<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------
<TABLE>
<S> <C> <C>
NEVADA 4724 86-0885559
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
100 SECOND AVENUE SOUTH, SUITE 1100S
ST. PETERSBURG, FLORIDA 33701-4301 (727) 896-1513
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
DANIEL G. BRANDANO, JR.
CHIEF EXECUTIVE OFFICER
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
100 SECOND AVENUE SOUTH, SUITE 1100S
ST. PETERSBURG, FLORIDA 33701-4301
(727) 896-1513
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
JOHN G. NOSSIFF, JR., ESQ.
BROWN, RUDNICK, FREED & GESMER
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
TEL: (617) 856-8200
FAX: (617) 856-8201
----------------------
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
<PAGE>
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 29,103,094 Shares (2) $4.812 $140,044,089 $36,972
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. Based upon the average
of the high and low prices of the common stock as quoted on the National
Association of Securities Dealers OTC Bulletin Board on March 7, 2000.
(2) Includes 19,158,094 shares being registered for resale by selling
stockholders and 9,945,000 shares issuable upon the exercise of outstanding
warrants.
--------------------------
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 SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH ___, 2000
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
29,103,094 SHARES OF COMMON STOCK
-----------------------
Of the 29,103,094 shares offered under this prospectus, we are selling
9,945,000 shares of our common stock issuable upon the exercise of outstanding
warrants to purchase common stock, and the selling stockholders of Affinity
International Travel Systems, Inc. identified on page 56of this prospectus may
offer, sell or otherwise transfer up to 19,158,094 shares of our common stock,
including 8,750,000 shares registered hereunder for issuance upon the exercise
of outstanding warrants. We will not receive any of the proceeds from the sale
of shares of common stock by the selling stockholders.
Our common stock is quoted on the National Association of Securities
Dealers Inc.'s OTC Bulletin Board under the symbol "AFFT." On March 7, 2000, the
last quoted sale price of the common stock was $4.687 per share.
-----------------------
AN INVESTMENT IN THE COMMON STOCK OFFERED UNDER THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
-----------------------
<TABLE>
- -----------------------------------------------------------------------------------------
Per Share Total
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Price to Public and Proceeds to Affinity (warrant shares) (1) $0.31 $3,085,000
- -----------------------------------------------------------------------------------------
Price to Public and Proceeds to Selling Stockholders (2) $4.687 $89,793,987
- -----------------------------------------------------------------------------------------
</TABLE>
(1) The amount of proceeds to Affinity assumes the exercise of the warrants to
purchase 9,945,000 shares of our common stock, at a weighted average exercise
price of $0.31 per share. In the event that the registration statement, of which
this prospectus is a part, is not declared effective by the SEC by June 20,
2000, then it is unlikely that we will receive $2,187,500 of proceeds from the
exercise of warrants to purchase an aggregate of 8,750,000 shares of common
stock, because the shares of common stock underlying those warrants may, in such
event, be acquired through a cashless exercise of the warrants.
(2) Based on the last quoted sale price of Affinity's common stock as quoted on
the OTC Bulletin Board on March 7, 2000.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------
THE DATE OF THIS PROSPECTUS IS MARCH ___, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY...............................................................1
RISK FACTORS.....................................................................5
WARNINGS REGARDING FORWARD-LOOKING STATEMENTS...................................18
USE OF PROCEEDS.................................................................20
DIVIDEND POLICY.................................................................20
PRICE RANGE OF COMMON STOCK.....................................................21
DILUTION........................................................................22
SELECTED CONSOLIDATED FINANCIAL DATA............................................24
PRO FORMA FINANCIAL DATA........................................................26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS......................................................................31
BUSINESS........................................................................40
MANAGEMENT......................................................................50
PRINCIPAL AND SELLING STOCKHOLDERS..............................................56
DESCRIPTION OF CAPITAL STOCK AND OTHER MATTERS..................................62
SHARES ELIGIBLE FOR FUTURE SALE.................................................64
PLAN OF DISTRIBUTION............................................................65
LEGAL MATTERS...................................................................65
EXPERTS.........................................................................65
WHERE YOU CAN FIND MORE INFORMATION.............................................65
</TABLE>
We maintain world wide web sites at WWW.AFFINITYINTERNATIONAL.COM,
WWW.SUNSTYLE.COM, WWW.FARAWAY.COM, WWW.AFFINITYRENTACAR.COM and
WWW.CRUISEAFFINITY.COM. Information contained on our web sites does not
constitute part of this prospectus.
As used in this prospectus, the terms "we," "us," "our," and "Affinity"
mean Affinity International Travel Systems, Inc. and its subsidiaries (unless
the context indicates a different meaning), and the terms "common stock" means
our common stock, $.001 par value per share.
ii
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS" AND OUR FINANCIAL STATEMENTS AND
THE NOTES TO THE FINANCIAL STATEMENTS, BEFORE MAKING AN INVESTMENT DECISION.
ABOUT AFFINITY
Affinity International Travel Systems, Inc., operating primarily through
its wholly-owned subsidiary, SunStyle International Holidays, Inc., is engaged
in the business of marketing, selling and distributing a variety of travel
related products and services. Specifically, we market, sell and distribute
vacation packages, tours, cruises, domestic and international airline tickets,
car rentals and accommodation products and services to travel agencies and
consumers. We are currently implementing a business strategy to utilize the
Internet as a delivery platform for our inventory of travel related products and
services.
A key component of our Internet business strategy is to focus our resources
in two segments: the business to consumer and business to business travel arena.
We intend to concentrate our resources on the business to business online travel
arena, where our objective is to sell to other travel providers leisure travel
products that traditionally have had higher margins than airline ticket sales,
including, among others, vacation packages, tours and cruises. We also intend to
continue to sell our leisure travel products directly to consumers.
We intend to fulfill demand for our travel products, in both the business
to business and business to consumer online travel arenas, by aggregating our
inventory of packaged leisure travel products and using the Internet as the
delivery platform. We believe our Internet business strategy is different from
current online travel distribution organizations which derive the majority of
their revenue from airline tickets sales, the least profitable but highest
volume product in the travel services industry. In order to implement our
business strategies, we have undertaken the following strategic initiatives:
- DEVELOPMENT AND ACQUISITION OF TECHNOLOGIES. We have developed and
acquired technologies and software relating to processing on-line
queries, vacation packaging, booking transactions, and making travel
reservations, all of which are currently available to travel agents
and consumers. Our software systems include TOURSCAPE, TOURWISE,
BOOKIT! and AND BOOKIT! PRO. Each of these software systems is
designed to assist us in developing and packaging customized travel
plans and reservations.
- SPECIALIZED KNOWLEDGE AND EXPERTISE IN DESTINATION MARKETS. We have
primarily focused our marketing and selling efforts on the following
destinations: Caribbean, Hawaii, Florida and Mexico. We believe our
knowledge of these markets provides us with the expertise necessary to
provide high-quality service to our clients.
- STRATEGIC RELATIONSHIPS WITH SUPPLIERS. We have negotiated
arrangements with major hotels and resorts, airlines, cruise and auto
rental companies, which allow us to offer competitive pricing and give
us access to a broader inventory base than suppliers who lack these
relationships. We believe that these arrangements give us a
competitive advantage over suppliers and other travel agencies who
lack these relationships because our experience has shown that travel
providers are increasingly utilizing specialized distributors, such as
Affinity, as a preferred source of distribution.
<PAGE>
We believe that our current infrastructure should enable us to take
advantage of the projected growth in online travel. Forrester Research reports
that online travel sales are projected to increase from $2.8 billion in 1999 to
$30 billion by 2003.
We plan to implement our Internet business strategy through the development
and implementation of our FarAway.com web site, which will utilize our existing
hardware and software infrastructure, strategic partnerships and existing vendor
contracts. This web site will be designed to attract a base of potential
customers in the United States, Europe, Asia and Latin America, and to convert
these potential customers into leisure travel buyers. We plan to implement our
strategy as follows:
- SALE OF SPECIALIZED LEISURE TRAVEL PACKAGES. We plan to have
specialized vacation package inventory available to consumers, which
can be accessed by our web site through the use of our online software
and tools that will help facilitate complex and specialized leisure
travel purchases. We expect that our established vendor relationships
will enable us to provide specialized packages at rates that customers
will find attractive.
- CUSTOMER SERVICE. Our customer service will be available to customers
to provide both on and offline assistance to ensure that the customer
is receiving the service that a customer would generally receive
through the use of an 800 number or a conventional travel agent. We
believe that because users of our site will have access to our travel
specialists through real time chat, Internet telephony, 800 telephone
service, and, in the future, Internet based video communication,
customers will begin to feel more comfortable making online travel
purchases.
- STRATEGIC PARTNERSHIPS AND ALLIANCES. In addition to traditional types
of online partnerships, such as those for content and advertising, we
intend to pursue online strategic partnerships and alliances with
other e-commerce companies. These relationships would allow us to
create a link from the online vendor's site to our site. The online
vendor would receive a commission for any sales generated on our site
as a result of the link. We believe that relationships with other
e-commerce companies should generate traffic to our web site, increase
the number of our customers and generate revenue.
- STRATEGIC ACQUISITIONS. We plan to seek strategic acquisitions within
the leisure travel industry. We believe the leisure travel industry is
highly fragmented, and includes numerous small, specialized
distributors. We believe growth opportunities are available through
acquisitions. We also believe that we will be able to broaden our
offering of specialized travel services, increase our level of
customer service, and improve our Internet and technology
infrastructure through strategic acquisitions.
- CREATE FARAWAY.COM REFERRAL PROGRAM. We plan to seek referral
relationships with other online vendors to increase our online traffic
and sales.
- TARGET EUROPEAN AND LATIN AMERICAN GEOGRAPHIC MARKETS. With the rapid
growth in the number of Internet users, especially in Europe and Latin
America, we plan to expand our target market beyond the United States,
to include more countries in Europe and Latin America. In anticipation
of expanding our international operations, we have opened an office in
the United Kingdom which is currently being connected to our TOURSCAPE
software system located in Florida.
Affinity International Travel Systems, Inc. was incorporated in Nevada in
1977 under the name Medanco, Inc. From 1977 through 1997, Medanco had no
revenues and limited operations. In 1997, Medanco changed its name to Pay Dirt,
Inc., which had no operations until it completed the acquisition of SunStyle
International Holidays, Inc. in July 1998, at which point it changed its name to
Affinity
2
<PAGE>
International Travel Systems, Inc. Since 1998, we have been primarily engaged in
marketing and selling travel products to travel agents and consumers.
Our principal executive offices are located at 100 Second Avenue South,
Suite 1100S, St. Petersburg, Florida 33701-4301, and our telephone number is
(727) 896-1513. Our web sites are located at WWW.AFFINITYINTERNATIONAL.COM,
WWW.SUNSTYLE.COM, WWW.FARAWAY.COM, WWW.AFFINITYRENTACAR.COM and
WWW.CRUISEAFFINITY.COM.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Affinity (1) .................................... 9,945,000 shares
Common stock offered by the selling stockholders......................... 19,158,094 shares
Common stock to be outstanding after the offering........................ 25,127,374 shares
Use of proceeds (2)...................................................... We will not receive any proceeds
from the sale of common stock by
the selling stockholders. We will
receive an aggregate of $3,085,000
upon the exercise of the warrants
to purchase 9,945,000 shares. We
intend to use the proceeds received
from the exercise of the warrants
for working capital and general
corporate purposes.
OTC Bulletin Board Symbol................................................ AFFT
</TABLE>
------------------
(1) Assumes the exercise of warrants to purchase 9,945,000 shares of our
common stock. We cannot guarantee that the holders of the warrants
will exercise their warrants into shares of our common stock. In the
event that the registration statement, of which this prospectus is a
part, is not declared effective under the Securities Act of 1933 by
June 20, 2000, then it is unlikely that we will receive $2,187,500 of
proceeds from the exercise of warrants to purchase an aggregate of
8,750,000 shares of common stock, because the shares of common stock
underlying those warrants may, in such event, be acquired through a
cashless exercise of the warrants.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Six months ended
Statement of Income Data: Year ended June 30, (1) December 31, (1)
------------------------------------------------------------- -----------------------
1995(2) 1996 1997 1998 1999 1998 1999
----------- ------------ ---------- ------------ ---------- ----------- -----------
(Unaudited)(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $-- $69 $665 $1,329 $2,325 $667 $2,056
Cost of sales -- 35 542 770 1,586 534 1,301
---------- ---------- ---------- ---------- ---------- ---------- -----------
Gross profit -- 34 123 559 739 133 755
Operating expenses 5 85 437 1,703 3,696 713 3,218
---------- ---------- ---------- ---------- ---------- ---------- -----------
Operating loss (5) (51) (314) (1,144) (2,957) (580) (2,463)
Interest income (expense), net -- -- (1) (41) (2,240) -- 9
Gain on sale of subsidiary -- -- -- -- -- -- 1,093
Financing charges -- -- -- -- -- -- (2,467)
Other income (expense), net -- -- (3) 16 14 2 (63)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net loss $(5) $(51) $(318) $(1,169) $(5,183) $(578) $(3,891)
========== ========== ========== ========== ========== ========== ===========
Net loss per common share:
Basic and diluted $(-) $(.02) $(.11) $(.27) $(.82) $(.11) $(.29)
Weighted average common shares
outstanding:
Basic and diluted (3) 2,800,000 2,800,000 2,848,718 4,249,506 6,290,174 5,383,060 13,556,085
</TABLE>
<TABLE>
<CAPTION>
Six months ended
Balance Sheet Data: Year ended June 30, (1) December 31, (1)
------------------------------------------------------------ -----------------------
1995(2) 1996 1997 1998 1999 1998 1999
----------- ----------- ----------- ------------ --------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $-- $21 $326 $64 $1,120 $11 $57
Working capital -- (102) 193 (596) 338 (542) (1,353)
Total assets -- 95 547 395 3,665 534 2,002
Long-term debt, less current maturities -- -- 9 -- -- -- --
Capital lease obligation, less current -- --
portion -- 38 23 29 16
Convertible debentures -- -- 150 -- 25 -- --
Total liabilities -- 146 362 834 1,360 872 2,178
Stockholders' equity (deficit) -- (51) 185 (439) 2,305 (338) (176)
</TABLE>
FOOTNOTES
(1) On July 31, 1998, Affinity acquired SunStyle in a transaction accounted
for as a purchase of Affinity by SunStyle (a reverse acquisition in which
SunStyle is considered the acquirer for accounting purposes). Therefore,
the historical financial statements herein are those of SunStyle. See Note 1
to the Consolidated Financial Statements for the three years ended June 30,
1999. In December 1999, we disposed of Prestige Travel Services, Inc.
(acquired on January 1, 1999) by selling all of its outstanding common stock
to its original stockholders. Prestige accounted for $626,000 and $590,000
of our revenues for the year ended June 30, 1999 and the six months ended
December 31, 1999, respectively. Our revenues in future periods will be
substantially less than shown in our Consolidated Financial Statements for
the three years ended June 30, 1999 and the six months ended December 31,
1999 if we are unable to replace the revenues we previously received from
Prestige's operations.
(2) The Predecessor commenced operations in May 1995 and had no revenues,
insignificant operating activity and minimal capitalization for the period
from inception to June 30, 1995.
(3) The weighted average common shares outstanding for the year ended June 30,
1995, 1996 and 1997, have been adjusted to reflect additional shares issued to
the then sole stockholder and a stock split which occurred during the year
ended June 30, 1997.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS BEFORE DECIDING TO
INVEST IN THE SHARES OF COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US, THAT WE CURRENTLY DEEM IMMATERIAL OR THAT ARE SIMILAR TO
THOSE FACED BY OTHER COMPANIES IN OUR INDUSTRY OR BUSINESS IN GENERAL, MAY ALSO
IMPAIR OUR BUSINESS OPERATIONS. THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THE RISKS FACED BY US DESCRIBED BELOW AND
ELSEWHERE IN THIS PROSPECTUS. PLEASE REFER TO "FORWARD-LOOKING STATEMENTS" ON
PAGE 18.
INVESTORS SHOULD ASSUME THAT, EVEN IF NOT SPECIFICALLY STATED BELOW, IF
ANY OF THE FOLLOWING RISKS ACTUALLY MATERIALIZE, OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF FUTURE OPERATIONS COULD BE MATERIALLY AND ADVERSELY
AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND
YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
WE HAVE A HISTORY OF NET LOSSES. IF WE ARE UNABLE TO BECOME PROFITABLE IT IS
UNLIKELY THAT WE WILL BE ABLE TO CONTINUE OUR OPERATIONS.
We have sustained substantial and recurring losses in each of the last
three fiscal years ended June 30, 1997, 1998 and 1999 and the six months ended
December 31, 1999. For these periods, we had aggregate net losses totaling
$10,561,000. For the fiscal year ended June 30, 1999, we had a net loss of
$5,183,000, and for the six months ended December 31, 1999, we had a net loss of
$3,891,000.
We expect significant losses and negative cash flow to continue for the
foreseeable future. We anticipate our losses will increase significantly from
current levels because we expect to incur significant additional costs and
expenses in excess of revenues in connection with our future operations.
Our operating losses and negative cash flow have materially and adversely
affected our financial condition and our ability to meet our financial
obligations on a current basis. If we continue to sustain losses and negative
cash flow, it is unlikely that we will be able to continue our operations. For
more information, please see our discussion of liquidity and capital resources
contained in our management's discussion and analysis of financial condition and
results of operations beginning on page 31 of this prospectus.
Our ability to become profitable depends on our ability to generate and
sustain substantially higher revenue while maintaining reasonable expense
levels. In particular, although we intend, to the extent our resources permit,
to increase significantly our spending on marketing and promotional activities,
these efforts may not be effective in converting a large number of customers
from traditional shopping methods to online shopping for travel products and
services or attracting online customers to our web site and thereafter
generating sales. In addition, we may be obligated to pay commissions, based on
a percentage of revenue, to companies with whom we have online marketing
relationships. These costs will increase as our revenues increase. If we do
achieve profitability, we cannot be certain that we will be able to sustain or
increase profitability on a quarterly or annual basis in the future. If we are
unable to generate and sustain higher revenue and achieve and sustain
profitability, it is unlikely that we will be able to continue our operations.
5
<PAGE>
WE HAVE BEEN UNABLE TO FUND OUR OPERATIONS WITH INTERNALLY GENERATED FUNDS
BECAUSE OUR BUSINESS HAS GENERATED NEGATIVE CASH FLOW. IF WE DO NOT GENERATE
SUFFICIENT CASH FROM OPERATIONS, WE WILL NEED ADDITIONAL FINANCING TO FUND
CONTINUED OPERATIONS AND IMPLEMENT OUR INTERNET BUSINESS STRATEGY AND SUCH
FINANCING MAY NOT BE AVAILABLE.
We have and will continue to require substantial capital to fund our
business. Since our inception, we have experienced and expect to continue to
experience for the foreseeable future negative cash flow from operations and
will need to raise additional capital to fund our operations and implement our
Internet business strategy within approximately thirty to sixty days. For the
fiscal year ended June 30, 1999 and for the six months ended December 31, 1999,
we used $1,801,000 and $1,452,000 of cash for our operating and investing
activities, respectively.
As of December 31, 1999, we had a working capital deficit of $1,352,000.
During January and February 2000 we raised additional capital totaling
$1,670,000 that was used to reduce our working capital deficit and is being used
to fund negative cash flow from operations and capital expenditures related to
the implementation of our Internet business strategy. In addition, $400,000 of
current liabilities were converted into warrants to purchase shares of our
common stock. For more information regarding our working capital deficiency,
please see the liquidity and capital resources discussion contained on page 31
of our management's discussion and analysis of financial condition and results
of operations. We expect to continue to experience for the foreseeable future
negative cash flow from operations and continued use of cash to implement our
Internet business strategy. We will need additional capital within approximately
thirty to sixty days to fund our operations and implement our Internet business
strategy.
In order to fund our operations and continue the implementation of our
Internet business strategy, we anticipate the need to raise at least $6.0
million in additional capital during the calendar year 2000. We will need to
raise a portion of that capital within approximately thirty to sixty days to
fund negative cash flow from operations and fund capital expenditures related to
the implementation of our Internet business strategy. If we raise additional
funds through the issuance of equity or debt securities, those securities may
have rights senior to those of our stockholders, and our stockholders will
experience substantial additional dilution. We cannot be certain that additional
financing will be available to us on favorable terms when required, or at all.
Additionally, we cannot be certain that this additional financing will be
sufficient to fund the implementation of our Internet business strategy. Our
failure to obtain sufficient additional funds, either through additional
financing or continuing operations, will have a material adverse effect on our
business and financial condition, our ability to implement our Internet business
strategies and our ability continue our operations.
IF WE ARE UNABLE TO BECOME A REPORTING COMPANY UNDER THE EXCHANGE ACT BY MAY 3,
2000, WE WILL BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD HAVE AN ADVERSE
EFFECT ON OUR STOCK PRICE AND OUR ABILITY TO RAISE ADDITIONAL CAPITAL.
Our common stock is currently quoted on the OTC Bulletin Board, which is
administered by the National Association of Securities Dealers, Inc. The Board
of Governors of the NASD recently enacted a rule that provides for the removal
from the OTC Bulletin Board of the stock of any company that does not file
periodic reports with the SEC pursuant to the Exchange Act before a specified
date. We do not currently file periodic reports with the SEC because our common
stock is not registered under the Exchange Act. We intend to register our common
stock under the Exchange Act and commence filing periodic reports with the SEC
upon the effectiveness of this registration statement. If our common stock is
not registered under the Exchange Act prior to May 3, 2000, then our common
stock will be removed from the OTC Bulletin Board and quotations for our common
stock would no longer be available on the OTC Bulletin Board. There is a
substantial risk that our common stock will not be registered under the Exchange
Act by May 3, 2000. The removal of our common stock from the OTC Bulletin Board
would have a material adverse effect on the price of and any trading market for
our common stock. In addition, the removal of our common stock from the OTC
Bulletin Board would have a material adverse effect on our ability to raise
additional capital.
6
<PAGE>
A SUBSTANTIAL NUMBER OF OUR SECURITIES WILL PROBABLY BE SOLD IN THE MARKET IN
THE NEAR FUTURE. THIS COULD CAUSE OUR STOCK PRICE TO DECLINE SIGNIFICANTLY, EVEN
IF OUR BUSINESS IS DOING WELL.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of our common stock in the market after this
offering or the perception that such sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
and at a price that we deem appropriate. As of March 7, 2000, we had
approximately 15,182,374 shares of common stock outstanding, which does not
include the 9,945,000 shares issuable upon exercise of outstanding warrants
which are being registered pursuant to the registration statement of which this
prospectus is a part.
Upon the effectiveness of the registration statement of which this
prospectus is a part, assuming the exercise of all outstanding warrants being
registered hereunder, approximately 24,749,352 shares will be freely tradable
without restriction under the Securities Act of 1933, as amended. In addition,
upon the effectiveness of the registration statement, of which this prospectus
is a part, subject to certain volume and other limitations, approximately 79,156
shares will be currently eligible for sale under Rule 144, and approximately
387,722 shares will be eligible for public sale without registration at
different times during the next twelve months, pursuant to Rule 144.
In addition to the 9,945,000 shares being registered for issuance upon
exercise of outstanding warrants, we also have outstanding warrants to purchase
34,535 shares of our common stock, which are not being registered under the
registration statement of which this prospectus is a part. The weighted average
purchase price of the outstanding warrants to purchase 9,979,535 shares of our
common stock is $0.32 per share.
We also have outstanding options to purchase 2,165,000 shares of our common
stock at a weighted average exercise price of approximately $0.54 per share.
Further, shortly after the effectiveness of the registration statement, of which
this prospectus is a part, we intend to file a Form S-8 registration statement
under the Securities Act registering 4,000,000 shares of common stock issuable
under our combination stock option plan, including the 2,165,000 options
currently outstanding. The sale of even a small number of the outstanding shares
of common stock may have a material adverse effect on the quoted price of our
common stock. The sale of any such shares may also have a material adverse
effect on our ability to raise capital and/or materially adversely affect the
quoted price of our common stock.
WE MADE SALES OF SECURITIES UNDER RULE 504 OF REGULATION D THAT MAY NOT HAVE
COMPLIED WITH RULE 504 AND WE MAY BE SUBJECT TO SUBSTANTIAL LIABILITY AS A
RESULT.
From July 1998 to January 1999, we made sales of common stock in
reliance upon the exemption from registration contained in Rule 504 of
Regulation D. With respect to the foregoing transactions made in reliance
upon the exemption contained in Rule 504 of Regulation D, it has since come
to our attention that such transactions may not have been made in compliance
with Rule 504. We are currently evaluating the matter, and if we determine
that the transactions were not in compliance with Rule 504, we intend to take
appropriate corrective action, including possibly offering recission rights
to the investors in such transactions. If the transactions were not in
compliance with Rule 504, we could be subject to substantial liabilities,
which could materially and adversely affect our financial condition and
results of operation.
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OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR NEW INTERNET BUSINESS MODEL IS
CURRENTLY IN THE EARLY STAGES OF DEVELOPMENT AND IMPLEMENTATION. IF A MARKET FOR
OUR PRODUCTS AND SERVICES DOES NOT DEVELOP, WE MAY BE UNABLE TO SUCCESSFULLY
IMPLEMENT OUR BUSINESS STRATEGY.
Our market may not develop as anticipated, and we may not successfully
execute our Internet business strategy. We have a limited operating history upon
which you can evaluate our business. Our new Internet business model is
currently in the early stages of development and implementation, including our
FarAway.com web site. In 1999, we began transitioning our way of doing business
to online sales of travel related products and services. In evaluating our
business, you must consider the challenges, risks and difficulties frequently
encountered by early stage companies using new and unproven business models in
new and rapidly evolving markets. Some of these challenges relate to our ability
to:
- increase our brand name recognition;
- expand our customer base;
- manage our supplier/distributor relationships; and
- develop and upgrade our web sites, transaction-processing systems,
fulfillment infrastructure and inventory management systems.
We cannot be certain that our Internet business strategy will be successful
or that we will successfully address these and other challenges, risks and
uncertainties.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO FORECAST OUR FUTURE
REVENUES. ACCORDINGLY, WE MAY ACHIEVE A LEVEL OF REVENUES THAT IS LOWER THAN WE
EXPECT, WHICH WOULD RESULT IN GREATER THAN EXPECTED LOSSES.
As a result of our limited operating history with our current Internet
business model, it is difficult to accurately forecast future revenues. We may
be unable to adjust our spending in a timely manner to compensate for any
unexpected revenue shortfall. Also, we have limited meaningful historical
financial data upon which to base planned operating expenses. We base our
current and future expense levels on our operating plans and estimates of future
revenue. Revenue and operating results are difficult to forecast because they
generally depend on the volume and timing of the orders we receive. As a result,
we may be unable to adjust our spending in a timely manner to compensate for any
unexpected revenue shortfall, which would result in further substantial losses.
We may also be unable to expand our operations in a timely manner to adequately
meet customer demand to the extent it exceeds our expectations.
OUR HISTORICAL FINANCIAL RESULTS ARE NOT MEANINGFUL TO AN ANALYSIS OF OUR
CURRENT BUSINESS.
The financial data included in this document covers periods prior to the
transition to our current Internet business strategy and is not necessarily
meaningful to an analysis of our current business. Since our incorporation, we
have completed several acquisitions, such as the acquisition of Prestige Travel
Services II, Inc., Goldmark Travel and Intrepid Travel. We have also
subsequently sold Prestige and Goldmark. Prestige, which was sold in December
1999, accounted for a substantial portion of our retail travel revenue in 1999.
Accordingly, revenues in future periods will be substantially less than prior
periods, unless we are able to replace the lost revenues from the Prestige and
Goldmark business with new business. The financial data included in this
document are not necessarily indicative of the results that may be realized in
the future during and after implementation of our Internet based travel
strategy.
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IF OUR TECHNOLOGY OR THE TECHNOLOGY OF THIRD PARTIES UPON WHICH OUR SYSTEMS RELY
EITHER FAIL OR MALFUNCTION, OUR ABILITY TO PROCESS TRANSACTIONS WOULD BE HARMED,
WHICH WOULD HAVE A MATERIAL AND ADVERSE AFFECT ON OUR BUSINESS.
We are currently dependent upon a number of different information and
telecommunication technologies to facilitate our access to information and
manage a high volume of inbound and outbound calls. Any failure of this
technology would have a material adverse effect on our business, financial
condition and results of operations. In addition, we are dependent upon certain
third party vendors, including central reservation systems (also known as global
distribution systems), such as SABRE, Amadeus and Worldspan for access to
certain information. Any failure or malfunction of these systems or restricted
access by us would have a material adverse effect on our business, financial
condition and results of operations.
OUR NEW TECHNOLOGY MAY NOT BE SUCCESSFULLY DEVELOPED, INSTALLED OR IMPLEMENTED
WITHOUT DISRUPTING OUR BUSINESS.
We are currently replacing many of our existing computer systems and web
sites with systems designed to operate with our new web site, FarAway.com. There
can be no assurance that these new systems will be successfully developed,
installed according to the expected time frame or within the anticipated budget,
implemented without any disruption to our business or result in the intended
operational benefits and cost efficiencies.
IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR SERVICES COULD BECOME
OBSOLETE AND WE COULD LOSE CUSTOMERS.
To be competitive, we must enhance and improve the functionality and
features of our online technology. The Internet and the online commerce industry
are rapidly changing. If competitors introduce new products and services
embodying new technologies, or if new industry standards and practices emerge,
our existing web sites, technology and systems may become obsolete. Our future
success will depend on our ability to do the following:
- both license and internally develop leading technologies useful in our
business;
- enhance our existing services and product offerings;
- develop new services, product offerings and technologies that address
the increasingly sophisticated and varied needs of our prospective
customers; and
- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
Ongoing development of our web sites and other technology entails
significant expense and technical risks. We may use new technologies
ineffectively or we may fail to adapt our web sites, transaction-processing
systems and network infrastructure to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements, our customers may forego the use of our services and instead, use
those of our competitors.
IF WE FAIL TO COMPETE EFFECTIVELY IN OUR MARKET, WE WILL BE UNABLE TO GENERATE
SALES WHICH WILL HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
The travel service industry is extremely competitive and has relatively low
barriers to entry. We primarily compete with:
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- other distributors of travel services;
- travel providers;
- travel agents;
- tour operators; and
- central reservation service providers.
Many of our competitors have greater experience, brand name recognition
and/or financial resources than we do. Our major competitors include:
Travelocity, Expedia, Preview Travel, Get There.com and Trip.com, Travel
Network, Uniglobe Travel and Lowestfare.com.
There is the risk that our travel providers may decide to compete more
directly with us and restrict the availability of their product
offerings/services and/or preferential pricing. In addition, other distributors
may have relationships with travel providers that enable them to provide better
product offerings or more competitive pricing than that offered by us.
Furthermore, some travel agents have a strong presence in their geographic area
that may make it difficult for us to attract customers in those areas.
Competition within the travel service industry is increasing as some of our
competitors are expanding their size and financial resources through
consolidation. Consolidation among travel suppliers has left the remaining
suppliers in a stronger position relative to providers of travel products and
services such as Affinity.
As a result of competitive pressures, we may suffer reduced revenues and
operating margins, loss of market share and diminished brand awareness. We may
be unable to compete successfully and our failure to compete successfully may
have a material adverse effect on our business, financial condition and results
of operations.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND MAY RESULT IN OUR LOSS
OF RIGHTS TO TECHNOLOGY WHICH IS IMPORTANT TO THE SUCCESS OF OUR BUSINESS
OPERATIONS.
We regard trademarks, copyrights, service marks, trade secrets, and similar
intellectual property as important to our success. We rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers and others to protect our intellectual
property rights.
Other parties may assert infringement or unfair competition claims against
us. If we are forced to defend against any claims of infringement, whether they
have merit or are determined in our favor, we will be subject to costly
litigation, diversion of technical and management personnel, and product
delivery delays. If there is a successful claim of infringement against us and
we are unable to develop non-infringing technology or license the infringed or
similar technology on a timely basis, or if we are required to cease using one
or more of our business or product names due to a successful trademark
infringement claim against us, it could adversely affect our business.
In addition, effective trademark, service mark, copyright, and trade secret
protection may not be available in every country in which we sell our products
and services online. Therefore, the steps we take to protect our intellectual
property rights may be inadequate and our business could be adversely affected.
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IF WE ARE UNABLE TO RETAIN OR ACQUIRE THE NECESSARY DOMAIN NAMES, OUR BRAND AND
REPUTATION COULD BE DAMAGED AND WE COULD LOSE CUSTOMERS.
We currently hold the web domain names affinityinternational.com,
faraway.com, sunstyle.com, affinityrentacar.com, and cruiseaffinity.com. The
acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees.
In the United States, the National Science Foundation has appointed Network
Solutions, Inc., and recently several others, as the current registrars for the
".com", ".net" and ".org" generic top-level domains. The regulation of domain
names in the United States and in foreign countries is subject to change in the
near future. As a result, we may be unable to acquire or maintain relevant
domain names in all countries in which we conduct business. Furthermore, the
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore, we may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights. In addition, if other parties acquire domain names that are
similar to ours and confuse our web site with another party's, our brand could
diminish.
IF INTERNET USERS MAKE ONLINE PURCHASES OF TRAVEL PRODUCTS AND SERVICES ON THE
WEB SITES OF TRAVEL SUPPLIERS RATHER THAN THE WEB SITE OF A VACATION PROVIDER
SUCH AS AFFINITY, THEN OUR SALES WILL BE ADVERSELY AFFECTED.
Innovations in online 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 these products and services
directly from suppliers, thereby bypassing vacation providers such as us.
Although we have a strategy to capitalize on the emergence of the Internet as a
primary distribution channel, our strategy may be unsuccessful and may
negatively impact our relationship with retail travel agents if Internet users
go directly to travel suppliers' web sites.
OUR FAILURE TO MAINTAIN OUR RELATIONSHIPS WITH TRAVEL SUPPLIERS WOULD MATERIALLY
AND ADVERSELY AFFECT OUR BUSINESS.
We are dependent upon travel suppliers for access to their products and
services. Our travel suppliers generally can cancel or modify their agreements
with us upon no or 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 our reputation.
Any of the following could have a material adverse effect on our business,
financial condition and results of operation:
- loss of travel supplier contracts;
- changes in our pricing agreements, commissions schedules or 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.
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OUR PLANNED GROWTH INVOLVES A NUMBER OF RISKS THAT COULD HAVE A NEGATIVE IMPACT
ON OUR RESULTS OF OPERATIONS.
Our management group has been assembled only recently and, as a result, our
management group may be unable to manage effectively our organization and/or
implement our Internet-business based strategy. In addition, the ongoing
transition of our current business to an Internet based model has, and will
continue to, place additional strain on our personnel, accounting, management
information, technology and corporate support systems. Any inadequacy of these
systems to manage the increased size and scope of operations resulting from our
transition and any future growth or our inability to integrate successfully any
future acquisition could materially adversely affect our business, financial
condition and results of operations.
IF WE ARE UNABLE TO MANAGE ANY FUTURE GROWTH AND THE RELATED EXPANSION IN OUR
OPERATIONS EFFECTIVELY, OUR BUSINESS MAY BE HARMED.
We plan to grow internally and through acquisitions. We also plan to spend
significant time, effort and working capital with the objective of expanding our
existing businesses and identifying, completing and integrating acquisitions.
There can be no assurance that our systems, procedures and controls will be
adequate to support any expansion of our operations. Any future growth also will
impose significant added responsibilities on members of our senior management,
including the need to identify, recruit and integrate new senior level managers
and executives. There can be no assurance that such additional management will
be identified or retained by us. To the extent that we are unable to manage our
growth efficiently and effectively, or are unable to attract and retain
qualified management, our business, financial condition and results of
operations could be materially adversely affected.
Factors affecting our ability to grow internally include, but are not
limited to:
- customer acceptance of our travel services and products;
- the ability to expand our customer base;
- the ability to expand the travel services offered;
- continued relationships with certain travel providers and travel
agents;
- the ability to recruit and retain qualified sales personnel;
- the ability to cross-sell services; and
- continued access to capital.
THE SUCCESS OF OUR BUSINESS DEPENDS ON THE CONTINUING CONTRIBUTION OF OUR KEY
PERSONNEL, INCLUDING MR. DANIEL BRANDANO, OUR PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AND OUR OTHER EXECUTIVE OFFICERS, WHOSE KNOWLEDGE OF OUR BUSINESS WOULD
BE DIFFICULT TO REPLACE IN THE EVENT WE LOSE THEIR SERVICES.
Our operations are dependent on the efforts and relationships of Daniel
Brandano and the other executive officers as well as the senior management of
our organization. We will likely be dependent on the senior management of our
organization for the foreseeable future. If any of these individuals becomes
unable to continue in their role, our business or prospects could be adversely
affected. For example, the loss of Mr. Brandano could inhibit the development
and enhancement of our web sites and could damage customer relations and our
brand and could restrict our ability to raise additional working capital if and
when needed. Although we have entered into an employment agreement with two of
our executive officers, Mr. Brandano and Mr. Mark Mandula, our chief operating
officer, there can be no assurance that these individuals will continue in their
present capacity for any particular period of time. Although
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we do not maintain key man life insurance covering any of our executive officers
or other members of senior management, we are currently in the process of
securing it for Mr. Brandano.
OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONALITY AND OTHER FACTORS.
The domestic and international leisure travel industry is seasonal. Our
historical results have been subject to quarterly fluctuations caused primarily
by the seasonal variations in the travel industry, especially the leisure travel
segment. We expect seasonality to continue in the future.
Quarterly results of operations may also be subject to fluctuations as a
result of a number of other factors including:
- the timing and cost of acquisitions;
- changes in the mix of services offered by us as a result of
acquisitions;
- internal growth rates among various travel segments;
- fare wars by travel providers;
- changes in relationships with certain travel providers;
- the timing of the payment of commissions;
- extreme weather conditions; and
- other factors affecting travel.
Unexpected variations in quarterly results could also adversely affect the
price of our common stock, which could limit our ability to make acquisitions or
raise additional equity capital and or debt and could limit a stockholder's
ability to sell shares of our common stock in the open market.
CHANGES IN CONSUMER PREFERENCES OR DISCRETIONARY CONSUMER SPENDING COULD
NEGATIVELY IMPACT OUR SALES AND RESULTS OF OPERATIONS.
Our continued success depends, in part, upon the popularity of our
wholesale vacation packages to Hawaii, Mexico, the Caribbean and Florida. For
the fiscal year ended June 30, 1999, we derived approximately 80% our revenues
from products and services associated with vacations to these destinations. A
downturn in the overall United States economy or shifts in consumer vacation
preferences could materially and adversely affect our business, financial
condition and results of operations. Also, our success depends to a significant
extent on numerous factors affecting discretionary consumer spending, including
economic conditions, disposable consumer income and consumer confidence. Adverse
changes in these factors could reduce our sales or impose practical limits on
pricing, either of which could have a material adverse effect on our business
and results of operations.
THE TRAVEL INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND TAXATION.
Many travel suppliers, particularly airlines, are subject to extensive
regulation by federal, state and foreign governments. In addition, the travel
services 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 and
changes in tax policy could have an adverse impact on the travel service
industry in general and could have a material adverse affect on our business,
financial condition, and results of operations. Changes in tax policy for online
purchases, including travel purchases, could also have a material adverse affect
on our business, financial condition and results of operations.
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THE TRAVEL INDUSTRY IS SUBJECT TO NUMEROUS RISKS THAT MAY ALSO AFFECT OUR
BUSINESS, FINANCIAL CONDITION AND RESULT OF OPERATIONS.
Our results of operations will depend upon factors affecting the vacation
industry in general. Our 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 could result in a temporary
or long-term overall decline and demand for packaged vacations, 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.
We believe that price-based competition will continue for the foreseeable
future. The continuation of price-based competition and the occurrence of any of
the events mentioned above could have a material adverse effect on our business,
financial condition and results of operations. In addition, demand for our
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 any recession in the
United States or these other markets could have a material adverse effect on our
business, financial condition in the result operations.
WE MAY BE UNABLE TO MAKE ATTRACTIVE ACQUISITIONS OR INTEGRATE ACQUIRED
COMPANIES, WHICH COULD SEVERELY DISRUPT OUR OPERATIONS AND ONGOING BUSINESS.
We plan to acquire or make investments in complementary businesses,
products, services or technologies. However, we cannot assure you that we will
be able to identify suitable acquisition or investment candidates.
Even if we do identify suitable candidates, we cannot assure you that we
will be able to make acquisitions or investments on commercially acceptable
terms. If we buy a business, we could have difficulty in assimilating that
company's personnel, operations, products, services or technologies into our
operations. We have experienced such difficulties in the past. If we encounter
these difficulties in the future, there will be disruptions in our ongoing
business, distractions to our management and employees, and increases in our
expenses, all of which will adversely affect our results of operations.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities would dilute our existing
stockholders' interest in Affinity.
ANY FUTURE ACQUISITIONS WE MAKE MAY NOT BE PROFITABLE.
Part of our Internet business strategy is to identify and acquire travel
related Internet organizations in the travel services industry. Future
acquisitions may involve a number of risks that could adversely affect our
business, results of operations and financial condition. These could include
adverse short-term effects on our reported operating results such as those
caused by severance payments to employees of acquired companies, difficulties in
eliminating duplicative costs, restructuring charges associated with
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the acquisitions and other expenses associated with the change of control, as
well as non-recurring acquisition costs. Acquisitions may also 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 we conduct due
diligence and generally require representations, warranties and indemnification
from the former owners of acquired companies, those former owners may not
accurately represent the financial and operating conditions of their companies
and may not 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 affect on our business, financial
condition and results of operations.
FINANCING OF FUTURE ACQUISITIONS WILL DILUTE EXISTING STOCKHOLDER OWNERSHIP.
We intend to finance future acquisitions by using shares of our common
stock or preferred stock for a substantial portion of the consideration to be
paid. This reliance upon the use of common stock or preferred stock as
consideration will dilute shareholders' interest in Affinity.
WE HAVE NEVER PAID DIVIDENDS AND WE DO NOT EXPECT TO PAY ANY DIVIDENDS IN THE
NEAR FUTURE. AN INVESTOR SHOULD NOT RELY ON DIVIDENDS TO BE PAID ON THE COMMON
STOCK AS A SOURCE OF INCOME.
We intend to retain any future earnings in order to finance our planned
operations and to implement our business plan. A potential purchaser of the
common stock should not rely on dividends from the common stock offered hereby
as a possible source of income.
THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE AND IS HIGHLY VOLATILE. YOU
MAY BE UNABLE TO SELL YOUR COMMON STOCK QUICKLY AT THE CURRENT MARKET PRICE.
The market price of our common stock has been highly volatile and will
likely fluctuate significantly. Attempts to purchase or sell relatively small
amounts of our common stock could cause the market price of our common stock to
fluctuate significantly. Low trading volume levels may also affect our
stockholders' ability to sell shares of our common stock quickly at the current
market price. In addition, sales of substantial amounts of our common stock, or
the perception that such sales could occur, would adversely affect the
prevailing market prices for our common stock.
MARKET PRICES OF INTERNET COMPANIES HAVE BEEN HIGHLY VOLATILE, AND THE MARKET
PRICE FOR OUR COMMON STOCK HAS BEEN AND WILL LIKELY CONTINUE TO BE HIGHLY
VOLATILE AS WELL. LITIGATION AND/OR REGULATORY INVESTIGATIONS MAY BE INSTITUTED
FOLLOWING SEVERE MARKET PRICE VOLATILITY.
The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies, particularly
Internet companies, have been highly volatile. The market price of our common
stock may be subject to significant fluctuations in response to numerous
factors, including:
- variations in our annual or quarterly financial results or our
competitors;
- changes by financial research analysts in their estimates of our
earnings or our failure to meet such estimates;
- conditions in the economy in general or in the travel industry in
particular;
- unfavorable publicity or changes in applicable laws and regulations
(or judicial or administrative interpretations thereof) affecting us
or the travel service industry; and
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- small increases/decreases in supply/demand for our common stock.
In the past, following periods of volatility in the market price of a
public company's securities, securities class action litigation and/or
regulatory investigations have often been instituted against that company. Such
litigation/investigations could result in substantial costs and a diversion of
management's attention and resources.
THE INTERESTS OF OUR CONTROLLING STOCKHOLDER MAY CONFLICT WITH YOUR INTERESTS.
As of February 25, 2000, Schoemann Venture Capital, LLC, trusts controlled
by Mr. Rodney Schoemann and/or his spouse, and trusts formed by Mr. Schoemann,
beneficially owned approximately 61.4% of our outstanding common stock, which
includes outstanding warrants to purchase 6,450,000 shares of our common stock
at a purchase price of $.25 per share. As a result, in practical effect,
Schoemann Venture Capital, LLC and the trusts control the election of our board
of directors, all matters requiring approval by our stockholders, including
approval of significant corporate transactions, and the direction of our
business. Schoemann Venture Capital, LLC and the trusts could exercise their
voting control in ways that could adversely affect your interests.
INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors will suffer immediate and substantial dilution upon the issuance
of additional shares of common stock that are currently subject to outstanding
warrants and options to purchase shares of our common stock. In addition,
purchasers of the shares of common stock offered hereby will suffer immediate
and substantial dilution from the estimated purchase price, compared to the book
value of the shares following the offering. Please see page 22 for a more
detailed discussion relating to dilution.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENT COULD PREVENT OR DELAY A CHANGE
IN CONTROL OF OUR COMPANY.
Our articles of incorporation, as amended, may discourage, delay or prevent
a merger or acquisition that a stockholder may consider favorable by:
- Authorizing blank check preferred stock, a type of stock with terms
and conditions set by the board of directors alone without further
stockholder approval; such preferred stock could be issued with more
voting power than the common stock, effectively giving control of the
company to the holders of preferred stock. An issuance of this type of
preferred stock could make it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire, a
majority of our outstanding voting stock. The existence of blank check
preferred stock could facilitate the introduction of a poison pill
rights distribution which could discourage or delay a merger or
acquisition.
WE DEPEND ON THE INTERNET AND THE DEVELOPMENT OF THE INTERNET INFRASTRUCTURE.
Our success will depend in large part on continued growth in, and the use
of, the Internet for commerce. The electronic commerce market is new and rapidly
evolving, and the extent of consumer acceptance is uncertain. The issues
concerning the commercial use of the Internet that we expect to affect the
development of the market for our services include security, reliability, cost
of access, ease of access, ease of use, speed and quality of service.
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In addition, popular companies that provide access to Internet transactions
through network access or web browsers, such as America Online, Yahoo, Lycos and
Microsoft, could promote our competitors or charge us a substantial fee for
connection to our web site. Either of these developments could adversely affect
our business.
OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATION OF THE INTERNET AND OTHER LEGAL
UNCERTAINTIES THAT COULD NEGATIVELY IMPACT OUR OPERATIONS.
Specific laws and regulations concerning the use of the Internet have been
enacted, which prohibit unfair and deceptive acts and practices in connection
with the collection and use of personal information obtained from children under
13 years old on the Internet.
The European Union has also adopted a directive that imposes restrictions
on the collection and use of personal data. The directive could, among other
things, adversely affect U.S. companies that collect information over the
Internet from individuals in EU member countries, and may impose restrictions
that are more stringent than current Internet privacy standards in the United
States. We may ultimately engage in data collection from users in EU member
countries. If we do, we would be subject to the EU directive.
While we expect to have a privacy policy designed to enhance the protection
of the privacy of our users, there can be no assurance that these programs will
conform with any regulations which have been adopted by the FTC or the European
Union directive. We do, however, intend to take the necessary measures to ensure
that our web site complies with industry standards relating to user privacy.
The laws governing the use of the Internet, in general, remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. This occurrence may impose additional burdens on companies
conducting business online by limiting how information can flow over the
Internet and the type of information that can flow over the Internet. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business.
IF WE ARE HELD LIABLE FOR THE CONTENT WE PROVIDE ON OUR WEB SITE OR WHICH IS
ACCESSED FROM OUR WEB SITE, THEN OUR BUSINESS AND REPUTATION MAY SUFFER.
As a publisher of online content, we face potential liability for
defamation, negligence, copyright, patent or trademark infringement, or other
claims based on the nature and content of materials that we publish or
distribute. In the past, plaintiffs have brought such claims and sometimes
successfully litigated them against online services. Although we carry general
liability insurance, our insurance may not cover claims of these types or may be
inadequate to indemnify us for all liability that may be imposed on us. If we
face liability, particularly liability that is not covered by our insurance or
is in excess of our insurance coverage, then our reputation and our business may
suffer.
OUR REVENUES AND REPUTATION WOULD BE ADVERSELY AFFECTED IF OUR SECURITY MEASURES
FAIL.
Consumer concerns regarding the security of transactions conducted on the
Internet and users' privacy may inhibit the growth of use of the Internet and
electronic commerce. To securely transmit confidential information, such as
customer credit card numbers, we rely on encryption and authentication
17
<PAGE>
technology that we license from third parties. We cannot predict whether we will
experience compromises of, or breaches in, the technologies we use to protect
customer transaction data.
We may need to expend significant additional capital and other resources to
protect against security breaches or alleviate problems caused by any such
breaches. We cannot guarantee that security breaches will not occur. If our
security measures fail, our business could be harmed. Any penetration of our
network security or misappropriation of our users' personal or credit card
information could subject us to liability. Claims could also be based on other
misuses of personal information, including the use of this information for
unauthorized marketing purposes. These claims could result in litigation.
OUR REVENUES AND REPUTATION WOULD BE ADVERSELY AFFECTED IF WE EXPERIENCE
SIGNIFICANT CREDIT CARD FRAUD.
Under current credit card practices, merchants are liable for fraudulent
credit card transactions where, as is the case with the transactions we process,
the merchant does not obtain a cardholder's signature. We may be liable for
claims based on unauthorized purchases with credit card information,
impersonation or other similar fraud claims. A failure to adequately control
fraudulent credit card transactions would harm our business.
YEAR 2000 READINESS; YEAR 2000 PROBLEMS COULD DISRUPT OUR BUSINESS.
The year 2000 problem is the potential for system and processing failure
of date-related data as the result of computer-controlled systems using two
digits rather than four digits to define the applicable year. This could
result in system failure or miscalculations causing disruptions of
operations, including, among other things, temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Problems associated with the year 2000 may not become apparent until some
time after January 2000. However, as of March 7, 2000, we have not
experienced any significant year 2000 problems.
We have evaluated our internal software and products for year 2000
problems. We believe that our products and business will not be substantially
affected by the year 2000 problem and that we have no significant exposure to
liabilities related to the year 2000 problem for the products that we have sold.
We have also communicated with others, including suppliers and customers whose
computer systems' functionality could directly impact our operations.
Although we believe our planning efforts are adequate to address our year
2000 concerns, undetected year 2000 problems may cause us to experience negative
consequences or significant costs. We cannot be sure that our suppliers,
customers or businesses that we may acquire will not experience similar
consequences or costs. Such consequences or costs could adversely affect our
business.
WARNINGS REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have filed with the Securities and
Exchange Commission which we have referenced under "Where You Can Find More
Information" on page 65 contain forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent our judgment regarding future events.
Although we would not make forward-looking statements unless we believe we have
a reasonable basis for doing so, we cannot guarantee their accuracy and actual
results may differ materially from those we anticipated due to a number of
uncertainties, many of which we are not aware. We urge you to consider
18
<PAGE>
the risks and uncertainties discussed under "Risk Factors" and elsewhere in this
prospectus and in the other documents filed with the SEC in evaluating our
forward-looking statements. We have no plans to update our forward-looking
statements to reflect events or circumstances after the date of this prospectus.
We generally identify forward-looking statements with the words "plans,"
"expects," "anticipates," "estimates," "will," "should" and similar expressions.
19
<PAGE>
USE OF PROCEEDS
Of the estimated 29,103,094 shares of common stock offered under this
prospectus, we are offering 9,945,000 shares issuable upon exercise of
outstanding warrants and 19,158,094 shares are being sold by the selling
stockholders identified on page 56. Assuming the exercise for cash of the
warrants to purchase the 9,945,000 shares being registered for issuance
hereunder, we will receive approximately $3,085,000. The weighted average
exercise price of the warrants to purchase 9,945,000 shares is $0.31 per share.
In the event that the registration statement, of which this prospectus is a
part, is not declared effective by the SEC by June 20, 2000, then the amount of
proceeds we will receive from the exercise of the warrants may be substantially
less because the holders of warrants to purchase 8,750,000 shares may elect to
exercise their warrants through a cashless exercise. The weighted average
exercise price with respect to these warrants to purchase 8,750,000 shares is
$0.25 per share. We intend to use any proceeds we receive from the exercise of
the warrants for working capital and general corporate purposes.
We will not receive any proceeds from the sale of common stock by the
selling stockholders.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock, and we do
not anticipate paying cash dividends in the foreseeable future. Our current
policy is to retain any earnings to finance our future development and growth.
We may reconsider this policy from time to time in light of conditions then
existing, including our earnings performance, financial condition and capital
requirements. Any future determination to pay cash dividends will be at the
discretion of our Board of Directors and will depend upon our financial
condition, operating results, capital requirements, general business conditions
and other factors that our Board of Directors deems relevant.
20
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the National Association of Securities
Dealer's OTC Bulletin Board under the symbol "AFFT." The following table sets
forth the range of high and low bid prices as quoted on the OTC Bulletin Board
for the period from September 3, 1998, when public trading for our common stock
commenced under the symbol "TRIP", through March 7, 2000. The over-the-counter
market quotations below reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDING JUNE 30, 1999
First Quarter...................................................... $3.500 $1.250
Second Quarter..................................................... $2.250 $0.500
Third Quarter...................................................... $4.000 $0.875
Fourth Quarter..................................................... $2.000 $0.687
FISCAL YEAR ENDING JUNE 30, 2000
First Quarter...................................................... $1.562 $0.300
Second Quarter..................................................... $2.490 $0.156
Third Quarter (through March 7, 2000).............................. $7.093 $1.250
</TABLE>
The last reported sale price of our common stock on the OTC Bulletin Board
on March 7, 2000 was $4.687 per share.
For a discussion on shares of our common stock that are or will become
eligible for future sale in the public market, which may impact the trading
price or trading market for our common stock, please see the discussion
contained under the heading "Shares Eligible for Future Sale" beginning on page
64.
HOLDERS. As of March 7, 2000, there were approximately 115 holders of
record of the common stock.
DIVIDENDS. We have never declared or paid any dividends on our common stock
and we do not intend to pay dividends on our common stock in the foreseeable
future. We anticipate that we will retain any earnings to finance the growth and
development of our business and for general corporate purposes.
21
<PAGE>
DILUTION
As of December 31, 1999, we had a negative net tangible book value of
approximately $(176,000) or $(0.01) per share of common stock. "Negative Net
tangible book value per share" represents the amount of total tangible assets
less total liabilities divided by the number of outstanding shares of common
stock. Assuming the exercise of outstanding warrants to purchase 9,945,000
shares of common stock for cash, investors purchasing shares from the selling
stockholders in this offering will incur immediate and substantial dilution
of $4.567 (97.4%.) per share between the adjusted net tangible book value per
share at December 31, 1999 as adjusted for this offering, $0.12, and the
estimated public offering price of $4.687 (the closing price of the common
stock on March 7, 2000 as quoted on the OTC Bulletin Board). The holders of
the warrants acquiring shares from us upon exercise of such warrants will
incur immediate and substantial dilution of $0.19 (59.4%) per share between
the adjusted net tangible book value per share at December 31, 1999 as
adjusted for this offering, $0.12, and the assumed weighted average exercise
price of $0.31 per share. Upon exercise of the warrants, the net tangible
book value per share of the common stock will increase from $(0.01) to $0.12.
<TABLE>
<S> <C> <C>
Estimated public offering price $4.687
Net negative tangible book value before the offering (0.01)
Increase attributable to investors exercising warrants 0.13
----
Adjusted net tangible book value after the offering 0.12
----
Dilution to investors purchasing from the selling shareholders $4.567
======
</TABLE>
22
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of December
31, 1999. This table should be read in conjunction with the unaudited
consolidated financial statements and related notes that appear in this
prospectus.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------
Actual As Adjusted
(Unaudited) (Unaudited)
------------------------ ----------------------
<S> <C> <C>
Short-term debt:
Current maturity of capital lease obligations $13,485 $13,485
======================== ======================
Long-term debt:
Capital lease obligations, less current maturities 15,933 15,933
Convertible debentures - -
------------------------ ----------------------
$15,933 $15,933
======================== ======================
Stockholders' equity (deficit):
Common stock, $.001 par value, shares authorized 100,000,000;
issued and outstanding 13,576,973 (Actual), 23,521,973 (As
Adjusted)(1) 13,577 23,522
Convertible preferred stock, $.001 par value, shares authorized
100,000,000; none outstanding - -
Additional paid-in capital 10,427,854 13,502,909
Accumulated deficit (10,617,294) (10,617,294)
------------------------ ----------------------
Total stockholders' equity (deficit) (175,863) 2,909,137
------------------------ ----------------------
Total capitalization $(159,930) $2,925,070
======================== ======================
</TABLE>
(1) Includes the assumed exercise of outstanding warrants to purchase
9,945,000 shares of common stock at the weighted average exercise price
of approximately $0.31 per share.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table contains certain selected consolidated financial
data and it is qualified in its entirety by the more detailed consolidated
financial statements and notes included elsewhere in this prospectus. We derived
the statement of operations data for the years ended June 30, 1999, 1998 and
1997, and the balance sheet data as of June 30, 1999 and June 30, 1998 from our
consolidated financial statements, which statements have been audited by BDO
Seidman LLP, independent accountants, and are included elsewhere in this
prospectus. The unaudited financial data as of June 30, 1995 and 1996 and as of
December 31, 1998 and 1999 have been prepared on a basis consistent with the
audited consolidated financial statements and, in our opinion, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition and results of operations for the periods
presented. The results for the six-month period ended December 31, 1999, are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 2000. You should read this data in conjunction with the
consolidated financial statements and related notes thereto and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Six months ended
Statement of Income Data: Year ended June 30, (1) December 31, (1)
----------------------------------------------------------- -----------------------
1995(2) 1996 1997 1998 1999 1998 1999
----------- ----------- ----------- ---------------------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $- $69 $665 $1,329 $2,325 $667 $2,056
Cost of sales - 35 542 770 1,586 534 1,301
----------- ----------- ----------- --------- ----------- ----------- -----------
Gross profit - 34 123 559 739 133 755
Operating expenses 5 85 437 1,703 3,696 713 3,218
----------- ----------- ----------- --------- ------------ ----------- -----------
Operating loss (5) (51) (314) (1,144) (2,957) (580) (2,463)
Interest income (expense), net - - (1) (41) (2,240) - 9
Gain on sale of subsidiary - - - - - - 1,093
Financing charges - - - - - - (2,467)
Other income (expense), net - - (3) 16 14 2 (63)
----------- ----------- ----------- --------- ------------ ----------- -----------
Net loss $(5) $(51) $(318) $(1,169) $(5,183) $(578) $(3,891)
=========== =========== =========== ========= ============ =========== ===========
Net loss per common share:
Basic and diluted $(-) $(.02) $(.11) $(.27) $(.82) $(.11) $(.29)
Weighted average common shares
outstanding:
Basic and diluted (3) 2,800,000 2,800,000 2,848,718 4,249,506 6,290,174 5,383,060 13,556,085
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Six months ended
Balance Sheet Data: Year ended June 30, (1) December 31, (1)
----------------------------------------------------------- ----------------------
1995(2) 1996 1997 1998 1999 1998 1999
----------- ----------------------- ------------ ---------- ----------------------
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents - $21 $326 $64 $1,120 $11 $57
Working capital - (102) 193 (596) 338 (542) (1,353)
Total assets - 95 547 395 3,665 534 2,002
Long-term debt, less current maturities - - 9 - - - -
Capital lease obligation, less current - -
portion - 38 23 29 16
Convertible debentures - - 150 - 25 - -
Total liabilities - 146 362 834 1,360 872 2,178
Stockholder's equity (deficit) - (51) 185 (439) 2,305 (338) (176)
</TABLE>
FOOTNOTES
(1) On July 31, 1998, Affinity acquired SunStyle in a transaction accounted
for as a purchase of Affinity by SunStyle (a reverse acquisition in which
SunStyle is considered the acquirer for accounting purposes) Therefore, the
historical financial statements herein are those of SunStyle. See Note 1 to
the Consolidated Financial Statements for the three years ending June 30,
1999. In December 1999, we disposed of Prestige Travel Services, Inc.
(acquired on January 1, 1999) by selling all of its outstanding common stock
to its original stockholders. Prestige accounted for $626,000 and $590,000
of our revenues for the year ended June 30, 1999 and the six months
ended December 31, 1999, respectively. Our revenues in future periods will be
substantially less than shown in our Consolidated Financial Statements for
the three years ended June 30, 1999 and the six months ended December 31,
1999 if we are unable to replace the revenues we previously received from
Prestige's operations.
(2) The Predecessor commenced operations in May 1995 and had no revenues,
insignificant operating activity and minimal capitalization for the period
from inception to June 30, 1995.
(3) The weighted average common shares outstanding for the years ended June 30,
1995, 1996 and 1997 have been adjusted to reflect additional shares issued to
the then sole stockholder and a stock split which occurred during the year ended
June 30, 1997.
25
<PAGE>
PRO FORMA FINANCIAL DATA
INTRODUCTION
The following pro forma financial data are based upon the historical
financial statements of Affinity and have been prepared to illustrate the
effects on such historical financial data of the Prestige Acquisition. The
unaudited pro forma combined statement of operations for the years ended June
30, 1998 gives effect to the Prestige Acquisition as if it had been completed
as of June 30, 1997. An unaudited pro forma combined balance sheet has not
been presented as the historical consolidated balance sheet of Affinity
contains the accounts of Prestige as of June 30, 1999. The Prestige
Acquisition is reflected using the purchase method of accounting for business
combinations.
The pro forma financial data is provided for comparative purposes
only and does not purport to represent the actual financial position or
results of operations of Affinity that actually would have been obtained if
the Prestige Acquisition had been consummated on the date specified, nor is
it necessarily indicative of the results of operations that may be achieved
in the future. In fact, on December 31, 1999, we sold all of the outstanding
capital stock of Prestige Travel Services II back to the former owners. The
unaudited pro forma combined statement of operations for the year ended June
30, 1999 and the six months ended December 31, 1999 gives effect to the sale
of the subsidiary by reversing the subsidiary's purchase on January 1, 1999
and eliminating its effect on operations from January 1, 1999 through
December 31, 1999.
The pro forma financial data are based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements, including the notes
thereto, appearing elsewhere herein.
26
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- ----------------------------------------
Prestige Acquisition
Affinity (A) Adjustments Combined
----------- ----------- ------------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Total revenue $1,329 $1,087 $ - $2,416
Cost of sales 770 258 - 1,028
----------- ----------- ------------------ ------------
Gross profit 559 829 - 1,388
Operating expenses 1,703 707 178 (B) 2,588
----------- ----------- ------------------ ------------
Operating income (loss) (1,144) 122 (178) (1,200)
Interest expense, net (41) - - (41)
Other income (expense), net 16 (8) - 8
----------- ----------- ------------------ ------------
Net income (loss) $(1,169) $114 $(178) $(1,233)
=========== =========== ================== ============
Net income per common share:
Basic and diluted $(0.22) $(.24)
Weighted average common shares outstanding:
Basic and diluted 5,233,246 - 5,233,246
</TABLE>
27
<PAGE>
FOOTNOTES
(A) The audited historical financial statements of Affinity and Prestige
were based on a December year end. These financial statements have been
adjusted to state the results of operations on a June year end basis.
(B) To record the amortization of goodwill acquired through the Prestige
and SunStyle acquisitions.
(C) No adjustment was made relative to the Prestige Acquisition, as we
issued convertible preferred stock as consideration for the
acquisition. This preferred stock was anti-dilutive during the pro
forma periods.
28
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Historical Pro Forma
------------ ---------------------------------------
Disposal
Affinity Adjustments As Adjusted
------------ --------------- --------------
<S> <C> <C> <C>
Total revenue $2,325 $(626) (A) $1,699
Cost of sales 1,586 (146) (B) 1,440
------------ --------------- --------------
Gross profit 739 (480) 259
Operating expenses 3,696 (537) (C) 3,159
------------ --------------- --------------
Operating income (loss) (2,957) 57 (2,900)
Interest expense, net (2,240) - (2,240)
Other income 14 - 14
------------ --------------- --------------
Net income (loss) $(5,183) $57 $(5,126)
============ =============== ==============
Net loss per common share:
Basic and diluted $(.82) $(.81)
Weighted average common shares outstanding:
Basic and diluted 6,290,174 - (D) 6,290,174
</TABLE>
(A) To eliminate the revenues of Prestige.
(B) To eliminate the cost of sales of Prestige.
(C) To eliminate the selling, general and administrative expenses of
Prestige, including the amortization of goodwill from the
acquisition.
(D) As of June 30, 1999, the common stock that was returned to Affinity
upon the sale of Prestige had not been converted from preferred
stock. The preferred stock was considered anti-dilutive as of June
30, 1999.
29
<PAGE>
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------- --------------------------------------
Affinity Disposal
(Unaudited) Adjustments As Adjusted
-------------- -------------- --------------
<S> <C> <C> <C>
Total revenue $2,056 $(590) (A) $1,466
Cost of sales 1,301 (174) (B) 1,127
-------------- -------------- --------------
Gross profit 755 (416) 339
Operating expenses 3,218 (550) (C) 2,668
-------------- -------------- --------------
Operating income (loss) (2,463) 134 (2,329)
Interest income, net 9 - 9
Gain on sale of subsidiary 1,093 (1,093) (D) -
Other expense, net (63) - (63)
Financing charges (2,467) - (2,467)
-------------- -------------- --------------
Net loss $(3,891) $(959) $(4,850)
============== ============== ==============
Net loss per common share:
Basic and diluted $(.29) $(.39)
Weighted average common shares outstanding:
Basic and diluted 13,556,085 (998,050) (E) 12,558,035
</TABLE>
(A) To eliminate the revenues of Prestige.
(B) To eliminate the cost of sales of Prestige.
(C) To eliminate the selling, general and administrative expenses of
Prestige, including the amortization of goodwill from the
acquisition.
(D) To eliminate the gain on the sale of Prestige.
(E) To eliminate the common stock that was returned to Affinity upon the
sale of Prestige.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ALL STATEMENTS, TREND ANALYSIS AND OTHER INFORMATION CONTAINED IN THE
FOLLOWING DISCUSSION RELATIVE TO MARKETS FOR OUR SERVICES AND TRENDS IN REVENUE,
GROSS MARGINS AND ANTICIPATED EXPENSE LEVELS, AS WELL AS OTHER STATEMENTS,
INCLUDING THE WORDS SUCH AS "MAY," "WILL," "ANTICIPATE," "BELIEVE," "PLAN,"
"ESTIMATE," EXPECT," AND "INTEND" AND OTHER SIMILAR EXPRESSIONS CONSTITUTE
FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
BUSINESS AND ECONOMIC RISKS AND UNCERTAINTIES, AND OUR ACTUAL RESULTS OF
OPERATIONS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AS WELL AS OTHER RISKS
AND UNCERTAINTIES REFERENCED IN THIS PROSPECTUS.
THE SIX MONTHS ENDED DECEMBER 31, 1999 VERSUS THE SIX MONTHS ENDED DECEMBER 31,
1998
- --------------------------------------------------------------------------------
The discussion that follows is based on the Consolidated Statement of
Operations and compares the results of our operations for the six months ended
December 31, 1999 to our operations for the six months ended December 31, 1998.
NET LOSS
During the six months ended December 31, 1999, we had a net loss of
$3,891,000, compared to a $578,000 net loss during the comparable prior period.
