering, each of the Senior
Executives will receive options to purchase 2.5% of the number of shares of
Common Stock outstanding immediately following the closing of this offering
(368,495 shares each, assuming the closing date of the offering is July 31, 1998
and assuming the price per share in this offering is $14.00) at an exercise
price equal to the initial public offering price pursuant to the Option Grant.
These options will be granted under the Stock Option Plan, will vest over four
years and will have an exercise price equal to the initial public offering
price. See "Management -- Employment Contracts and Related Matters" and
"Management -- Stock Option Plan."

Arrangements in Connection with the Acquisitions. Thayer funded a
substantial portion of the up-front costs associated with the Acquisitions.
Between March 30, 1998 and May 5, 1998, the Company made payments to Thayer
approximating $675,000 as reimbursement for these costs. A substantial portion
of these costs related to consulting and expense payments made by Thayer to the
Senior Executives, each of whom was a consultant to Thayer prior to joining the
Company. Of this amount, Mr. Ballou received approximately $363,000 from the
Company during this period in consideration of certain financial and management
consulting services provided to the Company by Mr. Ballou in connection with the
Acquisitions.

In addition, on March 30, 1998, the Company entered into a Professional
Services Agreement (the "Professional Services Agreement") with TC Management
whereby the Company agreed to pay TC Management a fee equal to 1% of the amount
of any debt or equity financing of the Company following the Recapitalization.
In exchange for such payments, TC Management agreed to provide financial and
management consulting services to the Company. Between March 30, 1998 and May 5,
1998, the Company paid a total of $615,000 pursuant to the Professional Services
Agreement. By its terms, the Professional Services Agreement will terminate upon
the effective date of this offering.

The Conversion. Concurrently with this offering, the Company will issue
3,360,124 shares of Common Stock to Thayer and TC Co-Investors and 27,297 shares
of Common Stock to the Senior Executives in the Conversion.

TRANSACTIONS WITH THE FORMER EXECUTIVE OFFICERS

Messrs. Stanley Fisher, Michael Fisher and Gregory Fisher are the executive
officers and principal shareholders of Allied Holding and therefore these
individuals (i) may receive certain benefits from cash payments made to Allied
Holding and (ii) may be deemed to be the beneficial owners of the shares of
Common Stock and Convertible Preferred Stock held by Allied Holding.

The Recapitalization. Prior to the Recapitalization, Allied Holding was
the sole shareholder of the Company. In connection with the Recapitalization,
the Company redeemed a portion of Allied Holding's interest for an aggregate
consideration of $14.7 million (consisting of $10.7 million in cash and a $4.0
million 120-day promissory note due on July 25, 1998 and bearing interest at 8%)
and issued 476,214 shares of Common Stock valued at $0.82 per share and 3,513
shares of Convertible Preferred Stock valued at $1,000 per share to Allied
Holding in respect of Allied Holding's remaining interest in the Company. The
Company will use a portion of the net proceeds of this offering to repay the
$4.0 million note issued to Allied Holding in the Recapitalization. In addition,
Allied Holding, as a holder of Convertible Preferred Stock, is entitled to
dividends on the shares of Convertible Preferred Stock issued to it in the
Recapitalization. These dividends accrue daily from the date of issuance of each
share of Convertible Stock and will be paid in additional shares of Convertible
Preferred Stock at a rate of 15% per annum.

49
<PAGE> 53

The Conversion. Concurrently with the closing of this offering, the
Company will issue 264,024 shares of Common Stock to Allied Holding in the
Conversion.

Consulting and Employment Agreements. The Company has entered into a
Consulting Agreement with Mr. Stanley Fisher (the "Consulting Agreement") and
Employment Agreements with each of Messrs. Michael Fisher and Gregory Fisher
(the "Fisher Employment Agreements"). The Consulting Agreement has a term
expiring December 31, 1999, subject to automatic extensions on a month-to-month
basis until the Company or Mr. Stanley Fisher provides one-month's written
notice of termination to the other. The Company will pay Mr. Stanley Fisher
$100,000 per year for consulting services and will reimburse him for all
reasonable expenses incurred by him in rendering such consulting services to the
Company. Pursuant to the Consulting Agreement, Mr. Stanley Fisher has agreed to
certain non-competition and non-solicitation provisions which will be in effect
until the sooner of one-year beyond the term of the Consulting Agreement or
March 27, 2002.

Each of the Fisher Employment Agreements provides for a term of four years
with automatic one-year extensions at the end of any term, provided that neither
the Company nor the applicable employee, provides notice of termination within
60 days of the end of the term. Each of these employees will receive an annual
base salary of $250,000 subject to increase in the future as agreed by the
Company and the applicable employee. Each of these employees also will be
eligible to receive an annual bonus of up to $150,000 based upon certain
performance criteria. Each of the employees will have the right, in certain
circumstances, to receive severance payments upon termination for a period of up
to two years from the date of termination based upon such employee's current
base salary and his bonus for the previous year. In addition, upon completion of
this offering, each of Messrs. Michael Fisher and Gregory Fisher will receive
options to purchase shares of Common Stock with an aggregate value of $1.0
million (71,428 shares, assuming the price per share in this offering is $14.00)
with an exercise price equal to the initial public offering price pursuant to
the Option Grant. These options will be granted under the Stock Option Plan,
will have an exercise price equal to the initial public offering price and will
vest over four years. Each of Messrs. Michael Fisher and Gregory Fisher also has
agreed to (i) certain non-competition provisions which will be in effect until
the later of March 18, 2002 or one year following the termination of his Fisher
Employment Agreement and (ii) certain non-solicitation provisions which will be
in effect during the term of his Fisher Employment Agreement and for two years
thereafter.

REGISTRATION RIGHTS AGREEMENT

The Company has entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with each shareholder who owned shares in the
Company prior to this offering (the "Original Shareholders"), including Thayer,
TC Co-Investors, the Senior Executives and Allied Holding. Pursuant to the
Registration Rights Agreement, the Original Shareholders will have the right to
require the Company to register their shares under the Securities Act following
this offering. If the Company proposes to register its securities under the
Securities Act, either for its own account or the account of others, the
Original Shareholders will be entitled to notice of such registration and to
include their shares in such registration; provided, among other conditions,
that the underwriters for any offering will have the right to limit the number
of such shares included in such registration, subject to certain conditions. In
addition, the holders of a majority of the shares held by the Original
Shareholders at any time will have the right to require the Company to file
under the Securities Act up to six registrations at the Company's expense and an
unlimited number of registrations at their own expense.

50
<PAGE> 54

PRINCIPAL SHAREHOLDERS

The following table sets forth the number and percentage of outstanding
shares of Common Stock that will be beneficially owned by (i) all persons known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
of the Former Executive Officers, (iii) each current director and executive
officer and (iv) all directors and executive officers as a group, in each case
both prior to and after this offering. This table assumes no exercise of the
Underwriters' over-allotment option. Two of the Company's shareholders, Thayer
and TC Co-Investors, have granted to the Underwriters options to purchase
446,387 and 3,613 shares, respectively, to cover over-allotments. See
"Underwriting." Footnotes 5 and 6 to the table provide information regarding the
share ownership of the Selling Shareholders after this offering in the event the
Underwriters exercise the over-allotment option in full.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OWNERSHIP
SHARES -------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS(1) OWNED(2) OFFERING OFFERING
- ------------------- ------------ -------- --------
<S> <C> <C> <C>
Roger H. Ballou............................................. 419,304 3.6% 2.8%
J. Raymond Lewis, Jr........................................ 123,782 1.1 *
Walter S. Berman............................................ 190,317 1.6 1.3
Frederic V. Malek(3)........................................ 9,536,713 81.2 64.7
Carl J. Rickertsen(3)....................................... 9,536,713 81.2 64.7
Stanley Fisher(4)........................................... 740,238 6.3 5.0
Michael Fisher(4)........................................... 740,238 6.3 5.0
Gregory Fisher(4)........................................... 740,238 6.3 5.0
Thayer Equity Investors III, L.P.(3)........................ 9,460,124 80.6 64.2(5)
TC Co-Investors, LLC(3)..................................... 76,589 * *(6)
Allied Tours Holding Corp................................... 740,238 6.3 5.0
All directors and executive officers as a group (5
persons).................................................. 10,270,116 87.5% 69.7%(7)
</TABLE>

- ---------------

* Less than 1%.

(1) The business address for Messrs. Ballou, Lewis and Berman is 1420 New York
Avenue, N.W., Suite 550, Washington, D.C. 20005. The business address for
Messrs. Malek and Rickertsen, Thayer Equity Investors III, L.P. and TC
Co-Investors, LLC is 1455 Pennsylvania Avenue, N.W., Suite 350, Washington,
DC 20004. The business address for Messrs. Stanley Fisher, Michael Fisher
and Gregory Fisher and Allied Tours Holding Corp. is 165 West 46th Street,
10th Floor, New York, New York 10036.

(2) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), a person has beneficial ownership of any securities as
to which such person, directly or indirectly, through any contract,
arrangement, undertaking, relationship or otherwise has or shares voting
power and/or investment power and as to which such person has the right to
acquire such voting and/or investment power within 60 days. Percentage of
beneficial ownership as to any person as of a particular date is calculated
by dividing the number of shares beneficially owned by such person by the
sum of the number of shares outstanding as of such date and the number of
shares as to which such person has the right to acquire voting and/or
investment power within 60 days.

(3) Includes 9,460,124 shares of Common Stock held of record by Thayer and
76,589 shares of Common Stock held of record by TC Co-Investors. Thayer is a
Delaware limited partnership whose sole general partner is TC Equity
Partners. TC Equity Partners beneficially owns, and has sole voting and
investment power with respect to, the shares of Common Stock held of record
by Thayer. TC Co-Investors is a Delaware limited liability company whose
managing member is TC Management. TC Management beneficially owns, and has
sole voting and investment power with respect to, the shares of Common Stock
held of record by TC Co-Investors. Frederic V. Malek, Dr. Paul G. Stern and
Carl J. Rickertsen are the members in TC Management and the principal
members of TC Equity Partners. Messrs. Malek and Rickertsen may be deemed to
be the beneficial owners of the shares of Common Stock held by each of
Thayer and TC Co-Investors. If the Underwriters' over-allotment option is
exercised in full, Thayer and TC Co-Investors together will sell a total of
450,000 shares and thereafter Messrs. Malek and Rickertsen each beneficially
will own 9,086,713 shares, representing 61.6% of the outstanding Common
Stock.

(4) Messrs. Stanley Fisher, Michael Fisher and Gregory Fisher are the executive
officers and principal shareholders of Allied Holding and may be deemed to
be the beneficial owners of the shares of Common Stock held by Allied
Holding.

(5) If the Underwriters' over-allotment option is exercised in full, Thayer will
sell 446,387 shares and thereafter beneficially own 9,013,737 shares,
representing 61.2% of the outstanding Common Stock.

(6) If the Underwriters' over-allotment option is exercised in full, TC
Co-Investors will sell 3,613 shares and thereafter beneficially own 72,976
shares, representing 0.5% of the outstanding Common Stock.

(7) If the Underwriters' over-allotment option is exercised in full, Thayer and
TC Co-Investors together will sell a total of 450,000 shares and thereafter
all directors and executive officers as a group beneficially will own
9,820,116 shares, representing 66.6% of the outstanding Common Stock.

51
<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

As of July 7, 1998, the Company had outstanding (i) 7,797,926 shares of
Common Stock with 29 holders of record of such Common Stock and (ii) 52,775.64
shares of Convertible Preferred Stock with 25 holders of record of such
Convertible Preferred Stock. The Conversion will occur concurrently with the
closing of this offering so that no shares of Convertible Preferred Stock will
be outstanding upon completion of this offering. Each holder of Convertible
Preferred Stock is entitled to dividends on the shares of Convertible Preferred
Stock issued to such shareholder. These dividends accrue daily from the date of
issuance of each share of Convertible Preferred Stock and will be paid in
additional shares of Convertible Preferred Stock at a rate of 15% per annum.
Effective as of the closing of this offering, pursuant to the Conversion, all
shares of Convertible Preferred Stock then outstanding will be converted into
shares of Common Stock at a conversion rate equal to $1,000 (the liquidation
value of each share of Convertible Preferred Stock), plus any accrued and unpaid
dividends on such shares as of the closing date of this offering, divided by the
initial public offering price.

The following table sets forth the number of shares of Common Stock into
which the Convertible Preferred Stock will be converted in the Conversion if the
closing date of this offering is July 31, 1998 at the offering price per share
indicated:

<TABLE>
<CAPTION>
OFFERING SHARES OF
PRICE COMMON STOCK
- -------- ------------
<S> <C>
$13.00 4,245,128
$14.00 3,941,912
$15.00 3,679,110
</TABLE>

If the closing date of this offering occurs after July 31, 1998, the number
of shares of Common Stock to be issued in the Conversion, assuming an initial
public offering price of $14.00, would increase by approximately 46,475 shares
per month thereafter.

Following this offering, the Company's authorized capital stock will
consist of 60,000,000 shares of Common Stock, par value $0.01 per share, of
which there will be 14,739,838 shares issued and outstanding, 6,000,000 shares
of undesignated preferred stock, par value $0.01 per share ("Preferred Stock"),
of which there will be no shares issued and outstanding.

COMMON STOCK

Each shareholder of record will be entitled to one vote for each
outstanding share of Common Stock owned by such shareholder on every matter
properly submitted to the shareholders for their vote. The holders of Common
Stock do not have cumulative voting rights and, accordingly, the holders of a
majority of the Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of Common Stock are
entitled to any dividend declared by the Board of Directors out of funds legally
available for such purpose, subject to any preferential dividend rights of any
outstanding Preferred Stock. In the event of liquidation, dissolution or winding
up of the Company, holders of Common Stock are entitled to receive on a pro rata
basis all remaining assets of the Company available after the payment of all
debts and other liabilities and subject to the prior rights of any outstanding
Preferred Stock. Holders of Common Stock do not have any preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares of Common Stock offered by the Company in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock that the Company may designate and issue in the
future.

PREFERRED STOCK

The Board of Directors is authorized, without further shareholder approval,
to issue shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including

52
<PAGE> 56

dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, and to fix the number of shares constituting any series
and the designations of such series.

The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. The Company currently has no plans to issue any
shares of Preferred Stock.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the New York Business Corporation Law (the "NYBCL"), the
Amended Certificate provides that a director of the Company shall not be
personally liable to the Company or its shareholders for damages for any breach
of duty in his or her capacity as a director unless a judgment or other final
adjudication adverse to such director establishes that (i) his or her acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law, (ii) such director personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled or (iii)
his or her acts violated Section 719 of the NYBCL.

This provision is intended to afford directors 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, shareholders 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 shareholders for any particular case, shareholders may
not have any effective remedy against the challenged conduct.

The Amended Certificate also provides 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 have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the Company's best interests, provided that
no indemnification may be made to or on behalf of any directors or officers if a
judgment or other final adjudication adverse to him or her established that his
or her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.

The Company will maintain director and officer liability insurance on
behalf of its directors and officers.

CERTAIN ANTI-TAKEOVER EFFECTS

The Company, as a New York corporation, is subject to the provisions of
Section 912 of the NYBCL and will continue to be so subject if and for so long
as it has a class of securities registered under Section 12 of the Exchange Act.
Section 912 provides, with certain exceptions (which include, among others,
transactions with shareholders who became interested prior to the effective date
of an amendment to the corporation's Certificate of Incorporation providing that
the corporation would be subject to Section 912 if such corporation did not then
have a class of stock registered pursuant to Section 12 of the Exchange Act),
that a New York corporation may not engage in a "business combination" (e.g.,
merger, consolidation, recapitalization or disposition of stock) with any
"interested shareholder" for a period of five years from the date that such
person first became an interested shareholder unless: (i) the transaction
resulting in a person becoming an interested shareholder, or the business
combination, was approved by the board of directors of the corporation prior to
that person becoming an interested shareholder; (ii) the business combination is
approved by the holders of a majority of the outstanding voting stock not
beneficially owned by such interested shareholder; or (iii) the business
combination meets certain valuation requirements for the stock of the New York
corporation. An "interested shareholder" is defined as any person that (a) is
the beneficial owner of 20% or more of the

53
<PAGE> 57

outstanding voting stock of a New York corporation or (b) is an affiliate or
associate of the corporation that at any time during the prior five years was
the beneficial owner, directly or indirectly, of 20% or more of the then
outstanding voting stock. These provisions are likely to impose greater
restrictions on an unaffiliated shareholder than on the existing shareholders
who will continue to own a majority of the Company's outstanding Common Stock
after this offering.

The Amended Certificate and the By-laws of the Company will contain certain
provisions intended to enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and of the policies formulated
by the Board which may discourage a future unsolicited takeover of the Company.
These provisions could have the effect of discouraging certain attempts to
acquire the Company or remove incumbent management, including incumbent members
of the Company's Board of Directors, even if some or a majority of the Company's
shareholders deemed such an attempt to be in their best interests. The Amended
Certificate or the By-laws of the Company, as applicable, will, among other
things: (i) provide that the number of directors will be not fewer than three
nor more than 15, with the exact number of directors to be determined from time
to time by the affirmative vote of more than two-thirds of the number of
directors which the Company would have, prior to an increase or decrease, if
there were no vacancies; (ii) provide for a classified Board of Directors
consisting of three classes of directors having staggered terms of three years
each; (iii) subject to any rights of holders of the Preferred Stock which may be
granted by the Board of Directors in the future and except as otherwise provided
by Section 706(d) of the NYBCL, provide that directors may be removed only for
cause and only by a majority of the directors in office or by vote of the
holders of at least two-thirds of the Company's capital stock entitled to vote;
(iv) subject to any rights of holders of the Preferred Stock which may be
granted by the Board of Directors in the future, permit vacancies on the Board
of Directors that may occur between annual meetings and any newly created seats
to be filled only by the Board of Directors and not by the shareholders; (v)
preclude shareholders from calling special meetings of shareholders; (vi)
prohibit shareholders from taking any action without a meeting; (vii) require
any shareholder who wishes to bring any proposal before a meeting of
shareholders or to nominate a person to serve as a director to give written
notice thereof and certain related information prior to the date of such
meeting; (viii) require the affirmative vote of the holders of at least
two-thirds of the Company's capital stock entitled to vote to amend certain
provisions of the Amended Certificate or to amend the By-laws of the Company;
and (ix) provide that the Board of Directors, without action by the
shareholders, may issue and fix the rights and preferences of shares of
Preferred Stock. These provisions may have the effect of delaying, deferring or
preventing a change of control of the Company without further action by the
shareholders, may discourage bids for the Common Stock at a premium over the
market price of the Common Stock and may adversely affect the market price of,
and the voting and other rights of the holders of, Common Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is .

54
<PAGE> 58

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have 14,739,838 shares of
Common Stock outstanding (assuming no exercise of outstanding options or
warrants). Of these shares, the 3,000,000 shares to be sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by affiliates of the Company,
as that term is defined in Rule 144 ("Affiliates"), may generally only be sold
in compliance with the limitations of Rule 144 described below.