REVENUES
Revenues increased $ 1,389,000 or 208.1% during the six month period ended
December 31, 1999 compared to the same period in the prior year. Such $1,389,000
increase in revenue is primarily attributable to a $590,000 increase in revenue
related to retail travel business resulting from the acquisition of Prestige
Travel Services II, Inc. (Prestige) in January 1999, and a $799,000 increase in
revenue related to growth in our wholesale travel package business. Because we
sold Prestige in December 1999, we no longer realize revenues from Prestige's
operations. Accordingly, we expect our future revenues to be lower, unless we
are able to replace the lost revenue from the results of our Internet based
strategy implementation.
The domestic and international leisure travel industry is seasonal. We
have not experienced significant seasonality because of our continued growth
in revenues. However, we expect our future results to be subject to quarterly
fluctuations caused primarily by the seasonal variations in the travel
industry, especially the leisure travel segment.
Results of operations may also be subject to fluctuations as a result of a
number of other factors including: the timing and cost of acquisitions; changes
in the mix of services offered by us as a result of acquisitions; internal
growth rates among various travel segments; fare wars by travel providers;
changes in relationships with certain travel providers; the timing of the
payment of additional revenue when certain volumes are reached by travel
providers; extreme weather conditions; and other factors affecting travel.
31
<PAGE>
GROSS PROFIT
Gross profit for the six months ended December 31, 1999 increased
$622,000 or 468.3%, compared to the same period in the prior year. $416,000
of the increase in gross profit was related to retail travel business
resulting from the acquisition of Prestige, and $121,000 of the increase in
gross profit resulted from growth in the wholesale travel package business.
As a percentage of sales, gross profit was 36.7% during the six months ended
December 31, 1999, compared with 19.9%, during the comparable prior period.
The increase in the gross profit percentage was primarily attributable to the
increase in retail travel business. Revenues from retail travel sales have
almost no direct costs of sales and therefore gross profit on retail sales
approximately equals the related revenue. As noted above, since we sold
Prestige in December 1999, we will no longer realize revenue or gross profit
from Prestige's operations. Accordingly, we expect future gross profit to be
lower unless we are able to replace the lost gross profit. Management expects
that gross profit on the wholesale travel package business as a percentage of
total gross profit will increase as the company establishes itself in the
wholesale travel package business. Accordingly, management expects gross
profit as a percentage of sales to decrease in the future.
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $ 731,000 or 259.6% during the six month
period ended December 31, 1999, compared to the prior year. The increase in
selling, general and administrative expenses was primarily attributable to
the following: a $104,000 increase in costs relating to audit, legal, and
consulting fees; $176,000 in costs related to the Prestige operation; and
$451,000 in expenses related to investor relations, depreciation and
amortization, travel, printing and brochures, computer expense, trade shows,
equipment rental, office supplies, telephone, director compensation, and
other miscellaneous expenses in support of our expanded operations.
SALARIES AND WAGES - Salaries and wages increased $1,597,000 or 464.8% during
the six month period ended December 31, 1999, compared to the same period in
the prior year. Such increase was primarily attributable to an $850,000
increase in salaries and wages due to the expansion of personnel in both the
retail travel business and the wholesale travel package business, of which
$374,000 related to the Prestige operation, and a $750,000 charge to
operations related to stock options granted to an officer with an exercise
price below the trading value on the date of grant.
CONSULTING FEES - Consulting fees increased $52,000 or 98.1% during the six
month period ended December 31, 1999, compared to the same period in the prior
year. This increase was principally related to consulting fees paid to a
significant shareholder for financial advisory services.
RENT - Rent expense increased $124,000 or 353.9% during the six month period
ended December 31, 1999, compared to the same period in the prior year. Such
increase was attributable to a $28,000 increase in rent relating to the Prestige
operation, and the balance related principally to the expansion of our office
space during fiscal 2000.
INTEREST
Interest income, net of interest expense increased $9,000 because we
carried larger average cash balances in interest bearing accounts during the
six month period ended December 31, 1999 compared to the same period in the
prior year.
32
<PAGE>
GAIN ON SALE OF SUBSIDIARY
We recognized a gain of $1,093,000 on the sale of Prestige back to its
original owners on December 29, 1999. There were no sales during the comparable
period last year.
FINANCING CHARGES
Financing charges increased $2,467,000 during the six month period ended
December 31, 1999, compared to the same period in the prior year. The increase
in financing charges is primarily attributable to a charge of $2,083,000
relating to the re-pricing of existing common stock warrants in connection with
a financing transaction. We also recorded a charge of $384,000 related to the
issuance of common stock for our failure to meet certain provisions of existing
financing agreements and consulting agreement.
For the fiscal quarter ended March 31, 2000, we will also record an
additional charge of $825,000 related to the issuance of common stock because
we failed to meet certain provisions of existing financing agreements and
consulting agreements. We will also record an additional charge of $7,140,000
related to the issuance of new common stock warrants and the re-pricing of
existing common stock warrants.
PROVISION FOR INCOME TAXES
There is no provision for income taxes in the six month periods ended
December 31, 1999 and 1998 due to the net operating loss for those periods
FISCAL 1999 VERSUS FISCAL 1998
- --------------------------------------------------------------------------------
The discussion that follows is based on the Consolidated Statement of
Operations and compares the results of the Company's operations for the year
ended June 30, 1999 to the Company's operations for the year ended June 30,
1998.
NET LOSS
During the year ended June 30, 1999, we incurred a net loss of
$5,183,368, compared with a net loss of $1,168,501 for the prior year.
REVENUES
Revenues increased $996,000 or 75% during the year ended June 30, 1999,
compared to the prior year. Such increase in revenue was primarily
attributable to a $626,000 increase in our retail travel business which
resulted from our acquisition of Prestige in January, 1999 and a $315,000
increase in our wholesale travel package business. As we disposed of Prestige
in December 1999, we will no longer realize revenues from Prestige's
operations. Accordingly, we expect our future revenues to be lower, unless we
are unable to replace the lost revenue.
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GROSS PROFIT
Gross profit for the year ended June 30, 1999, increased $180,000, or
32.2%, compared to the prior year. During the year ended June 30, 1999, gross
profit, as a percentage of revenue, was 31.8%, compared with 42.1% during the
comparable prior period. The decrease in gross profit as a percentage of
sales was attributable to greater sales of wholesale travel packages which
have lower gross margins than from retail travel sales, partially offset by
an increase in retail travel business. Revenues from retail travel sales have
almost no direct costs of sales and therefore gross profit on retail sales
equals approximately the related revenue. The increase in gross profit was
primarily attributable to a $480,000 increase related to the growth in our
retail travel business which resulted from our acquisition of Prestige. This
increase was partially offset by a $306,000 decrease in gross profit
resulting from the higher costs of travel packages initially purchased during
our expansion into the wholesale travel package business. As noted above,
since we sold Prestige in December 1999, we will no longer realize revenue or
gross profit from Prestige's operations. Accordingly, we expect future gross
profit to be lower unless we are able to replace the lost gross profit.
Management expects that gross profit on the wholesale travel package business
as a percentage of total gross profit will increase as the company
establishes itself in the wholesale travel package business. Accordingly,
management expects gross profit as a percentage of sales to decrease in the
future.
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $226,000 or 19.5% during the year ended June
30, 1999, compared to the prior year. Such increase was primarily attributable
to a $245,000 increase in expenses related to the Prestige operation that was
acquired in January 1999, partially offset by a $19,000 decrease in all other
selling, general and administrative expenses.
SALARIES AND WAGES - Salaries and wages increased $742,000 or 178.2% during
the year ended June 30, 1999, compared to the prior year. The increase in
salaries and wages was primarily attributable to a $292,000 increase related
to the Prestige operation that was acquired in January 1999 and a $450,000
increase related to expansion of personnel in both the retail and the
wholesale travel package businesses.
CONSULTING FEES - Consulting fees increased $937,000 during the year ended June
30, 1999, compared to the prior year. This increase was principally related to
consulting fees paid to a significant shareholder for financial advisory
services during fiscal year 1999, which we paid primarily through the issuance
of common stock and warrants.
RENT - Rent expense increased $87,000 or 108.1% during the year ended June 30,
1999, compared to the prior year, of which $31,000 related to the Prestige
operation that was acquired in January 1999, and the balance of the increase
($56,000) related to the expansion of our office space.
INTEREST
Interest expense, net of interest income, increased $2,199,000 during the year
ended June 30, 1999, compared to the prior year. During fiscal 1999, we recorded
interest expense totaling $2,222,000 resulting from issuance during the year of
certain convertible debentures where the conversion price was below the quoted
market price of our stock on the date of issuance (See Note 6. "Convertible Debt
and Warrants" in the "Notes to the Consolidated Financial Statements" of
Affinity International Travel Systems, Inc. and Subsidiaries). There were no
comparable costs in the prior year.
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PROVISION FOR INCOME TAXES
There is no provision for income taxes in fiscal 1999 or 1998 due to the
net operating loss for those periods (See Note 10 "Income Taxes" in the "Notes
to the Consolidated Financial Statements" of Affinity International Travel
Systems, Inc. and Subsidiaries).
FISCAL 1998 VERSUS FISCAL 1997
- --------------------------------------------------------------------------------
The discussion that follows is based on the Consolidated Statement of
Operations and compares the results of the Company's operations for the year
ended June 30, 1998 to our operations for the year ended June 30, 1997.
REVENUES
Revenues increased $663,000 or 99.7% during the year ended June 30, 1998,
compared to the prior year, of which $407,000 related to an increase in revenues
from wholesale travel packages and $256,000 related to revenue from the initial
year of retail travel sales.
GROSS PROFIT
Gross profit for the year ended June 30, 1998 increased $435,000, or
353.0%, compared to the prior year, of which $183,000 related to an increase in
revenues from wholesale travel packages and $252,000 related to gross profit on
retail travel sales. Revenues from retail travel sales have almost no direct
costs of sales and therefore gross profit on retail travel sales equals
approximately the related revenue.
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $ 896,000 or 338.5% during the year ended June
30, 1998, compared to the prior year. This increase was primarily attributable
to a $187,000 increase in audit, legal, consulting and director fees, and the
balance of the increase relates to various marketing and operating costs that
increased as a result of the growth in our business and corporate
infrastructure.
SALARIES AND WAGES - Salaries and wages increased $274,000 or 191.6% during the
year ended June 30, 1998, compared to the prior year. This increase was due to
the expansion of our personnel in both the retail and the wholesale travel
package businesses.
CONSULTING FEES - Consulting fees increased $45,000 or 100.0% during the year
ended June 30, 1998, compared to the same prior year. There were no comparable
expenditures during fiscal 1997.
RENT - Rent expense increased $51,000 or 173.9% during the year ended June 30,
1998, compared to the prior year, principally as result of the expansion of the
Company's business during fiscal 1998 compared to the prior year.
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INTEREST
Interest expense, net of interest income increased $40,000 during the year
ended June 30, 1998, compared to the prior year, principally as a result of
additional borrowings.
PROVISION FOR INCOME TAXES
There is no provision for income taxes in fiscal 1998 or 1997 due to the
net operating loss for those periods. We elected and filed our corporate tax
returns as a Subchapter S Corporation through June 3, 1997. No pro forma income
tax computation has been included as we incurred a net loss in fiscal year 1997
and there were no material differences between our book and tax net loss. (See
Note 10 "Income Taxes" in the "Notes to the Consolidated Financial Statements"
of Affinity International Travel Systems, Inc. and Subsidiaries).
PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
We have included pro forma financial information related to our
acquisition of Prestige in January 1999 and the subsequent sale of Prestige
to its former owners on December 29, 1999.
Further discussion of the effects of the Prestige acquisition and its
pro forma effects on our operations for the years ended June 30, 1998
assuming the acquisition would have occurred on July 1, 1997, as presented in
the pro forma financial information, has been excluded. There is only one pro
forma adjustment to arrive at combined pro forma financial information which
relates to the amortization of acquisition goodwill. Additionally, Affinity,
through SunStyle, is predominately a wholesale travel package operation and
Prestige was exclusively a retail travel business and all discussion related
to the changes in pro forma revenues and expenses would relate to combination
of these two lines of business.
The effects of the Prestige acquisition on our operations for the year
ended June 30, 1999 and the six months ended December 31, 1999, have been
discussed in the preceding Management's Discussion and Analysis section,
therefore further discussion in this section has been excluded.
LIQUIDITY AND CAPITAL RESOURCES
We have no line of credit or loans for working capital and we have relied
upon proceeds from the sale of our equity securities or debentures to fund
negative cash flow from operations and to fund our capital growth requirements.
We have been unable to fund our operations with the cash generated from our
business and currently required substantial capital to fund operations and our
Internet business strategy. Since our inception, we have experienced and expect
to continue to experience, for the foreseeable future, negative cash flow from
operations.
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We have had net losses in each of the three fiscal years ending June 30,
1997, 1998 and 1999 that cumulatively total $6,670,000. For the fiscal year
ended June 30, 1999, we had a net loss of $5,183,000, of which $3,337,000 was
attributable to non-cash expenses related to the issuance of convertible debt
and equity securities at a discount ($2,222,000) and compensation for services
($1,115,000). For the six months ended December 31, 1999, we had a net loss of
$3,891,000, of which $3,217,000 was attributable to non-cash expenses related to
the issuance of options to an employee with a below market exercise prices
($750,000,) the repricing of warrants ($2,083,000) and the issuance of common
stock as a penalty for not having a registration statement declared effective by
the SEC by certain dates ($384,000).
We have been experiencing and expect to continue to experience significant
negative cash flow. For the year ended June 30, 1999 and the six months ended
December 31, 1999, our operations used $1,515,000 and $652,000 in cash,
respectively, and our investing activities used $286,000 and $799,000 in cash,
respectively. The use of cash for investing activities in fiscal 1999 includes
the purchase of restricted use certificates of deposit and the purchase of
equipment. Cash used for investing activities during the six months ended
December 31, 1999 included the expenditure of $850,000 for computer equipment.
As of December 31, 1999, we had a working capital deficit of $1,353,000,
total stockholders' deficit of $176,000, a total of 13,577,000 shares
outstanding and outstanding warrants and options to purchase 6,670,000 shares of
our common stock with an average exercise price of $.34 per share.
During fiscal 1999, our principal source of cash was $2,857,000 provided
from net financing activities, including proceeds from the issuance of
convertible debentures totaling $2,247,000 and proceeds from the sale of common
stock totaling $672,000. Net cash provided from financing activities for the six
months ended December 31, 1999 of $389,000 related primarily to proceeds from
the issuance of common stock and warrants totaling $410,000 and the repayment of
short-term debt.
We expect net losses and negative cash flow to continue for the foreseeable
future and anticipate our losses and the use of cash will increase significantly
from current levels because we expect to incur significant expenses and capital
expenditures related to:
- - brand development, advertising, marketing and promotional
activities, including product discounts;
- - expansion of our supplier/distributor relationships;
- - expansion of our order fulfillment infrastructure;
- - continued development of our web site, transaction-processing
systems, fulfillment capabilities and network infrastructure, most
of which are capital expenditures;
- - expansion of our product offerings and web site content; and
- - employment of additional personnel as our business expands.
With our intended significant increase in expenditures on marketing and
promotional activities there are no assurances these efforts will be effective
in attracting customers to our on-line method of shopping for travel products
and services via our web site. In addition, we may be obligated to pay
commissions, based on a percentage of revenue, to companies with whom we have
online marketing relationships. These costs will increase as our revenues
increase. If we do achieve profitability, we cannot be certain that we will be
able to sustain or increase profitability on a quarterly or annual basis in the
future.
Our ability to achieve profitability depends on our ability to secure
additional financing, to generate and sustain substantially higher revenues with
high gross margins and control the growth in operating costs. During January and
February 2000 we raised additional capital totaling $1,670,000 that was used to
reduce our working capital deficit and is being used to fund negative cash flow
from operations and capital expenditures related to the implementation of our
Internet business strategies. In addition, $400,000 of current liabilities were
converted into warrants to purchase shares of our common stock. We also
currently have warrants and options outstanding to purchase 9,979,535 and
2,165,000 shares of our common stock with average per share exercise prices of
$.32 and $.54, respectively. If all currently outstanding warrants and options
were exercised, we would receive gross proceeds of $4,351,000. However, there
can be no assurance the holders of these warrants and options will exercise
their right under these financial instruments at such time we are in need of
additional capital or before the warrants and options expire. In addition, in
the event that the registration statement, of which this prospectus is a part,
is not declared effective by the SEC by June 20, 2000, then it is unlikely that
we will receive $2,187,500 of proceeds from the exercise of warrants to purchase
an aggregate of 8,750,000 shares of common stock, because the shares of common
stock underlying those warrants may, in such event, be acquired through a
cashless exercise of those warrants.
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In order to fund our operations and continue the implementation of our
Internet business strategy, we anticipate the need to raise at least $6.0
million in additional capital during the calendar year 2000. We will need to
raise a portion of that capital within approximately thirty to sixty days to
fund negative cash flow from operations and fund capital expenditures related
to the implementation of our Internet business strategy. If we raise
additional funds through the issuance of equity or debt securities, those
securities may have rights senior to those of our stockholders, and our
stockholders will experience substantial additional dilution. We cannot be
certain that additional financing will be available to us on favorable terms
when required, or at all. Additionally, we cannot be certain that this
additional financing will be sufficient to fund the implementation of our
Internet business strategy. Our failure to obtain sufficient additional
funds, either through additional financing or continuing operations, will
have a material adverse effect on our business and financial condition, our
ability to implement our Internet business strategies and our ability to
continue our operations. Additionally, we cannot be certain that this
additional financing will be sufficient to fund the implementation of our
Internet business strategy.
We anticipate incurring capital expenditures of approximately $1.5
million over the next twelve months as follows: approximately $200,000 for
the purchase of property and equipment, approximately $800,000 for website
development, and approximately $500,000 for software and other capital
expenditures.
From July 1998 to January 1999, we made sales of common stock in reliance
upon the exemption from registration contained in Rule 504 of Regulation D. With
respect to the foregoing transactions made in reliance upon the exemption
contained in Rule 504 of Regulation D, it has since come to our attention that
such transactions may not have been made in compliance with Rule 504. We are
currently evaluating the matter, and if we determine that the transactions were
not in compliance with Rule 504, we intend to take appropriate corrective
action, including possibly offering recission rights to the investors in such
transactions. If the transactions were not in compliance with Rule 504, we could
be subject to substantial liabilities, which could materially and adversely
affect our financial condition and results of operation.
We have never paid any cash dividends on our common stock, and we do not
anticipate paying cash dividends in the foreseeable future. Our current policy
is to retain all of our earnings to finance our future development and growth.
We may reconsider this policy from time to time in light of conditions then
existing, including our earnings performance, financial condition and capital
requirements. Any future determination to pay cash dividends will be at the
discretion of our Board of Directors and will depend upon our financial
condition, operating results, capital requirements, general business conditions
and other factors that our Board of Directors deems relevant.
OTHER SIGNIFICANT MATTERS
The travel industry is subject to numerous risks that may also affect our
business, financial condition and result of operations. Our results of
operations will depend upon factors affecting the vacation industry in general.
Our 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 could result in a temporary or long-term
overall decline and demand for packaged vacations, including:
- - political instability;
- - armed hostilities;
- - international terrorism;
- - labor disturbances;
- - a rise and fuel prices or other travel costs, or a surcharge imposed by
a travel provider to offset rising fuel prices;
- - excessive inflation;
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- - currency fluctuations;
- - extreme weather conditions; and
- - concerns about passenger safety.
We believe that price-based competition will continue for the foreseeable
future. The continuation of such competition and the occurrence of any of the
events mentioned above could have a material adverse effect on our business,
financial condition and results of operations. In addition, demand for our
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 down turn or any recession in the
United States or these other markets could have a material adverse effect on our
business, financial condition in the result operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not subject to material market risk exposure due to interest rate
risk, foreign currency exchange rate risk, commodity price risk or other
relevant market risks.
FUTURE ACCOUNTING PROUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 requires companies to recognize all derivatives contracts as either
assets or liabilities in the balance sheet and to measure them at fair value.
If certain conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the changes
in the fair value of the hedged asset or liability that are attributable to
the hedged risk or (ii) the earnings effect of the hedged forecasted
transaction. For a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of change. SFAS 133, as
amended by SFAS 137, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
Historically, we have not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, we do not
expect adoption of the new standard on July 1, 2000 to affect its financial
statements.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
provides guidance on accounting for the various types of costs incurred for
computer software developed or obtained for internal use. Also in June 1998,
the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities."
SOP 98-5 requires costs of start-up activities and organizational costs, as
defined, to be expensed as incurred. We have elected early adoption of these
SOPs, and they did not materially impact our financial statements.
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BUSINESS
OVERVIEW
Affinity International Travel Systems, Inc., operating primarily through
its wholly-owned subsidiary, SunStyle International Holidays, Inc., is engaged
in the business of marketing, selling and distributing a variety of travel
related products and services. Specifically, we market, sell and distribute
vacation packages, tours, cruises, domestic and international airline tickets,
car rentals and accommodation products and services to travel agencies and
consumers. We are currently implementing a business strategy to utilize the
Internet as a delivery platform for our inventory of travel related products and
services.
We intend to fulfill demand for our travel products in both the business to
business and business to consumer online travel arenas by aggregating our
inventory of packaged leisure travel products and using the Internet as the
delivery platform.
We believe we have developed and acquired the infrastructure necessary to
implement our Internet business strategy. Specifically, we have:
- developed and acquired technologies;
- developed specialized knowledge and experience concerning certain
geographic destinations; and
- established relationships with travel suppliers that enable us to offer
a large inventory base at competitive prices.
A key component of our Internet business strategy is to focus our resources
in two segments: the business to consumer and business to business travel arena.
We intend to concentrate our resources on the business to business online travel
arena, where our objective is to sell to other travel providers leisure travel
products that traditionally have had higher margins than airline ticket sales,
including, among others, vacation packages, tours and cruises. We also intend to
continue to sell our leisure travel products directly to consumers.
With our current infrastructure, we believe we are well-positioned to take
advantage of the potential growth in the domestic and international travel
industries and in online travel. Our strategy is to focus on the sale and
distribution of travel products, such as vacation packages, tours and cruises,
which traditionally have had higher margins than airline ticket sales.
Our Internet business strategy is centered on the development and
implementation of our FarAway.com web site. This site, currently in development,
will be designed to attract a loyal customer base in the United States, Europe,
Asia and Latin America, and to convert these potential customers into leisure
travel buyers.
HISTORY AND BACKGROUND
Affinity International Travel Systems, Inc. was incorporated in Nevada in
1977 under the name Medanco, Inc. From 1977 through 1997, Medanco had no
revenues and limited operations. In 1997, Medanco changed its name to Pay Dirt,
Inc., which had no operations until it completed the acquisition of SunStyle
International Holidays, Inc. in July 1998, at which point it changed its name to
Affinity International Travel Systems, Inc. Since 1998, we have been primarily
engaged in marketing and selling travel products to travel agents and consumers.
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RECENT ACQUISITIONS
In July 1998, we acquired all of the outstanding common stock of SunStyle
International Holidays, Inc. in exchange for 4,902,894 shares of our common
stock. SunStyle is now a wholly-owned subsidiary through which we conduct our
primary business operations. SunStyle is a wholesale tour operator focused on
travel to Hawaii, Florida, Mexico, and the Caribbean. SunStyle vacation packages
include accommodations, airfare, rental cars, and other services such as theme
park vouchers. SunStyle also provides air transportation through contracts with
major airlines such as Northwest Airlines, TWA, and Hawaiian Air Lines and Air
Jamaica and is an official wholesaler for Walt Disney World Attractions and
official tour operator for Universal Studios Escape Vacation Packages.
In August, 1998, we opened Affinity International Rent-A-Car, a division of
SunStyle. Affinity International Rent-A-Car supplies North American travel
agents and consumers with rental cars and vans in Western Europe, the U.S.,
Canada, Mexico, and the Caribbean.
On January 1, 1999, we acquired all of the outstanding common stock of
Prestige Travel Services II, Inc. for $1,600,000, which we paid for through the
issuance of 800,000 shares of Series A Convertible Preferred Stock. The shares
of preferred stock were subsequently converted into 1,497,076 shares of common
stock in accordance with the terms of the preferred stock. Prestige is a retail
travel agency headquartered in Tampa, Florida. Prestige caters mainly to the
leisure segment of the travel industry. Prestige also operated branch locations
in Ft. Lauderdale and Holiday, Florida. In December 1999, we sold Prestige to
its original owners for a sale price of $75,000 in cash and the surrender of
1,497,076 shares of our common stock.
On February 8, 1999, we acquired the assets and operations of
Design-A-Tour, Inc. in exchange for 36,320 shares of our common stock valued at
approximately $2.07 per share, or an aggregate purchase price of approximately
$75,000. Design-A-Tour, established in 1988, specializes in tour programs to
Costa Rica, Belize, Guatemala, Brazil, Argentina, Chile, and Peru. Design-A-Tour
currently operates as a division of SunStyle and operates tour programs to
Aruba, Bonaire, Curacao and Margarita Island and has wholesale air contracts
with Aerolinas Argentinas, TransBrazil, Varig, Aero Peru, Groupo Taca (Taca
Airlines, Aviateca, COPA, Lacasa, NICA), Serviventsa, and ALM.
In July, 1999, we acquired the assets and operations of Integrity Credit
Services (d/b/a Intrepid Travel and Goldmark Travel). Intrepid is a retail
travel agency that services clients in the Tampa Bay metropolitan area. On
January 7, 2000, we sold certain assets and the operations of Goldmark Travel
to Skelton's Dolphin Travel, located in St. Petersburg, Florida, for $30,000
in cash.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET
Because of the inherent limitations of traditional retail channels of
distribution, the Internet is dramatically affecting the way consumers and
businesses are buying and selling products and services. According to Jupiter
Communications, individual Internet users in the U.S. in 1999 will top the 100
million mark and continue to grow steadily to 157 million users in over 67
million households by 2003. A recent Forrester Research study stated that online
travel sales are expected to eclipse those of every other e-commerce category.
In addition, online use in Europe and Latin America is poised for explosive
growth.
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In Europe, the number of Internet users is predicted to grow from 38
million to 150 million by 2003, with online sales to consumers expected to grow
from $5.4 billion in 1999 to more than $115 billion in 2003. In Latin America,
the number of Internet users in the region is expected to grow from 4.8 million
in 1998 to 7.5 million this year and 19 million by 2003, according to
International Data Corporation. During this time, Latin American e-commerce
sales are expected to soar from a mere $167 million in 1998 to $8 billion within
five years.
GROWTH OF ELECTRONIC COMMERCE IN ONLINE TRAVEL
To date, the travel industry has been very successful in taking advantage
the e-commerce trends, particularly in the United States. According to Forrester
Research, during 1999, online travel sales were the single highest grossing
product sold on the Web. Internet analysts at Forrester Research expect the U.S.
online travel marketplace to increase from the current $2.8 billion to $29.5
billion within the next four years. Similarly, online travel research firm
PhoCusWright expects the online travel market in the U.S. to reach $20 billion
by as early as 2001. Industry analysts see similar online travel growth trends
in both the European and Latin American markets. Specific projections for the
Latin American market have yet to be released. However, by 2002, Data Monitor
predicts the sale of online travel products in Europe will reach $1.7 billion,
an increase from $7.7 million in 1997.
CURRENT RESULTS OF ELECTRONIC COMMERCE IN ONLINE TRAVEL
According to the 1999 Online Travel Report, the top four online travel
sites are currently generating about $12 to 16 million each in weekly sales.
Despite these impressive sales figures, however, all of these sites are losing
money. We believe the lack of profit can be attributed primarily to the reliance
of each site on airline ticket sales to generate revenue. Most major airlines
have capped the commissions they pay online travel agencies at 5 percent, or $10
maximum per ticket. According to the online agencies, the cost associated with
selling the average airline ticket is $21. Additionally, a typical
non-productive session on an online travel site, where a consumer makes fare
inquiries without purchasing any of them online, costs the agency about $4 in
fees it pays to the airline-owned computer reservation services. Thus, online
agencies lose money on virtually all airline-ticket purchases or queries. We
believe that because airline ticket purchases make up approximately 80% of
online travel transactions, online agencies that continue to operate under their
current business models will have a difficult time generating a profit in
today's marketplace. These limitations of traditional online travel agencies
create a significant opportunity for a company like ours that can combine our
existing infrastructure with the Internet.
OUR INTERNET BUSINESS STRATEGY
We believe that in order to become profitable we must begin selling travel
products such as vacation packages, tours and cruises, which traditionally have
had higher margin than airline ticket sales. Our Internet business strategy,
which is centered on the development of our FarAway.com web site and is focused
on the online sale of specialized vacation and tour packages, is designed to
sell such traditionally higher margin products. Specifically, our strategy is
designed to:
- - Attract and acquire a substantial base of travel customers in the U.S.,
Europe and Latin America, by developing a compelling and functional web
presence, launching the appropriate marketing and strategic partnership
initiatives and offering the necessary customer service mechanisms; and
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- - Convert customers into leisure travel buyers by offering attractive
prices on personalized vacation packages, tours and cruises utilizing
our TOURSCAPE operating system.
To achieve the goals of our business strategy, however, we need to
successfully develop our web site, FarAway.com, into a full-service web site
that will use our existing hardware and software infrastructure, as well as our
strategic partnerships and existing vendor contracts.
OUR INFRASTRUCTURE
We believe we are acquiring and developing the infrastructure necessary to
effectively carry out our Internet business strategy. This infrastructure is
comprised of our network architecture, Internet-enabled software engines,
back-end operations and strategic and contract-based relationships.
NETWORK ARCHITECTURE. We are developing and implementing a network
architecture designed to support our Internet and enterprise-based activities.
This architecture takes advantage of, and builds upon, our existing
technologies. Our systems are being designed and developed by a series of
vendors, including: Quest Technologies, Inc, Datalex, Convergent Technologies,
SABRE and Logibro, and with our internal technology staff. We believe that our
systems will be capable of supporting all of our internal operations and
Internet-related initiatives, including:
- A hosting environment for our web site, FarAway.com, and any other of
our web properties;
- A processing capability for online users' query and booking
transactions;
- A platform for multimedia intensive technologies, such as live agent
video-conferencing, voice-over-IP (Internet telephony) and video
streaming;
- An ability to provide on and off-site agents with the tools and
resources necessary to deliver superior customer service; and
- A means to support expansion that meets growing corporate needs and
consumer demands.
INTERNET-ENABLED SOFTWARE SYSTEMS. We have made significant investments
in the software infrastructure that will be integrated into the FarAway.com web
site. Our software systems include the following:
- TOURSCAPE: TOURSCAPE is a tour/wholesale reservation software system.
TOURSCAPE, developed by THE SABRE GROUP, improves productivity,
efficiency, record keeping and business tracking, as well as reducing
operator training and booking time. It also supports multiple product
lines, unlimited packaging capabilities, numerous pricing and costing
methods and various commission levels.
- TOURPATH: TOURPATH is a system interface that delivers single-source
connectivity to land and air reservation information. Additionally, it
delivers the ability to interface with multiple airline reservation
systems. These software applications are currently in full use by our
reservations agents in their day-to-day operations.
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- TOURWISE: TOURWISE is a customized interface and decision-support tool
that electronically communicates with the in-house host system,
TOURSCAPE, and the various airline reservation systems. This technology
is still in the process of being beta-tested. TOURWISE streamlines the
processing between us, the customer and the airlines reservations
system by using established booking, pricing and invoice business rules
customized to the system.
- BOOKIT!: BOOKIT! is an online booking engine that allows users to book
air, car and hotel reservations using inventory managed by a computer
reservation system.
- BOOKIT! PRO: BOOKIT! PRO provides outside agents affiliated with us
access to our in-house reservation system so that they may process
their own bookings from any remote location through the Internet.
INTERNAL OPERATIONS. Despite the automation of the real-time booking
processes, travel reservations still require some human interaction for
completion. At a minimum, this involves physically handling and mailing paper
airline tickets to customers, where applicable, and manually reviewing tour
package transactions for accuracy and completeness. Under our Internet business
strategy, we plan to provide live agent customer support to those customers
requiring it. Because of our expertise as a wholesale distributor as well as a
telephone-based travel operator, we believe we are well-positioned to expand
these operational capabilities to our Internet activities.
CONTRACTUAL RELATIONSHIPS. The leisure tours and packages we currently
market, which are a critical component to the overall success of our Internet
initiatives, are the result of contracts we have secured with travel industry
vendors. As a travel wholesaler, we believe we have a competitive advantage over
suppliers and other online travel agencies that lack such relationships. These
contractual relationships, along with the other relationships we have created
with others in the Internet and travel industries help lay the foundation for
our Internet initiatives. These contracts can be canceled or modified by the
supplier upon no or relatively short notice.
OUR MARKETING STRATEGY
We are employing the following marketing strategies:
FOCUSING ON THE SALE OF SPECIALIZED LEISURE TRAVEL PACKAGES. As noted by
industry analysts from Jupiter Communications and Forrester Research, it is
imperative that online travel agencies begin selling products that traditionally
have had higher margins than airline ticket sales, such as vacation packages,
tours and cruises in order to generate profitable operations. We believe that,
in order to be profitable, online agencies, must:
- have specialized vacation package inventory available to consumers;
- utilize online tools that help facilitate complex leisure travel
purchases; and
- provide the customer service, both online and off, that is necessary to
make the customer feel comfortable booking these types of transactions
online.
We believe we are well positioned to compete in the online travel business
for the following reasons:
- Our TOURSCAPE booking technology will provide consumers with a
user-friendly mechanism for booking complex and specialized travel
packages.
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- Our existing base of travel specialists can provide the requisite
e-travel personal assistance through real-time chat, Internet
telephony, 800 telephone service, and, in the near future,
Internet-based video communication.
- Finally, because of our status as a travel wholesaler and distributor,
with established travel vendor relationships, we expect that
FarAway.com will offer a wide variety of specialized packages at rates
that travel consumers will find attractive.
COMBAT THE TRADITIONALLY HIGH "LOOK-TO-BOOK" RATIO. According to research
from PhoCusWright, approximately 57 percent of online travel visitors have
looked, but not booked, online. Of those, approximately 70 percent have bought
their tickets through an 800 number or conventional travel agent after
researching online. Therefore, as a means of capturing maximum revenue,
FarAway.com customers will be encouraged to utilize the services of our travel
agent staff through live chat, Internet call button, or an 800 number if, for
some reason, they are not inclined to purchase online. To further combat this
trend, personalization technology, which will store a customer's travel
preferences, will be implemented into the FarAway.com site. By combining our
agent-based customer service and personalization technology, we believe
FarAway.com will be positioned to improve on the industry's current
"look-to-book" ratio.
FOSTER STRATEGIC PARTNERSHIPS AND PRIVATE LABEL PROGRAMS. We believe that
one of the most important aspects of developing a successful online travel web
site is the process of creating and managing the requisite strategic
partnerships and alliances. Strategic partnerships with web portals, e-commerce
companies and content providers have the potential to generate revenue from
transactions and advertisements, and also places the brand in front of Internet
users.
We intend to pursue these types of strategic online partnerships as a
means to generate traffic, customer acquisition and revenue. We intend to enter
into private label agreements to provide fulfillment on all travel purchased on
several heavily trafficked e-commerce web sites.
In a less conventional effort, we also plan to work with large corporations
to establish programs that provide incentives for the corporation's employees to
book travel through the FarAway.com Web site or through our network of travel
agents. Employees of each corporation will be issued a member ID number that,
when entered from the FarAway.com home page, will take them to a customized page
within FarAway.com offering special travel discounts and incentives. This
customized home page may alternatively be accessed directly from the employer's
corporate intranet. Corporate members will also have full access to our travel
specialists through special 800 numbers, where the same discounts and incentives
will be available. A goal of this effort is to utilize the corporate
communication infrastructure to promote and market these programs, which are, in
effect, employee benefits programs.
ESTABLISH A FARAWAY.COM AFFILIATE PROGRAM. Thousands of Web sites are
currently utilizing the affiliate (also known as associate or referral) programs
of online vendors such as CDNOW, Amazon.com, BarnesandNoble.com,
LendingTree.com, FogDog.com and CarPrices.com, to offer their visitors the
opportunity to buy everything from books to sporting goods to cars. These
programs allow any web site owner to create banner links that transport visitors
to the affiliated e-commerce web site in the hope they will make a purchase,
thereby entitling the web site owner to a commission.
By establishing and promoting a FarAway.com affiliate program, we believe
we will create an opportunity to sell travel products in appropriate contextual
settings on complementary web sites.
TARGET UNTAPPED INTERNATIONAL MARKETS. We believe online travel agencies
have, up to now, virtually ignored the non-U.S. travel market. Recognizing the
opportunities presented by rapid growth in
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use of the Internet abroad, we have formed Affinity International Travel
Systems, Ltd., a wholly owned subsidiary located in London, England, in an
effort to expand our target market. We believe the European market is a
potentially large source of business for the U.S. vacation accommodation product
and that our presence in the market provides a base for potential expansion and
a hub for customer service in the European online and offline market. We expect
our United Kingdom office will become fully functional once it is linked to the
TOURSCAPE software system.
COMPETITION
Our competitors in the online travel industry include travel suppliers and
travel agencies. Each of these types of competitors and factors upon which we
compete are described below. Many of our competitors have greater experience,
brand name recognition and/or financial resources than we do. We may be unable
to compete successfully and our failure to compete successfully may have a
material adverse effect on our business, financial condition and results of
operation.
SUPPLIERS. Suppliers primarily encompass airlines, hotels, car rental
agencies and some cruise lines. Among the suppliers, airlines are expanding
their Internet presence the most. This includes not only enhancing their web
sites and adding the Internet as a significant distribution channel to
consumers, but also expanding their marketing efforts and forming new strategic
alliances with other key online players.
Advantages of suppliers over their agency counterparts include, among
others:
- Well-established brands and consumer confidence in those brands;
- Customer loyalty;
- Existing operational infrastructure and fulfillment capabilities;
- Access to additional inventories and pricing incentives;
- Other incentives such as frequent flyer miles programs; and
- Availability of extensive financial resources to invest in Internet
initiatives.
TRAVEL AGENCIES. Travel agencies with an online presence are comprised of
both the online companies and established brick-and-mortar operations. According
to studies of online travel, such as the Jupiter Analyst Report, some of the
leaders in online travel include, among others:
- Travelocity
- Expedia
- Preview Travel
- GetThere.com
- Trip.com
- Travel Network
- Uniglobe Travel
- Lowestfare.com
All of the leaders mentioned above offer price and availability search
capabilities for air, hotel and car rental and allow the user to book directly
online without human intervention. Most of the agencies also offer special deals
and discounted offerings. Some provide destination content. One of the areas
some agencies are endeavoring to enhance is their offering of tour packages and
cruises.
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INTELLECTUAL PROPERTY
We regard the protection of our intellectual property as important to our
future success and rely on a combination of copyright, trademark, service mark
and trade secret laws, license agreements and contractual restrictions to
establish and protect intellectual property rights in our web site architecture
and technology, products, content and services. We plan to enter into
confidentiality and invention assignment agreements with our employees and
contractors in order to limit disclosure of our confidential information and to
protect our ownership interest in our web site architecture and technology. We
cannot assure you that these contractual arrangements or the other steps taken
by us to protect our intellectual property will prove sufficient to prevent
misappropriation of our technology or deter independent third-party development
of similar technologies.
We have filed an application to register our trademark for Faraway.com.
There are a number of other trademarks and domain names that may be similar to
ours. An infringement action could be brought against us at any time by the
holders of these marks. There is a substantial risk that the owner of other
marks would overcome any defenses that we could raise. If the owner of such
marks were to prevail in such an action, we could lose the ability to use the
Faraway.com name and domain name and could be subject to substantial damages.
Such adverse outcomes could adversely affect our business. If we are required to
change our domain name, we could lose customers and brand equity which would
have a material adverse effect on our business and financial condition. Although
we may attempt to acquire or license the right to use potentially relevant
third-party trademarks and domain names, we may not be successful.
We have licensed in the past, and expect that we may license in the future,
certain of our intellectual property rights, such as trademarks or copyrighted
material, to third parties. While we attempt to ensure that the quality of the
our brand is maintained by such licensees, we cannot assure you that such
licensees will not take actions that might materially adversely affect the value
of our intellectual property rights or reputation, which could harm our
business.
REGULATORY ENVIRONMENT
REGULATION OF THE TRAVEL INDUSTRY
Many travel suppliers, particularly airlines, are subject to extensive
regulation by federal, state and foreign governments. In addition, the travel
services 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 and
changes in tax policy could have an adverse impact on the travel service
industry in general and could have a material adverse affect on our business,
financial condition, and results of operations. Changes in tax policy for online
purchases, including travel purchases, could also have a material adverse affect
on our business, financial condition and results of operations.
REGULATION OF THE INTERNET
At the present time the amount of state and federal governmental regulation
applicable to the Internet is relatively small when compared to other areas of
communication and commerce. As the size, use and popularity of the Internet
increases, it is possible that laws and regulations may be enacted with respect
to the Internet, covering issues such as user privacy, pricing, taxation,
content, copyrights, distribution, antitrust and quality of products and
services. Additionally, the rapid growth of electronic commerce may trigger the
development of tougher consumer protection laws. The adoption of such laws or
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regulations could reduce the rate of growth of the Internet and could make it
more difficult and expensive for us to carry on our planned business activities.
Due to the increasing use of the Internet and the burden it has placed on
the current telecommunications infrastructure, telephone carriers have requested
the Federal Communications Commission, the FCC, to regulate Internet service
providers and online service providers and impose access fees on those
providers. If the FCC imposes access fees, the costs of using the Internet could
increase dramatically. These regulations, if promulgated, could result in the
reduced use of the Internet as a medium for commerce, which could have a
material adverse effect on our business, financial condition and results of
operations.
REGULATION CONCERNING PRIVACY
Specific laws and regulations concerning the use of the Internet have been
enacted. In particular, as directed by Congress in the Children's Online Privacy
Protection Act, also known as COPPA, the Federal Trade Commission recently
adopted regulations, effective April 21, 2000, prohibiting unfair and deceptive
acts and practices in connection with the collection and use of personal
information obtained from children under 13 years old on the Internet. Because
our web site is not directed at children and we do not anticipate its widespread
use by children, COPPA and the FTC's regulations should not have a significant
effect upon our business.
The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could, among other things, adversely affect
U.S. companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standards in the United States. We may ultimately
engage in data collection from users in EU member countries. If we do, we would
be subject to the EU directive.
While we expect to have a privacy policy designed to ensure the protection
of the privacy of our users, there can be no assurance that these programs will
conform with any regulations which have been adopted by the FTC or the European
Union directive.
It is also possible that cookies, or information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, which are used to track demographic information and to target
advertising, may become subject to laws limiting or prohibiting their use.
Limitations on or elimination of our use of cookies could limit the
effectiveness of our ability to market to certain users, which could have a
material adverse effect on our business, results of operations and financial
condition.
We intend to take the necessary measures to ensure that our web site
complies with industry standards relating to user privacy.
EMPLOYEES
As of March 7, 2000, we had 42 full-time employees, including 20 in the
reservation and customer service departments, and 22 serving in operations,
sales and marketing, information systems, management, accounting and
administration. Our employees are not represented by a union, and we believe our
employee relations are good.
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FACILITIES
Our headquarters are located in City Center, St. Petersburg, Florida, where
we lease an office with approximately 10,815 square feet of space. This lease
expires in June 2004. We have also entered into a sublease agreement with an
adjacent tenant for an additional 5,683 square feet of office space to
accommodate our Internet expansion strategy.
Our Design-A-Tour division leases office space in Atlanta, Georgia, and
our Intrepid Travel division leases office space in a suburban office complex
located in Seminole, Florida. We believe that our facilities are adequate to
meet our current requirements and that suitable additional or substitute space
will be available as needed.
LEGAL PROCEEDINGS
As of the date of this prospectus, we are not party to any material
proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about our executive
officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Daniel G. Brandano 50 President, Chief Executive Officer and Director
Joan C. Brandano 49 Secretary and Director
John E. Vahl 64 Vice President and Director
Gerard J. LaMontagne 52 Chief Financial Officer
Mark S. Mandula 42 Chief Operating Officer
</TABLE>
DANIEL G. BRANDANO has served as our President, Chief Executive Officer and
Chairman of the Board since August 1998. Prior to joining us, Mr. Brandano
served as a consultant to a Canadian hotel reservation-processing firm from
May 1994 to May 1995. Mr. Brandano founded SunStyle International Holidays,
Inc., a wholly-owned subsidiary of Affinity, and has served as chief
executive officer and director of SunStyle International Holidays from May
1995 through July 1998. Mr. Brandano founded USA Rent-A-Car in June 1985 and
was a co-founder Affinity International Rent-A-Car in May 1995. USA
Rent-A-Car and Affinity International Rent A Car are rental car businesses.
Mr. Brandano is married to Joan Brandano, our secretary and a director.
JOAN C. BRANDANO has served as our Secretary and a Director since August
1998. Prior to joining us, Ms. Brandano co-founded the business of Affinity
International Rent-A-Car. She served as vice president of Affinity
International Rent-A-Car from May 1995 to May 1998. Prior thereto, she served
as a senior manager at USA Rent-A-Car and as a customer service manager for a
large wholesale supplier of airline crew equipment and supplies. Ms. Brandano
is married to Daniel G. Brandano, our president and chief executive officer
and a director.
JOHN E. VAHL has been a Director of Affinity since August 1998. Prior to joining
us, Mr. Vahl served as a director of SunStyle International Holidays, Inc. from
August 1996 through July 1998. Mr. Vahl served as president of Payless
Rent-A-Car System, an international rental car-franchising firm, from June 1990
to April 1991. Mr. Vahl has extensive international business experience with
particular emphasis in the emerging Asian markets. From April 1993 to the
present, he has been serving as a liason between a major European automobile
manufacturer and representatives of a major Chinese automobile group.
GERARD J. LAMONTAGNE has served as our Chief Financial Officer since October
1998. Prior to joining us, he served as vice president and chief financial
officer of Goddard Medical Associates, a multi-specialty health care provider,
in southeastern Massachusetts from February 1984 to September 1998. Mr.
LaMontagne is a certified public accountant.
MARK S. MANDULA has served as our Chief Operating Officer since July 1999. Since
1995, Mr. Mandula has also served as chief executive officer of Integrity Credit
Services, Inc., a professional service corporation. Prior thereto, from 1988 to
1994, Mr. Mandula served as chief executive officer of MWN Corp. and CCB
Services, financial services institutions. Mr. Mandula has extensive experience
in the credit, investment banking and travel industries.
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ELECTION OF OFFICERS AND DIRECTORS
Our Board of Directors currently consists of three members. Each director
is serving as a director until the next annual meeting of stockholders and until
his successor is elected and qualified or until his earlier resignation or
removal. Each of our executive officers has been chosen for a term which
continues until the meeting of the Board of Directors which follows the next
annual meeting of stockholders and until his successor shall is chosen and
qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
We currently do not have any committees of the Board of Directors.
DIRECTOR COMPENSATION
In December 1999, we granted each of our three directors options to
purchase 50,000 shares of our common stock at an exercise price of $1.00 per
share as compensation for services provided and to be provided from May 1999
through July 2000. The exercise price of these options on the date of grant was
greater than the last sale price of our common stock as quoted on the OTC
Bulletin Board. All of the options granted are immediately exercisable and
expire three years from the date of grant. Our directors do not receive any
monetary compensation for acting as a director of Affinity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not have a formal compensation committee. Executive compensation
matters are determined by the Board of Directors as a group. Mr. Brandano, our
President and Chief Executive Officer, does not, however, participate in
discussions concerning his compensation.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain information
concerning the compensation awarded to, earned by or paid to our Chief Executive
Officer and each of our other executive officers whose total annual salary and
bonuses exceeded $100,000 for all services rendered in all capacities to us for
each of our last three fiscal years. The officers listed in the table below are
sometimes referred to as the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------------- --------------
Fiscal Other Securities
Name and Year Annual Underlying All Other
Principal Ended Salary Bonus Compensation Options Compensation
Position 6/30 ($) ($) ($) (#) ($)
- ------------------------------ --------- --------------- ------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel G. Brandano........ 1999 $62,000 - - - -
President and Chief 1998 52,500 - - - -
Executive Officer(1) 1997 36,479 - - - -
Gerard J. LaMontagne 1999 $48,500 - $66,563(3) - -
Chief Financial Officer(2)
</TABLE>
- ------------------------------
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(1) The compensation shown for the fiscal years ended June 30, 1998 and June
30, 1997 includes amounts paid to Mr. Brandano for services rendered in his
capacity as chief executive officer of SunStyle International Holidays,
Inc., prior to the SunStyle acquisition in July 1998.
(2) Mr. LaMontagne began serving as our chief financial officer in October,
1998.
(3) Represents the fair market value of 55,000 shares of common stock of
Affinity that were issued as part of Mr. LaMontagne's compensation during
fiscal 1999. Such shares were valued at the closing price of our common
stock as quoted on the OTC Bulletin Board on the last day of each month,
the date on which such shares are earned by Mr. LaMontagne.
OPTION GRANTS IN LAST FISCAL YEAR
No named executive officer was granted options during the fiscal year
ended June 30, 1999. In July 1999, we granted Mr. Brandano, our chief
executive officer, an option to purchase 2,000,000 shares of our common stock
at an exercise price of $0.50 per share. These options are immediately
exercisable and expire 10 years from the date of grant. In August 1999, we
also granted Mr. LaMontagne, our chief financial officer, an option to
purchase 15,000 shares of our common stock at an exercise price of $1.00 per
share. Mr. LaMontagne's options expire 3 years from the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
No named executive officer had any options through the fiscal year ended
June 30, 1999.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL
ARRANGEMENTS
Mr. Daniel G. Brandano, our president and chief executive officer, has an
employment agreement with us dated July 1, 1999. The term of Mr. Brandano's
agreement ends on June 30, 2006 and may be extended for additional one year
periods thereafter. Mr. Brandano's base salary is $120,000 for fiscal 2000 and
increases each year of his term. Mr. Brandano is also eligible to receive a
bonus and fringe benefits, such as a monthly payment for an automobile. In the
event we terminate Mr. Brandano without cause or if Mr. Brandano terminates his
employment for good reason, we must pay him an amount equal to his base salary
payable during the term of his agreement and we must continue to pay the cost of
his participation in our health and dental plans. In the event of Mr. Brandano's
death, resignation, disability, termination for cause, we must pay him an amount
equal to base salary and bonus or incentive pay earned and unpaid as of the date
of termination.
Mr. Mark S. Mandula, our chief operating officer, also has an
employment agreement with us dated July 1, 1999. The term of Mr. Mandula's
agreement ends on July 31, 2002 and it continues on a month to month basis
thereafter. Mr. Mandula's base salary was originally $58,000. In February 2000,
we amended his base salary to $78,000. Mr. Mandula's base salary increases each
year of the agreement, and he is eligible to participate in an annual bonus for
each year of the agreement. We also pay for Mr. Mandula's fringe benefits, such
as a monthly payment for an automobile and insurance.
Mr. Gerard J. LaMontagne, our chief financial officer, has an arrangement
with us pursuant to which he receives $6,500 in cash and 5,000 shares of our
common stock each month for services rendered. The shares we issue to
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Mr. LaMontagne are valued at the closing price of our common stock as quoted on
the OTC Bulletin Board on the last day of each month for which he provides
services.
STOCK OPTION PLAN
We have adopted the 1999 Combination Stock Option Plan. Under the 1999
Combination Stock Option Plan, both non-qualified and incentive stock options to
purchase shares of our common stock may be granted to key employees and other
persons who are in a position to contribute to our long-term success and growth.
The Board of Directors currently administers the stock option plan and has the
authority to, among other things, determine those persons who are eligible to
participate; determine the size of the grant; establish the terms and conditions
of the options granted; make or alter restrictions and conditions on the
options; and adopt rules and regulations and interpret the stock option plan. A
total of 4,000,000 shares have been reserved for issuance under the stock option
plan. As of March 7, 2000, options to purchase 2,165,000 shares of common stock
were outstanding or committed for issuance under the stock option plan.
CERTAIN TRANSACTIONS
In July 1998, we entered into an acquisition agreement with all of
the stockholders of SunStyle International Holidays, Inc. pursuant to which
we purchased 4,902,894 shares of SunStyle International Holidays, which
represented all of the issued and outstanding shares of SunStyle, in exchange
for 4,902,894 shares of our common stock. Although we acquired SunStyle, the
transaction was accounted for as a purchase of Affinity by SunStyle (a
reverse acquisition in which SunStyle is considered the acquirer for
accounting purposes) since the previous stockholders of SunStyle obtained a
majority of the voting rights of Affinity as a result of this transaction.
For accounting purposes, the reverse acquisition is treated as a
recapitalization of SunStyle and not as a business combination, therefore, no
value was allocated to the common stock issued for the acquisition. Mr.
Brandano, our President and a Director, was a principal stockholder and the
founder of SunStyle International Holidays, Inc. Following the acquisition,
Mr. Brandano became an officer and director of Affinity.
Between December 1998 and January 2000, we entered into a series of
agreements with Schoemann Venture Capital, LLC, a five percent beneficial holder
of our securities, pursuant to which Schoemann Venture Capital, LLC purchased or
received as penalty shares in connection with such financings an aggregate of
7,357,143 shares of our common stock (of which we are registering 6,014,286
shares) and warrants to purchase 6,450,000 shares of our common stock (which are
being registered for issuance to and resale by Schoemann Venture Capital, LLC
and related parties) at a current exercise price of $.25 per share, for an
aggregate purchase price of $2,872,000. These transactions are as follows:
- - In December 1998, Schoemann Venture Capital, LLC, purchased for an
aggregate consideration of $400,000, 1,142,857 shares of our common stock
and warrants to purchase an additional 200,000 shares of our common stock
at an exercise price of $0.35 per share. In January 1999, Schoemann Venture
Capital, LLC acquired the 200,000 shares under its warrant agreement for
$70,000. The shares acquired in this transaction are not being registered
in the registration statement, of which this prospectus is a part;
- - In January 1999, Schoemann Venture Capital, LLC, purchased for an aggregate
consideration of $222,000, a convertible note in the principal amount of
$222,000 and warrants to purchase 250,000
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shares of our common stock at an exercise price of $.35 per share.
Schoemann Venture Capital, LLC subsequently converted its note into 634,286
shares of our common stock;
- - In April 1999, Schoemann Venture Capital, LLC, purchased for an aggregate
consideration of $1,000,000, a convertible note in the principal amount of
$1,000,000 and warrants to purchase 750,000 shares of our common stock at
an exercise price of $1.75 per share. Schoemann Venture Capital, LLC
subsequently converted its note into 2,300,000 shares of our common stock;
- - In April 1999, we entered into a consulting agreement with Schoemann
Venture Capital, LLC, pursuant to which Schoemann Venture Capital, LLC was
entitled to receive a monthly consulting fee of $6,666 for business and
financial advisory services and a 5% commission on gross proceeds we
received from the sale of our securities resulting from introductions
Schoemann Venture Capital, LLC made to us. This agreement was amended in
June 1999 to provide that Schoemann Venture Capital, LLC is entitled to
receive a monthly consulting fee of $13,333 and warrants to purchase
750,000 shares of our common stock at an exercise price of $2.00;
- - In June 1999, Schoemann Venture Capital, LLC, purchased for an aggregate
consideration of $1,000,000, a convertible note in the principal amount of
$1,000,000 and warrants to purchase 2,750,000 shares of our common stock at
an exercise price of $2.00 per share. Schoemann Venture Capital, LLC
subsequently converted its note into 2,000,000 shares of our common stock;
- - In December 1999, we issued 840,000 shares to Schoemann Venture Capital,
LLC, in payment of penalties to Schoemann Venture Capital, LLC resulting
from our failure to have a registration statement declared effective by the
SEC prior to a specified date in our then existing agreements with
Schoemann Venture Capital, LLC;
- - In December 1999, Schoemann Venture Capital, LLC and GCD Investments, LLC,
an unrelated third party, purchased, for an aggregate consideration of
$250,000 and $500,000, respectively, 714,286 and 1,458,571 shares of common
stock, respectively, at a price of $0.35 per share. In connection with this
transaction, we repriced outstanding warrants to purchase 4,250,000 shares
of our common stock. The last sale price of our common stock on December
20, 1999 as quoted on the OTC Bulletin Board was $0.50 per share. These
agreements were terminated in January 2000, as described below;
- - In January 2000, we issued an additional 240,000 shares to Schoemann
Venture Capital, LLC in payment of penalties to Schoemann Venture Capital,
LLC resulting from our failure to have a registration statement declared
effective by the SEC prior to a specified date in our then existing
agreements with Schoemann Venture Capital, LLC;
- - In January 2000, we terminated the December agreements and entered into an
agreement with Schoemann Venture Capital, LLC, pursuant to which we agreed
to sell for $250,000 (less certain costs) warrants to purchase 1,150,000
shares of our common stock at an exercise price of $0.25 per share; and
- - In January 2000, we also agreed to issue warrants to purchase an aggregate
of 800,000 shares of our common stock at an exercise price of $0.25 per
share in payment of penalties to Schoemann Venture Capital, LLC resulting
from our failure to have a registration statement declared effective by the
SEC prior to a specified date in the prior agreements with Schoemann
Venture Capital, LLC. We also agreed that the exercise price for all
outstanding warrants to purchase 4,500,000 shares of our common stock that
were previously sold to Schoemann Venture Capital, LLC would be further
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reduced to $0.25 per share. Finally, we agreed that all rights and
obligations of the parties under the earlier agreements with Schoemann
Venture Capital, LLC, aside from certain registration rights and rights to
receive a 5% commission on certain sales of our securities, were terminated
in all respects.
In January 2000, as part of the same financing with Schoemann Venture
Capital, LLC in January 2000, we entered into an agreement with GCD Investments,
LLC, a five percent beneficial owner, which replaced an existing agreement dated
December 20, 1999, pursuant to which we agreed to sell warrants to 2,300,000
shares of our common stock at an exercise price of $0.25 per share. GCD
Investments paid us $500,000, less certain costs, in consideration of the
issuance of the warrants. GCD Investments became a 5% beneficial owner as a
result of this transaction.
On January 1, 1999, we acquired all of the outstanding capital stock of
Prestige Travel Services II, Inc., a retail travel agency with an independent
agent sales program and an internet cruise brokerage operation, for $1,600,000,
which we paid through the issuance of 800,000 shares of Series A Convertible
Preferred Stock . The conversion price of the Series A Convertible Preferred
Stock was $1.06875 per share based on the 20 day average trading price preceding
August 1, 1999 as provided for in the purchase agreement. The holders of the
Series A Convertible Preferred Stock subsequently converted their shares of
preferred stock into 1,497,076 shares of common stock, thereby resulting in
their becoming a greater than five percent owner of our company.
In December 1999, we entered into an agreement with the former owners of
Prestige Travel Services II, who were then 5% beneficial owners of our stock,
pursuant to which the former owners repurchased all of the outstanding capital
stock of Prestige Travel Services from us. The former owners paid us a purchase
price of $75,000 in cash and transferred to us the 1,497,076 shares of our
common stock which the owners received upon conversion of the Series A
Convertible Preferred Stock issued to them in the acquisition.
In July 1999, we entered into an employment agreement with Daniel Brandano,
our president and chief executive officer. The term of Mr. Brandano's agreement
ends on June 30, 2006 and may be extended for additional one year periods
thereafter. Mr. Brandano's base salary is $120,000 for fiscal 2000 and increases
each year of his term. For a more detailed description of Mr. Brandano's
employment agreement, please see the section entitled "Employment Contracts,
Termination of Employment Agreements and Change in Control Arrangements" on page
52.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to us regarding
beneficial ownership of our common stock as of February 25, 2000 by:
- The named executive officers;
- Each of our directors;
- Each person, other than those officers or directors who are 5%
holders who are listed elsewhere in the table, known by us to be
the beneficial owner of more than 5% of our common stock;
- All executive officers and directors as a group; and
- Each selling stockholder, other than those officers or directors
or 5% holders who are listed elsewhere in the table, who is
offering shares of our common stock under this prospectus.
Unless otherwise noted below, the address of each person listed in the
table is c/o Affinity International Travel Systems, Inc. 100 Second Avenue
South, 1100S, St. Petersburg, Florida 33701-4301, and each person has the sole
voting and investment power over the shares as beneficially owned except to the
extent authority is shared by spouses under applicable law and except as set
forth in the footnotes to the table.
We have determined beneficial ownership in accordance with the rules of the
SEC. Shares of common stock subject to warrants or options that are either
currently exercisable or exercisable within 60 days of February 25, 2000 are
treated as outstanding and beneficially owned by the warrant or option holder
for the purpose of computing the percentage ownership of the option/warrant
holder. However, these shares are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. For purposes of
determining beneficial ownership after the offering, we have assumed that each
selling stockholder will sell all shares they are offering.
All shares of common stock being offered by selling stockholders are being
registered by this prospectus pursuant to contractual registration rights or
similar obligations on behalf of Affinity or are being registered voluntarily by
Affinity.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------- --------------------
NAME AND ADDRESS NUMBER OF PERCENTAGE OF NUMBER OF SHARES NUMBER OF PERCENTAGE OF
OF BENEFICIAL OWNER SHARES OWNERSHIP BEING OFFERED SHARES OWNERSHIP
------------------- --------- ------------- ---------------- --------- -------------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND OFFICERS
Daniel G. Brandano (1) 4,950,000 28.60% 25,000 2,100,000 7.70%
Joan C. Brandano(2) 4,950,000 28.60% 2,825,000 2,100,000 7.70%
John E. Vahl(3) 50,000 0.30% -0- 50,000 0.20%
Gerard J. LaMontagne(4) 100,000 0.66% 85,000 15,000 0.06%
Mark S. Mandula 140,000 0.90% 140,000 -0- 0.00%
All executive officers and 5,240,000 30.20% 3,075,000 2,165,000 7.90%
directors as a group
(5 persons) (5)
</TABLE>
56
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
5% BENEFICIAL OWNERS
Gordon Dumont, Manager(6) 2,300,000 13.20% 2,300,000 -0- 0.00%
4821 Sheridan
Metairie, LA 70002
Bradley S. Johnson (7) 2,550,000 14.90% 2,550,000 -0- 0.00%
c/o David Lukinovich
3333 W. Napoleon Ave.
Suite 101
Metairie, LA 70001
Gina M. Music (8) 2,856,706 17.10% 2,856,706 -0- 0.00%
c/o David Lukinovich
3333 W. Napoleon Ave.
Suite 101
Metairie, LA 70001
Claire M. Olivier (9) 320,000 0.20% 320,000 -0- 0.00%
2401 Jay St.
New Orleans, LA 70122
Marcus A. Pelletteri (10) 2,750,000 15.30% 2,750,000 -0- 0.00%
c/o David Lukinovich
3333 W. Napoleon Ave.
Suite 101
Metairie, Louisiana 70001
Florence M. Schoemann (11) 3,103,294 20.40% 3,103,294 -0- 0.00%
3904 Wheat Dr.
Metairie, Louisiana 70002
Rodney R. Schoemann, Sr. (12) 1,767,555 11.50% 884,286 883,269 35.15%
3904 Wheat Dr.
Metairie, Louisiana 70002
SELLING STOCKHOLDERS
Cliff Barnett(13) 40,000 0.26% 20,000 20,000 0.08%
Linster E. Brinkley, Jr. 74,854 0.50% 74,854 -0- 0.00%
Carrollton Golf Partners(14) 330,000 2.15% 165,000 165,000 0.65%
David Comstock(15) 100,000 0.66% 50,000 50,000 0.20%
Peter Thomas Dazzio, Jr.(16) 50,000 0.30% 25,000 25,000 0.10%
Dan T. Dickerson (17) 50,000 0.30% 25,000 25,000 0.10%
Kim and Maria Greene(18) 20,000 0.13% 10,000 10,000 0.04%
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
James Hanner (19) 40,000 0.26% 20,000 20,000 0.08%
David Heideman(20) 100,000 0.66% 50,000 50,000 0.20%
George B. Juneman (21) 150,000 1.00% 75,000 75,000 0.30%
Brian Kessler 168,954 1.17% 168,954 -0- 0.00%
Charles Kessler(22) 65,000 0.40% 60,000 5,000 0.02%
David Matheny (23) 30,000 0.20% 15,000 15,000 0.06%
John Rasmussen(24) 50,000 0.30% 25,000 25,000 0.10%
Charles Schwab f/b/o Robert 100,000 0.66% 50,000 50,000 0.20%
Clayton Pritchard and Beth
Pritchard (25)
Charles Schwab f/b/o Howard R. 615,000 3.95% 250,000 365,000 1.40%
Pritchard (26)
Gary M. Smith(27) 70,000 0.46% 35,000 35,000 0.14%
Mark and Cathy Sommer(28) 180,000 1.20% 90,000 90,000 0.36%
Neal Tourdo(29) 60,000 0.40% 30,000 30,000 0.10%
Dennis Travis(30) 50,000 0.30% 25,000 25,000 0.10%
G.K. Ulrich(31) 115,000 0.75% 15,000 100,000 0.40%
R. Trent Ulrich(32) 30,000 0.20% 15,000 15,000 0.06%
Mark Young 25,000 0.16% 25,000 -0- 0.00%
</TABLE>
- ---------------------------
* Less than 1% of the outstanding common stock.
(1) Includes 2,050,000 shares issuable upon the exercise of options
exercisable within 60 days of February 25, 2000. Also includes
2,875,000 held of record by Mr. Brandano's spouse, Joan Brandano, our
secretary and a director. Mr. Brandano disclaims beneficial ownership
of the shares held by Ms. Brandano.
(2) Includes 50,000 shares issuable upon the exercise of options
exercisable within 60 days of February 25, 2000. Also includes
2,075,000 shares held of record by Ms. Brandano's spouse, Daniel
Brandano, our chief executive officer and president. Ms. Brandano
disclaims beneficial ownership of the shares held by Mr. Brandano.
(3) Includes 50,000 shares issuable upon the exercise of options
exercisable within 60 days of February 25, 2000.
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<PAGE>
(4) Includes 15,000 shares issuable upon the exercise of options
exercisable within 60 days of February 25, 2000.
(5) Includes 2,140,000 shares issuable upon the exercise of options
exercisable within 60 days of February 25, 2000.
(6) Includes 2,300,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 2,300,000 shares of our common stock.
(7) Includes 600,000 shares of common stock held in the Affinity 5R Trust;
650,000 shares of common stock held in the Affinity 5K Trust; 650,000
shares of common stock held in the Affinity 6R Trust and 650,000 shares
of common stock held in the Affinity 6K Trust. Mr. Johnson serves as
the trustee for each of these trusts. Of the amounts beneficially owned
by Mr. Johnson, 1,950,000 shares are issuable upon the exercise of
immediately exercisable warrants to purchase 1,950,000 shares of our
common stock.
(8) Includes 750,000 shares of common stock held in the Affinity 1R Trust;
678,353 shares of common stock held in the Affinity 1K Trust; 678,353
shares of common stock held in the Affinity 2R Trust; and 750,000
shares of common stock held in the Affinity 2K Trust. Ms. Music serves
as the trustee for each of these trusts. Of the amounts beneficially
owned by Ms. Music, 1,500,000 shares are issuable upon the exercise of
immediately exercisable warrants to purchase 1,500,000 shares of our
common stock.
(9) Includes 160,000 shares of common stock held in the Rodney Ryan
Schoemann, Sr. Grantor Retained Annuity Trust UAD 6/20/97; and 160,000
shares of common stock held in the Carol Lynn Henry Schoemann Grantor
Retained Annuity Trust UAD 6/20/97. Ms. Olivier serves as the trustee
for such trusts.
(10) Includes 690,000 shares of common stock held in the Affinity 3R Trust;
690,000 shares of common stock held in the Affinity 3K Trust; 690,000
shares of common stock held in the Affinity 4R Trust; and 680,000
shares of common stock held in the Affinity 4K Trust. Mr. Pelletteri
serves as the trustee for such trusts. Of the amounts beneficially
owned by Mr. Pelletteri, 2,750,000 shares are issuable upon the
exercise of immediately exercisable warrants to purchase 2,750,000
shares of our common stock.
(11) Includes 465,824 shares of common stock held in the Rodney Ryan
Schoemann Sr. Family Trust No. 1; 465,823 shares of common stock held
in the Rodney Ryan Schoemann Sr. Family Trust No. 2; 705,823 shares of
common stock held in the Carol Lynn Henry Schoemann Family Trust No. 1;
705,824 shares of common stock held in the Carol Lynn Henry Schoemann
Family Trust No. 2; 380,000 shares of common stock held in the Rodney
Ryan Schoemann, Jr. Intervivos Trust of 1998 UAD 12/10/97; and 380,000
shares of common stock held in the Kristina Marie Schoemann Intervivos
Trust of 1998 UAD 12/10/97. Ms. Schoemann serves as trustee for each of
these trusts..
(12) Includes 160,000 shares of common stock held in the Ryan Schoemann, Sr.
Foundation. Mr. Schoemann serves as director of the foundation. Of the
amounts beneficially owned by Mr. Schoemann, 250,000 shares are
issuable upon the exercise of immediately exercisable warrants to
purchase 250,000 shares of our common stock.
59
<PAGE>
(13) Includes 20,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 20,000 shares of our common stock.
(14) Includes 165,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 165,000 shares of our common stock.
(15) Includes 50,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 50,000 shares of our common stock.
(16) Includes 25,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 25,000 shares of our common stock.
(17) Includes 25,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 25,000 shares of our common stock.
(18) Includes 10,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 10,000 shares of our common stock.
(19) Includes 20,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 20,000 shares of our common stock.
(20) Includes 50,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 50,000 shares of our common stock.
(21) Includes 25,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 25,000 shares of our common stock
which are held in the Frances B. Juneman Trust, a trust for which Mr.
Juneman serves as trustee. Also includes 50,000 shares issuable upon
the exercise of immediately exercisable warrants to purchase 50,000 of
our common stock which are held in Mr. Juneman's name.
(22) Includes 5,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 5,000 shares of our common stock.
(23) Includes 15,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 15,000 shares of our common stock.
(24) Includes 25,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 25,000 shares of our common stock.
(25) Includes 50,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 50,000 shares of our common stock.
(26) Includes 365,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 365,000 shares of our common stock.
(27) Includes 35,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 35,000 shares of our common stock.
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<PAGE>
(28) Includes 90,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 90,000 shares of our common stock.
(29) Includes 30,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 30,000 shares of our common stock.
(30) Includes 25,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 25,000 shares of our common stock.
(31) Includes 100,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 100,000 shares of our common stock.
(32) Includes 15,000 shares issuable upon the exercise of immediately
exercisable warrants to purchase 15,000 shares of our common stock.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK AND OTHER MATTERS
Our authorized capital stock consists of 100,000,000 shares of common
stock, $.001 par value, and 100,000,000 shares of preferred stock, $.001 par
value per share.
COMMON STOCK
As of March 7, 2000, there were 15,182,374 shares of common stock
outstanding, held of record by approximately 115 stockholders.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at the meeting and entitled to vote in such election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor, after provision has been made for any preferential dividend rights of
outstanding preferred stock. Upon our liquidation, dissolution or winding up,
the holders of common stock are entitled to receive ratably the net assets
available after the payment of all of our debts and other liabilities, and after
the satisfaction of the rights of any outstanding preferred stock. Holders of
the common stock have no preemptive, subscription, redemption or conversion
rights, nor are they entitled to the benefit of any sinking fund. The
outstanding shares of common stock are validly issued, fully paid and
non-assessable. The rights, powers, preferences and privileges of holders of
common stock are subordinate to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which we may designate
and issue in the future.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to create one or more series of preferred stock and determine the
number of shares, designation, price, redemption terms, conversion and voting
rights with respect to any such series.
Our stockholders have granted the Board of Directors authority to issue the
preferred stock and to determine the rights and preferences of the preferred
stock in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of common stock will be
subordinate to the rights of holders of any preferred stock issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power or other rights of the holders of common
stock, and could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, a majority of our
outstanding voting stock. We have previously issued shares of Series A
Convertible Preferred Stock, but such shares have since been converted into
common stock and the shares of Series A Convertible Preferred Stock have been
canceled and are not subject to reissuance. Accordingly, to date, there are no
shares of preferred stock outstanding and we have no present plans to issue any
shares of preferred stock.
WARRANTS
As of March 7, 2000, there were outstanding warrants to purchase an
aggregate of 9,979,535 shares of our common stock, of which 9,945,000 shares
underlying such warrants are being registered by the registration statement of
which this prospectus is a part. The weighted average exercise price of the
warrants being registered is $0.31 per share.
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<PAGE>
REGISTRATION RIGHTS
All of the shares being sold the selling stockholders, the 9,945,000
shares issuable upon exercise of the warrants that we are selling, and the
8,750,000 shares issuable upon exercise of the warrants which we are registering
for resale by certain stockholders, are being registered in the registration
statement, of which this prospectus is a part, pursuant to contractual
obligations and registration rights granted to such selling stockholders.
LIMITATION OF OUR OFFICERS' AND DIRECTORS' LIABILITY
Our articles of incorporation, as amended, and by-laws include provisions
to eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty and require us to indemnify our
directors and officers to the fullest extent permitted by law.
ADDITIONAL PROVISIONS IN OUR CHARTER AND BYLAWS
Our articles of incorporation, as amended, may discourage, delay or prevent
a merger or acquisition that a stockholder may consider favorable by authorizing
blank check preferred stock, a type of stock with terms and conditions set by
the board of directors alone without further stockholder approval; such
preferred stock could be issued with more voting power than the common stock,
effectively giving control of the company to the holders of preferred stock. An
issuance of this type of preferred stock could make it more difficult for a
third party to acquire, or discourage a third party from attempting to acquire,
a majority of our outstanding voting stock. The existence of blank check
preferred stock could facilitate the introduction of a poison pill rights
distribution which could discourage or delay a merger or acquisition.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Interwest
Transfer, Inc. located in Salt Lake City, Utah.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of March 7, 2000, we had approximately 15,182,374 shares of common stock
outstanding, which does not include the 9,945,000 shares issuable upon exercise
of outstanding warrants which are being registered pursuant to the registration
statement of which this prospectus is a part.
Upon the effectiveness of the registration statement of which this
prospectus is a part, assuming the exercise of all outstanding warrants being
registered hereunder, approximately 24,749,352 shares will be freely tradable
without restriction under the Securities Act of 1933, as amended. Subject to
certain volume and other limitations, approximately 79,156 shares are currently
eligible for sale under Rule 144, and approximately 387,722 shares will be
eligible for public sale without registration at different times during the next
twelve months, pursuant to Rule 144.
In addition to the outstanding warrants for which we are registering the
shares issuable upon exercise, we also have outstanding warrants to purchase
34,535 shares of our common stock, which are not being registered under the
registration statement of which this prospectus is a part. The weighted average
purchase price of the outstanding warrants to purchase 9,979,535 shares of our
common stock is $0.32 per share.
We also have outstanding options to purchase 2,165,000 shares of our
common stock at a weighted average exercise price of $0.54 per share. Further,
shortly after the effectiveness of the registration statement, of which this
prospectus is a part, we intend to file a Form S-8 registration statement under
the Securities Act registering 4,000,000 shares of common stock issuable under
our combination stock option plan, including the 2,165,000 options currently
outstanding. The sale of even a small number of the outstanding shares of common
stock may have a material adverse effect on the quoted price of our common
stock. The sale of any such shares may also have a material adverse effect on
our ability to raise capital and/or materially adversely affect the quoted price
of our common stock.
In general, under Rule 144, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- - one percent of the number of shares of common stock then outstanding; or
- - the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice and the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
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<PAGE>
PLAN OF DISTRIBUTION
Of the 29,103,094 shares being registered under this prospectus, we are
selling 9,945,000 shares issuable upon the exercise of warrants to purchase
9,945,000 shares of our common stock. The selling stockholders are selling an
aggregate of 19,158,094 shares, which includes 8,750,000 shares we are
registering for resale by certain stockholders who will acquire such shares from
the 9,945,000 shares we are selling under this prospectus upon the exercise of
outstanding warrants. The price and manner of sale of the shares of common stock
offered by the selling stockholders hereunder by this prospectus are in the sole
discretion of the selling stockholders. The shares of common stock offered by
this prospectus may be offered through any of several methods, such as ordinary
brokerage transactions at market prices or in privately negotiated transactions
at prices agreed upon by the parties. We do not have, nor, to our knowledge, do
the selling stockholders have, any agreement, arrangement or understanding with
any broker or dealer entered into prior to the effective date of the
registration statement of which this prospectus is a part with respect to the
sale of the common stock offered by this prospectus.
LEGAL MATTERS
Brown Rudnick Freed & Gesmer, Boston, Massachusetts will pass upon
certain legal matters in connection with this offering for us.
EXPERTS
The consolidated financial statements of Affinity International
Travel Systems, Inc. and subsidiaries as of June 30, 1999 and 1998 and for
the three years then ended, included in this prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of
said firm as experts in auditing and accounting.
The financial statements of Affinity International Travel Systems,
Inc. at December 31, 1997 and 1996 and for each of the three years then
ended, and the period from inception to December 31, 1997, have been included
herein and in the registration statement in reliance upon the report of Tubbs
& Bartnick, P.A., independent certified public accountants, appearing
elsewhere herein and upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Prestige Travel Services II, Inc. at
December 31, 1998 and 1997 and for each of the two years then ended, have
been included herein and in the registration statement in reliance upon the
report Tubbs & Bartnick, P.A., independent certified public accountants,
appearing elsewhere herein and upon the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act registering the common stock to be sold in this offering. As
permitted by the rules and regulations of the SEC, this prospectus omits certain
information contained in the registration statement and the exhibits and
schedules filed as a part of the registration statement. For further information
concerning us and the common stock to be sold in this offering, you should refer
to the registration statement and to the exhibits and schedules filed as part of
the registration statement. Statements contained in this prospectus regarding
the contents of any agreement or other document filed as an exhibit to the
registration
65
<PAGE>
statement are not necessarily complete, and in each instance reference is made
to the copy of the agreement filed as an exhibit to the registration statement,
each statement being qualified by this reference. The registration statement,
including the exhibits and schedules filed as a part of the registration
statement, may be inspected at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at its regional offices located at Seven World Trade Center, New
York, New York 10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of all or any part thereof may be obtained from such offices
upon payment of the prescribed fees.
Upon effectiveness of the registration statement, we will become subject to
the reporting requirements of the Exchange Act of 1934, as amended. As a
reporting company, we will be filing quarterly, annual and other periodic and
current reports and proxy statements with the SEC. You may call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms, and you can request copies of the documents upon payment of a duplicating
fee by writing to the SEC. In addition, the SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants (including us) that file electronically with the SEC which
can be accessed at http://www.sec.gov.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1998 and June 30, 1999 F-4
Consolidated Statements of Operations for the years ended June 30, 1997,
June 30, 1998 and June 30, 1999 F-6
Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1997, June 30, 1998 and June 30, 1999 F-7
Consolidated Statements of Cash Flows for the years ended June 30, 1997,
June 30, 1998 and June 30, 1999 F-8
Notes to consolidated financial statements F-9
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of December 31, 1998 and December 31, 1999 F-29
Unaudited Consolidated Statements of Operations for the periods ended December 31, F-31
1998 and December 31, 1999
Unaudited Consolidated Statements of Stockholders' Equity for the periods ended
December 31, 1998 and December 31, 1999 F-32
Unaudited Consolidated Statements of Cash Flows for the periods ended December 31, 1998 F-33
and December 31, 1999
Notes to consolidated financial statements F-34
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. (FORMERLY PAYDIRT, INC.)
INDEPENDENT AUDITOR'S REPORT F-39
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997 and 1996 F-40
Statements of Operations for the years ended December 31, 1997, 1996 and
1995, and the period from inception to December 31, 1997 F-41
Statements of Stockholders' Equity for the period from inception to December 31,
1997 F-42
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 and
the period from inception to December 31, 1997 F-43
Notes to financial statements F-44
PRESTIGE TRAVEL SERVICES, II INC.
INDEPENDENT AUDITOR'S REPORT F-47
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997 and December 31, 1998 F-48
Statements of Operations for the years ended December 31, 1997
and December 31, 1998 F-49
Statements of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1997 and December 31, 1998 F-50
Statements of Cash Flows for the years ended December 31, 1997
and December 31, 1998 F-51
Notes to financial statements F-52
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Affinity International Travel Systems, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Affinity
International Travel Systems, Inc. and subsidiaries as of June 30, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended June
30, 1999. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Affinity
International Travel Systems, Inc. and subsidiaries as of June 30, 1999 and 1998
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1999 in conformity with generally accepted
accounting principles.
BDO Seidman, LLP
Orlando, Florida
September 3, 1999, except for Note 12,
as to which the date is March 7, 2000
F-3
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
JUNE 30, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $1,119,796 $ 64,061
Restricted certificates of deposit (Note 8) 195,280 32,132
Accounts receivable 158,156 35,403
Prepaid accommodations 128,471 31,520
Prepaid expenses 48,273 37,250
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,649,976 200,366
PROPERTY AND EQUIPMENT, net (Note 4) 268,464 139,395
GOODWILL, net of accumulated amortization of $90,210 1,688,309 --
DEPOSITS 40,230 29,180
OTHER ASSETS 17,944 26,224
- --------------------------------------------------------------------------------
TOTAL ASSETS $3,664,923 $ 395,165
================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
JUNE 30, 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable $ 27,000 $ --
Accounts payable 621,227 543,474
Accrued expenses 339,152 92,405
Deferred revenue 294,953 65,539
Due to customers 13,865 68,066
Current portion of long-term debt (Note 5) -- 13,984
Current portion of capital lease obligations (Note 8) 15,410 12,448
- ---------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,311,607 795,916
CAPITAL LEASE OBLIGATIONS, less current portion (Note 8) 22,924 38,334
CONVERTIBLE DEBENTURE (Note 6) 25,000 --
- ---------------------------------------------------------------------------------
TOTAL LIABILITIES 1,359,531 834,250
- ---------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 1, 6, 7, 8, 9
and 11):
Common stock, $.001 par value, shares authorized
100,000,000, issued and outstanding 12,263,165
and 4,902,894 12,263 4,903
Convertible preferred stock, $.001 par value, shares
authorized 100,000,000, issued and outstanding -
800,000 and -0 800 --
Additional paid-in capital 9,018,199 1,098,514
Accumulated deficit (6,725,870) (1,542,502)
- ---------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 2,305,392 (439,085)
- ---------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,664,923 $ 395,165
(DEFICIT)
================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 2,324,943 $ 1,328,577 $ 665,143
COST OF SALES 1,585,807 769,667 541,751
- ---------------------------------------------------------------------------------
Gross profit 739,136 558,910 123,392
- ---------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling, general and administrative 1,386,964 1,160,623 264,682
Salaries and wages 1,159,709 416,917 142,986
Consulting fees 982,352 44,997 --
Rent 167,058 80,281 29,313
- ---------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 3,696,083 1,702,818 436,981
- ---------------------------------------------------------------------------------
Operating loss (2,956,947) (1,143,908) (313,589)
- ---------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 1,775 6,221 1,440
Interest expense (Notes 6 and 11) (2,241,570) (46,942) (2,225)
Other income (expense) 13,374 16,128 (3,451)
- ---------------------------------------------------------------------------------
TOTAL OTHER EXPENSE (2,226,421) (24,593) (4,236)
- ---------------------------------------------------------------------------------
NET LOSS $(5,183,368) $(1,168,501) $ (317,825)
=================================================================================
NET LOSS PER COMMON SHARE $ (.82) $ (.27) $ (.11)
=================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 6,290,174 4,249,506 2,848,718
=================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK
--------------------------- --------------------------
PAR PAR
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, July 1, 1996 187 $ - - $ -
Advances from stockholder converted to common stock 2,799,813 2,800 - -
Advances from related party contributed to capital - - - -
Sale of common stock 1,400,003 1,400 - -
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1997 4,200,003 4,200 - -
Issuance of common stock for acquisition 6,667 7 - -
Issuance of common stock for compensation 75,000 75 - -
Issuance of common stock for conversion of debentures 371,224 371 - -
Sale of common stock 250,000 250 - -
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1998 4,902,894 4,903 - -
Record issuance of common stock related to reverse acquisition 330,840 331 - -
Beneficial conversion feature in convertible debentures and
common stock warrants - - - -
Issuance of common stock for conversion of debentures 4,934,286 4,934 - -
Issuance of preferred stock for acquisition - - 800,000 800
Issuance of common stock for acquisition 36,320 36 - -
Issuance of common stock for warrants 200,000 200 - -
Issuance of common stock for compensation and services 182,433 182 - -
Issuance of common stock warrants for services - - - -
Sale of common stock 1,676,392 1,677 - -
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1999 12,263,165 $ 12,263 800,000 $ 800
====================================================================================================================================
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
PAID-IN ACCUMULATED EQUITY
CAPITAL DEFICIT (DEFICIT)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, July 1, 1996 $ 5,046 $ (56,176) $ (51,130)
Advances from stockholder converted to common stock 12,199 - 14,999
Advances from related party contributed to capital 68,859 - 68,859
Sale of common stock 468,850 - 470,250
Net loss - (317,825) (317,825)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1997 554,954 (374,001) 185,153
Issuance of common stock for acquisition 19,993 - 20,000
Issuance of common stock for compensation 74,925 - 75,000
Issuance of common stock for conversion of debentures 198,892 - 199,263
Sale of common stock 249,750 - 250,000
Net loss - (1,168,501) (1,168,501)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1998 1,098,514 (1,542,502) (439,085)
Record issuance of common stock related to reverse acquisition (331) - -
Beneficial conversion feature in convertible debentures and
common stock warrants 2,222,000 - 2,222,000
Issuance of common stock for conversion of debentures 2,217,066 - 2,222,000
Issuance of preferred stock for acquisition 1,599,200 - 1,600,000
Issuance of common stock for acquisition 71,839 - 71,875
Issuance of common stock for warrants 69,800 - 70,000
Issuance of common stock for compensation and services 457,759 - 457,941
Issuance of common stock warrants for services 682,500 - 682,500
Sale of common stock 599,852 - 601,529
Net loss - (5,183,368) (5,183,368)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1999 $ 9,018,199 $ (6,725,870) $ 2,305,392
========================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net loss $(5,183,368) $ (1,168,501) $(317,825)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 151,613 47,926 10,368
Loss on disposals of property and equipment 3,623 - 4,000
Write off of notes receivable 10,000 9,896 -
Write off of goodwill - 66,681 -
Write off of organization costs - 30,246 -
Issuance of common stock for interest - 44,263 -
Issuance of common stock for compensation and services 432,941 43,750 -
Issuance of common stock warrants for services 682,500 - -
Issuance of convertible debt and common stock warrants at a discount 2,222,000 - -
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (59,838) (14,993) (4,049)
Prepaid accommodations (96,951) (4,719) -
Prepaid expenses 10,852 (6,000) (14,526)
Note receivable - 3,887 (13,783)
Accounts payable 35,767 458,719 20,811
Accrued expenses 132,478 43,527 48,878
Deferred revenue 197,570 7,239 21,303
Due to customers (54,201) 68,066 -
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (1,515,014) (370,013) (244,823)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restricted certificate of deposit (163,148) (12,132) (20,000)
Purchase of property and equipment (87,696) (38,589) (50,820)
Cash paid for acquisition of SunStyle (28,558) - -
Cash paid for acquisition of Ritter-Witt - (55,000) -
Cash paid for acquisition of Prestige Travel (6,185) - -
Cash obtained from acquisition of Prestige Travel 33,428 - -
Increase in organizational costs - - (13,872)
Increase (decease) in deposits (11,050) 9,126 (21,806)
Net increase in other assets (23,250) (21,495) (1,487)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (286,459) (118,090) (107,985)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder - - 38,097
Principal payments of notes payable (34,889) - -
Principal payments of long-term debt (13,984) (23,295) -
Principal payments of capital lease obligations (12,448) (5,993) -
Proceeds from issuance of convertible debentures 2,247,000 5,000 150,000
Net proceeds from sale of common stock 671,529 250,000 470,250
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,857,208 225,712 658,347
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 1,055,735 (262,391) 305,539
CASH AND CASH EQUIVALENTS, beginning of year 64,061 326,452 20,913
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 1,119,796 $ 64,061 $ 326,452
================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. NATURE OF NATURE OF ORGANIZATION
ORGANIZATION
Affinity International Travel Services, Inc.,
formerly Medanco, Inc. ("Medanco"), through
its wholly-owned subsidiaries, currently
provides packaged vacation programs, as well
as airline, car rental, hotel and cruise ship
reservations for both retail travel agents
and direct consumers.
The consolidated financial statements include
the accounts of Affinity International Travel
Systems, Inc. ("Affinity" or collectively the
"Company") and its wholly-owned subsidiaries,
Affinity International Travel Services, Ltd.;
Prestige Travel Services II, Inc.; and
SunStyle International Holidays, Inc.
("SunStyle") and its wholly-owned
subsidiaries, SunStyle International
Holidays, Ltd.; SunStyle International
Holidays of California, Inc.; and Air Travel
Trust, Inc. All material intercompany
accounts and transactions have been
eliminated.
(A) ACQUISITION OF SUNSTYLE INTERNATIONAL
HOLIDAYS, INC.
On July 14, 1998, Affinity acquired
SunStyle, and SunStyle became a
wholly-owned subsidiary of Affinity.
Pursuant to the acquisition agreement,
all the outstanding common stock of
SunStyle was acquired by Affinity and
the following occurred:
1. Affinity effected a 1.75-to-1
reverse stock split, after which
it had 330,840 of its 100,000,000
authorized shares of $.001 par
value common stock outstanding.
2. The holders of SunStyle common
stock received one common share of
Affinity for each common share
held of SunStyle, which
represented 4,902,894 shares or
approximately 94% of the 5,233,734
shares of common stock of Affinity
outstanding after the acquisition.
3. The officers and director of
Affinity resigned, and the former
officers and directors of SunStyle
were appointed officers and
directors of Affinity.
Although SunStyle was acquired by
Affinity, the transaction was accounted
for as a purchase of Affinity by
SunStyle (a reverse acquisition in
which SunStyle is considered the
acquirer for accounting purposes) since
the previous stockholders of SunStyle
obtained a majority of the
F-9
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
voting rights of Affinity as a result
of this transaction. Therefore, the
historical financial statements herein
are those of SunStyle up to July 31,
1998, the acquisition date. Immediately
after the acquisition, the Company's
balance sheet included the accounts of
Affinity and SunStyle. The historical
operations and related financial
statements of Affinity prior to the
acquisition were insignificant, and
therefore, the pro forma information
assuming the acquisition had taken
place at the beginning of the
respective periods is not presented.
The purchase price for Affinity
consisted solely of the acquisition
costs incurred of $28,558. As the
common stock of Affinity had no recent
activity and Affinity had no operations
or net book value, no value was
allocated to the common stock issued
for the acquisition.
(B) ACQUISITION OF RITTER-WITT, INC.
On October 10, 1997 the Company
purchased certain assets of
Ritter-Witt, Inc. d/b/a Mariner's
Travel, a retail travel agency located
in Newport Beach, California, with
$55,000 in cash, 6,667 shares of the
Company's common stock valued at
$20,000 ($3.00 per share based on the
value negotiated between the Company
and Ritter-Witt, Inc.) and promissory
notes of $105,000 for a total purchase
price of $180,000. The transaction was
accounted for as a purchase, and the
purchase price was allocated to the
assets acquired based on their
estimated fair market values on the
date of the transaction. The excess of
the purchase price over the fair value
of the net assets acquired was $159,402
and was recorded as goodwill.
In July 1998, a key employee of this
operation resigned, and as a result, a
lawsuit was filed by the Company that
alleged the employee breached her
employment and non-compete agreements.
The lawsuit was settled in February
1999 and resulted in the outstanding
debt payable to the former owners that
arose through the acquisition of
approximately $93,000 being forgiven
and recorded as a purchase price
adjustment, along with a $5,000
judgment against the employee's new
employer. The remaining goodwill of
approximately $67,000 was charged to
operations for the year ended June 30,
1998 as it was determined to be
impaired as a result of the breached
employment agreement and its related
effect on the acquired business. The
California operation continued on a
limited basis until it was relocated in
July 1999 to Marietta, Georgia, where
its operations were consolidated with
Design-A-Tour, Inc. (see Note 1[D]).
(C) ACQUISITION OF PRESTIGE TRAVEL SERVICES
II, INC.
F-10
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On January 1, 1999, the Company
acquired all of the outstanding stock
of Prestige Travel Services II, Inc., a
retail travel agency with an
independent agent sales program and an
internet cruise brokerage operation
known as Cruise Brokers.com., for
$1,600,000, paid through the issuance
of 800,000 shares of Series A
convertible preferred stock. Prestige
operates offices in Tampa and Ft.
Lauderdale, Florida. The transaction
was accounted for as a purchase. The
agreement provided for the measurement
of the conversion price to be made on
August 1, 1999 based on the average
trading price of the Company's common
stock for the preceding 20 days'
average trading price. The conversion
price on August 1, 1999 was determined
to be $1.06875 per share of common
stock, resulting in 1,497,076 shares of
common stock. The excess of the
purchase price, including acquisition
costs of $107,715, plus the excess of
the liabilities assumed over the fair
market value of the assets acquired of
$1,746,828, was recorded as goodwill
and is being amortized on a
straight-line basis over ten years.
Acquisition costs included $85,000
payable to an unrelated third party as
a finder's fee, of which $5,000 had
been paid as of June 30, 1999. The
remaining $80,000 was accrued as of
June 30, 1999 and was converted into
74,854 shares of the Company's common
stock after June 30, 1999. The
conversion price was determined at
August 1, 1999 based on the average
trading price of the Company's common
stock for the preceding 20 days.
(D) ACQUISITION OF DESIGN-A-TOUR, INC.
On February 8, 1999, the Company
entered into an asset purchase
agreement in which it acquired the
assets of Design-A-Tour, Inc. in
exchange for $75,000 of the Company's
convertible preferred stock in a
transaction accounted for under the
purchase method of accounting. The
purchase agreement was amended to
provide for the issuance of 36,320
shares of the Company's common stock
valued at approximately $2.07 per share
(the quoted market value on the
acquisition date) in lieu of the
convertible preferred stock. The
Company's financial statements reflect
the issuance of these shares although
the certificate had not been released
to the seller pending the execution of
the amendment to the purchase agreement
which occurred in August 1999.
The entire purchase price was allocated
to the assets acquired based on their
estimated fair market value. The assets
included furniture and equipment, an
internet web site, rights to use a
search engine on that web site and the
rights to make airline reservations
under a related servicing
F-11
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
agreement. The acquired tangible and
intangible assets are being depreciated
and amortized over their estimated
useful lives of three to five years.
The operating results of the significant
acquired businesses have been included in the
consolidated statement of operations from the
dates of acquisition. The following pro forma
information has been prepared assuming
certain of the acquisitions above, which were
deemed to be significant acquisitions, had
taken place at the beginning of the
respective periods. The pro forma information
includes adjustments for interest expense
that would have been incurred to finance the
purchases, additional depreciation based on
the fair value of property acquired and the
amortization of intangibles arising from the
transactions. The pro forma financial
information is not necessarily indicative of
the results of operations as they would have
been had the transactions been effected on
the assumed dates.
<TABLE>
<CAPTION>
UNAUDITED
---------------------------------------
YEAR ENDED JUNE 30, 1999 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $3,588,584 $2,416,290 $1,597,208
Net loss applicable to common stock (5,316,218) (1,229,808) (483,772)
Net loss per common share (.85) (.29) (.29)
================================================================================
</TABLE>
The results of operations of the
insignificant acquisitions were not material
to the Company's consolidated results of
operations.
2. SUMMARY OF (A) Revenue Recognition
SIGNIFICANT
ACCOUNTING The Company sells travel packages
POLICIES through both wholesale and retail
operations. The revenues and cost of
sales from wholesale operations are
recorded at the gross amounts received
from customers and the amounts paid to
vendors. The Company negotiates the
prices it pays to its vendors and sets
the prices that it sells to customers
and therefore bears the financial risks
of the transactions. The revenues and
cost of sales from the retail operations
are recorded on a net basis. The
revenues consist primarily of
commissions earned by travel agents on
the sales of products and the cost of
sales consist primarily of commissions
paid to independent travel agents. For
these transactions, the travel agents
merely act as intermediaries for the
customers and vendors thereby earning a
commission.
Advance payments made by customers are
recorded as deferred revenue and advance
payments made to vendors are recorded as
prepaid accommodations. Revenues and
related expenses are recognized when the
F-12
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
revenue is earned, which varies by the
type of product. Revenues from airline
ticket sales are recorded when the
tickets are issued. Revenues from cruise
and tour sales are recognized at the
time that the amounts paid are no longer
refundable to the customer. Revenues
from hotel sales and auto rentals are
not recognized until the customer
utilizes them. The related commissions
due to travel agents are recorded as a
cost of sales and a payable at the same
time the underlying revenue is
recognized.
(B) Property, Equipment and Depreciation
Property and equipment are stated at
cost. Depreciation is computed over the
estimated useful lives of the assets by
the straight-line method for financial
statement purposes and by accelerated
methods for income tax purposes.
(C) Advertising Costs
The Company expenses advertising costs
as incurred. The total advertising costs
charged to expense were approximately
$44,000, $31,000 and $36,000 for the
years ended June 30, 1999, 1998 and
1997, respectively.
(D) Income Taxes
The Company accounts for income taxes
on the liability method. Under this
method, deferred tax assets and
liabilities are determined based on
differences between financial reporting
and tax bases of assets and
liabilities. Measurement of deferred
income tax is based on enacted tax
rates and laws that will be in effect
when the differences are expected to
reverse, with the measurement of
deferred income tax assets being
reduced by available tax benefits not
expected to be realized.
(E) Net Loss per Share
Potential common shares are not
considered in the calculation of loss
per share because their inclusion would
be antidilutive. Potential common shares
consist of 4,505,000 common stock
warrants and 800,000 shares of
convertible preferred stock. The 74,854
shares of common stock to be issued as
finder's fees (see Note 1[C]) and 40,000
shares of common stock to be issued as
employee compensation (see Note 8) have
been included in the calculation of loss
per share since their issuance is not
dependent upon a future contingency.
F-13
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(F) 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 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.
(G) Financial Instruments
Statement of Financial Accounting
Standards No. 107, "Disclosures about
Fair Value of Financial Instruments,"
requires disclosure of fair value
information about financial instruments.
Fair value estimates discussed herein
are based upon certain market
assumptions and pertinent information
available to management as of June 30,
1999.
The respective carrying value of certain
on-balance-sheet financial instruments
approximated their fair values. These
financial instruments include cash and
cash equivalents, accounts receivable,
notes payable, accounts payable, accrued
expenses, long-term debt and capital
lease obligations. Fair values were
assumed to approximate carrying values
for these financial instruments since
they are short term in nature and their
carrying amounts approximate fair values
or they are receivable or payable on
demand.
(H) Impairment of Long-Lived Assets
Assets are evaluated for impairment
when events or changes in circumstances
indicate that the carrying amounts of
the assets may not be recoverable. When
any such impairment exists, the related
assets will be written down to fair
value. As discussed in Note 1(B), the
Company recorded a write-down of
goodwill of approximately $67,000
during the year ended June 30, 1999.
(I) Stock-Based Compensation
Statement of Financial Accounting
Standard No. 123, "Accounting for
Stock-Based Compensation," issued by
the Financial Accounting Standards
Board, encourages a fair value method
of accounting for stock-based
compensation plans. This statement
provides a choice to either adopt the
fair value based method of accounting
or continue to apply APB Opinion No.
25, which would require only disclosure
of the pro forma net
F-14
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
income and earnings per share,
determined as if the fair value based
method has been applied. The Company
continued to apply APB Opinion No. 25
when adopting this statement, and
accordingly, this statement did not
have a material impact on the Company.
(J) Recent Accounting Pronouncements
In June 1998, the Financial Accounting
Standards Board issued SFAS 133,
"Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS
133 requires companies to recognize all
derivatives contracts as either assets
or liabilities in the balance sheet and
to measure them at fair value. If
certain conditions are met, a derivative
may be specifically designated as a
hedge, the objective of which is to
match the timing of gain or loss
recognition on the hedging derivative
with the recognition of (i) the changes
in the fair value of the hedged asset or
liability that are attributable to the
hedged risk or (ii) the earnings effect
of the hedged forecasted transaction.
For a derivative not designated as a
hedging instrument, the gain or loss is
recognized in income in the period of
change. SFAS 133, as amended by SFAS
137, is effective for all fiscal
quarters of fiscal years beginning after
June 15, 2000.
Historically, the Company has not
entered into derivatives contracts
either to hedge existing risks or for
speculative purposes. Accordingly, the
Company does not expect adoption of the
new standard on July 1, 2000 to affect
its financial statements.
In March 1998, the American Institute
of Certified Public Accountants
("AICPA") issued Statement of Position
("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or
Obtained for Internal Use." SOP 98-1
provides guidance on accounting for the
various types of costs incurred for
computer software developed or obtained
for internal use. Also in June 1998,
the AICPA issued SOP 98-5, "Reporting
on the Costs of Start-Up Activities."
SOP 98-5 requires costs of start-up
activities and organizational costs, as
defined, to be expensed as incurred.
The Company has elected early adoption
of these SOPs, and they did not
materially impact the Company's
financial statements.
F-15
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. NOTE In July 1996, the Company sold a license for
RECEIVABLE $22,406 to a Canadian corporation to allow
that corporation to use one of its trade
names. The Company had recorded this note
using an imputed interest rate of 10%. Under
the terms of the agreement, the Company is to
receive monthly installment payments of $741
for 35 months. The unpaid balance on this
note of $9,896 was written off due to
uncollectibility during the year ended June
30, 1998.
4. PROPERTY AND EQUIPMENT Property and equipment are summarized as
follows:
<TABLE>
<CAPTION>
USEFUL
JUNE 30, LIVES 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Leasehold improvements 3-5 yrs. $ 4,100 $ 5,435
Furniture and equipment 5-7 yrs. 242,728 129,583
Computer software 3 yrs. 152,270 60,930
--------------------------------------------------------------------------------
399,098 195,948
Less accumulated depreciation (130,634) (56,553)
--------------------------------------------------------------------------------
$ 268,464 $ 139,395
================================================================================
</TABLE>
5. LONG-TERM Long-term debt at June 30, 1998 consists of a
DEBT note payable to Sabre Group, Inc. related to
a licensing agreement under which the Company
acquired the right to use certain reservation
software. The note was payable in monthly
installments of $970 including principal and
interest at 15% and was paid off in March
1999.
F-16
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. CONVERTIBLE The Company issued $150,000 of 8%
DEBT AND subordinated convertible debentures during
WARRANTS 1997 with a conversion price of $.5357 per
share. These debentures had a term of 18
months and matured from July to November
1998. The Company issued an additional 5,000
of these debentures in May 1998 with
essentially the same terms. On June 30, 1998,
the debentures, including approximately
$44,000 of accrued interest, were converted
into 371,224 shares of common stock.
On January 15, 1999, the Company issued a
convertible note to a significant shareholder
in the amount of $222,000. The note was
immediately convertible into 634,286 shares
of the Company's common stock at a conversion
price of $.35 per share, which was below the
quoted market price of the Company's common
stock. The value of the beneficial conversion
feature was approximately $1,522,000, of
which $222,000 was immediately charged to
interest expense as the debt discount related
to the beneficial conversion feature is
limited to the original balance of the note.
The note was converted into common stock on
February 1, 1999.
The Company granted warrants to purchase
250,000 shares of its common stock at $.35
per share in connection with the convertible
note issued on January 15, 1999. The warrants
were immediately exercisable and expire two
years from the date of grant. The value of
these warrants were not recorded as the
maximum debt discount related to the
convertible note had previously been
recorded. These warrants were outstanding as
of June 30, 1999.
On April 14, 1999, the Company issued a
convertible debenture to an individual in the
amount of $25,000. The debenture was
immediately convertible into 25,000 shares of
the Company's common stock at a conversion
price of $1.00 per share, which approximated
the quoted market price for the Company's
common stock on the date of issuance. In
connection with this debenture, the Company
also issued a warrant to purchase 5,000
shares of the Company's common stock with an
exercise price of $1.00 per share. The value
of these warrants was approximately $4,000
determined using the Black-Scholes
option-pricing model at the date of grant
with the following assumptions: 0% dividend
yield, an expected life of two years;
expected volatility of 140% and a risk-free
interest rate of 5.8% and has been charged to
interest expense for the year ended June 30,
1999. As of June 30, 1999, the debenture had
not been converted and the warrants had not
been exercised.
On April 23, 1999, the Company issued a
convertible note to a significant stockholder
in amount of $1,000,000. The note was
immediately convertible into 2,300,000 shares
of the Company's common stock at a conversion
price of $.43 per share, which was below the
quoted market price of the Company's
F-17
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
common stock. The value of the beneficial
conversion feature was approximately
$1,084,000, of which $1,000,000 was
immediately charged to interest expense as
the debt discount related to the beneficial
conversion feature is limited to the original
balance of the note. The note was converted
into common stock on May 6, 1999.
The Company granted warrants to purchase
750,000 shares of its common stock at $1.75
per share in connection with the convertible
note issued on April 23, 1999. The warrants
were immediately exercisable and expire five
years from the date of grant. The value of
these warrants was not recorded as the
maximum debt discount related to the
convertible note had previously been
recorded. These warrants were outstanding as
of June 30, 1999.
On June 10, 1999, the Company issued a
convertible note to a significant stockholder
in the amount of $1,000,000. The note was
immediately convertible into 2,000,000 shares
of the Company's common stock at $.50 per
share, which was below the quoted market
price of the Company's common stock. The
value of the beneficial conversion feature
was approximately $1,250,000, of which
$1,000,000 was immediately charged to
interest expense as the debt discount related
to the beneficial conversion feature is
limited to the original balance of the note
on the date the note was issued. The note was
converted into common stock on June 15, 1999.
The Company granted warrants to purchase
2,750,000 shares of its common stock at $2.00
per share in connection with the convertible
note issued June 10, 1999. The warrants were
immediately exercisable and expire five years
from the date of grant. The value of these
warrants was not recorded as the maximum debt
discount related to the convertible note had
previously been recorded. These warrants were
outstanding as of June 30, 1999.
7. RELATED PARTY
TRANSACTIONS SALE OF DEBENTURES
During 1997, the Company sold $35,000 of
debentures to an officer of the Company and
$5,000 of debentures to a relative of a
director of the Company.
CONSULTING AGREEMENT
On April 23, 1999, the Company executed a
consulting agreement with a company (the
"Consultant") owned by a significant
stockholder of the
F-18
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Company. Under the terms of the agreement,
the Consultant is to provide business and
financial advisory services in exchange for
monthly consulting fees of $6,666. The
Consultant is also to receive a 5% commission
on gross proceeds received by the Company
from the sale of the Company's securities
resulting from introductions made by the
Consultant and from related transactions in
which the Consultant's efforts were
instrumental in negotiating and closing a
transaction on behalf of the Company. This
agreement remains in effect until such time
as either party terminates it with 10 days'
written notice.
On June 1, 1999, the consulting agreement was
amended providing for a monthly consulting
fee of $13,333 and the granting of warrants
to purchase 750,000 shares of the Company's
common stock with an exercise price of $2.00
per share. The warrants were immediately
exercisable and expire five years from the
date of the amendment. The warrants were
valued at $682,500 using the Black-Scholes
option-pricing model at the date of grant
with the following assumptions: 0% dividend
yield, an expected life of five years;
expected volatility of 140% and a risk-free
interest rate of 5.7%. The Company charged
the value of the warrants to operations in
June 1999.
8. COMMITMENTS AND LETTERS OF CREDIT
CONTINGENCIES
The Company has three letters of credit which
total $42,400 in connection with the
certifications enabling the Company to issue
airline tickets. Each letter of credit is
secured by restricted certificates of deposit
which total $45,280 as of June 30, 1999 and
mature from September 1999 to June 2000. As
of June 30, 1999, there were no outstanding
balances under these lines of credit.
The Company also has a $150,000 letter of
credit in connection with the lease for its
corporate office space. The letter of credit
is secured by a $150,000 restricted
certificate of deposit as of June 30, 1999
which matures in May 2000. As of June 30,
1999, there was no outstanding balance under
this line of credit.
LEASES
The Company leases various equipment under
lease agreements which are classified as
capital leases. Total monthly payments under
these capital leases was $1,472, which
includes interest at rates ranging from 11%
to 14%. The equipment was recorded at a cost
of $57,334 and had accumulated depreciation
of $24,259 as of June 30, 1999.
The Company leases various equipment and
office space under leases classified as
operating leases. Rental expense under all
operating leases amounted to
F-19
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
approximately $158,000, $137,000, and $47,000
for the years ended June 30, 1999, 1998 and
1997, respectively.
As of June 30, 1999, future minimum rental
payments required under capital and operating
leases that have initial or remaining
noncancelable lease terms in excess of one
year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $ 17,664 $ 294,042
2000 11,784 301,072
2001 10,836 195,385
2002 4,428 193,376
--------------------------------------------------------------------------------
Total net minimum lease payments 44,712 $ 983,875
==================
Less amount representing interest (6,378)
------------
Present value of net minimum lease payments $ 38,334
============
</TABLE>
SERVICE AGREEMENT WITH WEBLINK
COMMUNICATIONS, INC.
On October 26, 1998, the Company entered into
an agreement to pay $250,000 to receive
electronic media consulting services from
Weblink Communications, Inc. ("Weblink"), an
unrelated third party. The Company paid
$25,000 in cash and issued 25,000 shares of
common stock valued at $21,875 (the quoted
market price on the date of the agreement)
upon the execution of the agreement. Weblink
has to assist the Company in the design,
implementation and marketing of an internet
web site that would be affiliated with other
web sites maintained by Weblink. As of June
30, 1999, services under this agreement had
not commenced pending resolution of the
payment terms for the balance due Weblink
under the service agreement, and the Company
had recorded the advance payments to Weblink
as a prepaid expense. The service agreement
expires three years from the date that the
web site is launched on the Internet.
As of September 3, 1999, a tentative
agreement had been reached which provided for
the issuance of an additional 257,143 shares
of the Company's common stock to Weblink in
full satisfaction of amounts due under the
terms of the agreement.
F-20
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
MANAGEMENT AGREEMENT WITH TRAVEL SYSTEMS,
INC.
On April 5, 1999, the Company entered into a
management agreement with an option to
purchase the assets of Travel Systems
International, Inc. ("TSI"). Under the terms
of the agreement, the Company advanced TSI
$10,000 under a promissory note. The Company
subsequently terminated its management
agreement and agreed to a termination fee
equal to the balance on the outstanding
promissory note. As a result, the Company
charged the $10,000 promissory note to
operations during the year ended June 30,
1999.
RESERVATION SYSTEMS AGREEMENTS
The Company has agreements with reservation
systems providers that require the Company to
pay monthly fees equal to the larger of
certain flat monthly fees or fees based on
the number of bookings recorded each month.
EMPLOYMENT AGREEMENTS
As of June 30, 1999, accrued compensation of
$40,000 is recorded pursuant to an employment
agreement with an officer of the Company.
Under the terms of this agreement, the
officer is to receive 5,000 shares of common
stock per month. The employment agreement is
on a month-to-month basis. The amount accrued
represents 40,000 shares of common stock
based on the estimated market value of $1.00
per share.
On July 1, 1999, the Company entered into an
employment agreement with its President. The
agreement provides for payment of salary
through June 2006 and the establishment of a
bonus program.
9. STOCKHOLDERS' COMMON STOCK
EQUITY
In February 1997, the Company converted
advances from its sole stockholder into
2,799,813 shares of common stock at a price
of $.01 per share, and subsequently, the
stockholder contributed an additional $68,859
to capital.
During 1997, the Company issued 1,400,003
shares of its common stock in two private
placements for net proceeds of $470,250 at
prices per share ranging from $.35 to $1.00
(the estimated fair market values on the
dates of issuance). The Company paid $62,250
in cash and issued 250,000 shares of common
stock for offering costs related to these
private placements.
F-21
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
In December 1998, the Company sold 1,142,857
shares of its common stock at a price of $.35
per share for net proceeds of $354,869 to a
significant stockholder. The Company recorded
offering costs of $45,131 related to this
stock issuance. In connection with this sale
of common stock, the Company granted warrants
to purchase 200,000 shares of its common
stock at $.35 per share. The warrants were
immediately exercisable and expired two years
from the date of the agreement. These
warrants were exercised on January 25, 1999.
CONVERTIBLE PREFERRED STOCK
In September 1998, the Company authorized
100,000,000 shares of $.001 par value
convertible preferred stock. In January 1999,
the Company issued 800,000 shares of
convertible preferred stock in connection
with the acquisition of Prestige Travel
Services II, Inc. (see Note 1[C]).
STOCK OPTION PLAN
On July 1, 1999, The Company adopted a stock
option plan which authorizes the issuance of
up to 4,000,000 shares of its common stock in
the form of incentive stock options to
employees and nonqualified stock options to
nonemployees. Upon the plan's adoption, the
Company granted its President incentive stock
options to purchase 2,000,000 shares of its
common stock with an exercise price of $.50
per share which expire ten years from the
date of grant. The Company will account for
these options in fiscal year 2000.
RESERVED SHARES
The Company has reserved 4,505,000 shares of
common stock as of June 30, 1999 for issuance
in connection with the convertible debt and
common stock warrants (see Note 6).
F-22
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. INCOME From the Company's inception through June 3,
TAXES 1997, the Company, with the consent of its
stockholders, was treated as an S
Corporation, and the results of operations
were included in the tax returns of the
stockholders. On June 3, 1997, the Company
terminated its S Corporation election and
became a C Corporation. In addition, the
Company has changed its tax year end from
December 31 to June 30. Therefore, the
Company filed an S Corporation income tax
return for the year ended December 31, 1996
and for the short period from January 1, 1997
to June 2, 1997. The absence of a pro forma
provision for income taxes for the period
prior to June 3, 1997 and a provision for
income taxes for the period subsequent to
June 2, 1997 is due to net operating losses.
The components of the net deferred income tax
assets consist of the following:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,264,000 $ 437,000
Warrants issued 257,000 -
Other 10,000 13,000
--------------------------------------------------------------------------------
Gross deferred income tax assets 1,531,000 450,000
Valuation allowance (1,517,000) (444,000)
--------------------------------------------------------------------------------
Total deferred income tax assets 14,000 6,000
--------------------------------------------------------------------------------
Deferred income tax liabilities:
Depreciation (14,000) (6,000)
--------------------------------------------------------------------------------
Net deferred income tax assets $ - $ -
================================================================================
</TABLE>
The change in the valuation allowance for
deferred tax assets was an increase of
$1,073,000 and $413,800 during 1999 and 1998,
respectively.
The amounts shown for income taxes in the
statements of operations differ from amounts
that would be derived from computing income
taxes at federal statutory rates. The
following is a reconciliation of those
differences:
F-23
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at federal statutory (34%) (34%) (34%)
rates
Discount on convertible debt 15 - -
Amortization of goodwill 1 2 -
Net operating loss with no tax benefit 18 32 34
--------------------------------------------------------------------------------
Income taxes at effective rates -% -% -%
================================================================================
The Company had unused net operating losses
for income tax purposes, expiring in various
amounts from 2012 through 2018, of
approximately $3,394,000 at June 30, 1999 for
carryforward against future years' taxable
income.
11. INTEREST EXPENSE Interest expense consists of the following:
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount on convertible debt $ 2,222,000 $ - $ -
Interest on debentures - 42,038 2,225
Other 19,570 4,904 -
--------------------------------------------------------------------------------
$ 2,241,570 $ 46,942 $ 2,225
================================================================================
</TABLE>
12. SUBSEQUENT ACQUISITION OF INTEGRITY CREDIT SERVICES,
EVENT INC.
On July 5, 1999, the Company entered into an
asset purchase agreement in which it acquired
certain assets of Integrity Credit Services,
Inc. ("Integrity") in exchange for 140,000
shares of the Company's common stock.
Integrity operates a series of travel
agencies located in Seminole and St.
Petersburg, Florida under the trade names
Intrepid Travel and Goldmark Travel. The
Company also entered into an employment
agreement with the seller of Integrity which
provides for payment of salary through July
2002.
F-24
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
RULE 504 OFFERING
From July 1998 to January 1999, the
Company made sales of common stock in
reliance upon the exemption from
registration contained in Rule 504 of
Regulation D. With respect to the
foregoing transactions made in reliance
upon the exemption contained in Rule 504
of Regulation D, it has since come to the
Company's attention that such transactions
may not have been made in compliance with
Rule 504. As of March 7, 2000 the Company
continues to evaluate the matter, and if
it determines that the transactions were
not in compliance with Rule 504, the
Company intends to take appropriate
corrective action, including possibly
offering recission rights to the investors
in such transactions. If the transactions
were not in compliance with Rule 504, the
Company could be subject to substantial
liabilities, which could materially and
adversely affect its financial condition
and results of operation.
F-25
<PAGE>
13. SUPPLEMENTAL Supplemental cash flow information is as
CASH FLOW follows:
INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 19,570 $ 5,149 $ -
Noncash financing and investing activities:
Conversion of debentures into common
stock 2,222,000 155,000 -
Common stock issued in connection with
service agreement 21,875 - -
Capital lease obligation incurred in
connection with the acquisition of
equipment - 56,775 -
Purchase of software license with debt - - 20,000
Advances from stockholder converted to 14,999
common stock - -
Amounts due to related party contributed 68,859
to capital - - 6
Common stock issued as offering costs - - 56,875
--------------------------------------------------------------------------------
The following is a summary of noncash transactions related to the acquisition
of Ritter-Witt, Inc. disclosed in Note 1 (B):
<CAPTION>
YEAR ENDED JUNE 30, 1998
--------------------------------------------------------------------------------
<S> <C>
Common stock issued $ (20,000)
Property, plant and equipment acquired 20,598
Goodwill acquired 159,402
--------------------------------------------------------------------------------
Total noncash acquisition of assets 160,000
Long-term debt issued (105,000)
--------------------------------------------------------------------------------
Net cash paid $ 55,000
================================================================================
</TABLE>
F-26
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The following is a summary of noncash
transactions related to the Prestige
acquisition disclosed in Note 1 (C):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
<S> <C>
Convertible preferred stock issued $ (1,600,000)
Accounts receivable acquired 62,915
Property, plant and equipment acquired 30,999
Goodwill acquired 1,750,361
Acquisition costs capitalized (21,530)
--------------------------------------------------------------------------------
Total noncash acquisition of assets 222,745
--------------------------------------------------------------------------------
Notes payable assumed (61,889)
Accounts payable assumed (41,986)
Accrued expenses assumed (114,269)
Deferred revenue assumed (31,844)
--------------------------------------------------------------------------------
Total noncash assumption of liabilities (249,988)
--------------------------------------------------------------------------------
Net cash acquired (net of cash paid of $6,185) $ 27,243
================================================================================
</TABLE>
14. SEGMENT During 1999, the Company adopted Statement of
INFORMATION Financial Accounting Standards No. 131 (SFAS
131), "Disclosures about Segments of an
Enterprise and Related
Information." SFAS 131 requires that public
enterprises report certain information about
reporting segments in financial statements.
It also requires the disclosure of certain
information regarding services provided,
geographic areas of operation and major
customers.
The accounting policies of the segments are
the same as those described in the summary of
significant accounting policies. Intercompany
revenues are market based. The Company
evaluates performance based on operating
earnings of the respective business units.
The Company's continuing operations are
classified into three reportable segments.
The wholesale segments sell the Company's
travel products to retail travel agents and
consumers from its corporate offices in
Florida. The retail segment consists of
travel agencies who sell the travel products
directly to the consumer in Florida, Georgia
and California.
The following table shows certain financial
information by reportable segment as of and
for the years ended June 30, 1999, 1998 and
1997:
F-27
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
CORPORATE
WHOLESALE RETAIL AND OTHER COMBINED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Revenue from external customers $ 1,363,300 $ 961,643 $ - $ 2,324,943
Net income (loss) (1,493,827) 28,371 (3,717,912) (5,183,368)
Depreciation and amortization 38,325 22,678 90,610 151,613
Compensation and service expense related to common
stock issued 140,250 - 292,691 432,941
Services expense related to common stock warrants - - 682,500 682,500
Interest income 1,775 - - 1,775
Interest expense 15,792 570 2,225,208 2,241,570
Total assets 421,546 298,516 2,944,861 3,664,923
Capital expenditures 82,086 3,210 2,400 87,696
1998
Revenue from external customers $ 1,071,833 $ 256,744 $ - $ 1,328,577
Net loss (836,362) (53,951) (278,188) (1,168,501)
Depreciation and amortization 45,238 2,688 - 47,926
Compensation and service expense related to common
stock issued - - 43,750 43,750
Interest income 6,221 - - 6,221
Interest expense 4,486 418 42,038 46,942
Total assets 317,670 77,495 - 395,165
Capital expenditures (exclusive of acquisitions) 38,589 - - 38,589
1997
Revenue from external customers $ 665,143 $ - $ - $ 665,143
Net loss (269,864) - (47,961) (317,825)
Depreciation and amortization 10,638 - - 10,638
Interest income 1,440 - - 1,440
Interest expense 2,225 - - 2,225
Total assets 547,086 - - 547,086
Capital expenditures 50,820 - - 50,820
==================================================================================================================
</TABLE>
F-28
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 57,170
Restricted certificates of deposit 183,652
Accounts receivable 121,166
Prepaid accommodations 48,852
Prepaid expenses (Note 6) 398,333
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 809,173
PROPERTY AND EQUIPMENT, net 1,048,262
GOODWILL, net of accumulated amortization of $9,181 71,627
DEPOSITS 58,770
OTHER ASSETS 14,132
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,001,964
====================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-29
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 1,460,706
Accrued expenses 134,097
Deferred revenue 147,417
Due to customers 6,140
Advances for common stock subscriptions (Note 6) 400,049
Current portion of capital lease obligations 13,485
- ----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,161,894
CAPITAL LEASE OBLIGATIONS, less current portion 15,933
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,177,827
- ----------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' DEFICIT (Notes 1, 3, 4, 5 and 6):
Common stock, $.001 par value, shares authorized 100,000,000, issued and
outstanding 13,576,973 13,577
Additional paid-in capital 10,427,854
Accumulated deficit (10,617,294)
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (175,863)
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,001,964
================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-30
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 1998
- -----------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 2,055,801 $ 667,189
COST OF SALES 1,301,176 534,403
- -----------------------------------------------------------------------------------------------------------------
Gross profit 754,625 132,786
- -----------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling, general and administrative 1,012,969 281,678
Salaries and wages 1,940,760 343,569
Consulting fees 105,523 53,269
Rent 158,619 34,943
- -----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 3,217,871 713,459
- -----------------------------------------------------------------------------------------------------------------
Operating loss (2,463,246) (580,673)
- -----------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 12,311 995
Interest expense (3,806) (804)
Gain on sale of subsidiary (Note 4) 1,093,397 -
Financing charges (Note 6) (2,466,500) -
Other income (expense), net (63,580) 1,983
- -----------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (1,428,178) 2,174
- -----------------------------------------------------------------------------------------------------------------
NET LOSS $ (3,891,424) $ (578,499)
=================================================================================================================
NET LOSS PER COMMON SHARE $ (.29) $ (.11)
=================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 13,556,085 5,383,060
=================================================================================================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
F-31
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK
--------------------------- ------------------------ ADDITIONAL
PAR PAR PAID-IN
SHARES VALUE SHARES VALUE CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1999 12,263,165 $ 12,263 800,000 $ 800 $ 9,018,199
Issuance of common stock for acquisition 140,000 140 - - 117,992
Issuance of common stock options as compensation - - - - 750,000
Issuance of common stock for conversion of preferred stock 1,497,076 1,497 (800,000) (800) (697)
Sale of common stock 25,000 25 - - 9,975
Issuance of common stock for compensation and
services 283,808 284 - - 238,427
Issuance and repricing of common stock warrants - - - - 2,082,500
Issuance of common stock for conversion of debentures 25,000 25 - - 24,975
Return of common stock through disposal of subsidiary (1,497,076) (1,497) - - (2,571,677)
Issuance of common stock for financing charges 840,000 840 - - 758,160
Net loss - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1999 13,576,973 $ 13,577 - $ - $ 10,427,854
====================================================================================================================================
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY (DEFICIT)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, June 30, 1999 $ (6,725,870) $ 2,305,392
Issuance of common stock for acquisition - 118,132
Issuance of common stock options as compensation - 750,000
Issuance of common stock for conversion of preferred stock - -
Sale of common stock - 10,000
Issuance of common stock for compensation and
services - 238,711
Issuance and repricing of common stock warrants - 2,082,500
Issuance of common stock for conversion of debentures - 25,000
Return of common stock through disposal of subsidiary - (2,573,174)
Issuance of common stock for financing charges - 759,000
Net loss (3,891,424) (3,891,424)
- ------------------------------------------------------------------------------------------------
BALANCE, December 31, 1999 $(10,617,294) $ (175,863)
================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
F-32
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net loss $ (3,891,424) $ (578,499)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 188,086 13,757
Loss on disposals of property and equipment 18,639 -
Gain on sale of Prestige Travel (1,093,397) -
Write off of investments 48,273 -
Issuance of common stock options for compensation 750,000 -
Repricing of common stock warrants per warrant agreements 2,082,500 -
Issuance of common stock for financing charges 384,000 -
Issuance of common stock for compensation and services 238,711 -
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable (8,262) (127,367)
Prepaid accommodations 79,619 10,001
Prepaid expenses (23,333) (36,201)
Accounts payable 853,115 66,101
Accrued expenses (170,384) (8,399)
Deferred revenue (100,770) (12,911)
Due to customers (7,725) (58,103)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (652,352) (731,621)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of restricted certificate of deposit 11,628 -
Purchase of property and equipment (849,966) -
Proceeds from sale of property and equipment 1,020 -
Net proceeds from sale of Prestige Travel 56,390 -
Cash paid for acquisition of Intrepid (1,018) -
Increase in deposits (18,540) (8,386)
Increase (decease) in other assets 1,079 (43,657)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (799,407) (52,043)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - 65,319
Principal payments of notes payable (12,000) (13,984)
Principal payments of capital lease obligations (8,916) (639)
Advances for common stock subscriptions 400,049 -
Sale of common stock 10,000 679,604
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 389,133 730,300
- ------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH (1,062,626) (53,364)
CASH AND CASH EQUIVALENTS, beginning of period 1,119,796 64,061
- ------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 57,170 $ 10,697
==============================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
F-33
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. FINANCIAL The financial statements included herein
STATEMENTS have been prepared without audit, pursuant
to the rules and regulations of the
Securities and Exchange Commission. Certain
information and footnote disclosures normally
included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted
pursuant to such rules and regulations;
however, management believes that the
disclosures are adequate to make the
information presented not misleading.
The financial statements for the interim
periods included herein, which are unaudited,
include, in the opinion of management, all
adjustments (consisting only of normal
recurring adjustments) necessary to present
fairly the financial statements and results
of operations of Affinity International
Travel Systems, Inc. and Subsidiaries for the
periods presented. The results of operations
for interim periods should not be considered
indicative of results to be expected for the
full year.
2. NATURE OF NATURE OF ORGANIZATION
ORGANIZATION
Affinity International Travel Services, Inc.,
formerly Medanco, Inc. ("Medanco"), through
its wholly-owned subsidiaries, currently
provides packaged vacation programs, as well
as airline, car rental, hotel and cruise ship
reservations for both retail travel agents
and direct consumers.
The consolidated financial statements include
the accounts of Affinity International Travel
Systems, Inc. ("Affinity" or collectively the
"Company") and its wholly-owned subsidiaries,
Affinity International Travel Services, Ltd.;
Prestige Travel Services II, Inc.; and
SunStyle International Holidays, Inc.
("SunStyle") and its wholly-owned
subsidiaries, SunStyle International
Holidays, Ltd.; SunStyle International
Holidays of California, Inc.; and Air Travel
Trust, Inc. All material intercompany
accounts and transactions have been
eliminated.
3. ACQUISITION On July 5, 1999, the Company acquired
certain assets of Integrity Credit Services,
Inc. ("Integrity") in exchange for 140,000
shares of the Company's common stock.
Integrity operates a series of travel
agencies located in Seminole and St.
Petersburg, Florida under the trade names
Intrepid Travel and Goldmark Travel. The
Company also entered into an employment
agreement with the seller of Integrity which
provides for payment of salary through July
2002.
4. SALE OF On January 1, 1999, the Company acquired all
SUBSIDIARY of the outstanding stock of Prestige Travel
Services II, Inc., a retail travel agency,
for $1,600,000, paid through the issuance of
800,000 shares of Series A convertible
preferred stock. The transaction was
accounted for as a purchase. On August 1,
1999, the preferred shares were converted to
1,497,076 shares of common stock based on the
average trading price of the Company's common
stock for the preceding 20 days' average
trading price in accordance with the purchase
agreement.
F-34
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On December 29, 1999, the Company sold all
the outstanding common stock of Prestige
Travel Services II, Inc. to its original
owners for $75,000 in cash plus the return of
1,497,076 shares of the Company's common
stock valued at $2,573,174, or approximately
$1.72 per share. The Company recorded a gain
of $1,093,397 on the transaction.
The operating results of Prestige Travel
Services II, Inc. have been included in the
consolidated statement of operations from the
date of acquisition through the date of its
disposal. The following pro forma information
has been prepared assuming the sale of
Prestige Travel Services II, Inc., which was
deemed to be a significant disposal of
assets, had taken place immediately prior to
the six-month period ending December 31,
1999. The pro forma information includes
adjustments to remove the operating results
of the subsidiary, related amortization of
goodwill arising from the initial acquisition
and the gain on disposal. The pro forma
financial information is not necessarily
indicative of the results of operations as
they would have been had the transaction been
effected on the assumed date.
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
(UNAUDITED)
<S> <C>
Total revenues $ 1,466,025
Net loss (5,301,233)
Net loss per common share (.42)
================================================================================
</TABLE>
5. STOCK OPTIONS On July 1, 1999, the Company adopted a
stock option plan which authorizes the
issuance of up to 4,000,000 shares of its
common stock in the form of incentive stock
options to employees and nonqualified stock
options to nonemployees. Upon the plan's
adoption, the Company granted its President
incentive stock options to purchase 2,000,000
shares of its common stock with an exercise
price of $.50 per share which expire ten
years from the date of grant. The Company
recorded compensation expense of $750,000
related to the difference between the
exercise price of $.50 per share and the
market price of $.88 per share on the date of
grant.
On August 17, 1999, the Company granted
incentive stock options to an employee to
purchase 15,000 shares of the Company's
common stock with an exercise price of $1.00
per share or market value at the date of
grant. These options expire three years from
the grant date.
On December 20, 1999, the Company granted
incentive stock options and nonqualified
stock options to two employee/directors and
an outside director to purchase a total of
100,000 and 50,000 shares of the Company's
common stock, respectively. These options
were granted with an exercise price of $1.00
per share when the market value of the
Company's common stock was $.50 per share.
The fair market value of the nonqualified
stock options was insignificant on the date
of grant, and all options granted expire
three years from the grant date.
F-35
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
6. EQUITY In December 1999, the Company sold 25,000
shares of common stock for $10,000, or $.40
per share, to an unrelated investor. In
December 1999, the Company issued 840,000
shares of common stock valued at $759,000,
or approximately $.90 per share for the
Company's failure to have a registration
statement declared effective by the SEC
prior to a specified date. Of this amount,
$384,000 was charged to financing charges
and $375,000 was recorded as prepaid
expenses and will be charged to operations
in January 2000. On January 15, 2000, the
stockholder was entitled to receive an
additional 240,000 shares of common stock
valued at $450,000, or $1.88 per share,
pursuant to these agreements, which will be
charged to operations in January 2000.
On December 20, 1999, the Company entered
into agreements (that were later terminated
on January 26, 2000) to receive gross
proceeds of $250,000 and $500,000 from the
majority stockholder and another investor in
exchange for 714,286 and 1,458,571 shares of
common stock, respectively, at a price of
$.35 per share. The majority stockholder also
agreed to the repricing of 4,250,000 common
stock warrants to $.50 per share. The fair
market value of the Company's common stock on
December 20, 1999 was $.50 per share. The
Company recorded a charge of $2,082,500 to
financing charges related to the repricing of
these warrants. As a result of the January
26, 2000 termination, the Company recorded
the net proceeds it received as of December
31, 1999 as a current liability.
On January 26, 2000, the Company terminated
the December 20, 1999 agreements and entered
into new agreements to sell 1,150,000 and
2,300,000 common stock warrants for $250,000
and $500,000, respectively. All warrants have
an exercise price of $.25 per share and an
expiration date of December 20, 2004. The
Company received net proceeds from these
transactions of $650,049, of which $400,049
was collected as of December 31, 1999.
On January 26, 2000, the majority stockholder
also agreed to terminate the provisions of
all previously issued financing agreements
and a consulting agreement in exchange for
800,000 common stock warrants with an
exercise price of $.25 per share that expire
in five years and the repricing of 4,500,000
common stock warrants to an exercise price of
$.25 per share. The market value of the
Company's common stock on January 26, 2000
was $1.75 per share. Therefore, the Company
will record an additional charge of
$7,139,500 to financing charges relating to
the issuance and repricing of these warrants
in January 2000.
The Company would receive proceeds of
approximately $2,188,000 if the above
warrants, representing 8,750,000 shares of
the Company's common stock, were exercised.
If the Company does not have a registration
statement declared effective by the SEC prior
to June 20, 2000, all of these warrants can
be exercised using a cashless exercise
feature.
F-36
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
7. COMMITMENTS SERVICE AGREEMENT WITH WEBLINK
COMMUNICATIONS, INC.
On October 26, 1998, the Company entered into
an agreement to pay $250,000 to receive
electronic media consulting services from
Weblink Communications, Inc. ("Weblink"), an
unrelated third party. The Company paid
$25,000 in cash and issued 25,000 shares of
common stock valued at $21,875 (the quoted
market price on the date of the agreement)
upon the execution of the agreement. Weblink
has to assist the Company in the design,
implementation and marketing of an internet
web site that would be affiliated with other
web sites maintained by Weblink. As of June
30, 1999, services under this agreement had
not commenced pending resolution of the
payment terms for the balance due Weblink
under the service agreement, and the Company
had recorded the advance payments to Weblink
as a prepaid expense.
As of September 3, 1999, a tentative
agreement had been reached which provided for
the issuance of an additional 257,143 shares
of the Company's common stock to Weblink in
full satisfaction of amounts due under the
terms of the agreement. However, in January
2000, the consulting agreement was
terminated, and therefore, the Company did
not issue any additional shares and wrote off
its advance payments under the contract.
FARAWAY.COM WEB SITE DEVELOPMENT
In December 1999, the Company entered into
two software development and integration
agreements for the design of their
Faraway.com web site and related software.
The agreements provide for total payments of
approximately $873,000 to be paid as work
progresses on the web site. A $25,000 advance
deposit was paid prior to December 31, 1999.
EMPLOYMENT AGREEMENT
On July 1, 1999, the Company entered into an
employment agreement with its President. The
agreement provides for payment of salary
through June 2006 and the establishment of a
bonus program.
RULE 504 OFFERING
From July 1998 to January 1999, the
Company made sales of common stock in
reliance upon the exemption from
registration contained in Rule 504 of
Regulation D. With respect to the
foregoing transactions made in reliance
upon the exemption contained in Rule 504
of Regulation D, it has since come to the
Company's attention that such transactions
may not have been made in compliance with
Rule 504. As of March 7, 2000 the Company
continues to evaluate the matter, and if
it determines that the transactions were
not in compliance with Rule 504, the
Company intends to take appropriate
corrective action, including possibly
offering recission rights to the investors
in such transactions. If the transactions
were not in compliance with Rule 504, the
Company could be subject to substantial
liabilities, which could materially and
adversely affect its financial condition
and results of operation.