The remaining 11,739,838 shares of Common Stock outstanding will be
restricted shares within the meaning of Rule 144 under the Securities Act. Of
these shares, approximately 740,238 shares may be eligible for sale in the
public market immediately after this offering pursuant to Rule 144(k) under the
Securities Act, subject to 180-day Lock-up Agreements as described below. The
remaining 10,999,600 shares will become eligible for sale in the public market
from time to time, subject to Lock-up Agreements.

The Company, its executive officers and directors and each of its existing
shareholders, who will hold an aggregate of 11,739,838 shares of Common Stock
after this offering, have agreed that, until 180 days following the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., sell, offer to sell, solicit any offer to buy, contract to sell, grant any
option to purchase (other than under the Stock Option Plan), or otherwise
transfer or dispose of any shares of Common Stock, or any securities convertible
into, or exercisable or exchangeable for, Common Stock, except that the Company
may grant options under the Stock Option Plan and may issue shares of Common
Stock pursuant to the exercise of options granted under the Stock Option Plan.
Smith Barney Inc. may release shares subject to the Lock-up Agreements in whole
or in part in its sole discretion without notice.

In general, under Rule 144, a person (or persons whose shares are
aggregated), including an Affiliate, who has beneficially owned restricted
shares for at least one year is entitled to sell, within any three-month period,
a number of such shares that does not exceed the greater of (i) one percent of
the then outstanding shares of Common Stock (147,398 shares immediately after
this offering) or (ii) the average weekly trading volume in the Common Stock on
the NYSE during the four calendar weeks preceding the date on which notice of
such sale is filed, provided certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied. In
addition, Affiliates must comply with the restrictions and requirements of Rule
144, other than the one-year holding period requirement, in order to sell shares
of Common Stock that are not restricted securities. Under Rule 144(k), a person
who is not an Affiliate and has not been an Affiliate for at least three months
prior to the sale and who has beneficially owned restricted shares for at least
two years may resell such shares without compliance with the foregoing
requirements. In meeting the one-year and two-year holding periods described
above, a holder of Restricted Shares can include the holding periods of a prior
owner who was not an Affiliate. The one-year and two-year holding periods
described above do not begin to run until the full purchase price or other
consideration is paid by the person acquiring the restricted shares from the
issuer or an Affiliate.

At July 7, 1998, 84,716 shares of Common Stock were issuable pursuant to
options under the Company's Stock Option Plan. None of these options are
currently exercisable and none will be exercisable prior to January 1999. Upon
completion of this offering the Company will issue (i) options to purchase a
total of 7.5% of the outstanding shares of Common Stock at that time to the
Senior Executives (an aggregate of 1,105,485 shares, assuming the closing date
of this offering is July 31, 1998 and assuming the price per share in this
offering is $14.00) and (ii) options to purchase shares of Common Stock with an
aggregate value of $2,475,000 (an aggregate of 176,784 shares, assuming the
price per share in this offering is $14.00). In addition, the Company intends to
grant options concurrently with the closing of this offering to purchase up to
195,000 shares of Common Stock.

Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 under the Securities Act the
shares of Common Stock issuable under the Stock Option Plan. These registration
statements are expected to become effective upon filing and shares covered by
these registration statements will be eligible for sale in the public market
immediately after the effective dates

55
<PAGE> 59

of such registration statements. At any time a number of shares equal to 12% of
the then outstanding shares of Common Stock will be reserved for issuance under
the Stock Option Plan.

Prior to this offering, there has been no public market for the Common
Stock of the Company, and no precise prediction can be made as to the effect, if
any, that market sales of shares of Common Stock or the availability of shares
of Common Stock for sale will have on the market price of the Common Stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices and could impair the Company's future ability to raise capital through
the sale of its equity securities.

Following completion of the offering, holders of 11,739,838 shares of
Common Stock will have the right to require the Company to register such shares
under the Securities Act pursuant to terms and conditions of a Registration
Rights Agreement with the Company. See "Certain Transactions -- Registration
Rights Agreement."

56
<PAGE> 60

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each underwriter named below (collectively, the
"Underwriters") has severally agreed to purchase, and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------- ---------
<S> <C>
Smith Barney Inc. ..........................................
NationsBanc Montgomery Securities LLC.......................
BancAmerica Robertson Stephens..............................
ING Baring Furman Selz LLC..................................

---------
Total.................................................. 3,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., NationsBanc Montgomery
Securities LLC, BancAmerica Robertson Stephens and ING Baring Furman Selz LLC
are acting as the Representatives, propose to offer part of the shares directly
to the public at the public offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at a price that represents
a concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial offering
of the shares to the public, the public offering price and such concessions may
be changed by the Representatives. The Representatives have advised the Company
that the Underwriters do not intend to confirm sales of any shares to any
accounts over which they exercise discretionary authority.

The Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with the offering of the shares
offered hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company, its executive officers and directors and each of its existing
shareholders, who will hold an aggregate of 11,739,838 shares of Common Stock
after this offering, have agreed that, until 180 days following the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., sell, offer to sell, solicit any offer to buy, contract to sell, grant any
option to purchase (other than under the Stock Option Plan), or otherwise
transfer or dispose of any shares of Common Stock, or any securities convertible
into, or exercisable or exchangeable for, Common Stock, except that the Company
may grant options under the Stock Option Plan and may issue shares of Common
Stock pursuant to the exercise of options granted under the Stock Option Plan.
Smith Barney Inc. may release shares subject to the Lock-up Agreements in whole
or in part in its sole discretion without notice.

Prior to this offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
shares of Common Stock included in the offering will be determined by
negotiations between the Company and the Representatives. Among the factors to
be

57
<PAGE> 61

considered in determining such price are the history of and prospects for the
Company's business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for growth
of the Company's revenues and earnings, the current state of the economy in the
United States and the current level of economic activity in the industry in
which the Company competes and in related or comparable industries, and
currently prevailing conditions in the securities markets, including current
market valuations of publicly traded companies that are comparable to the
Company.

The Representatives have advised the Company that, pursuant to Regulation M
under the Exchange Act, certain persons participating in the offering may engage
in transactions, including stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, which may have the effect of stabilizing or
maintaining the market price of the Common Stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the Common Stock on behalf of the Underwriters for the purpose
of fixing or maintaining the price of the Common Stock. A "syndicate covering
transaction" is the bid for or the purchase of the Common Stock on behalf of the
Underwriters to reduce a short position incurred by the Underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
Representatives to reclaim the selling concession otherwise accruing to an
Underwriter or syndicate member in connection with the offering if the Common
Stock originally sold by such Underwriter or syndicate member is purchased by
the Representatives in a syndicate covering transaction and has therefore not
been effectively placed by such Underwriter or syndicate member. The
Underwriters are not required to engage in any of these activities and any such
activities, if commenced, may be discontinued at any time. The Representatives
have advised the Company that such transactions may be effected on the New York
Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

The Company, the Underwriters and certain shareholders of the Company have
agreed to indemnify each other against certain liabilities, including
liabilities arising under the Securities Act.

LEGAL MATTERS

The validity of shares of Common Stock will be passed upon on behalf of the
Company by Hogan & Hartson L.L.P., Washington, D.C. Certain legal matters will
be passed upon for the Underwriters by Hale and Dorr LLP, Washington, D.C.

EXPERTS

The financial statements and schedules of Global Vacation Group, Inc.
(formerly Allied Bus Corp.) as of December 31, 1996 and 1997 and for each of the
three years in the period ended December 1997, included in this Prospectus and
elsewhere in this registration statement, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

The financial statements of Classic Custom Vacations as of December 31,
1997 and for the years ended December 31, 1995 and 1997, included in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.

The financial statements of Classic Custom Vacations as of and for the year
ended December 31, 1996, appearing in this Prospectus and the Registration
Statement, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein and in the Registration Statement and is
included in reliance upon the report given of such firm as experts in accounting
and auditing.

The financial statements of MTI Vacations as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997, included
in this Prospectus, have been included herein in reliance on the report of
Coopers & Lybrand LLP, independent accountants given on the authority of that
firm as experts in accounting and auditing.

58
<PAGE> 62

The financial statements of Haddon Holidays, Inc. as of December 31, 1997
and for the year ended December 31, 1997, included in this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the SEC a Registration Statement on Form S-1
(including exhibits, schedules and amendments thereto, the "Form S-1") pursuant
to the Securities Act, with respect to the offering hereby of the Common Stock.
This Prospectus, while forming a part of the Form S-1, does not contain all of
the information set forth in the Form S-1. Reference is hereby made to the Form
S-1 for further information with respect to the Company and the Common Stock
offered hereby. Statements contained herein concerning the provisions of
documents filed as exhibits to the Form S-1 are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Securities and Exchange
Commission (the "SEC"). The Form S-1 is available for inspection and copying at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the Regional Offices of the SEC
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such information can be obtained by mail from the Public
Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates, or on the Internet at http://www.sec.gov.

The Company intends to furnish its shareholders annual reports containing
financial statements audited by its independent accountants and quarterly
reports containing unaudited financial statements for the first three quarters
of each fiscal year.

59
<PAGE> 63

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOBAL VACATION GROUP, INC. (FORMERLY ALLIED BUS CORP.):
Report of Independent Public Accountants -- Arthur
Andersen LLP.......................................... F- 2
Consolidated Balance Sheets as of December 31, 1996 and
1997 and March 31, 1998 (unaudited)................... F- 3
Consolidated Statements of Operations for the Years
Ended December 31, 1995, 1996 and 1997 and the Three
Months Ended March 31, 1997 and 1998 (unaudited)...... F- 4
Consolidated Statements of Changes in Shareholders'
Equity (Deficit) for the Years Ended December 31,
1995, 1996 and 1997 and the Three Months Ended March
31, 1998 (unaudited).................................. F- 5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1996 and 1997 and the Three
Months Ended March 31, 1997 and 1998 (unaudited)...... F- 6
Notes to Consolidated Financial Statements............. F- 7
CLASSIC CUSTOM VACATIONS:
Report of Independent Public Accountants -- Arthur
Andersen LLP.......................................... F-19
Independent Auditors' Report -- Deloitte & Touche
LLP................................................... F-20
Consolidated Balance Sheets as of December 31, 1996 and
1997 and March 31, 1998 (unaudited)................... F-21
Consolidated Statements of Operations for the Years
Ended December 31, 1995, 1996 and 1997 and the Three
Months Ended March 31, 1997 and 1998 (unaudited)...... F-22
Consolidated Statements of Changes in Shareholders'
Equity (Deficit) for the Years Ended December 31,
1995, 1996 and 1997 and the Three Months Ended March
31, 1998 (unaudited).................................. F-23
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1996 and 1997 and the Three
Months Ended March 31, 1997 and 1998 (unaudited)...... F-24
Notes to Consolidated Financial Statements............. F-25
MTI VACATIONS:
Report of Independent Accountants -- Coopers & Lybrand
LLP................................................... F-36
Balance Sheets as of December 31, 1996 and 1997 and
March 31, 1998 (unaudited)............................ F-37
Statements of Income (Loss) for the Years Ended
December 31, 1995, 1996 and 1997 and the Three Months
Ended March 31, 1997 and 1998 (unaudited)............. F-38
Statements of Changes in Owners' Deficit for the Years
Ended December 31, 1995, 1996 and 1997 and the Three
Months Ended March 31, 1998 (unaudited)............... F-39
Statements of Cash Flows for the Years Ended December
31, 1995, 1996 and 1997 and the Three Months Ended
March 31, 1997 and 1998 (unaudited)................... F-40
Notes to Financial Statements.......................... F-41
HADDON HOLIDAYS, INC.:
Report of Independent Public Accountants -- Arthur
Andersen LLP.......................................... F-46
Balance Sheets as of December 31, 1997 and March 31,
1998 (unaudited)...................................... F-47
Statements of Operations for the Year Ended December
31, 1997 and the Three Months Ended March 31, 1997 and
1998 (unaudited)...................................... F-48
Statements of Changes in Shareholders' Equity (Deficit)
for the Year Ended December 31, 1997 and the Three
Months Ended March 31, 1998 (unaudited)............... F-49
Statements of Cash Flows for the Year Ended December
31, 1997 and the Three Months Ended March 31, 1997 and
1998 (unaudited)...................................... F-50
Notes to Financial Statements.......................... F-51
</TABLE>

F-1
<PAGE> 64

The financial statements included herein have been adjusted to give effect
to the anticipated increase in authorized shares and a 12.2-for-one stock split
as described in Note 2 to the financial statements. We expect to be in a
position to render the following audit report upon the effectiveness of such
events assuming that from July 7, 1998, to the effective date of such events, no
other events will have occurred that would affect the accompanying financial
statements or notes thereto.

ARTHUR ANDERSEN LLP
Washington, D.C.

July 7, 1998

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Global Vacation Group, Inc.
(Formerly Allied Bus Corp.)

We have audited the accompanying consolidated balance sheets of Global
Vacation Group, Inc. (a New York corporation, formerly Allied Bus Corp.) and
subsidiaries, as of December 31, 1996 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. 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 an 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 Global Vacation Group, Inc.
and subsidiaries, as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

F-2
<PAGE> 65

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses.................. $16,365 $15,759 $ 18,942
Customer deposits...................................... 1,639 1,541 5,089
Loans payable to shareholders.......................... -- 1,717 --
Note payable........................................... -- -- 4,000
Current portion of long-term debt...................... -- -- 2,000
------- ------- --------
Total current liabilities......................... 18,004 19,017 30,031
------- ------- --------
Long-term debt, net of current portion...................... -- -- 13,400
------- ------- --------
Total liabilities................................. 18,004 19,017 43,431
------- ------- --------
Class A Convertible Preferred Stock, $1,000 par value; no
shares authorized, issued or outstanding at December 31,
1996 and 1997; 100,000 shares authorized, 27,865 shares
issued and outstanding as of March 31, 1998 (aggregate
liquidation preference, plus accrued and unpaid dividends,
of $28,015)............................................... -- -- 28,015
Commitments and contingencies (Notes 4, 6 and 8)
Shareholders' equity (deficit) (Note 4):
Preferred stock, $0.01 par value, 6,000,000 shares
authorized, no shares issued and outstanding......... -- -- --
Common stock, $0.01 par value, 60,000,000 shares
authorized, 5,291,262, 5,291,262 and 7,505,126 shares
issued and outstanding, respectively................. 53 53 75
Additional paid-in capital............................. -- -- 3,249
Retained earnings (deficit)............................ 1,620 305 (47,369)
------- ------- --------
Total shareholders' equity (deficit).............. 1,673 358 (44,045)
------- ------- --------
Total liabilities and shareholders' equity
(deficit).................................. $19,677 $19,375 $ 27,401
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 66

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues................................ $18,464 $22,259 $ 24,255 $ 2,425 $ 2,477
Operating expenses.......................... 13,316 16,025 17,852 2,820 3,032
------- ------- --------- ------- ---------
Gross profit (loss).................... 5,148 6,234 6,403 (395) (555)
------- ------- --------- ------- ---------
General and administrative expenses......... 5,702 6,905 7,797 1,129 1,571
Depreciation and amortization............... 131 154 182 41 34
------- ------- --------- ------- ---------
Loss from operations................... (685) (825) (1,576) (1,565) (2,160)
------- ------- --------- ------- ---------
Other income (expense):
Interest income........................ 521 581 556 65 74
Interest expense....................... -- -- -- -- (14)
Other.................................. 67 (4) 41 -- --
------- ------- --------- ------- ---------
Total............................. 588 577 597 65 60
------- ------- --------- ------- ---------
Loss before (provision for) benefit from
income taxes.............................. (97) (248) (979) (1,500) (2,100)
(Provision for) benefit from income taxes... (106) (122) (124) 10 61
------- ------- --------- ------- ---------
Net loss............................... $ (203) $ (370) $ (1,103) $(1,490) $ (2,039)
Dividends on Class A Convertible
Preferred Stock........................... -- -- -- -- 150
------- ------- --------- ------- ---------
Net loss available to common shareholders... $ (203) $ (370) $ (1,103) $(1,490) $ (2,189)
======= ======= ========= ======= =========
Pro forma income data (unaudited):
Historical loss before income taxes as
reported............................. $ (979) $ (2,100)
Pro forma (provision for) benefit from
income taxes......................... (124) 882
--------- ---------
Pro forma net loss..................... $ (1,103) (1,218)
========= =========
Pro forma basic and diluted net loss
per share............................ $ (0.21) $ (0.23)
========= =========
Pro forma basic and diluted weighted
average shares outstanding........... 5,291,262 5,390,919
========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 67

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
REDEEMABLE SHAREHOLDERS' EQUITY (DEFICIT)
CONVERTIBLE ------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------- ---------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994... -- $ -- 5,291,262 $ 53 $-- $ 4,065 $ 4,118
Net loss................ -- -- -- -- -- (203) (203)
Distributions........... -- -- -- -- -- (764) (764)
------ ------- ---------- ---- ------ -------- --------
Balance, December 31, 1995... -- -- 5,291,262 53 -- 3,098 3,151
Net loss................ -- -- -- -- -- (370) (370)
Distributions........... -- -- -- -- -- (1,108) (1,108)
------ ------- ---------- ---- ------ -------- --------
Balance, December 31, 1996... -- -- 5,291,262 53 -- 1,620 1,673
Net loss................ -- -- -- -- -- (1,103) (1,103)
Distributions........... -- -- -- -- -- (212) (212)
------ ------- ---------- ---- ------ -------- --------
Balance, December 31, 1997... -- -- 5,291,262 53 -- 305 358
Redemption of common
stock (unaudited)..... -- -- (1,799,025) (18) -- (14,728) (14,746)
Class A Convertible
Preferred stock
dividend
(unaudited)........... 25,762 25,762 -- -- -- (25,762) (25,762)
Issuance of common and
preferred stock
(unaudited)........... 1,653 1,653 3,951,889 39 3,200 -- 3,239
Issuance of common and
Class A Convertible
Preferred stock in
connection with the
Haddon Holidays, Inc.
acquisition
(unaudited)........... 450 450 61,000 1 49 -- 50
Accrued dividend on
Class A Convertible
Preferred stock
(unaudited)........... -- 150 -- -- -- (150) (150)
Net loss (unaudited).... -- -- -- -- -- (2,039) (2,039)
Distributions(unaudited)... -- -- -- -- -- (4,995) (4,995)
------ ------- ---------- ---- ------ -------- --------
Balance, March 31, 1998
(unaudited)................ 27,865 $28,015 7,505,126 $ 75 $3,249 $(47,369) $(44,045)
====== ======= ========== ==== ====== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 68

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (203) $ (370) $(1,103) $(1,490) $(2,039)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization..................... 131 154 182 41 34
Amortization of deferred financing costs.......... -- -- -- -- 2
Changes in assets and liabilities excluding effect
of acquisition:
Accounts receivable.......................... (2,755) (1,593) (470) 1,044 2,752
Other assets................................. 92 29 (74) (8) 63
Accounts payable and accrued expenses........ 4,758 2,881 (606) (1,507) 277
Customer deposits............................ 104 561 (98) 90 94
------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities............................ 2,127 1,662 (2,169) (1,830) 1,183
------- ------- ------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment.................... (21) (126) (170) (37) (111)
Acquisition of Haddon Holidays, Inc., net of cash
acquired............................................. -- -- -- -- (5,253)
Net sales (purchases) of investments................... 5,065 (1,483) 1,744 (40) (30)
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities............................ 5,044 (1,609) 1,574 (77) (5,394)
------- ------- ------- ------- -------
Cash flows from financing activities:
Net borrowings (repayments) on loans to/from
shareholders......................................... (17) (67) 2,204 (9) (1,732)
Distributions to shareholders.......................... (764) (1,108) (212) (17) (4,995)
Proceeds from borrowings under credit agreement........ -- -- -- -- 15,400
Deferred financing costs............................... -- -- -- -- (997)
Redemption of common stock............................. -- -- -- -- (10,746)
Proceeds from issuance of common stock................. -- -- -- -- 3,239
Proceeds from issuance of Class A Convertible Preferred
stock................................................ -- -- -- -- 1,653
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities............................ (781) (1,175) 1,992 (26) 1,822
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 6,390 (1,122) 1,397 (1,933) (2,389)
Cash and cash equivalents, beginning of period.............. 409 6,799 5,677 5,677 7,074
------- ------- ------- ------- -------
Cash and cash equivalents, end of period.................... $ 6,799 $ 5,677 $ 7,074 $ 3,744 $ 4,685
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for income taxes............................. $ 20 $ 123 $ 48 $ 43 $ 224
======= ======= ======= ======= =======
Supplemental disclosure of noncash investing and financing
activities:
Issuance of common and preferred stock as consideration
in the Haddon Holidays, Inc. acquisition (Note 10)... -- -- -- -- $ 500
Issuance of promissory note in connection with
redemption of common stock (Note 4).................. -- -- -- -- $ 4,000
Class A Convertible Preferred stock dividend (Note
4)................................................... -- -- -- -- $25,762
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 69

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. BUSINESS DESCRIPTION AND ORGANIZATION

Global Vacation Group, Inc. ("GVG" or the "Company," a New York
corporation) is a vacation travel company that provides a variety of services to
support inbound travel to the United States from foreign countries. The Company
generally sells vacation products and services to consumers through wholesalers
and agents outside of the United States.