8. SUBSEQUENT
EVENTS SALE OF BUSINESS UNIT
On January 7, 2000, the Company sold certain
assets and related operations of a business
unit that was acquired on July 5, 1999 as
part of the Integrity acquisition (Note 3)
for $30,000 in cash and recognized a gain of
approximately $25,000 on the transaction.
Revenues and related expenses from this
business unit were insignificant to the
Company's consolidated operations during the
six months ended December 31, 1999.
F-37
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
SALES OF COMMON STOCK
During January and February 2000, the Company
raised additional capital through two private
offerings. In the first offering, 345,401
shares of common stock were sold for proceeds
of $456,750, net of offering costs of
$50,750, or an average price of $1.47 per
share. In connection with this offering,
34,535 common stock warrants were issued at
exercise prices from $2.50 to $3.00, which
expire five years from the date of issuance.
In the second offering, 990,000 shares of
common stock were sold for proceeds of
$990,000, or $1.00 per share. In connection
with this offering, 1,190,000 common stock
warrants were issued at an exercise price of
$.75, which expire five years from the date
of issuance.
9. SUPPLEMENTAL CASH Supplemental cash flow information is as
FLOW INFORMATION follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 1998
---------------------------------------------------------------------------
<S> <C> <C>
Cash paid for interest $ 3,806 $ 3,029
Noncash financing and investing activities:
Common stock issued as prepaid financing charges 375,000 -
Conversion of debentures into common stock 25,000 -
===========================================================================
</TABLE>
The following is a summary of noncash
transactions related to the sale of Prestige
disclosed in Note 4:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------------
<S> <C>
Fair market value of common stock returned $ 2,573,174
-------------------------------------------------------------------------------
Accounts receivable 45,252
Property, plant and equipment 23,874
Goodwill 1,577,114
Notes payable (15,000)
Accounts payable (13,636)
Accrued expenses (34,671)
Deferred revenue (46,766)
--------------------------------------------------------------------------------
Net noncash assets surrendered 1,536,167
--------------------------------------------------------------------------------
Gain on sale recognized 1,093,397
--------------------------------------------------------------------------------
Net cash received (net of cash surrendered of $18,610) $ 56,390
================================================================================
</TABLE>
F-38
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Affinity International Travel Systems, Inc.
(Formerly Pay Dirt, Inc.)
We have audited the accompanying balance sheets of Affinity International Travel
Systems, Inc. (a development stage Company) as of December 31, 1997 and 1996,
and the related statements of operations, changes in stockholders' equity, and
cash flows for each of the three years ended December 31, 1997, 1996, and 1995
and the period from inception (June 16, 1977) to 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 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 Affinity International Travel
Systems, Inc. (a development stage Company) as of December 31, 1997 and 1996,
and the results of its operations, and its cash flows for each of the three
years ended December 31, 1997, 1996, and 1995 and the period from inception
(June 16, 1977) to December 31, 1997, in conformity with generally accepted
accounting principles.
TUBBS & BARTNICK, P.A.
Certified Public Accountants
Boca Raton, Florida
December 30, 1998
F-39
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Total current assets $ - $ -
------------- -------
TOTAL ASSETS $ - $ -
- ------------ ============== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Total current liabilities $ - $ -
------------- -------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
100,000,000 shares authorized,
330,352 shares issued and
outstanding 330 330
Additional paid in capital 90,040 84,215
Deficit accumulated during the ------------- -------
development stage (90,370) (84,545)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ -
- ------------------------------------------ ============= =======
</TABLE>
Read the accompanying notes to the financial statements.
F-40
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND
THE PERIOD FROM INCEPTION (JUNE 16, 1977) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Year Year Year Inception
Ended Ended Ended to
December 31, December 31, December 31, December 31,
1997 1996 1995 1997
<S> <C> <C> <C> <C>
REVENUE $ - $ - $ - $ -
COSTS AND EXPENSES
General and Administrative 5,825 - - (90,370)
------- ------------- --------- ---------
NET (LOSS) $(5,825) $ - $ - $ (90,370)
- ---------- ======= =========== ========= =========
PER SHARE INFORMATION
Weighted average number
of common shares
outstanding 330,352 330,352 330,352 326,927
======= ======= ======= =======
Basic (loss) per share $ (.02) $ (.00) $ (.00) $ (.28)
======= ======= ======= ========
</TABLE>
Read the accompanying notes to the financial statements.
F-41
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 16, 1977) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Additional Deficit Accumulated
Paid in During the
Common Stock Capital Development Stage
------------ ------- -----------------
Shares Amount
------ ------
<S> <C> <C> <C> <C>
Balance June 16, 1977 (date of inception) - $ - $ - $ -
Shares issued for cash during February, 1981 80,230 80 17,020
Shares issued for services and expenses
during February, 1981 43,222 43 18,982
Shares issued for cash during April, 1981 149,300 149 43,421
Net (loss) for the year ended December 31, 1981 (19,025)
Shares issued for services and expenses
during March, 1982 57,600 58 4,792
Net (loss) for the year ended December 31, 1982 - - - (65,520)
------------- --- ------ -------
Balance December 31, 1994 330,352 330 84,215 (84,545)
------- --- ------ -------
Balance December 31, 1995 330,352 330 84,215 (84,545)
------- --- ------ -------
Balance December 31, 1996 330,352 330 84,215 (84,545)
-------
Capital contribution 5,825
Net (loss) for the year ended December 31, 1997 - - - (5,825)
-------------- --- ----- -------
BALANCE DECEMBER 31, 1997 330,352 $330 $90,040 $(90,370)
- ------------------------- ======= === ====== =======
</TABLE>
Read the accompanying notes to the financial statements.
F-42
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND
THE PERIOD FROM INCEPTION (JUNE 16, 1977) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Year Year Year Inception
Ended Ended Ended to
December 31, December 31, December 31, December 31,
1997 1996 1995 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (5,825) $ - $ - $ (90,370)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Issuance of common stock for services
and expenses 23,875
Contributions to capital 5,825 - - 5,825
----------- ----------- ---------- ------------
Net cash provided by (used in)
operating activities - - - (60,670)
----------- ----------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided by (used in)
investing activities - - - -
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock - - - 60,670
----------- ----------- ---------- ------------
Net cash provided by (used in)
financing activities - - - 60,670
----------- ----------- ---------- ------------
NET INCREASE (DECREASE) IN CASH - - - -
------------ ------------ ----------- ------------
BEGINNING CASH - - - -
------------ ------------ ------------ ------------
ENDING CASH $ - $ - $ - $ -
- ----------- ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes $ - $ - $ - $ -
Interest $ - $ - $ - $ -
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1981 the Company issued 43,222 shares of common stock for services and
expenses valued at $19,025.
During 1982 the Company issued 57,600 shares of common stock for services and
expenses valued at $4,850.
During 1997 an officer made a capital contribution by paying expenses on behalf
of the Company in the amount of $5,825.
Read the accompanying notes to the financial statements.
F-43
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Company was incorporated on June 16, 1977, in the State of Nevada. The
Company is in the development stage and its intent is to locate suitable
business ventures to acquire. The Company has had no significant business
activity to date and has chosen December 31, as a year end.
B. Cash and cash equivalents
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of less than three months.
C. Net loss per share
The Basic loss per share is computed by dividing the net loss for the period by
the weighted average number of common shares outstanding for the period.
D. Use of estimates
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
NOTE 2. STOCKHOLDERS' EQUITY
During February, 1981 the Company issued 80,230 shares of its $.001 par value
common stock for cash aggregating $17,100.
During February, 1981 the Company issued 43,222 shares of its $.001 par value
common stock for services and reimbursement of expenses valued at $19,025.
During April, 1981 the Company issued 149,300 shares of its $.001 par value
common stock for cash aggregating $43,570.
During March, 1982 the Company issued 57,600 shares of its $.001 par value
common stock for services and reimbursement of expenses valued at $4,850.
F-44
<PAGE>
During August, 1997 an officer of the Company contributed the value of expenses
paid by him on behalf of the Company aggregating $5,825 to the capital of the
Company.
During August, 1997 the Company effected a forward stock split of 6 shares for 1
share and during June, 1998 the Company effected a 1 for 1.75 reverse stock
split. All share and per share amounts have been restated to reflect these stock
splits.
F-45
<PAGE>
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
(FORMERLY PAY DIRT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for recission of the sales if
such exemptions were found not to apply.
NOTE 3. INCOME TAXES
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classifications of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or non-current depending on
the periods in which the temporary differences are expected to reverse. The
deferred tax asset related to the operating loss carryforward has been fully
reserved.
The Company currently has net operating loss carryforwards aggregating
approximately $6,000 which expire in 2012.
NOTE 4. SUBSEQUENT EVENTS
During July, 1998 the Company agreed to acquire all of the issued and
outstanding stock of SunStyle International Holiday's, Inc. (SunStyle) in
exchange for 4,447,000 shares of its common stock. This transaction will be
accounted for as an acquisition of Affinity by SunStyle and a recapitalization
of SunStyle by the issuance of 330,352 shares of common stock to the
shareholders of Affinity.
During October and November, 1998 the Company issued 299,229 shares of common
stock in exchange for 299,229 shares of common stock of SunStyle which had been
issued by SunStyle upon the conversion of $120,000 of SunStyle convertible
debentures and $11,181 of accrued interest on said debentures.
During the period from August 1998 through December, 1998 the Company issued
1,461,745 shares of common stock for cash aggregating $496,409 and services
valued at $95,000 and accepted subscriptions for 455,082 shares of common stock
for cash and debt conversion aggregating $83,402 and services valued at
$255,000.
F-46
<PAGE>
TUBBS & BARTNICK, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders:
Prestige Travel Services II, Inc.
We have audited the balance sheets of Prestige Travel Services II, Inc. as of
December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for each of the two years 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 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 Prestige Travel Services II,
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the two years then ended, in conformity with generally
accepted accounting principles.
TUBBS & BARTNICK, P.A.
Certified Public Accountants
Boca Raton, Florida
June 28, 1999
2300 GLADES ROAD, SUITE 415E, BOCA RATON, FL 33431, TEL (561) 361-0330, FAX
(561) 368-7720
(MEMBER - AICPA DIVISION FOR CPA FIRMS)
F-47
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
BALANCE SHEET
AS OF DECEMBER 31,
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 33,428 $ 74,515
Accounts receivable 62,915 35,592
Other receivables - 25,889
----------- -----------
Total current assets 96,343 135,996
----------- ----------
PROPERTY AND EQUIPMENT, NET 30,999 10,052
----------- -----------
OTHER ASSETS
Organization costs, net of amortization of $696 - 175
Goodwill, net of amortization of $467 3,533 -
------------ ----------
TOTAL ASSETS $ 130,875 $ 146,223
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
CURRENT liabilities
Notes payable - shareholders $ 49,889 $ -
Accounts payable and accrued expenses 88,260 82,134
Deferred revenue 31,844 22,648
----------- -----------
Total current liabilities 169,993 104,782
---------- ----------
Stockholders' EQUITY (DEFICIT) Common stock, $1.00 par value, 500 shares
authorized, 500 shares
issued and outstanding 500 500
Accumulated deficit (39,618) 40,941
----------- -----------
Total Stockholders' Equity (Deficit) (39,118) 41,441
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 130,875 $ 146,223
=========== ===========
</TABLE>
F-48
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
REVENUE
<S> <C> <C>
Net revenues $ 1,247,149 $ 1,025,840
OPERATING COSTS AND expenses
Selling, general and administrative expenses 1,236,426 984,705
---------- ----------
NET INCOME $ 10,723 $ 41,135
- ---------- ============ ===========
PER SHARE INFORMATION:
Weighted average common shares outstanding 500 500
============= ============
Basic income per share $ 21.45 $ 82.27
============ ============
PRO FORMA INFORMATION:
INCOME BEFORE PROVISION FOR INCOME TAXES $ 10,723 $ 41,135
PROVISION FOR INCOME TAXES 2,050 7,900
------------- -----------
NET INCOME $ 8,673 $ 33,235
============ ===========
Basic income per share $ 17.35 $ 66.47
============ ===========
</TABLE>
F-49
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE TWO YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
RETAINED
EARNINGS
COMMON STOCK (ACCUMULATED
SHARES AMOUNT DEFICIT)
------ ------ --------
<S> <C> <C> <C>
Balance - December 31, 1996 500 $ 500 $ 23,073
S Corporation distributions (23,267)
Net income for the year 41,135
----- ----- ---------
Balance - December 31, 1997 500 500 40,941
S Corporation distributions (91,282)
Net income for the year 10,723
----- ----- ---------
BALANCE - DECEMBER 31, 1998 500 $ 500 $ (39,618)
- --------------------------- ===== ==== =========
</TABLE>
F-50
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 10,723 $ 41,135
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 6,370 4,397
(Gain) loss on disposition of property and equipment (829) 9,614
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (16,933) (3,483)
Increase (decrease) in:
Deferred revenue 9,195 14,041
Accounts payable and accrued expenses 1,626 19,794
--------- ---------
Net Cash Provided By (Used In) Operating Activities 10,152 85,498
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (9,846) (2,917)
---------- ----------
Net Cash Provided By (Used In) Investing Activities (9,846) (2,917)
---------- ----------
Cash flows from financing activities
Shareholder distributions (41,393) (23,267)
--------- ---------
Net Cash Provided by (Used In) Financing Activities (41,393) (23,267)
--------- ---------
Net increase (DECREASE) in cash (41,087) 59,314
Cash - beginning of year 74,515 15,201
--------- ---------
CASH - END OF YEAR $ 33,428 $ 74,515
- ------------------ ========= ==========
Supplemental DISCLOSURES OF cash flow information:
CASH PAID FOR:
INTEREST $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrual of shareholder distribution $ 49,889 $ -
Non cash acquisition of property, equipment
And intangible assets $ 20,000 $ -
</TABLE>
F-51
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
NOTE 1 - ACCOUNTING POLICIES
A. Organization
The Company provides specialized sales and distribution of leisure travel
products and services. These products and services are provided principally
through a network of commissioned independent travel consultants. The Company
was incorporated under the laws of the State of Florida on June 14, 1993.
B. Revenue recognition
The Company's revenue is derived primarily from selling travel products,
including cruise vacations, airline tickets and auto rentals, by providing
electronic hotel reservation services to independent hotels and by providing
various programs and services to independent travel agencies. Revenues primarily
consist of commissions and markups on travel products sold and fees for services
including processing and delivering tickets and hotel reservations.
The Company records net revenues when earned as follows: for cruise bookings at
the time the customer completes travel, for airline tickets at the time a
reservation is booked and ticketed, for hotel reservation services at the time
the traveler checks out of the hotel, for car rentals at the time the customer
completes the car rental, and for other services at the time the service is
provided.
The Company provides allowances for cancellations, reservation changes, and
"no-shows" based on historical experience. The allowances, provided as reduction
of net revenues are not material in the two years ended December 31, 1998.
However, actual cancellations and reservation changes could vary significantly
based upon changes in economic and political conditions that may impact leisure
travel patterns.
C. Property and equipment
Property and equipment are recorded at cost. Depreciation is provided over
estimated useful lives of the respective assets on a straight-line basis.
Depreciation is calculated using the expected useful lives of the assets as
follows:
Furniture and equipment 5 - 7 years
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 income.
D. Cash and cash equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less at the date of purchase to be cash equivalents.
F-52
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
E. Use of Estimates
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 consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F. Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 1998 and
1997. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include
cash, accounts receivable, accounts payable and accrued expenses and notes
payable - shareholders. Fair values were assumed to approximate carrying values
for these financial instruments because they are short term in nature and their
carrying amounts approximate fair values or they are receivable or payable on
demand.
G. Impairment of long lived assets
Long lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or circumstances
indicate the carrying amount of an asset may not be recoverable or is impaired.
H. Advertising costs
Advertising costs are expensed as incurred. Advertising costs charged to
operations were $16,650 and $15,158 in 1998 and 1997.
I. Intangible assets
The Company is amortizing the goodwill related to the business combination
accounted for as a purchase (see Note 2) using the straight line method over a
period of five years. Amortization charged to operations was $467 in 1998.
J. Earnings per share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Basic earnings per common share ("EPS")
calculations are determined by dividing net income by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings
per common share calculations are determined by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding. During the periods presented no dilutive common share equivalents
existed.
F-53
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
K. Comprehensive income
The Company follows Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. For all periods presented, there were no
differences between reported net income and comprehensive income.
L. Segment Reporting
The Company follows Statement of Financial Accounting Standards No. 130,
"Disclosures About Segments of an Enterprise and Related Information." The
Company operates as a single segment and will evaluate additional segment
disclosure requirements as it expands its operations.
M. Income taxes
The Company has elected S Corporation status under the provisions of the
Internal Revenue Code and was not subject to income taxes.
Effective January 1, 1999 the Company's Subchapter S election will be terminated
in conjunction with the sale by the Company of all of its issued and outstanding
common stock to Affinity International Travel Services, Inc. (See Notes 8 and
9).
N. Recent pronouncement
In June, 1998 the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivatives and Hedging Activities", which establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company does not expect that SFAS 133 will have a
material impact on its financial statements or disclosures.
NOTE 2 - BUSINESS COMBINATION
During April, 1998 the Company acquired the assets of Valrico Travel (dba Cruise
Brokers of Tampa) in a business combination accounted for as a purchase. Valrico
Travel is primarily engaged in providing specialized sales and distribution of
cruise related travel products. The results of operations of Valrico Travel are
included in the accompanying financial statements since the date of acquisition.
The total cost of the acquisition was $20,000, which exceeded the fair value of
the net assets of Valrico Travel by $4,000. This excess is being amortized using
the straight line method over a period of five years.
The following summarized pro forma (unaudited) information assumes that the
acquisition had occurred on January 1, 1997.
F-54
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net sales $1,327,000 $1,100,000
Net income $ 10,000 $ 43,000
Basic earnings per share $ 20 $ 86
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Furniture and equipment $ 45,889 $ 26,042
Less: accumulated depreciation 14,890 15,990
----------- --------
PROPERTY AND EQUIPMENT - NET $ 30,999 $ 10,052
---------------------------- =========== ========
</TABLE>
Depreciation expense was $5,728 and $5,684 for the years ended December 31, 1998
and 1997.
NOTE 4 - NOTES PAYABLE - SHAREHOLDERS
Note payable consists of the following at December 31, 1998 (see Note 9):
<TABLE>
<S> <C>
Note payable, due April, 1999, non-interest bearing, payable
to shareholders $ 24,889
Note payable, due July, 1999, non-interest bearing, payable
to shareholders 25,000
TOTAL NOTES PAYABLE - SHAREHOLDERS $ 49,889
---------------------------------- =========
</TABLE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its office facilities pursuant to three leases expiring
between August, 1999 and June, 2001. Total monthly lease payments currently
aggregate approximately $4,904.
Total rent expense was $59,083 in 1998 and $47,330 in 1997.
Future minimum rentals are as follows:
<TABLE>
<S> <C>
1999 $53,134
2000 $38,814
2001 $16,435
</TABLE>
F-55
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
NOTE 6 - CONCENTRATIONS OF RISK:
Travel Service Providers
The Company markets and provides reservation services for a variety of cruise
lines, airlines, hotels and car rental companies. One cruise lines represented
14% of the Company's net revenues in 1998.
NOTE 7 - TRADE PAYABLES AND ACCRUED EXPENSES:
Trade payables and accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Due to travel providers $ 17,144 $ 14,816
Accrued commissions 34,269 33,454
Trade payables 20,061 23,404
Other 16,786 10,460
---------- ---------
$ 88,260 $ 82,134
========= ========
</TABLE>
NOTE 8 - INCOME TAXES
Prior to the completion of the exchange of shares described in Note 9 the
Company had elected to be treated as an "S" Corporation under the provisions of
the Internal Revenue Code and state statutes. Under these provisions no income
taxes are incurred on a corporate level. Instead, shareholders of the Company
include their pro-rata share of income or loss on their individual income tax
returns. In conjunction with the exchange of shares described in Note 9, the "S"
Corporation status was terminated and the Company became subject to corporate
income taxes. The accumulated deficit through the termination of the "S"
election of $39,618 will be reclassified to paid in capital on January 1, 1999.
Effective on January 1, 1999 the Company will follow Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS No. 109") for
recording the provision for income taxes. Deferred tax assets and liabilities
are computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal tax rate
applicable when the related asset or liability is expected to be realized or
settled. Deferred income tax expenses or benefits are based on the changes in
the asset or liability each period. If available evidence suggests that it is
more likely than not that some portion or all of the deferred tax assets will
not be realized, a valuation allowance is required to reduce the deferred tax
assets to the amount that is more likely than not to be realized. Future changes
in such valuation allowance are included in the provision for deferred income
taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to
F-56
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997
which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to
reverse.
The pro forma provision for income taxes for the years presented has been
computed in accordance with Financial Accounting Standards Board Statement No.
109, Accounting for Income Taxes. There are no material differences between
financial statement income and taxable income.
The amounts shown for pro forma income taxes in the statements of operations
differ from amounts that would be derived from computing pro forma income taxes
at federal statutory rates. The following is a reconciliation of those
differences.
<TABLE>
<CAPTION>
(PRO FORMA)
1998 1997
----- ----
<S> <C> <C>
Tax at federal statutory rate 34% 34%
Surtax exemption (19) (19)
State income tax net of federal tax benefit 4 4
-------- --------
19% 19%
======= =======
</TABLE>
THE COMPANY HAS AGREED TO MAKE A DISTRIBUTION TO ITS EXISTING SHAREHOLDERS
AGGREGATING $49,889 (SEE NOTES 4 AND 9).
NOTE 9 - SUBSEQUENT EVENT
Effective January 1, 1999 the shareholders of the Company exchanged all of the
Company's issued and outstanding common stock for 800,000 shares of Series A
Convertible Preferred Stock of Affinity International Travel Systems (Affinity).
The preferred shares are convertible into common shares of Affinity by dividing
$1.6 million by the market price of the common stock at the time of conversion
(conversion ratio). The preferred shares may be converted at any time between
August 1, 1999 and January 1, 2000. On January 2, 2000 the preferred shares
shall automatically be converted into common stock at the conversion ratio. The
preferred stock carries a 6% cumulative dividend.
In addition, the shareholders of the Company received a cash payment of $100,000
and notes aggregating $49,889 (see Notes 4 and 8).
F-57
<PAGE>
=================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO
DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS
NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS
IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE
DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THE SECURITIES.
=================================================================
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
29,103,094 SHARES
COMMON STOCK
------------------
PROSPECTUS
------------------
MARCH ___, 2000
=================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
TOTAL EXPENSES
<S> <C>
SEC Registration Fee.......................................... 36,972
Blue Sky Fees and Expenses.................................... NA
Transfer Agent and Registrar Fees ............................ NA
Accounting Fees and Expenses.................................. 75,000*
Legal Fees and Expenses....................................... 150,000*
Printing and Engraving ....................................... 10,000*
Miscellaneous................................................. 30,000*
TOTAL................................................... $301,972*
=========
* Estimated
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation law of the State of Nevada and our articles of
incorporation, as amended, and by-laws provide for indemnification of our
directors and officers for liabilities and expenses that they may incur in such
capacities. In general, directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, our best interests and, with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were
unlawful. Reference is made to our articles and bylaws filed as Exhibits 3.1 and
3.2 to this registration statement, respectively.
In addition, we intend to apply for directors and officers liability
insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities that
we issued within the past three years which were not registered under the
Securities Act.
From 1997 through July 1998, we had no issuances of unregistered
securities.
In July 1998, we entered into an acquisition agreement with all of the
stockholders of SunStyle International Holidays, Inc. pursuant to which we
purchased 4,902,894 shares of SunStyle International Holidays, which
represented all of the issued and outstanding shares of SunStyle, in exchange
for 4,902,894 shares of our common stock. Although we acquired SunStyle, the
transaction was accounted for as a purchase of Affinity by SunStyle, because
the previous stockholders of SunStyle obtained a majority of our voting
rights as a result of the acquisition. For accounting purposes, the reverse
acquisition is treated as a recapitalization of SunStyle and not as a business
combination, therefore, no value was allocated to the common stock issued in
connection with the acquisition. The issuance of the shares was effected
without registration under the Securities Act of 1933, as amended, in
reliance upon the
II-1
<PAGE>
exemption from registration contained in Rule 504 of Regulation D promulgated
under the Securities Act.
In July 1998 and August 1998 we sold an aggregate of 35,000 shares of our
common stock to two investors for an aggregate purchase price of $35,000.
In October 1998, we issued 25,000 shares of our common stock to a
consulting services firm in consideration of services to be rendered by such
firm, such services were valued at $25,000. The issuance of the shares was
effected without registration under the Securities Act of 1933, as amended, in
reliance upon the exemption from registration contained in Rule 504 of
Regulation D promulgated under the Securities Act.
In November 1998, we sold an aggregate of 10,000 shares of our common stock
to one investor for an aggregate purchase price of $10,000.
Between October 1998 and January 1999, we sold an aggregate of 1,621,392
shares of our common stock in a private placement for an aggregate consideration
of $657,000. In connection with this private placement, in December 1998,
Schoemann Venture Capital, LLC purchased, for an aggregate consideration,
1,142,857 shares of our common stock and received warrants to purchase an
additional 200,000 shares of our common stock at an exercise price of $0.35 per
share. In January 1999, Schoemann Venture Capital, LLC acquired the 200,000
shares under its warrant agreement for an aggregate consideration of $70,000.
The issuance of the shares was effected without registration under the
Securities Act of 1933, as amended, in reliance upon the exemption from
registration contained in Rule 504 of Regulation D promulgated under the
Securities Act.
In January 1999, we issued 94,286 shares of our common stock in
consideration of services rendered, such services were valued at approximately
$33,000. The issuance of the shares was effected without registration under the
Securities Act of 1933, as amended, in reliance upon the exemption from
registration contained in Rule 504 of Regulation D promulgated under the
Securities Act.
With respect to the foregoing transactions made in reliance upon the
exemption contained in Rule 504 of Regulation D, it has since come to our
attention that such transactions may not have been made in compliance with Rule
504. We are currently evaluating the matter, and if we determine that the
transactions were not in compliance with Rule 504, we intend to take appropriate
corrective action, including possibly offering recission rights to the investors
in such transactions.
In January 1999, we acquired all of the outstanding capital stock of
Prestige Travel Services II, Inc., a retail travel agency with an independent
agent sales program and an internet cruise brokerage operation, for $1,600,000,
which we paid through the issuance of 800,000 shares of Series A Convertible
Preferred Stock, or $2.00 per share of preferred stock. The conversion price of
the Series A Convertible Preferred Stock was $1.06875 per share. In August 1999,
the holders of the Series A Convertible Preferred Stock converted their shares
of preferred stock into 1,497,076 shares of common stock. In connection with
this acquisition, we issued 74,854 shares of common stock in payment of a
finder's fee to a third party.
In January 1999, Schoemann Venture Capital, LLC, purchased a convertible
note in the principal amount of $222,000 and warrants to purchase 250,000 shares
of our common stock at an exercise price of $.35 per share, for an aggregate
consideration of $222,000. In February 1999, Schoemann Venture Capital, LLC
subsequently converted its note into 634,286 shares of our common stock.
II-2
<PAGE>
In January 1999, we issued an aggregate of 51,000 shares of our common
stock to employees and consultants in full and complete satisfaction and in
payment of services rendered which were valued at $51,000.
In January 1999, we issued an aggregate of 12,147 shares of our common
stock to four vendors in full and complete satisfaction of accounts payable to
such vendors in the aggregate amount of $12,147.
In February 1999, we sold an aggregate of 10,000 shares of our common stock
to one investor for an aggregate purchase price of $10,000.
In February 1999, we entered into an asset purchase agreement with
Design-A-Tour pursuant to which we acquired certain assets of Design-A-Tour
valued at approximately $75,000. We issued an aggregate of 36,320 shares of our
common stock as payment for the acquired assets.
In April 1999, we sold, for an aggregate consideration of $25,000, a
convertible debenture in the principal amount of $25,000 and warrants to
purchase 5,000 shares of our common stock at a purchase price of $1.00 per
share. The holder of the convertible note converted its note into 25,000 shares
of our common stock in December 1999.
In April 1999, Schoemann Venture Capital, LLC, purchased, for an aggregate
consideration of $1,000,000, a convertible note in the principal amount of
$1,000,000 and warrants to purchase 750,000 shares of our common stock at a
purchase price of $1.75 per share. In May 1999, Schoemann Venture Capital, LLC
converted its note into 2,300,000 shares of our common stock.
In April 1999, we entered into a consulting agreement with Schoemann
Venture Capital, LLC. This agreement was amended in June 1999 to provide, among
other things, that Schoemann Venture Capital, LLC is entitled to receive a
monthly consulting fee of $13,333 and warrants to purchase 750,000 shares of our
common stock at an exercise price of $2.00.
In June 1999, Schoemann Venture Capital, LLC purchased, for an aggregate
consideration of $1,000,000, a convertible note in the principal amount of
$1,000,000 and warrants to purchase 2,750,000 shares of our common stock at an
exercise price of $2.00 per share. In June 1999, Schoemann Venture Capital, LLC
converted its note into 2,000,000 shares of our common stock. The convertible
note, the warrants and the shares issued upon conversion of the convertible note
were issued in connection with a private placement in reliance upon the
exemption from registration contained in Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended.
In July 1999, we entered into an asset purchase agreement pursuant to which
we acquired certain assets of Integrity Credit Services, an entity doing
business under the names Intrepid Travel and Goldmark Travel. We issued an
aggregate of 140,000 shares of our common stock in payment for the assets we
acquired. The assets were valued at approximately $67,000.
In July 1999, we issued incentive stock options to purchase an aggregate of
2,000,000 shares of our common stock at an exercise price of $.50 per share to
our chief executive officer in consideration of services provided and to be
provided. These options expire ten years from the date of grant.
In August 1999, we issued an aggregate of 40,000 shares of our common stock
in consideration of services provided by an employee.
II-3
<PAGE>
In August 1999, we issued incentive stock options to an employee to
purchase 15,000 shares of our common stock at an exercise price of $1.00 per
share. These options expire three years from the date of grant.
In October 1999, we issued an aggregate of 168,954 shares of our common
stock to a consultant in consideration and in payment for expenses and services
rendered. Such expenses and services were valued at approximately $134,000.
In December 1999, we sold 25,000 shares of our common stock to one investor
for a purchase price of $.40 per share, or an aggregate consideration of
$10,000.
In December 1999, we issued 840,000 shares of our common stock to Schoemann
Venture Capital, LLC in consideration of the payment of penalties resulting from
not having a registration statement declared effective by the SEC prior to a
specified date in the prior financing agreements with Schoemann Venture Capital,
LLC.
In December 1999, we granted incentive stock options to purchase 50,000
shares of our common stock at an exercise price of $1.00 per share to one of
our employee/directors. These options expire three years from the date of
grant. We also granted nonqualified stock options to purchase 50,000 shares
of our common stock to a non-employee director and to an employee/director at
an exercise price of $1.00 per share. These options also expire three years
from the date of grant.
In December 1999, Schoemann Venture Capital, LLC and GCD Investments, LLC,
an unrelated third party, purchased, for an aggregate consideration of $250,000
and $500,000, respectively, 714,286 and 1,458,571 shares of common stock,
respectively, at a price of $0.35 per share. In connection with this
transaction, we repriced outstanding warrants to purchase 4,250,000 shares of
our common stock. The last sale price of our common stock on December 20, 1999
as quoted on the OTC Bulletin Board was $0.50 per share. These agreements were
terminated in January 2000, as described below.
In January 2000, we issued 240,000 shares of our common stock to Schoemann
Venture Capital, LLC in consideration of the payment of penalties resulting from
not having a registration statement declared effective by the SEC prior to a
specified date in the prior financing agreements with Schoemann Venture Capital,
LLC.
In January 2000, we terminated the December agreements with Schoemann
Venture Capital, LLC and GCD Investments, LLC and entered into an agreement with
Schoemann Venture Capital, LLC, pursuant to which we sold warrants to purchase
1,150,000 shares of our common stock at an exercise price of $0.25 per share,
for an aggregate consideration of $250,000. In addition, we also agreed to issue
warrants to purchase an aggregate of 800,000 shares of our common stock at an
exercise price of $0.25 per share in payment of penalties to Schoemann Venture
Capital, LLC resulting from not having a registration statement declared
effective by the SEC prior to a specified date in the prior agreements with
Schoemann Venture Capital, LLC. We also agreed that the exercise price for all
outstanding warrants to purchase 4,500,000 shares of our common stock that were
previously sold to Schoemann Venture Capital, LLC would be further reduced to
$0.25 per share. Finally, we agreed that all rights and obligations of the
parties under the earlier agreements with Schoemann Venture Capital, LLC, aside
from certain registration rights and rights to receive a 5% commission on
certain sales of our securities, were terminated in all respects.
II-4
<PAGE>
In January 2000, we entered into an agreement with GCD Investments, LLC,
which replaced an existing agreement dated December 20, 1999, pursuant to which
we sold warrants to purchase 2,300,000 shares of our common stock at an exercise
price of $0.25 per share, for an aggregate consideration of $500,000.
In February 2000, we issued an aggregate of 1,335,401 shares of our common
stock for gross proceeds of $1,446,750 in a private placement. In addition, in
connection with the private placement, we issued warrants to purchase an
aggregate of 1,024,535 shares of our common stock at a weighted average exercise
price of $0.82 per share.
In January 2000, we issued warrants to purchase 200,000 shares of our
common stock at an exercise price of $0.75 per share to three consultants for
services provided and to be provided by such consultants.
In January 2000, we issued an aggregate of 30,000 shares of our common
stock in consideration of services provided by an employee.
Except as otherwise specified, to the extent that the foregoing
transactions constituted "sales" within the meaning of the Securities Act, the
securities issued in such transactions were not registered under the Securities
Act in reliance upon the exemption from registration set forth in Section 4(2)
thereof, relating to sales by an issuer not involving any public offering. Each
of the foregoing transactions, to the extent constituting "sales" within the
meaning of the Securities Act, were exempt under the applicable exemption based
on the following facts: to our knowledge, there was no general solicitation,
there were a limited number of purchasers, the purchasers were provided with or
had access to information about our company, and either the purchasers or their
respective representatives were sophisticated about business and financial
matters; and, as applicable, the purchasers were "accredited investors" within
the meaning of Rule 501 under the Securities Act and the Company took reasonable
steps to assure that the purchasers were not underwriters within the meaning of
Section 2(11) under the Securities Act.
None of the foregoing transactions, either individually or in the
aggregate, involved a public offering.
ITEM 16(A). EXHIBITS
<TABLE>
<CAPTION>
- ------------------------- -------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
- ------------------------- -------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Acquisition Agreement dated July 14, 1999 between Affinity
International Systems, Inc. ("Affinity") and SunStyle International Holidays, Inc.*
- ------------------------- -------------------------------------------------------------------------------------
2.2 Affinity/Prestige Acquisition Agreement dated January 1, 1999*
- ------------------------- -------------------------------------------------------------------------------------
2.3 Asset Purchase Agreement between Affinity Design-A-Tour, Inc. dated February 3,
1999*
- ------------------------- -------------------------------------------------------------------------------------
2.4 Asset Purchase Agreement between Affinity and Integrity Credit Services, Inc. (d/b/a
Intrepid Travel and/or Goldmark Travel) dated July 15, 1999*
- ------------------------- -------------------------------------------------------------------------------------
2.5 Agreement dated December 29, 1999 between Affinity, Prestige Travel Services II,
Anita LaScala, Ron LaScala, Kimberly LaScala and Prestige Travel Systems*
- ------------------------- -------------------------------------------------------------------------------------
3.1 Articles of Incorporation, as amended*
- ------------------------- -------------------------------------------------------------------------------------
3.2 Bylaws of Affinity International Travel Systems, Inc. **
- ------------------------- -------------------------------------------------------------------------------------
4.1 Specimen Certificate of Common Stock*
- ------------------------- -------------------------------------------------------------------------------------
4.2 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
- ------------------------- -------------------------------------------------------------------------------------
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
- ------------------------- -------------------------------------------------------------------------------------
December 2, 1998*
- ------------------------- -------------------------------------------------------------------------------------
4.3 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated December 2, 1998*
- ------------------------- -------------------------------------------------------------------------------------
4.4 Amendment to Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated January 21, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.5 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated January 15, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.6 Restatement of Subscription Agreement between Affinity and Schoemann Venture
Capital, LLC dated January 31, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.7 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC
dated April 23, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.8 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated April 23, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.9 Consulting Agreement between Affinity and Schoemann Venture Capital, LLC dated
April 23, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.10 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
June 10, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.11 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated June 10, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.12 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
December 20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.13 Letter Agreement between Affinity and Schoemann Venture Capital, LLC effective date
as of September 1, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.14 First Amended and Restated Consulting Agreement between Schoemann Venture
Capital, LLC dated June 1, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.15 Termination of Agreements by and between Affinity and Schoemann Venture Capital,
LLC dated January 26, 2000*
- ------------------------- -------------------------------------------------------------------------------------
4.16 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the
Warrant Subscription Agreement dated January 15, 1999, as amended on January 31,
1999*
- ------------------------- -------------------------------------------------------------------------------------
4.17 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the
Warrant Subscription Agreement dated April 23, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.18 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the
Warrant Subscription Agreement dated June 1, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.19 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the
Warrant Subscription Agreement dated June 10, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.20 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital,
LLC dated January 26, 2000 regarding an Amendment and Restatement of the
Subscription Agreement dated December 20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.21 Subscription Agreement between Affinity and GCD Investments, LLC dated December
20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.22 Termination of Agreements between Affinity and GCD Investments, LLC dated January
26, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.23 Warrant Subscription Agreement between Affinity and GCD Investments, LLC dated
January 26, 2000 regarding an Amendment and Restatement of the Subscription
Agreement dated December 20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.24 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding
the shares issued to Schoemann Venture Capital, LLC on January 15, 1999*
- ------------------------- -------------------------------------------------------------------------------------
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
- ------------------------- -------------------------------------------------------------------------------------
4.25 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding
the shares issued to Schoemann Venture Capital, LLC on April 23, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.26 Amended and Restated Stock Purchase dated January 26, 2000 and regarding the shares
issued to Schoemann Venture Capital, LLC on June 1, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.27 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding
the shares issued to Schoemann Venture Capital, LLC on June 10, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.28 Stock Purchase Warrant issued to Schoemann Venture Capital, LLC dated December
20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.29 Stock Purchase Warrant issued to GCD Investments, LLC dated December 20, 1999*
- ------------------------- -------------------------------------------------------------------------------------
4.30 Form of Subscription Agreement used in connection with Affinity's Private Placement
in January 2000*
- ------------------------- -------------------------------------------------------------------------------------
4.31 Form of Warrant used in connection with Affinity's Private Placement in January 2000*
- ------------------------- -------------------------------------------------------------------------------------
4.32 Incentive Stock Option Agreement between Affinity and Daniel G. Brandano dated July
1, 1999.*
- ------------------------- -------------------------------------------------------------------------------------
5.1 Opinion of Brown, Rudnick, Freed & Gesmer**
- ------------------------- -------------------------------------------------------------------------------------
10.1 Lease Agreement Between Affinity and City Center Associates, Ltd. dated May 27,
1999*
- ------------------------- -------------------------------------------------------------------------------------
10.2 Employment Agreement dated July 1, 1999 between Affinity and Daniel Brandano*
- ------------------------- -------------------------------------------------------------------------------------
10.3 Employment Agreement dated July 1, 1999 between SunStyle International Holidays,
Inc. and Mark S. Mandula, as amended*
- ------------------------- -------------------------------------------------------------------------------------
10.4 1999 Combination Stock Option Plan*
- ------------------------- -------------------------------------------------------------------------------------
10.5 Management Agreement and Option to Purchase effective as of April 5, 1999*
- ------------------------- -------------------------------------------------------------------------------------
10.6 Termination and Settlement Agreement between Affinity, Prestige Travel Services II
and Kenneth Wiggins effective as of April 5, 1999*
- ------------------------- -------------------------------------------------------------------------------------
10.7 Software License Agreement between SunStyle International Holidays City and The
SABRE Group, Inc. dated April 26, 1997**
- ------------------------- -------------------------------------------------------------------------------------
10.8 Amendment No. 1 effective June 1, 1999 of Software License Agreement dated April
26, 1997**
- ------------------------- -------------------------------------------------------------------------------------
10.9 Consulting Agreement between Affinity and James E. Hicks dated December 20, 1999.*
- ------------------------- -------------------------------------------------------------------------------------
21.1 Subsidiaries of Affinity International Travel Systems, Inc.*
- ------------------------- -------------------------------------------------------------------------------------
23.1 Consent of BDO Seidman LLP, independent auditors*
- ------------------------- -------------------------------------------------------------------------------------
23.2 Consent of Tubbs & Bartnick, LLP, independent auditors*
- ------------------------- -------------------------------------------------------------------------------------
23.3 Consent of Tubbs & Bartnick, LLP, independent auditors*
- ------------------------- -------------------------------------------------------------------------------------
24.1 Power of Attorney (contained on signature page of registration statement)*
- ------------------------- -------------------------------------------------------------------------------------
27.1 Financial Data Schedule*
- ------------------------- -------------------------------------------------------------------------------------
</TABLE>
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
II-7
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the Registrant's By-Laws, the Underwriting
Agreement relating to this offering, 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 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 Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
II-8
<PAGE>
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 St.
Petersburg, State of Florida, on March 13, 2000
AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC.
By: /s/ Daniel G. Brandano
-----------------------------------------
Daniel G. Brandano, Jr., Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Daniel G. Brandano, Jr. and Joan Brandano, and
each of them (with full power to each of them to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, and, in connection with any
registration of additional securities pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, to sign any abbreviated registration
statement and any and all amendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, in each case, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
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 dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Daniel G. Brandano, Jr. President, Chief Executive Officer and March 13, 2000
- ------------------------------------
Daniel G. Brandano, Jr. Director
/s/ Gerard LaMontagne Chief Financial Officer, (Principal Financial March 10, 2000
- ------------------------------------
Gerard LaMontagne and Accounting Officer)
/s/ Joan Brandano Secretary and Director March 13, 2000
- ------------------------------------
Joan Brandano
/s/ John Vahl Director March 8, 2000
- -------------------------------------
John Vahl
</TABLE>
<PAGE>
EXHIBIT INDEX
ITEM 16(A). EXHIBITS
<TABLE>
<CAPTION>
- ------------------------- --------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
- ------------------------- --------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Acquisition Agreement dated July 14, 1999 between Affinity International
Systems, Inc. ("Affinity") and SunStyle International Holidays, Inc.*
- ------------------------- --------------------------------------------------------------------------------------------------
2.2 Affinity/Prestige Acquisition Agreement dated January 1, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
2.3 Asset Purchase Agreement between Affinity Design-A-Tour, Inc. dated February 3, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
2.4 Asset Purchase Agreement between Affinity and Integrity Credit Services, Inc. (d/b/a Intrepid
Travel and/or Goldmark Travel) dated July 15, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
2.5 Agreement dated December 29, 1999 between Affinity, Prestige Travel Services II, Anita LaScala,
Ron LaScala, Kimberly LaScala and Prestige Travel Systems*
- ------------------------- --------------------------------------------------------------------------------------------------
3.1 Articles of Incorporation, as amended*
- ------------------------- --------------------------------------------------------------------------------------------------
3.2 Bylaws of Affinity International Travel Systems, Inc. **
- ------------------------- --------------------------------------------------------------------------------------------------
4.1 Specimen Certificate of Common Stock*
- ------------------------- --------------------------------------------------------------------------------------------------
4.2 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated December 2,
1998*
- ------------------------- --------------------------------------------------------------------------------------------------
4.3 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
December 2, 1998*
- ------------------------- --------------------------------------------------------------------------------------------------
4.4 Amendment to Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
January 21, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.5 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated January
15, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.6 Restatement of Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated
January 31, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.7 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated April 23, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.8 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated April
23, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.9 Consulting Agreement between Affinity and Schoemann Venture Capital, LLC dated April 23, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.10 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated June 10, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.11 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated June
10, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.12 Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated December 20,
1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.13 Letter Agreement between Affinity and Schoemann Venture Capital, LLC effective date as of
September 1, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.14 First Amended and Restated Consulting Agreement between Schoemann Venture Capital, LLC dated
June 1, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.15 Termination of Agreements by and between Affinity and Schoemann Venture Capital, LLC dated
January 26, 2000*
- ------------------------- --------------------------------------------------------------------------------------------------
4.16 Warrant Subscription Agreement dated January 26, 2000
which amends and restates the Warrant Subscription
Agreement dated January 15, 1999, as amended on
January 31, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------- --------------------------------------------------------------------------------------------------
4.17 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the Warrant
Subscription Agreement dated April 23, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.18 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the Warrant
Subscription Agreement dated June 1, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.19 Warrant Subscription Agreement dated January 26, 2000 which amends and restates the Warrant
Subscription Agreement dated June 10, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.20 Warrant Subscription Agreement between Affinity and Schoemann Venture Capital, LLC dated January
26, 2000 regarding an Amendment and Restatement of the
Subscription Agreement dated December 20, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.21 Subscription Agreement between Affinity and GCD Investments, LLC dated December 20, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.22 Termination of Agreements between Affinity and GCD Investments, LLC dated January 26, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.23 Warrant Subscription Agreement between Affinity and
GCD Investments, LLC dated January 26, 2000 regarding
an Amendment and Restatement of the Subscription
Agreement dated December 20, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.24 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding the shares
issued to Schoemann Venture Capital, LLC on January 15, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.25 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding the shares
issued to Schoemann Venture Capital, LLC on April 23, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.26 Amended and Restated Stock Purchase dated January 26, 2000 and regarding the shares issued to
Schoemann Venture Capital, LLC on June 1, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.27 Amended and Restated Stock Purchase Warrant dated January 26, 2000 and regarding the shares
issued to Schoemann Venture Capital, LLC on June 10, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.28 Stock Purchase Warrant issued to Schoemann Venture Capital, LLC dated December 20, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.29 Stock Purchase Warrant issued to GCD Investments, LLC dated December 20, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
4.30 Form of Subscription Agreement used in connection with Affinity's Private Placement in January
2000*
- ------------------------- --------------------------------------------------------------------------------------------------
4.31 Form of Warrant used in connection with Affinity's Private Placement in January 2000*
- ------------------------- --------------------------------------------------------------------------------------------------
4.32 Incentive Stock Option Agreement between Affinity and Daniel G. Brandano dated July 1, 1999.*
- ------------------------- --------------------------------------------------------------------------------------------------
5.1 Opinion of Brown, Rudnick, Freed & Gesmer**
- ------------------------- --------------------------------------------------------------------------------------------------
10.1 Lease Agreement Between Affinity and City Center Associates, Ltd. dated May 27, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
10.2 Employment Agreement dated July 1, 1999 between Affinity and Daniel Brandano*
- ------------------------- --------------------------------------------------------------------------------------------------
10.3 Employment Agreement dated July 1, 1999 between SunStyle International Holidays, Inc. and Mark
S. Mandula, as amended*
- ------------------------- --------------------------------------------------------------------------------------------------
10.4 1999 Combination Stock Option Plan*
- ------------------------- --------------------------------------------------------------------------------------------------
10.5 Management Agreement and Option to Purchase effective as of April 5, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
10.6 Termination and Settlement Agreement between Affinity, Prestige Travel Services II and Kenneth
Wiggins effective as of April 5, 1999*
- ------------------------- --------------------------------------------------------------------------------------------------
10.7 Software License Agreement between SunStyle International Holidays City and The SABRE Group,
Inc. dated April 26, 1997**
- ------------------------- --------------------------------------------------------------------------------------------------
10.8 Amendment No. 1 effective June 1, 1999 of Software License Agreement dated April 26, 1997**
- ------------------------- --------------------------------------------------------------------------------------------------
10.9 Consulting Agreement between Affinity and James E. Hicks dated December 20, 1999.*
- ------------------------- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------- --------------------------------------------------------------------------------------------------
21.1 Subsidiaries of Affinity International Travel Systems, Inc.*
- ------------------------- --------------------------------------------------------------------------------------------------
23.1 Consent of BDO Seidman LLP, independent auditors*
- ------------------------- --------------------------------------------------------------------------------------------------
23.2 Consent of Tubbs & Bartnick, LLP, independent auditors*
- ------------------------- --------------------------------------------------------------------------------------------------
23.3 Consent of Tubbs & Bartnick, LLP, independent auditors*
- ------------------------- --------------------------------------------------------------------------------------------------
24.1 Power of Attorney (contained on signature page of registration statement)*
- ------------------------- --------------------------------------------------------------------------------------------------
27.1 Financial Data Schedule*
- ------------------------- --------------------------------------------------------------------------------------------------
</TABLE>
* Filed herewith.
** To be filed by amendment.
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF ACQUISITION
This AGREEMENT AND PLAN OF ACQUISITION (this "Agreement"), entered into
this 14 day of July, 1998 among Affinity International Travel Systems, Inc., a
Nevada corporation ("Acquirer"), and SunStyle International Holidays, Inc., a
Florida corporation, ("Sub").
RECITALS
A. The Boards of Directors of Acquirer and Sub each have determined that a
business combination between Acquirer and Sub is in the best interests of their
respective companies and stockholders, and presents an opportunity for their
respective companies to achieve long-term strategic objectives, and accordingly
have agreed to effect the Agreement provided for herein upon the terms and
subject to the conditions set forth herein.
B. Acquirer and Sub desire to make certain representations, warranties and
Agreements in connection with the Agreement (as defined in Section 1.1 below).
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and Agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
The AGREEMENT
1.1 The AGREEMENT. Subject to the terms and conditions of this Agreement,
at the Closing Date (as defined in Section 1.3), Sub shall become a wholly owned
subsidiary of the Acquirer in accordance with this Agreement and the Acquirer
shall become the parent corporation (sometimes herein referred to as "Parent"
and/or "Parent/Subsidiary"). The Parent shall continue to be governed by the
laws of the State of Nevada, and Sub shall continue to be governed by the laws
of the State of Florida, with each corporation having the advantages of their
separate corporate existence with all rights, privileges, powers, immunities,
purposes and franchises of their respective states unaffected by the Agreement.
1.2 The Closing. The closing of the Agreement (the "Closing") shall take
place (a) at the executive offices of Sub, in the State of Florida, at 9:00 am.,
local time, on the 31st of July, 1998, or at such other time and place and/or on
such other date as Sub and Acquirer may agree (the "Closing Date").
1.3 Closing Date. If all the conditions to the Agreement set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated in accordance with Article 9, then upon
submission of all appropriate subscription Agreements with the stock
certificates from the present shareholders of Sub, and acceptance of the same by
Acquirer, the Acquirer shall cause new stock certificates representing the stock
of
<PAGE>
Acquirer to be issued and delivered to the former shareholders of Sub by or as
soon as possible following the Closing Date.
ARTICLE 2
[INTENTIONALLY LEFT BLANK]
ARTICLE 3
Directors and Officers of the Parent/Subsidiary
3.1 Officers and Directors. The officers and directors of Acquirer and of
Sub immediately prior to the Closing Date shall, from and after the Closing
Date, continue as directors of the Parent until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles of Incorporation
and Bylaws.
ARTICLE 4
Conversion of Shares in the AGREEMENT
4.1 Conversion of Shares. The manner of converting shares of Acquirer and
Sub in the Agreement shall be as follows:
(a) At the Closing Date, each share of the Common Stock, par value
$.01 per share of Sub issued and outstanding immediately prior to the Closing
Date shall, by virtue of the Agreement and pursuant to acceptance of
Subscription Agreements coupled with said stock certificates, shall be converted
into one share of Common Stock, par value $.001 per share of Acquirer stock (the
"Exchange Ratio").
(b) As a result of the Agreement, subject to Submission by the
shareholders of Sub of the requisite subscription Agreements and related stock
certificates, properly endorsed, all issued and outstanding Shares of Sub shall
become the property of Acquirer and the participating shareholders of Sub shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Acquirer Common Stock in accordance with Section 4.1 (a)
upon the surrender of such Certificate(s).
4.2 Exchange of Certificates Representing Shares.
(a) As of the Closing Date, Acquirer shall make available, or shall
cause to be made available, to Interwest Transfer Agency, Inc. ("Agent") which
is the Transfer Agent for Acquirer and Sub, for the benefit of Sub shareholders,
certificates representing a sufficient number of shares of Acquirer's Common
Stock necessary for the Agent to effectuate the exchange. Acquirer shall provide
appropriate letters of instruction, together with Board resolutions, directing
the issuance and transmittal of Subject shares.
(b) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or
<PAGE>
destroyed and, if required by the Acquirer, the posting by such person of a bond
in such reasonable amount as the Acquirer may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
shares of Acquirer Common Stock.
4.3 Adjustment of Exchange Ratio. In the event that between the date of
this Agreement and the Closing Date, Acquirer changes the number of shares of
Shares issued and outstanding as a result of a stock split, reverse stock split,
stock dividend, recapitalization or other similar transaction, the Exchange
Ratio shall be appropriately adjusted. In the event that between the date of
this Agreement and the Closing Date, Sub changes the number of shares of Sub
Common Stock issued and outstanding as a result of a stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction, the
Exchange Ratio shall be appropriately adjusted.
ARTICLE 5
Representations and Warranties of Sub
Except as set forth in the Disclosure Documents and financials delivered
at or prior to the execution hereof to Acquirer (the "Sub Disclosure
Documents"), Sub represents and warrants to Acquirer as of the date of this
Agreement as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
o Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida.
o Sub is duly licensed or qualified to do business as a foreign corporation
and is in good standing under laws of any other state of the United States
in which the character of the properties owned or leased by it therein or
in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on Sub.
o Sub has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted.
o Sub is not in default with respect to any order of any court, governmental
authority or arbitration board or tribunal to which Sub is a party or is
subject.
o Sub is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject, where such default or violation would
have a material adverse effect on Sub.
o Sub has obtained all licenses, permits and other authorizations and has
taken all actions required by applicable law or governmental regulation in
connection with its business as now conducted where the failure to obtain
any such item or to take any such action would have a material adverse
effect on Sub.
o The copies of Sub's Articles of Incorporation and Bylaws previously
delivered to Acquirer are true and correct.
o Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida.
<PAGE>
o Sub has not conducted any business or incurred any liabilities other than
in connection with the negotiation and execution of this Agreement.
o Sub has the corporate power and authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby.
o As used in this Agreement, the term "material adverse effect" means, with
respect to any entity, a material adverse effect on the financial
condition, properties, business or results of operations of such entity
and its subsidiaries taken as a whole, or on the ability of such entity to
perform its obligations hereunder or to consummate the transactions
contemplated hereby.
5.2 Authorization, Validity and Effect of Agreements. Sub has the
requisite corporate power and authority to execute and deliver this Agreement
and all Agreements and documents contemplated hereby, and the consummation by
Sub of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all Agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Sub enforceable in accordance with their terms.
5.3 Capitalization. The authorized capital stock of Sub consists of
10,000,000 shares of Sub Common Stock. As of July 1, 1998, there were 4,447,000
shares of Sub Common Stock issued and outstanding. Since such date, no
additional shares of capital stock of Sub have been issued. All such issued and
outstanding shares of Sub Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Other than as set forth
above or in the Sub Disclosure Letter and the Stock Detail Document provided to
Acquirer, or as contemplated by this Agreement, there are not at the date of
this Agreement any existing options, warrants, calls, put rights, subscriptions,
convertible securities, or other rights or other Agreements or commitments that
obligate Sub to issue any shares of its capital stock or that obligate Sub in
any other way.
5.4 Subsidiaries. Sub owns, directly or indirectly, each of the
outstanding shares of capital stock of the subsidiaries identified in Sub's
Disclosure Documents, which are the only subsidiaries of Sub that Sub has or has
ever, directly or indirectly owned. Each of the outstanding shares of capital
stock of such subsidiary is duly authorized, validly issued, fully paid and
nonassessable and are owned by Sub free and clear of all liens, pledges,
security interests, claims or other encumbrances.
5.5 Noncontravention. Except as set forth in the Sub Disclosure Documents,
neither the execution and delivery by Sub of this Agreement, nor the
consummation by Sub of the transactions contemplated hereby in accordance with
the terms hereof, will: (a) conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of the Sub; (b) violate,
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Sub under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, Agreement or
<PAGE>
other instrument or commitment or obligation to which Sub is a party
("Contracts"), or by which Sub or any of its properties is bound or affected
except with respect to matters which are not material to Sub; or (c) other than
the filings provided for in Article I under the Securities Act, applicable state
securities and "Blue Sky" laws, and the rules and regulations promulgated by the
National Association of Securities Dealers, Inc. and in connection with the
maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, domestic or foreign, of which the failure
to obtain would have a material adverse effect on Sub.
5.6 Reports, Financial Statements. Sub is not a reporting company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is not
required to file periodic reports with the Securities and Exchange Commission
("SEC"). Sub Disclosure Document, fairly presents the financial position of Sub,
as of its date, and each of the statements of income, prepared in accordance
with generally accepted accounting principles consistently applied, except
liabilities arising in the ordinary course of business since such date.
5.7 Litigation. Except as disclosed in the Sub Disclosure Document, there
are no actions, suits or proceedings pending against Sub, threatened against Sub
at law or in equity, or before or by any federal, state, commission, board,
bureau, agency or instrumentality.
5.8 Absence of Certain Changes. Except as disclosed in the Sub Disclosure
Document, Sub has conducted its business only in the ordinary course of such
business and there has not been (a) any change in Sub or any development or
combination of developments that has resulted or is reasonably likely to result
in a material adverse effect on Sub; (b) any declaration, setting aside or
payment of any dividend or other distribution with respect to its capital stock;
or (c) any material change in its accounting principles, practices or methods.
5.9 Taxes and Tax Returns. Sub (a) has timely filed all material federal,
state and foreign income, franchise, property, sales, use, payroll and other tax
returns and reports required to be filed by it for its tax years ended prior to
the date of this Agreement or requests for extensions have been timely filed and
any such request shall have been granted and not expired and all such filed
returns are complete in all material respects, (b) has paid or accrued all taxes
shown to be due and payable on such returns, (c) has properly accrued all such
taxes for such periods subsequent to the periods covered by such returns, and
(d) the "open" years for federal income tax returns are set forth in the Sub
Disclosure Documents.
5.10 Proprietary Rights. Sub owns or has the right to use pursuant to
lease or license computer software programs, which, in the aggregate, are
sufficient and adequate to operate the business of Sub. Sub has registered the
trademarks, service marks and copyrights identified in Sub Disclosure Documents,
such trademarks, service marks and copyrights do not infringe upon the rights of
any third parties, nor have any claims been asserted with respect thereto, which
infringement would have a material adverse effect on Sub.
5.11 Brokers. Except as set forth in the Sub Disclosure Documents, Sub has
not entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of Acquirer or Sub to pay, and the Sub
is not aware of any claim for
<PAGE>
payment of, any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.12 Capital Stock. The shares of Common Stock of Sub are validly issued,
fully paid and nonassessable and are owned directly by Sub, free and clear of
all liens, claims and encumbrances.
ARTICLE 6
Representations and Warranties of Acquirer
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof by Acquirer to Sub (the "Acquirer Disclosure Documents"),
Acquirer represents and warrants to Sub as of the date of this Agreement as
follows:
6.1 Existence, Good Standing; Corporate Authority; Compliance With Law.
Acquirer is a corporation duly incorporated, validly existing in good standing
under the laws of the State of Nevada.
o Acquirer is duly licensed or quailed to do business as a foreign
corporation and in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on Acquirer.
o Acquirer has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted.
Acquirer is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal to which Acquirer
is a party or is subject, and Acquirer is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject,
where such default or violation would have a material adverse effect on
Acquirer.
o Acquirer has obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental
regulations in connection with their business as now conducted, where the
failure to obtain any such item or to take any such action would have a
material adverse effect on Acquirer.
o The copies of Acquirer's Article of Incorporation and Bylaws previously
delivered to the Corporation are true and correct.
6.2 Authorization, Validity and Effect of Agreements. The execution and
delivery of this Agreement and all Agreements and documents contemplated hereby
by Acquirer, and the consummation by them of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action.
This Agreement constitutes, and all Agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of Acquirer, enforceable
in accordance with their terms.
<PAGE>
6.3 Capitalization. The authorized capital stock of Acquirer consists of
100,000,000 shares of Common Stock, par value $.001 per share ("Acquirer Common
Stock"). As of July 1, 1998, 330,352 shares of Acquirer Common Stock were issued
and outstanding, no shares of Acquirer Common Stock were held in treasury,
Acquirer has no shares of Acquirer Common Stock reserved for issuance. All such
issued and outstanding shares of Acquirer Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Other
than as set forth in the Acquirer Disclosure Documents, or as contemplated by
this Agreement, there are not at the date of this Agreement any existing
options, warrants, calls, subscriptions, convertible securities, or other rights
or other Agreements or commitments which obligate Acquirer to issue, transfer or
sell any shares of capital stock of Acquirer.
6.4 Subsidiaries. Acquirer does not own, directly or indirectly, any
subsidiary.
6.5 Noncontravention. Except as set forth in the Acquirer Disclosure
Documents, neither the execution and delivery by Acquirer of this Agreement, nor
the consummation by Acquirer of the transactions contemplated hereby and thereby
in accordance with the terms hereof and thereof, will: (a) conflict with or
result in a breach of any provisions of the Articles of Incorporation or Bylaws
of Acquirer; (b) violate, or conflict with, or result in a material breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any material lien,
security interest, charge or encumbrance upon any of the material properties of
Acquirer under, or result in being declared void, voidable, or without further
binding effect, any of the terms, conditions or provisions of any Contract, to
which Acquirer is a party, or by which Acquirer or any of its properties is
bound or affected except with respect to matters which are not material to
Acquirer; or (c) other than Regulatory Filings, require any material consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, of which the failure to obtain which would
have a material adverse effect on Acquirer.
6.6 Reports, Financial Statements. Acquirer is not a reporting company
under the Exchange Act and is not required to file reports with the SEC. Each of
the balance sheets and financial statements (including related notes and
schedules, if any) fairly presents the financial position of Acquirer as of its
date and each of the statements of income and of cash flows (including related
notes and schedules, if any) fairly presents the results of operations and cash
flows, of Acquirer for the periods set forth therein (subject, in the case of
unaudited balance sheets and statements, to normal year-end adjustments which
would not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein.
ARTICLE 7
Covenants
7.1 Interim Operations of the Sub. Sub covenants and agrees as to itself
that, from and after the date hereof until the Closing Date (except as Acquirer
shall otherwise agree or except as otherwise contemplated by this Agreement):
<PAGE>
(a) To the extent reasonably practicable taking into account any
operational matters that may arise that are attributable to the pendency of the
Agreement, the business of Sub shall be conducted only in the ordinary course.
(b) Sub shall not (i) sell, pledge or otherwise transfer, or agree
to sell, pledge or otherwise transfer any capital stock owned by it; (ii) amend
its Articles of Incorporation or Bylaws; (iii) split, combine or reclassify any
outstanding capital stock (other than to effect reverse stock split as described
in Section 7.14); (iv) declare, set aside or pay any dividend payable in cash,
stock or property with respect to any of its capital stock; or (v) repurchase,
redeem or otherwise acquire, any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Sub shall (i) issue, sell, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, pledge, disposition or encumbrance of,
any shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of its
capital stock or any class of Voting Debt; (ii) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of any other property or assets or
encumber any property or assets or incur or modify any indebtedness or other
liability other than in the ordinary course of business; (iii) authorize capital
expenditures other than in the ordinary course of business; (iv) make any
Agreements for investment in the assets of or stock of any other person or
entity; or (v) make any payment to third parties for goods or services which are
not commercially reasonable or on an arm's length basis.
(d) Sub shall not grant any bonus or pay increase or any severance
or termination pay to, or enter into any employment Agreement with, any
director, officers or other employee of Sub, except as required by applicable
law.
(e) Except as set forth in the Sub Disclosure Document or as may be
required to satisfy existing contractual obligations of Sub existing as of the
date hereof and the requirements of applicable law, Sub shall not establish,
adopt, enter into, make or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement for the
benefit of any class of directors, officers or employees.
(f) Sub shall not, except in the ordinary and usual course of
business and on commercially reasonable terms, modify, amend or terminate any of
its Contracts or waive, release or assign any rights or claims.
(g) Sub shall not change its method of accounting as in effect at
December 31, 1997, except as required by changes in generally accepted
accounting principles as concurred to by Sub's independent auditors. Sub will
not change its fiscal year.
(h) Sub will not authorize or enter into an Agreement to do any of
the actions referred to in paragraphs (a) through (h) above unless such
Agreement is conditioned upon the consent of Acquirer.
<PAGE>
7.2 Interim Operations of Acquirer. Acquirer does not anticipate that the
business of Acquirer will be conducted in any manner materially inconsistent
with its business in the ordinary and usual course, including the Agreement from
time to time of the assets or stock of other businesses.
7.3 Filings; Other Action. Subject to the terms and conditions herein
provided, Sub and Acquirer shall use all reasonable efforts to cooperate with
one another in (a) determining which filings are required to be made prior to
the Closing Date with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Closing Date from, governmental or
regulatory authorities of the United States, the several States and foreign
jurisdictions in connection with the execution and delivery of this Agreement,
and the consummation of the transactions contemplated hereby and (b) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; and use all reasonable efforts to take, or cause to be taken,
all other action and do, or cause to be done, all other things, necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and/or directors of Acquirer, Sub shall take all
such necessary action.
7.4 Access. Each of Sub and Acquirer shall afford the other and their
respective officers, employees, counsel, accountants and other authorized
representatives reasonable access, upon reasonable notice and during normal
business hours throughout the period prior to the Closing Date, to all of the
properties, books, contracts, commitments and records of Sub, on the one hand,
and Acquirer, on the other hand.
7.5 Publicity. Neither Acquirer nor Sub shall issue any press releases or
otherwise make public statements with respect to the transactions contemplated
hereby without the prior consent of the other parties except as may be required
by law in making any filings with any federal or state governmental or
regulatory agency in which event the contents of any disclosure will be
discussed with the other parties before release.
7.6 Further Action. Each party hereto shall, subject to the fulfillment at
or before the Closing Date of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Agreement.
7.7 Notification of Certain Matters. Sub shall give prompt notice to
Acquirer of (a) any notice of, or other communication which becomes known to an
executive officer of Sub relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Sub subsequent to the
date of this Agreement and prior to the Closing Date, under any Contract
material to the businesses of Sub and to which Sub is a party or is subject; and
(b) any change that results in a material adverse effect on such party. Sub
shall give prompt notice to Acquirer of any notice or other communication from
any third party that becomes known to an executive officer of Sub alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
<PAGE>
7.8 Legal Conditions to Agreement. Each party to this Agreement shall, use
its reasonable efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements which may be imposed on such party
or its subsidiaries with respect to the Agreement and, subject to the terms and
conditions set forth in this Agreement, to consummate the transactions
contemplated by this Agreement. Each party will promptly cooperate with and
furnish information to each other party in connection with any such restriction
suffered by, or requirement imposed upon, it in connection with the foregoing.
7.9 Expenses. Whether or not the Agreement is consummated, all costs and
expenses incurred in connection with this Agreement and the actions contemplated
hereby shall be paid by the party incurring such expense except as expressly
provided herein.
7.10 Resignation of Directors and Officers. Prior to the Closing Date,
each of the directors and officers of Acquirer shall deliver to Sub irrevocable
resignations from the Board of Directors of Acquirer to be effective upon
consummation of the Agreement.