The Company's services include provision of accommodations, road maps and
sightseeing guides, and, to a lesser extent, theater tickets and restaurant
vouchers to individuals traveling in the United States. The Company also
develops customized group and escorted tour products which include
accommodations, airport transfers, tour bus transportation and guide services.

In March 1998, the Company changed its name from Allied Bus Corp. to Global
Vacation Group, Inc. The Company had previously operated under the trade name
"Allied Tours." The name change was concurrent with a recapitalization of the
Company (the "Recapitalization") (Note 4). On March 30, 1998, the Company
completed the acquisition of Haddon Holidays, Inc. and subsequent to March 31,
1998, the Company has completed three other acquisitions, which have expanded
the Company's travel services and products (Note 10).

The Company's operations are subject to certain risks and uncertainties,
including, among others, current and potential competitors with greater
resources, changing industry dynamics related to new methods of distribution
within the travel industry, seasonal fluctuations in operating results,
dependence on rapidly changing technologies, reliance on key personnel,
international political and economic conditions impacting travel patterns and
dependence on travel suppliers.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Increase in Authorized Shares, Stock Split, and Conversion

In connection with the Company's proposed initial public offering, the
Company will amend and restate its certificate of incorporation to increase the
number of authorized shares of common stock to 60,000,000, par value $0.01 per
share, and to authorize 6,000,000 shares of undesignated preferred stock, par
value $0.01 per share. The Company will effect a 12.2-for-one stock split of the
common stock. All share and per share amounts have been retroactively adjusted
to give effect to these events. These actions are subject to the closing of the
offering contemplated in this prospectus. In addition, effective as of the
closing date of the offering contemplated in this prospectus, all shares of
Class A Convertible Preferred Stock (the "Convertible Preferred") then
outstanding, plus any accrued and unpaid dividends on such shares as of the
closing date of this offering, will be converted into shares of common stock at
the initial public offering price.

Unaudited Interim Financial Statements

The accompanying consolidated balance sheet as of March 31, 1998, and the
accompanying consolidated statements of operations and cash flows for the three
months ended March 31, 1997 and 1998, are unaudited. The unaudited financial
statements include all adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
such financial statements. The data disclosed in the notes to the financial
statements for these periods is unaudited. The results of operations for the
three months ended March 31, 1998, are not necessarily indicative of the results
to be expected for the entire fiscal year.

F-7
<PAGE> 70
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent 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 those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Included in cash and
cash equivalents are money market investments and U.S. treasury bills. As of
December 31, 1996 and 1997 and March 31, 1998, the Company had invested $2.6
million, $653,000 and $2.3 million, respectively, in money market investments.
As of December 31, 1996 and 1997, the Company had invested approximately $3.0
million and $6.0 million, respectively, in U.S. treasury bills that are
considered cash equivalents. No U.S. treasury bills were included in cash and
cash equivalents as of March 31, 1998.

Short-Term Investments

Short-term investments consist of bank certificates of deposit and U.S.
treasury bills with original maturities in excess of three months, mutual fund
shares and U.S. treasury bills. The bank certificates of deposit are pledged as
collateral for letters of credit (Note 8).

The Company classifies its certificates of deposit and U.S. treasury bills
as held-to-maturity as the Company has the intent and ability to hold these
securities to maturity. These securities are carried at cost which approximates
market value at December 31, 1996 and 1997 and at March 31, 1998. The Company
classifies its mutual fund shares as available-for-sale. These are securities
with readily determinable fair values that the Company intends to hold for an
indefinite period of time. These securities are carried at cost which
approximates their market value at December 31, 1996 and 1997 and at March 31,
1998.

Revenue Recognition

Net revenues consist primarily of markups on travel packages. The Company
recognizes net revenue when earned on the date of travel. The Company estimates
and records accruals for cancellations and changes to reservations booked. For
the years ended December 31, 1995, 1996 and 1997, net revenues are derived from
sale of travel products and services with a value of $95.1 million, $116.7
million and $125.9 million, respectively, net of $76.6 million, $94.4 million
and $101.6 million, respectively, in direct costs to suppliers. For the three
months ended March 31, 1997 and 1998, net revenues are derived from sale of
travel products and services with a value of $17.2 million and $17.2 million,
respectively, net of $14.8 million and $14.7 million in direct costs to
suppliers.

Operating Expenses

Operating expenses include commissions, salaries, benefits and payroll tax
expenses, communications, facilities and other costs associated with the selling
and processing of tour packages.

F-8
<PAGE> 71
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Depreciation and Amortization

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line method for leasehold improvements. The Company uses accelerated
and straight-line methods for recording depreciation on furniture and fixtures
and equipment with lives that range from 5 to 10 years. Leasehold improvements
are depreciated over the shorter of the lease term or the estimated useful life
of the asset.

Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)

<S> <C> <C> <C>
Furniture and fixtures................................... $ 270 $ 284 $ 344
Equipment................................................ 811 961 1,072
Leasehold improvements................................... 119 125 155
------ ------ -------
1,200 1,370 1,571
Accumulated depreciation and amortization................ (802) (984) (1,015)
------ ------ -------
Property and equipment, net.................... $ 398 $ 386 $ 556
====== ====== =======
</TABLE>

Intangible Assets

Intangible assets consist of goodwill from acquisitions (Note 10) and
deferred financing costs incurred in connection with the Company's credit
agreement (Note 6). Goodwill is amortized over 35 years. Deferred financing
costs are charged to interest expense over the life of the debt using the
effective interest method. Intangible assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
(UNAUDITED)

<S> <C>
Goodwill.................................................... $ 9,463
Deferred financing costs.................................... 997
Accumulated amortization.................................... (5)
-------
$10,455
=======
</TABLE>

Long-Lived Assets

The Company reviews its long-lived assets, including property and
equipment, identifiable intangibles, and goodwill whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows will be less
than the carrying amount of the assets.

Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," and
SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments," require the disclosure of the fair value of financial
instruments, whether or not recognized in the balance sheet, for which

F-9
<PAGE> 72
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
it is practicable to estimate that value. The carrying value of the Company's
financial instruments approximates fair value due to the relatively short
maturities of these instruments.

In the normal course of business, the Company is a party to letters of
credit which are not reflected in the accompanying balance sheets (Notes 6 and
8). Such financial instruments are valued based on the amount of exposure under
the instrument and the likelihood of performance being required. Based on the
Company's past experience, management does not expect any material losses to
result from these off-balance-sheet instruments and, therefore, is of the
opinion that the fair value of these instruments is zero.

Concentrations

The Company maintains bank accounts with federally insured financial
institutions. Periodically, balances may exceed insured limits.

As of December 31, 1997, no individual customer represented more than 10
percent of net revenues or accounts receivable. The Company's revenues and
accounts receivable are principally with customers outside the United States. As
of December 31, 1997, accounts receivable from customers located in Europe and
South America represented approximately 73 percent and 13 percent of the total
accounts receivable, respectively.

Income Taxes

Until March 1998, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions, the Company
did not pay corporate income taxes on its taxable income. Instead, the
shareholders were liable for individual income taxes on their respective shares
of the Company's taxable income. Accordingly, there is no provision for Federal
income taxes in the accompanying financial statements. The Company was taxable
in certain states and other jurisdictions that did not recognize S Corporation
status. In March 1998, the Company terminated its S Corporation election and,
accordingly, will be subject to Federal and state income taxes.

The Company accounts for state and local income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax
assets and liabilities are computed based on the difference between the
financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. SFAS No. 109 requires that a net deferred tax asset
be reduced by a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some portion or all of the net
deferred tax asset will not be realized.

Unaudited Pro Forma Information

The accompanying unaudited pro forma income data for the year ended
December 31, 1997 and the three months ended March 31, 1998, includes a
provision for Federal and state income taxes as if the Company had been a C
Corporation for the periods presented. The effective income tax rate reflects
the combined Federal and state income taxes at an assumed rate of 43 percent.
The difference between the pro forma income tax rate and the Federal statutory
rate of 35 percent relates primarily to the impact of state and local income
taxes.

Pro Forma Basic and Diluted Net Loss per Common Share

The pro forma net loss per common share is computed using the pro forma
weighted average number of common shares outstanding during each period. In
March 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128, "Earnings Per Share." The Company has implemented SFAS No. 128 for 1997.
SFAS No. 128 requires dual presentation of basic and diluted earnings per share.
Basic income or loss

F-10
<PAGE> 73
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
per share includes no dilution and is computed by dividing net income or loss
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted income or loss per share includes the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. There were no such
securities or other contracts to issue common stock issued or outstanding in the
years ended December 31, 1995, 1996 and 1997.

The pro forma basic and diluted weighted average common shares outstanding
for the three months ended March 31, 1998, gives effect to the assumed
conversion of the outstanding Convertible Preferred stock into common stock,
upon the closing of the initial public offering contemplated in this prospectus,
at an assumed offering price of $14.00 per share. Options to purchase 92,355
shares of common stock that were outstanding at March 31, 1998 were not included
in the computation of diluted loss per share for the three months ended March
31, 1998 as their effect would be anti-dilutive. As a result, the pro forma
basic and diluted loss per share amounts are identical for the three months
ended March 31, 1998.

New Accounting Standards

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The adoption of SFAS No. 130 will
have no impact on the Company's results of operations, financial position, or
cash flows.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements beginning after December 15,
1997. Financial statement disclosures for prior periods are required to be
restated. The adoption of SFAS No. 131 will have no impact on the Company's
results of operations, financial position, or cash flow.

3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- ------------
(UNAUDITED)

<S> <C> <C> <C>
Accounts payable....................................... $ 8,260 $ 9,879 $ 8,904
Bank overdraft......................................... 7,375 4,745 8,426
Accrued expenses....................................... 730 1,135 1,612
------- ------- -------
$16,365 $15,759 $18,942
======= ======= =======
</TABLE>

F-11
<PAGE> 74
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. SHAREHOLDERS' EQUITY (DEFICIT)

Recapitalization

In March 1998, the Company was recapitalized pursuant to an agreement
between the Company, its existing shareholders, Allied Tours Holding Corp.
("Allied Holding"), the shareholders of Allied Holding and a new investor (the
"Investor"). Prior to the Recapitalization, the Company had 100 shares of issued
and outstanding common stock all of which were owned by Allied Holding. Pursuant
to the Recapitalization, the Company redeemed an aggregate of 34 shares of
common stock for $14.7 million from Allied Holding and the Investor purchased 57
shares from Allied Holding for $24.7 million. The redemption price was paid in
cash of $10.7 million and $4.0 million in a 120-day promissory note bearing
interest at 8 percent. The redemption was financed, in part, with $13.0 million
in borrowings under the Company's credit agreement (Note 6).

Following the redemption, the Company amended and restated its certificate
of incorporation to authorize two classes of capital stock: common stock with a
par value of $.01 per share and preferred stock with a par value of $1,000 per
share. At that time, the 66 shares outstanding were converted into 3,492,237
shares of common stock and 25,762 shares of Convertible Preferred. The
conversion into the Convertible Preferred was accounted for as a noncash
dividend in March 1998 and the conversion into common stock was accounted for as
a stock split. All share and per share amounts have been restated to reflect
this common stock split.

Preferred Stock

Holders of Convertible Preferred are entitled to dividends to be paid in
additional shares of Convertible Preferred at a rate of 15 percent per annum.
The Convertible Preferred carries a liquidation preference equal to the
Liquidation Value ($1,000 per share) plus any accrued but unpaid dividends. In
the event that the Company effects a qualified initial public offering ("IPO"),
the holders of the Convertible Preferred shall have the right to convert into
common stock at a rate equal to the Liquidation Value plus any accrued but
unpaid dividends divided by the per share IPO price.

The Company has the option at any time to redeem any or all of the
Convertible Preferred. The Company is required to redeem all of the Convertible
Preferred on December 31, 2003. Holders of the Convertible Preferred may also
require the Company to redeem all or a portion of the Convertible Preferred
prior to the scheduled redemption date in the event of a qualified IPO, a change
in ownership (as defined) or a fundamental change (as defined) in the business
of the Company. Upon any redemption, the redemption price shall be the
Liquidation Value plus any accrued but unpaid dividends.

Equity Purchase Agreement

In March 1998, the Company entered into a purchase agreement with the
Investor and certain other parties in which the Company agreed to sell 22,751
shares of Convertible Preferred and 3,083,977 shares of common stock to the
Investor and an aggregate of 1,228 shares of Convertible Preferred and an
aggregate of 166,412 shares of common stock to such other parties at a price of
$1,000 per Convertible Preferred share and $0.82 per common share. These shares
were issued between March and May 1998 to fund, in part, the cash component of
the Company's purchase price for certain business acquisitions made during that
time (see Note 8). The agreement places restrictions on, among other things,
dividends, the redemption and issuance of debt and equity securities,
acquisitions, sales of assets, and related party transactions. Such restrictions
will terminate upon the occurrence of certain events including the closing of a
qualified IPO (as defined).

F-12
<PAGE> 75
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. STOCK OPTION PLAN

The Company adopted the 1998 Stock Option Plan (the "Stock Option Plan") to
assist the Company in attracting and retaining qualified employees, directors,
consultants and advisors. The Stock Option Plan provides that at any time a
number of shares equal to 12 percent of the number of then outstanding shares of
common stock will be reserved for issuance pursuant to grants of stock options.
Unless sooner terminated by the Company's Board of Directors, the Stock Option
Plan will terminate on March 29, 2008. Options granted under the Stock Option
Plan may be either incentive stock options ("ISOs"), or nonstatutory stock
options ("NSOs"). No option granted under the Stock Option Plan is exercisable
after the tenth anniversary of the option's date of grant.

In March 1998, the Company granted stock options to acquire an aggregate of
84,716 shares of common stock at an exercise price of $0.82 per share. Upon the
closing of an IPO, the Company has agreed to grant options to purchase a number
of shares equal in the aggregate to 7.5 percent of the number of shares of
Common Stock then outstanding to certain members of management (Note 8), as well
as options to purchase a number of shares of Common Stock with an aggregate
value equal to $2.5 million based upon the per share price of the IPO to certain
other employees of the Company.

6. CREDIT AGREEMENT

In March 1998, the Company entered into a credit agreement with a bank that
provides for a $10.0 million revolving credit facility and provides for term
loans of up to $55.0 million to be used for acquisitions. The revolving credit
facility matures on September 30, 2004. The credit agreement also provides for
the issuance of letters of credit having an outstanding face amount up to $5.0
million. The amount available under the revolving credit facility is reduced by
the amount of any outstanding letters of credit.

The amounts available for borrowing under the term loans may be limited in
certain circumstances based upon the level of equity financing and by the
aggregate acquisition consideration to be paid in connection with the permitted
acquisitions (as defined in the agreement). The aggregate outstanding principal
balance of the term loans is payable in 26 consecutive quarterly installments
commencing on June 30, 1998, as follows (in thousands).

<TABLE>
<S> <C>
June 30, 1998 through March 31, 1999........................ $ 500
June 30, 1999 through March 31, 2000........................ 750
June 30, 2000 through March 31, 2001........................ 1,250
June 30, 2001 through March 31, 2002........................ 1,750
June 30, 2002 through March 31, 2003........................ 2,000
June 30, 2003 through March 31, 2004........................ 2,300
June 30, 2004............................................... 5,000
September 30, 2004......................Any remaining unpaid principal
</TABLE>

If the aggregate amount of the term loans exceeds $44.2 million, each of
the scheduled payments set forth above will be increased in proportion to the
additional borrowing over $44.2 million and the remaining scheduled payments.
The Company has the right to prepay any of the term loans without penalty. Term
loans once repaid may not be re-borrowed.

The Company may be required to prepay unpaid principal amounts on the term
loans and the revolving credit facility upon the occurrence of certain events
including, among others, the disposition of a business or portion thereof, the
sale of equity securities, or a refinancing of the Company's debt. In addition,
the level of

F-13
<PAGE> 76
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. CREDIT AGREEMENT -- (CONTINUED)
the Company's leverage ratio (as defined) for a given year may result in the
required prepayment of certain amounts as specified in the agreement.

Borrowings under the revolving credit facility and term loans may be
designated by the Company as alternate base rate advances ("ABR Advances") or
eurodollar advances ("Eurodollar Advances"). ABR Advances generally bear
interest at a base rate plus an applicable margin. The base rate is equal to the
higher of the prime rate or the federal funds rate plus 0.5 percent. The
applicable margin generally ranges from 0.25 percent to 1 percent based upon the
Company's leverage ratio (as defined). Interest on ABR Advances is generally
payable quarterly.

Eurodollar Advances generally bear interest at the eurodollar rate plus an
applicable margin. The eurodollar rate is the rate of interest obtained by
dividing (i) the rate quoted by the bank to leading banks in the London
interbank eurodollar market as the rate at which the bank is offering dollar
deposits in an amount approximately equal to the advance and having a period to
maturity approximately equal to the interest period applicable to the eurodollar
advance by (ii) a number equal to one minus the aggregate of the then stated
maximum rates during such interest period of all reserve requirements
established in respect of eurocurrency funding. The interest period is the
period commencing on the borrowing date and ending one, two, three or six months
thereafter as selected by the Company. The applicable margin generally ranges
from 1.25 percent to 2 percent based upon the Company's leverage ratio (as
defined). Interest on Eurodollar Advances is due at the end of the interest
period or at the end of each three month interval during the interest period.
The number of Eurodollar Advances that the Company is permitted to have
outstanding may be limited in certain circumstances.

The Company's obligations under the credit agreement are secured by
substantially all of the Company's assets and the credit agreement includes
certain restrictive covenants including, among others, limitations on
acquisitions, indebtedness, sales or other asset dispositions, investments,
dividends or distributions, and related party transactions. The credit agreement
also requires that the Company maintain certain operating and financial ratios
as defined, including a maximum leverage ratio, a minimum interest coverage
ratio, a minimum fixed charge coverage ratio, minimum net worth and annual
limitations on capital expenditures.

7. INCOME TAXES

The provision for income taxes represents amounts owed in states and other
jurisdictions that did not recognize S Corporation status. For the years ended
December 31, 1995, 1996 and 1997 and the three months ended March 31, 1998, the
provision for income taxes reflects effective rates that differ from the
statutory Federal rate as a result of the effect of income taxed directly to
shareholders and the effect of state and local income taxes. The components of
the (provision for) benefit from income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- ---------------------
1995 1996 1997 1997 1998
----- ----- ----- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current............................ $(111) $(124) $(136) $ 8 $64
Deferred........................... 5 2 12 2 (3)
----- ----- ----- --- ---
$(106) $(122) $(124) 10 61
===== ===== ===== === ===
</TABLE>

F-14
<PAGE> 77
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES -- (CONTINUED)
The components of the Company's net deferred tax asset (liability) are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------ MARCH 31,
1996 1997 1998
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Allowance for doubtful accounts............................ $12 $24 $20
Accrued expenses........................................... 4 6 5
Other...................................................... (7) (9) (7)
--- --- ---
$ 9 $21 $18
=== === ===
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

Senior Management Agreements

In March 1998, the Company entered into employment agreements with three
new executives. The agreements prescribe salary and bonus compensation and
provide for severance payments in certain circumstances. The agreements extend
to April 2001 with one year renewals thereafter. The agreements also contain
various non-compete and non-solicitation provisions.

Under the terms of the agreements, the Company sold an aggregate of 701,500
shares of common stock at a price of $0.82 per share and an aggregate of 425
shares of Convertible Preferred at a price of $1,000 per share to the three
executives in March 1998. All of the shares of Convertible Preferred are
"Non-Vesting Preferred Stock." Of the shares of common stock sold, 643,879
shares are "Vesting Stock" and 57,621 shares are "Non-Vesting Common Stock."

The Vesting Stock vests based upon both the passage of time and the
performance of the Company. Of the total Vesting Stock, 67 percent, or 429,245
shares, vest 20 percent immediately and the remaining 80 percent generally vests
ratably at 20 percent per year. The remaining 33 percent or 214,634 shares of
the Vesting Stock will become fully vested on April 1, 2005. Such vesting may be
accelerated based upon the performance of the Company (as defined). The
Non-Vesting Common Stock and the Non-Vesting Preferred Stock vested immediately
upon purchase.

In the event that an executive ceases to be employed by the Company, the
executive stock will be subject to repurchase by the Company. In the event of
termination, (i) the purchase price for each unvested share of common stock will
be the executive's original cost for such share, (ii) the purchase price for
each vested share of common stock will be the fair market value for such share,
provided, however that if the executive's employment is terminated for cause (as
defined), the purchase price will be the executive's original cost for such
share and (iii) the purchase price for each share of Convertible Preferred will
be the Liquidation Value of such share (Note 4) plus all accrued and unpaid
dividends thereon. If the Company does not elect to purchase all of the
executive stock pursuant to the repurchase option, the Investor shall be
entitled to exercise the repurchase option for the shares of any class of
executive stock the Company has not elected to purchase.

The agreements also provide that effective upon the closing of an IPO, the
Company shall grant the executives options to purchase an aggregate of 7.5
percent of the Company's common stock outstanding at the time of the IPO at an
exercise price equal to the IPO price. The options will vest in four equal
installments on each of the first four anniversary dates of the grants.

F-15
<PAGE> 78
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Consulting and Employment Agreements

In March 1998, the Company entered into a consulting agreement with the
former majority stockholder of the Company. The terms of the agreement provide
for a fixed level of compensation and the term of the agreement extends through
December 1999 and can be automatically extended for one month periods
thereafter. The agreement also includes a covenant not to compete for the longer
of four years or one year beyond the engagement of this individual as a
consultant.

In March 1998, the Company entered into employment agreements with two
individuals who are stockholders of the Company. The Company has also entered
into an employment agreement with the spouse of another stockholder. These
agreements generally extend for a term of four years with one year renewals. The
agreements prescribe salary and bonus compensation based upon the performance of
the Company and, in certain circumstances, provide for severance payments. The
agreements also contain various non-compete and non-solicitation provisions. The
Company has also agreed that, effective upon the closing of a qualified IPO (as
defined), the Company will grant options to two of the executives to purchase up
to an aggregate of $2.0 million worth of common stock at an exercise price per
share equal to the IPO price. Such options will generally vest in four equal
annual installments on the first four anniversaries of the date of grant.

Professional Services Agreement

In March 1998, the Company entered into a consulting agreement with an
affiliate of the Investor who will advise the Company on, among other things,
corporate strategy, acquisitions, and debt and equity financing. Upon
consummation of any debt or equity financing, the Company is required to pay a
fee equal to 1 percent of the amount raised by the Company in connection with
such financing. The term of the agreement extends to the earlier of the date
that the Investor owns less than 10 percent of the Company or the effective date
of a qualified IPO (as defined).

Leases

The Company leases its facilities, automobiles and certain equipment under
noncancellable operating leases. The following is a schedule by years of future
minimum rental payments, required under these leases expiring through 2002, as
of December 31, 1997 (in thousands):

<TABLE>
<S> <C>
1998........................... $ 777
1999........................... 661
2000........................... 491
2001........................... 402
2002........................... 20
------
Total..................... $2,351
======
</TABLE>

Total facilities rent expense for the years ended December 31, 1995, 1996
and 1997 and for the three months ended March 31, 1998 was approximately
$417,000, $423,000, $454,000 and $125,000, respectively.

Letters of Credit

As of December 31, 1997 and March 31, 1998, the Company had issued letters
of credit totaling $835,000 and $2.0 million, respectively, in favor of certain
vendors. Certificates of deposit of similar amount and maturity have been
pledged as collateral and are included in the accompanying balance sheet as
short-term investments.

F-16
<PAGE> 79
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Litigation

The Company is periodically a party to disputes arising from normal
business activities. In the opinion of management, resolution of these matters
will not have a material adverse effect upon the financial position or future
operating results of the Company, and adequate provision for any potential
losses has been made in the accompanying financial statements.

9. RELATED PARTY TRANSACTIONS

Loans receivable from/loans payable to shareholders are related to
borrowings from and advances to shareholders throughout the year. The loans
payable to shareholders bear no interest and were repaid in March 1998.

Shareholder/officer salary and bonus compensation totaled $3.8 million,
$4.8 million, $5.8 million, $790,000 and $170,000 for the years ended December
31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998,
respectively.

10. SUBSEQUENT ACQUISITIONS

Since March 1998, the Company has acquired Haddon Holidays, Inc.
("Haddon"), Classic Custom Vacations ("Classic") and Globetrotters, Inc.
("Globetrotters") and substantially all of the assets of MTI Vacations, Inc.
("MTI"). Each of these acquisitions was acquired for cash. The Company financed
these acquisitions with proceeds from the issuance of additional shares of
Convertible Preferred and common stock and from borrowings under the credit
agreement. The acquisition of each of these business has been accounted for as a
purchase for financial reporting purposes. The Company allocated the excess of
the purchase price over the fair value of net tangible assets acquired primarily
to goodwill. The Company will amortize amounts allocated to goodwill over 35
years for financial reporting purposes.

Haddon

On March 30, 1998, the Company purchased all of the outstanding capital
stock of Haddon, a packaged vacation provider that historically has provided
air, hotel and ground transportation packages for travelers to Hawaii. The
Company paid a purchase price of $7.7 million. In addition, the Company incurred
direct acquisition costs of approximately $260,000. The Company financed the
cash purchase price and the direct acquisition costs with $4.9 million in
proceeds from the issuance of common stock and Convertible Preferred, and $2.4
million in borrowings under the credit agreement. In connection with the
acquisition of Haddon, the Company sold 61,000 shares of common stock, valued at
$0.82 per share, and 450 shares of Convertible Preferred, valued at $1,000 per
share, to the former shareholders of Haddon.

This transaction has been accounted for as a purchase. The purchase price
has been allocated on a preliminary basis as follows (in thousands):

<TABLE>
<S> <C>
Cash and investments........................................ $ 3,475
Accounts receivable......................................... 428
Fixed assets and other assets............................... 703
Goodwill.................................................... 9,463
Liabilities assumed and direct acquisition costs............ (6,359)
-------
Total............................................. $ 7,710
=======
</TABLE>

F-17
<PAGE> 80
GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SUBSEQUENT ACQUISITIONS -- (CONTINUED)
Classic

In April 1998, the Company purchased all of the outstanding capital stock
of Classic Vacations, a packaged vacation provider. The Company paid a purchase
price of $17.1 million, all of which was paid in cash. In addition, the Company
incurred direct acquisition costs of approximately $1.4 million. The Company
financed the cash purchase price and the direct acquisition costs with proceeds
from the issuance of $6.7 million of Convertible Preferred and $13.1 million in
borrowings under the credit agreement. The proceeds from this sale and borrowing
also provided approximately $1.3 million in working capital.

MTI

In May 1998, the Company acquired substantially all of the assets of MTI, a
packaged vacation provider that (i) provides vacation packages for travelers to
Hawaii (ii) provides packages for Amtrak-sponsored vacations (iii) operates the
reservation system associated with packaged vacations sponsored by Hyatt and
(iv) provides credit card reward fulfillment programs. The Company paid a
purchase price of $26.4 million. In addition, the Company incurred direct
acquisition costs of approximately $820,000. The Company financed the cash
purchase price and direct acquisition costs with proceeds from the issuance of
$15.5 million of Convertible Preferred and $11.1 million in borrowings under the
credit agreement. The proceeds from this sale and borrowing also provided
approximately $1.8 million in working capital. In connection with the
acquisition of substantially all of the assets of MTI, the Company sold 292,800
shares of common stock, valued at $0.82 per share, and 2,160 shares of
Convertible Preferred, valued at $1,000 per share, to an affiliate of the
seller.

The Company entered into an agreement with a former affiliate of MTI,
whereby the affiliate will provide the Company with management information
system ("MIS") support relating to MTI's computer reservation system and related
functions.

Globetrotters

In May 1998, the Company purchased all of the outstanding capital stock of
Globetrotters, a packaged vacation provider that historically has provided
vacation packages, primarily for the Florida, Mexico and Caribbean markets. The
Company paid a purchase price of $5.4 million, of which $3.4 million was paid in
cash, with the remaining $2.0 million paid through the forgiveness of
related-party debt. In addition, the Company incurred direct acquisition costs
of approximately $415,000. The Company financed the cash purchase price and the
direct acquisition costs with proceeds from the issuance of $551,000 of
Convertible Preferred, $1.9 million in borrowings under the credit agreement and
$1.3 million from working capital.

F-18
<PAGE> 81

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Classic Custom Vacations:

We have audited the accompanying consolidated balance sheet of Classic
Custom Vacations (a California corporation) as of December 31, 1997 and the
related consolidated statements of operations, changes in shareholders' equity
(deficit) and cash flows for the year then ended. We have also audited the
accompanying consolidated statements of operations, changes in shareholders'
equity (deficit) and cash flows for the year 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 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 financial position of Classic Custom Vacations as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended and for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP
San Jose, California

June 26, 1998

F-19
<PAGE> 82

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Classic Custom Vacations:

We have audited the accompanying balance sheet of Classic Custom Vacations
as of December 31, 1996 and the related statements of operations, changes in
shareholders' equity (deficit) and cash flows for the year then ended. 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 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 accompanying financial statements present fairly, in
all material respects, the financial position of Classic Custom Vacations at
December 31, 1996 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
San Jose, California
May 21, 1997

F-20
<PAGE> 83

CLASSIC CUSTOM VACATIONS

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 3,687 $ 9,245 $16,203
Accounts receivable.................................... 2,262 1,747 2,126
Short-term and current maturities of investments....... 2,325 3,392 3,037
Prepaid expenses and other current assets.............. 2,135 3,780 3,997
------- ------- -------
Total current assets ............................. 10,409 18,164 25,363
Investments, net of current maturities...................... 19,711 25,600 24,423
Notes receivable from shareholders.......................... 735 765 781
Property and equipment, net................................. 3,156 3,173 3,101
Other assets, net........................................... 138 118 113
------- ------- -------
Total assets...................................... $34,149 $47,820 $53,781
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft ........................................ $ 1,762 $ 2,125 $ 2,743
Accounts payable....................................... 10,578 11,209 11,619
Accrued liabilities.................................... 2,087 2,779 1,949
Deferred revenues...................................... 14,121 19,501 25,123
Current portion of long-term debt...................... 100 -- --
Deferred income taxes.................................. 25 25 25
------- ------- -------
Total current liabilities......................... 28,673 35,639 41,459
------- ------- -------
Long-term debt, net of current portion...................... 5,906 11,676 11,596
------- ------- -------
Commitments and contingencies (Note 10)
Shareholders' equity (deficit):
Common stock, no par value; authorized shares: 100,000,
100,004 and 100,004, respectively; shares issued and
outstanding: 86,028, 86,032 and 86,032,
respectively......................................... 1,955 1,955 1,955
Notes receivable from shareholders..................... (250) (250) (250)
Accumulated deficit.................................... (2,135) (1,200) (979)
------- ------- -------
Total shareholders' (deficit) equity.............. (430) 505 726
------- ------- -------
Total liabilities and shareholders' (deficit)
equity.......................................... $34,149 $47,820 $53,781
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 84

CLASSIC CUSTOM VACATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues............................. $31,521 $38,394 $42,870 $ 9,305 $10,681
Operating expenses....................... 26,353 34,677 38,154 8,470 10,030
------- ------- ------- ------- -------
Gross profit........................ 5,168 3,717 4,716 835 651
------- ------- ------- ------- -------
General and administrative expenses...... 4,273 3,392 4,449 848 929
Depreciation and amortization............ 393 760 1,020 225 271
Settlement agreement legal expense....... -- -- 1,184 231 20
------- ------- ------- ------- -------
Income (loss) from operations....... 502 (435) (1,937) (469) (569)
------- ------- ------- ------- -------
Other income (expense):
Interest income..................... 1,435 2,557 3,225 618 898
Interest expense.................... (136) (333) (440) (66) (99)
Other............................... 207 148 137 165 (4)
------- ------- ------- ------- -------
Total.......................... 1,506 2,372 2,922 717 795
------- ------- ------- ------- -------
Income before provision for income
taxes.................................. 2,008 1,937 985 248 226
Provision for income taxes............... (272) (18) (50) (5) (5)
------- ------- ------- ------- -------
Net income.......................... $ 1,736 $ 1,919 $ 935 $ 243 $ 221
======= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 85

CLASSIC CUSTOM VACATIONS

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK NOTES SHAREHOLDERS'
--------------- RECEIVABLE FROM ACCUMULATED EQUITY
SHARES AMOUNT SHAREHOLDERS DEFICIT (DEFICIT)
------ ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995............... 57,352 $1,705 $ -- $(5,790) $(4,085)
Net income........................ -- -- -- 1,736 1,736
------ ------ ----- ------- -------
Balance, December 31, 1995............. 57,352 1,705 -- (4,054) (2,349)
Issuance of shares................ 28,676 250 (250) -- --
Net income........................ -- -- -- 1,919 1,919
------ ------ ----- ------- -------
Balance, December 31, 1996............. 86,028 1,955 (250) (2,135) (430)
Issuance of shares................ 4 -- -- -- --
Net income........................ -- -- -- 935 935
------ ------ ----- ------- -------
Balance, December 31, 1997............. 86,032 1,955 (250) (1,200) 505
Net income (unaudited)............ -- -- -- 221 221
------ ------ ----- ------- -------
Balance, March 31, 1998 (unaudited).... 86,032 $1,955 $(250) $ (979) $ 726
====== ====== ===== ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 86

CLASSIC CUSTOM VACATIONS

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 1,736 $ 1,919 $ 935 $ 243 $ 221
Adjustments to reconcile net income to net
cash provided by operating activities:
Non-cash compensation expense for
forgiveness of notes receivable...... 556 -- -- -- --
Depreciation and amortization.......... 393 760 1,020 225 271
Unrealized loss on investments......... -- 150 -- -- --
Changes in assets and liabilities:
Accounts receivable.................. (318) (1,095) 485 (489) (395)
Prepaid expenses and other assets.... (1,571) 1,552 (1,647) (4,126) (215)
Accounts payable..................... 2,447 2,203 631 33 410
Accrued liabilities.................. 1,737 (667) 693 (229) (831)
Deferred revenues.................... 4,029 1,128 5,380 8,370 5,622
-------- -------- -------- -------- --------
Net cash provided by operating
activities...................... 9,009 5,950 7,497 4,027 5,083
-------- -------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment......... (1,189) (2,052) (1,020) (229) (199)
Purchases of investments.................... (6,393) (11,051) (15,907) (2,990) (320)
Proceeds from maturities and scheduled
payments of investments................... 420 2,024 7,335 1,325 1,694
Issuance of notes receivable from
shareholders.............................. -- (588) -- -- --
Redemption of notes receivable from
shareholders.............................. -- 15 -- --
Other assets................................ (63) (28) 4 8 4
-------- -------- -------- -------- --------
Net cash (used in) provided by
investing activities............ (7,225) (11,680) (9,588) (1,886) 1,179
-------- -------- -------- -------- --------
Cash flows from financing activities:
Bank overdraft.............................. 1,257 30 363 291 618
Repayment of long term debt................. -- -- -- (25) --
Borrowings on long-term debt, net........... 781 1,986 6,208 -- 31
-------- -------- -------- -------- --------
Net cash provided by financing
activities...................... 2,038 2,016 6,571 266 649
-------- -------- -------- -------- --------
Effects of exchange rate change on cash.......... -- (196) 1,078 386 47
-------- -------- -------- -------- --------
Net increase (decrease) in cash and
equivalents.................................... 3,822 (3,910) 5,558 2,793 6,958
Cash and cash equivalents, beginning of period... 3,775 7,597 3,687 3,687 9,245
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period......... $ 7,597 $ 3,687 $ 9,245 $ 6,480 $ 16,203
======== ======== ======== ======== ========
Supplemental disclosure of cash flow information:
Interest............................... $ 136 $ 221 $ 469 $ 2 $ 99
-------- -------- -------- -------- --------
Income taxes........................... $ 13 $ 247 $ 50 $ 6 $ --
======== ======== ======== ======== ========
Supplemental schedule of noncash financing
activity:
Issuance of common stock for notes
receivable from shareholders......... $ -- $ 250 $ -- $ -- $ --
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 87

CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND MARCH 31, 1998 IS UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Classic Custom Vacations (the "Company") was incorporated in California in
February 1984. The Company is in the travel business offering customized
vacations to Hawaii, North America and certain European destinations. The
Company sells exclusively through travel agents.