7.11 Appointment. Prior to the Closing Date, the Board of Acquirer shall
appoint those persons who are designated by Sub immediately prior to the Closing
Date to assure them of a position at the consummation of the Agreement.
ARTICLE 8
Conditions
8.1 Conditions to Each Party's Obligation to Effect the Agreement. The
respective obligation of each party to effect the Agreement shall be subject to
the fulfillment in all material respects at or prior to the Closing Date of the
following conditions:
(a) The Agreement shall have been approved in the manner required by
law by the holders of the issued and outstanding shares of the parties hereto.
(b) Neither Acquirer nor Sub shall be subject to any order or
injunction against the consummation of the transaction contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its reasonable efforts to have any such injunction
lifted.
8.2 Conditions to Obligation of Sub to Effect the Agreement. The
obligation of the Sub to effect the Agreement shall be subject to the
fulfillment in all material respects at or prior to the Closing Date of the
following conditions; Acquirer shall have performed each Agreement contained in
this Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Acquirer contained in this Agreement shall be
true in all material respects on and as of the Closing Date (other than any
failure to so perform or any misrepresentation or omission which would not
materially influence the investment decision of a reasonable purchaser of
securities).
8.3 Conditions to Obligation of Acquirer to Effect the Agreement. The
obligation of Acquirer to effect the Agreement shall be subject to the
fulfillment in all material respects at or prior to the Closing Date of the
following conditions:
<PAGE>
(a) Sub shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Sub contained in this Agreement shall be true
in all material respects on and as of the Closing Date (other than any failure
to so perform or any misrepresentation or omission which would not materially
influence the investment decision of a reasonable purchaser of securities).
ARTICLE 9
Termination
9.1 Termination by Mutual Consent. This Agreement may be terminated and
may be abandoned at any time prior to the Closing Date, before or after the
approval of this Agreement by the shareholders of Acquirer by the mutual consent
of Acquirer and Sub.
9.2 Termination by Either Acquirer or Sub. This Agreement may be
terminated and the Agreement may be abandoned by action of the Board of
Directors of either Acquirer or Sub if (a) the Agreement shall not have been
consummated by July 30, 1998 or (b) the approval of the Acquirer's stockholders
required by Section 8.1(a) shall not have been obtained provided, in the case of
a termination pursuant to clause (a) above, the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
referred to in said clause.
9.3 Termination by the Sub. This Agreement may be terminated and the
Agreement may be abandoned at any time prior to the Closing Date, before or
after the adoption and approval by the shareholders of Sub referred to in
Section 8.1(a), by action of the Board of Directors of Sub if there has been a
breach by Acquirer of any representation, warranty, covenant or agreement
contained in this Agreement which would have a material adverse effect on
Acquirer which is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Sub to Acquirer.
9.4 Termination by Acquirer. This Agreement may be terminated and the
Agreement may be abandoned at any time prior to the Closing Date, before or
after the adoption and approval by shareholders of Acquirer referred to in
Section 8.1(a), by action of the Board of Directors of Acquirer, if there has
been a breach by Sub of any representation, warranty, covenant or agreement
contained in this Agreement which would have a material adverse effect on Sub
which is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by Acquirer to Sub.
9.5 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Agreement pursuant to this Article 9,
no party to this Agreement (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement except as
provided herein below.
9.6 Extension; Waiver. At any time prior to the Closing Date of the
Agreement, any party to this Agreement, by action taken by its Board of
Directors, may, to the extent legally allowed,
<PAGE>
(a) extend the time for the performance of any of the obligations or
other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant to
this Agreement, and
(c) waive compliance with any of the Agreements or conditions for
the benefit of such party contained herein. Any Agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 10
General Provisions
10.1 Non-survival of Representations, Warranties and Agreements. All
representations, warranties and Agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Agreement and shall not
survive the Agreement.
10.2 Notices. Any notice required to be given hereunder shall be in
writing and given by facsimile, overnight courier service, hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid), addressed as follows:
If to Sub: Dan Brandano, President
SunStyle International Holidays, Inc.
City Center, Suite 303N
100 Second Avenue South
St. Petersburg, Florida 33701-4301
FAX: (813) 896-1403
If to Acquirer: Affinity International Travel Systems, Inc.
ATTN: Janamarie Riche
10271 So. 1300 East, Suite 190
Sandy, Utah 84092
Copy to: J. Garry McAllister, Esq.
1487 East Thistle Downs Dr.
Sandy, Utah 84092
FAX: (801) 572-2490
or to such other address as any party shall specify by written notice so given.
Such notice shall be deemed given and received on the date it is delivered if
given by facsimile, overnight courier or hand delivery or on the fifth business
day following the date it is so mailed.
<PAGE>
10.3 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
10.4 Entire Agreement. This Agreement, Exhibits, Schedules and Disclosure
Letters constitute the entire Agreement among the parties with respect to
Subject matter hereof and supersede all prior Agreements and understandings,
among the parties with respect thereto, including without limitation any oral or
written understandings or commitments. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties to this Agreement.
10.5 Amendment. This Agreement may be amended by the parties, by action
taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Agreement by the
shareholders of the parties, however after such shareholder approval, no
amendment shall be made which by law requires the final approval of shareholders
without obtaining such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to its rules of
conflicts of laws.
10.7 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties to this
Agreement.
10.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or Agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
<PAGE>
10.11 Incorporation of Exhibits and Disclosure Documents. All Exhibits and
Disclosure Documents attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
10.12 Severability. If for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision invalid in
any other case or of rendering any of the other provisions of this Agreement,
inoperative, unenforceable or invalid.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same
to be duly delivered on their behalf on the day and year first hereinabove
written.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
By: /s/ JanaMarie Riche
--------------------------------
JANAMARIE RICHE, President
SUNSTYLE INTERNATIONAL HOLIDAYS, INC.
By: /s/ Dan Brandano
--------------------------------
DAN BRANDANO, CEO
<PAGE>
Exhibit 2.2
AFFINITY/PRESTIGE ACQUISITION AGREEMENT
THIS AFFINITY/PRESTIGE ACQUISITION AGREEMENT (the "Agreement") shall be
deemed effective as of January 1, 1999, by and among Affinity International
Travel Systems, Inc., a publicly held Nevada corporation (hereinafter the
"Purchaser"), Prestige Travel Services II, Inc., a privately-held Florida
corporation (hereinafter the "Private Company"), and the shareholders of the
Private Company whose names are set forth upon the signature page of this
Agreement (the "Selling Shareholders").
RECITALS:
WHEREAS, the Purchaser wishes to acquire, and the Selling Shareholders are
willing to sell, all of the outstanding stock of the Private Company in exchange
solely for Series "A" Convertible Preferred Stock of the Purchaser; and
WHEREAS, the parties hereto intend to qualify such transaction as a
tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Purchaser, the Private Company, and the
Selling Shareholders hereby approve and adopt this Agreement and mutually
covenant and agree with each other as follows:
ARTICLE 1. EXCHANGE
1.1 Shares to be Exchanged.
(a) At the Closing, the Selling Shareholders shall transfer to the
Purchaser certificates for the number of shares of the common stock of the
Private Company (the "Private Company Shares") described in Schedule "A",
attached hereto and incorporated herein, which in the aggregate shall represent
all of the issued and outstanding Private Company Shares. Following said
transfer, the Private Company shall become a wholly-owned subsidiary of the
Purchaser.
(b) In exchange for the transfer of the Private Company Shares, the
Purchaser shall, at the Closing and contemporaneously with such transfer of the
Private Company Shares to it by the Selling Shareholders. issue and deliver to
the Selling Shareholders Eight Hundred Thousand (800,000) shares of Series "A"
Convertible Preferred Stock of the Purchaser (the "Preferred Shares"), in the
manner set forth on Schedule "A" hereof:
(c) The Preferred Shares shall be convertible into shares of common stock
of the Purchaser (the "Common Stock"), as allows:
At the time of conversion, the Current Market Price of the Common Stock,
as defined below, shall be divided into the sum of $1,600,000. The
resulting number shall determine
<PAGE>
the number of shares of Common Stock that the Selling Shareholders shall
receive in total.
Example: If the Current Market Price is $1.60, the Selling
Shareholders will be entitled to and receive upon conversion a total
of 1,000,000 shares of the Common Stock among them.
The term "Current Market Price" shall mean the Current Market Price of the
Common Stock, which shall be calculated, in the event the Common Stock is
publicly traded, as the daily average closing price per share of the
Common Stock for twenty (20) consecutive trading days immediately
preceding the conversion date (as adjusted for any stock dividend, split,
combination or reclassification that was effected during such twenty (20)
day trading period). The closing price for each day shall be the last
reported sale price regular way, or, in case no reported sale takes place
on such day, the average of the last closing bid and asked prices, regular
way, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if not so listed or admitted to
trading, the closing sale price per share of the Common Stock as reported
by NASDAQ or the NASD Electronic Over the Counter Bulletin Board (OTCBB).
In the event the Common Stock is not quoted on NASDAQ or OTCBB, Current
Market Price shall be deemed to be the fair market value per share of the
Common Stock on the conversion date as determined by the independent
accountants for the Corporation.
1.2 Time and Place of Closing. The closing of the exchange provided for in
this Agreement (herein called the "Closing") shall be held at the offices of
Edwin B. Kagan, P.A., at 10:00 a.m., February 9, 1999, provided that all of the
conditions to the obligations of the parties to consummate the transactions
contemplated hereby as set forth in Articles 6 and 7 have been satisfied or
waived in writing, or at such other place, date or time as may be fixed by
mutual agreement of the parties.
1.3 Delivery of the Private Company Shares. At the Closing, the Selling
Shareholders shall deliver or cause to be delivered to the Purchaser, among
other things:
(a) certificates for the Private Company Shares owned by each of the
Selling Shareholders, duly endorsed in blank for transfer or with stock powers
attached duly executed in blank, with all signatures guaranteed;
(b) such other documents as may be required to effect a valid transfer of
the Private Company Shares by the Selling Shareholders, free and clear of any
and all liens, encumbrances, charges or claims, under Article 8 of the Uniform
Commercial Code of the State of Florida or otherwise;
(c) general releases by all present officers and directors of the Private
Company of any liability of the Private Company to them or any claim which they
may have against the Private Company, except claims for accrued but unpaid
compensation and benefits, and claims for amounts owing and payable to Ron
LaScala and Anita LaScala under those certain promissory notes of the Private
Company dated December 31, 1998, attached hereto as Exhibit "A"; and
(d) such other documents as may be required elsewhere in or by this
Agreement.
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1.4 Delivery of the Preferred Shares. At the Closing, the Purchaser shall
deliver or cause to be delivered to the Selling Shareholders, among other
things, certificates representing the Preferred Shares, registered in the names
of the Selling Shareholders, free and clear of any and all liens, encumbrances,
charges or claims, under Article 8 of the Uniform Commercial Code of the State
of Florida or otherwise.
1.5 Further Assurances. The Selling Shareholders from time to time after
the Closing at the request of Purchaser and without further consideration shall
execute and deliver further instruments of transfer and assignment (in addition
to those delivered under Section 1.3) and take such other action as the
Purchaser may reasonably require to more effectively transfer and assign to, and
vest in, the Purchaser the Private Company Shares.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE PRIVATE COMPANY AND THE SELLING
SHAREHOLDERS.
The Private Company and the Selling Shareholders, jointly and severally,
hereby represent and warrant to the Purchaser as follows:
2.1 Organization and Qualification of the Private Company. The Private
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, with full power and authority to own,
lease and operate its properties and to conduct its business in the manner and
in the places where such properties are owned or leased or such business is
conducted by it, except where the failure to be so qualified or in good standing
will not, taken together with all other such failures have a material adverse
effect on the business, business prospects, assets, operations or financial
condition of the Private Company taken as a whole. (Any such material adverse
effect being hereafter referred to as "Material Adverse Effect"). Copies of the
Private Company's Articles of Incorporation or equivalent documents as amended
to date ("Charter"), attached as Schedule 2.1 hereto and previously delivered to
the Purchaser, are and will be at the Closing complete and correct.
2.2 Capitalization of the Private Company; Title to the Private Company
Shares.
(a) The authorized capital stock of the Private Company consists of Five
Hundred (500) shares of Common Stock, $1.00 par value, of which Five Hundred
(500) shares are issued and outstanding. All such issued and outstanding shares
of capital stock were validly issued, are fully paid and nonassessable and were
issued in compliance with Federal and applicable state securities laws. Except
as set forth on Schedule 2.2 hereto, there are no (I) outstanding or authorized
subscriptions, warrants, options or other rights granted by the Private Company
or any Selling Shareholder to purchase or acquire, or preemptive rights with
respect to the issuance or sale of, the capital stock of the Private Company
which obligate or may obligate the Private Company, to issue any additional
shares of its capital stock or any securities convertible into or evidencing the
right to subscribe for any shares of its capital stock, (ii) other securities of
the Private Company directly or indirectly convertible into or exchangeable for
share of capital stock of the Private Company, or (iii) restrictions on the
transfer of the Private Company's capital stock.
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(b) Each Selling Shareholder is the record and beneficial owner of the
number of the Private Company Shares set forth next to such Selling
Shareholder's name on Schedule "A" hereto, and no Selling Shareholder owns of
record or beneficially any other shares of capital stock of the Private Company,
or rights, options, or warrants with respect thereto, including those described
in item (I) of paragraph (a) above. The Private Company Shares to be delivered
by the Selling Shareholders to the Purchaser pursuant to this Agreement will be,
when delivered, duly authorized, validly issued, fully paid and nonassessable,
and will be free and clear of all liens, encumbrances, charges or claims under
Article 8 of the Uniform Commercial Code of the State of Florida or otherwise.
2.3 Subsidiaries. The Private Company does not own, directly or
indirectly, any capital stock of any corporation. Except as set forth on
Schedule 2.3, the Private Company does not own any securities issued by any
other business organization or governmental authority, except US Government
securities, nor is the Private Company a partner or participant in any joint
venture or partnership of any kind.
2.4 Authorization of Transaction. The Private Company has the full power
and authority to execute, deliver and perform this Agreement and to carry out
the transactions contemplated hereby. All necessary action, corporate or
otherwise, has been taken by each Selling Shareholder and the Private Company to
authorize the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, and the Agreement is the legal, valid and
binding obligation of the Private Company and the Selling Shareholders,
enforceable against the Private Company and the Selling Shareholders in
accordance with its terms, subject to laws of general application affecting
creditors generally.
2.5 Present Compliance with Obligations and laws. The Private Company is
not (a) in violation of its Charter or bylaws; (b) in default in the performance
of any obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice) affords to any person the
right to accelerate any indebtedness or terminate any right; (c) in default of
or breach of (with or without the passage of time or the giving of notice) any
other contract to which it is a party or by which it or its assets are bound; or
(d) in violation of any law, regulation, administrative order or judicial order,
decree or judgment applicable to it or its business or assets.
2.6 No Conflict of Transaction With Obligations and Laws.
(a) Except as set forth on Schedule 2.6(a), neither the execution,
delivery and performance of this Agreement, nor the performance of the
transactions contemplated hereby, will: (I) constitute a breach or violation of
the Charter or bylaws of the Private Company; (ii) require any consent, approval
or authorization of or declaration, filing or registration with, any person,
(iii) conflict with or constitute (with or without the passage of time or the
giving of notice) a breach of, or default under, any debt instrument to which
the Private Company is a party, or give any person the right to accelerate any
indebtedness or terminate, modify or cancel any right; (iv) constitute (with or
without the passage of time or giving of notice) a default under or breach of
any other agreement, instrument or obligation to which the Private Company is a
party or by which it or its assets are bound; (v) result in the creation of any
lien or encumbrance upon any of the Private Company Shares or any of the assets
of the Private Company; or (vi)
4
<PAGE>
result in a violation of any law, regulation, administrative order or judicial
order, decree or judgment applicable to the Private Company, or its businesses
or assets, or (vii) invalidate or adversely affect any permit, license or
authorization used in the Private Company's business.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by the Selling Shareholders do not require the
consent, waiver, approval, authorization, exemption of or giving of notice to
any governmental authority, except for those listed on Schedule 2.6(b).
2.7 Financial Statements. Attached as Schedule 2.7 hereto are the
following financial statements of the Private Company audited or unaudited as
indicated, all of which statements are complete and correct and fairly present
the financial position of the Private Company on the dates of such statements
and the results of its operations on the applicable basis for the periods
covered thereby, and such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved and prior periods:
Balance sheets, statements of profit and loss, statements of changes in
stockholders equity and statements of cash flow at and as of each of the
twelve (12) months ended December 31, 1997, 1996, and 1995, and for the
eleven (11) months ended November 30, 1998.
Statements of accounts payable and accounts receivable as of November 30,
1998.
The balance sheet dated November 30, 1998 included in the above financial
statements is sometimes referred to hereinafter as the "Base Balance
Sheet".
2.8 Absence of Undisclosed Liabilities. To the best of the knowledge and
belief of the Selling Shareholders, as of the date of the Base Balance Sheet,
the Private Company had no liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others, or liabilities for taxes due
or then accrued or to become due), except: (a) liabilities stated or adequately
reserved against on the Base Balance Sheet; (b) liabilities not in excess of
$1,000 arising in the ordinary course of business; (c) liabilities with respect
to those certain promissory, notes of the Private Company dated December 31,
1998, executed in favor of Ron LaScala and Anita LaScala; and (d) liabilities
disclosed in Schedule 2.8 hereto. There is no fact which materially adversely
affects, or may in the future (so far as can now be reasonably foreseen)
materially adversely affect, the business, properties, operation or condition of
the Private Company which has not been specifically disclosed herein or in a
schedule furnished herewith.
2.9 Absence of Certain Changes. Except as disclosed in Schedule 2.9
hereto, since the date of the Base Balance Sheet there has not been:
(a) any change in the financial condition, working capital, earning,
reserves, properties, assets, liabilities, business or operations of the Private
Company, which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has had a Material
Adverse Effect with respect to the Private Company;
5
<PAGE>
(b) any contingent liability incurred by the Private Company as guarantor
or otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the properties of
the Private Company which remains in existence on the date hereof or at the time
of the Closing;
(d) any obligation or liability incurred by the Private Company other than
an obligation or liability incurred in the ordinary course of business,;
(e) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Private Company other than in the ordinary course of
business;
(f) any damage, destruction or loss, whether or not covered by insurance,
which has had a Material Adverse Effect on the Private Company;
(g) any declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock of the Private
Company, or any direct or indirect redemption, purchase or other acquisition by
the Private Company of its own capital stock;
(h) any labor trouble or claim of unfair labor practices involving the
Private Company; any change in the compensation payable or to become payable by
the Private Company to any of its officers, employees or agents other than
normal merit increases in accordance with its usual practices, or any change in
any bonus, pension, or profit sharing payment, entitlement or arrangement made
to or with any of such officers, employees or agents;
(i) any change with respect to the management or supervisory personnel of
the Private Company;
(j) any payment or discharge of a lien, claim, obligation or liability of
the Private Company which was not shown on the Base Balance Sheet or incurred in
the ordinary course of business thereafter;
(k) any obligation or liability incurred by the Private Company to any of
its officers, directors or shareholders, except normal compensation and expense
allowances payable to officers and liability incurred by the Private Company
under those certain promissory notes of the Private Company dated December 31,
1998, executed in favor of Ron LaScala and Anita LaScala, attached hereto as
Exhibit "A";
(l) any loan or advance made by the Private Company to any of its
officers, directors or shareholders
(m) any disposal or lapse of any right to the use of any trademark,
tradename, patent or copyright, or disposal of or disclosure to any person other
than the Purchaser of any trade secret, formula, process or know-how not
theretofore a matter of public knowledge other than pursuant to confidentiality
agreements;
(n) any change in any method of accounting or accounting practice; or
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(o) any agreement, whether in writing or otherwise, to take any action
described in this Section 2.09.
2.10 Payment of Taxes. The Private Company has duly and timely filed all
federal, state, local, and foreign government income, excise, gross receipts or
franchise tax returns, real estate and personal property tax returns, sales and
use tax returns, employee tax and contribution returns, and all other tax
returns, reports and declarations, including valid extensions therefore, or
estimated taxes required to be filed by it, with respect to all applicable taxes
("Tax Returns") including without limitation, with respect to all income,
profit, franchise, sales, use, real property, personal property, ad valorem,
excise, employment, social security and wage withholding, severance, stamp,
occupation, and windfall profits taxes, of every kind, character or description,
and imposed by any government or quasi-governmental authority (domestic or
foreign), and any interest or fines, and any and all penalties or additions
relating to such taxes, charges, fees, levies or other assessments ("Taxes").
All of the Tax Returns are complete and correct. All Taxes shown to be due on
each Tax Return have been paid or are being contested in good faith by the
Private Company (which contest is being diligently pursued and is described in
Schedule 2.10). With respect to all other taxes which no return is required, or
which have not yet accrued or otherwise become due, adequate provision has been
made in the pertinent financial statements referred to in Section 2.7 above. All
Taxes and other assessments and levies which the Private Company are required to
withhold or collect have been withheld or collected and paid over or will be
paid over to proper governmental authorities as required. Except as set forth on
Schedule 2.10 the tax returns have never been examined by any government entity,
including the Internal Revenue Service and the Florida Department of Revenue.
The Private Company is not aware of any intention on the part of any
government entity to examine any of the Tax Returns. No deficiencies have been
asserted or assessments made against the Private Company, nor is the Internal
Revenue Service nor any other taxing authority now asserting or, to the
knowledge of the Private Company or any Selling Shareholder, threatening to
assert against the Private Company any deficiency or claim for additional taxes
or interest thereon or penalties in connection therewith. The Private Company
has not extended the time for the filing of any Tax Return or the assessment of
deficiencies or waived any statute of limitations for any year, which extension
or waiver is still in effect. The provisions for taxes reflected in the
above-mentioned financial statements are adequate to cover any tax liabilities
of the Private Company in respect of its businesses, properties and operations
during the periods covered by said financial statements and all prior periods.
The Private Company has not filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Private Company has not had
any nonresident aliens or foreign corporations as stockholders. The Private
Company has never been part of an affiliated group filing consolidated returns,
and it has not entered into any tax allocation or tax sharing agreement.
2.11 Title to Properties: Liens: Condition of Properties.
(a) Set forth on Schedule 2.11 hereto is a listing of (i) all the real
property owned by the Private Company at the date hereof, (ii) all leases under
which the Private Company leases real property at the date hereof, (iii) a
complete description of the machine, equipment and other personal property with
a fair market value in excess of $2,000 used or owned by the Private Company as
of the date hereof, and (iv) all leases under which the Private Company or any
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Subsidiary leases any personal property at the date hereof with an original cost
in excess of $1,000. The Private Company has delivered to the Purchaser true,
correct and complete copies of all leases, subleases, rental agreements,
contracts of sale, tenancies or licenses related to any of the real or personal
property identified on Schedule 2.11. The real and personal property identified
on said Schedule includes all properties and assets (whether real, personal or
mixed, tangible or intangible) reflected in the Base Balance Sheet or purchased
by the Private Company since the date of the Base Balance Sheet in the ordinary
course of business), and include all property and assets used or required for
use in the Private Company business.
(b) Except as specifically disclosed in Schedule 2.11 or in the Base
Balance Sheet, the Private Company has good and marketable title in fee simple
to all of their real and personal property, including property described in said
Schedule, and all of its leases are valid, binding and enforceable in accordance
with their terms against the parties thereto, and no default exists under any
such leases. The Private Company has not received notice that any party to any
such lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or any right thereunder.
(c) None of the real or personal property owned or used by the Private
Company is subject to any mortgage, pledge, deed of trust, lien (other than for
taxes not yet due and payable), conditional sale agreement, security title,
encumbrance, or other adverse claim or interest of any kind, except as
specifically disclosed in Schedule 2.11 or in the Base Balance Sheet.
(d) Except as otherwise specified in Schedule 2.11 hereto:
(i) all buildings, machinery and equipment of the Private Company
and each Subsidiary are in good condition, working order and repair normal
wear and tear and excepted, are adequate for the uses to which they are
being put, have been well maintained, substantially conform with all
applicable ordinances, regulations, and zoning, safety or other laws, and
do not encroach on property of others; and
(ii) as of the date hereof, neither the Private Company, nor any
Selling Shareholder knows of any pending or threatened change of any such
ordinance, regulation or zoning, safety or other law and there is no
pending or threatened condemnation of any such property.
2.12 Collectibility of Accounts Receivable. To the best of the knowledge
and belief of the Selling Shareholders, all of the accounts receivable of the
Private Company shown or reflected on the Base Balance Sheet, less a reserve for
bad debts in the amount shown of the Base Balance Sheet, are, and those existing
at the time of Closing, less the reserve shown on the Base Balance Sheet, will
be, (a) valid and enforceable claims, (b) which arose out of transactions with
unaffiliated parties, (c) fully collectible within ninety (90) days from invoice
date through the Private Company's normal means of collection and (d) subject to
no set-off, defense or counterclaim.
2.13 Profitable Operation. Between the date of the Base Balance Sheet and
the date of this Agreement, the Private Company has conducted its businesses
only in the ordinary course and at a net profit after taxes on a consolidated
basis of not less than $___________ The Private
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Company warrants that from the date hereof until the Closing, it will continue
to conduct its business only in the ordinary course and at a net profit after
taxes on a consolidated basis of not less than $92,000, and that it will have
total revenues for calendar year 1998 in excess of $9,000,000. For the purpose
of this Section 2.13, whether the Private Company operated at a net profit after
taxes for such period shall be determined in accordance with generally accepted
accounting principles, practices and methods, consistently applied ("GAAP").
2.14 Value of the Private Company Business. At the Closing, the value of
the Private Company's assets shall be not less than $41,900 in excess of
liabilities. For the purpose of this Section 2.14, the value of the Private
Company's assets shall be deemed to be the aggregate book value thereof at the
Closing, net of depreciation and other reserves, determined in accordance with
GAAP.
2.15 Contracts and Commitments
(a) Except for contracts, commitments, plans, agreements and licenses
described in Schedule 2.15(a) hereto, the Private Company is not a party to or
subject to:
(i) any contract or agreement for the purchase of any commodity,
material, equipment, or asset;
(ii) any other contract or agreements creating any obligations of
the Private Company after the date of the Base Balance Sheet of $1,000 or
more with respect to any such contract or agreement, other than sales and
purchase commitments in the ordinary course of business;
(iii) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Private Company (or
its successor or assign) within one year after the date hereof;
(iv) any contract or agreement for the sale or lease of its products
not made in the ordinary course of business;
(v) any contract with any sales agent or distributor of products of
the Private Company;
(vi) any contract containing covenants limiting the freedom of the
Private Company to compete in any line of business or with any person or
entity;
(vii) any license or franchise agreement (as licensor or licensee of
franchiser or franchisee); or
(viii) any contract which is material to the business of the Private
Company.
(b) Except as set forth on Schedule 2.15(b), the Private Company has not
had any customer who accounted, directly or indirectly, for more than ten
percent (10%) of its sales during the last two fiscal years and the Private
Company has no supplier from whom it has purchased more than ten percent (10%)
of the goods and services that it purchased during the last
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two fiscal years. The Private Company is not in default under any contracts,
commitments, plans, agreements or licenses described in Schedule 2.15(b) nor
does the Private Company or any Selling Shareholder have knowledge of any
termination, cancellation, limitation or modification or change in any business
relationship with any material supplier or customer. For the purposes hereof, a
supplier or customer is material if it accounts for more than ten percent (10%)
of the orders or sales, of the Private Company.
2.16 Labor and Employee Relations: Agents
(a) Except as shown on Schedule 2.16(a) hereto, there are no currently
effective consulting or employment agreements or other material agreements with
individual consultants or employees to which the Private Company or any is a
party. Complete and accurate copies of all such written agreements have been
delivered to Purchaser and are attached to Schedule 2.16. Also shown on Schedule
2.16(a) are the name and rate of compensation (including all salary, bonus,
benefit and compensation) of each officer, employee or agent of the Private
Company.
(b) Except as shown on Schedule 2.16(b), none of the employees of the
Private Company is covered by any collective bargaining agreement with any trade
or labor union, employees' association or similar association. The Private
Company has complied in all respects with applicable laws, rules and regulations
relating to the employment of labor, including without limitation those relating
to wages, hours, unfair labor practices, discrimination, and payment of social
security and similar taxes. There are no representation elections, arbitration
proceedings, labor strikes, slowdowns or stoppages, material grievances or other
labor troubles pending, or to the knowledge of the Selling Shareholders, overtly
threatened, with respect to the employees of the Private Company.
(c) There are no complaints against the Private Company pending or, to the
knowledge of the Selling Shareholders, overtly threatened before the National
Labor Relations Board or any similar state or local labor agencies, or before
the Equal Employment Opportunity Commission or any similar state or local
agency, by or on behalf of any employee or former employee of the Private
Company.
(d) There is no contingent liability for sick leave, vacation time,
severance pay or similar items not set forth on the Base Balance Sheet or on
Schedule 2.16(d). The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not trigger any
severance pay obligation under any contract or at law.
(e) The Selling Shareholders have provided to the Purchaser a complete
description of all employment policies under which the Private Company has
operated or which has been communicated to its employees.
(f) Set forth on Schedule 2.16(f) is a list of all outside agents and
sales representatives who provide services for and on behalf of the Private
Company, together with (I) a description of their related commission or other
compensation scheme for such services, (ii) their total compensation for fiscal
1997 to date, and (iii) a copy of any written agreements with the Private
Company to which they are parties.
2.17 Employee Benefits and ERISA.
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(a) Except as shown on Schedule 2.17 hereto, there are no currently
effective retirement, pension, executive or deferred compensation, stock
purchase, stock option, stock bonus, stock appreciation, severance, profit
sharing, bonus, savings, thrift, cafeteria, medical, health, hospitalization,
dental, vision, welfare, life insurance, disability, accident insurance, group
insurance, sick pay, holiday and vacation programs or other employee benefit
plans, funds, programs, contracts, arrangements or practices, formal or
informal, including "employee benefit plans" as defined in Section 3 of the
Employment Retirement Income Act of 1974, as amended ("ERISA"), (each such plan,
arrangement or practice being hereafter referred to as "Benefit Plan") relating
to the employees of the Private Company. The Private Company has no agreement,
arrangement, or commitment, whether formal or informal and whether legally
binding or not, to create any additional plan, fund, program, contract or
arrangement or to modify or amend any existing Benefit Plan. There are no
multi-employer plans (as defined within the meaning of Section 3 (37) and
4001(a)(3) of ERISA) relating to the employees of the Private Company, nor has
there been any multi-employer plan relating to such employees within the last
five (5) years.
(b) With respect to each Benefit Plan described in Schedule 2.17, the
Private Company has furnished to the Purchaser complete and accurate copies of
the Benefit Plan, including all amendments, the most recent determination letter
from the Internal Revenue Service, the three (3) most recent form 5500's, the
most recent plan actuarial reports, summary plan descriptions, summary annual
reports, summaries of material modifications, employee manuals and material
employee communications, and all reports of the Benefit Plan required by ERISA
and the regulations thereunder. The Purchaser has also been provided with copies
of any insurance contracts or trust agreements through which any Benefit Plan is
funded and notice of any material adverse change occurring with respect to any
Benefit Plan since the date of the most recently completed and filed annual
report.
(c) With respect to each Benefit Plan which is subject to ERISA:
(i) the value of the Benefit Plan's assets equals or exceeds the
total value of all vested and unvested employee benefits under such plan;
(ii) there is no "accumulated funding deficiency" and no "reportable
event" or "prohibited transaction" has occurred (as such terms are defined
in ERISA);
(iii) the Benefit Plan meets all applicable requirements of ERISA
and Section 401(a) of the Internal Revenue Code;
(iv) the Private Company has properly and timely made all required
governmental filings with respect to the Benefit Plan;
(v) the Base Balance Sheet reflects in the aggregate all amounts
accrued but unpaid under the aforesaid plans and arrangements as of the
date hereof.
(d) The execution and delivery of this Agreement by the Selling
Shareholders, and the consummation of the transactions contemplated hereunder:
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(i) do not constitute a prohibited transaction within the meaning of
Section 406 if ERISA or Section 4975 of the Internal Revenue Code; and
(ii) will not result in any obligation or liability of the Purchaser
or the Private Company to any employee of the Private Company or to the
Pension Benefit Guaranty Corporation in respect of any Benefit Plan.
2.18 Environmental Matters
[INTENTIONALLY OMITTED]
2.19 Permits. The Private Company holds all licenses, permits,
registrations, orders, authorizations, approvals and franchises which are
required to permit it to conduct its businesses as presently conducted, and all
such licenses, permits, registrations, orders, authorizations, approvals and
franchises are listed on Schedule 2.19 hereto and are now, and will be after the
Closing, valid and in full force and effect, and the Purchaser shall have full
benefit of the same. The Private Company has not received any notification of
any asserted present failure (or past and unremedied failure) by it to have
obtained any such license, permit, registration, order, authorization, approval
or franchise.
2.20 Warranty, or Other Claims. Neither the Private Company nor any
Selling Shareholder knows of, or has reason to know of; any existing or
threatened claims, or any facts upon which a claim could be based, against the
Private Company for services which are defective or fail to meet any service or
product warranties. No claim has been asserted against the Private Company for
renegotiations or price predetermination of any business transaction, and
neither the Private Company, nor any Selling Shareholder has knowledge of any
facts upon which any such claim could be based.
2.21 Litigation Claims and Legal Proceedings. Except for matters described
in Schedule 2.21 hereto, there are no claims, actions, suits, arbitration's,
proceedings or investigations pending (or, to the knowledge of the Private
Company or any Selling Shareholder, threatened) against, the Private Company and
there are no outstanding court orders, court decrees, or court stipulations to
which the Private Company is a party or by which any of its assets are bound,
any of which (a) question this Agreement or affect the transactions contemplated
hereby, or (b) materially restrict the present business properties, operations,
prospects, assets or condition, financial or otherwise, of the Private Company
or (c) will result in any materially adverse change in the business, properties,
operations, prospects assets or the condition, financial or otherwise, of the
Private Company. Neither the Private Company nor any Selling Shareholder has any
reason to believe that any such claim, action, suit, arbitration, proceeding or
investigation may be brought against the Private Company.
2.22 Borrowings and Guarantees. Except as shown on Schedule 2.22 hereto,
there are no agreements and undertaking pursuant to which the Private Company:
(a) is borrowing or is entitled to borrow any money, (b) is lending or has
committed itself to lend any money, or (c) is a guarantor or surety with respect
to the obligations of any person. Complete and accurate copies of all such
written agreements have been delivered to Purchaser and are attached to Schedule
2.22.
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2.23 Financial Service Relations and Powers of Attorney. All of the
arrangements which the Private Company has with any bank depository institution
or other financial services entity, whether or not in the Private Company's name
are completely and accurately described in Schedule 2.23 hereto.
2.24 Insurance. The Private Company maintains (i) insurance on all of its
property (including leased premises) that insures against loss or damage by fire
or other casualty (including extended coverage) and (ii) insurance against
liabilities, claims and risks of a nature and in such amounts as are normal and
customary in its industry. Schedule 2.24 contains a complete and correct list of
all policies of insurance maintained by the Private Company (including insurance
providing benefits for employees) in effect on the date hereof, together with
complete and correct information with respect to the premiums, coverage's,
insurers, expiration dates, and deductibles in respect of such policies. Such
policies are sufficient for compliance with all requirements of law currently
applicable to the Private Company and of all agreements to which the Private
Company is a party, will remain in full force and effect through the respective
expiration dates of such policies without the payment of additional premiums and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Except for amounts deductible under
policies of insurance described on such schedule or with respect to risks
assumed as a self-insurer and described on such schedule, the Private Company is
not, nor has it been at any time, subject to any liability as a self-insurer of
the businesses or assets of the Private Company that is reasonable likely to
have a Material Adverse Effect upon the businesses, assets, revenues, condition
(financial or otherwise) or prospects of the Private Company. Except as set
forth of Schedule 2.24, there are no claims pending or, to the knowledge of
Selling Shareholders, overtly threatened, under any of said policies, or
disputes with insurers, and all premiums due and payable thereunder have been
paid, and all such policies are in full force and effect in accordance with
their respective terms. No notice of cancellation or termination has been
received with respect to any such policy. The Private Company has not been
refused any insurance with respect to its assets or operations, nor has its
coverage been limited, by any insurance carrier with which it has applied for
any such insurance or with which it has carried insurance.
2.25 Corporate Minute Books and Records. The minute books and stock
ledgers of the Private Company, copies of which have been made available for
inspection by the Purchaser, accurately record all action taken by the Private
Company's shareholders, boards of directors and committees thereof.
2.26 Finder's Fee. Neither the Private Company nor any Selling Shareholder
has incurred or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement except for the fee incurred by the Selling Shareholders to Linster E.
Brinkley which shall be paid by the Purchaser.
2.27 Transactions with Interested Persons. No officer, supervisory
employee, director or stockholder of the Private Company, or any Selling
Shareholder, or their respective spouses or children, (i) owns, directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer or director of, any customer, competitor or supplier of the
Private Company, or any organization which has a material contract or
arrangement with the Private Company, or (ii) has any contract or agreement with
the Private Company other than as disclosed
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on a Schedule hereto, and all such agreements are, except as noted on such
schedule, on arms-length terms.
2.28 Absence of Sensitive Payments. Neither the Private Company nor, to
the knowledge of the Private Company or any Selling Shareholder, any of the
Private Company's directors, officers, agents, stockholders or employees:
(a) has made or has agreed to make any contributions, payments or gifts of
funds or property to any governmental official, employee or agent where either
the payment or the purpose of such contribution, payment or gift was or is
illegal under the laws of the United States, any state thereof, or any other
jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund or asset for any
purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) has made or has agreed to make any contribution or expenditure, or has
reimbursed any political gift or contribution or expenditure made by any other
person to candidates for public office, whether federal, state or local (foreign
or domestic) where such contributions were or would be a violation of applicable
law.
2.29 Disclosure of Material Information. Neither this Agreement nor any
exhibit hereto or certificate issued pursuant hereto contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements herein or therein not misleading, relating to the business
or affairs of the Private Company. There is no fact which materially adversely
affects, or may in the future (so far as now can be reasonably foreseen)
materially adversely affect, the business, properties, operations or conditions
(financial or otherwise) or prospects of the Private Company which has not been
specifically disclosed herein.
2.30 Pooling. Neither the Private Company nor any executive officer,
director or other person or entity which are "affiliates" of the Private Company
for purposes of Rule 145 under the Securities Act of 1933, as amended, to the
extent such persons or entities own Private Company Shares, has through the date
of this Agreement, taken or agreed to take any action that would prevent the
Private Company and the Purchaser from accounting for the business combination
to be entered into pursuant to this Agreement as a "pooling of interest" in
accordance with GAAP. The Private Company has received a letter from Clevenger &
Associates with respect to the absence of certain attributes of the Private
Company which would preclude the transaction contemplated by this Agreement from
being tracked as a "pooling of interests" for accounting purposes. A copy of
such letter has been furnished to the Purchaser.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Selling Shareholders
and the Private Company as follows:
3.1 Organization of the Purchaser. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada with full corporate power to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
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3.2 Capitalization of the Purchaser. The authorized capital stock of the
Purchaser consists of 100,000,000 shares of common stock, $.001 par value, and
100,000,000 shares of preferred stock, $.001 par value. All of the presently
issued and outstanding capital stock of the Purchaser has been duly authorized
and validly issued and is fully paid and nonassessable. There are no outstanding
options, warrants or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into, any additional shares of capital stock
of any class of the Purchaser.
3.3 Authorization of Transaction. The Purchaser has the full power and
authority to execute, deliver and perform this Agreement and to carry out the
transactions contemplated hereby. All necessary action, corporate or otherwise,
has been taken by the Purchaser to authorize the execution, delivery and
performance of this Agreement and the transaction contemplated hereby, and the
Agreement is the legal, valid and binding obligation of the Purchaser
enforceable in accordance with its terms, subject to laws of general application
affecting creditor's rights generally.
3.4 The Purchaser's Preferred Shares. The Preferred Shares to be delivered
pursuant to this Agreement will be, when delivered, duly authorized, validly
issued, fully paid and nonassessable, and free and clear of all liens,
encumbrances, charges or claims under Article 8 of the Uniform Commercial Code
of the State of Florida or otherwise.
3.5 Financial Statements. The Purchaser has delivered to the Selling
Shareholders an audited consolidated balance sheet of the Purchaser and its
subsidiaries as of June 30, 1997 and the related consolidated statement of
income, retained earnings and capital in excess of par value for the fiscal year
then ended, certified by B.D.O. Seidman LLP. The foregoing financial statements
have been prepared in accordance with GAAP and present fairly the consolidated
financial condition of the Purchaser and its subsidiaries as at the date thereof
and the consolidated results of their operations for the year then ended. The
Purchaser has also delivered to the Selling Shareholders an unaudited balance
sheet, statement of profit and loss and statement of changes in stockholders
equity at and as of the twelve (12) months ended June 30, 1998.
3.6 Litigation. There is no litigation pending or, to the knowledge of the
Purchaser, threatened against Purchaser which will have a material adverse
effect on its properties, assets of business or which would prevent or hinder
the consummation of the transactions contemplated by this Agreement.
3.7 Finder's Fee. The Purchaser has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement except that, upon consummation of
the Closing, the Purchaser shall assume the Selling Shareholders' obligation to
pay to Linster E. Brinkley, Jr. a finders fee in connection with the
transactions contemplated by this Agreement, which fee shall be payable in the
form of 40,000 shares (or equivalent pro rata amount based on the ultimate
Purchase Price) of the Purchaser's Common Stock.
ARTICLE 4. COVENANTS OF THE PRIVATE COMPANY AND THE SELLING SHAREHOLDERS.
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Each of the Selling Shareholders and the Private Company hereby covenant
and agree with the Purchaser as follows:
4.1 Conduct of Business. Between the date of this Agreement and the
Closing, the Private Company will do the following unless Purchaser shall
otherwise be advised of:
(a) conduct its business only in the ordinary course and retain from
changing or introducing any method of management or operations except in the
ordinary course of business and consistent with prior practices;
(b) refrain from making any purchase, sale or disposition of any asset or
property other than in the ordinary course of business and consistent with prior
practices;
(c) refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except those that are usual
and normal in the ordinary course of business;
(d) refrain from making any change or incurring any obligation to make a
change in its Charter or bylaws or authorized or issued capital stock, except as
contemplated by this Agreement;
(e) refrain from splitting, combining or reclassifying any shares of its
capital stock; declaring, setting aside or paying any dividend or making any
other distribution in respect of capital stock (whether in cash, stock or
property or any combination thereof), or making any direct or indirect
redemption, purchase or other acquisition of capital stock, of the Private
Company;
(f) refrain from entering into any employment contract (other than as may
be contemplated by this Agreement) or making any change in the compensation
payable or to become payable to any of its officers, employees or agents;
(g) refrain from prepaying any loans from its stockholders, officers or
directors (if any) or making any change in its borrowing arrangements;
(h) use its best efforts to prevent any change with respect to its banking
arrangements;
(i) use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all suppliers, customers and others having business relation with
it;
(j) have in effect and maintain at all times all insurance of the kind, in
the amount and with the insurers set forth in Schedule 2.24 hereto or equivalent
insurance with any substitute insurers approved by the Purchaser; and
(k) permit the Purchaser and its authorized representatives to have full
access to all its properties, assets, records, tax returns, contracts and
documents and furnish to the Purchaser or its authorized representatives such
financial and other information with respect to its business or properties as
the Purchaser may from time to time reasonably request, refrain from issuing,
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selling, delivering or agreeing or committing to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorizing the issuance,
sale or delivery of, or redemption or repurchase of, any stock of any class or
any other securities or any rights, warrants or options to acquire any such
stock or other securities, or amend any of the terms of any such convertible
securities, options or warrants;
(l) except in the ordinary course of business and consistent with past
practice; refrain from creating, incurring or assuming any debt not currently
outstanding (including obligations in respect of capital leases); assuming,
guaranteeing, endorsing or otherwise becoming liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person; or
making any loans, advances or capital contributions to, or investments in, any
other person;
(m) refrain from entering into, adopting or amending any ERISA Benefit
Plan or Benefit Plan or any employment or severance agreement or arrangement or
materially modifying the employment terms of, its directors, officers of
employees, generally or individually, or paying any benefit not required by the
terms in effect on the date hereof of any existing ERISA Benefit Plan or Benefit
Plan;
(n) refrain from making any change in any material respect its accounting
methods, principles or practices, except insofar as may be required by a
generally applicable change in GAAP;
(o) refrain from discharging or satisfying any security interest, lien or
other obligation or liability other than in the ordinary course of business and
consistent with past practice;
(p) refrain from entering into, amending, terminating, taking or omitting
to take any action that would constitute a violation of or default under, or
waive any material rights under, any material contract or agreement;
(q) refrain from taking any action or failing to take any action permitted
by this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the Private
Company set forth in this Agreement becoming untrue or (ii) any of the
conditions set forth in Article 6 not being satisfied;
(r) refrain from entering into any lease with respect to real property; or
(s) refrain from agreeing in writing or otherwise taking any of the
foregoing actions.
4.2 Authorization from Others. Prior to the Closing, the Private Company
and Selling Shareholders will have obtained all authorizations, consents and
permits of others required to permit the consummation by the Private Company and
the Selling Shareholders of the transactions contemplated by this Agreement.
4.3 Breach of Representations and Warranties. Promptly upon the occurrence
of, or promptly upon the Private Company or any Selling Shareholder becoming
aware of the impending or threatened occurrence of, any event which would cause
or constitute a breach, or would have caused or constituted a breach had such
event occurred or been known to the Private
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Company or any Selling Shareholder prior to the date hereof, of any of the
representations and warranties of the Private Company and the Selling
Shareholders contained in or referred to in this Agreement, such person shall
give detailed written notice thereof to the Purchaser and the Private Company
and the Selling Shareholders shall use their best efforts to prevent or promptly
remedy the same.
4.4 Consummation of Agreement. The Private Company and each Selling
Shareholder shall use their best efforts to perform and fulfill all conditions
and obligations on their part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be fully carried out. To this end, the Private Company and each Selling
Shareholder which is a corporation will obtain all necessary authorizations or
approvals of its stockholders and Board of Directors. From the date hereof until
the termination of this Agreement, neither the Private Company nor any Selling
Shareholder will discuss or negotiate with any other party, or entertain or
consider any inquiries or proposals received from any other party, concerning
the possible disposition of the Private Company's business, assets or capital
stock and the Private Company and the Selling Shareholders shall promptly inform
the Purchaser of all such inquiries or proposals together with the terms
thereof.
4.5 No Transfer or Encumbrance of the Private Company Shares. None of the
Selling Shareholders will at any time prior to the Closing assign, transfer,
hypothecate or otherwise encumber or create in favor of any other party any
right or interest in the Private Company Shares now owned by them.
4.6 Tax Effect. The Selling Shareholders acknowledge that this transaction
has been designed to be effectuated as a tax free exchange as stated herein
above. The Selling Shareholders have relied upon their tax advisers with regard
to said treatment under the terms of this Agreement.
4.7 Disposition of the Preferred Shares. Each Selling Shareholder agrees
that it will deliver an investment letter in the form of Exhibit B hereto and
will not sell or otherwise dispose of any of the Preferred Shares in violation
of the registration requirements of the Securities Act of 1933, as amended or in
violation of any other federal or state laws or regulations governing the sale
or other disposition of securities.
ARTICLE 5. COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Private Company and
each of the Selling Shareholders as follows:
5.1 Authorization from Others. Prior to the Closing, the Purchaser will
have obtained all authorizations, consents and permits of others required to
permit the consummation by the Purchaser of the transactions contemplated by
this Agreement.
5.2 Consummation of Agreement. The Purchaser shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement, to the end that the transactions contemplated
by this Agreement shall be fully carried out. To this end, the Purchaser will
obtain any approvals of its stockholders or Board of Directors, which may be
required in order to consummate the transactions contemplated hereby.
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5.3 Breach of Representations and Warranties. Promptly upon the occurrence
of, or promptly upon the Purchaser becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach, or would have
caused or constituted a breach had such event occurred or been known to the
Purchaser prior to the date hereof, of any of the representations and warranties
of the Purchaser contained in or referred to in this Agreement, the Purchaser
shall give detailed written notice thereof to the Private Company and Selling
Shareholders and the Purchaser shall use its best efforts to prevent or promptly
remedy the same.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 6 will have been accomplished.
6.1 Representations: Warranties: Covenants. Each of the representations
and warranties of the Private Company and the Selling Shareholders contained in
Article 2 shall be true and correct as though made on and as of the Closing; the
Private Company and the Selling Shareholders shall, on or before the Closing,
have performed all of their obligations hereunder which by the terms hereof are
to be performed on or before the Closing; and the Private Company shall have
delivered to the Purchaser a certificate of the Private Company's President
dated as of the Closing to the foregoing effect.
6.2 Resignations of Officers and Directors. The Selling Shareholders shall
have provided the Purchaser with a complete and correct list of all of the
officers and directors of the Private Company, the Purchaser shall have received
the written resignations of such of the officers and directors of the Private
Company as Purchaser shall have designated in a writing delivered to the Private
Company at least ten days prior to the Closing which resignations will be
effective no later than the Closing.
6.3 Employment and Non-Competition Agreements. The Private Company shall
have executed and delivered to Ron LaScala, Anita LaScala and Kimberly LaScala
employment agreements having substantially the terms and conditions of Exhibits
C- 1, C-2, and C-3 attached hereto and Non-competition Agreements having
substantially the temps mid conditions of Exhibits D-1, D-2, and D-3.
6.4 Approval of the Purchaser's Board of Directors. There shall have been
no determination by the Board of Directors of the Purchaser, acting in good
faith, that the consummation of the transactions contemplated by this Agreement
has become inadvisable or impracticable by reason of the institution or threat
by any person or any federal, state or other governmental authority of material
litigation, proceedings or other action against the Purchaser or the Selling
Shareholders or the Private Company.
6.5 Approval of the Purchaser's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and all related
legal matters contemplated by this Agreement shall have been approved by counsel
for Purchaser, provided that the approval of such counsel shall not be
unreasonably withheld.
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6.6 Absence of Certain Litigation. There shall not be any (a) injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, (b) suit,
action or other proceeding by the United States (or any agency thereof) or by
any state (or any agency thereof) pending before any court or governmental
agency, or threatened to be filed or initiated, wherein such complainant seeks
the restraint or prohibition of the consummation of any material transaction
contemplated by this Agreement or asserts the illegality thereof or (c) suit,
action or other proceeding by a private party pending before any court or
governmental agency, or threatened to be filed or initiated, which in the
reasonable opinion of counsel for Purchaser is likely to result in the restraint
or prohibition of the consummation of any material transaction contemplated
hereby or the obtaining of an amount in payment (or indemnification) of material
damages from or other material relief against any of the parties or against any
directors or officers of Purchaser, in connection with consummation of any
material transaction contemplated hereby.
6.7 Pooling of Interests. The Purchaser shall have received:
(a) an agreement from each of the Selling Shareholders that he will not
dispose of any of the Preferred Shares or in any other way reduce his risk
relative to any of the Purchase Shares prior to the date on which financial
results of the Purchaser covering at least thirty (30) days of post-Closing
combined operations of the Purchaser and the Private Company have been published
in the manner necessary for Purchaser to meet the requirements for pooling of
interests accounting treatment of the acquisition contemplated hereby under
Accounting Series Release Nos. 130 and 135 of the Securities and Exchange
Commission;
(b) an opinion of Clevenger & Associates, the Private Company's
independent public accountants, reasonably satisfactory to the Purchaser with
respect to the absence of certain attributes of the Private Company which would
preclude thc transactions contemplated hereby from being treated as a "pooling
of interests" for accounting purposes; and
(c) an opinion of B.D.O. Seidman LLP, the Purchaser's independent public
accountants, that the transaction contemplated hereby may be treated as a
pooling of interests under generally accepted accounting principles.
ARTICLE 7. CONDITIONS TO OBLIGATIONS OF THE PRIVATE COMPANY AND THE SELLING
SHAREHOLDERS.
The obligations of the Private Company and the Selling Shareholders to
consummate this Agreement and the transactions contemplated hereby are subject
to the condition that on or before the Closing the actions required by this
Article 7 will have been accomplished.
7.1 Representations: Warranties: Covenants. Each of the representations
and warranties of the Purchaser contained in Article 3 shall be true and correct
as though made on and as of the Closing; Purchaser shall, on or before the
Closing, have performed all of its obligations hereunder which by the terms
hereof are to be performed on or before the Closing; and the Purchaser shall
have delivered to the Private Company and the Selling Shareholders a certificate
20
<PAGE>
of the President or any Vice President of the Purchaser dated as of the Closing
to the foregoing effect.
7.2 Opinion of the Purchaser's Counsel. At the Closing, the Private
Company and the Selling Shareholders shall have been received from J. Garry
McAllister, counsel for the Purchaser, an opinion dated as of the Closing, in
form and substance satisfactory to the Selling Shareholders and their counsel.
In rendering said opinion, such counsel may rely on, to the extent he deems such
reliance proper (i) certificates of public officials, (ii) certificates, in form
and substance satisfactory to the Selling Shareholders and their counsel, of
officers of the Purchaser, and (iii) an opinion or opinions in form and
substance satisfactory to the Selling Shareholders and their counsel, or other
counsel satisfactory to the Selling Shareholders and their counsel. In the event
such counsel for the Purchaser rely upon any such certificate or opinion, a
counterpart of each thereof shall be delivered to the Selling Shareholders and
their counsel.
7.3 Employment Agreements. The Purchaser shall have executed mid delivered
to the Selling Shareholders the Employment Agreements described in Section 6.3.
ARTICLE 8. TERMINATION OF AGREEMENT
8.1 Termination. At any time prior to the Closing, this Agreement may be
terminated (a) by mutual consent of the parties with the approval of the
respective Board of Directors of the Purchaser and the Private Company, (b) by
either side if there has been a material misrepresentation, breach of warranty
or breach of covenant by the other side in its representations, warranties mid
covenants set forth herein, (c) by the Purchaser if the conditions stated in
Article 6 have not been satisfied at or prior to the Closing, or (d) by the
Private Company and the Selling Shareholders if the conditions stated in Article
7 have not been satisfied at or prior to the Closing.
8.2 Effect of Termination. If this Agreement shall be terminated as above
provided, all obligations of the parties hereunder shall terminate without
liability of either party to the other. In the event that this Agreement is so
terminated, each part), will return all papers, documents, financial statements
and other data furnished to it by or with respect to each other party to such
other party (including any copies thereof made by the first party).
8.3 Right to Proceed. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Article 6 hereof have not
been satisfied, the Purchaser shall have the rights to proceed with the
transactions contemplated hereby without waiving its rights hereunder, and if
any of the conditions specified in Article 7 hereof have not been satisfied, the
Selling Shareholders shall have the right to proceed with the transactions
contemplated hereby without waiving their rights hereunder.
ARTICLE 9. INDEMNIFICATION.
9.1 Definitions. For purposes of this Article 9:
"Losses" means all losses, damages (including, without limitation,
punitive and consequential damages), liabilities, payments and obligations, and
all expenses related thereto. Losses shall include any reasonable legal fees and
costs incurred by any of the Indemnified
21
<PAGE>
Persons subsequent to the Closing in defense of or in connection with any
alleged or asserted liability, payment or obligation, whether or not any
liability or payment, obligation or judgement is ultimately imposed against the
Indemnified Persons and whether or not the Indemnified Persons are made or
become parties to any such action.
"Purchaser's Indemnified Persons" means the Purchaser, its subsidiary and
affiliate corporations, their respective directors, officers, employees,
stockholders, agents, the Private Company after the Closing, and any person
serving as a director, officer, employee or agent of the Private Company at the
Purchaser's request after the Closing.
"Indemnified Person" means any person entitled to be indemnified under
this Article 9.
"Indemnifying Person" means any person obligated to indemnify another
person under this Article 9.
"Third Party Action" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to which
any person believes it may be an Indemnified Person hereunder.
9.2 Indemnification by the Selling Shareholders.
(a) Subject to the limitations in paragraph (b) below, each Selling
Shareholder jointly and severally agrees to defend, indemnify and hold harmless
Purchaser's Indemnified Persons from and against all Losses directly or
indirectly incurred by or sought to be imposed upon any of them:
(i) resulting from or arising out of any breach of any of the
representations or warranties made by the Selling Shareholders in or
pursuant to this Agreement or any agreement, document or instrument
executed and delivered pursuant hereto or in connection with the Closing,
(ii) resulting from or arising out of any breach of any covenant or
agreement made by the Selling Shareholders in or pursuant to this
Agreement, or
(iii) in respect of any liability or obligations of the Private
Company which any Selling Shareholder has expressly assumed or for which
any Selling Shareholder has expressly agreed to be responsible.
(b) The right to indemnification under paragraph (a) is subject to the
following limitation: the Selling Shareholders shall have no liability under
paragraph (a) unless one or more of the Purchaser's Indemnified Persons gives
written notice to the Selling Shareholders asserting a claim for Losses,
including reasonably detailed facts and circumstances pertaining thereto, before
the expiration of the period set forth below:
(i) for claims under clause (i) of paragraph (a) above, a period of
five (5) years from the Closing;
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<PAGE>
(ii) for claims under clause (ii) of paragraph (a) above, for so
long as any claim may be made in respect of such matter under any
applicable statute of limitations; and
(iii) for fraud and for claims under clause (iii) of paragraph (a)
above, without limitation as to time.
(c) Notwithstanding anything to the contrary contained herein, the
limitations on the periods of survival contained in paragraph (a) above shall
not apply to any covenant or undertaking contained in this Agreement or any
agreement or instrument contemplated hereby, which is to be performed following
the Closing.
9.3 Indemnification by the Purchaser.
(a) Subject to the limitations in paragraph (b) below, from and after the
Closing, the Purchaser shall indemnify and hold harmless Selling Shareholders'
Indemnified Persons from any and all Losses directly or indirectly incurred by
or sought to be imposed upon them:
(i) resulting from or arising out of any breach of any of the
representations or warranties made by the Purchaser, in or pursuant to
this agreement or in any agreement, document or instrument executed and
delivered pursuant hereto or in connection with the Closing; and
(ii) resulting from or arising out of any breach of any covenant or
agreement made by the Purchaser in or pursuant to this Agreement.
(b) The fight to indemnification under paragraph (a) above is subject to
the limitation that the Purchaser shall have no liability under paragraph (a)
unless a Seller's Indemnified Person gives written notice to the Purchaser
asserting a claim for Losses, including reasonably detailed facts and
circumstances pertaining thereto, before the expiration of five (5) years from
the Closing.
9.4 Notice: Defense of Claims. The Purchaser shall give prompt written
notice to the Selling Shareholders of each claim for indemnification hereunder,
specifying the amount and nature of the claim, and of any matter which in the
opinion of the Purchaser is likely to give rise to an indemnification claim. The
Selling Shareholders shall have the right to participate at their own expense in
the defense of any such matter or its settlement. If, in the opinion of the
Purchaser, its financial condition or business or the financial condition or
business of the Private Company acquired by the Purchaser would not be impaired
thereby, the Purchaser may authorize the Selling Shareholders to take over the
defense of such matter so long as such defense is expeditious. Failure to give
notice of a matter which may give rise to an indemnification claim shall not
affect the rights of the Purchaser to collect such claim from the Selling
Shareholders from the Selling Shareholders' transferees.
ARTICLE 10. MISCELLANEOUS
10.1 Survival of Warranties. All representations, warranties, agreements,
covenants and obligations herein or in any schedule, certificate or financial
statement delivered by any party to another party incident to the transactions
contemplated hereby are material, shall be deemed to
23
<PAGE>
have been relied upon by the other party and shall Survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto.
10.2 Fees and Expenses. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of the Private Company relating
in any way to the purchase and sale of stock hereunder shall be charged to or
paid by the Purchaser or included in any account of the Private Company as of
the Closing.
10.3 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram) addressed as provided below and if either (a) actually delivered at
said address, or (b) in the case of a letter, three business days shall have
elapsed after the same shall have been deposited in the United States mail,
postage prepaid and registered or certified, return receipt requested:
If the Selling Shareholders or, prior to the Closing to the Private Company, to:
Ron LaScala
5814 Schooner Way
Tampa, FL 33615
Telephone: 813-855-8849
If the Purchaser, to:
Daniel G. Brandano, Jr.
Affinity International, Inc.
100 2nd Ave. S. Suite 303N
St. Petersburg, FL 33701
Telephone: 800-704-2233
Fax: 813-896-1403
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
10.4 Entire Agreement. This Agreement (including all exhibits or schedules
appended to this Agreement and all documents delivered pursuant to or referred
to in this Agreement, all of which are hereby incorporated herein by reference)
constitutes the entire agreement between the parties, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto, have been expressed herein or in the documents
incorporated herein by reference.
10.5 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors and assigns; provided, however, that (a) an assignment of
this Agreement may be made by the Purchaser to a subsidiary of the Purchaser or
otherwise, although no such assignment shall relieve the Purchaser of any
liabilities or obligations under this Agreement, and (b) this Agreement may not
be assigned by the Selling Shareholders without the prior written consent of the
Purchaser.
24
<PAGE>
10.6 Publicity and Disclosures. No press releases or any public
disclosure, either written or oral, of the transactions contemplated by this
Agreement shall be made without the prior knowledge and written consent of the
Purchaser.
10.7 Confidentiality. The parties agree that they will keep confidential
and not disclose or divulge any confidential, proprietary or secret information
which they may obtain from the Private Company in connection with the
transactions contemplated herein, or pursuant to inspection rights granted
hereunder unless such information is or hereafter becomes public information.
10.8 Governing Law Severability. This Agreement shall be deemed a contract
made under the laws of the State of Florida and, together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State. The invalidity or enforceability of any other provision
hereof.
10.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.10 Effect of Table of Contents and Headings. Any table of contents,
title of an article or section heading herein contained is for convenience of
reference only and shall not affect the meaning of construction of any of the
provisions hereof.
Signatures on Following Page
25
<PAGE>
IN WITNESS WHEREOF. the parties hereto have caused this Affinity/Prestige
Acquisition Agreement to be executed as of the date set forth above by their
duly authorized representatives.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
a Nevada corporation
By: /s/ Daniel G. Brandano, Jr.
---------------------------
Daniel G. Brandano, Jr., President
PRESTIGE TRAVEL SERVICES II, INC.
a Florida corporation
By: /s/ Anita LaScala
---------------------------
Anita LaScala, President
SELLING SHAREHOLDERS:
/s/ Ron LaScala
-------------------------------
Ron LaScala
/s/ Anita LaScala
-------------------------------
Anita LaScala
/s/ Kimberly LaScala
-------------------------------
Kimberly LaScala
26
<PAGE>
ADDENDUM TO AFFINITY/PRESTIGE ACQUISITION AGREEMENT
THIS ADDENDUM (the "Addendum") is made as of the first day of January,
1999, to the Affinity/Prestige Acquisition Agreement (the "Agreement") of even
date herewith, by and among Affinity International Travel Systems, a Nevada
corporation (the "Purchaser"), Prestige Travel Services II, Inc., a Florida
corporation (the "Private Company"), and the shareholders of the Private Company
(the "Selling Shareholders").
1. The Purchaser has duly authorized the issuance and delivery to the
Selling Shareholders of the number of shares set forth on Schedule "A" to the
Agreement of Series "A" Convertible Preferred Stock, $0.001 par value, having
the rights, restrictions, privileges and preferences set forth in the
Certificate of Designation attached hereto as Exhibit A, which Certificate of
Designation the Purchaser has duly filed with the Secretary of State of the
State of Nevada.
3. Section 2.13 shall be deleted in its entirety.
4. Section 2.14 shall be deleted in its entirety.
5. Section 2.30 shall be deleted in its entirety.
6. Section 6.2 shall be deleted in its entirety.
7. Section 6.3 shall be deleted in its entirety, and replaced as follows:
6.3 Employment Agreements. The Purchaser and the Selling
Shareholders shall have entered into and executed employment agreements
having substantially the terms and conditions of Exhibits C-I, C-2 and
C-3.
8. Section 6.5 shall be deleted in its entirety.
9. Section 6.7 shall be deleted in its entirety.
10. Section 7.2 shall be deleted in its entirety.
11. The following ARTICLE 11. REGISTRATION RIGHTS shall be incorporated in
and made part of the Agreement:
ARTICLE 11. REGISTRATION RIGHTS
11.1 Certain Definitions. As used in this Article 11, the following terms
shall have the following respective meanings:
(a) The terms "Register" "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
<PAGE>
(b) "Registrable Securities" shall mean all Common Stock not
previously sold to the public: (A) issued or issuable upon conversion of the
Purchaser's Series "A" Preferred Stock, or (B) Common Stock issued pursuant to
stock splits, stock dividends and similar distributions with respect to such
shares.
(c) "Registration Expenses" shall mean all expenses incurred by the
Purchaser in complying with this ARTICLE 11, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Purchaser, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but shall not include Selling Expenses.
(d) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
United States Securities and Exchange Commission thereunder, all as the same
shall be in effect at the time.
(e) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
11.2 Piggyback Registration.
(a) Notice of Piggyback Registration and Inclusion of Registrable
Securities. In the event the Purchaser decides to Register any of its Common
Stock (either for its own account or the account of a security holder exercising
demand registration rights), the Purchaser shall: (i) promptly give the holders
of the Registrable Securities written notice thereof (which shall include a list
of the jurisdictions in which the Purchaser intends to attempt to qualify such
securities under the applicable Blue Sky or other state securities laws), and
(ii) include in such Registration (and any related qualification under Blue Sky
Laws or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request delivered to the Purchaser
by any of the holders thereof within twenty (20) days after delivery of such
written notice from the Purchaser.
(b) Underwriting in Piggyback Registration.
(i) If the Registration of which the Purchaser gives notice is
a Registered public offering including an underwriting, the Purchaser shall so
advise the holders of the Registrable Securities as part of the written notice
given pursuant to Section 11.2(a). In such event, the right of the holders of
the Registrable Securities to Registration shall be conditioned upon such
underwriting (as it is agreed to by the Purchaser) and the inclusion of any
Registrable Securities in such underwriting to the extent provided in this
Section 11.2. The Selling Shareholders requesting Registration ("Registering
Selling Shareholders") shall, together with the Purchaser, enter into an
underwriting agreement with the underwriter selected for such underwriting by
the Purchaser (the "Underwriter").
(ii) Marketing Limitation in Piggyback Registration. In the
event the Underwriter advises the Purchaser and the holders of the Registerable
Securities in writing that market factors (including, without limitation, the
aggregate number of shares of Common Stock requested to be Registered, the
general condition of the market and the status of the persons proposing to sell
securities pursuant to the Registration) require a limitation of the number of
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<PAGE>
shares to be underwritten, the Underwriter (subject to the allocation priority
set forth in Section 11.2(b) (iii) below) may exclude some or all of the
Registrable Securities from such Registration and underwriting.
(iii) Allocation of Shares in Piggyback Registration. In the
event that the Underwriter limits the number of shares to be included in a
Registration pursuant to Section 11.2(b) (ii), the Registering Selling
Shareholders shall be entitled to include a portion of the Registrable
Securities requested to be included in such registration pro rata (based on the
number of shares requested to be included) with the other holders of Registrable
Securities requesting Registration.
(c) Blue Sky in Piggyback Registration. In the event of any
Registration of Registrable Securities pursuant to this Section 11.2, the
Purchaser will exercise its best efforts to Register and qualify the securities
covered by the Registration Statement under such other securities or Blue Sky
Laws of such jurisdictions as the Purchaser shall otherwise be registering or
qualifying.
11.3 Additional Requirements.
(a) Expenses of Registration. All Registration Expenses incurred in
connection with the Registration pursuant to this ARTICLE 11, shall be borne by
the Purchaser.
(b) Registration Procedures. The Purchaser shall keep the
Registering Selling Shareholders advised as to the initiation and completion of
such Registration. At its expense the Purchaser shall: (i) use its best efforts
to keep such Registration effective until the Registering Selling Shareholders
have completed the distribution described in the Registration Statement relating
thereto; and (ii) furnish such number of prospectuses (including preliminary
prospectuses) and other documents as the Registering Selling Shareholders from
time to time may reasonably request.
11.4 Information Furnished by Registering Selling Shareholders. It
shall be a condition precedent of the Purchaser's obligations under this
Agreement that the Registering Selling Shareholders furnish to the Purchaser
such information regarding the holders of the Registrable Securities and the
distribution proposed by the holders of the Registrable Securities as the
Purchaser may reasonably request.
11.5 Indemnification.
(a) Purchaser's Indemnification of the Registering Selling
Shareholders. To the extent permitted by the law, the Purchaser will indemnify
the Registering Selling Shareholders, their heirs, personal representatives and
assigns, against all claims, losses, damages or liabilities (or actions in
respect thereof) to the extent such claims, losses, damages or liabilities arise
out of or are based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document (including any
related Registration Statement) incident to any such Registration, qualification
or compliance, or are based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Purchaser of any rule
or regulation promulgated under the Securities Act applicable to the Purchaser
and relating to action or
3
<PAGE>
inaction required of the Purchaser in connection with any such Registration,
qualification or compliance. The Purchaser will reimburse the Registering
Selling Shareholders for any legal and any other expenses reasonably incurred in
connection with investigation or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 11.5(a) shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Purchaser (which consent shall not unreasonably be withheld); and
provided further, that the Purchaser shall not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to the Purchaser by the Registering Selling Shareholders, and stated
to be for use in connection with the offering of securities of the Purchaser.
(b) Registering Selling Shareholder's Indemnification of the
Purchaser. To the extent permitted by law, the Registering Selling Shareholders
shall, indemnify the Purchaser, its directors and officers, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based upon any untrue statement (or alleged untrue statement) of a material
fact contained in any such Registration Statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Registering Selling Shareholders
of any rule or regulation promulgated under the Securities Act applicable to the
Registering Selling Shareholders and relating to action or inaction required of
the Registering Selling Shareholders in connection with any such Registration,
qualification or compliance; and will reimburse the Purchaser, such directors,
officers, partners, persons, law and accounting firms, underwriters or control
persons for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement, prospectus, offering circular or other
document in reliance, upon and in conformity with written information furnished
to the Purchaser by the Registering Selling Shareholders and stated to be
specifically for use in connection with the offering of securities of the
Purchaser.
(c) Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 11.5 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 11.5, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and to
assume the defense of such claim; provided, however, that the indemnifying party
shall be entitled to select counsel for the defense of such claim with the
approval of any parties entitled to indemnification, which approval shall not be
unreasonably withheld, provided further, however, that if either party
reasonably determines that there may be a conflict between the position of the
Purchaser and the Registering Selling Shareholders in conducting the defense of
such action, suit or proceeding by reason of recognized claims for indemnity
under this Section 11.5, then
4
<PAGE>
counsel for such party shall be entitled to conduct the defense to the extent
reasonably determined by such counsel to be necessary to protect the interest of
such party. The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 11.5, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise other than under this Section 11.5.
11.6 Limitations on Additional Registration Rights. The Purchaser shall
not, without the prior written consent of the Selling Shareholders, which
consent shall not be unreasonably withheld, enter into any agreement with any
holder or prospective holder of any securities of the Purchaser providing for
the granting to such holder of any right to Register or cause the Registration
of any securities of the Purchaser, unless such rights are in all respects
subordinate to those of the Selling Shareholders.
12. Capitalized terms not otherwise defined in this Addendum shall have
the definitions set forth in the Agreement.
13. This Addendum may be executed in counterparts, each of which shall be
deemed an original, but together which shall constitute one and the same
instrument.
14. This Addendum shall be deemed to be part of the Agreement. In the
event of any conflict between the terms of this Addendum and the terms of the
Agreement, the terms of this Addendum shall prevail.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Addendum to
Affinity/Prestige Acquisition Agreement as of the first day of January, 1999.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC., PRESTIGE TRAVEL SERVICES II, INC.
a Nevada corporation a Florida corporation
By: /s/ Daniel G. Brandano, Jr. By: /s/ Anita LaScala
-------------------------------- -----------------------------
Daniel G. Brandano, Jr. Anita LaScala
President President
SELLING SHAREHOLDERS:
/s/ Ron LaScala
- ------------------------------------
RON LASCALA
/s/ Anita LaScala
- ------------------------------------
ANITA LASCALA
Kimberly LaScala
- ------------------------------------
KIMBERLY LASCALA
6
<PAGE>
Exhibit 2.3
[AFFINITY LOGO]
August 9, 1999
Jim Vecchione, President
Design-A-Tour, Inc.
2866 Johnson Ferry Road, Suite 250
Marietta, GA 30062
Dear Mr. Vecchione:
Reference is made to that certain Asset Purchase Agreement by and between
Affinity International Travel Systems, Inc. ("Affinity") and Design-A-Tour, Inc.
("Design-A-Tour"), entered into as of February 8, 1999 (the "Agreement").
In consideration of the sale by Design-A-Tour of the Assets (as that term
is defined in the Agreement), Affinity hereby agrees to pay to Design-A-Tour
36,320 shares of its Common Stock (the "Shares"), which Shares will be paid in
full and complete satisfaction of the Series "B" Convertible Preferred Stock
owed by Affinity to Design-A-Tour pursuant to Section 1.2 of the Agreement.
If the foregoing correctly expresses our understanding, please so indicate
your agreement by signing the enclosed copy of this letter and returning it to
me.
Very truly yours,
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ D.G. Brandano
----------------------------------------
Daniel Brandano, Chief Executive Officer
Understood and Agreed
DESIGN-A-TOUR, INC.
By: /s/ Jim Vecchione
---------------------------
Jim Vecchione, President
Date: August 24, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT entered into as of the 3rd day of February, 1999, by and between
Affinity International Travel Systems, Inc., a Nevada corporation ("Buyer") with
its principal place of business at 100 Second Avenue South, Suite 303N, St.
Petersburg, Florida 33701, and Design-A-Tour, Inc., a Georgia corporation
("Seller") with its principal place of business at 2866 Johnson Ferry Road,
Suite 250, Marietta, Georgia 30062.
WHEREAS, the Buyer wishes to acquire certain of the assets of Seller
consisting of all of the business and assets of Seller related to its travel
operations conducted under the names "Design-A-Tour", "Faraway Travel", and
"Internet Travel Service" (the "Business"), and Seller wishes to convey such
assets to Buyer, on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE OF ASSETS.
1.1. Sale of Assets. Subject to the provisions of this Agreement, Seller
agrees to sell and Buyer agrees to purchase, at the Closing (as defined in
Section 1.4 hereof), all of the properties, assets and business of Seller used
in or related to the business and operations of the Business, including without
limitation, all furniture, fixtures, equipment, computer hardware and software,
business relationships, business opportunities, customer lists and profiles,
customer files, contracts (other than Seller's office lease for the Business),
contract rights (including the benefit of noncompetition covenants and other
agreements given by employees and independent contractors of the Business),
business records, brochures, trade and fictitious names and marks, telephone
numbers and good will, including without limitation, those contracts, furniture,
fixtures, equipment, customers, business opportunities and other assets listed
on Schedule 1.1 (a), hereto and accounts receivable to the extent described on
Schedule 1.1 (b). With respect to any contracts listed on Schedule 1.1 (a),
Buyer shall assume all obligations under such contracts which arise and relate
to periods after the Closing.
1.2. Purchase Price and Payment.
(a) In consideration of the sale by Seller of the Assets, Buyer
shall pay to Seller SEVENTY-FIVE THOUSAND DOLLARS ($75,000),
payable in shares of Buyer's Series "B" Convertible Preferred
Stock, $.00l par value ("Preferred Shares") specified in
Schedule "A" hereto.
(b) The Preferred Shares shall carry a 6% cumulative dividend, by
nonvoting, and shall have the following conversion features:
<PAGE>
- The Preferred Shares shall not be convertible to
Common Stock at any time prior to 6 months following the
close of this transaction and SHALL be converted by
Buyer upon the one year anniversary date of the
effective date of this Agreement; and
- The Preferred Shares shall be convertible to Common
Shares of Buyer, as herein above stated, as follows:
- The average daily closing offer price for stock of
Buyer, for twenty (20) consecutive trading days
immediately preceding the 6 month conversion date, or
immediately following the forced 12 month conversion (if
applicable), shall be divided into the sum of
$75,000.00. The resulting number shall determine the
number of shares of common stock that the Seller shall
receive in total.
Example: If the average closing offer price is $2.00,
then the Seller will be entitled to a total of 37,500
shares of Buyer's Common Stock.
- If Seller has not converted its Preferred Shares by
the one year anniversary date, Buyer shall convert the
Preferred Shares on the first day following the one year
Anniversary date.
1.3. No Assumption of Liabilities. Buyer agrees to assume only those
liabilities expressly set forth and described in Schedule 2.6 hereto ("Assumed
Liabilities"). It is expressly acknowledged and agreed that any and all other
debts, obligations, responsibilities or liabilities of the Seller or the
Stockholder, known or unknown, absolute or contingent, asserted or unasserted or
otherwise ("Retained Liabilities") will be retained by the Seller and/or the
Stockholder, as the case may be, and Buyer shall not assume nor shall Buyer be
liable in any respect for any of the Retained Liabilities. All known or
suspected Retained Liabilities are expressly set forth in Schedule 2.7 hereto.
1.4. Time and Place of Closing. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be deemed to
occur upon the complete execution hereof, the satisfaction of all conditions
contemplated hereby and the provision of all documents or agreements required
hereby.
1.5. Transfer of Assets. At the Closing, Seller shall deliver or cause to
be delivered to Buyer good and sufficient instruments of transfer transferring
to Buyer title to all of the Assets. Such instruments of transfer (a) shall be
in the form and will contain the warranties, covenants and other provisions (not
inconsistent with the provisions hereof) which are usual and customary for
transferring the type of property involved under the laws of the jurisdictions
applicable to such transfers, (b) shall be in form and substance satisfactory to
counsel for Buyer, and (c) shall effectively vest in Buyer good and
<PAGE>
marketable title to all the Assets free and clear of all security interest
liens, restrictions and encumbrances.
1.6. Delivery of Records and Contracts. At the Closing, Seller shall
deliver or cause to be delivered to Buyer all of Seller's leases, contracts,
commitments and rights referenced on Schedules 1.1, with such assignments
thereof and consents to assignments as are necessary to assure Buyer of the full
benefit of the same, and Seller shall take all requisite steps to put Buyer in
actual possession and operating control of the Assets.
1.7. Further Assurances. Seller from time to time after the Closing at the
request of Buyer and without further consideration shall execute and deliver
further instruments of transfer and assignment (in addition to those delivered
under Section 1.4) and take such other action as Buyer may reasonably require to
more effectively transfer and assign to, and vest in, Buyer each of the Assets.
Nothing herein shall be deemed a waiver by Buyer of its right to receive at the
Closing an effective assignment of each of the leases, contracts, commitments or
rights of Seller.
1.8. Right to Hire Employees. Seller shall make available to the Buyer all
of Seller's employees and independent contractors engaged by the Seller prior to
the Closing with respect to the business and operations of the Business for hire
by the Buyer at or after the Closing. Buyer shall have the right, but not the
obligation, to hire any of such employees. The Seller shall be responsible for
all wages, benefits, severance obligations, sick leave accruals, vacation
accruals and other obligations for such employees up to the date such employee
is no longer an employee of Seller. Within forty-eight (48) hours after the
Closing, Seller shall pay to its employees the cash value of all such
obligations that exist as of the Closing date.
1.9. Right to Use ARC Number(s).
(a) Seller agrees that until such time as ARC approves the change of
ownership of the Business and the change of name of the Business to "Affinity
International" or a derivative, affiliate, or subsidiary thereof, Seller shall
(i) keep its standing Letter of Credit posted for the benefit of ARC in place;
(ii) permit Buyer to use Seller's ARC accreditation and number; and (iii) permit
Buyer to use Seller's bank account related to its arrangements with ARC, from
which Seller shall remove its signatures and permit Buyer to appoint new
signatures.
(b) From and after the date of Closing until Buyer is assigned its
own ARC number, Buyer agrees to and shall make prompt payment of all charges it
makes under Seller's ARC number. Buyer will indemnify and hold Seller harmless
against any charges it makes on said account during said period.
1.10. Right to Use of WorldSpan Contract.
(a) Seller agrees that until such time as the Buyer shall
renegotiate Seller's existing CRS Contract with WorldSpan (see Schedule 1.1.a),
Buyer may use and take advantage of the benefits and Buyer shall keep current on
any and all obligations incurred with regards to said contract.
<PAGE>
(b) From and after the date of closing until Buyer has renegotiated
the aforesaid WorldSpan Contract, Buyer agrees to and shall make prompt payment
of all charges, and, shall indemnify and hold Seller harmless from and against
any and all sums due under such contract during said period.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Each of Seller and the Stockholder, jointly and severally, hereby
represents and warrants to Buyer as follows:
2.1. Organization and Qualification of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the law of the State
of Georgia with full power and authority to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it.
2.2. Stockholders. The undersigned Stockholder is the sole stockholder of
the Seller, and no other individual or entity currently owns or will own at the
Closing, any of the capital stock of Seller or any right thereto.
2.3. Authorization of Transaction. All necessary action, corporate or
otherwise, has been taken by Seller to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, and the
Agreement is the valid and binding obligation of Seller and the Stockholders
enforceable in accordance with its terms, and has been duly authorized by the
Stockholders.
2.4. Compliance of Transaction With Laws. The Seller is not in violation
of its Charter or bylaws as of the date hereof. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby does not
require any approval or consent which has not been obtained and which is not in
full force and effect as of the date hereof, will not conflict with or
constitute a breach or violation of the Seller's Charter or bylaws and will not
result in a violation of any law or regulation.
2.5. Financial Statements. Attached as Schedule 2.5 hereto are the most
recent financial statements of the Seller and the Business, audited or unaudited
as indicated, all of which statements are complete and correct and fairly
present the financial position of the Seller on the date of such statements find
the results of the Seller's and the Businesses operations on the applicable
basis for the periods covered thereby, and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved and prior periods. Also attached to Schedule 2.5 are financial
projections indicating that the revenues of Seller during calendar year 1998
will be in excess of $800,000, which projections are true and correct and based
on valid assumptions.
2.6. Title to Properties: Liens: Condition of Properties.
(a) Except as specifically disclosed in Schedule 2.6, Seller has
good and marketable title in fee simple to all of the Assets referenced thereon
and all of the leases
<PAGE>
and contracts listed on said Schedule are valid and subsisting, free of default
and fully assignable by Seller such that Buyer shall have the benefit of said
leases and contracts subject to the continuing obligation of Buyer to make any
and all payments required thereunder. None of the Assets listed on Schedule 2.6
is subject to any mortgage, pledge, lien, conditional sale agreement, security
title, encumbrance or other charge except as specifically disclosed in said
Schedule.
(b) Except as otherwise specified in Schedule 2.6 hereto, all of the
Assets (other than the furniture, fixtures or equipment, which is being
transferred "as is" without any representations or warranties except as to
title) owned or leased by Seller and included within the Assets, are in good
repair, have been well maintained, substantially conform with all applicable
laws, ordinances and regulations, environmental or otherwise, and each such
Asset is in good working order; and
2.7. Payment of Taxes. Seller has filed all federal, state and local
income, excise or franchise tax returns, real estate and personal property tax
returns, sales and use tax returns and other tax returns required to be filed by
them and have paid all taxes owing by them except taxes which have not yet
accrued or otherwise become due, for which adequate provision has been made in
the pertinent financial statements and will be paid when due. All transfer,
excise or other taxes payable to any jurisdiction by reason of the sale and
transfer of the Assets pursuant to this Agreement shall be paid or provided for
by Seller after the Closing.
2.8. Absence of Undisclosed Liabilities. There are no material liabilities
of the Seller of any nature, whether accrued, absolute, contingent or otherwise
not disclosed in the financial statements attached as Schedule 2.5 or disclosed
on Schedule 2.8 attached hereto. There is no fact which materially adversely
affects, or may in the future materially adversely affect, the business,
properties, operations or condition of Seller which has not been specifically
disclosed herein or in a schedule furnished herewith.
2.9. Customer Lists. Buyer has the right to use, free and clear of any
claims or rights of others, any and all customer lists identified on Schedule
1.1.
2.10. Contracts and Commitments. Seller is neither a party to nor subject
to any contract, commitments, plans, agreements or licenses related to the
business and operations of the Business, except as disclosed in Schedule 1.1 and
except for Seller's existing office lease for the Business location, which
lease, together with all obligations thereunder, is being retained by Seller and
constitutes a Retained Liability hereunder. Seller is not in material default
under any such contracts, commitments, plans, agreements or licensed nor does
Seller have knowledge of any termination, cancellation, limitation, modification
or change in any business relationship with any supplier or customer.
2.11. Employees and Employee Benefits. Set forth on Schedule 2.11 hereto
is the name, rate of compensation (including bonuses) and list of benefits of
each employee of Seller who performs services for the Business. Except as
specifically disclosed on said Schedule, Seller is not a party to any pension,
retirement, profit sharing, savings, bonus, incentive, deferred compensation,
group health insurance or group life insurance plan or
<PAGE>
obligation relating to employees of the Business, or to any collective
bargaining agreement or other contract, written or oral, with any trade or labor
union, employees' association or similar organization relating to employees of
the Business.
2.12. Permits. Seller holds all licenses, permits and franchises required
to permit the Seller to conduct the business and operation of the Business. All
such licenses and permits are listed on Schedule 2.12 and are and will be after
the Closing valid and in full force and effect and Buyer shall have full benefit
of the same.
2.13. Compliance with Laws. Seller is in full compliance with all laws and
regulations which apply to the conduct of its business, including all laws and
regulations relating to employment, occupational safety and environmental
matters.
2.14. Litigation. There is no litigation pending or, to the knowledge of
Seller or any Stockholder, threatened against Seller and there are no
outstanding court orders, court decrees, or court stipulations to which Seller
is a party which question this Agreement or affect the transactions contemplated
hereby, or which will result in any materially adverse change in the business,
properties, operations, prospects, assets or in the condition, financial or
otherwise, of Seller.
2.15. Disclosure of Material Information. Neither this Agreement nor any
exhibit or schedule thereto or certificate issued pursuant hereto contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the statements herein or therein not misleading, relating to the
business or affairs of Seller. There is no fact which materially adversely
affects the business, condition (financial or otherwise) or prospects of Seller
which has not been set forth herein.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to the Seller and each of the
Stockholders as follows:
3.1. Organization of Buyer. Buyer is a corporation in formation under the
laws of the State of Nevada.
3.2. Authorization of Transaction. All necessary action, corporate or
otherwise, has been taken by Buyer to authorize the execution, delivery and
performance of this Agreement, and the same is the valid and binding obligation
of Buyer enforceable in accordance with its terms, subject to laws of general
application affecting creditor's rights generally.
ARTICLE 4. CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to consummate this Agreement and the transactions
contemplated hereby are subject to the condition that on or before the Closing
the actions required by the Article 5 will have been accomplished.
<PAGE>
4.1. Representations: Warranties: Covenants. Each of the representations
and warranties of Seller contained in Article 2 shall be true and correct as
though made on and as of the Closing; and Seller shall, on or before the
Closing, have performed all of its obligations hereunder which by the terms
hereof are to be performed on or before the Closing.
4.2. Bill of Sale and Conveyance. The Seller shall have delivered to Buyer
a Bill of Sale and Conveyance relative to all of the Assets referenced on
Schedule 1.1 in the form of Exhibit B hereto.
4.3. Lease. The Buyer shall have entered into a lease with _________ for
the office at which the Seller currently operates the Business on the same terms
and conditions as the Seller's existing lease for such office or such other
terms acceptable to Buyer in its sole and unfettered discretion.
4.5. Noncompetition Agreement. Seller and its shareholder each shall have
executed and delivered to the Buyer a noncompetition and proprietary information
agreement in substantially the forms of Exhibit D-I, D-2, and D-3.
4.6. Approval of Buyer's Counsel. All actions, proceedings, instruments
and documents required to carry out this Agreement and all related legal matters
contemplated by this Agreement shall have been approved by counsel for Buyer,
provided that the approval of such counsel shall not be unreasonable withheld.
4.7. Absence of Certain Litigation. There shall not be any injunction,
restraining order, suit, action or other proceeding or order of any nature
issued by any court of competent jurisdiction or any governmental agency which
directs that this Agreement or any material transaction contemplated hereby
shall not be consummated as herein provided or asserts the illegality thereof.
ARTICLE 5. INDEMNIFICATION.
5.1. Indemnification by Seller. Seller and the Stockholder jointly and
severally agree to defend, indemnify and hold Buyer harmless from and against
any damages, liabilities, losses and expenses (including reasonable counsel
fees) of any kind or nature whatsoever which may be sustained or suffered by
Buyer based upon (i) a breach of any representation, warranty or covenant made
by Seller or the Stockholder in this Agreement or in any exhibit, certificate or
financial statement delivered hereunder, or (ii) by reason of any claim, action
or proceeding asserted or instituted growing out of any matter or thing covered
by such representations, warranties or covenants, or (iii) from any liability of
Seller including without limitation any of the Retained Liabilities and any
other liabilities relating to the operation of the Business, prior to Closing.
Promptly upon a claim being made against Buyer by a third party upon which a
claim for indemnification may be based, Buyer shall give Seller thirty (30) days
written notice of such claim, provided that the failure to provide such notice
not impair Buyer's rights hereunder unless Seller is materially prejudiced as a
result.
<PAGE>
5.2. Payment of Claims. Indemnification claims shall be paid or otherwise
satisfied by Seller, the Stockholder's or Seller's transferees in liquidation
within thirty (30) days after notice thereof is given by Buyer. Buyer may offset
such amounts against any amounts owing by Buyer to Seller, including under the
Note.
ARTICLE 6. MISCELLANEOUS.
6.1. Fees and Expenses. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of Seller relating in any way to
the purchase and sale of the Assets hereunder shall be charged to or paid by
Buyer or included in any account of Seller as of the Closing.
6.2. Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram) addressed as provided below and if either (a) actually delivered at
said address, or (b) in the case of a letter, three business days shall have
elapsed after the same shall have been deposited in the United States mail,
postage prepaid and registered or certified, return receipt requested:
If to the Seller or the Stockholder, to:
Jim Vecchione, President
Design-A-Tour, Inc.
2866 Johnson Ferry Road, Suite 250
Marietta, Georgia 30062
with a copy to:
Mark Panfel, Esquire
Suite 850, 900 Circle 75 Parkway
Atlanta, GA 30339
If to the Buyer, to:
Daniel Brandano, C.E.O.
Affinity International Travel Systems, Inc.
100 Second Ave. S, Suite 303N
St. Petersburg, FL 33701
with a copy to:
Linster E. Brinkley, Jr., Esquire
2350-N 34th Street North, Suite 110
St. Petersburg, FL 33713
<PAGE>
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
6.3. Entire Agreement. This Agreement (including all exhibits or schedules
appended to this Agreement and all documents delivered pursuant to or referred
to in this Agreement, all of which are hereby incorporated herein by reference)
constitutes the entire Agreement between the parties, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by my party hereby, have been expressed herein or in the documents
incorporated herein by reference.
6.4. Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors and assigns; provided, however, that (a) an assignment of
this Agreement may be made by Buyer to a nominee of Buyer or otherwise upon
written notice to Seller, although no such assignment shall relieve Buyer of any
liabilities or obligations under this Agreement and (b) this Agreement may not
be assigned by Seller without the prior written consent of Buyer.
6.5. Governing Law; Severability. This Agreement shall be deemed a
contract made under the laws of the State of Florida and, together with the
rights and obligations of the - heading herein contained is for convenience of
reference only and shall not affect the meaning of construction of any of the
provisions hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representatives.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
BY: /s/ D.G. Brandano
----------------------------------
Daniel Brandano, C.E.O.
DESIGN-A-TOUR, INC.
BY: /s/ Jim Vecchione
----------------------------------
Jim Vecchione, President
BY: /s/ Jim Vecchione
----------------------------------
Jim Vecchione, as Stockholder of
Design-A-Tour, Inc.
<PAGE>
Exhibit 2.4
ASSET PURCHASE AGREEMENT
This Agreement by and between Integrity Credit Services, Inc. of St
Petersburg, Florida, a corporation organized and existing pursuant to the laws
of the state of Delaware, d/b/a/Intrepid Travel and or Goldmark Travel
(hereinafter referred to as the "Seller"), and Affinity International Travel
Services, Inc. (hereinafter referred to as the "Buyer");
WITNESSETH
Whereas Seller owns and operates a series of Travel Agencies located in
Seminole and St. Petersburg Florida, and desires to sell the assets of the
business hereinafter listed to the Buyer; and Whereas the Buyer desires to
purchase selected assets of Seller upon the terms and conditions hereinafter
stated; and
Whereas this purchase and sale is limited to the assets hereinafter
specifically set forth, and it is the intention of the parties that Buyer shall
not assume any liabilities of the Seller other than those identified on Appendix
B attached.
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreement undertakings hereinafter set forth, do hereby agree as
follows:
1. Sate of Selected Assets
Seller agrees to sell and Buyer agrees to purchase (a) all of the right,
title, interest, and goodwill of the assets of the Travel Agencies located at
8050 Seminole Mall, Suite 100, Seminole, Florida 33772 [Intrepid Travel] and at
5901 Sun Boulevard, St. Petersburg, Florida 33715 [Goldmark Travel]; (b) The
right to use the Seller's names. Seller shall transfer or change names to effect
use of name by Buyer; (c) Fixtures and equipment, including the telephone system
and fax machine; (d) Goodwill, Intangible assets and covenant not to compete;
(e) Client records, materials, supplies, leasehold improvements, transferable
licenses, and telephone numbers. This Asset Purchase Agreement does not include
the following: Operating cash, Account Receivables, Certificate of Deposits
required for ARC Bond, and any deposits.
2. Landlord's Consent Requirements
This Contract is contingent upon Buyer obtaining the landlord's consent
for assignment of the leases at 8050 Seminole Mall, Suite 100 [Intrepid Travel]
and 5901 Sun Boulevard [Goldmark Travel].
3. Covenant Not to Compete and Employment Agreement
Seller covenants that after the closing date of this Agreement, he shall
not solely or jointly with any other person, firm, or corporation, either
directly or indirectly, carry on, engage in, or be interested in any manner in a
Travel business within Pinellas County or adjacent counties for a period of 3
years. In addition, Buyer will enter into an Employment Agreement with Mark S.
Mandula for a period of three (3) years at closing.
-1-
<PAGE>
4. Representations by Seller
Seller covenants and represents:
(a) That Seller is the owner of, and has good and marketable title to, all
of the assets specifically enumerated in Appendix A of this Agreement, free and
clear of all defects and encumbrances, and said assets shall be enjoyed by Buyer
free and clear of all encumbrances.
(b) That Seller has entered into no contracts related to its business,
such as union agreements, other than the utility bills accruing in the ordinary
course of business.
(c) That there are presently and will be at the time of closing, no liens
or security interests against the property and assets being transferred herein.
(d) That all of the equipment and fixtures to be transferred are now are
and at the closing date will be located at either 8050 Seminole Mall, Suite 100,
Seminole, Florida and or 5901 Sun Boulevard, St. Petersburg, Florida and will
not be removed therefrom without the written consent of the Buyer.
(e) Consents. No consent from or other approval of a governmental entity
or other person is necessary in connection with the execution of the Agreement
or the consummation by Seller of the business of Seller by Buyer in the manner
previously conducted by Seller.
(f) Litigation. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of the Seller, threatened against or
involving Seller or brought by Seller or affecting any of the property before or
by any federal, state, municipal, or other governmental department, commission,
board, agency, or instrumentality, domestic or foreign. Seller is not operating
its business under or subject to, or in default with respect to, any order,
writ, injunction, or decree of any court of federal, state, municipal, or
governmental department, commission, board, agency, or instrumentality, domestic
or foreign.
(g) Compliance with Laws. To the best of its knowledge, Seller has
complied with and is operating its business in compliance with all laws,
regulations, and orders applicable to the business conducted by it, and the
present uses by the Seller of the purchased property do not violate any such
laws, regulations, and orders.
(h) Liabilities. Seller has as of the purchase date and shall have on the
closing date no liabilities of any kind whatsoever, contingent or otherwise.
5. Indemnification Provisions
It is agreed by and between the parties that the Seller shall indemnify
and hold Buyer and its assigns harmless from any and all claims of any nature
whatsoever, including without limitation any creditor claims; and any claims for
wages, vacation, sick pay, or fringe benefits claimed by Seller's employees for
periods prior to the closing date. Seller shall furnish Buyer with a list of all
Seller's employees, full- and part-time, their current rate of compensation and
fringe benefits.
-2-
<PAGE>
6. Allocation of Purchase Price
Seller and Buyer agree that the Asset Purchase Price will be allocated as
follows: Accounts Receivable $ 0; Fixed Assets $69,264; Goodwill and Cover ant
not to compete $130,736; TOTAL $ 200,000.
7. Covenants of Seller
The Seller covenants with the Buyer as follows:
(a) The Bill of Sale to be delivered at the closing date will transfer all
the assets enumerated in the attached appendices free and clear of all
encumbrances and will contain the usual warranties;
(b) The business will be conducted up to the closing date in substantially
the same manner as it has been conducted in the past and in accordance with all
applicable laws and regulations.
8. Conditions Precedent of Buyer
The obligations of the Buyer hereunder are subject to the condition that
on or prior to the closing date:
(a) Representations and Warranties True at Closing. The representations
and warranties of the Seller contained in the Agreement or any certificate or
document delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true on and as of the closing date as
though such representations and warranties were made at and as of such date,
except if such representations and warranties were made as of a specified date
and such representations and warranties shall be tree as of such date.
(b) Seller's Compliance with Agreement. The Seller shall have performed
and complied with all Agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the closing of the Agreement.
(c) Resolutions and Seller's Certificate. The Seller shall have delivered
to the Buyer copies of the resolutions of the board of directors of the Seller
authorizing the transactions contemplated herein, with such resolutions to be
certified to be true and correct by its secretary or assistant secretary,
together with a certificate of an officer of the Seller, dated the closing date,
certifying in such detail as the Buyer may request to the fulfillment of the
conditions specified in subparagraphs (a) and (b) above.
(d) Injunction. On the closing date, there shall be no effective
injunction, writ, preliminary restraining order, or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein provided.
-3-
<PAGE>
(e) Approval of Proceedings. All actions, proceedings, instruments, and
documents required to carry out this Agreement, or incidental thereto, and all
other related legal matters shall have been approved by counsel for the Buyer.
(f) Casualty. The purchased property or any substantial portion thereof
shall not have been adversely affected in any material way as a result of any
fire, accident, flood, or other casualty or act of God or the public enemy, nor
shall any substantial portion of the purchased property have been stolen, taken
by eminent domain, or subject to condemnation. If the closing occurs hereunder
despite such casualty as a result of the waiver of this condition by Buyer, the
Seller shall assign or pay over to the Buyer the proceeds of any insurance or
any condemnation proceeds with respect to any casualty involving the purchased
property that occurs after the date hereof.
9. Closing Date
This Agreement shall be closed on July 5, 1999, and the consideration to
be received by Seller from Buyer as presented on Appendix C will then be made.
At the closing, the Seller shall deliver to Buyer an appropriate Bill of Sale of
the assets specified to be sold and the keys to the premises in return for
payment as called for herein.
10. Miscellaneous
(a) This Agreement supersedes all prior agreements between the parties and
may not be changed orally.
(b) The terms and conditions of the Agreement shall be binding upon the
representatives, successors, and assigns of the respective parties.
(c) This Agreement shall be construed pursuant to the laws of the State of
Florida.
(d) This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed to be an original and all of which shall constitute a
single instrument, and the signature of any party of any counterpart shall be
deemed a signature to any and may be appended to any other counterpart.
11. Entire Agreement/Modification
This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein and no representation,
promise, inducement, or statement of intention relating to the transactions
contemplated by this Agreement has been made by any party that is not set forth
in the Agreement. This Agreement shall not be modified or amended except by an
instrument in writing signed by or on behalf of the parties hereto.
-4-
<PAGE>
For Seller, Integrity Credit Services, Inc.
/s/ Mark S. Mandula
- --------------------------------------------------------------------------------
Date
July 15, 1999
- --------------------------------------------------------------------------------
For Buyer, Affinity International Travel Services, Inc.
/s/ Daniel Brandano
- --------------------------------------------------------------------------------
Date
- --------------------------------------------------------------------------------
-5-
<PAGE>
Appendix A - Assets to be Acquired
Refer to attached listing.
-6-
<PAGE>
Appendix B - Liabilities to be assumed by Buyer
1. Lease between Integrity Credit Services, Inc. and Bluffs Retail
Associates, LP, for office space of Intrepid Travel, located at 8050
Seminole Mall, Suite 100, Seminole, Florida.
2. Lease between Bayway Goldmark Travel Services, Inc. and EBK Properties,
Inc. for office space of Goldmark Travel, located at 5901 Sun Boulevard,
Suite 114, St. Petersburg, Florida.
3. Contract between Intrepid Travel and System One Amadeus, L.L.C.
4. Contract between Bayway Goldmark Travel Services, Inc., and System One
Amadeus, L.L.C.
5. Contract between Integrity Credit Service Inc., d/b/a/ Intrepid Travel and
Goldmark Travel and the Airlines Reporting Corporation.
-7-
<PAGE>
Appendix C - Consideration
140,00 shares of Common Stock of Affinity International Travel Services, Inc.
Symbol "AFFT"
Employment Agreement dated July 1, 1999 between Mark S. Mandula and Affinity
International Travel Services, Inc.
-8-
<PAGE>
Resolution
All of the Shareholders and Directors named in the Articles of Incorporation for
Integrity Credit Service, Inc. being present, upon motion duly being made and
carried it is:
Resolved that the sale of selected Assets of Integrity Credit Services, Inc.,
d/b/a/ Intrepid Travel and Goldmark Travel, located at 8050 Seminole Mall, Suite
100, Seminole, Florida [Intrepid] and 5901 Sun Boulevard, Suite 114, St.
Petersburg, Florida, is hereby ratified and approved. It is further
Resolved that Mark S. Mandula shall be designated to sign all documents on
behalf of Integrity Credit Services, Inc., to effectuate the sale of selected
assets of Integrity Credit Services, Inc.
Dated this 5th day of July, 1999
/s/ Mark S. Mandula
- ----------------------------
Mark S. Mandula
-9-
<PAGE>
ABSOLUTE BILL OF SALE
Know all men these present, that Integrity Credit Service, Inc., a Delaware
Corporation, 8050 Seminole Mall, Suite 100, Seminole, Florida 33772, ("Seller"),
for and in consideration of the sum identified on Appendix A of the attached
Asset Purchase Agreement, and Affinity International Travel Services, Inc., a
Florida Corporation ("Buyer"), the receipt whereof is hereby acknowledged by
Seller, has granted, bargained, sold, transferred and delivered, and by these
presents does grant, bargain, sell, transfer and deliver unto Buyer, the
following:
All equipment identified and appearing on Appendix A attached hereto.
Seller makes no warranty of merchantability or fitness for a particular purpose
in respect of any of the assets conveyed herein, and the same are conveyed in an
"as is, where is" condition, with all faults. By acceptance of delivery of this
absolute Bill of Sale, Buyer affirms that it has not relied on Seller's skill or
judgement to select or furnish the assets for any particular purpose, and the
Seller makes no warranty that the assets are fit for any particular purpose and
that there are not representations or warranties, expressed, implied or
statutory, with respect to any of the assets. Seller is the lawful owner of the
assets identified on Schedule A attached hereto, and Seller has the good right
to sell all of the assets identified on Schedule A attached hereto.
For Seller, Integrity Credit Services, Inc.
/s/ Mark S. Mandula
- --------------------------------------------------------------------------------
Date
July 15, 1999
- --------------------------------------------------------------------------------
For Buyer, Affinity International Travel Services, Inc.
/s/ Daniel Brandano
- --------------------------------------------------------------------------------
Date
July 15, 1999
- --------------------------------------------------------------------------------
-10-
<PAGE>
ACCOUNTS RECEIVABLE AGREEMENT
Integrity Credit Services, Inc., a Delaware Corporation, 8050 Seminole Mall,
Suite 100, Seminole, Florida 33772 ("Seller"), and Affinity International Travel
Services, Inc., a Florida Corporation ("Buyer"), the parties to a Asset Purchase
Agreement dated ________________, 1999 agree that:
1. All Accounts Receivable arising from any invoices generated by Seller
through and including June 30, 1999 shall be the sole and exclusive
property of Integrity Credit Services, Inc. These include all invoices
generated by Intrepid Travel and Goldmark Travel.
2. All payments received by Buyer for invoices generated by Seller and
including June 30, 1999 shall be forwarded to Seller at 1355 Brightwaters
Blvd. NE., St. Petersburg, Florida 33704 within ten (10) days of receipt.
For Seller, Integrity Credit Services, Inc.
/s/ Mark S. Mandula
- --------------------------------------------------------------------------------
Date
July 15, 1999
- --------------------------------------------------------------------------------
For Buyer, Affinity International Travel Services, Inc.
/s/ Daniel Brandano
- --------------------------------------------------------------------------------
Date
July 15, 1999
- --------------------------------------------------------------------------------
-11-
<PAGE>
Exhibit 2.5
AGREEMENT
This Agreement (the "Agreement") is entered into this December 29, 1999 by
Affinity International Travel Systems, Inc. ("Affinity"), Prestige Travel
Services II, Inc., a Florida corporation ("Prestige"), Anita LaScala, Ron
LaScala, and Kimberly LaScala (collectively the "LaScalas") and Prestige Travel
Systems, Inc. (" Prestige Systems").
RECITALS
A. Affinity is engaged in the retail and wholesale travel agency business.
B. Prestige is a wholly owned subsidiary of Affinity and is engage in the
retail travel agency business.
C. The LaScalas are the former owners of Prestige who sold their ownership
interest in Prestige to Affinity in a prior business transaction.
D. Affinity is desirous of selling Prestige and the LaScalas are desirous of
reacquiring Prestige.
F. Prestige Systems is a corporation formed in 1999 and owned by the LaScalas
which joins in this agreement for purposes of the indemnity, document
inspection, and document return provisions of this Agreement.
NOW THEREFORE the parties stipulate and agree that each has received good and
valuable consideration for the entry into this Agreement and agree as follows:
1. RECITALS ARE TRUE AND CORRECT. The parties agree that the recitals are
true and correct.
2. PAYMENT AND STOCK TRANSFER TO AFFINITY. The LaScalas shall pay Affinity
the sum of $75,000 in certified funds and shall transfer 1,497,076 shares of
stock in Affinity owned by the LaScalas as follows:
A. To Affinity from Anita LaScala, Stock Certificate No 2312,
evidencing her ownership of 598,830 shares; and
B. To Affinity from Ron LaScala, Stock Certificate No 2311,
evidencing his ownership of 598,830 shares; and
C. To Affinity from Kimberly LaScala, Stock Certificate No 2313,
evidencing her ownership of 299,416 shares;
all of which shall be delivered together with the fully executed stock
subscription agreements (delivered to Michael Addison, Esq. on October 4,1999)
to the offices. Michael J. Keane, Esq. on or before 5:00 p.m. December 30, 1999.
<PAGE>
3. STOCK TRANSFER TO THE LASCALAS. Affinity shall transfer 500 shares of
stock in Prestige, (representing all of the outstanding shares of stock in
Prestige) to the LaScalas all of which shall be delivered to the offices of
Phyllis Towzey, Esq. on or before 5:00 p.m. December 30, 1999.
4. MUTUAL RELEASES. Affinity hereby forever waives, discharges,
terminates, extinguishes, and otherwise releases all Claims (as hereinafter
defined) that it now has, has had or may hereafter have against the LaScalas and
their respective officers, directors, shareholders, employees, attorneys,
agents, contractors, insurers, successors or assigns, past or present, or any of
them.
The LaScalas and Prestige hereby forever waive, discharge terminate,
extinguish, and otherwise release all Claims (as hereinafter defined) that they
now have, have had or may hereafter have against Affinity, its subsidiaries and
affiliates and their respective officers, directors, shareholders, employees,
attorneys, agents, contractors, insurers, successors or assigns, past or
present, or any of them.
The term "Claims" as used above includes any promises,
representations, causes of action, rights and other claims and defenses of any
kind (in the broadest sense of those words), whether presently known or unknown,
whether matured or not yet ripe, and whether discovered or undiscovered prior to
the execution hereof, in law or in equity, arising or whole or in part out of or
otherwise relating to anything that has or has not occurred, in whole or in
part, prior to the effective date of this Mutual Release, including, but not
limited to:
(A) all Claims made or which have been made to date by or
against the parties to this Agreement; and
(B) all Claims made or which could have been made to date by
or against the parties to this Agreement arising from any action
which predates the effective date of this Agreement; and
(C) all Claims arising out of or relating to any breach of any
contract, if any, and
(D) all intentional tort claims, including fraud, libel and
slander, conversion malicious prosecution, abuse of process or other
tort Claims arising out any action which predates the effective date
of this Agreement; and
(E) all Claims arising from any and all allege violations of
any federal, state or local statutes, ordinances, rules
administrative orders, or other forms of regulations, as well as any
other claims based on constitutional, statutory, common law or
regulatory grounds; and
(F) all Claims, any portion or element of which began to
accrue prior to the date of this Agreement, even though other
portions or elements of which do not occur or accrue until after the
date of this Agreement; and
(G) all Claims arising from any and all alleged violations of
any federal or state securities laws; and
<PAGE>
(H) all claims arising under any employment agreement among
the LaScalas and Affinity, including any claims for unpaid wages or
expenses; and
(I) all claims arising under any prior acquisition agreement
or any agreement or commitment related thereto.
The term "Claims," however, shall not include and specifically excludes (1) any
and all promises, agreements, representations, warranties contained in this
Agreement, (2, any and all causes, causes of action, rights and other claims and
defenses of any kind which Affinity may have against the company commonly
referred to as Amadeus, (3) any and all causes, causes of action, rights and
other claims and defenses of any kind arising out of the future performance or
non-performance of the terms and conditions of this Agreement.
5. STATEMENT TO THE MEDIA AND CONFIDENTIALITY. The parties recognize that
by this Agreement, Affinity admits no liability to the LaScalas The LaScalas
will initiate no contact with the news media or any persons (excluding any
professional advisers and those employed by Prestige or Prestige Systems who
have an express and direct "need to know") regarding this Agreement or any of
the facts, circumstances, issues or negotiations which relate to and predate
this Agreement. If contacted by the news media or any other third person, the
LaScalas agree to state that they have reached an amicable agreement with
Affinity and shall decline further comment. Affinity shall be entitled to issue
such press releases as it deems appropriate and will provide the LaScalas an
advance copy for their informational purposes.
6. REPRESENTATIONS AND WARRANTIES OF THE LASCALAS. The LaScalas represent
and warrant the following facts to be true:
A. As of the date of this Agreement the LaScalas were officers of
Prestige and employees of Affinity. In that capacity the LaScalas have had the
primary responsibility for all day to day business, financial and accounting
functions of Prestige since January 1, 1999. As such each of them are intimately
familiar with the business affairs of Prestige.
B. Prior to the acquisition of Prestige by Affinity the LaScalas
were the owners of Prestige and were likewise responsible for all day to day
business, financial and accounting functions of Prestige from its inception up
through the acquisition by Affinity prior to January 1, 1999. As such each of
them have been continuously intimately familiar with the business affairs of
Prestige.
C. As employees of Affinity the LaScalas have had the opportunity to
review the financials, business plans and other strategic business information
of Affinity. They have had the opportunity to ask questions and have done so
regarding the business affairs and plans of Affinity.
D. The LaScalas are knowledgeable about the business projections,
financial condition, and strategies of Affinity. They recognize and acknowledge
that Affinity intends to seek other business opportunities and that the Affinity
stock transferred pursuant to this Agreement may be subject to dramatic and
substantial changes in value. The LaScalas with full knowledge and appreciation
of these prospects and facts enter into this Agreement and commit to transfer
all of the outstanding shares which they own in Affinity. The LaScalas further
recognize that Affinity makes no warranties or representations of any kind
regarding this Agreement and the transaction contemplated herein.
<PAGE>
E. The LaScalas have not assigned, pledged, hypothecated, or
otherwise encumbered the Affinity shares to be transferred pursuant to this
Agreement which shares shall be delivered free and clear of all claims, liens
and other forms of encumbrances of any and all kinds.
7. CANCELLATION OF CONTRACTUAL AGREEMENTS. All executory provisions of the
Employment Agreements among the LaScalas and Affinity; any prior acquisition and
related contracts; and any other contractual agreements in favor of the LaScalas
which may impose some obligation on Affinity or Prestige are hereby deemed
canceled and of no further force and effect.
8. INDEMNIFICATION. The LaScalas, Prestige and Prestige Systems hereby
unconditionally indemnify and hold harmless Affinity, its subsidiaries,
affiliates, and their respective officers, directors, shareholders, employees,
attorneys, agents, contractors, insurers, successors or assigns, past or
present, or any of them the ("Indemnitees") from and against any and all claims,
causes of action, losses, costs, expenses, awards, judgments, liabilities,
damages, fees and other charges or monetary obligations incurred by Indemnitees
that that arise out any act or omission or contractual undertaking of the
LaScalas, Prestige, and Prestige Systems including, but not limited to, any and
all attorneys' fees, costs and expenses incurred by Indemnitees in connection
with any or all of the foregoing.
9. DEFAULT. In the event of a default under this Agreement, the
non-defaulting party shall have available to it all fights described herein and
all fights available in law or equity. The prevailing party in any proceeding
arising out of or in connection with this Agreement shall be entitled to an
award of reasonable attorneys' fees and costs (including appellate attorneys'
fees and costs).
10. MISCELLANEOUS.
A. The parties have negotiated the terms and provisions of this
Agreement, have consulted with such legal, tax, accounting, financial and other
advisors retained by them of their personal choice as each considered necessary
or advisable with respect to this Agreement and the transactions contemplated
hereby, and this Agreement shall not be construed against any party as the
drafter hereof.
B. This Agreement shall be governed, construed and enforced
accordance with the internal laws of the State of Florida without reference to
its laws relating to the conflict of laws. Each party irrevocably consents to
personal jurisdiction over that party by the courts of the State of Florida and
the court in the Pending Action for all purposes of this Agreement. Venue shall
lie exclusively in the state courts of Pinellas County, Florida.
C. Time is of the essence under this Agreement.
D. Each of the Parties shall execute and deliver such other
documents, certificates, agreements and other writings and shall take such other
actions to as may be reasonably necessary to implement expeditiously or to
consummate this Agreement.
E. This Agreement contains the complete agreement of the Parties
concerning the settlement of the Pending Action and supersedes all prior
agreements, promises, representations and warranties that may have been made
between the parties concerning that subject, whether in connection with the
negotiation of this Agreement or otherwise.
<PAGE>
F. The signatories to this Agreement represent and warrant that they
are authorized to sign for and bind the person or entity as to which they have
signed the Agreement.
G. No delay of or omission in the exercise of any right, power or
remedy accruing to any party as a result of any breach or default by any other
party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or in any similar breach or default occurring later, nor shall any
waiver of any single breach or default be deemed a waiver of any other breach of
default occurring before or after that waiver.
H. The effective date of the transfers of stock and the closing of
this transaction for accounting purposes shall be December 31, 1999. The
LaScalas shall deliver to Affinity a preliminary 1999 year-end financial
statement for Prestige no later than January 20, 2000. The parties express their
general recognition and intent that Affinity shall be given full and complete
access to all business, contractual, accounting and financial records of
Prestige and Prestige Systems as are needed by the accountants for Affinity to
prepare interim and final financial reports and audits pertaining to Prestige in
accordance with GAAP and GAAS. The LaScalas, Prestige and Prestige Systems
recognize the commitments made in this paragraph are critical to Affinity and
recognize that substantial damages and irreparable harm will occur to Affinity
if timely, full, and complete access to the required information is prevented,
hindered or impaired. Therefore the LaScalas, Prestige and Prestige Systems more
particularly and expressly promise that on 24 hours telephonic notice they shall
make all requested business, contractual, accounting and financial information
available, shall provide adequate work space, and access to telefax machines,
copiers and such other office equipment as may be necessary for Affinity and its
representatives to conduct their needed inspections and reviews. Inspection and
copying shall be permitted and shall occur during business hours. The LaScalas,
Prestige and Prestige Systems promise to cooperate fully and not hinder, impair,
or delay to in any way inspection, review and copying described in this
paragraph. Any breach of this independent covenant may be remedied by emergency
injunctive relief without bond, but with telephonic notice to the offices of
Phyllis Towzey, Esq. at 727-894-4333. The amount of notice given shall not be
cause to delay an emergency injunction hearing or represent an independent
grounds for appeal of any injunction so entered. The LaScalas expressly
recognize that the benefits which inure to them under this Agreement would not
have occurred but for the promises and the actual performance of the promises
made in this paragraph.
I. The LaScalas, Prestige and Prestige Systems shall deliver to
Affinity within 3 business days the originals and all copies (whether preserved
electronically or not) all business and strategic plans, the Internet Strategy
Plan, dated November 10, 1999, and the June 30, 1999 year-end audit of Affinity.
The LaScalas, Prestige and Prestige Systems promise not to retain any copies or
any data or information derived from these documents and further agree not to
use them in any way for any purpose. The LaScalas, Prestige and Prestige Systems
agree that the document described in this paragraph are trade secrets of
Affinity and shall not contest their classification or status as trade secrets.
J. Affinity and Prestige affirmatively state that Prestige has
entered into no contracts of which the LaScalas are not aware.
K. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original instrument, but all such counterparts
together shall constitute but one agreement. This Agreement shall become
effective and binding upon the parties to it
<PAGE>
only if and when all parties to it have signed and exchanged with one another
counterparts of this Agreement. A telefax signature as to Kimberly LaScala shall
suffice to bind the parties. Kimberly LaScala shall deliver a telefax copy of
her Affinity stock reflecting its endorsement in blank. Kimberly LaScala shall
deliver an original signature to tiffs Agreement, and shall deliver the original
stock certificate duly endorsed within 5 business days of the date of this
Agreement.
L. Affinity shall return to the LaScalas the manual which they
prepared and Affinity agrees not to use it.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC. Approved as to form by Counsel for
Affinity International Travel Systems, Inc.
By: /s/ Daniel G. Brandano /s/ Michael Keane
----------------------------- -----------------
Its: Chief Executive Officer Michael Keane, Esq.
----------------------------
PRESTIGE TRAVEL SERVICES II, INC.
By: /s/ Anita LaScala
-----------------------------
Its: President
----------------------------
PRESTIGE TRAVEL SYSTEMS, INC. Approved as to form by Counsel for
Prestige Travel Systems, Inc.
By: /s/ Anita LaScala /s/ Phyllis J. Towzey
----------------------------- --------------------------------------------
Its: President Phyllis J. Towzey, Esq.
----------------------------
/s/ Anita LaScala Ron LaScala
- --------------------------------- --------------------------------------------
ANITA LaSCALA RON LaSCALA
/s/ Kimberly LaScala
- ---------------------------------
KIMBERLY LaSCALA
Approved as to form by counsel for
The LaScalas
/s/ Phyllis J. Towzey
--------------------------------------------
Phyllis J. Towzey, Esq.
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
MEDANCO, INC.
For the purpose of forming this corporation under the laws of the State of
Nevada, the undersigned incorporation hereby state:
ARTICLE FIRST
Name
The name of the corporation is:
Medanco, Inc.
ARTICLE SECOND
Purposes and Duration
The purposes for which the corporation is formed are:
(a) To engage in any lawful business activity from time to time
authorizing or approved by the board of directors of this
corporation;
(b) To act as principal, agent, partner or joint venturer or in any
other legal capacity in any transaction;
(c) To do business anywhere in the world; and
(d) To have and exercise all rights and powers from time to time granted
to a corporation by law.
<PAGE>
The above purpose clauses shall not be limited by reference to or
inference from one another, but each purpose clause shall be construed as a
separate statement conferring independent purposes and powers upon the
corporation.
The duration of this corporation shall be perpetual.
ARTICLE THIRD
Location
The county in the State of Nevada where the principal office for the
transaction of the business of the corporation is located is the County of
Clark, and the address of the principal office is: 3890 South Swenson, Suite
100, Las Vegas, Nevada, 89109.
ARTICLE FOURTH
Directors
The number of directors of the corporation is three until changed by an
amendment of these Articles of Incorporation or a by-law duly adopted by the
shareholders of the corporation.
ARTICLE FIFTH
Names of First Directors and Incorporators
The names and addresses of the persons who are appointed to act as first
directors of the corporation, who are also the incorporators, are:
Joseph R. Laird, Jr.
3890 South Swenson, Suite 100
Las Vegas, Nevada 89109
Kenneth J. Fisher
3890 South Swenson, Suite 100
Las Vegas, Nevada 89109
Patricia J. Laird
3890 South Swenson, Suite 100
Las Vegas, Nevada 89109
<PAGE>
ARTICLE SIXTH
Stock
The corporation is authorized to issue only one class of stock, which
shall be designated Capital Stock.
The total number of shares of Capital Stock that the corporation is
authorized to issue is 100,000 shares. The aggregate par value of all of said
shares is $25,000.00, and the par value of each such share is $0.25.
IN WITNESS WHEREOF, the undersigned incorporators, who are also the first
directors of the corporation, have executed these Articles of Incorporation on
June 7, 1977.
/s/ Joseph R. Laird, Jr.
--------------------------------------------
Joseph R. Laird, Jr.
/s/ Kenneth J. Fisher
--------------------------------------------
Kenneth J. Fisher
/s/ Patricia J. Laird
--------------------------------------------
Patricia J. Laird
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On this 7th day of June, 1977, before me, the undersigned, a Notary Public
in and for the said County and State, residing therein, duly commissioned and
sworn, personally appeared Joseph R. Laird, Jr., Kenneth J. Fisher, and Patricia
J. Laird, known to me to be the persons whose names are subscribed to the within
Articles of Incorporation, and acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ K. Edward Smith
--------------------------------------------
Notary Public
<PAGE>
()
Certificate of Revival Pursuant to NRS 78,730
---------------------------------------------
(Read instructions on reverse side) (Please remit with at least one copy
1. The name of the corporation: Medanco, Inc.
------------------------------------------------
(name must appear exactly the same as last
recorded in this office)
2. The name and address of the corporation's resident agent:
Theresa Marrott
- ----------------------------------- ---------------------------------------
3522 Desert Plains N/A
- ----------------------------------- ---------------------------------------
Elko, NV 89801
- ----------------------------------- ---------------------------------------
(physical address of Resident (mailing address, if different from
Agent) physical)
3. The date when the revival of the charter is to commence or be effective,
which may be, before the date of the certificate: June 22, 1997
-------------
4. Indicate whether or not the revival is to be perpetual, and, if not
perpetual, the time for which the revival is to continue. The corporation's
existence shall be: PERPETUAL or ______________________________.
(Time for which the revival is to continue)
5. The undersigned declare that the corporation desires to revive its corporate
charter and is, or has been, organized and carrying on the business authorized
by its existing or original charter and amendments thereto, and desires to
continue through revival its existence pursuant to and subject to the provisions
of this charter.
6. The names and addresses of the president, secretary and treasurer and all of
the corporation's directors are as follows:
Ronal Birkinbine 806 Clover Drive, Boise, ID 83703
- --------------------------------------------------------------------------------
(president) (address)
Vicky Birkinbine 806 Clover Drive, Boise, ID 83703
- --------------------------------------------------------------------------------
(secretary) (address)
- --------------------------------------------------------------------------------
(treasurer) (address)
- --------------------------------------------------------------------------------
(director) (address)
- --------------------------------------------------------------------------------
(director) You may attach additional pages, if necessary
<PAGE>
The undersigned declare that they have obtained written consent of all the
stockholders of the corporation and the unanimous consent was secured and that
they are the person(s) designated or appointed by the stockholders of the
corporation to revive the corporation.
/s/ Charles H. Spaulding
- ------------------------------------ ----------------------------------
(signature) (signature
State of Utah
County of Salt Lake
Signed and sworn (or affirmed) before me on 6/22/97 by:
-------
Charles K. Spaulding (name)
- ------------------------
- ------------------------
Denise M. Williams (Notarial Officer)
- ------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF MEDANCO, INC.
We, the undersigned, Ronald R. Birkinbine, President and Vicky Birkinbine,
Secretary of Medanco, Inc., do hereby certificate:
That the Board of Directors of said corporation at a meeting duly convened, held
on the 6th day of September, 1997, adopted a resolution to amend the original
articles as follows:
Article I which presently reads as follows:
ARTICLE FIRST
Name
The name of the corporation is: Medanco, Inc.
Is hereby amended to read as follows:
The name of the corporation is: Pay Dirt, Inc.
Article IV which presently reads as follows:
ARTICLE FOURTH
Directors
The number of directors of the corporation is three until changed by
an amendment of these Articles of Incorporation or a by-law duly adopted
by the shareholders of the corporation.
Is hereby amended to read as follows:
ARTICLE FOURTH
DIRECTORS
The Directors are hereby granted the authority to do any act on
behalf of the Corporation as may be allowed by law. Any action taken in
good faith, shall be deemed appropriate and in each instance where the
Business Corporation Act provides that the Directors may act in certain
instances where the Articles of Incorporation so authorize, such action by
the Directors, shall be deemed to exist in these Articles and the
authority granted by said Act shall be imputed hereto without the same
specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9)
directors, as determined, from time to time, by the then existing Board of
Directors.
<PAGE>
Article VI which presently reads as follows:
ARTICLE SIXTH
Stock
The corporation is authorized to issue only one class of stock,
which shall be designated Capital Stock.
The total number of shares of Capital Stock that the corporation is
authorized to issue is 100,000 shares. The aggregate par value of all of
said shares is $25,000.00, and the par value of each such share is $0.25.
Is hereby amended to read as follows:
ARTICLE VI
AUTHORIZED CAPITAL STOCK
The total authorized capital stock of the Corporation is 100,000,000
shares of Common Stock, with a par value of $0.001 (1 mil). All stock when
issued shall be deemed fully paid and non-assessable. No cumulative
voting, on any matter to which Stockholders shall be entitled to vote,
shall be allowed for any purpose.
The authorized stock of this corporation may be issued at such time,
upon such terms and conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this
Corporation.
THE FOLLOWING NEW ARTICLES ARE HEREBY ADOPTED
ARTICLE VII
COMMON DIRECTORS
As provide by Nevada Revised Statutes 78.140, without repeating the
section in full here, the same is adopted and no contract or other
transaction between this Corporation and any of its officers, agents or
directors shall be deemed void or voidable solely for that reason. The
balance of the provisions of the code section cited, as it now exists,
allowing such transactions, is hereby incorporated into this Article as
though more fully set-forth, and such Article shall be read and
interpreted to provide the greatest latitude in its application.
ARTICLE VIII
LIABILITY OF DIRECTORS AND OFFICERS
No Director, Officer or Agent, to include counsel, shall be
personally liable to the Corporation or its Stockholders for monetary
damage for any breach or alleged breach of fiduciary or professional duty
by such person acting in such capacity. It shall be
<PAGE>
presumed that in accepting the position as an Officer, Director, Agent or
Counsel, said individual relied upon and acted in reliance upon the terms
and protections provided for by this Article. Notwithstanding the
foregoing sentences, a person specifically covered by this Article, shall
be liable to the extent provided by applicable law, for acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law,
or for the payment of dividends in violation of NRS 78.300
ARTICLE IX
ELECTION REGARDING NRS 78.378 - 78.3793 and 78.411-78.444
This Corporation shall NOT be governed by nor shall the provisions
of NRS 78.378 through and including 78.3793 and NRS 78.411 through and
including 78.444 in any way whatsoever affect the management, operation or
be applied in this Corporation. These Articles may only be amended by a
majority vote of not less than 90% of the then issued and outstanding
shares of the Corporation. A quorum of outstanding shares for voting on an
Amendment to these articles shall not be met unless 95% or more of the
issued and outstanding shares are present at a properly called and noticed
meeting of the Stockholders. The super-majority set forth in these
Articles only applies to any attempted amendment to these Articles.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is 99,095; that the said change(s)
and amendment have been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ Ronald Birkinbine
--------------------------------------------
Ronald Birkinbine
President
/s/ Vicky Birkinbine
--------------------------------------------
Vicky Birkinbine
Secretary/Treasurer
State of Utah
County of Salt Lake
On September 10, 1997, personally appeared before me, a Notary Public, Ronald
Birkinbine and Vicky Birkinbine who acknowledged that they executed the above
instrument.
/s/ Denise M. Williams
--------------------------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT
PAY DIRT, INC.
A Nevada Corporation
The undersigned, Janamarie Riche, President and Shawni Larrabee, Secretary
of Pay Dirt, Inc. hereby certify:
The shareholders of Pay Dirt, Inc., through an Action of Shareholders
without a meeting, adopted a resolution to amend the Articles of Incorporation
as follows:
Article I which presently reads:
Article First - Name
The name of the corporation is Pay Dirt, Inc.
Is hereby amended to read as:
Article First - Name
The name of the corporation is Affinity International Travel Systems, Inc.
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 578,970, total number of
shares voting for above amendment is 307,800 representing over 53% and a
majority of each class of stock outstanding and entitled to vote thereon.
Dated this 23rd day of June, 1998.
/s/ Janamarie Riche
--------------------------------------------
Janamarie Riche, President
/s/ Shawni Larrabee
--------------------------------------------
Shawni Larrabee, Secretary
SUBSCRIBED AND SWORN TO BEFORE ME THIS 23RD DAY OF JUNE, 1998.
/s/ Melinda K. Orth
--------------------------------------------
NOTARY PUBLIC
COMMISSION EXPIRES: 2/23/2000
<PAGE>
CERTIFICATE OF AMENDMENT
AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC.
A Nevada Corporation
The undersigned, Janamarie Riche, President and Shawni Larrabee, Secretary
of Pay Dirt, Inc. hereby certify:
The shareholders of Affinity International Travel Systems, Inc., through
an Action of Shareholders without a meeting and representing over 95% of the
issued and outstanding stock, adopted a resolution to amend and clarify the
Articles of Incorporation as follows:
Article IX Is hereby amended to read as:
Article First - Name
The Corporation shall NOT be governed by nor shall the provisions of NRS
78.378 through and including NRS 78.3793 and NRS 78.411 through and including
78.444 in any way whatsoever affect the management, operation or be applied in
this Corporation. This Article may only be amended by amended by a majority vote
of not less than 90% of the then issued and outstanding shares of the
Corporation. A quorum of outstanding shares for voting on an Amendment to this
Article shall not be met, unless 95% or more of the issued and outstanding
shares are present at a properly called and noticed meeting of the Stockholders.
The super-majority set-forth in this Article only applies to any attempted
amendment to this Article.
Dated this 1st day of July, 1998.
/s/ Janamarie Riche
--------------------------------------------
Janamarie Riche, President
/s/ Shawni Larrabee
--------------------------------------------
Shawni Larrabee, Secretary
Page 1 of 2
<PAGE>
Page 2
Certificate of Amendment
Affinity International Travel Systems, Inc.
Notary Page
STATE OF UTAH )
)ss
COUNTY OF SALT LAKE )
On this the 1st day of July, 1998, Janamarie Riche and Shawni Larrabee,
President and Secretary respectively, personally appeared before me and executed
the attached Certificate of Amendment for Affinity International Travel Systems,
Inc.
/s/
--------------------------------------------
Notary Public
Page 2 of 2
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
Pursuant to Nevada Statute, the following Amendment to the Restated
Articles of Incorporation of the Company were taken, without meeting, pursuant
to authorized by the written consent of Shareholders holding over a majority of
the outstanding voting power of the Company.
I
Article IV of the Articles of Incorporation of the Corporation shall be
amended to read as follows:
ARTICLE VI
Capitalization. The Corporation shall have the authority to issue
100,000,000 shares of common stock with each share of common stock having a par
value of $.001 (one mill.). The common stock of the Corporation is of the same
class and shall have the same rights and preferences.
The Corporation shall have the authority to issue 100,000,000 shares of
preferred stock with each share of preferred stock having a par value of $.001
(one mill.). Pursuant to NRS 78.195 and all other applicable sections, the Board
of Directors of the Corporations shall have the authority to fix the
designations, rights, voting powers, limitations and preferences or other
variations of or within this class or any series within this class.
Fully paid stock of the Corporation shall not be liable for further call
or assessment. All shares shall be issued at the direction of the Board of
Directors.
II
The aforementioned amendment to the Restated Articles of Incorporation
were adopted, without meeting and pursuant to NRS 78.320(2), by Shareholders
holding over a majority of the outstanding shares of the Corporation on the 22nd
day of September, 1998. At the time of said resolution, without meeting, there
were 4,265,433 common shares outstanding, all of which were entitled to vote,
and the vote in favor, without meeting, of said amendments equaled 2,850,000.
The undersigned being the President and Secretary of the Corporation do
hereby certify that the aforementioned Amendment to the Articles of
Incorporation properly represent the amendment approved, without meeting by the
Shareholders holding over a majority of the outstanding shares of the
corporation, and that said amendment was approved by said Shareholders by the
aforementioned vote.
<PAGE>
In addition, the undersigned, being President and Secretary of the
Corporation, do hereby certify that written consent of said action was received
in accordance with the provisions of Nevada Statutes.
/s/ Joan Brandano
- -------------------------------
Joan Brandano, President
/s/ Maura Palmer
- -------------------------------
Maura Palmer, Secretary
On this 22 day of September, 1998, personally appeared before me Joan
Brandano, President and Maura Palmer, Secretary of Affinity International Travel
Systems, Inc. who, after being duly sworn, did state that the matters contained
above are true and correct to the best of their knowledge.
/s/ Marilyn Ward
- -------------------------------
Notary Public
My Commission Expires: October 11, 2001
----------------
<PAGE>
CERTIFICATE OF DESIGNATION
of
Rights, Preferences and Privileges
Of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
SERIES "A" CONVERTIBLE PREFERRED STOCK
$0.001 par value
The undersigned duly authorized officers of Affinity International Travel
Systems, Inc., a corporation organized and existing under the General
Corporation Law of the State of Nevada (the "Corporation"), DO HEREBY CERTIFY:
FIRST: That pursuant to authority expressly vested in the Board of
Directors of said corporation by the provisions of its Articles of
Incorporation, as amended, said Board of Directors duly adopted the following
resolution:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article VI of the Corporation's Articles of Incorporation,
as amended, a series of preferred stock of the Corporation be, and it hereby is,
created out of the authorized but unissued shares of the capital stock of the
Corporation, such series to be designated Series "A" Convertible Preferred
Stock, to consist of 1,000,000 shares, $0.001 par value per share, of which the
designations, powers, rights, preferences and the qualifications, limitations or
restrictions thereof shall be (in addition to those set forth in the
Corporation's Articles of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have, for all purposes of this resolution, the
meanings herein specified.
Board of Directors. The term "Board of Directors" shall mean the Board of
Directors of this Corporation, and, to the extent permitted by law and the
Articles of Incorporation and Bylaws of the Corporation, any committee of the
Board of Directors authorized to exercise the powers of the Board of Directors.
Common Stock. The term "Common Stock" shall mean all shares now or
hereafter authorized of any class of Common Stock of the Corporation, which has
the right (subject always to prior rights of any class or series of preferred
stock) to participate in the distribution of the assets and earnings of the
Corporation without limit as to per share amount.
Conversion Date. The term "Conversion Date" shall have the meaning set
forth either in Section 4(b) in the event of an optional conversion, or in
Section 4(c) in the case of a mandatory conversion.