Unaudited Interim Financial Data

The unaudited interim financial statements as of March 31, 1998 and for the
three months ended March 31, 1997 and 1998 have been prepared on the same basis
as the audited financial statements and, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance with
generally accepted accounting principles. The data disclosed in the notes to the
consolidated financial statements for these periods is unaudited. The Company's
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for any future period.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses as of the dates and for the periods presented. Actual results could
differ from those estimates.

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and equivalents,
accounts receivable and investments. Risks associated with cash are mitigated by
banking with creditworthy institutions. Risks associated with accounts
receivable are mitigated by the Company's ability to offset the majority of its
receivables which are due from the Company's vendors against amounts due to
those vendors. See Note 2 for risks associated with investments.

Investments

The Company classifies its investments as "held-to-maturity," and they are
measured at amortized cost based on the Company's intent and ability to hold the
investments to maturity. Any gains and losses on sales of investments are
computed on a specific identification basis. Investments are classified as
current and long-term based on contractual maturities.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of payments to
airlines for future air travel, which are recognized as expenses on the
departure.

F-25
<PAGE> 88
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to five years or the lease term, if shorter.

Long-Lived Assets

The Company evaluates the recoverability of long-term assets on an ongoing
basis based on undiscounted future cash flows.

Revenue Recognition

The Company recognizes revenue from the sale of travel components (hotel,
air, car) upon departure. Prepayments from customers are classified as deferred
revenues and are recognized as revenue upon the customer's departure. For the
years ended December 31, 1995, 1996 and 1997, and for the three months ended
March 31, 1997 and 1998, net revenues are derived from the sale of travel
products and services with a value of approximately $123.1 million, $153.8
million, $169.3 million, $35.9 million and $42.8 million, net of approximately
$91.6 million, $115.4 million, $126.4 million, $26.7 million and $32.1 million
in direct costs from suppliers, respectively.

Operating Expenses

Operating expenses include travel agent commissions and credit card fees,
together with salaries and expenses for reservations, sales, marketing, and
operational support personnel.

Settlement Agreement Legal Expense

Settlement agreement legal expense comprises the costs incurred by the
Company as a result of the matters discussed in Note 14 relating to the
settlement agreement.

Income Taxes

Deferred income tax liabilities are recognized for future taxable amounts
and deferred income tax assets are recognized for future deductions, net of a
valuation allowance, to reduce deferred tax assets to amounts that are more
likely than not to be realized. Effective January 1, 1996, the Company elected
to be taxed as a Subchapter S Corporation for both Federal and California income
tax purposes and, accordingly, the income of the Company is included in the
individual tax returns of the shareholders. Subchapter S Corporation status is
subject to certain perpetual qualifications. In the event that the Company no
longer complies with such qualifications, the Company would be subject to
corporate level taxation. See Note 15.

Foreign Currency

Gains and losses resulting from foreign currency transactions are included
in the accompanying consolidated statements of operations.

Derivative Financial Instruments

In the ordinary course of business, the Company uses derivative financial
instruments to offset exposures to foreign exchange and interest rate
fluctuation risks. It is the Company's policy not to engage in the use of
derivative financial instruments for speculative purposes. All foreign
currency-hedging transactions mature within one year and are used to hedge Swiss
Franc (CHF) and Danish Kroner (DKK) exposures.

F-26
<PAGE> 89
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Gains and losses on future and forward contracts, and sold options are
generally offset with gains and losses on the assets, liabilities and
transactions being hedged and, therefore, do not subject the Company to
additional risks from exchange and interest rate movements. The gain and losses
are included in other income on the accompanying consolidated statements of
operations. The discount or premium on forward contracts are included in other
income on the accompanying consolidated statements of operations and recognized
over the life of the forward contract.

Sold foreign exchange option contracts are carried at fair value and, as
such, are adjusted each balance sheet date for changes in exchange rates. Gains
and losses associated with these financial instruments are recorded in income.

Interest Rate Derivatives

The Company enters into interest rate futures in order to hedge the
adjustable interest rate on the Company's foreign bank borrowings.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments,"
requires the Company to disclose the fair value of financial instruments for
which it is practicable to estimate fair value. Financial instruments included
in the Company's balance sheet for the periods presented consist of cash and
cash equivalents, investments, notes receivable from shareholders and long-term
debt. For cash and equivalents, the carrying amount is a reasonable estimate of
the fair value as the borrowings are at adjusted interest rates based on
fluctuations in market conditions. It is not practicable to estimate the fair
value of the notes receivable from shareholders due to the related party
relationship.

Consolidation

In December 1997, the Company formed two wholly-owned subsidiaries (the
"Subsidiaries"). All significant intercompany accounts and transactions between
the Company and the Subsidiaries have been eliminated in the accompanying
consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform with the
current year presentation.

Recently Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which is required to be adopted by the Company in its first quarter of
fiscal 1998. At that time, the Company will be required to disclose, in
financial statement format, all non-owner changes in equity. Such changes
include, for example, cumulative foreign currency translation adjustments,
certain minimum pension liabilities and unrealized gains and losses on
available-for-sale securities. The Company has studied the implications of SFAS
130 and, based on its initial evaluation, does not expect it to have a material
impact on the Company's financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for reporting information about operating segments in annual financial
statements and interim financial reports. It also establishes standards for
related disclosures about products and services,

F-27
<PAGE> 90
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
geographic areas and major customers. As defined in SFAS 131, operating segments
are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision-maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company will adopt SFAS 131 in fiscal 1998.

2. INVESTMENTS

The Company's investments are for purposes other than trading and consist
of:

- Certificates of Deposit. Certificates of deposit are made with
various financial institutions in the U.S. with original maturities
generally from 30 to 360 days. All of the Company's certificates of
deposit are held to secure terms with various vendors and to
collateralize U.S. bank borrowings (see Note 7).

- Domestic Mortgages. Domestic mortgages consist of first, second
and third mortgages on various properties primarily in Southern
California and Nevada, including land, single and multi-family
dwellings, and commercial property. Interest payments are due
monthly at rates ranging from 8.0% to 14.0%. Principal payments are
due upon maturity, which range from one to five years and include
an option to extend the loan with the consent of both parties.

- Foreign Mortgages. Foreign mortgages consist of second mortgages
on single family dwellings in Denmark. Principal and interest
payments are due quarterly, and the loan terms range from
maturities of generally 6 to 25 years. The mortgages bear interest
at rates ranging from 7.3% to 14.1%. All foreign mortgages serve as
collateral for foreign bank borrowings (see Note 7).

Investments, at amortized cost, consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Certificates of deposit............................... $ 1,500 $ 1,000 $ 1,000
Domestic mortgages.................................... 10,110 11,156 10,195
Foreign mortgages..................................... 10,426 16,836 16,265
------- ------- -------
Total investments..................................... 22,036 28,992 27,460
Current maturities.................................... (2,325) (3,392) (3,037)
------- ------- -------
$19,711 $25,600 $24,423
======= ======= =======
</TABLE>

The estimated fair value of the domestic mortgages approximates their cost. The
estimated fair value of foreign mortgages was $11.7 million and $17.9 million
and $16.6 million at December 31, 1996 and 1997 and March 31, 1998,
respectively.

At December 31, 1996 and 1997 and March 31, 1998, 23%, 22% and 18%,
respectively, of the Company's mortgage portfolio consisted of domestic
mortgages with two borrowers.

F-28
<PAGE> 91
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. INVESTMENTS -- (CONTINUED)
The amortized cost of investments by contractual maturities is as follows
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------
DUE AFTER DUE AFTER
ONE YEAR FIVE YEARS DUE AFTER
DUE IN ONE THROUGH THROUGH TEN
YEAR OR LESS FIVE YEARS TEN YEARS YEARS
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Certificates of Deposit..................... $1,000 $ -- $ -- $ --
Domestic mortgages.......................... 2,392 8,764 -- --
Foreign mortgages........................... -- -- 156 16,680
------ ------ ---- -------
Total investments........................... $3,392 $8,764 $156 $16,680
====== ====== ==== =======
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998 (UNAUDITED)
--------------------------------------------------
DUE AFTER DUE AFTER
ONE YEAR FIVE YEARS DUE AFTER
DUE IN ONE THROUGH THROUGH TEN
YEAR OR LESS FIVE YEARS TEN YEARS YEARS
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Certificates of Deposit..................... $1,000 $ -- $ -- $ --
Domestic mortgages.......................... 2,037 8,158 -- --
Foreign mortgages........................... -- -- 289 15,976
------ ------ ---- -------
Total investments........................... $3,037 $8,158 $289 $15,976
====== ====== ==== =======
</TABLE>

The Company did not sell any investments during the years ended December
31, 1995, 1996 and 1997 or during the three months ended March 31, 1998.

In December 1997, certain domestic mortgages, valued at approximately $4.3
million, and foreign mortgages, valued at approximately $1.4 million, net of
borrowings, (see Notes 2 and 7) were transferred by the Company to the
Subsidiaries.

Interest Rate Futures and Foreign Currency Instruments

The table below shows the contract amount and credit risk amounts of the
Company's interest rate futures and foreign currency instruments in U.S. dollar
equivalents. The unrealized gain (loss) represents the Company's gross exposure
to potential gains or losses on these transactions, based on then-current
interest rates and currency exchange rates at each respective date. The
Company's exposure to credit loss and market risk will vary over time as a
function of interest rates and currency exchange rates.

The table below does not reflect the gains or losses associated with the
exposures and transactions that the foreign exchange and interest rate
instruments are intended to hedge (in thousands).

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 MARCH 31, 1998
---------------------- ---------------------- ----------------------
CONTRACT UNREALIZED CONTRACT UNREALIZED CONTRACT UNREALIZED
AMOUNT GAIN (LOSS) AMOUNT GAIN AMOUNT GAIN (LOSS)
-------- ----------- -------- ----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts:
Futures.............. $5,972 $ (1) $ -- $ -- $9,550 $ (5)
Foreign currency
contracts:
Forward contracts.... 4,600 120 6,300 182 6,300 153
Sold options......... 1,508 (253) -- -- -- --
</TABLE>

F-29
<PAGE> 92
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment.............................................. $ 4,739 $ 5,212 $ 5,459
Furniture and fixtures................................. 1,385 866 878
Leasehold improvements................................. 603 699 696
Projects in progress................................... 645 784 722
------- ------- -------
7,372 7,561 7,755
Accumulated depreciation and amortization.............. (4,216) (4,388) (4,654)
------- ------- -------
$ 3,156 $ 3,173 $ 3,101
======= ======= =======
</TABLE>

4. NOTES RECEIVABLE FROM SHAREHOLDERS

Notes receivable from shareholders consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
MATURITY INTEREST -------------- MARCH 31,
SHAREHOLDER DATE RATE 1996 1997 1998
----------- ------------- -------- ----- ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
A November 1999 Variable $ 176 $ 191 $ 195
B July 2002 8% 381 381 389
C July 2002 8% 237 256 260
D July 2002 Variable 191 187 187
----- ------ ------
985 1,015 1,031
Amount classified within shareholders' equity
(deficit) (250) (250) (250)
----- ------ ------
$ 735 $ 765 $ 781
===== ====== ======
</TABLE>

The variable interest rate is defined as Bank of America's prime rate
(8.25% at December 31, 1996 and 1997 and 8.5% at March 31, 1998).

The note receivable from shareholder C is collateralized by 10% of the
shareholder's common stock in the Company. The remaining notes are unsecured.

5. OTHER ASSETS

Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equity investments............................. $ 57 $ 56 $ 56
Long-term deposits and other................... 85 82 82
---- ---- ----
142 138 138
Accumulated amortization....................... (4) (20) (25)
---- ---- ----
Other assets, net.............................. $138 $118 $113
==== ==== ====
</TABLE>

F-30
<PAGE> 93
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued compensation and related benefits... $1,372 $1,850 $ 903
Other....................................... 715 929 1,046
------ ------ ------
$2,087 $2,779 $1,949
====== ====== ======
</TABLE>

7. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Foreign bank borrowings............................ $5,606 $11,676 $11,596
Note payable....................................... 400 -- --
------ ------- -------
Total.............................................. 6,006 11,676 11,596
Current portion of long-term debt.................. (100) -- --
------ ------- -------
Long-term debt, net of current portion............. $5,906 $11,676 $11,596
====== ======= =======
</TABLE>

The Company's foreign bank borrowings represent a multi-currency loan
facility with a borrowing limit of DKK 75.0 million (approximately US $11.0
million) with a bank in Denmark, due February 2, 2002. As a result of currency
fluctuations, at December 31, 1997, borrowings of Swiss francs under the DKK
loan facility exceeded the borrowing base (see Note 15). Interest is due
periodically (based upon the loan draw down date) at which time the interest
rate is adjusted to LIBOR (1.94% at December 31, 1997) plus 1.25%. Borrowings
under the facility are collateralized by substantially all of the foreign
mortgages (see Note 2). Current borrowings are denominated in Swiss francs (CHF
17.0 million), bear interest at rates ranging from 2.8% to 3.6%.

The note payable at December 31, 1996, represents an installment note due
to a domestic bank, payable in 48 monthly installments of $8,000 plus interest
at 6.15% and is secured by a $500,000 certificate of deposit (see Note 2).

At December 31, 1996, the Company had a $100,000 line of credit, due on
demand and bearing interest at the bank's prime rate (8.25% at December 31,
1996) secured by a $100,000 certificate of deposit with the same bank. The line
expired in 1997. Separately, during 1997, the Company entered into a $1.0
million line of credit with the same bank due on demand and bearing interest at
the bank's prime rate (8.25% at December 31, 1997). The line was collateralized
by certain of the Company's assets and no amount was outstanding at December 31,
1997. The line was cancelled in April 1998.

8. INCOME TAXES

The income tax provision for the years ended December 31, 1996 and 1997 and
for the three months ended March 31, 1997 and 1998 consists of currently payable
state franchise taxes of $18,000, $50,000, $5,000 and $5,000, respectively. The
1995 income tax provision consists of currently payable federal and state income
taxes.

F-31
<PAGE> 94
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES -- (CONTINUED)
Deferred income taxes reflect the impact of the temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Deferred income taxes
result principally from depreciation and amortization and other expenses
recognized for financial reporting purposes that are not deductible for income
tax purposes until future years. At December 31, 1996 and 1997 and at March 31,
1998, the Company had a net deferred tax liability of $25,000.

Effective January 1, 1996, the Company elected to be taxed as a Subchapter
S Corporation for both federal and California income tax purposes and,
accordingly, the income of the Company is included in the individual tax returns
of the shareholders. The Company is subject to a California income tax of 1.5%
in addition to the taxes required from its shareholders. To the extent that the
Company makes any disposition of assets subject to the S Corporation "built-in
gains" tax within 10 years from January 1, 1996, any disposition gain would be
taxed at the corporate tax rate in effect at the date of such disposition.
"Built-in gains" are the net appreciation of assets arising prior to the
Company's election to be taxed as an S Corporation. See Note 15.

9. STOCK PURCHASE AGREEMENT

During 1996, two individuals purchased 25,808 shares of common stock
pursuant to an agreement dated August 28, 1992. In connection with the stock
issuance, the Company issued notes receivable totaling $250,000.

10. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under various
operating leases expiring through January 2002. Under the terms of the
facilities lease, the Company is required to pay property taxes, insurance and
maintenance costs.

Future minimum annual payments under operating leases are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
1998............................................ $ 628
1999............................................ 576
2000............................................ 110
2001............................................ 16
2002............................................ 12
------
Total minimum lease payments.................... $1,342
======
</TABLE>

Rent expense under operating leases was $347,000, $518,000, $570,000,
$142,000 and $157,000 for 1995, 1996 and 1997, and the three months ended March
31, 1997 and 1998, respectively.

During 1997, the Company had volume purchase commitments with a
long-distance telephone carrier that were not achieved. The Company is currently
negotiating with the carrier to restructure the agreement. In the event that
such negotiations are unsuccessful, the Company may be subject to certain claims
by the carrier.

11. RELATED PARTY TRANSACTIONS

The Company holds a domestic mortgage of $1.2 million from a shareholder of
the Company. The mortgage is secured by real property and bears interest at 8%
due monthly. The note is due on November 15, 1999 (see Note 15).
F-32
<PAGE> 95
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. RELATED PARTY TRANSACTIONS -- (CONTINUED)
The Company holds a mortgage of $175,000 from a consultant to the Company.
The mortgage is secured by real property in Denmark and bears interest at 10%
due monthly. The note is due in December 1999 and is classified as a domestic
mortgage.

In July 1996, the Company entered into separate five-year employment
agreements (the "Employment Agreements") with two of its officers who are also
shareholders. The respective Employment Agreements each provide for (i) annual
base compensation of $250,000, (ii) incentive compensation of 10% percent of net
profit, as defined, and (iii) compensation of $1.0 million in the event of a
change in control, as defined (see Note 15).

During 1995, the Company made an equity investment of approximately
$147,000 in a public company of which a shareholder of the Company was an
officer. During 1996, the investment was written down by $146,000, included in
other income, net, in the accompanying consolidated financial statements, due to
a decline in market value, and was fully written off in 1997.

12. PROFIT-SHARING PLAN

The Company adopted a 401(k) Savings and Investment Plan (the "Plan")
effective January 1, 1995. All employees completing six months of service are
eligible to participate in the Plan subject to certain restrictions.
Profit-sharing contributions by the Company are determined at the discretion of
the Board of Directors. The Company contributed $29,000, $34,000, $41,000,
$9,600 and $12,000 to the Plan during the years ended December 31, 1995, 1996
and 1997 and during the three-month periods ended March 31, 1997 and 1998,
respectively.

13. MARKET CONCENTRATIONS, MAJOR CUSTOMERS AND VENDORS

The Company operates in one market segment: sales of flexible itinerary
travel. In 1995, 1996, 1997 and the three-month periods ended March 31, 1997 and
1998, net revenues for travel to and from Hawaii totaled $30.7 million, $36.2
million, $40.6 million, $8.9 million and $10.2 million, respectively, or 97%,
94%, 95%, 97% and 96%, respectively, of total net revenues.

The following customers accounted for 10% or more of net revenues in the
period indicated:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------------------- ---------------------
1995 1996 1997 1997 1998
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer A...................... 17.9% 16.6% 17.2% 18.7% 15.8%
Customer B...................... * * 12.1% 10.3% 11.8%
</TABLE>

--------------------
* Less than 10%

During 1996 and 1997 and the three months ended March 31, 1997 and 1998,
one vendor accounted for 19.5%, 21.2%, 16.8% and 19.1%, respectively, of total
cost of goods sold.

14. SETTLEMENT AGREEMENT

Effective June 18, 1997, the Company's shareholders entered into an
agreement (the "Settlement Agreement") providing for the settlement of
litigation among the shareholders without consideration being paid to or by any
shareholder. Legal and other fees relating to the matters addressed by the
Settlement Agreement amounted to approximately $1.7 million in 1997 including
$1.2 million of legal fees reflected on

F-33
<PAGE> 96
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. SETTLEMENT AGREEMENT -- (CONTINUED)
the accompanying consolidated statement of operations. Additionally, the
Settlement Agreement provided for, among other things, the following:

Articles of Incorporation

The Settlement Agreement provided for amendment of the Company's articles
of incorporation to (i) increase the number of authorized directors of the
Company to 5 and (ii) create a two-class capital structure consisting of 100,000
Class A Common Shares (the "Class A Shares") and 4 Class B Common Shares (the
"Class B Shares"). The Class A Shares replaced the then outstanding shares of
the Company's common stock. The Class B Shares were issued at $1 per share. In
addition to having the same rights as the Class A Shares, approval of 75 percent
of the Class B Shares is required to (i) effect further amendments to the
articles of incorporation, (ii) approve the issuance of additional Class A
Shares and (iii) remove any director appointed as the fifth director, as
defined.

Consulting Agreements

The Settlement Agreement also provided that the Company would enter into
separate consulting agreements (the "Consulting Agreements") with three of the
shareholders for the period from January 1, 1997 through the earlier of the sale
of the Company or December 31, 1999. In the event that services are rendered
under all of the Consulting Agreements, then aggregate fees relating thereto
would amount to approximately $42,000 per month. Fees paid under the Consulting
Agreements amounted to approximately $504,000 during 1997 and $125,000 during
the three months ended March 31, 1998. These amounts are included in general and
administrative expenses on the accompanying statements of operations.

Employment Agreements

The Settlement Agreement modified the Employment Agreements referred to in
Note 11 to provide for special bonuses in the annual amounts of $250,000 and
$83,333, respectively, to the two shareholders during both 1998 and 1999, except
that the Company's obligation to pay such amounts terminates upon the sale of
the Company, with pro rata payment made through the date of any such sale.
Additionally, the Settlement Agreement further amended the calculation of
incentive compensation under the Employment Agreements to exclude legal and
certain other expenses relating to the matters addressed by the Settlement
Agreement from the expenses of the Company included in such compensation
calculations. Also, the Settlement Agreement provided that the compensation to
be paid to these individuals in the event of a change in control, as defined,
was amended to be $1.0 million to each.

Commitment to Sale

The Settlement Agreement also provided that the parties use their best
efforts to sell the Company by December 31, 1997 (see Note 15).

15. SUBSEQUENT EVENTS

On April 20, 1998, all of the outstanding shares of the Company were
acquired (the "Acquisition") by Global Vacation Group, Inc., a New York
corporation ("GVG") for $15.1 million, including $625,000 deposited in escrow
pursuant to certain indemnity provisions. Certain of the shareholders sold their
shares for $9.3 million in cash, while others exchanged their shares in the
Company for all of the outstanding shares of the Subsidiaries (see Note 2)
valued at $5.8 million. The Acquisition is subject to certain regulatory
consents and approvals.

F-34
<PAGE> 97
CLASSIC CUSTOM VACATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SUBSEQUENT EVENTS -- (CONTINUED)
Concurrent with the closing of the Acquisition, (i) all of the shareholder
notes receivable and accrued interest (see Note 4) were paid in full and (ii)
the Company sold the remaining portion of its mortgage investments not held by
the Subsidiaries, together with the associated debt and all foreign currency
contracts (see Notes 2 and 7), to Master Capital Company, a California general
partnership ("Master"). One of the Company's former shareholders is a partner in
Master. These mortgage investments were sold at net book value at April 20,
1998, less a discount of $500,000. The Company received cash proceeds and a note
receivable (the "Master Note"). The Master Note has outstanding principal at
April 20, 1998 of $5.5 million bearing interest at 9% per annum and providing
for $3.0 million of principal payments during 1998, with the balance, $2.5
million, due April 15, 2000. Interest on the Master Note is payable in four
installments from May 15, 1998 to August 15, 1998 and, thereafter, is payable
quarterly until maturity.

The remaining $2.0 million change in control payments referred to in Note
14 were paid upon closure of the Acquisition.

As a result of the Acquisition of its shares by GVG, the Company will
convert to C Corporation status for income tax reporting purposes in 1998.

F-35
<PAGE> 98

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders of
MTI Vacations, Inc.

We have audited the accompanying balance sheets of MTI Vacations (as
described in Note 1) as of December 31, 1996 and 1997 and the related statements
of income (loss), changes in owners' deficit and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of MTI Vacations 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 audits 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 MTI Vacations as of December
31, 1996 and 1997, and the results of operations and cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND LLP

Chicago, Illinois
March 27, 1998, except for Notes 1 and 10, as to which the date is May 1, 1998.

F-36
<PAGE> 99

MTI VACATIONS

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997 AND UNAUDITED MARCH 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents:
Unrestricted...................................... $ 13 $ 13 $ 13
Restricted........................................ -- 1,344 8,427
Short-term investments -- restricted................... -- 500 500
Prepaid tour costs..................................... 2,371 2,083 2,853
Receivables............................................ 1,077 1,618 1,138
Due from employees..................................... 25 7 5
Other.................................................. 933 352 257
------- ------- -------
Total current assets......................... 4,419 5,917 13,193
------- ------- -------
FURNISHINGS AND EQUIPMENT, NET.............................. 2,073 1,600 1,561
OTHER ASSETS:
Long-term investments -- restricted.................... 11,527 9,608 9,295
Deposits............................................... 101 102 178
------- ------- -------
Total other assets........................... 11,628 9,710 9,473
------- ------- -------
Total assets............................ $18,120 $17,227 $24,227
======= ======= =======
LIABILITIES AND OWNERS' DEFICIT
CURRENT LIABILITIES:
Customer deposits...................................... $11,527 $11,452 $18,222
Accounts payable....................................... 5,305 6,618 6,562
Accrued expenses....................................... 2,483 2,532 1,918
Deferred marketing revenue............................. -- 123 400
------- ------- -------
Total current liabilities.................... 19,315 20,725 27,102
------- ------- -------
COMMITMENTS (See Note 6)
OWNERS' DEFICIT:
Unrealized holding gains............................... 68 198 182
Owners' investment..................................... (1,263) (3,696) (3,057)
------- ------- -------
Total owners' deficit........................ (1,195) (3,498) (2,875)
------- ------- -------
Total liabilities and owners' deficit... $18,120 $17,227 $24,227
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-37
<PAGE> 100

MTI VACATIONS

STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND FOR THE UNAUDITED THREE
MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues...................................... $25,655 $30,108 $29,194 $ 5,453 $5,899
Operating expenses................................ 22,405 26,458 25,782 6,298 5,717
------- ------- ------- ------- ------
Gross profit (loss)..................... 3,250 3,650 3,412 (845) 182
General and administrative expenses............... 2,292 2,715 1,643 382 893
Depreciation and amortization..................... 681 566 528 120 129
------- ------- ------- ------- ------
Income (loss) from operations........... 277 369 1,241 (1,347) (840)
Investment income................................. 1,072 985 1,086 249 304
------- ------- ------- ------- ------
Net income (loss)....................... $ 1,349 $ 1,354 $ 2,327 $(1,098) $ (536)
======= ======= ======= ======= ======
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-38
<PAGE> 101

MTI VACATIONS

STATEMENTS OF CHANGES IN OWNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND FOR THE UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED HOLDING OWNERS'
GAINS/LOSSES INVESTMENT TOTAL
------------------ ------------- -------
<S> <C> <C> <C>
Balance at December 31, 1994............................ $(143) $(1,616) $(1,759)
Net income......................................... -- 1,349 1,349
Net change in owners' investment................... -- (2,633) (2,633)
Net change in unrealized holding gains/losses...... 134 -- 134
----- ------- -------
Balance at December 31, 1995............................ (9) (2,900) (2,909)
Net income......................................... -- 1,354 1,354
Net change in owners' investment................... -- 283 283
Net change in unrealized holding gains/losses...... 77 -- 77
----- ------- -------
Balance at December 31, 1996............................ 68 (1,263) (1,195)
Net income......................................... -- 2,327 2,327
Net change in owners' investment................... -- (4,760) (4,760)
Net change in unrealized holding gains/losses...... 130 -- 130
----- ------- -------
Balance at December 31, 1997............................ 198 (3,696) (3,498)
Net loss (unaudited)............................... -- (536) (536)
Net change in owners' investment (unaudited)....... -- 1,175 1,175
Net change in unrealized holding gains/losses
(unaudited)...................................... (16) -- (16)
----- ------- -------
Balance at March 31, 1998 (unaudited)................... $ 182 $(3,057) $(2,875)
===== ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-39
<PAGE> 102

MTI VACATIONS

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
AND FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ 1,349 $ 1,354 $ 2,327 $(1,098) $ (536)
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and amortization... 681 566 528 120 129
Changes in assets and
liabilities:
Prepaid tour costs......... (2,014) 1,059 288 (916) (770)
Receivables................ 102 101 (541) 251 480
Other current assets....... (218) (179) 581 168 95
Deposits................... (77) (1) (1) -- (76)
Customer deposits.......... 4,169 249 (75) 7,121 6,770
Accounts payable........... 2,355 (1,627) 1,313 4,380 (56)
Accrued expenses........... 427 27 49 955 (614)
Deferred revenue........... -- -- 123 -- 277
------- ------- ------- ------- ------
Net cash provided from
operating
activities.......... 6,774 1,549 4,592 10,981 5,699
------- ------- ------- ------- ------
Cash flows from investing activities:
Capital expenditures, net of loss on
disposals.......................... (90) (1,690) (55) (15) (90)
(Increase) decrease in cash and cash
equivalents -- restricted.......... (503) 914 (1,344) (6,824) (7,083)
Collections on loans to employees.... -- 30 18 8 2
Loans to employees................... (14) -- -- -- --
Proceeds from maturities and sales of
investments........................ -- -- 1,549 -- 297
Purchases of investments............. (3,532) (1,086) -- (271) --
------- ------- ------- ------- ------
Net cash provided by
(used in) investing
activities.......... (4,139) (1,832) 168 (7,102) (6,874)
------- ------- ------- ------- ------
Cash flows from financing activities:
Net change in owners' investment..... (2,633) 283 (4,760) (3,879) 1,175
------- ------- ------- ------- ------
Net cash provided by
(used in) financing
activities.......... (2,633) 283 (4,760) (3,879) 1,175
------- ------- ------- ------- ------
Net increase in cash and cash
equivalents -- unrestricted............. 2 -- -- -- --
Cash and cash
equivalents -- unrestricted -- beginning
of period............................... 11 13 13 13 13
------- ------- ------- ------- ------
Cash and cash
equivalents -- unrestricted --
end of period........................... $ 13 $ 13 $ 13 $ 13 $ 13
======= ======= ======= ======= ======
Supplemental disclosure of cash flow
information:
Cash paid for interest............... $ 92 $ 142 $ 9 $ 9 $ --
======= ======= ======= ======= ======
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-40
<PAGE> 103

MTI VACATIONS
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1998 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. BASIS OF PRESENTATION AND ORGANIZATION

Basis of Presentation

On May 1, 1998 Global Vacation Group, Inc. ("GVG") acquired certain assets
and liabilities of MTI Vacation, Inc. The accompanying financial statements
reflect the assets and liabilities acquired by GVG on a historical cost basis
for all periods presented, and are referred to as "MTI" or "MTI Vacations". The
assets and liabilities of MTI Vacations, Inc. excluded from the acquisition were
principally non operating assets and liabilities.

Organization

MTI provides a variety of services primarily to the travel industry. MTI
packages vacation tours which include air transportation, hotel accommodations
and ground transportation to selected destinations under its own MTI Vacations
brand. These vacation packages are sold predominantly through individual travel
agencies. Through 1996, MTI offered vacation packages to Florida, Las Vegas and
Hawaii. During 1997 MTI discontinued offering packages to Florida and Las Vegas
and continues to serve Hawaii exclusively. MTI also provides turnkey
reservations and travel package processing services to the travel industry
including a national hotel chain and a national rail company under their
respective brand names. In addition, MTI is a seller of optional sight-seeing
tours in the state of Hawaii.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

MTI considers all highly liquid instruments with original maturities of
three months or less to be cash equivalents. For cash and cash equivalents, the
carrying amount on the balance sheets approximate the fair value of those
instruments.

Investments

Available for sale securities are reported at fair value with unrealized
gains and losses included in a separate component of owners' deficit. All
investments of MTI are considered available for sale.

Realized gains and losses on the sale of investments are computed on a
specific basis using the first-in, first-out method. Investments classified as
noncurrent assets reflect the ability and intent of MTI to postpone the
conversion of such assets into cash for at least one year.

Furnishings and Equipment

Furnishings and equipment are stated at cost. MTI provides for depreciation
and amortization using the straight-line method over the estimated useful lives
of the furnishings and equipment.

Recognition of Gross Profit from Tour Operations

Tour revenue and all associated direct tour expenses are recognized in the
month of a customer's departure. For the years ended December 31, 1995, 1996,
and 1997, net revenues consist of gross revenues of $117.2 million, $126.9
million, and $127.1 million, offset by direct tour expenses of $91.5 million,
$96.8 million, and $97.9 million. For the unaudited three month periods ended
March 31, 1997 and 1998, the net revenues consisted of gross revenues of $28.4
million and $25.5 million, offset by direct tour expenses of $22.9 million and
$19.6 million, respectively.

F-41
<PAGE> 104
MTI VACATIONS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes

MTI is not a tax paying entity and therefore the accompanying financial
statements do not reflect the impact of income taxes.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Unaudited Interim Financial Data

The interim financial data relating to the three months ended March 31,
1997 and 1998 are unaudited; however, in the opinion of company's management,
the interim data includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The results for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year or any
other interim period.

3. RESTRICTED FUNDS

Under the Department of Transportation regulations governing public charter
operators, customer payments for future charter tours are deposited to an escrow
account. Under the tour contract between MTI and its customers for bulk fare
tours, the same practice must be followed. Prior to the departure of charter
tours, funds may be expended only for certain direct charter tour costs. The
balance of the escrow fund becomes available to MTI two days subsequent to the
completion of the tour. Customer deposits at December 31, 1997 represent future
bookings through December 1998.

F-42
<PAGE> 105
MTI VACATIONS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS

The amortized cost and fair market value of available for sale securities
at December 31, 1996 and 1997 and March 31, 1998 (unaudited) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available for sale:
Mortgage backed securities....... $11,459 $114 $46 $11,527
------- ---- --- -------
Total securities............ $11,459 $114 $46 $11,527
======= ==== === =======
DECEMBER 31, 1997
----------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
Available for sale:
Mortgage backed securities....... $ 7,376 $182 $ 3 $ 7,555
Municipal bonds and notes........ 2,534 19 -- 2,553
------- ---- --- -------
Total securities............ $ 9,910 $201 $ 3 $10,108
======= ==== === =======
MARCH 31, 1998
----------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
(UNAUDITED)
Available for sale:
Mortgage backed securities....... $ 6,882 $213 $ 3 $ 7,092
Municipal bonds and notes........ 2,731 14 42 2,703
------- ---- --- -------
Total securities............ $ 9,613 227 45 $ 9,795
======= ==== === =======
</TABLE>

MTI maintains investments to cover certain escrow requirements for customer
deposits and transfers investments to and from a related party as escrow
requirements change. These transfers are accounted for as contributions or
distributions in the owners' investment account. Gains and losses are treated as
unrealized in the financial statements until the investments are disposed of by
the related party or MTI. Upon disposal, realized gains or losses are included
in investment income. Realized gains and losses were immaterial in 1995, 1996,
1997 and the three months ended March 31, 1998.

The amortized cost and estimated fair value of available for sale
securities at December 31, 1996 and 1997 and at March 31, 1998, by contractual
maturity, are shown below. Expected maturities can differ from

F-43
<PAGE> 106
MTI VACATIONS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS -- (CONTINUED)
contractual maturities since borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 MARCH 31, 1998
-------------------- -------------------- --------------------
AVAILABLE FOR SALE AVAILABLE FOR SALE AVAILABLE FOR SALE
-------------------- -------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- --------- -------- --------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Maturities:
Within 1 year.................... $ -- $ -- $ 500 $ 500 $ 500 $ 500
1 to 5 years..................... -- -- 1,308 1,321 2,024 1,996
5 to 10 years.................... -- -- 726 732 207 207
Mortgage backed securities....... 11,459 11,527 7,376 7,555 6,882 7,092
------- ------- ------ ------- ------ ------
Total securities............ $11,459 $11,527 $9,910 $10,108 $9,613 $9,795
======= ======= ====== ======= ====== ======
</TABLE>

5. FURNISHINGS AND EQUIPMENT

Furnishings and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- --------------
1996 1997 1998
------- ------- --------------
(IN THOUSANDS) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Computer equipment............................ $ 4,206 $ 3,958 $ 4,020
Phone equipment............................... 1,231 1,381 1,368
Furniture, fixtures and office................ 854 1,285 1,236
Computer software............................. 386 397 397
Building improvements and other............... 194 128 128
------- ------- -------
6,871 7,149 7,149
Less accumulated depreciation................. (4,798) (5,549) (5,588)
------- ------- -------
Net furnishings and equipment............ $ 2,073 $ 1,600 $ 1,561
======= ======= =======
</TABLE>

6. COMMITMENTS

Operating Leases

MTI leases various equipment and office space. In addition, MTI leases a
building from a related party under a 5 year arrangement with annual rentals of
$876,000. Minimum future rentals as of December 31, 1997 are approximately:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 961
1999........................................................ 917
2000........................................................ 876
2001........................................................ 876
2002 and thereafter......................................... --
------
$3,630
======
</TABLE>

Rental expense for 1995, 1996 and 1997 was $428,000, $729,000 and $1.2
million, respectively.

F-44
<PAGE> 107
MTI VACATIONS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS -- (CONTINUED)
Letters-of-Credit

MTI had outstanding standby letters-of-credit of approximately $829,000 at
both December 31, 1997 and March 31, 1998. These letters-of-credit have been
issued primarily to guarantee payment to vendors. These letters have fixed
expiration dates and are expected to expire without being drawn upon.

7. INCENTIVE SAVINGS PLANS

The incentive savings plan offered by MTI covers substantially all
employees with more than six months of service. Under the incentive savings
program, MTI will match 50% of the first 6% of compensation deferred by each
eligible employee. Total contributions to the incentive savings plans made by
MTI were $78,000, $201,000, and $158,000, for the years ended December 31, 1995,
1996 and 1997, respectively. Contributions to the profit-sharing program are
made at the discretion of the Board of Directors and were $100,000 for the year
ended December 31, 1995. Contributions of $51,000 and $36,000 were made for the
unaudited three-month periods ending March 31, 1997 and 1998.

8. TRANSACTIONS WITH RELATED PARTIES

MTI, through MTI Vacations, Inc., has an agreement with certain entities
related through common ownership, wherein cash can be invested or borrowed on a
daily basis. Pursuant to this agreement, total interest income from related
entities for 1995, 1996 and 1997 was $92,000, $124,000 and $271,000,
respectively. For the unaudited three-month periods ended March 31, 1997 and
1998, total interest income from related parties was $32,000 and $126,000,
respectively. Total interest expense to related parties was $185,000, $142,000
and $9,000 in 1995, 1996 and 1997, respectively. For the unaudited three-month
periods ended March 31, 1997 and 1998, total interest expense to related parties
was $9,000 and $0, respectively.