Conversion Ratio. The term "Conversion Ratio" shall mean the ratio used to
determine the number of shares of Common Stock issuable and deliverable upon
conversion of each share of the Series "A" Preferred Stock. The Conversion Ratio
shall be the contractual ratio as
1
<PAGE>
negotiated with respect to one or more acquisition or other transactions in
which the Corporation is a party and issues Series "A" Preferred Stock, subject
to adjustment in accordance with Section 4(e) below.
Current Market Price. The term "Current Market Price" shall mean the
Current Market Price of the Common Stock, which shall be calculated, in the
event the Common Stock is publicly traded, as the daily average closing price
per share of the Common Stock for twenty (20) consecutive trading days
immediately preceding the Conversion Date (as adjusted for any stock dividend,
split, combination or reclassification that was effected during such twenty (20)
day trading period). The closing price for each day shall be the last reported
sale price regular way, or, in case no reported sale takes place on such day,
the average of the last closing bid and asked prices, regular way, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or if not so listed or admitted to trading, the closing
sale price per share of the Common Stock as reported by NASDAQ or the NASD
Electronic Over the Counter Bulletin Board (OTCBB). In the event the Common
Stock is not quoted on NASDAQ or OTCBB, Current Market Price shall be deemed to
be the fair market value per share of the Common Stock on the Conversion Date as
determined by the accountants for the Corporation.
Preferred Stock. The terms "Preferred Stock" or Series "A" Preferred
Stock, shall mean the Series "A" Convertible Preferred Stock, $0.001 par value
per share of the Corporation.
2. Preferential Dividend. The holders of Series "A" Preferred Stock shall
be entitled to receive or have set apart, out of funds of the Corporation
legally available for the payment of dividends, a cumulative, preferential cash
dividend in an amount equal to six percent (6%) per annum on the amount of the
distribution that the holders of the Series A Preferred Stock are entitled to
receive upon liquidation or dissolution of the Corporation as provided in
Section 3 below, payable quarterly on dates set by the Board of Directors,
before any dividend may be set apart or paid on the Common Stock. The holders of
the Preferred Stock shall not participate in the earnings of the Corporation
beyond the preferential dividend of six percent (6%) per annum and all
accumulated preferential dividends in arrears. Nothing herein contained shall
require the Corporation to pay a dividend in any fiscal year.
3. Distribution Upon Liquidation, Dissolution or Winding Up. In the event
of any liquidation or dissolution of the Corporation, whether voluntary or
involuntary, or other winding up of the affairs of the Corporation, the holders
of Series "A" Preferred Stock shall be entitled to receive out of the net assets
of the Corporation the sum of Two Dollars ($2.00) per share, plus an amount
equal to all accumulated preferential dividends in arrears, before any
distribution may be made to the holders of the Common Stock. The holders of the
Preferred Stock shall not be entitled to any further participation in the
distribution of the assets of the Corporation. Neither the consolidation or
merger of the Corporation into or with another corporation, nor the sale of all
or substantially all of the assets of the Corporation to another corporation or
corporations shall be deemed a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of this Section 3.
4. Conversion. The Series "A" Preferred Stock shall be convertible into
Common Stock as follows:
2
<PAGE>
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section 4, the holder of any shares of Series "A" Preferred
Stock shall have the right, on or after August 1, 1999, until January 1, 2000,
to convert, in whole or in part, such shares of Preferred Stock into fully paid
and non-assessable shares of Common Stock at the Conversion Ratio, subject to
adjustment in accordance with Section 4 above(e) below. Any unpaid preferential
dividend payable on the shares of the Series "A" Preferred Stock so converted,
shall be forfeited upon conversion.
(b) Mechanics of Optional Conversion. The holder of any shares of
Series "A" Preferred Stock may exercise the conversion rights specified in
Section 4(a) by surrendering to the Corporation or any transfer agent of the
Corporation the certificate or certificates representing the shares of Preferred
Stock to be converted, duly endorsed, accompanied by written notice specifying
the number of shares to be converted and the person(s), and the share amounts
thereof, to whom the certificate or certificates for Common Stock are to be
issued. Conversion shall be deemed to have been effected on the date when notice
of an election to convert is delivered and a certificate or certificates
representing the shares of Preferred Stock to be converted are surrendered, and
such date is referred to herein as the "Conversion Date." As promptly as
practicable thereafter, the Corporation shall issue and deliver a certificate or
certificates, representing in the aggregate the number of whole shares of Common
Stock to which the holder of the Preferred Stock is entitled upon conversion, to
the person(s) and in the Common Stock share amounts specified in the written
notice. The Corporation shall also deliver to such holder a check or cash with
respect to any fractional share of Common Stock that would otherwise be issuable
as provided in Section 4(d). The person(s) in whose names the certificate or
certificates for shares of Common Stock are to be issued shall be deemed to have
become holders of record of such Common Stock on the Conversion Date. Upon
conversion of all of a holder's shares of Preferred Stock, the rights of such
holder as a stockholder shall cease. Upon conversion of only a portion of shares
covered by a certificate of Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to the holder of the Preferred Stock, at the
expense of the Corporation, a new certificate representing the number of shares
of Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(c) Mandatory Conversion. In the event a holder of the Series "A"
Preferred Stock has not elected to convert all of such holder's shares of
Preferred Stock on or before January 1, 2000, the unconverted shares of
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Ratio on January 2, 2000, which shall be deemed the Conversion
Date. Upon such conversion, the rights of a holder of the Preferred Stock as a
stockholder shall cease, and the Corporation shall issue and deliver a
certificate or certificates, representing in the aggregate the number of whole
shares of Common Stock resulting from the mandatory conversion, to such holder,
or to such holder's designee(s) in the event written notice is delivered to the
Corporation prior to the Conversion Date specifying the person(s), and the share
amounts thereof, to whom the shares of Common Stock are to be issued. The
Corporation shall also deliver to the holder of the Preferred Stock a check or
cash with respect to any fractional share of Common Stock that would otherwise
be issuable as provided in Section 4(d). The person(s) in whose names the
certificate or certificates for shares of Common Stock are to be issued shall be
deemed to have become holders of record of such Common Stock on the Conversion
Date. Any unpaid preferential dividend payable on the shares of the Series "A"
Preferred Stock so converted, shall be forfeited upon conversion.
3
<PAGE>
(d) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of shares of Series "A" Preferred Stock. The number of
whole shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of Preferred Stock, the
Corporation shall pay a cash amount in respect of such fractional share interest
equal to that fractional interest of the then Current Market Price.
(e) Conversion Ratio Adjustments. The Conversion Ratio shall be
subject to adjustment from time to time as follows:
(i) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall: (i) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, or (ii)
subdivide or reclassify the outstanding shares of Common Stock into a greater
number of shares, or (iii) combine or reclassify the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Ratio in effect at
the time of the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted, so that the holder of any shares of Series "A"
Preferred Stock surrendered for conversion after such date shall be entitled to
receive the number of shares of Common Stock which such holder would have owned
or been entitled to receive had such Series "A" Preferred Stock been converted
immediately prior to such date. Successive adjustments in the Conversion Ratio
shall be made whenever any event specified above shall occur.
(ii) Consolidation, Merger, Sale, Lease or Conveyance. In case
of any consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of all or substantially all of the assets of the Corporation, each
share of Series "A" Preferred Stock shall, after the date of such consolidation,
merger, sale, lease or conveyance, be convertible into the number of shares of
stock or other securities or property (including cash) to which the Common Stock
issuable (at the time of such consolidation, merger, sale, lease or conveyance)
upon conversion of such share or Series "A" Preferred Stock would have been
entitled to receive had the holder of the Preferred Stock converted immediately
prior to the occurrence of such consolidation, merger, sale, lease or
conveyance.
(iii) Rounding of Calculations; Minimum Adjustment. All
calculations under this Section 4(e) shall be made to the nearest cent or to the
nearest one hundredth (1/100th) of a share, as the case may be. Any provision of
Section 4 to the contrary notwithstanding, no adjustment in the Conversion Ratio
shall be made if the amount of such adjustment would be less than $0.05, but any
such amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate $0.05 or more.
(iv) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of this Section 4(e)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event (A) issuing to the holder of any share of Series "A"
4
<PAGE>
Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the shares of
Common Stock issuable upon such conversion before giving effect to such
adjustment and (B) paying to such holder any amount of cash in lieu of a
fractional share of Common Stock pursuant to Section 4(d); provided that the
Corporation upon request shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event requiring such
adjustment.
(f) Statement Regarding Adjustments. Whenever the Conversion Ratio
shall be adjusted as provided in Section 4(e), the Corporation shall forthwith
file, at the office of any transfer agent for the Series "A" Preferred Stock and
at the principal office of the Corporation, a statement showing in detail the
facts requiring such adjustment and the Conversion Ratio that shall be in effect
after such adjustment, and the Corporation shall also cause a copy of such
statement to be sent by mail, first class postage prepaid, to each holder of
shares of Series "A" Preferred Stock at such holder's address appearing on the
Corporation's records. Each such statement shall be signed by the Corporation's
independent public accountants, if applicable, or the Corporation's officers
responsible for preparing such information. Where appropriate, such copy may be
given in advance and may be included as part of a notice required to be mailed
under the provisions of Section 4(g).
(g) Notice to Holders. In the case of any action which would require
the giving of notice to the holders of the Series "A" Preferred Stock, under
this Section 4 or any other section of this Certificate of Designation, such
notice shall be sufficient if mailed, registered or certified, to holder's
address as shown on the stock records of the Corporation's transfer agent.
(h) Treasury Stock. For the purposes of this Section 4, the sale or
other disposition of any Common Stock theretofore held in the Corporation's
treasury shall be deemed to be an issuance thereof.
(i) Costs. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock upon conversion of any shares of Series "A" Preferred
Stock; provided that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the shares of Series "A" Preferred Stock in respect of which such
shares are being issued.
(j) Reservation of Shares. The Corporation shall reserve at all
times so long as any shares of Series "A" Preferred Stock remain outstanding,
free from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the shares of Series "A" Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Series "A" Preferred Stock.
(k) Valid Issuance. All shares of Common Stock which may be issued
upon conversion of the shares of Series "A" Preferred Stock will upon issuance
by the Corporation be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges
5
<PAGE>
with respect to the issuance thereof, and the Corporation shall take no action
which will cause a contrary result (including without limitation, any action
which would cause the Conversion Ratio to be less than the par value, if any of
the Common Stock).
5. Voting Rights. The holders of the issued and outstanding shares of
Series "A" Preferred Stock shall be entitled to one (1) vote per share at all
meetings of the shareholders of the Corporation. Except as otherwise provided in
the Corporation's Articles of Incorporation and as required by law, the shares
of Preferred Stock shall vote with the shares of the Common Stock as one voting
group.
6. Exclusion of Other Rights. Except as may otherwise be required by law,
the shares of Series "A" Preferred Stock shall not have any preferences or
relative, participating, optional or special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Corporation's Articles of Incorporation. The
shares of Series "A" Preferred Stock shall have no preemptive or subscription
rights.
7. Headings. The headings of the various Sections and subsections hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
8. Severability of Provisions. If any right, preference or limitation of
the Series "A" Preferred Stock set forth in this resolution (as such resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation set forth shall be deemed dependent upon
any other such right, preference or limitation unless so expressed herein.
9. Status of Reacquired Shares. Shares of Series "A" Preferred Stock which
have been issued and reacquired in any manner, through conversion or otherwise,
shall (upon compliance with any applicable provisions of the laws of the State
of Nevada) be canceled and not subject to reissuance by the Corporation.
IN WITNESS WHEREOF, Affinity International Travel Systems, Inc. has caused
this Certificate to be signed by its President, Daniel G. Brandano, and attested
by its Assistant Secretary, Gerard LaMontagne, this 8 day of February, 1999.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
By: /s/ D. G. Brandano
---------------------------------
Daniel G. Brandano, President
ATTEST:
By: /s/ Gerard LaMontagne
---------------------------------
Gerard LaMontagne, Assistant Secretary
6
<PAGE>
STATE OF FLORIDA
COUNTY OF PINIELAS
On the 8th day of February, 1999, personally appeared before me Daniel G.
Brandano, President of Affinity International Travel Systems, Inc., who, after
being duly sworn did state that the matters contained above are true and correct
to the best of his knowledge.
Personally known _______ or Produced Identification Florida driver's license
------------------------
Type of Identification Produced Fla Drivers License
-------------------
/s/ Nancy J. Deitemeyer
- --------------------------------
Notary Public
My Commission Expires: April 22, 2002
--------------
STATE OF FLORIDA
COUNTY OF PINIELAS
On the 8th day of February, 1999, personally appeared before me Gerard
LaMontagne, Assistant Secretary of Affinity International Travel Systems, Inc.,
who, after being duly sworn did state that the matters contained above are true
and correct to the best of her knowledge.
Personally known _______ or Produced Identification ____________________
Type of Identification Produced ________________________________________________
/s/ Nancy J. Deitemeyer
- --------------------------------
Notary Public
My Commission Expires: April 22, 2002
--------------
7
<PAGE>
Exhibit 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
----------------------
CUSIP No. 00826 F 10 8
----------------------
----------------- -----------------
Number SHARES
2355
----------------- -----------------
AffINITY
INTERNATIONAL TRAVEL SYSTEMS
-----------------------------
"World Class Service Worldwide"
AUTHORIZED COMMON STOCK: 100,000,000 SHARES - PAR VALUE $.001
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
-- Shares of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. Common Stock --
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
- --------------------------------- -----------------------------------
SECRETARY PRESIDENT
[GRAPHIC OMITTED]
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
CORPORATE
Seal
NEVADA
- --------------------------------------------------------------------------------
[LOGO] INTERWEST TRANSFER CO. INC. P.O. BOX 84117/SALT LAKE CITY, UTAH
COUNTERSIGNED & REGISTERED
----------------------------------------
COUNTERSIGNED Transfer Agent
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a
saving bank), or a trust company. The following abbreviations, when
used in the inscription on the face of this certificate, shall be
construed as though they were written out in full according to
applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ...........Custodian.............
(Cust) (Minor)
under Uniform Gifts to Minors Act
.................................
(State)
Additional abbreviations may also be used though
not in the above list.
For Value Received, ___________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint.
_____________________________________________________________________Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated _______________
________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
<PAGE>
Exhibit 4.2
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale up to 1,142,857 shares
of its Common Stock, $0.001 par value per share (the "Common Stock"), at $0.35
per share.
The undersigned further understands that the offering is being made without
registration of the Common Stock under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on an exemption for transactions by an
issuer not involving a public offering and Rule 504 of Regulation D under the
Securities Act, and further understands that the undersigned is purchasing the
Common Stock without being furnished any prospectus setting forth all of the
information that would be required to be furnished under the Securities Act, and
understands further that the offering is being made only to "accredited
investors" (as defined in Rule 501 of Regulation D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Agreement, the
undersigned hereby irrevocably subscribes for that number of shares of Common
Stock set forth in Appendix A at a price per share of $0.35, which is payable as
described in Section 4.
2. Acceptance of Subscription and Issuance of Shares. It is understood and
agreed that the Company has the right to accept or reject this subscription, in
whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Common Stock (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place at such times and place as the Company shall designate by
notice to the undersigned. The Company may, at its option, elect to close the
purchase and sale of the shares in one or more Closings.
4. Payment for Shares. The undersigned shall make payment in the amount of $0.35
per share for the Common Stock, less the amount necessary to satisfy all costs
and expenses, including reasonable attorney and professional fees, travel,
lodging and other transportation
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expenses, of the undersigned incurred in connection with this subscription, to
the Company via certified check, personal check, or wire transfer to the account
designated by the Company.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock, when issued and paid for, will
represent validly authorized, duly issued and fully paid and non-assessable
shares of the Company, and the issuance thereof will not conflict with the
Certificate of Incorporation or Bylaws of the Company nor with any outstanding
warrant, option, call, preemptive right or commitment of any type relating to
the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. The Company agrees that it, or a wholly owned
subsidiary of the Company, shall only use the proceeds received from this
subscription for directly related operating expenses of the Company or any
wholly owned subsidiary of the Company, but in no event shall the proceeds from
this subscription be used for present or future compensation, whether regular or
special, of any officer or director of the Company.
(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company desires to
engage in any private placement of securities or other financing efforts
utilizing securities of the Company, the Company shall first offer to the
undersigned the ability to participate in all or part of such private placement
or financing. The undersigned shall accept or reject the offer within five
business (5) days of receipt of the offer. Such response shall be made in
writing via certified mail, return receipt requested, or via overnight mail. In
the event that the undersigned agrees to provide such future financing, the
undersigned shall be required to provide such financing at a discounted
commission rate of five percent (5%).
(iii) Registration Rights. The undersigned shall be entitled to
unlimited "piggyback" registration rights in connection with all registrations
of securities by the Company under the Securities Act of 1933 or in connection
with any demand registration of any shareholder of the Company (except for
registrations on Form S-8 or Form S-4). The Company will bear all registration
expenses (exclusive of underwriting discounts and commissions) of all piggyback
registrations by the undersigned. The undersigned shall also have the right to
participate pro-rata in any registered offering by the Company.
(iv) Price Stability. From and after the date hereof, in the event
that the Company in any non-public offering sells any common stock at a price
per share that is less than that which is paid by the undersigned herein, then
for no additional consideration, the Company shall immediately transfer to the
undersigned that number of unrestricted shares of common stock of the Company
equal to the difference between (1) the number of shares which would have been
subscribed to at the lesser price per share of such subsequently sold securities
and (2) the number of the shares subscribed to herein.
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(v) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the undersigned a right of co-sale (on a pro-rata basis) such that upon notice
to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including legal
fees and expense, incurred pursuant to the exercise or the attempted exercise of
the undersigned's rights hereunder.
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
(v) Marketability. The Company shall maintain adequate current
public information in satisfaction of the requirements for resales of restricted
stock pursuant to Rule 144 promulgated under the Securities Act of 1933 and Rule
15c-2(11) promulgated under the Securities Exchange Act of 1934, including, but
not limited to, the publication over a nationally recognized reporting service
or newswire of annual audited financial statements and semi-annual interim
unaudited balance sheets and income statements.
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(vi) Stock Splits. In order to induce the undersigned to enter into
this subscription agreement and to facilitate the closing of the transaction
contemplated hereby, the Company represents and warrants to the undersigned that
from and after the date hereof, the Company will not engage in any manner of
reverse split.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to have been
reaffirmed and confirmed as of the Closing, taking into account all
information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
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(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for his own beneficial account, for investment purposes, and not
with a view to, or for immediate resale in connection with, any
distribution of the Common Stock. The undersigned has not offered or sold
any portion of its shares of Common Stock and has no present intention of
dividing his shares of Common Stock with others or of reselling his shares
of Common Stock. The undersigned understands that the Common Stock has not
been registered under the Securities Act or any State Securities Laws by
reason of specific exemptions under the provisions thereof which depend in
part upon the investment intent of the undersigned and of the other
representations made by the undersigned in this Agreement. The undersigned
understands that the Company is relying upon the representations and
agreements contained in this Agreement (and any supplemental information)
for the purpose of determining whether this transaction meets the
requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (A) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Common Stock or any interest therein, or make any offer or attempt to do
any of the foregoing, except pursuant to a registration of the Common
Stock under the Securities Act and all applicable State Securities Laws or
in a transaction which is exempt from the registration provisions of the
Securities Act and all applicable State Securities Laws; and (B) that the
Company and any transfer agent for the Common Stock shall not be required
to give effect to any purported transfer of any of the Common Stock except
upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the number of shares of
Common Stock specified herein and of the Company to sell the Common Stock are
subject to the satisfaction at or before the Closing of the following condition
precedent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Warrant Subscription Agreement. On or prior to the date hereof,
the Company and the undersigned shall have enter into a Warrant
Subscription Agreement on mutually acceptable terms.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EST, December 4, 1998.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in
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equity, to specific performance of this Agreement by the party that so refused
or failed to consummate the transactions contemplated hereby. In any action to
enforce the terms of this Agreement, the successful party shall be entitled to
recover its reasonable attorneys' fees, all costs and expenses from the party
who refused or failed to perform this Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by either the Company or the undersigned without the prior written
consent of the other party.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
13. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
15. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
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with a copy, which shall not constitute notice, to:
Locke, Purnell, Rain, Harrell
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the shares of Common Stock.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 2nd day of December, 1998.
Name: Schoemann Venture Capital, LLC
/s/ Rodney R. Schoemann, Sr.
----------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
December 2, 1998
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
----------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
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APPENDIX A
CONSIDERATION TO BE DELIVERED
- --------------------------------------------------------------------------------
Shares of Common Stock to be Acquired Aggregate Amount to Be Paid
- ------------------------------------- ---------------------------
1,142,857 $400,000.00 less the amount necessary to
satisfy all outstanding expenses
incurred in connection with this
subscription
- --------------------------------------------------------------------------------
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APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
____ a. any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 and has a
reasonable expectation of reaching the same income level in the
current year;
____ c. any bank as defined in section 3(a)(2) of the
Securities Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of
the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the "1940 Act")
or a business development company as defined in section 2(a)(48) of
the 1940 Act; any Small Business Investment Company licensed by the
U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; any employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of
$5,000,000; or, if a self-directed plan,
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with investment decisions made solely by persons that are accredited
investors;
____ d. any private business development company as defined
in section 202(a)(22) of the Investment Advisers Act of 1940;
____ e. any organization described in section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose
of acquiring the securities offered, with total assets in excess of
$5,000,000;
____ f. any director, executive officer, or general partner
of the Company;
X g. any entity in which all of the equity owners are
- ---- accredited investors; or
____ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as
described in section 230.506(b)(2)(ii) of Regulation D under the
Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 2nd day of December, 1998.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------------------
Rodney R. Schoemann, Sr.
Managing Member
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Exhibit 4.3
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
WARRANT SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a warrant (the
"Warrant") to purchase 200,000 shares of its Common Stock, $0.001 par value per
share (the "Common Stock"), at $0.35 per share.
The undersigned further understands that the offering of the Warrant and any
subsequent exercise of the Warrant and purchase of the Common Stock are being
made without registration of the Warrant and/or the Common Stock subject to the
Warrant under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance on an exemption for transactions by an issuer not involving a public
offering and Rule 504 of Regulation D under the Securities Act, and further
understands that the undersigned is purchasing the Warrant and upon exercise of
the Warrant, the Common Stock, without being furnished any prospectus setting
forth all of the information that would be required to be furnished under the
Securities Act, and understands further that the offering is being made only to
"accredited investors" (as defined in Rule 501 of Regulation D under the
Securities Act).
1. Subscription. Subject to the terms and conditions of this Agreement, the
undersigned hereby irrevocably subscribes for that number of Warrants to
purchase the shares of Common Stock set forth in Appendix A. The consideration
for the Warrant shall be the execution of the Subscription Agreement by and
between the Company and the undersigned (the "Subscription Agreement") on or
prior to the date hereof and the payment of the purchase price for the Common
Stock as set forth in Section 1 of the Subscription Agreement; provided,
however, that the execution, delivery and performance of the Subscription
Agreement by Purchaser shall be a condition precedent of the obligations of the
Company hereunder.
2. Acceptance of Warrant Subscription and Issuance of Shares. It is understood
and agreed that the Company has the right to accept or reject this subscription,
in whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
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3. The Closing. The closing of the purchase and sale of the Common Stock (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place at such times and place as the Company shall designate by
notice to the undersigned. The Company may, at its option, elect to close the
purchase and sale of the shares in one or more Closings.
4. Exercise of Warrant and Payment for Shares. The Warrant is exercisable
commencing on the date hereof and shall expire on the date which is two (2)
years from the date hereof. Upon exercise of the Warrant, the undersigned shall
make payment in the amount of $0.35 per share for the Common Stock as set forth
on Appendix A hereof, to the Company via certified check, personal check, or
wire transfer to the account designated by the Company.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. Upon issuance of the Warrant and upon exercise of the
Warrant and issuance of the Common Stock, the Common Stock will represent
validly authorized, duly issued and fully paid and non-assessable shares of the
Company, and the issuance thereof will not conflict with the Certificate of
Incorporation or Bylaws of the Company nor with any outstanding warrant, option,
call, preemptive right or commitment of any type relating to the Company's
capital stock.
(b) Other Representations and Agreements.
(i) Registration Rights. Following the exercise of the Warrant and
issuance of the Common Stock, the undersigned shall be entitled to unlimited
"piggyback" registration rights in connection with all registrations of
securities by the Company under the Securities Act of 1933 or in connection with
any demand registration of any shareholder of the Company (except for
registrations on Form S-8 or Form S-4). The Company will bear all registration
expenses (exclusive of underwriting discounts and commissions) of all piggyback
registrations by the undersigned. The undersigned shall also have the right to
participate pro-rata in any registered offering by the Company.
(ii) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the undersigned a right of co-sale (on a pro-rata basis) such that upon notice
to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or
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<PAGE>
hereunder, shall have the "put" option provided below, and the Company and the
Shareholders shall be bound by the applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including legal
fees and expense, incurred pursuant to the exercise or the attempted exercise of
the undersigned's rights hereunder.
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
(iii) Marketability. The Company shall maintain adequate current
public information in satisfaction of the requirements for resales of restricted
stock pursuant to Rule 144 promulgated under the Securities Act of 1933 and Rule
15c-2(11) promulgated under the Securities Exchange Act of 1934, including, but
not limited to, the publication over a nationally recognized reporting service
or newswire of annual audited financial statements and semi-annual interim
unaudited balance sheets and income statements.
(iv) No Restrictions on Public Sale; Aggregation. It is fully
understood by the Company that this Warrant is issued pursuant to Rule 504 of
Regulation D promulgated under the Securities Act of 1933, and that as such,
upon exercise of the Warrant and issuance of the Common Stock, the undersigned
shall receive "unrestricted securities" as that term is used in Rule 144 of the
Securities Act of 1933. It is further understood by the Company that since this
Warrant is issued pursuant to Rule 504, the value of the purchase price of the
Common Stock upon exercise of the Warrant as set forth on Appendix A shall be
integrated with all other sales of common stock of the Company under Rule 504
within the previous twelve (12) months. The effect of such integration being
that the Company shall be limited to raising an aggregate of $1,000,000.00
pursuant to such Rule 504 offering and the aggregation of this Warrant with all
other sales of common stock in the
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<PAGE>
previous twelve (12) months, including the sale pursuant to the Subscription
Agreement, may preclude any future capital raises pursuant to Rule 504 for the
time periods specified in Rule 504.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to have been
reaffirmed and confirmed as of the Closing, taking into account all
information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(g) Investment Intent. The undersigned is acquiring the Warrant
solely for his own beneficial account, for investment purposes, and not
with a view to, or for immediate resale in connection with, any
distribution of the common stock of the Company. The undersigned has not
offered or sold any portion of its shares of Common Stock and has no
present
4
<PAGE>
intention of dividing its shares of Common Stock with others or of
reselling his shares of Common Stock. The undersigned understands that the
Warrant and the Common Stock have not been registered under the Securities
Act or any State Securities Laws by reason of specific exemptions under
the provisions thereof which depend in part upon the investment intent of
the undersigned and of the other representations made by the undersigned
in this Agreement. The undersigned understands that the Company is relying
upon the representations and agreements contained in this Agreement (and
any supplemental information) for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (A) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Warrant or the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a registration of
the Warrant or the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt from
the registration provisions of the Securities Act and all applicable State
Securities Laws; and (B) that the Company and any transfer agent for the
Common Stock shall not be required to give effect to any purported
transfer of any of the Common Stock except upon compliance with the
foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to accept this Warrant and of the Company to
grant the Warrant are subject to the satisfaction at or before the Closing of
the following condition precedent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Subscription Agreement. On or prior to the date hereof, the
Company and the undersigned shall have enter into a Subscription Agreement
on mutually acceptable terms and the undersigned shall have paid the
purchase price as set forth in Section 1 of the Subscription Agreement.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EST, December 4, 1998.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the
5
<PAGE>
successful party shall be entitled to recover its reasonable attorneys' fees,
all costs and expenses from the party who refused or failed to perform this
Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by either the Company or the undersigned without the prior written
consent of the other party.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
13. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
15. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
6
<PAGE>
with a copy, which shall not constitute notice, to:
Locke, Purnell, Rain, Harrell
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the grant of the Warrant and the issuance and sale of the
shares of Common Stock upon exercise of the Warrant.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the issuance of
the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 2nd day of December, 1998.
Name: Schoemann Venture Capital, LLC
/s/ Rodney R. Schoemann, Sr.
----------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
December 2, 1998
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
-------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
8
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- --------------------------------------------------------------------------------
Consideration for Warrant Aggregate Amount to Be Paid Number of Warrant Shares
Upon Exercise of Warrant
Execution of Subscription $70,000.00 200,000.00
Agreement and payment of
the purchase price set
forth in Section 1 thereof
- --------------------------------------------------------------------------------
9
<PAGE>
APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
____ a. any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching
the same income level in the current year;
____ c. any bank as defined in section 3(a)(2) of the Securities
Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934; any insurance company as defined
in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the
"1940 Act") or a business development company as defined
in section 2(a)(48) of the 1940 Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions
for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a
self-directed plan, with investment
10
<PAGE>
decisions made solely by persons that are accredited
investors;
____ d. any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of
1940;
____ e. any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
____ f. any director, executive officer, or general partner of
the Company;
X g. any entity in which all of the equity owners are
- ---- accredited investors; or
____ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 2nd day of December, 1998.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------------
Rodney R. Schoemann, Sr.
Managing Member
11
<PAGE>
Exhibit 4.4
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCIPTION AGREEMENT (this "Amendment") is entered into as of
the 21st day of January, 1999, by and among Affinity International Travel
Systems, Inc., a Nevada corporation (the "Company") and Schoemann Venture
Capital, LLC, a Delaware corporation ("SVC").
WHEREAS, the Company and SVC have executed a Subscription Agreement dated
on or about December 2, 1998 (the "Subscription Agreement") pursuant to which
SVC agreed to purchase from the Company 1,142,857 shares of common stock of the
Company subject to the terms and conditions of the Agreement; and
WHEREAS, the Company and SVC desire to amend and modify the Subscription
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto covenant and agree
to amend and modify the Agreement as follows:
1. Section 5(b)(ii) of the Subscription Agreement shall be modified in its
entirety to provide as follows:
"(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company
solicits, or is advised by an investment banker or financing specialist to
solicit, investment capital by means of any private placement of
securities or other financing efforts utilizing securities of the Company,
the Company shall first offer to the undersigned the ability to
participate in all or part of such private placement or financing. The
undersigned shall accept or reject the offer within five business (5) days
of receipt of the offer. Such response shall be made in writing via
certified mail, return receipt requested, or via overnight mail. In the
event that the undersigned agrees to provide such future financing, the
undersigned shall be required to provide such financing at a discounted
commission rate of five percent (5%). This provision shall not be
effective for any investment opportunity not generated through the initial
efforts of the Company.
2. Section 5(b)(iv) of the Subscription Agreement shall be modified in its
entirety to provide as follows:
"(iv) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company in any non-public offering sells any
common stock at a price per
<PAGE>
share that is less than that which is paid by the undersigned herein, then
for no additional consideration, the Company shall immediately transfer to
the undersigned that number of shares of common stock of the Company equal
to the difference between (1) the number of shares which would have been
subscribed to at the lesser price per share of such subsequently sold
securities and (2) the number of the shares subscribed to herein;
provided, however, that this provision shall not be operative any time the
price per share of the Company's common stock as reported on the
Over-the-Counter Bulletin Board quotation system or any national
securities exchange is below $0.625.
3. Other than as modified by this Amendment, all other provisions of the
Subscription Agreement not in conflict with this Amendment, shall remain in full
force and effect.
IN WITNESS THEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
BY: /s/ Daniel G. Brandano
-------------------------------------
Daniel G. Brandano
Chief Executive Officer
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
-------------------------------------
Rodney R. Schoemann, Sr.
Managing Member
<PAGE>
Exhibit 4.5
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
WARRANT SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a warrant (the
"Warrant") to purchase 250,000 shares of its Common Stock, $0.001 par value per
share (the "Common Stock"), at $0.35 per share.
The undersigned further understands that the offering of the Warrant and any
subsequent exercise of the Warrant and purchase of the Common Stock are being
made without registration of the Warrant and/or the Common Stock subject to the
Warrant under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance on an exemption for transactions by an issuer not involving a public
offering, and further understands that the undersigned is purchasing the Warrant
and upon exercise of the Warrant, the Common Stock, without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that the offering is
being made only to "accredited investors" (as defined in Rule 501 of Regulation
D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Agreement, the
undersigned hereby irrevocably subscribes for that number of Warrants to
purchase the shares of Common Stock set forth in Appendix A. The consideration
for the Warrant shall be the execution of the Subscription Agreement by and
between the Company and the undersigned (the "Subscription Agreement") on or
prior to the date hereof and the payment of the purchase price for the Common
Stock as set forth in Section 1 of the Subscription Agreement; provided,
however, that the execution, delivery and performance of the Subscription
Agreement by Purchaser shall be a condition precedent of the obligations of the
Company hereunder.
2. Acceptance of Warrant Subscription and Issuance of Shares. It is understood
and agreed that the Company has the right to accept or reject this subscription,
in whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Common Stock (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place at such time
<PAGE>
and place as the Company shall designate by notice to the undersigned. The
Company may, at its option, elect to close the purchase and sale of the shares
in one or more Closings.
4. Exercise of Warrant and Payment for Shares. The Warrant is exercisable
commencing on the date hereof and shall expire on the date which is two (2)
years from the date hereof. Upon exercise of the Warrant, the undersigned shall
make payment in the amount of $0.35 per share for the Common Stock as set forth
on Appendix A hereof, to the Company via certified check, personal check, or
wire transfer to the account designated by the Company.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. Upon issuance of the Warrant and upon exercise of the
Warrant and issuance of the Common Stock, the Common Stock will represent
validly authorized, duly issued and fully paid and non-assessable shares of the
Company, and the issuance thereof will not conflict with the Certificate of
Incorporation or Bylaws of the Company nor with any outstanding warrant, option,
call, preemptive right or commitment of any type relating to the Company's
capital stock.
(b) Other Representations and Agreements.
(i) Registration of Shares. Not later than 270 days from the date
hereof, the Company shall effect a registration under the Securities Act of all
shares of common stock owned by the undersigned and which the undersigned
requests to be registered within thirty (30) days of receipt of written notice
from the Company of such intention to register the shares. The Company will bear
all registration expenses (exclusive of underwriting discounts and commissions)
of all registrations of the securities owned by the undersigned.
If the Company intends to distribute any of the registered
shares of the undersigned and/or any other shareholder and/or the Company
pursuant to an underwriting and the underwriter advises the Company in writing
that marketing factors require a limitation of shares to be underwritten, the
number of shares of the undersigned to be included in such underwriting shall
not be reduced, pro rata or otherwise, unless all other securities are first
entirely excluded from the underwriting or upon receipt of the written consent
of the undersigned, which consent may be withheld for any or no reason. If
despite the best efforts of the Company, the total number of shares requested by
the undersigned to be registered cannot be so included, the Company shall
purchase from the undersigned that number of shares which was unable to be
included in the underwritten offering at the price per share received in the
offering.
If the Company shall furnish to the undersigned a certificate
signed by the Chief Executive Officer of the Company providing that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period not to exceed ninety (90) days;
provided, however, in the event that the Company
<PAGE>
shall fail to have a registration statement declared effective by the United
States Securities and Exchange Commission ("SEC") within 270 days of the date
hereof for any reason whatsoever, including pursuant to the terms of this
paragraph, as compensation for the breach of the terms of this Subscription
Agreement by the Company, the Company shall immediately transfer to the
undersigned 100,000 shares of common stock. For each successive thirty (30) day
period commencing on the 271st day from the date hereof that the Company does
not have an effective registration statement filed with the SEC, the Company
shall transfer to the undersigned an additional 100,000 shares of common stock.
The Company shall not have the right to defer registration more than once in any
twelve (12) month period.
(ii) Additional Registration Rights. The undersigned shall be
entitled to unlimited "piggyback" registration rights in connection with all
registrations of securities by the Company under the Securities Act of 1933 or
in connection with any demand registration of any shareholder of the Company
(except for registrations on Form S-8 or Form S-4). The Company will bear all
registration expenses (exclusive of underwriting discounts and commissions) of
all piggyback registrations of securities owned by the undersigned.
(iii) Co-Sale Rights. The Company shall, and shall cause its
officers and directors (collectively with the Company the "Shareholders") to,
grant to the undersigned a right of co-sale (on a pro-rata basis) such that upon
notice to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including legal
fees and expense, incurred pursuant to the exercise or the attempted exercise of
the undersigned's rights hereunder.
<PAGE>
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
(iv) Marketability. The Company shall maintain adequate current
public information in satisfaction of the requirements for resales of restricted
stock pursuant to Rule 144 promulgated under the Securities Act of 1933 and Rule
15c-2(11) promulgated under the Securities Exchange Act of 1934, including, but
not limited to, the publication over a nationally recognized reporting service
or newswire of annual audited financial statements and semi-annual interim
unaudited balance sheets and income statements.
(v) Use of Proceeds. Upon exercise of this Warrant, the Company
agrees that it, or a wholly owned subsidiary of the Company, shall only use the
proceeds received from this subscription for directly related operating expenses
of the Company or any wholly owned subsidiary of the Company, but in no event
shall the proceeds from this subscription be used for present or future
compensation, whether regular or special, of any officer or director of the
Company.
(vi) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company solicits,
or is advised by an investment banker or financing specialist to solicit,
investment capital by means of any private placement of securities or other
financing efforts utilizing securities of the Company, the Company shall first
offer to the undersigned the ability to participate in all or part of such
private placement or financing. The undersigned shall accept or reject the offer
within five business (5) days of receipt of the offer. Such response shall be
made in writing via certified mail, return receipt requested, or via overnight
mail. In the event that the undersigned agrees to provide such future financing,
the undersigned shall be required to provide such financing at a discounted
commission rate of five percent (5%). This provision shall not be effective for
any investment opportunity not generated through the initial efforts of the
Company.
(vii) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company in any non-public offering sells any
common stock at a price per share that is less than that which is agreed to be
paid by the undersigned herein, then the Company shall immediately adjust the
purchase price and/or the number of shares which are the subject of this Warrant
Subscription Agreement such that the price per share and/or the number of shares
hereunder is or are equal to the difference between (1) the number of shares
which would have been subscribed to at the lesser price per share of such
subsequently sold securities and (2) the number of the shares subscribed to
herein; provided, however, that this provision shall not be operative any time
the price
<PAGE>
per share of the Company's common stock as reported on the Over-the-Counter
Bulletin Board quotation system or any national securities exchange is below
$0.625.
(viii) Stock Splits. In order to induce the undersigned to enter
into this Warrant Subscription Agreement and to facilitate the closing of the
transactions contemplated hereby, the Company represents and warrants to the
undersigned that from and after the date hereof, the Company will not engage in
any manner of reverse split without the prior written consent of the
undersigned, which consent may be withheld for any or no reason.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to have been
reaffirmed and confirmed as of the Closing, taking into account all
information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
<PAGE>
(g) Investment Intent. The undersigned is acquiring the Warrant
solely for his own beneficial account, for investment purposes, and not
with a view to, or for immediate resale in connection with, any
distribution of the common stock of the Company. The undersigned has not
offered or sold any portion of its shares of Common Stock and has no
present intention of dividing its shares of Common Stock with others or of
reselling his shares of Common Stock. The undersigned understands that the
Warrant and the Common Stock have not been registered under the Securities
Act or any State Securities Laws by reason of specific exemptions under
the provisions thereof which depend in part upon the investment intent of
the undersigned and of the other representations made by the undersigned
in this Agreement. The undersigned understands that the Company is relying
upon the representations and agreements contained in this Agreement (and
any supplemental information) for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (A) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Warrant or the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a registration of
the Warrant or the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt from
the registration provisions of the Securities Act and all applicable State
Securities Laws; and (B) that the Company and any transfer agent for the
Common Stock shall not be required to give effect to any purported
transfer of any of the Common Stock except upon compliance with the
foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to accept this Warrant and of the Company to
grant the Warrant are subject to the satisfaction at or before the Closing of
the following condition precedent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Subscription Agreement. On or prior to the date hereof, the
Company and the undersigned shall have enter into a Subscription Agreement
on mutually acceptable terms and the undersigned shall have paid the
purchase price as set forth in Section 1 of the Subscription Agreement.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EST, January 15, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable
<PAGE>
harm to the other party, for which there may be no adequate remedy at law. A
party not in default at the time of such refusal shall be entitled, in addition
to other remedies at law or in equity, to specific performance of this Agreement
by the party that so refused or failed to consummate the transactions
contemplated hereby. In any action to enforce the terms of this Agreement, the
successful party shall be entitled to recover its reasonable attorneys' fees,
all costs and expenses from the party who refused or failed to perform this
Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
13. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
15. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
(2) If to the undersigned:
<PAGE>
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
with a copy, which shall not constitute notice, to:
Locke, Purnell, Rain, Harrell
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the grant of the Warrant and the issuance and sale of the
shares of Common Stock upon exercise of the Warrant.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the issuance of
the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 15th day of January, 1999.
Name: Schoemann Venture Capital, LLC
/s/ Rodney R. Schoemann, Sr.
-------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
January 15, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
----------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- --------------------------------------------------------------------------------
Consideration for Warrant Aggregate Amount to Be Paid Number of Warrant Shares
Upon Exercise of Warrant
Execution of Subscription $87,500.00 250,000.00
Agreement and payment of
the purchase price set
forth in Section 1 thereof
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
____ a. any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching
the same income level in the current year;
____ c. any bank as defined in section 3(a)(2) of the Securities
Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934; any insurance company as defined
in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the
"1940 Act") or a business development company as defined
in section 2(a)(48) of the 1940 Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions
for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a
self-directed plan, with investment decisions made
solely by persons that are accredited investors;
<PAGE>
____ d. any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of
1940;
____ e. any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
____ f. any director, executive officer, or general partner of
the Company;
X g. any entity in which all of the equity owners are
- ---- accredited investors; or
____ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 15th day of January, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------------
Rodney R. Schoemann, Sr.
Managing Member
<PAGE>
Exhibit 4.6
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
January 31, 1999
Mr. Rodney R. Schoemann, Sr.
Managing Member
Schoemann Venture Capital, LLC
3904 Wheat Drive
Metairie, Louisiana 70002
RE: Restatement of Subscription Agreement
by and between Affinity International Travel
Systems, Inc. and Schoemann Venture Capital, LLC
Dated January 15, 1999
Dear Rodney:
It has come to my attention that the documentation evidencing the
transaction by and between Affinity International Travel Systems, Inc. ("AFFT")
and Schoemann Venture Capital, LLC ("SVC" or "the subscriber") executed as of
January 15, 1999 does not embody the true intention of the agreement reached by
AFFT and SVC. As such, this letter, with your consent, evidenced by your
execution of this letter agreement where indicated below, will void ab initio
the Subscription Agreement dated January 15, 1999 by and between AFFT and SVC
and restate, retroactively to January 15, 1999, the terms and conditions of
AFFT's sale of a convertible note in the aggregate principal amount of
$222,000.00 (the "Note"), convertible into 634,286 shares of common stock,
$0.001 par value per share (the "Common Stock") for the purchase price set forth
in Section 4 hereof to SVC. The Note is unsecured, shall not bear any interest,
is immediately convertible, shall only be payable in common stock at the time of
conversion and, to the extent the Note has not been converted by March 31, 1999,
the unconverted principal shall automatically be converted into shares of common
stock, as provided herein without further action on the part of the Company or
the subscriber.
SVC understands that the offering is being made without registration of
the Note or the underlying Common Stock under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance on an exemption for transactions by
an issuer not involving a public offering and further understands that SVC is
purchasing such securities without being furnished any prospectus setting forth
all of the information that would be required to be furnished under the
Securities Act, and understands further that the offering is being made only to
"accredited investors" (as defined in Rule 501 of Regulation D under the
Securities Act).
<PAGE>
TERMS AND CONDITIONS
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the subscriber hereby irrevocably subscribes for
the Note, the purchase price for which is payable as described in Section 4.
2. Acceptance of Subscription and Issuance of Note. It is understood and agreed
that the Company has the right to accept or reject this subscription, in whole
or in part, and that this subscription is accepted by the Company only when it
is signed by a duly authorized officer of the Company and delivered to the
subscriber at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Note (the "Closing")
shall take place at the offices of the Company or such other mutually acceptable
place at such time and place as the Company shall designate by notice to the
subscriber. The Company may, at its option, elect to close the purchase and sale
of the shares in one or more Closings.
4. Payment and Terms of Note. The undersigned shall make payment in the amount
of Two Hundred Twenty Two Thousand and No/100 Dollars ($222,000.00) (the
"Purchase Price"), for the Note, less the amount necessary to satisfy all costs
and expenses, including reasonable attorney and professional fees, travel,
lodging and other transportation expenses, if any, of the subscriber incurred in
connection with this subscription, to the Company via certified check, personal
check, or wire transfer to the account designated by the Company.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock issuance upon conversion of the Note,
when issued in accordance with the Note, will represent validly authorized, duly
issued and fully paid and non-assessable shares of the Company, and the issuance
thereof will not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive right or
commitment of any type relating to the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. The Company agrees that it, or a wholly owned
subsidiary of the Company, shall only use the proceeds received from this
subscription for directly related operating expenses of the Company or any
wholly owned subsidiary of the Company, but in no event shall the proceeds from
this subscription be used for present or future compensation, whether regular or
special, of any officer or director of the Company.
(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company solicits,
or is advised by an investment banker or financing specialist to solicit,
investment capital by means of any private placement of securities or other
financing efforts utilizing securities of the Company, the Company shall first
offer to the subscriber the ability to participate in all or part of such
private placement or
2
<PAGE>
financing. The subscriber shall accept or reject the offer within five business
(5) days of receipt of the offer. Such response shall be made in writing via
certified mail, return receipt requested, or via overnight mail. In the event
that the subscriber agrees to provide such future financing, the subscriber
shall be required to provide such financing at a discounted commission rate of
five percent (5%). This provision shall not be effective for any investment
opportunity not generated through the initial efforts of the Company.
(iii) Registration of Shares. Not later than December 15, 1999, the
Company shall effect a registration under the Securities Act of all shares of
common stock owned by the undersigned and which the undersigned requests to be
registered. The Company will bear all registration expenses (exclusive of
underwriting discounts and commissions) of all registrations of the securities
owned by the undersigned.
If the Company intends to distribute any of the registered
shares of the subscriber and/or any other shareholder and/or the Company
pursuant to an underwriting and the underwriter advises the Company in writing
that marketing factors require a limitation of shares to be underwritten, the
number of shares of the subscriber to be included in such underwriting shall not
be reduced, pro rata or otherwise, unless all other securities are first
entirely excluded from the underwriting or upon receipt of the written consent
of the subscriber, which consent may be withheld for any or no reason. If
despite the best efforts of the Company, the total number of shares requested by
the subscriber to be registered cannot be so included, the Company shall
purchase from the subscriber that number of shares which was unable to be
included in the underwritten offering at the price per share received in the
offering.
If the Company shall furnish to the subscriber a certificate
signed by the Chief Executive Officer of the Company providing that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period not to exceed ninety (90) days;
provided, however, in the event that the Company shall fail to have a
registration statement declared effective by the United States Securities and
Exchange Commission ("SEC") by December 15, 1999 for any reason whatsoever,
including pursuant to the terms of this paragraph, as compensation for the
breach of the terms of this Subscription Agreement by the Company, the Company
shall immediately transfer to the subscriber 100,000 shares of common stock. For
each successive thirty (30) day period commencing on December 16, 1999 that the
Company does not have an effective registration statement filed with the SEC,
the Company shall transfer to the subscriber an additional 100,000 shares of
common stock. The Company shall not have the right to defer registration more
than once in any twelve (12) month period.
(iv) Additional Registration Rights. The subscriber shall be
entitled to unlimited "piggyback" registration rights in connection with all
registrations of securities by the Company under the Securities Act of 1933 or
in connection with any demand registration of any shareholder of the Company
(except for registrations on Form S-8 or Form S-4). The Company will bear all
registration expenses (exclusive of underwriting discounts and commissions) of
all piggyback registrations by the subscriber.
3
<PAGE>
(v) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company in any non-public offering sells any
common stock at a price per share that is less than $0.35, then for no
additional consideration, the Company shall immediately transfer to the
undersigned that number of shares of common stock of the Company equal to the
difference between (1) the number of shares which would have been issuable upon
conversion of the Note at the lesser price per share of such subsequently sold
securities and (2) the number of shares issuable under the Note.
(vi) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the subscriber a right of co-sale (on a pro-rata basis) such that upon notice to
the subscriber of any non-public sale or disposition of shares of the Company by
such Shareholders and/or the Company, the subscriber, upon written notice to the
Company and/or the selling Shareholders, shall be entitled to participate,
pro-rata as determined by each party's percentage ownership in the Company, in
such sale of shares of the Company on the same terms and conditions as the
Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the subscriber under this Agreement (a
"Prohibited Transfer"), the subscriber, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the subscriber shall have the
right to sell to the Company the number of shares equal to the number of shares
the subscriber would have been entitled to transfer to the purchaser hereunder
had the Prohibited Transfer been effected pursuant to and in compliance with the
terms hereof. Such sale shall be made on the following terms and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the subscriber for any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted exercise of the
subscriber's rights hereunder.
(2) Within ninety (90) days after the later of the dates on
which the subscriber either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the subscriber shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the subscriber pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
subscriber.
4
<PAGE>
(vii) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company shall maintain adequate current public information in satisfaction of
the requirements for resales of restricted stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, and Rule 15c-2(11)
promulgated under the Exchange Act, including, but not limited to, the
publication over a nationally recognized reporting service or newswire of annual
audited financial statements and semi-annual interim unaudited balance sheets
and income statements. After the Company becomes a fully reporting company, the
Company shall file all reports required under the Exchange Act.
(viii) Stock Splits. In order to induce the subscriber to enter into
this subscription agreement and to facilitate the closing of the transaction
contemplated hereby, the Company represents and warrants to the subscriber that
from and after the date hereof, the Company will not engage in any manner of
reverse split without the prior written consent of the subscriber, which consent
may be withheld for any or no reason.
6. Representations and Warranties of the Subscriber. The subscriber hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The subscriber has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the subscriber hereunder.
(b) Access to Information. The subscriber is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The subscriber has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
subscriber has also had an opportunity to ask questions of officers of the
Company, which questions were answered to his satisfaction. The subscriber
understands that such discussions were intended to describe certain
aspects of the Company's business and financial condition, properties,
operations and prospects, but were not a thorough or exhaustive
description.
(c) Representations and Warranties as of Closing. The subscriber
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the subscriber's representations
and warranties contained in this Agreement will be deemed to have been
reaffirmed and confirmed as of the Closing, taking into account all
information received by the subscriber.
(d) Risk Factors. The subscriber understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The subscriber has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of
5
<PAGE>
evaluating the merits and risks of an investment in Common Stock. To the
extent necessary, the subscriber has retained, at his own expense, and
relied upon, appropriate professional advice regarding the investment, tax
and legal merits and consequences of this Agreement and owning Common
Stock.
(f) Accredited Investor. The subscriber is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(g) Investment Intent. The subscriber is acquiring the Common Stock
solely for his own beneficial account, for investment purposes, and not
with a view to, or for immediate resale in connection with, any
distribution of the Common Stock. The subscriber has not offered or sold
any portion of its shares of Common Stock and has no present intention of
dividing his shares of Common Stock with others or of reselling his shares
of Common Stock. The subscriber understands that the Common Stock has not
been registered under the Securities Act or any State Securities Laws by
reason of specific exemptions under the provisions thereof which depend in
part upon the investment intent of the subscriber and of the other
representations made by the subscriber in this Agreement. The subscriber
understands that the Company is relying upon the representations and
agreements contained in this Agreement (and any supplemental information)
for the purpose of determining whether this transaction meets the
requirements for such exemptions.
(h) Stock Transfer Restrictions. The subscriber agrees: (i) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Common Stock or any interest therein, or make any offer or attempt to do
any of the foregoing, except pursuant to a registration of the Common
Stock under the Securities Act and all applicable State Securities Laws or
in a transaction which is exempt from the registration provisions of the
Securities Act and all applicable State Securities Laws; and (ii) that the
Company and any transfer agent for the Common Stock shall not be required
to give effect to any purported transfer of any of the Common Stock except
upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Subscriber and the Company. The
obligations of the subscriber to purchase and pay for the number of shares of
Common Stock specified herein and of the Company to sell the Common Stock are
subject to the satisfaction at or before the Closing of the following condition
precedent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the subscriber
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Warrant Subscription Agreement. On or prior to the date hereof,
the Company and the subscriber shall have entered into a Warrant
Subscription Agreement on mutually acceptable terms.
6
<PAGE>
8. Obligations Irrevocable. The obligations of the subscriber hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EST, January 31, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
subscriber. The subscriber may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the subscriber shall be in compliance with all federal and state
securities laws.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
13. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
15. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
7
<PAGE>
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
with a copy, which shall not constitute notice, to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Gordon R. Berman, Esq.
Fax: (617) 856-8201
(2) If to the subscriber:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp, LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the Note and upon conversion the
issuance of the shares of Common Stock.
8
<PAGE>
18. Notification of Changes. The subscriber hereby covenants and agrees to
notify the Company upon the occurrence of any event before the closing of the
purchase of the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the subscriber contained in this
Agreement to be false or incorrect.
If you agree with the foregoing, please evidence your (i) consent to void
ab initio the Subscription Agreement dated January 15, 1999 and (ii) acceptance
of the terms and conditions of the sale of the Note as contained herein.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
/s/ Daniel G. Brandano
--------------------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
Consented to and accepted this 31st day of January, 1999.
Name: Schoemann Venture Capital, LLC
/s/ Rodney R. Schoemann, Sr.
--------------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
9
<PAGE>
Exhibit 4.7
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a convertible note in
the aggregate principal amount of $1,000,000.00 (the "Note"), convertible into
2,300,000 shares of common stock, $0.001 par value per share (the "Common
Stock") for the Purchase Price set forth in Section 4 hereof. This Note is
unsecured, shall not bear any interest, is immediately convertible, shall only
be payable in common stock at the time of conversion and, to the extent the Note
has not been converted by June 15, 1999, the unconverted principal shall
automatically be converted into shares of common stock, as provided herein
without further action on the part of the Company or the undersigned.
The undersigned further understands that the offering is being made without
registration of the Note or the underlying Common Stock under the Securities Act
of 1933, as amended (the "Securities Act"), in reliance on an exemption for
transactions by an issuer not involving a public offering and further
understands that the undersigned is purchasing such securities without being
furnished any prospectus setting forth all of the information that would be
required to be furnished under the Securities Act, and understands further that
the offering is being made only to "accredited investors" (as defined in Rule
501 of Regulation D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the undersigned hereby irrevocably subscribes for
the Note, the purchase price for which is payable as described in Section 4.
2. Acceptance of Subscription and Issuance of Note. It is understood and agreed
that the Company has the right to accept or reject this subscription, in whole
or in part, and that this subscription is accepted by the Company only when it
is signed by a duly authorized officer of the Company and delivered to the
undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Note (the "Closing")
shall take place at the offices of the Company or such other mutually acceptable
place on or before May 10, 1999 or at such time and place as the Company and the
undersigned shall mutually agree upon. The
1
<PAGE>
Company may, at its option, elect to close the purchase and sale of the Note in
one or more Closings. In the event that the Closing does not take place on or
before May 10, 1999, the Company shall immediately refund the Deposit (as
defined hereinbelow) to the undersigned.
4. Payment and Terms of Note. The undersigned shall make payment in the amount
of One Million and No/100 Dollars ($1,000,000.00) (the "Purchase Price"), for
the Note, less (i) the amount of any deposit received by the Company and (ii) an
amount necessary to cover all costs and expenses, including reasonable attorney
and professional fees, travel, lodging and other transportation expenses, if
any, of the undersigned incurred in connection with this subscription and, upon
request, submission of appropriate invoices and receipts. The Purchase Price
shall be paid to the Company via certified check, personal check, or wire
transfer to the account designated by the Company. The Company hereby
acknowledges the receipt of the full sum of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) (the "Deposit") from the undersigned paid as a
deposit on the Purchase Price. The Purchase Price, less any and all deductions
therefrom as provided for herein, shall be paid in full to the Company not later
that May 10, 1999.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock issuance upon conversion of the Note,
when issued in accordance with the Note, will represent validly authorized, duly
issued and fully paid and non-assessable shares of the Company, and the issuance
thereof will not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive right or
commitment of any type relating to the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. The Company agrees that it, or a wholly owned
subsidiary of the Company, shall use not less than twenty percent (20%) of the
proceeds received from this subscription for the Information Technology (as that
term is understood by the undersigned and the Company) requirements of the
Company or any wholly owned subsidiary of the Company. Additionally, the Company
will reserve a reasonable percentage of the funds received in from this
subscription, but in no event shall such percentage exceed ten percent (10%) of
the Purchase Price, for the future legal expenses of the undersigned incurred as
a result of this subscription agreement and amounts owing to the undersigned for
its continuing efforts on behalf of the Company pursuant to that certain
consulting agreement by and between the Company and the undersigned dated the
date hereof. The remainder of the proceeds received from this subscription shall
only be used by the Company or any wholly owned subsidiary of the Company for
directly related operating expenses of the Company or any wholly owned
subsidiary of the Company, but in no event shall the proceeds from this
subscription be used for present or future compensation, (other than normal
salaries) of any officer or director of the Company.
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<PAGE>
(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company solicits,
or is advised by an investment banker or financing specialist to solicit,
investment capital by means of any private placement of securities or other
financing efforts utilizing securities of the Company, the Company shall first
offer to the undersigned the ability to participate in all or part of such
private placement or financing. The undersigned shall accept or reject the offer
within five business (5) days of receipt of the offer. Such response shall be
made in writing via certified mail, return receipt requested, or via overnight
mail. If the undersigned does not accept such offer within such five (5)
business day period, such offer shall be deemed rejected for purposes of this
Agreement. In the event that the undersigned agrees to provide such future
financing, the undersigned shall be required to provide such financing at a
discounted commission rate of five percent (5%).
(iii) Registration of Shares. Not later than December 15, 1999, the
Company shall effect a registration under the Securities Act of all shares of
common stock owned by the undersigned and which the undersigned requests to be
registered. The Company will bear all registration expenses (exclusive of
underwriting discounts and commissions) of all registrations of the securities
owned by the undersigned.
If the Company intends to distribute any of the registered
shares of the undersigned and/or any other shareholder and/or the Company
pursuant to an underwriting and the underwriter advises the Company in writing
that marketing factors require a limitation of shares to be underwritten, the
number of shares of the undersigned to be included in such underwriting shall
not be reduced, pro rata or otherwise, unless all other securities are first
entirely excluded from the underwriting or upon receipt of the written consent
of the undersigned waiving such right, which consent may be withheld for any or
no reason. If despite the best efforts of the Company, the total number of
shares requested by the undersigned to be registered cannot be so included, the
Company shall purchase from the undersigned that number of shares which was
unable to be included in the underwritten offering at the price per share
received in the offering.
If the Company shall furnish to the undersigned a certificate
signed by the Chief Executive Officer of the Company providing that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period not to exceed ninety (90) days;
provided, however, in the event that the Company shall fail to have a
registration statement declared effective by the United States Securities and
Exchange Commission ("SEC") by December 15, 1999 for any reason whatsoever,
including pursuant to the terms of this paragraph, as compensation for the
breach of the terms of this Subscription Agreement by the Company, the Company
shall immediately transfer to the undersigned 120,000 shares of common stock.
For each successive thirty (30) day period commencing on December 16, 1999 that
the Company does not have an effective registration statement filed with the
SEC, the Company shall transfer to the undersigned an additional 120,000
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<PAGE>
shares of common stock. The Company shall not have the right to defer
registration more than once in any twelve (12) month period.
(iv) Additional Registration Rights. The undersigned shall be
entitled to unlimited "piggyback" registration rights in connection with all
registrations of securities by the Company under the Securities Act of 1933 or
in connection with any demand registration of any shareholder of the Company
(except for registrations on Form S-8 or Form S-4). The Company will bear all
registration expenses (exclusive of underwriting discounts and commissions) of
all piggyback registrations by the undersigned.
(v) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company in any non-public offering sells any
common stock at a price per share that is less than $0.50, then for no
additional consideration, the Company shall immediately transfer to the
undersigned that number of shares of common stock of the Company equal to the
difference between (1) the number of shares which would have been issuable upon
conversion of the Note at the lesser price per share of such subsequently sold
securities and (2) the number of shares issuable under the Note.
(vi) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the undersigned a right of co-sale (on a pro-rata basis) such that upon notice
to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including
reasonable legal fees and expenses, incurred pursuant to the exercise or the
attempted exercise of the undersigned's rights hereunder.
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<PAGE>
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
(vii) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company shall maintain adequate current public information in satisfaction of
the requirements for resales of restricted stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, and Rule 15c-2(11)
promulgated under the Exchange Act, including, but not limited to, the
publication over a nationally recognized reporting service or newswire of annual
audited financial statements and semi-annual interim unaudited balance sheets
and income statements it being understood that the Company does not currently
have audited financial statements for the year ended June 30, 1998. After the
Company becomes a fully reporting company, the Company shall file all reports
required under the Exchange Act.
(viii) Stock Splits. In order to induce the undersigned to enter
into this subscription agreement and to facilitate the closing of the
transaction contemplated hereby, the Company represents and warrants to the
undersigned that from and after the date hereof, the Company will not engage in
any manner of reverse split without the prior written consent of the
undersigned, which consent may not be unreasonably withheld.
(ix) Mandatory Offer of Redemption. In the event that the Company
sells any of its common stock in any secondary public offering, whether
underwritten or not, immediately following the earlier of the receipt of the
proceeds from such offering or the closing of the offering transaction the
Company will make an offer to the undersigned to purchase an amount of the
Company's common stock from the undersigned with a value of up to ten percent
(10%) of the total value of the offering. The offer to the undersigned shall be
at the same price per share as received by the Company in the offering. For
example, if the Company closes a public sale for 1,000,000 shares of common
stock at $5.00 per share (aggregate offering price of $5,000,000.00), the
Company must offer to redeem 100,000 shares of common stock from the undersigned
at $5.00 per share. Nothing in this subsection (ix) shall obligate the
undersigned to accept the redemption offer by the Company; however, any
acceptance by the undersigned must be received within five (5) business days
from receipt by the undersigned of a written offer from the Company.
5
<PAGE>
(x) Consulting Agreement. The Company recognizes that the
undersigned has certain expertise in business, management, investment and
financial matters which would be beneficial to the Company and its subsidiaries.
Accordingly, the Company and the undersigned shall enter into a consulting
agreement on terms and conditions mutually acceptable to the Company and the
undersigned.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to have been
reaffirmed and confirmed as of the Closing, taking into account all
information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in the Note and the underlying Common Stock. To the extent
necessary, the undersigned has retained, at his own expense, and relied
upon, appropriate professional advice regarding the investment, tax and
legal merits and consequences of this Agreement and owning the Note and
the underlying Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
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<PAGE>
(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for his own beneficial account, for investment purposes, and not
with a view to, or for resale in connection with, any distribution of the
Common Stock. The undersigned has not offered or sold any portion of its
shares of Common Stock and has no present intention of dividing his shares
of Common Stock with others or of reselling his shares of Common Stock.
The undersigned understands that the Common Stock has not been registered
under the Securities Act or any State Securities Laws by reason of
specific exemptions under the provisions thereof which depend in part upon
the investment intent of the undersigned and the other representations
made by the undersigned in this Agreement. The undersigned understands
that the Company is relying upon the representations and agreements
contained in this Agreement (and any supplemental information) for the
purpose of determining whether this transaction meets the requirements for
such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (i) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Note or underlying Common Stock or any interest therein, or make any offer
or attempt to do any of the foregoing, except pursuant to a registration
of the Common Stock under the Securities Act and all applicable State
Securities Laws or in a transaction which is exempt from the registration
provisions of the Securities Act and all applicable State Securities Laws;
and (ii) that the Company and any transfer agent for the Common Stock
shall not be required to give effect to any purported transfer of any of
the Common Stock except upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the Note specified herein
and of the Company to sell the Note are subject to the satisfaction at or before
the Closing of the following condition precedent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Warrant Subscription Agreement. On or prior to the date hereof,
the Company and the undersigned shall have entered into a Warrant
Subscription Agreement on mutually acceptable terms.
(c) Consulting Agreement. On or prior to the date hereof, the
Company and the undersigned shall have entered into a Consulting Agreement
on mutually acceptable terms.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EDT, May 10, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable
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harm to the other party, for which there may be no adequate remedy at law. A
party not in default at the time of such refusal shall be entitled, in addition
to other remedies at law or in equity, to specific performance of this Agreement
by the party that so refused or failed to consummate the transactions
contemplated hereby. In any action to enforce the terms of this Agreement, the
successful party shall be entitled to recover its reasonable attorneys' fees,
all costs and expenses from the party who refused or failed to perform this
Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
12. Expenses. The Company shall pay all actual expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate invoices and receipts. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
14. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
16. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
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(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
with a copy, which shall not constitute notice, to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Gordon R. Berman, Esq.
Fax: (617) 856-8201
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp, LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
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17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the Notes.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the Notes and issuance of the underlying Common Stock pursuant to
this Agreement which would cause any representation, warranty, or covenant of
the undersigned contained in this Agreement to be false or incorrect.
[The immediately following page contains the signatures of the parties]
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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 23rd day of April, 1999.
Name: Schoemann Venture Capital, LLC
BY: /s/ Rodney R. Schoemann, Sr.
--------------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
April 23, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
----------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
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APPENDIX A
CONSIDERATION TO BE DELIVERED
- --------------------------------------------------------------------------------
Convertible Note to be Acquired Aggregate Amount to Be Paid on Closing
------------------------------- --------------------------------------
$1,000,000.00 principal amount $1,000,000.00 less the amount of any
Deposit and any amount necessary to
satisfy all outstanding expenses of the
subscriber incurred in connection with
this subscription agreement
- --------------------------------------------------------------------------------
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APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
____ a. any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching
the same income level in the current year;
____ c. any bank as defined in section 3(a)(2) of the Securities
Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934; any insurance company as defined
in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the
"1940 Act") or a business development company as defined
in section 2(a)(48) of the 1940 Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions
for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a
self-directed plan, with investment
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decisions made solely by persons that are accredited
investors;
____ d. any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of
1940;
____ e. any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
____ f. any director, executive officer, or general partner of
the Company;
X g. any entity in which all of the equity owners are
- ---- accredited investors; or
____ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 23rd day of April, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------------------
Rodney R. Schoemann, Sr.
Managing Member
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Exhibit 4.8
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
WARRANT SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a warrant (the
"Warrant") to purchase 750,000 shares of its Common Stock, $0.001 par value per
share (the "Common Stock"), at $1.75 per share.
The undersigned further understands that the offering of the Warrant and any
subsequent exercise of the Warrant and purchase of the Common Stock are being
made without registration of the Warrant and/or the Common Stock subject to the
Warrant under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance on an exemption for transactions by an issuer not involving a public
offering, and further understands that the undersigned is purchasing the Warrant
and upon exercise of the Warrant, the Common Stock, without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that the offering is
being made only to "accredited investors" (as defined in Rule 501 of Regulation
D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Warrant, the
undersigned hereby irrevocably subscribes for that number of Warrants to
purchase the shares of Common Stock set forth in Appendix A. The consideration
for the Warrant shall be the execution of the Subscription Agreement by and
between the Company and the undersigned dated of even date herewith (the
"Subscription Agreement") and the payment of the consideration for the Note as
set forth in Section 1 of the Subscription Agreement; provided, however, that
the execution, delivery and performance of the Subscription Agreement in full by
Purchaser shall be a condition precedent of the obligations of the Company
hereunder.