9. DISCONTINUED PRODUCT LINES (UNAUDITED)

During 1997, MTI discontinued selling vacation packages for the Florida and
Las Vegas markets. The following table represents the unaudited activity in 1997
pertaining to these markets as included in the accompanying MTI 1997 statement
of income.

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net revenues................................................ $ 2,217
Operating expenses.......................................... 3,147
-------
Gross profit...................................... (930)
General and administrative expenses......................... 293
Depreciation and amortization............................... 144
-------
Loss from operations.............................. (1,367)
Investment income........................................... 82
-------
Net loss.......................................... $(1,285)
=======
</TABLE>

10. SUBSEQUENT EVENT

On May 1, 1998, Global Vacation Group, Inc. purchased the operating assets
and liabilities of MTI pursuant to an Asset Purchase Agreement.

F-45
<PAGE> 108

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Haddon Holidays, Inc.:

We have audited the accompanying balance sheet of Haddon Holidays, Inc. (an
S Corporation, the "Company") as of December 31, 1997, and the related
statements of operations, changes in shareholders' equity(deficit), and cash
flows for the year then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Haddon Holidays, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Washington, D.C.
March 13, 1998

F-46
<PAGE> 109

HADDON HOLIDAYS, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $1,715 $1,957
Marketable securities.................................. 1,500 1,518
Accounts receivable.................................... 335 428
Prepaid expenses....................................... 646 575
------ ------
Total current assets.............................. 4,196 4,478
------ ------
Property and equipment:
Furniture and equipment................................ 675 675
Leasehold improvements................................. 62 69
Less--accumulated depreciation......................... (433) (464)
------ ------
Net property and equipment........................ 304 280
------ ------
Cash surrender value of life insurance...................... 38 38
------ ------
Total assets...................................... $4,538 $4,796
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses.................. $2,196 $1,894
Customer deposits...................................... 2,230 3,454
------ ------
Total current liabilities......................... 4,426 5,348
------ ------
Commitments and contingencies (Note 3)
Shareholders' equity(deficit):
Common stock, no par value; 100 shares issued and
outstanding........................................... -- --
Retained earnings(deficit)............................. 80 (569)
Unrealized holding gain on marketable securities,
net................................................... 32 17
------ ------
Total shareholders' equity(deficit)............... 112 (552)
------ ------
Total liabilities and shareholders'
equity(deficit)................................. $4,538 $4,796
====== ======
</TABLE>

The accompanying notes are an integral part of these balance sheets.
F-47
<PAGE> 110

HADDON HOLIDAYS, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ---------------------
1997 1997 1998
------------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Net revenues.............................................. $7,138 $1,365 $1,427
Operating expenses........................................ 5,306 1,179 1,265
------ ------ ------
Gross profit......................................... 1,832 186 162
General and administrative expenses....................... 1,953 232 850
Depreciation and amortization............................. 95 23 31
------ ------ ------
Loss from operations................................. (216) (69) (719)
------ ------ ------
Other income (expense):
Interest income...................................... 351 80 70
Other expense........................................ (47) (12) --
------ ------ ------
Total other income (expense)......................... 304 68 70
------ ------ ------
Income (loss) before provision for income taxes........... 88 (1) (649)
Provision for income taxes................................ -- -- --
------ ------ ------
Net income (loss).................................... $ 88 $ (1) $ (649)
====== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.
F-48
<PAGE> 111

HADDON HOLIDAYS, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
COMMON RETAINED HOLDING
STOCK EARNINGS GAIN, NET TOTAL
------ -------- ---------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1997.................................. $ -- $ 192 $ 63 $ 255
Net income........................................... -- 88 -- 88
Distributions to shareholders........................ -- (200) -- (200)
Unrealized holding loss.............................. -- -- (31) (31)
----- ----- ---- -----
Balance, December 31, 1997................................ -- 80 32 112
Net loss (unaudited)................................. -- (649) -- (649)
Unrealized holding loss (unaudited).................. -- -- (15) (15)
----- ----- ---- -----
Balance, March 31, 1998 (unaudited)....................... $ -- $(569) $ 17 $(552)
===== ===== ==== =====
</TABLE>

The accompanying notes are an integral part of these statements.
F-49
<PAGE> 112

HADDON HOLIDAYS, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, --------------------
1997 1997 1998
------------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 88 $ (1) $ (649)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities--
Depreciation and amortization..................... 95 23 31
Realized loss on investment....................... 86 -- --
Net realized gains on marketable securities....... (116) -- (11)
Decrease (increase) in accounts receivable........ 112 190 (93)
(Increase) decrease in prepaid expenses........... (318) (75) 71
(Increase) decrease in cash surrender value of
life insurance.................................. (5) 1 --
Increase (decrease) in accounts payable and
accrued expenses................................ 628 311 (302)
Increase in customer deposits..................... 126 348 1,224
------ ------ ------
Net cash provided by operating activities.... 696 797 271
------ ------ ------
Cash flows from investing activities:
Purchase of property and equipment..................... (254) (83) (7)
Proceeds from sales of marketable securities........... 1,569 -- 11
Purchases of marketable securities..................... (710) (8) (33)
------ ------ ------
Net cash provided by (used in) investing
activities................................. 605 (91) (29)
------ ------ ------
Cash flows from financing activities:
Distributions to shareholders.......................... (200) -- --
------ ------ ------
Net cash used in financing activities........ (200) -- --
------ ------ ------
Net increase in cash and cash equivalents................... 1,101 706 242
Cash and cash equivalents, beginning of period.............. 614 614 1,715
------ ------ ------
Cash and cash equivalents, end of period.................... $1,715 $1,320 $1,957
====== ====== ======
Supplemental disclosures:
Realized loss on investment in Community Camera,
Inc.................................................. $ (86) $ -- $ --
====== ====== ======
Unrealized holding (loss) gain on marketable securities
available for sale................................... $ (31) $ 12 $ (15)
====== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.
F-50
<PAGE> 113

HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. ORGANIZATION

Haddon Holidays, Inc. (the "Company"), incorporated in New Jersey, was
formed on April 5, 1975. The Company was organized for the purpose of providing
the distribution of travel services to Hawaii. The Company's offices are
currently located in Mount Laurel, New Jersey.

As of December 31, 1997, the Company's ownership structure consisted of 100
shares of common stock, no par value, held by two individuals. These individuals
held 55 percent and 45 percent of the common stock of the Company, respectively.

2. SIGNIFICANT ACCOUNTING PRINCIPLES

Unaudited Interim Financial Statements

The accompanying balance sheet as of March 31, 1998 and the accompanying
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the three months ended March 31, 1997 and 1998 are unaudited. The
unaudited financial statements include all adjustments (consisting of normal
recurring adjustments), which are, in the opinion of management, necessary for a
fair presentation of such financial statements. The data disclosed in the notes
to the financial statements for these periods is unaudited. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the entire fiscal year.

Revenue Recognition

The Company records net revenues when earned, which for all services
provided is the departure date of the customer. Net revenues consist primarily
of commissions and markups on travel services, volume bonuses from travel
service providers and cancellation fees. Cancellation fee revenue is recorded
when received. The Company has not recorded a reserve for cancellations, as any
previously recorded net revenue would be offset by the cancellation fees
received. For the year ended December 31, 1997, and the three months ended March
31, 1997 and 1998, net revenue is derived from the sale of travel products and
services with a value of approximately $28.3 million, $5.2 million and $5.8
million, respectively, net of approximately $21.2 million, $3.9 million and $4.4
million, respectively, in direct costs from suppliers.

Operating Expenses

Operating expenses include travel agent commissions, salaries,
communications, advertising, and other costs associated with the selling and
processing of travel reservations and services.

Customer Deposits

Customer deposits represent amounts received from customers for which net
revenues have not been earned and operating costs have not yet been remitted to
the related travel service vendor. Customer deposits are generally collected one
to two months prior to departure date.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

F-51
<PAGE> 114
HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING PRINCIPLES -- (CONTINUED)
Property and Equipment

Property and equipment are stated at cost. Furniture and equipment are
depreciated on a straight-line basis over their estimated useful lives, which
range from five to seven years. Leasehold improvements are depreciated on a
straight-line basis over the lesser of the estimated useful life or the term of
the lease.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the costs and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
federal corporate income taxes on its taxable income. Instead, the shareholders
are liable for individual federal income taxes on their respective shares in
their individual income tax returns. The Company has also elected to be taxed as
a Subchapter S Corporation for New Jersey state purposes.

Marketable Securities

Marketable securities at December 31, 1997 and March 31, 1998 are
principally instruments of the U.S. government and its agencies, of state
governments, and of municipalities. The Company accounts for its marketable
securities under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Under SFAS 115, the Company classifies its debt and marketable
equity securities in one of three categories: trading, available-for-sale or
held-to-maturity. Trading securities are bought and held principally for the
purpose of selling them in the near term. Held-to-maturity securities are those
securities which the Company has the ability and intent to hold to maturity. All
other securities not included in trading or held-to-maturity are classified as
available-for-sale. In 1997 and 1998, the Company did not have any securities
classified as trading or held-to-maturity.

Under SFAS 115, available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on available-for-sale securities are
excluded form earnings and are reported as a separate component of stockholders'
equity until realized. Dividend and interest income are recognized when earned.
Realized gains and losses for securities classified as available-for-sale are
included in earnings and are derived using the specific identification method
for determining the cost of securities sold.

Accounts Receivable

As of December 31, 1997 and March 31, 1998, accounts receivable consist
primarily of credit card and co-op marketing receivables. Co-op marketing
receivables relate to the agreements that the Company has with various travel
service suppliers to be included in the Company's marketing plan. Income from
co-op marketing is recognized over the life of the marketing brochure (generally
one year) and is recorded as reduction of marketing expense in general and
administrative expense on the accompanying statements of operations. No reserve
for uncollectible accounts has been recorded because in the opinion of
management, all amounts reflected as accounts receivable on the accompanying
balance sheets are considered collectible.

F-52
<PAGE> 115
HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING PRINCIPLES -- (CONTINUED)
Cash Surrender Value of Life Insurance

The Company currently holds a life insurance policy on one of its officers
with a face amount of $200,000. The cash surrender value of this policy at
December 31, 1997 and March 31, 1998 was $38,000 and is recorded as an asset on
the accompanying balance sheets.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. Cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses are reflected in the financial statements
at cost, which approximates fair value. Marketable securities are reflected at
fair value.

Use of Estimates

Concentrations of Risk

Travel Service Providers -- The Company markets and sells travel services
of global, national and local land and air service providers. One airline
accounted for approximately 30% of the Company's cost of sales in 1997.

Geographical -- All travel services sold in 1997 had Hawaii destinations.

New Accounting Standards

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The adoption of SFAS 130 will
have no impact on the Company's results of operations, financial position or
cash flows.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about product and services, geographic areas, and major customers. SFAS 131 is
effective for financial statements beginning after December 15, 1997. Financial
statement disclosures for prior periods are required to be restated. The
adoption of SFAS 131 will have no impact on the Company's results of operations,
financial position or cash flow.

Reclassifications

Certain reclassifications have been made to the 1997 financial statements
to conform with the presentation for the three months ended March 31, 1997 and
1998.

F-53
<PAGE> 116
HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. COMMITMENTS AND CONTINGENCIES

Pension Plan

The Company has a defined contribution voluntary savings plan for eligible
employees. This 401(k) plan is designed to enhance the existing retirement
programs of participating employees. The Company matches 25 percent of the
participants' contributions to the plan. Vesting of both employer and employee
contributions is immediate.

Letters of Credit

At December 31, 1997 and March 31, 1998, the Company had standby letters of
credit issued and outstanding totaling $1.2 million which primarily guarantee
various trade activities. The letters of credit are secured by marketable
securities having a fair value at December 31, 1997 and March 31, 1998 of $1.5
million. The Company recognizes losses on these commitments as incurred. No
material losses of these commitments have been incurred as of December 31, 1997
or March 31, 1998, nor are any anticipated.

Operating Leases

The Company leases its office facilities located in Mount Laurel, N.J. from
Brandywine Realty Trust, effective as of January 24, 1997. On April 14, 1997,
the Company agreed to an amendment of its current lease. Future minimum rental
payments on the office space and other operating leases as of December 31, 1997
are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $160
1999........................................................ 145
2000........................................................ 145
2001........................................................ 145
2002........................................................ 36
----
Total.................................................. $631
====
</TABLE>

Insurance

The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the year ended December 31, 1997
or the three months ended March 31, 1998.

4. MARKETABLE SECURITIES

At December 31, 1997 and March 31, 1998, the Company classified all
investments as available-for-sale. The amortized cost, gross unrealized holding
gains, gross unrealized holding losses and fair value of the

F-54
<PAGE> 117
HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. MARKETABLE SECURITIES -- (CONTINUED)
available-for-sale securities by security type at December 31, 1997 and March
31, 1998, were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. government agencies.................. $1,051 $ 20 $ -- $1,071
Municipal obligations..................... 349 12 -- 361
Short term investments.................... 68 -- -- 68
------ ---- ---- ------
Total................................ $1,468 $ 32 $ -- $1,500
====== ==== ==== ======
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. government agencies.................. $ 700 $ 13 $ -- $ 713
Municipal obligations..................... 355 4 -- 359
Short term investments.................... 446 -- -- 446
------ ---- ---- ------
Total................................ $1,501 $ 17 $ -- $1,518
====== ==== ==== ======
</TABLE>

In 1997 and the three months ended March 31, 1998, proceeds from sales of
marketable securities were $1.6 million and $11,000, respectively, and related
net realized gains, included in interest income, were $116,000 and $11,000,
respectively. There were not any sales of marketable securities in the three
months ended March 31, 1997.

5. INVESTMENT IN COMMUNITY CAMERA, INC.

At December 31, 1997 and March 31, 1998, the Company owned 132,394 shares
of common stock of Community Camera, Inc. ("CCI", trading as CCI Communications,
representing approximately 26 percent of the total common shares outstanding).
CCI is located in West Chester, PA and was incorporated in 1983 to provide video
production, non-linear editing, mobile production and multimedia services. Prior
to 1996, the Company accounted for its investment in CCI under the equity method
of accounting. During 1996, the Company wrote-off approximately $49,000 of its
investment in CCI, and wrote-off the remaining amount of $86,000 in 1997, as
management deemed the investment's value was unrealizable. This write-off is
included in general and administrative expense on the accompanying statements of
operations.

6. STOCKHOLDER COMPENSATION

As of December 31, 1997, the Company held employment agreements with the
two shareholders, which provided for annual salaries of approximately $540,000,
in the aggregate, with annual bonuses to be paid based on the operating
performance of the Company. These agreements were terminated effective March 30,
1998 as part of the acquisition of the Company (see Note 8). For the year ended
December 31, 1997 and the three months ended March 31, 1997 and 1998,
shareholder compensation in the amount of approximately $1.4 million, $135,000
and $135,000, respectively, was incurred (of which approximately $850,000 in
1997 represented bonuses in excess of salaries), and is recorded in general and
administrative expense on the accompanying statements of operations.

F-55
<PAGE> 118
HADDON HOLIDAYS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED-PARTY TRANSACTIONS

In 1997 and the three months ended March 31, 1998, the Company employed and
obtained consulting services from a small number of individuals related to the
shareholders at wages and consulting fees commensurate with their experience and
level of responsibility.

In 1997 and the three months ended March 31, 1998, the Company paid
approximately $50,000 and $10,000, respectively, on behalf of the shareholders
as related to car leases and life insurance.

8. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

On March 30, 1998, Global Vacation Group, Inc. ("GVG") purchased all of the
outstanding common stock of the Company for an aggregate purchase price of
approximately $7.7 million. GVG paid this purchase price with cash. In
connection with the transaction, the Company paid bonuses of approximately
$600,000 in March 1998 to certain key employees which are included in general
and administrative expense in the accompanying 1998 statement of operations.

F-56
<PAGE> 119

IN LIEU OF PRESENTING ARTWORK ON THIS PAGE, GLOBAL VACATION GROUP, INC., IS
MAKING A DONATION OF $25,000 TO THE NATIONAL ACADEMY FOUNDATION FOR USE IN ITS
TRAVEL AND TOURISM PROGRAM. THE UNDERWRITERS ALSO ARE MAKING A $25,000 DONATION.
THE NATIONAL ACADEMY FOUNDATION IS A NONPROFIT EDUCATIONAL ORGANIZATION THAT
CREATES PARTNERSHIPS BETWEEN BUSINESS AND PUBLIC SCHOOLS TO PREPARE HIGH SCHOOL
STUDENTS FOR THEIR FUTURE EDUCATION AND CAREERS. THESE PARTNERSHIPS FORM
EDUCATIONAL PROGRAMS IN FINANCE, TRAVEL AND TOURISM AND PUBLIC SERVICE THROUGH A
COMBINATION OF CLASSROOM INSTRUCTION AND PAID INTERNSHIPS. THE NATIONAL ACADEMY
FOUNDATION IS AT THE FOREFRONT OF THE SCHOOL-TO-WORK MOVEMENT AND EDUCATION
REFORM NATIONWIDE. ACADEMY PROGRAMS, LOCATED IN MORE THAN 230 SCHOOLS IN 31
STATES, SERVE THE NEEDS OF STUDENTS WHO MAY OTHERWISE LACK THE NECESSARY SKILLS
AND EXPERIENCE TO PURSUE THEIR EDUCATIONAL GOALS OR ENTER THE JOB MARKET. OF THE
ALMOST 15,000 STUDENTS WHO HAVE GRADUATED FROM ACADEMY PROGRAMS, MORE THAN 90%
HAVE GONE ON TO ATTEND COLLEGE. ROGER H. BALLOU, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OF GLOBAL VACATION GROUP, INC., SERVES ON THE BOARD OF DIRECTORS OF THE
NATIONAL ACADEMY FOUNDATION.

<PAGE> 120

===============================================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
The Company........................... 15
The Recapitalization.................. 15
The Acquired Businesses............... 16
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Unaudited Pro Forma Condensed Combined
Financial Statements................ 20
Selected Financial Data............... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business.............................. 36
Management............................ 44
Certain Transactions.................. 48
Principal Shareholders................ 51
Description of Capital Stock.......... 52
Shares Eligible for Future Sale....... 55
Underwriting.......................... 57
Legal Matters......................... 58
Experts............................... 58
Additional Information................ 59
Index to Financial Statements......... F-1
</TABLE>

Until , 1998 (25 days after the commencement of the offering), all
dealers effecting transactions in the Common Stock, 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.

===============================================================================
===============================================================================
3,000,000 SHARES

GLOBAL VACATION GROUP, INC.

COMMON STOCK

[GLOBAL VACATION GROUP LOGO]
------------

PROSPECTUS

, 1998

------------

SALOMON SMITH BARNEY

NATIONSBANC MONTGOMERY
SECURITIES LLC

BANCAMERICA
ROBERTSON STEPHENS

ING BARING FURMAN SELZ

===============================================================================
<PAGE> 121

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all fees and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All amounts shown are
estimates except for the registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Securities and Exchange Commission registration fee......... $ 18,659
NASD filing fee............................................. 6,825
NYSE listing fee............................................ 150,000
Blue sky qualification fees and expenses.................... 12,000
Accounting fees and expenses................................ 1,400,000
Legal fees and expenses..................................... 350,000
Printing and engraving expenses............................. 300,000
Transfer agent and registrar fees........................... 15,000
Miscellaneous expenses...................................... 247,516
----------
Total............................................. $2,500,000
==========
</TABLE>

--------------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Sections 721 through 725 of the Business Corporation Law of the State
of New York (the "NYBCL"), the Registrant has broad powers to indemnify its
directors, officers and other employees. These sections (i) provide that the
statutory indemnification and advancement of expenses provisions of the NYBCL
are not exclusive, provided that no indemnification may be made to or on behalf
of any director or officer if a judgment or other final adjudication adverse to
the director or officer establishes that his or her acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that he or she personally gained in
fact a financial profit or other advantage to which he or she was not legally
entitled, (ii) establish procedures for indemnification and advancement of
expenses that may be contained in the certificate of incorporation or bylaws,
or, when authorized by either of the foregoing, set forth in a resolution of the
shareholders or directors or an agreement providing for indemnification and
advancement of expenses, (iii) apply a single standard for statutory
indemnification for third-party and derivative suits by providing that
indemnification is available if the director or officer acted in good faith, for
a purpose which he or she reasonably believed to be in the best interests of the
corporation, and in criminal actions, had no reasonable cause to believe that
his or her conduct was unlawful and (iv) permit the advancement of litigation
expenses upon receipt of an undertaking to repay such advance if the director or
officer is ultimately determined not to be entitled to indemnification or to the
extent the expenses advanced exceed the indemnification to which the director or
officer is entitled. Section 726 of the NYBCL permits the purchase of insurance
to indemnify a corporation or its officers and directors to the extent
permitted.

As permitted by Section 721 of the NYBCL, the Registrant's Amended and
Restated By-laws (the "By-laws") provide that the Registrant shall indemnify its
officers and directors, as such, to the fullest extent permitted by applicable
law, and that expenses reasonably incurred by any such officer or director in
connection with a threatened or actual action or proceeding shall be advanced or
promptly reimbursed by the Registrant in advance of the final disposition of
such action or proceeding under the circumstances permitted by the NYBCL.

The Registrant's Restated Certificate of Incorporation further provides
that no director of the Registrant shall be held personally liable to the
Registrant or its shareholders for damages for any breach of duty in his or her
capacity as a director unless a judgment or other final adjudication adverse to
such director establishes that
II-1
<PAGE> 122

(i) such director's acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law, or (ii) such director personally
gained in fact a financial profit or other advantage to which such director was
not legally entitled, or (iii) such director's acts violated Section 719 of the
NYBCL.

The Registrant intends to purchase directors' and officers' liability
insurance on behalf of its directors and others.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The transactions described below do not reflect a 12.2-for-1 split of the
Company's common stock to be effected prior to completion of this offering.

(a) On March 27, 1998, pursuant to a Recapitalization Agreement dated as of
March 18, 1998 among Thayer Equity Investors III, L.P. ("Thayer"), the
Registrant, Allied Tours Holding Corp. ("Allied Holding") and the shareholders
of Allied Holding (the "Recapitalization Agreement"), the Registrant was
recapitalized (the "Recapitalization") and issued (i) 247,215 shares of common
stock, par value $.01 per share ("Common Stock"), and 22,249 shares of Class A
Convertible Preferred Stock, par value $1,000 per share ("Convertible Preferred
Stock"), to Thayer in respect of its interest in the Registrant as of the time
of the Recapitalization and (ii) 39,034 shares of Common Stock and 3,513 shares
of Convertible Preferred Stock to Allied Holding in respect of its interest in
the Registrant as of the time of the Recapitalization. These shares were issued
without registration under the Securities Act of 1993, as amended (the
"Securities Act"), in reliance upon an exemption from registration contained in
Section 3(a)(9) thereof ("Section 3(a)(9)").

(b) On March 30, 1998, in connection with an Equity Purchase Agreement (the
"Thayer Purchase Agreement") dated as of March 30, 1998 among the Registrant,
Thayer TC Co-Investors, LLC, an affiliate of Thayer, and 16 other individuals or
entities (collectively, the "Investors"), the Registrant issued (i) a total of
266,425.4 shares of Common Stock to the Investors at a purchase price of $10 per
share for an aggregate consideration of $2,664,254 and (ii) a total of 1,227.64
shares of Convertible Preferred Stock to the Investors at a purchase price of
$1,000 per share for an aggregate consideration of $1,227,640. These shares were
issued without registration under the Securities Act in reliance upon an
exemption from registration contained in Section 4(2) thereof ("Section 4(2)").

(c) On March 30, 1998, in connection with Senior Management Agreements
entered into with each of Roger H. Ballou, the Registrant's Chief Executive
Officer and Chairman, J. Raymond Lewis, Jr., the Registrant's President and
Chief Operating Officer, and Walter S. Berman, the Registrant's Executive Vice
President and Chief Financial Officer, the Registrant issued to Messrs. Ballou,
Lewis and Berman (i) a total of 57,500 shares of Common Stock at a purchase
price of $10 per share for an aggregate consideration of $575,000 and (ii) a
total of 425 shares of Convertible Preferred Stock at a purchase price of $1,000
per share for an aggregate consideration of $425,000. These shares were issued
without registration under the Securities Act in reliance upon an exemption from
registration contained in Section 4(2).

(d) Between April 3, 1998 and May 5, 1998, pursuant to the Thayer Purchase
Agreement, the Registrant issued 22,751 shares of Convertible Preferred Stock to
Thayer at a purchase price of $1,000 per share for an aggregate consideration of
$22,751,000. These shares were issued without registration under the Securities
Act in reliance upon an exemption from registration contained in Section 4(2).

(e) On March 30, 1998, in connection with an Equity Subscription Agreement
dated as of such date by and among the Registrant and two former shareholders of
Haddon Holidays, Inc. ("Haddon"), the Registrant issued to such persons (i) a
total of 5,000 shares of Common Stock at a purchase price of $10 per share for
an aggregate consideration of $50,000 and (ii) a total of 450 shares of
Convertible Preferred Stock at a purchase price of $1,000 per share for an
aggregate consideration of $450,000. These shares were issued without
registration under the Securities Act in reliance upon an exemption from
registration contained in Section 4(2).

(f) On May 4, 1998, in connection with an Equity Subscription Agreement
dated as of April 30, 1998 by and among the Registrant and a former affiliate of
MTI Vacations, Inc. ("MTI"), the Registrant issued to such person an 24,000
shares of Common Stock at a purchase price of $10 per share for an aggregate

II-2
<PAGE> 123

consideration of $240,000 and 2,160 shares of Convertible Preferred Stock at a
purchase price of $1,000 per share for an aggregate consideration of $2,160,000.
These shares were issued without registration under the Securities Act in
reliance upon an exemption from registration contained in Section 4(2).

Each of the foregoing transactions was effected without an underwriter.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Restated Certificate of Incorporation of the Registrant
3.2+ Amended and Restated By-laws of the Registrant
4.1* Form of Specimen Common Stock Certificate
5.1* Opinion of Hogan & Hartson L.L.P.
10.1+ Recapitalization Agreement dated as of March 18, 1998 among
the Registrant, Thayer, Allied Holding and the shareholders
of Allied Holding
10.2+ Equity Purchase Agreement dated as of March 30, 1998 between
the Registrant and Thayer and certain other purchasers
10.3+ Equity Subscription Agreement dated as of March 30, 1998 by
and among the Registrant, Ralph M. Caliri and William W.
Webber
10.4+ Equity Subscription Agreement dated as of April 30, 1998
between the Registrant and James F. Miller
10.5+ Registration Rights Agreement dated as of June 12, 1998 by
and among the Registrant, Thayer and certain shareholders of
the Registrant
10.6+ Stock Purchase Agreement dated as of March 30, 1998 by and
among the Registrant, Haddon and the shareholders of Haddon
10.7+ Stock Purchase Agreement dated as of April 20, 1998 by and
among the Registrant, Classic Custom Vacations, Inc.
("Classic") and the stockholders of Classic
10.8+ Asset Purchase Agreement dated as of April 30, 1998 by and
among the Registrant, MTI and James F. Miller
10.9+ Stock Purchase Agreement dated as of May 4, 1998 by and
among the Registrant, Globetrotters, Inc. and Robert A.
Grinberg.
10.10+ Professional Services Agreement dated as of March 30, 1998
between the Registrant and TC Management Partners, LLC
10.11+ Credit Agreement dated as of March 27, 1998 by and among the
Registrant, the lenders party thereto and The Bank of New
York, as administrative agent
10.12+ Amendment No. 1 and Consent dated as of April 8, 1998 to
Credit Agreement dated as of March 27, 1998 by and among the
Registrant, the lenders party thereto and The Bank of New
York as administrative agent
10.13+ Amendment No. 2 dated as of May 5, 1998 to Credit Agreement
dated as of March 27, 1998 by and among the Registrant, the
lenders party thereto and The Bank of New York as
administrative agent
10.14+ Registrant's 1998 Stock Option Plan
10.15+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and Roger H. Ballou
10.16+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and J. Raymond Lewis, Jr.
10.17+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and Walter S. Berman
10.18+ Consulting Agreement dated as of March 27, 1998 by and
between the Registrant and Stanley Fisher
10.19+ Employment Agreement dated as of March 18, 1998 by and
between the Registrant and Michael Fisher
</TABLE>

II-3
<PAGE> 124

<TABLE>
<C> <S>
10.20+ Employment Agreement dated as of March 18, 1998 by and
between the Registrant and Gregory Fisher
10.21* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Ballou
10.22* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Lewis
10.23* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Berman
11.1 Earnings Per Share
21.1+ Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP (Financial Statements of the
Registrant)
23.2 Consent of Arthur Andersen LLP (Financial Statements of
Classic)
23.3 Consent of Arthur Andersen LLP (Financial Statements of
Haddon)
23.4 Consent of Deloitte & Touche LLP (Financial Statements of
Classic)
23.5 Consent of PricewaterhouseCoopers LLP (Financial Statements
of MTI)
23.6 Consent of James M. Sullivan (Director Nominee)
23.7* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1+ Power of Attorney
27.1 Financial Data Schedule
</TABLE>

- ---------------
+ Previously filed.
* To be filed by amendment.

(b) Financial Statement Schedule

The following schedule to the Financial Statements of the Registrant was
previously filed as a part of this Registration Statement:

Schedule II -- Allowance for Doubtful Accounts

ITEM 17. UNDERTAKINGS.

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 may be required by the
underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 of this
Registration Statement, 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.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the 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 this Registration
Statement as of the time it was declared effective.

II-4
<PAGE> 125

(2) For the purpose of determining any liability under the Securities Act,
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-5
<PAGE> 126

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WASHINGTON, DISTRICT OF
COLUMBIA, ON THE 7TH DAY OF JULY, 1998.

GLOBAL VACATION GROUP, INC.

By: /s/ ROGER H. BALLOU
------------------------------------
ROGER H. BALLOU
CHIEF EXECUTIVE OFFICER AND CHAIRMAN

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>

/s/ ROGER H. BALLOU Chief Executive Officer July 7, 1998
- ----------------------------------------------------- and Chairman
ROGER H. BALLOU (Principal Executive Officer)

/s/ WALTER S. BERMAN Executive Vice President July 7, 1998
- ----------------------------------------------------- and Chief Financial Officer
WALTER S. BERMAN (Principal Financial and
Accounting Officer)

* Director
- -----------------------------------------------------
FREDERIC V. MALEK

* Director
- -----------------------------------------------------
CARL J. RICKERTSEN

*By: /s/ ROGER H. BALLOU Attorney-in-fact July 7, 1998
-------------------------------------------------
ROGER H. BALLOU
</TABLE>

II-6
<PAGE> 127

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Global Vacation Group, Inc (formerly Allied Bus Corp.)

We have audited in accordance with generally accepted auditing standards,
the financial statements of Global Vacation Group, Inc (formerly Allied Bus
Corp.) (as defined in Note 1 of the financial statements) included in this
registration statement, and have issued our report thereon dated July 7, 1998.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II -- Allowance for Doubtful Accounts is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Washington, DC

July 7, 1998

S-1
<PAGE> 128

GLOBAL VACATION GROUP, INC.
(FORMERLY ALLIED BUS CORP.)

SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

<TABLE>
<CAPTION>
DEDUCTIONS
ADDITIONS FROM RESERVE
BALANCE AT CHARGED TO FOR PURPOSES FOR
BEGINNING COST AND WHICH RESERVE BALANCE AT
OF YEAR EXPENSE WAS CREATED END OF YEAR
---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
1995....................................... $283 $ 310 $ 283 $310
1996....................................... 310 1,208 1,070 448
1997....................................... 448 771 358 861
</TABLE>

S-2
<PAGE> 129

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
----
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Restated Certificate of Incorporation of the Registrant
3.2+ Amended and Restated By-laws of the Registrant
4.1* Form of Specimen Stock Certificate
5.1* Opinion of Hogan & Hartson L.L.P.
10.1+ Recapitalization Agreement dated as of March 18, 1998 among
the Registrant, Thayer, Allied Holding and the shareholders
of Allied Holding
10.2+ Equity Purchase Agreement dated as of March 30, 1998 between
the Registrant and Thayer and certain other purchasers
10.3+ Equity Subscription Agreement dated as of March 30, 1998 by
and among the Registrant, Ralph M. Caliri and William W.
Webber
10.4+ Equity Subscription Agreement dated as of April 30, 1998
between the Registrant and James F. Miller
10.5+ Registration Rights Agreement dated as of June 12, 1998 by
and among the Registrant, Thayer and certain shareholders of
the Registrant
10.6+ Stock Purchase Agreement dated as of March 30, 1998 by and
among the Registrant, Haddon and the shareholders of Haddon
10.7+ Stock Purchase Agreement dated as of April 20, 1998 by and
among the Registrant, Classic Custom Vacations, Inc.
("Classic") and the shareholders of Classic
10.8+ Asset Purchase Agreement dated as of April 30, 1998 by and
among the Registrant, MTI and James F. Miller
10.9+ Stock Purchase Agreement dated as of May 4, 1998 by and
among the Registrant, Globetrotters, Inc. and Robert A.
Grinberg.
10.10+ Professional Services Agreement dated as of March 30, 1998
between the Registrant and TC Management Partners, LLC
10.11+ Credit Agreement dated as of March 27, 1998 by and among the
Registrant, the lenders party thereto and The Bank of New
York, as administrative agent
10.12+ Amendment No. 1 and Consent dated as of April 8, 1998 to
Credit Agreement dated as of March 27, 1998 by and among the
Registrant, the lenders party thereto and The Bank of New
York as administrative agent
10.13+ Amendment No. 2 dated as of May 5, 1998 to Credit Agreement
dated as of March 27, 1998 by and among the Registrant, the
lenders party thereto and The Bank of New York as
administrative agent
10.14+ Registrant's 1998 Stock Option Plan
10.15+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and Roger H. Ballou
10.16+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and J. Raymond Lewis, Jr.
10.17+ Senior Management Agreement dated as of March 30, 1998
between the Registrant and Walter S. Berman
10.18+ Consulting Agreement dated as of March 27, 1998 by and
between the Registrant and Stanley Fisher
10.19+ Employment Agreement dated as of March 18, 1998 by and
between the Registrant and Michael Fisher
10.20+ Employment Agreement dated as of March 18, 1998 by and
between the Registrant and Gregory Fisher
10.21* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Ballou
10.22* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Lewis
</TABLE>

<PAGE> 130

<TABLE>
<CAPTION>
PAGE
----
<C> <S>
10.23* Amendment No. 1 dated as of June 24, 1998 to Senior
Management Agreement dated as of March 30, 1998 between the
Registrant and Mr. Berman
11.1 Earnings Per Share
21.1+ Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP (Financial Statements of the
Registrant)
23.2 Consent of Arthur Andersen LLP (Financial Statements of
Classic)
23.3 Consent of Arthur Andersen LLP (Financial Statements of
Haddon)
23.4 Consent of Deloitte & Touche LLP (Financial Statements of
Classic)
23.5 Consent PricewaterhouseCoopers LLP (Financial Statements of
MTI)
23.6 Consent of James M. Sullivan (Director Nominee)
23.7* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1+ Power of Attorney
27.1 Financial Data Schedule
</TABLE>

- ---------------
+ Previously filed.
* To be filed by amendment.

<PAGE> 1
Exhibit 11.1

Global Vocation Group, Inc.
Earnings Per Share
Calculation of Pro forma Weighted-Average Shares Outstanding

Year Ended Three Months
December 31, Ended March 31,
1997 1998
--------- ---------
<S> <C> <C>
Common Stock 5,291,262 5,100,589
Convertible Preferred Stock -- 290,330
--------- ---------
Pro forma basic and
diluted weighted average
shares outstanding 5,291,262 5,390,919
========= =========

</TABLE>

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) relating to Global Vacation Group, Inc.
(formerly Allied Bus Corp.) included in or made a part of this registration
statement.

/s/ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Washington, D.C.
July 7, 1998

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) relating to Classic Custom Vacations
included in or made a part of this registration statement.

/s/ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

San Jose, California
July 7, 1998

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) relating to Haddon Holidays, Inc. included
in or made a part of this registration statement.

/s/ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Washington, D.C.
July 7, 1998

<PAGE> 1
EXHIBIT 23.4

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 3 to Registration Statement No.
333-52673 of Global Vacation Group, Inc. of our report dated May 21, 1997 on
the financial statements of Classic Custom Vacations for the year ended
December 31, 1996, appearing in the Prospectus, which is part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.

/s/DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
San Jose, California
July 7, 1998

<PAGE> 1
EXHIBIT 23.5

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1
(File No. 333-52673) of our report dated March 27, 1998, except for Notes 1 and
10, as to which the date is May 1, 1998, on our audits of the financial
statements of MTI Vacations. We also consent to the reference to our firm under
the caption "Experts."

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Chicago, Illinois
July 2, 1998

<PAGE> 1
EXHIBIT 23.6

CONSENT OF DIRECTOR NOMINEE

I hereby consent to being named as a Director Nominee in the Registration
Statement on Form S-1 (File No. 333-52673) of Global Vacation Group, Inc.

/s/ JAMES M. SULLIVAN

JAMES M. SULLIVAN

Washington, D.C.
July 7, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GLOBAL
VACATION GROUP, INC. BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1 REGISTRATION STATEMENT, #333-52673
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,685
<SECURITIES> 2,384
<RECEIVABLES> 9,060
<ALLOWANCES> 747
<INVENTORY> 0
<CURRENT-ASSETS> 16,371
<PP&E> 556
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,401
<CURRENT-LIABILITIES> 30,031
<BONDS> 13,400
0
28,015
<COMMON> 75
<OTHER-SE> (44,120)
<TOTAL-LIABILITY-AND-EQUITY> 27,401
<SALES> 2,477
<TOTAL-REVENUES> 0
<CGS> 3,032
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,100)
<INCOME-TAX> (61)
<INCOME-CONTINUING> (2,039)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,039)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>