2. Acceptance of Warrant Subscription and Issuance of Shares. It is understood
and agreed that the Company has the right to accept or reject this subscription,
in whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Common Stock (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place on or before
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May 10, 1999 or at such time and place as the Company and the undersigned shall
mutually agree upon. The Company may, at its option, elect to close the
transaction contemplated hereby in one or more Closings.
4. Exercise of Warrant and Payment for Shares. The Warrant is exercisable
commencing on the date hereof and shall expire on the date which is five (5)
years from the date hereof. Upon exercise of the Warrant, the undersigned shall
make payment in the amount of $1.75 per share for the Common Stock as set forth
on Appendix A hereof, to the Company via certified check, personal check, or
wire transfer to the account designated by the Company or via cashless exercise
pursuant to Section 5(b)(ix) hereof.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. Upon issuance of the Warrant and upon exercise of the
Warrant and issuance of the Common Stock in accordance with this Warrant
Agreement, the Common Stock will represent validly authorized, duly issued and
fully paid and non-assessable shares of the Company, and the issuance thereof
will not conflict with the Certificate of Incorporation or Bylaws of the Company
nor with any outstanding warrant, option, call, preemptive right or commitment
of any type relating to the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. Upon exercise of this Warrant, the Company
agrees that it, or a wholly owned subsidiary of the Company, shall use not less
than twenty percent (20%) of the proceeds received from this subscription for
the Information Technology (as that term is understood by the undersigned and
the Company) requirements of the Company or any wholly owned subsidiary of the
Company. The remainder of the proceeds received from this subscription upon
exercise of this Warrant shall only be used by the Company or any wholly owned
subsidiary of the Company for directly related operating expenses of the Company
or any wholly owned subsidiary of the Company, but in no event shall the
proceeds from this subscription be used for present or future compensation,
whether regular or special, of any officer or director of the Company.
(ii) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company sells any common stock or warrants to
purchase common stock at a price per share or an exercise price per share for
warrants that is less than $1.75, then the Company shall immediately adjust the
purchase price and/or the number of shares which are the subject of this Warrant
Subscription Agreement such that the price per share and/or the number of shares
hereunder is or are equal to the difference between (1) the number of shares
which would have been subscribed to at the lesser price per share of such
subsequently sold securities and (2) the number of the shares subscribed to
herein.
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(iii) Cashless Exercise. At any time following the date hereof, the
warrant holder, whether the undersigned or otherwise, in lieu of any cash
payment required under the Warrants, shall have the rights to exercise the
Warrants in whole or in part by surrendering the Warrants in exchange for the
number of shares of the Company's common stock equal to (x) the number of shares
as to which the Warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined below) of the common stock
less the exercise price of the Warrants being exercised, and the denominator of
which is such Market Price. The term "Market Price" means the average of the
closing sale price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on each of the ten
(10) consecutive trading days preceding the date on which written notice of
election to exercise the Warrants has been given to the Company (a "cashless
exercise"). If the warrant holder opts for a cashless exercise of the warrants,
no other consideration shall be paid to the Company, other than surrendering the
warrant itself, nor will there be paid any commission or other remuneration to
any other person or entity by the warrant holder. In the event that the warrant
holder is not permitted to "tack" the holding period of the warrants to the
holding period of the common stock received upon the cashless exercise for
purposes of satisfaction of the holding period requirements of Rules
144(d)(3)(ii) and 144(k) under the Securities Act of 1933, as amended, for
whatever reason and there is no presently filed registration statement effective
as to the shares received or to be received through the cashless exercise of
this Warrant, the Company shall, upon receipt of the written request of the
warrant holder, promptly prepare and file a registration statement with the U.S.
Securities and Exchange Commission with respect to all of the shares underlying
this Warrant.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to
3
<PAGE>
have been reaffirmed and confirmed as of the Closing, taking into account
all information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(g) Investment Intent. The undersigned is acquiring the Warrant
solely for his own beneficial account, for investment purposes, and not
with a view to, or for resale in connection with, any distribution of the
common stock of the Company. The undersigned has not offered or sold any
portion of its shares of Common Stock and has no present intention of
dividing its shares of Common Stock with others or of reselling his shares
of Common Stock. The undersigned understands that the Warrant and the
Common Stock have not been registered under the Securities Act or any
State Securities Laws by reason of specific exemptions under the
provisions thereof which depend in part upon the investment intent of the
undersigned and the other representations made by the undersigned in this
Agreement. The undersigned understands that the Company is relying upon
the representations and agreements contained in this Agreement (and any
supplemental information) for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (A) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Warrant or the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a registration of
the Warrant or the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt from
the registration provisions of the Securities Act and all applicable State
Securities Laws; and (B) that the Company and any transfer agent for the
Common Stock shall not be required to give effect to any purported
transfer of any of the Common Stock except upon compliance with the
foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to accept this Warrant and of the Company to
grant the Warrant are subject to the satisfaction at or before the Closing of
the following condition precedent:
4
<PAGE>
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Subscription Agreement. On or prior to the date hereof, the
Company and the undersigned shall have entered into a Subscription
Agreement for a Convertible Note (principal amount $1,000,000.00) on
mutually acceptable terms and the undersigned shall have paid the
consideration as set forth in Section 1 of such Subscription Agreement.
(c) Consulting Agreement. On or prior to the date hereof, the
Company and the undersigned shall have enter into a Consulting Agreement
on mutually acceptable terms.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EDT, May 10, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
12. Expenses. The Company shall pay all actual expenses incurred in
connection with this Warrant and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate receipts or invoices. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
5
<PAGE>
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
14. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
16. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
and
with a copy, which shall not constitute notice, to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Gordon R. Berman, Esq.
Fax: (617) 856-8201
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
6
<PAGE>
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
17. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
18. Survival. All representations contained in this Agreement shall
survive the closing of the grant of the Warrant and the issuance and sale of the
shares of Common Stock upon exercise of the Warrant.
19. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the issuance of
the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
[The immediately following page contains the signatures of the parties]
7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 23rd day of April, 1999.
Name: Schoemann Venture Capital, LLC
BY: /s/ Rodney R. Schoemann, Sr.
--------------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
April 23, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
---------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
8
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- --------------------------------------------------------------------------------
Consideration for Warrant Aggregate Amount to Be Number of Warrant Shares
- ------------------------- Paid Upon Exercise of ------------------------
Warrant (assuming all
warrant shares are
exercised)
----------
Execution of Subscription
Agreement for a
Convertible Note
($1,000,000.00 principal $1,312,500.00 750,000.00
amount) and payment of (or cashless exercise)
the purchase price set
forth in Section 1 thereof
- --------------------------------------------------------------------------------
9
<PAGE>
APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
____ a. any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching
the same income level in the current year;
____ c. any bank as defined in section 3(a)(2) of the Securities
Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934; any insurance company as defined
in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the
"1940 Act") or a business development company as defined
in section 2(a)(48) of the 1940 Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions
for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a
self-directed plan, with investment decisions made
solely by persons that are accredited investors;
10
<PAGE>
____ d. any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of
1940;
____ e. any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
____ f. any director, executive officer, or general partner of
the Company;
X g. any entity in which all of the equity owners are
- ---- accredited investors; or
____ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 23rd day of April, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------------------
Rodney R. Schoemann, Sr.
Managing Member
11
<PAGE>
Exhibit 4.9
CONSULTING AGREEMENT
THIS AGREEMENT (this "Agreement"), made this 23rd day of April, 1999,
by and between SCHOEMANN VENTURE CAPITAL, L.L.C. ("SVC"), a Delaware limited
liability company, and AFFINITY INTERNATIONAL TRAVEL SERVICES, INC.
("Affinity"), a Nevada corporation.
WHEREAS, SVC has certain expertise in management, financial, investment
and business matters which will be beneficial to Affinity in the conduct of its
business.
WHEREAS, Affinity desires to retain SVC as a consultant and advisor to
Affinity in connection with certain investment and business matters of Affinity
and SVC desires to be so retained and to enter into such an agreement with
Affinity.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained and the consideration to be paid hereunder, and for other valuable
consideration, the parties agree as follows:
1. Recitals are True. The above recitals are true and correct and
incorporated herein.
2. Consulting Services. Affinity agrees to retain SVC and SVC agrees to
be retained by Affinity on an as-needed basis from and after the date hereof
until terminated in accordance with the provisions of Section 6 hereinbelow as a
consultant and advisor to Affinity in connection with certain investment and
business matters of Affinity.
3. Devotion of Time to Consulting Services. SVC shall devote such time
to rendering consulting and advising services as is reasonably requested from
time-to-time by Affinity. The services to be rendered by SVC to Affinity
hereunder may be rendered in person or by letter, telephone or other means of
communication as shall be appropriate under the circumstances. SVC shall not be
required to observe any fixed schedule of attendance at the principal place of
business of Affinity or any other person or entity for the rendition of such
services.
4. Consideration for Consulting Services. As consideration for SVC's
services hereunder during the term of this Agreement, Affinity shall pay SVC and
SVC shall accept from Affinity the following:
(a) on the first (1st) day of each month from and after the date
hereof until terminated pursuant to Section 6 hereof, the sum of $6,666.66
per month, pro rated for any partial month, until all shares of common
stock owned by SVC are registered for sale under the Securities Act of
1933, as amended, or freely tradable on the public securities markets,
pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended; and
<PAGE>
(b) a sum equal to five percent (5%) of the gross investment
proceeds received by Affinity (1) from investor(s) introduced to Affinity
by SVC (and with whom Affinity has no prior relationship) or (2) in a
transaction with respect to which SVC's efforts were instrumental in
negotiating and closing on behalf of the Company. Such sum shall be due
and payable by Affinity upon receipt by Affinity of the proceeds or
consideration from such investment transaction.
In addition, Affinity shall reimburse SVC for all actual expenses
incurred by SVC for services rendered on behalf of Affinity and, at the request
of Affinity, upon submission of appropriate invoices or receipts therefor.
5. Status as Independent Contractor. The parties agree that SVC's
relationship with Affinity will be that of independent contractor, and nothing
in this Agreement shall be deemed to create an employer-employee relationship
between the parties. As such, SVC will not be entitled to any compensation other
than as agreed upon herein.
6. Term of Agreement. The effective date of this Agreement shall be the
date hereof, and it shall remain effective and continue in force and effect
until terminated in accordance herewith; this Agreement may be terminated by
either party upon ten (10) business days prior written notice to the other
party. Termination of this Agreement pursuant to this Section 6 shall in no way
terminate the obligation of Affinity to pay to SVC any amounts accrued under
Section 4 hereof prior to termination.
7. Severability. The parties hereto intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly,
should a court of competent jurisdiction determine that the scope of any
provision is too broad to be enforced as written, the parties intend that the
court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future law, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance, except to the extent such remaining provisions constitute
obligations of another party to this Agreement corresponding to the
unenforceable provision.
8. Notices. Any and all notices, demands, requests, designations,
consents, offers, acceptances or any other communications that may be or are
required to be given, served or sent by any party to another party pursuant to
this Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or by verifiable overnight delivery postage prepaid, or
transmitted by hand delivery (against a signed receipt) or by facsimile with
confirmation of receipt addressed as follows: (a) if to SVC at 3904 Wheat Drive,
Metairie, Louisiana, 70002 FAX (504) 455-8845, with a copy to William C. Perez,
Esq., 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201 FAX: (214) 740-8800; (b)
if to Affinity at 100 Second Avenue South, Suite 303N, St. Petersburg, Florida
33701 FAX: (727) 896-1403 with a copy to Gordon R. Berman, Esq., Brown, Rudnick,
Freed & Gesmer, One Financial Center, Boston, MA 02111 (FAX: (617) 856-8201 or
to such other address which may be designated by either Affinity or SVC.
<PAGE>
9. Modification. No change or modification of this Agreement shall be
valid unless the same be in writing and signed by the parties hereto, other than
modification by a Court of law in accordance with Section 7 hereof.
10. Applicable Law and Binding Effect. This Agreement shall be
construed and regulated under and by the laws of the State of Nevada and shall
inure to the benefit of and be binding upon the parties hereto and their heirs,
personal representatives, successors and assigns.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Agreement
to be executed the day and year first above written.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
By: /s/ D.G. Brandano
-------------------------------------
DANIEL G. BRANDANO
President
SCHOEMANN VENTURE CAPITAL, L.L.C.
By: /s/ Rodney R. Schoemann, Sr.
-------------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
<PAGE>
Exhibit 4.10
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a convertible note in
the aggregate principal amount of $1,000,000.00 (the "Note"), convertible into
2,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock") for the Purchase Price set forth in Section 4 hereof. This Note is
unsecured, shall not bear any interest, is immediately convertible, shall only
be payable in common stock at the time of conversion and, to the extent the Note
has not been converted by June 15, 1999, the unconverted principal shall
automatically be converted into shares of common stock, as provided herein
without further action on the part of the Company or the undersigned.
The undersigned further understands that the offering is being made without
registration of the Note or the underlying Common Stock under the Securities Act
of 1933, as amended (the "Securities Act"), in reliance on an exemption for
transactions by an issuer not involving a public offering and further
understands that the undersigned is purchasing such securities without being
furnished any prospectus setting forth all of the information that would be
required to be furnished under the Securities Act, and understands further that
the offering is being made only to "accredited investors" (as defined in Rule
501 of Regulation D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the undersigned hereby irrevocably subscribes for
the Note, the purchase price for which is payable as described in Section 4.
2. Acceptance of Subscription and Issuance of Note. It is understood and
agreed that the Company has the right to accept or reject this subscription, in
whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Note (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place on or before June 10, 1999 or at such time and place as the
Company and the undersigned shall mutually agree upon. The Company may, at its
option, elect to close the purchase and sale of the Note in one or more
Closings.
1
<PAGE>
4. Payment and Terms of Note. The undersigned shall make payment in the
amount of One Million and No/100 Dollars ($1,000,000.00) (the "Purchase Price"),
for the Note, less (i) the amount of any deposit received by the Company and
(ii) an amount necessary to cover all costs and expenses, including reasonable
attorney and professional fees, travel, lodging and other transportation
expenses, if any, of the undersigned incurred in connection with this
subscription and, upon request, submission of appropriate invoices and receipts.
The Purchase Price shall be paid to the Company via certified check, personal
check, or wire transfer to the account designated by the Company. The Purchase
Price, less any and all deductions therefrom as provided for herein, shall be
paid in full to the Company not later than the Closing Date.
5. Representations of the Company. As of the date of the Closing (the
"Closing Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock issuance upon conversion of the Note,
when issued in accordance with the Note, will represent validly authorized, duly
issued and fully paid and non-assessable shares of the Company, and the issuance
thereof will not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive right or
commitment of any type relating to the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. The Company agrees that it, or a wholly owned
subsidiary of the Company, shall use not less than fifty percent (50%) of the
proceeds received from this subscription for the Information Technology (as that
term is understood by the undersigned and the Company) requirements of the
Company or any wholly owned subsidiary of the Company and not less than ten
percent (10%) of the proceeds received from this subscription for the direct
marketing purposes of the Company or any wholly owned subsidiary of the Company.
Additionally, the Company will reserve a reasonable percentage of the funds
received in from this subscription, but in no event shall such percentage exceed
ten percent (10%) of the Purchase Price, for the future legal expenses of the
undersigned incurred as a result of this subscription agreement and amounts
owing to the undersigned for its continuing efforts on behalf of the Company
pursuant to that certain consulting agreement by and between the Company and the
undersigned dated April 23, 1999. The remainder of the proceeds received from
this subscription shall only be used by the Company or any wholly owned
subsidiary of the Company for directly related operating expenses of the Company
or any wholly owned subsidiary of the Company, but in no event shall the
proceeds from this subscription be used for present or future compensation,
(other than normal salaries) of any officer or director of the Company.
(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company solicits,
or is advised by an investment banker or financing specialist to solicit,
investment capital by means of any private placement of securities or other
financing efforts utilizing securities of the Company, the Company shall first
offer to the undersigned the ability to participate in all or part of such
private placement or financing. The undersigned shall accept or reject the offer
within five business (5) days of receipt
2
<PAGE>
of the offer. Such response shall be made in writing via certified mail, return
receipt requested, or via overnight mail. If the undersigned does not accept
such offer within such five (5) business day period, such offer shall be deemed
rejected for purposes of this Agreement. In the event that the undersigned
agrees to provide such future financing, the undersigned shall be required to
provide such financing at a discounted commission rate of five percent (5%).
(iii) Registration of Shares. Not later than December 15, 1999, the
Company shall effect a registration under the Securities Act of all shares of
common stock owned by the undersigned and which the undersigned requests to be
registered. The Company will bear all registration expenses (exclusive of
underwriting discounts and commissions) of all registrations of the securities
owned by the undersigned.
If the Company intends to distribute any of the registered
shares of the undersigned and/or any other shareholder and/or the Company
pursuant to an underwriting and the underwriter advises the Company in writing
that marketing factors require a limitation of shares to be underwritten, the
number of shares of the undersigned to be included in such underwriting shall
not be reduced, pro rata or otherwise, unless all other securities are first
entirely excluded from the underwriting or upon receipt of the written consent
of the undersigned waiving such right, which consent may be withheld for any or
no reason. If despite the best efforts of the Company, the total number of
shares requested by the undersigned to be registered cannot be so included, the
Company shall purchase from the undersigned that number of shares which was
unable to be included in the underwritten offering at the price per share
received in the offering.
If the Company shall furnish to the undersigned a certificate
signed by the Chief Executive Officer of the Company providing that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period not to exceed ninety (90) days;
provided, however, in the event that the Company shall fail to have a
registration statement declared effective by the United States Securities and
Exchange Commission ("SEC") by December 15, 1999 for any reason whatsoever,
including pursuant to the terms of this paragraph, as compensation for the
breach of the terms of this Subscription Agreement by the Company, the Company
shall immediately transfer to the undersigned 120,000 shares of common stock.
For each successive thirty (30) day period commencing on December 16, 1999 that
the Company does not have an effective registration statement filed with the
SEC, the Company shall transfer to the undersigned an additional 120,000 shares
of common stock. The Company shall not have the right to defer registration more
than once in any twelve (12) month period.
(iv) Additional Registration Rights. The undersigned shall be
entitled to unlimited "piggyback" registration rights in connection with all
registrations of securities by the Company under the Securities Act of 1933 or
in connection with any demand registration of any shareholder of the Company
(except for registrations on Form S-8 or Form S-4). The Company will bear all
registration expenses (exclusive of underwriting discounts and commissions) of
all piggyback registrations by the undersigned.
3
<PAGE>
(v) Sale of Additional Investor Shares. From and after the date
hereof, in the event that the Company in any non-public offering sells any
common stock at a price per share that is less than $0.50, then for no
additional consideration, the Company shall immediately transfer to the
undersigned that number of shares of common stock of the Company equal to the
difference between (1) the number of shares which would have been issuable upon
conversion of the Note at the lesser price per share of such subsequently sold
securities and (2) the number of shares issuable under the Note.
(vi) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the undersigned a right of co-sale (on a pro-rata basis) such that upon notice
to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including
reasonable legal fees and expenses, incurred pursuant to the exercise or the
attempted exercise of the undersigned's rights hereunder.
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
4
<PAGE>
(vii) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company shall maintain adequate current public information in satisfaction of
the requirements for resales of restricted stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, and Rule 15c-2(11)
promulgated under the Exchange Act, including, but not limited to, the
publication over a nationally recognized reporting service or newswire of annual
audited financial statements and semi-annual interim unaudited balance sheets
and income statements it being understood that the Company does not currently
have audited financial statements for the year ended June 30, 1998. After the
Company becomes a fully reporting company, the Company shall file all reports
required under the Exchange Act.
(viii) Stock Splits. In order to induce the undersigned to enter
into this subscription agreement and to facilitate the closing of the
transaction contemplated hereby, the Company represents and warrants to the
undersigned that from and after the date hereof, the Company will not engage in
any manner of reverse split without the prior written consent of the
undersigned, which consent may not be unreasonably withheld.
(ix) Mandatory Offer of Redemption. In the event that the Company
sells any of its common stock in any secondary public offering, whether
underwritten or not, immediately following the earlier of the receipt of the
proceeds from such offering or the closing of the offering transaction the
Company will make an offer to the undersigned to purchase an amount of the
Company's common stock from the undersigned with a value of up to ten percent
(10%) of the total value of the offering. The offer to the undersigned shall be
at the same price per share as received by the Company in the offering. For
example, if the Company closes a public sale for 1,000,000 shares of common
stock at $5.00 per share (aggregate offering price of $5,000,000.00), the
Company must offer to redeem 100,000 shares of common stock from the undersigned
at $5.00 per share. Nothing in this subsection (ix) shall obligate the
undersigned to accept the redemption offer by the Company; however, any
acceptance by the undersigned must be received within five (5) business days
from receipt by the undersigned of a written offer from the Company.
(x) Consulting Agreement. The Company and the undersigned shall
amend and restate the consulting agreement entered into by and between the
Company and the undersigned on April 23, 1999 (the "Consulting Agreement") to
reflect the current agreement between the parties thereto.
6. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company and to each officer, director, and
agent of the Company that:
(a) Authority. The undersigned has all requisite authority to enter into
this Agreement and to perform all the obligations required to be performed by
the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the business
and financial condition, properties, operations and prospects of the Company.
The undersigned has been
5
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furnished copies of the Financial Statements and all other documents requested
by it and has had an opportunity to discuss the Company's business and financial
condition, properties, operations and prospects with the Company's management.
The undersigned has also had an opportunity to ask questions of officers of the
Company, which questions were answered to his satisfaction. The undersigned
understands that such discussions were intended to describe certain aspects of
the Company's business and financial condition, properties, operations and
prospects, but were not a thorough or exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the contrary at
or before the Closing, all the undersigned's representations and warranties
contained in this Agreement will be deemed to have been reaffirmed and confirmed
as of the Closing, taking into account all information received by the
undersigned.
(d) Risk Factors. The undersigned understands that the purchase of the
Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such knowledge,
skill and experience in business, financial and investment matters so that is
capable of evaluating the merits and risks of an investment in the Note and the
underlying Common Stock. To the extent necessary, the undersigned has retained,
at his own expense, and relied upon, appropriate professional advice regarding
the investment, tax and legal merits and consequences of this Agreement and
owning the Note and the underlying Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for his own beneficial account, for investment purposes, and not with a
view to, or for resale in connection with, any distribution of the Common Stock.
The undersigned has not offered or sold any portion of its shares of Common
Stock and has no present intention of dividing his shares of Common Stock with
others or of reselling his shares of Common Stock. The undersigned understands
that the Common Stock has not been registered under the Securities Act or any
State Securities Laws by reason of specific exemptions under the provisions
thereof which depend in part upon the investment intent of the undersigned and
the other representations made by the undersigned in this Agreement. The
undersigned understands that the Company is relying upon the representations and
agreements contained in this Agreement (and any supplemental information) for
the purpose of determining whether this transaction meets the requirements for
such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (i) that it will
not sell, assign, pledge, give, transfer or otherwise dispose of the Note or
underlying Common Stock or any interest therein, or make any offer or attempt to
do any of the foregoing, except pursuant to a registration of the Common Stock
under the Securities Act and all applicable State Securities Laws or in a
transaction which is exempt from the registration provisions of the Securities
Act and all applicable State Securities Laws; and (ii) that the Company and any
transfer agent for the
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Common Stock shall not be required to give effect to any purported transfer of
any of the Common Stock except upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the Note specified herein
and of the Company to sell the Note are subject to the satisfaction at or before
the Closing of the following condition precedent:
(a) Representations and Warranties. The representations and warranties of
the Company contained in Section 5 and of the undersigned contained in Section 6
shall be true and correct on and as of the Closing in all respects with the same
effect as though such representations and warranties had been made on and as of
the Closing.
(b) Warrant Subscription Agreement. On or prior to the date hereof, the
Company and the undersigned shall have entered into a Warrant Subscription
Agreement on mutually acceptable terms.
(c) Consulting Agreement. On or prior to the date hereof, the Company and
the undersigned shall have amended and restated the Consulting Agreement to
reflect the current agreement of the parties thereto.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EDT, June 10, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
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<PAGE>
12. Expenses. The Company shall pay all actual expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate invoices and receipts. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
14. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
16. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
with a copy, which shall not constitute notice, to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Gordon R. Penman, Esq.
Fax: (617) 856-8201
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
8
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and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp, LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the Notes.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the Notes and issuance of the underlying Common Stock pursuant to
this Agreement which would cause any representation, warranty, or covenant of
the undersigned contained in this Agreement to be false or incorrect.
[The remainder of this page intentionally left blank; the signature page
follows.]
9
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 10th day of June, 1999.
Name: Schoemann Venture Capital, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
June 10, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
10
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- -------------------------------------------------------------------------------
Convertible Note to be Acquired Aggregate Amount to Be Paid on Closing
------------------------------- --------------------------------------
$1,000,000.00 less the amount of any
$1,000,000.00 principal amount deposit and any amount necessary to
convertible into 2,000,000 shares of satisfy all outstanding expenses of the
common stock subscriber incurred in connection with
this subscription agreement
- -------------------------------------------------------------------------------
11
<PAGE>
APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
___ a. any natural person whose individual net
worth, or joint net worth with that person's spouse, at
the time of his purchase exceeds $1,000,000;
___ b. any natural person who had an individual
income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse
in excess of $300,000 and has a reasonable expectation
of reaching the same income level in the current year;
___ c. any bank as defined in section 3(a)(2) of
the Securities Act of 1933, as amended (the "Act"), or
any savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Act, whether acting
in its individual or fiduciary capacity; any broker or
dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company
as defined in section 2(13) of the Act; any investment
company registered under the Investment Company Act of
1940 (the "1940 Act") or a business development company
as defined in section 2(a)(48) of the 1940 Act; any
Small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any
plan established and maintained by a state, its
political subdivisions for the benefit of its employees,
if such plan has total assets in excess of $5,000,000;
any employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974
("ERISA"), if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, which
is either a bank, savings and loan association,
insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess
of $5,000,000; or, if a self-directed plan, with
investment decisions made solely by persons that are
accredited investors;
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<PAGE>
___ d. any private business development company
as defined in section 202(a)(22) of the Investment
Advisers Act of 1940;
___ e. any organization described in section
501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000;
___ f. any director, executive officer, or
general partner of the Company;
X g. any entity in which all of the equity
owners are accredited investors; or
___ h. any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in
section 230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 10th day of June, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
Rodney R. Schoemann, Sr.
Managing Member
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<PAGE>
Exhibit 4.11
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
WARRANT SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale a warrant (the
"Warrant") to purchase 2,750,000 shares of its Common Stock, $0.001 par value
per share (the "Common Stock"), at $2.00 per share.
The undersigned further understands that the offering of the Warrant and any
subsequent exercise of the Warrant and purchase of the Common Stock are being
made without registration of the Warrant and/or the Common Stock subject to the
Warrant under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance on an exemption for transactions by an issuer not involving a public
offering, and further understands that the undersigned is purchasing the Warrant
and upon exercise of the Warrant, the Common Stock, without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that the offering is
being made only to "accredited investors" (as defined in Rule 501 of Regulation
D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Warrant, the
undersigned hereby irrevocably subscribes for that number of Warrants to
purchase the shares of Common Stock set forth in Appendix A. The consideration
for the Warrant shall be the execution of the Subscription Agreement by and
between the Company and the undersigned dated of even date herewith (the
"Subscription Agreement") and the payment of the consideration for the Note as
set forth in Section 1 of the Subscription Agreement; provided, however, that
the execution, delivery and performance of the Subscription Agreement in full by
Purchaser shall be a condition precedent of the obligations of the Company
hereunder.
2. Acceptance of Warrant Subscription and Issuance of Shares. It is understood
and agreed that the Company has the right to accept or reject this subscription,
in whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
3. The Closing. The closing of the purchase and sale of the Common Stock (the
"Closing") shall take place at the offices of the Company or such other mutually
acceptable place on or before June 10, 1999 or at such time and place as the
Company and the undersigned shall mutually agree
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<PAGE>
upon. The Company may, at its option, elect to close the transaction
contemplated hereby in one or more Closings.
4. Exercise of Warrant and Payment for Shares. The Warrant is exercisable
commencing on the date hereof and shall expire on the date which is five (5)
years from the date hereof. Upon exercise of the Warrant, the undersigned shall
make payment in the amount of $2.00 per share for the Common Stock as set forth
on Appendix A hereof, to the Company via certified check, personal check, or
wire transfer to the account designated by the Company or via cashless exercise
pursuant to Section 5(b)(ix) hereof.
5. Representations of the Company. As of the date of the Closing (the "Closing
Date"), the Company represents as follows:
(a) Valid Issuance. Upon issuance of the Warrant and upon exercise of the
Warrant and issuance of the Common Stock in accordance with this Warrant
Agreement, the Common Stock will represent validly authorized, duly issued and
fully paid and non-assessable shares of the Company, and the issuance thereof
will not conflict with the Certificate of Incorporation or Bylaws of the Company
nor with any outstanding warrant, option, call, preemptive right or commitment
of any type relating to the Company's capital stock.
(b) Other Representations and Agreements.
(i) Use of Proceeds. Upon exercise of this Warrant, the Company
agrees that it, or a wholly owned subsidiary of the Company, shall use not less
than twenty percent (20%) of the proceeds received upon conversion of the
Warrants granted pursuant to this subscription for the Information Technology
(as that term is understood by the undersigned and the Company) requirements of
the Company or any wholly owned subsidiary of the Company and not less than ten
percent (10%) of the proceeds received upon conversion of the Warrants granted
pursuant to this subscription for the direct marketing purposes of the Company
or any wholly owned subsidiary of the Company. The remainder of the proceeds
received from this subscription upon exercise of this Warrant shall only be used
by the Company or any wholly owned subsidiary of the Company for directly
related operating expenses of the Company or any wholly owned subsidiary of the
Company, but in no event shall the proceeds from this subscription be used for
present or future compensation, whether regular or special, of any officer or
director of the Company.
(ii) Sale of Additional Investor Shares. Except for transactions
involving the undersigned, from and after the date hereof, in the event that the
Company sells any common stock or warrants to purchase common stock at a price
per share or an exercise price per share for warrants that is less than $2.00,
then the Company shall immediately adjust the purchase price and/or the number
of shares which are the subject of this Warrant Subscription Agreement such that
the price per share and/or the number of shares hereunder is or are equal to the
difference between (1) the number of shares which would have been subscribed to
at the lesser price per share of such subsequently sold securities and (2) the
number of the shares subscribed to herein.
2
<PAGE>
(iii) Cashless Exercise. At any time following the date hereof, the
warrant holder, whether the undersigned or otherwise, in lieu of any cash
payment required under the Warrants, shall have the rights to exercise the
Warrants in whole or in part by surrendering the Warrants in exchange for the
number of shares of the Company's common stock equal to (x) the number of shares
as to which the Warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined below) of the common stock
less the exercise price of the Warrants being exercised, and the denominator of
which is such Market Price. The term "Market Price" means the average of the
closing sale price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on each of the ten
(10) consecutive trading days preceding the date on which written notice of
election to exercise the Warrants has been given to the Company (a "cashless
exercise"). If the warrant holder opts for a cashless exercise of the warrants,
no other consideration shall be paid to the Company, other than surrendering the
warrant itself, nor will there be paid any commission or other remuneration to
any other person or entity by the warrant holder. In the event that the warrant
holder is not permitted to "tack" the holding period of the warrants to the
holding period of the common stock received upon the cashless exercise for
purposes of satisfaction of the holding period requirements of Rules
144(d)(3)(ii) and 144(k) under the Securities Act of 1933, as amended, for
whatever reason and there is no presently filed registration statement effective
as to the shares received or to be received through the cashless exercise of
this Warrant, the Company shall, upon receipt of the written request of the
warrant holder, promptly prepare and file a registration statement with the U.S.
Securities and Exchange Commission with respect to all of the shares underlying
this Warrant.
6. Representations and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Company and to each officer, director, and agent
of the Company that:
(a) Authority. The undersigned has all requisite authority to enter
into this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the
business and financial condition, properties, operations and prospects of
the Company. The undersigned has been furnished copies of the Financial
Statements and all other documents requested by it and has had an
opportunity to discuss the Company's business and financial condition,
properties, operations and prospects with the Company's management. The
undersigned has also had an opportunity to ask questions of officers of
the Company, which questions were answered to his satisfaction. The
undersigned understands that such discussions were intended to describe
certain aspects of the Company's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's representations
and warranties contained in this Agreement will be deemed to
3
<PAGE>
have been reaffirmed and confirmed as of the Closing, taking into account
all information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of
the Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such
knowledge, skill and experience in business, financial and investment
matters so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(g) Investment Intent. The undersigned is acquiring the Warrant
solely for his own beneficial account, for investment purposes, and not
with a view to, or for resale in connection with, any distribution of the
common stock of the Company. The undersigned has not offered or sold any
portion of its shares of Common Stock and has no present intention of
dividing its shares of Common Stock with others or of reselling his shares
of Common Stock. The undersigned understands that the Warrant and the
Common Stock have not been registered under the Securities Act or any
State Securities Laws by reason of specific exemptions under the
provisions thereof which depend in part upon the investment intent of the
undersigned and the other representations made by the undersigned in this
Agreement. The undersigned understands that the Company is relying upon
the representations and agreements contained in this Agreement (and any
supplemental information) for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (A) that it
will not sell, assign, pledge, give, transfer or otherwise dispose of the
Warrant or the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a registration of
the Warrant or the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt from
the registration provisions of the Securities Act and all applicable State
Securities Laws; and (B) that the Company and any transfer agent for the
Common Stock shall not be required to give effect to any purported
transfer of any of the Common Stock except upon compliance with the
foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to accept this Warrant and of the Company to
grant the Warrant are subject to the satisfaction at or before the Closing of
the following condition precedent:
4
<PAGE>
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the Closing
in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Subscription Agreement. On or prior to the date hereof, the
Company and the undersigned shall have entered into a Subscription
Agreement for a Convertible Note (principal amount $1,000,000.00) on
mutually acceptable terms and the undersigned shall have paid the
consideration as set forth in Section 1 of such Subscription Agreement.
(c) Consulting Agreement. On or prior to the date hereof, the
Company and the undersigned shall have amended and restated the consulting
agreement entered into by and between the Company and the undersigned on
April 23, 1999 to reflect the current agreement of the parties thereto.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EDT, June 10, 1999.
9. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
10. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
12. Expenses. The Company shall pay all actual expenses incurred in
connection with this Warrant and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate receipts or invoices. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
5
<PAGE>
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
14. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
16. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(1) If to the Company, to it at the following address:
100 Second Avenue South
Suite 303 N
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
and
with a copy, which shall not constitute notice, to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Gordon R. Penman, Esq.
Fax: (617) 856-8201
(2) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
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<PAGE>
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
17. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
18. Survival. All representations contained in this Agreement shall
survive the closing of the grant of the Warrant and the issuance and sale of the
shares of Common Stock upon exercise of the Warrant.
19. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the issuance of
the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
[The immediately following page contains the signatures of the parties]
7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 10th day of June, 1999.
Name: Schoemann Venture Capital, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
June 10, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
-------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
8
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- -------------------------------------------------------------------------------
Consideration for Warrant Aggregate Amount to Be Number of Warrant Shares
- ------------------------ Paid Upon Exercise of ------------------------
Warrant (assuming all
warrant shares are
exercised)
----------
Execution of
Subscription Agreement
for a Convertible Note $5,500,000.00 2,750,000
($1,000,000.00 principal (or cashless exercise)
amount) and payment of
the purchase price set
forth in Section 1
thereof
- -------------------------------------------------------------------------------
9
<PAGE>
APPENDIX B
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
___ a. any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
___ b. any natural person who had an individual income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching
the same income level in the current year;
___ c. any bank as defined in section 3(a)(2) of the Securities
Act of 1933, as amended (the "Act"), or any savings and
loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934; any insurance company as defined
in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 (the
"1940 Act") or a business development company as defined
in section 2(a)(48) of the 1940 Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions
for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a
self-directed plan, with investment decisions made
solely by persons that are accredited investors;
10
<PAGE>
___ d. any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of
1940;
___ e. any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
___ f. any director, executive officer, or general partner of
the Company;
X g. any entity in which all of the equity owners are
accredited investors; or
___ h. any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 10th day of June, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
Rodney R. Schoemann, Sr.
Managing Member
11
<PAGE>
Exhibit 4.12
Name: Schoemann Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100S
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale up to 2,142,857 shares
of its Common Stock, $0.001 par value per share (the "Common Stock") for the
Purchase Price set forth in Section 4 hereof.
The undersigned further understands that the offering is being made without
registration of the Common Stock under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on the exemption contained in Rule 504 of
Regulation D under the Securities Act for transactions by an issuer not
involving a public offering and the undersigned further understands that the
undersigned is purchasing the Common Stock without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that this offering
is being made only to "accredited investors" (as defined in Rule 501 of
Regulation D under the Securities Act).
These securities have not been registered with or approved by the Securities
Division of the Attorney General's Office in Delaware. They are offered and sold
pursuant to the Accredited Investor exemption provided by Section 503 of the
Securities Rules and Regulations of the State of Delaware. Sales may only be
made to accredited investors. Resale or disposal of these securities within
Delaware may only be made pursuant to an exemption or an effective registration
statement.
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the undersigned hereby irrevocably subscribes for
that number of shares of Common Stock set forth in Appendix A, which is payable
as described in Section 4.
2. Acceptance of Subscription and Issuance of Shares. It is understood and
agreed that the Company has the right to accept or reject this subscription, in
whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
1
<PAGE>
3. The Closing. The closing of the purchase and sale of the Common Stock
(the "Closing") shall take place at the offices of the Company or such other
mutually acceptable place on or before December 20, 1999 or at such time and
place as the Company and the undersigned shall mutually agree upon. The Company
may, at its option, elect to close the purchase and sale of the shares in one or
more Closings.
4. Payment for Shares. The undersigned shall make payment in the amount of
Two Hundred Fifty Thousand and 10/100 Dollars ($250,000.10) (the "Purchase
Price"), for the Common Stock, less the costs, expenses, fees and commissions
set forth on the attached Appendix B. The Purchase Price shall be paid to the
Company via certified check, personal check, or wire transfer to the account
designated by the Company. The Purchase Price, less any and all deductions
therefrom as provided for herein, shall be paid in full to the Company not later
than Friday, December 24, 1999.
5. Representations of the Company. As of the date of the Closing (the
"Closing Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock, when issued and paid for, will
represent validly authorized, duly issued and fully paid and
non-assessable shares of the Company, and the issuance thereof will
not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive
right or commitment of any type relating to the Company's capital
stock.
(b) No Transfer Restrictions. Upon issuance to the undersigned, the
Common Stock will be free from any and all restrictions on transfer,
including pursuant to Rule 144 of the Securities Act except as
agreed to by and between the undersigned and the Company herein;
provided, however, that the undersigned must be in full compliance
with all requirements of Rule 504 of Regulation D under the
Securities Act, Rule 144 of the Securities Act and all state
securities laws.
(c) Other Representations and Agreements.
i) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company shall maintain adequate current
public information in satisfaction of the requirements for
resales of restricted stock pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended, and Rule
15c-2(11) promulgated under the Exchange Act, including, but
not limited to, the publication over a nationally recognized
reporting service or newswire of annual audited financial
statements and semi-annual interim unaudited balance sheets
and income statements, it being understood that the Company
does not currently have audited financial
2
<PAGE>
statements for the year ended June 30, 1998. After the Company
becomes a fully reporting company, the Company shall file all
reports required under the Exchange Act.
6. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company and to each officer, director, and
agent of the Company that:
(a) Authority. The undersigned has all requisite authority to enter into
this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the business
and financial condition, properties, operations and prospects of the
Company. The undersigned has been furnished copies of the financial
statements of the Company and all other documents requested by it
and has had an opportunity to discuss the Company's business and
financial condition, properties, operations and prospects with the
Company's management. The undersigned has also had an opportunity to
ask questions of officers of the Company, which questions were
answered to his satisfaction. The undersigned understands that such
discussions were intended to describe certain aspects of the
Company's business and financial condition, properties, operations
and prospects, but were not a thorough or exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's
representations and warranties contained in this Agreement will be
deemed to have been reaffirmed and confirmed as of the Closing,
taking into account all information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of the
Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such knowledge,
skill and experience in business, financial and investment matters
so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned
has retained, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The undersigned has
completed an Accredited Investor Questionnaire, a copy of which is
attached hereto as Appendix C
(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for its own beneficial account, for investment purposes, and
not with a view to, or for
3
<PAGE>
immediate resale in connection with, any improper distribution of
the Common Stock. The undersigned understands that the Common Stock
has not been registered under the Securities Act or any State
Securities Laws by reason of specific exemptions under the
provisions thereof which depend in part upon the investment intent
of the undersigned and of the other representations made by the
undersigned in this Agreement. The undersigned understands that the
Company is relying upon the representations and agreements contained
in this Agreement (and any supplemental information) for the purpose
of determining whether this transaction meets the requirements for
such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (i) that it
will not sell, assign, pledge, give, transfer or otherwise dispose
of the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a
registration of the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt
from the registration provisions of the Securities Act and all
applicable State Securities Laws; and (ii) that the Company and any
transfer agent for the Common Stock shall not be required to give
effect to any purported transfer of any of the Common Stock except
upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the number of shares of
Common Stock specified herein and of the Company to sell the Common Stock are
subject to the satisfaction at or before the Closing of the following condition
precedent:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the
Closing in all respects with the same effect as though such
representations and warranties had been made on and as of the
Closing.
(b) Escrow Agreement. On or prior to the date hereof, the Company and
the undersigned shall have entered into an escrow agreement on
mutually acceptable terms whereby the undersigned agrees to place
certain shares of common stock of the Company into escrow for the
purpose of satisfying certain obligations of the Company to the
undersigned pursuant to several previous agreements by and between
the undersigned and the Company.
8. Additional Agreements.
(a) Lock-Up Agreement. Without the prior written consent of the Company,
which consent shall not be unreasonably withheld, the undersigned
agrees not to sell any of the shares of Common Stock in a
transaction on the public markets, whether through registration,
sale pursuant to Rule 144 of the Securities Act, or otherwise, for a
period of ninety (90) days following the Closing Date. It is
acknowledged that any breach of this provision will cause
irreparable harm to the Company for
4
<PAGE>
which there will be no adequate remedy at law and the Company shall
be entitled, in addition to other remedies at law or in equity, to
specific performance of this provision by the undersigned. In the
event that the undersigned sells, transfers, assigns or otherwise
disposes of any of the Common Stock in a non-public transaction, the
purchaser or transferee of such Common Stock must agree to be bound
by the provisions of this paragraph and must attest to such
agreement in writing, a copy of which must be provided to the
Company upon request.
(b) Amendment of Previous Agreements. On the Closing Date, the Company
shall amend those certain Warrant Subscription Agreements and that
certain First Amended and Restated Consulting Agreement listed on
Appendix D attached hereto and made a part hereof (collectively the
"SVC Agreements") such that all warrants granted to the undersigned
or any affiliate, assignee or transferee of the undersigned under
the SVC Agreements (the "Warrants") will be amended to include the
following terms: (i) all Warrants shall be immediately exercisable,
(ii) upon exercise of the Warrants, the purchase price for the
shares of common stock of Borrower underlying the Warrants shall be
$0.50 per share; and (iii) upon exercise of the Warrants, payment
for the shares of common stock underlying the Warrants may be made
through "cashless exercise", as defined hereinbelow.
For purposes of this Section, the term "cashless exercise" means
that at any time following the Closing Date, the undersigned, in
lieu of any cash payment required hereunder for the exercise of the
warrant, shall have the right to exercise the warrant in whole or in
part by surrendering the warrant in exchange for the number of
shares of the Company's common stock equal to (x) the number of
shares as to which the warrant is being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined
below) of the common stock less the aggregate exercise price of the
warrant being exercised, and the denominator of which is the Market
Price. The term "Market Price" means the average of the closing sale
price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on each
of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given
to the Company. If the undersigned opts for a cashless exercise of
the warrant, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid
any commission or other remuneration to any other person or entity
by the undersigned. In the event that the undersigned is not
permitted to "tack" the holding period of the warrant to the holding
period of the common stock received upon the cashless exercise for
purposes of satisfaction of the holding period requirements of Rules
144(d)(3)(ii) and 144(k) under the Securities Act for whatever
reason and there is no presently filed registration statement
effective as to the shares received or to be received through the
cashless exercise of the warrant granted herein, the Company shall,
upon receipt of the written request of the warrant holder, promptly
prepare and file a registration statement with the SEC with respect
to all of the warrant shares purchased by the undersigned.
5
<PAGE>
(c) Shareholders' Meetings. For so long as the undersigned or any
affiliate or assignee of the undersigned is a shareholder of the
Company, the Company shall notice and hold a general meeting of the
shareholders of the Company not less than once every calendar year
for the purpose of electing directors of the Company.
(d) Board of Director Observer Rights. For so long as the undersigned is
a shareholder of the Company, the Company shall grant to the
undersigned "observer rights" to the Board of Directors of the
Company such that the undersigned, or the appointed designee of the
undersigned, shall be entitled to receive all written materials
prepared by, presented to or considered by the Board of Directors of
the Company in connection with any general or special meeting of the
directors of the Company, including, but not limited to, all minutes
of the meetings of directors, officer's employment contracts,
proposals to sell or offers to purchase a material amount of the
assets of the Company, or proposals to sell or offers to purchase
any equity security of the Company. The Company shall send such
written materials to the undersigned at least three (3) business
days prior to the date of any such general or special meeting of the
directors.
(e) Acknowledgement of Additional Consideration for Reduction of Warrant
Exercise Price. The Company acknowledges that the undersigned, or
persons acting exclusively on behalf of the undersigned, has
contributed substantial time and effort to the management and
affairs of the Company, both at the principal place of business of
the Company and elsewhere, has negotiated substantially more
favorable payment terms from creditors and vendors of the Company,
has assisted in the strategic acquisition of synergistic businesses
and business partners, has been and will continue to be instrumental
in the raising of significant investment capital, intends to remain
substantially involved in negotiating the terms and conditions and
the closing of investments in the Company, has provided continued
funding for the operations of the Company, and has foregone
enforcement of the contractual obligations of the Company pursuant
to the SVC Agreements referred to in Section 8(b) hereinabove in
order to improve the Company's cash-flow position.
Because of these significant contributions to the Company, the
Company's Board of Directors, in their good faith business judgment,
have determined that it is in the best interest of the Company and
its shareholders, and is fair and equitable to the undersigned, to
reduce the exercise price of the Warrants and to issue those certain
shares of common stock of the Company as set forth hereinabove.
9. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 5:00 p.m.
EDT, December 20, 1999.
6
<PAGE>
10. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
11. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
12. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
13. Expenses. The Company shall pay all actual expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate invoices and receipts. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
15. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
17. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the Company, to it at the following address:
7
<PAGE>
100 Second Avenue South
Suite 1100S
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
with a copy, which shall not constitute notice, to
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: John Nossiff, Esq.
Fax: (617) 856-8201
(b) If to the undersigned:
Schoemann Venture Capital, L.L.C.
1209 Orange Street
Wilmington, Delaware 19801
and
Rodney R. Schoemann, Sr.
3904 Wheat Drive
Metairie, Louisiana 70002
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp, LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the shares of Common Stock.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the
8
<PAGE>
Common Stock pursuant to this Agreement which would cause any representation,
warranty, or covenant of the undersigned contained in this Agreement to be false
or incorrect.
[The immediately following page contains the signatures of the parties]
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 20th day of December, 1999.
Name: Schoemann Venture Capital, L.L.C.
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
Accepted as of
December 20, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ D.G. Brandano
-------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
9
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- -------------------------------------------------------------------------------
Shares of Common Stock to be Acquired Aggregate Amount to Be Paid
------------------------------------- At Closing
----------
714,286 $250,000.10 less the amount of all
costs, expenses, fees and other charges
set forth on Appendix B hereto
- -------------------------------------------------------------------------------
10
<PAGE>
APPENDIX B
COSTS AND EXPENSES
See attached.
11
<PAGE>
APPENDIX C
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
___ a. any natural person whose individual net worth,
or joint net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000;
___ b. any natural person who had an individual income
in excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching the
same income level in the current year;
___ c. any bank as defined in section 3(a)(2) of the
Securities Act of 1933, as amended (the "Act"), or any
savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section
2(13) of the Act; any investment company registered under
the Investment Company Act of 1940 (the "1940 Act") or a
business development company as defined in section 2(a)(48)
of the 1940 Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment Act
of 1958; any plan established and maintained by a state, its
political subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary, as defined
in section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a self-directed
plan,
12
<PAGE>
with investment decisions made solely by persons that
are accredited investors;
___ d. any private business development company as
defined in section 202(a)(22) of the Investment Advisers Act
of 1940;
___ e. any organization described in section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000;
___ f. any director, executive officer, or general
partner of the Company;
X g. any entity in which all of the equity owners
are accredited investors; or
___ h. any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 20th day of December, 1999.
SCHOEMANN VENTURE CAPITAL, LLC
BY: /s/ Rodney R. Schoemann, Sr.
----------------------------
Rodney R. Schoemann, Sr.
Managing Member
13
<PAGE>
APPENDIX D
SVC AGREEMENTS
1. Warrant Subscription Agreement by and between Schoemann Venture Capital,
L.L.C. and Affinity International Travel Systems, Inc. dated April 23, 1999.
2. Warrant Subscription Agreement by and between Schoemann Venture Capital,
L.L.C. and Affinity International Travel Systems, Inc. dated June 10, 1999
3. Consulting Agreement by and between Schoemann Venture Capital, L.L.C. and
Affinity International Travel Systems, Inc. (as amended and restated) dated June
1, 1999
14
<PAGE>
Exhibit 4.13
Rodney R. Schoemann Sr.
Managing Member SVC,LLC
3904 Wheat Drive
Metairie, Louisiana 70002
August 25, 1999
1(504) 454-6455
RE: Consulting Agreement
Mr. Daniel Brandano
President of AFFT
1000 Second Ave. South
Suite 1100S
St. Petersburg, FL
Dear Dan,
Starting September 1st, 1999 until such time that all of the shares from the
various agreements with Schoemann Venture Capital, LLC ("SVC,LLC") and AFFT have
been fully registered and unrestricted or other financing has been obtained by
AFFT; SVC,LLC in an effort to help AFFT to conserve there cash position and cash
flow needs, will elect to defer future "Consulting Fee" payments that are
presently being made to SVC,LLC on a monthly basis of $13,333.32. If AFFT agrees
to the above, as evidenced by execution of this letter agreement, SVC,LLC will
charge interest on any future outstanding balance at a rate of 5% per annum
until the amount of principle and interest is paid in full, BUT must be fully
paid before 3/01/2000. The full amount of principle and interest starting on
9/01/99 will become due when the company and/or any of its subsidiaries obtain
any funding, working capital, interim financing or financing, but definitely
become due before 3/01/2000.
This offer is being made to AFFT in an effort to help the company conserve its
cash flow until such time that the company obtains additional funding as to be
in a better financial condition to pay the agreed upon consulting fee. A balance
of $12,500.00 is due 8/25/99. This amount must be paid in full 8/25/99, as
stated in previous agreements between AFFT and SVC,LLC, and before the terms of
this letter become binding on SVC,LLC. Furthermore, AFFT will still remain
obligated to pay any and all expenses, other than the consulting agreement, that
are stated in the various contracts with SVC,LLC. These expenses must be paid
within 10 days of receipt by AFFT.
Sincerely,
/s/ Rodney R. Schoemann, Sr.
- ----------------------------
Rodney R. Schoemann, Sr.
Managing Member
Schoemann Venture Capital, LLC
/s/ D.G. Brandano
- ----------------------------
Daniel Brandano
President
Affinity International Travel Systems, Inc. ("AFFT")
<PAGE>
Exhibit 4.14
FIRST AMENDED AND RESTATED
CONSULTING AGREEMENT
THIS FIRST AMENDED AND RESTATED AGREEMENT (this "Amendment"), made this
1st day of June, 1999, by and between SCHOEMANN VENTURE CAPITAL, L.L.C. ("SVC"),
a Delaware limited liability company, and AFFINITY INTERNATIONAL TRAVEL
SERVICES, INC. ("Affinity" or "the Company"), a Nevada corporation.
WHEREAS, Affinity and SVC have entered into that certain Consulting
Agreement dated April 23, 1999 (the "Agreement");
WHEREAS, Affinity and SVC desire to amend and restate the terms and
conditions of the Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained and the consideration to be paid hereunder, and for other valuable
consideration, the Agreement is hereby amended and restated in its entirety as
follows:
1. Recitals are True. The above recitals are true and correct and
incorporated herein.
2. Consulting Services. Affinity agrees to retain SVC and SVC agrees to be
retained by Affinity on an as-needed basis from and after the date hereof until
terminated in accordance with the provisions of Section 7 hereinbelow as a
consultant and advisor to Affinity in connection with certain investment and
business matters of Affinity.
3. Devotion of Time to Consulting Services. SVC shall devote such time to
rendering consulting and advising services as is reasonably requested from
time-to-time by Affinity. The services to be rendered by SVC to Affinity
hereunder may be rendered in person or by letter, telephone or other means of
communication as shall be appropriate under the circumstances. SVC shall not be
required to observe any fixed schedule of attendance at the principal place of
business of Affinity or any other person or entity for the rendition of such
services.
4. Consideration for Consulting Services. As consideration for SVC's
services hereunder during the term of this Agreement, Affinity shall pay SVC and
SVC shall accept from Affinity the following:
(a) on the first (1st) day of each month from and after the date
hereof until terminated pursuant to Section 7 hereof, the sum of
$13,333.32 per month, pro rated for any partial month, until all shares of
common stock owned by SVC are registered for sale under the Securities Act
of 1933, as amended, or freely tradable on the public securities markets,
pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended;
(b) a sum equal to five percent (5%) of the gross investment
proceeds received by Affinity (1) from investor(s) introduced to Affinity
by SVC (and with whom Affinity has
<PAGE>
no prior relationship) or (2) in a transaction with respect to which SVC's
efforts were instrumental in negotiating and closing on behalf of the
Company. Such sum shall be due and payable by Affinity upon receipt by
Affinity of the proceeds or consideration from such investment
transaction; and
(c) the grant of warrants to purchase up to 750,000 shares of common
stock of the Company, $0.001 par value per share, at $2.00 per share. The
warrant is exercisable commencing on the date hereof and shall expire on
the date which is five (5) years from the date hereof. Upon exercise of
the warrants, SVC shall make payment in the amount of $2.00 per share for
the common stock underlying the warrants to the Company via certified
check, personal check, or wire transfer to the account designated by the
Company or via cashless exercise pursuant to Section 4(d) hereof.
(d) Cashless Exercise of Warrants. At any time following the date
hereof, the warrant holder, whether SVC or otherwise, in lieu of any cash
payment required hereunder for the warrants, shall have the rights to
exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to
(x) the number of shares as to which the warrants are being exercised
multiplied by (y) a fraction, the numerator of which is the Market Price
(as defined below) of the common stock less the exercise price of the
warrants being exercised, and the denominator of which is such Market
Price. The term "Market Price" means the average of the closing sale price
per share of the common stock on the principal stock exchange or market on
which the common stock is then quoted or traded on each of the ten (10)
consecutive trading days preceding the date on which written notice of
election to exercise the warrants has been given to the Company (a
"cashless exercise"). If the warrant holder opts for a cashless exercise
of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the
warrant holder. In the event that the warrant holder is not permitted to
"tack" the holding period of the warrants to the holding period of the
common stock received upon the cashless exercise for purposes of
satisfaction of the holding period requirements of Rules 144(d)(3)(ii) and
144(k) under the Securities Act of 1933, as amended, for whatever reason
and there is no presently filed registration statement effective as to the
shares received or to be received through the cashless exercise of the
warrants granted herein, the Company shall, upon receipt of the written
request of the warrant holder, promptly prepare and file a registration
statement with the U.S. Securities and Exchange Commission with respect to
all of the shares underlying the warrants granted herein; provided,
however, that the provisions of this paragraph relating to a demand for
registration by the warrant holder shall not be effective at any time
prior to December 15, 1999.
In addition, Affinity shall reimburse SVC for all actual expenses incurred
by SVC for services rendered on behalf of Affinity and, at the request of
Affinity, upon submission of appropriate invoices or receipts therefor.
5. Status as Independent Contractor. The parties agree that SVC's
relationship with
2
<PAGE>
Affinity will be that of independent contractor, and nothing in this Agreement
shall be deemed to create an employer-employee relationship between the parties.
As such, SVC will not be entitled to any compensation other than as agreed upon
herein.
6. Default by Affinity. Affinity hereby acknowledges that late payment by
Affinity of sums due under this Agreement will cause SVC to incur certain costs,
the exact amount of which will be difficult to ascertain. In the event that
Affinity does not pay all sums due to SVC hereunder on the date on which any
such payment is due (the "Payment Date"), Affinity shall pay interest on such
unpaid amount at an annual rate of eighteen percent (18%) which shall accrue
from the Payment Date until the date any such payment is paid in full; provided,
however, that if such interest rate exceeds the rate allowable by law, then the
highest rate allowed by law shall apply. SVC's acceptance of interest hereunder
shall in no event constitute a waiver of Affinity's default with respect to such
overdue amount, nor prevent SVC from exercising any other right or remedy
granted to SVC hereunder or at law or in equity.
7. Term of Agreement. The effective date of this Agreement shall be the
date hereof, and it shall remain effective and continue in force and effect
until terminated in accordance herewith; this Agreement may be terminated by
either party upon ten (10) business days prior written notice to the other
party. Termination of this Agreement pursuant to this Section 7 shall in no way
terminate the obligation of Affinity to pay to SVC any amounts accrued under
Section 4 hereof prior to termination.
8. Severability. The parties hereto intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly,
should a court of competent jurisdiction determine that the scope of any
provision is too broad to be enforced as written, the parties intend that the
court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future law, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance, except to the extent such remaining provisions constitute
obligations of another party to this Agreement corresponding to the
unenforceable provision.
9. Notices. Any and all notices, demands, requests, designations,
consents, offers, acceptances or any other communications that may be or are
required to be given, served or sent by any party to another party pursuant to
this Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or by verifiable overnight delivery postage prepaid, or
transmitted by hand delivery (against a signed receipt) or by facsimile with
confirmation of receipt addressed as follows: (a) if to SVC at 3904 Wheat Drive,
Metairie, Louisiana, 70002 FAX (504) 455-8845, with a copy to William C. Perez,
Esq., 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201 FAX: (214) 740-8800; (b)
if to Affinity at 100 Second Avenue South, Suite 1100S, St. Petersburg, Florida
33701 FAX: (727) 896-1403 with a copy to Gordon R. Penman, Esq., Brown, Rudnick,
Freed & Gesmer, One Financial Center, Boston, MA 02111 (FAX: (617) 856-8201 or
to such other address which may be designated by either Affinity or SVC.
3
<PAGE>
10. Modification. No change or modification of this Agreement shall be
valid unless the same be in writing and signed by the parties hereto, other than
modification by a Court of law in accordance with Section 8 hereof.
11. Applicable Law and Binding Effect. This Agreement shall be construed
and regulated under and by the laws of the State of Nevada and shall inure to
the benefit of and be binding upon the parties hereto and their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Agreement to
be executed the day and year first above written.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Daniel G. Brandano
----------------------------------
DANIEL G. BRANDANO
President
SCHOEMANN VENTURE CAPITAL, L.L.C.
By: /s/ Rodney R. Schoemann, Sr.
----------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
4
<PAGE>
Exhibit 4.15
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
100 Second Avenue South
Suite 1100 S
St. Petersburg, Florida 33701
January 26, 2000
Mr. Rodney R. Schoemann, Sr.
Managing Member
Schoemann Venture Capital, LLC
3904 Wheat Drive
Metairie, Louisiana 70002
RE: Termination of Terms and Conditions of Such Agreements by and
between Affinity International Travel Systems, Inc.
and Schoemann Venture Capital, L.L.C.
Dear Rodney:
Thank you for participating in our recent telephone conferences regarding
the proposed termination and waiver of certain agreements by and between
Affinity International Travel Systems, Inc. ("AFFT") and Schoemann Venture
Capital, L.L.C. ("SVC") and the agreement as to certain other terms and
conditions as more fully set forth hereinafter.
As we discussed, both AFFT and SVC desire to terminate all rights of SVC,
all obligations and duties of each of SVC and AFFT, and all other terms and
conditions of the agreements as set forth herein for the mutual benefit of all
parties involved. As such, this letter, with your consent, evidenced by your
execution of this letter where indicated below, as of the date hereof, will
terminate all terms and conditions of such agreements. Notwithstanding the
foregoing, nothing contained herein shall have the effect of terminating,
altering or modifying the subscription for shares of common stock of AFFT by SVC
or the acceptance thereof by AFFT. Additionally, AFFT will issue to SVC warrants
and will amend previously issued warrants to purchase common stock of AFFT, as
set forth more fully on Schedule A attached hereto and made a part hereof.
From and after the date hereof, all provisions of the following agreements
will be null and void:
1. That certain Subscription Agreement by and between AFFT and SVC dated
January 15, 1999, as amended January 31, 1999, pursuant to which SVC subscribed
for a convertible note in the principal amount of $222,000;
2. That certain Subscription Agreement by and between AFFT and SVC dated
April 23, 1999, pursuant to which SVC subscribed for a convertible note in the
principal amount of $1,000,000;
1
<PAGE>
3. That certain Subscription Agreement by and between AFFT and SVC dated
June 10, 1999, pursuant to which SVC subscribed for a convertible note in the
principal amount of $1,000,000;
4. That certain Subscription Agreement by and between AFFT and SVC dated
December 20, 1999, pursuant to which SVC subscribed for 714,286 shares of AFFT;
5. That certain Warrant Subscription Agreement by and between AFFT and SVC
dated January 15, 1999, pursuant to which SVC subscribed for warrants to
purchase 250,000 shares of AFFT;
6. That certain Warrant Subscription Agreement by and between AFFT and SVC
dated April 23, 1999, pursuant to which SVC subscribed for warrants to purchase
750,000 shares of AFFT;
7. That certain Warrant Subscription Agreement by and between AFFT and SVC
dated June 10, 1999, pursuant to which SVC subscribed for warrants to purchase
2,750,000 shares of AFFT;
8. That certain Consulting Agreement by and between AFFT and SVC dated
April 23, 1999, as amended June 1, 1999, pursuant to which SVC received warrants
to purchase 750,000 shares of AFFT; and
The aforementioned agreements are hereinafter collectively referred to as
the "Agreements".
All rights, obligations and duties of each of SVC and AFFT, as well as any
person or entity acting on behalf of, or any transferee or assignee of either
AFFT or SVC, contained in the Agreements shall null and void and of no further
effect, including, but not limited to, those provisions relating to use of
proceeds, right of first refusal in connection with future financings by AFFT,
registration of shares, whether by demand or otherwise, sales of additional
investor shares, co-sale rights, stock splits and put rights.
As consideration for the waiver and termination of the rights afforded to
SVC in the Agreements, AFFT hereby agrees and covenants to the following:
A. AFFT will file, and will use its best efforts to cause to become
effective a registration statement under the Securities Act of 1933, as amended
(the "Act") registering all shares of common stock owned and/or purchased by,
and all shares underlying all warrants purchased and/or granted and/or issued in
all transactions involving, SVC or GCD Investments, LLC ("GCD") (regardless of
the present holder of record or otherwise) provided that all stockholders whose
shares are to be registered complete and provide AFFT with a selling stockholder
questionnaire.
2
<PAGE>
B. SVC will earn, and AFFT will pay, a commission equal to five percent
(5%) of the gross investment proceeds received by AFFT (i) from investors
introduced to AFFT by SVC and with whom AFFT has no prior relationship, or (ii)
in a transaction in which SVC's efforts were instrumental in negotiating and
closing on behalf of AFFT, or (iii) in a transaction in which James E. Hicks' or
J. Edgar Capital's efforts were instrumental in negotiating and closing on
behalf of AFFT. Such payment will be paid to SVC within ten (10) business days
from receipt of such investment proceeds by AFFT. Within two (2) business days
after the receipt of investment proceeds received pursuant to subsection (iii)
above, AFFT will provide notice to SVC by facsimile or overnight courier of the
receipt of such proceeds. If such payment is not received within such ten (10)
business day time period, the outstanding amount will accrue simple interest at
the rate of five percent (5%) per annum based on a 360-day year; provided,
however, that acceptance of such interest shall in no way constitute a waiver of
any other rights that SVC may have hereunder or at law.
C. AFFT will pay SVC a consulting fee in the amount of $13,333.32 per
month until a registration statement under the Act covering (i) all shares of
common stock originally purchased by SVC and GCD that are specifically
identified in a selling stockholder questionnaire to be completed by the selling
stockholder and provided to AFFT, and (ii) all shares of common stock underlying
all warrants purchased by, issued to or granted to SVC and/or GCD is declared
effective by the United States Securities and Exchange Commission ("SEC"). Such
payment must be received by SVC within five (5) business days of the first (1st)
day of each month. If such payment is not received within such time period, the
outstanding amount will accrue simple interest at the rate of five percent (5%)
per annum based on a 360-day year. It is acknowledged that a payment was due and
payable to SVC on February 1, 2000 which payment is currently outstanding and
next consulting payment is due and payable on March 1, 2000.
D. Beginning on February 25, 2000 and until the effective date of the
aforementioned registration statement, AFFT will maintain adequate current
public information in satisfaction of the requirements for resales of restricted
stock pursuant to Rule 144 under the Act ("Rule 144") and Rule 15c-2(11) under
the Exchange Act, including, but not limited to, the publication over a
nationally recognized reporting service or newswire of annual audited financial
statements and semi-annual interim unaudited balance sheets and income
statements. Additionally, if it becomes necessary for SVC or GCD or any
recipient of any shares of common stock of AFFT from either SVC of GCD to
utilize Rule 144 for a resale of such common stock, AFFT will cause its legal
counsel to promptly provide the necessary opinion to the transfer agent for
AFFT, but in no event later than ten (10) business days from the provision of
all required documents to such counsel, allowing such resale in reliance on Rule
144. Notwithstanding the foregoing sentence, such legal counsel will not be
required to issue any such opinion if it has determined in good faith that Rule
144 is not available for the contemplated resale.
E. AFFT will promptly pay all reasonable legal fees, costs and expenses of
SVC incurred in connection with the transactions contemplated hereby and/or
referred to herein (including expenses (exclusive of underwriting discounts and
commissions) in connection with the registration of the shares to be registered
pursuant to Paragraph A above).
3
<PAGE>
Each party hereto acknowledges that a refusal without just cause by such
party to consummate the transactions contemplated hereby will cause irreparable
harm to the other party, for which there may be no adequate remedy at law. A
party not in default at the time of such refusal shall be entitled, in addition
to other remedies at law or in equity, to specific performance of the agreement
contained herein by the party that so refused or failed to consummate the
transactions contemplated hereby. In any action to enforce the terms hereof, the
successful party shall be entitled to recover its reasonable attorneys' fees,
costs and expenses from the party who refused or failed to perform this
Agreement.
Nothing in this letter nor any provisions hereof shall be modified,
changed, discharged or terminated except by an instrument in writing, signed by
both parties.
Subject to compliance with applicable securities laws, the provisions of
this agreement may be specifically assigned, transferred, pledged, encumbered,
mortgaged or otherwise alienated by SVC, and AFFT shall be bound by the terms
hereof to such assignee or transferee.
The consummation of the transactions contemplated herein is conditioned on
the receipt of all necessary approvals of the board of directors of AFFT.
It is specifically agreed that this letter may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which together shall be deemed to be one and the same
agreement.
If you agree with the foregoing, please execute this letter where
indicated below to evidence your (i) consent to terminate the Agreements and
(ii) acceptance of the terms and conditions as contained herein.
4
<PAGE>
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
--------------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
Consented to and accepted this 26th day of January, 2000.
Name: Schoemann Venture Capital, L.L.C.
/s/ Rodney R. Schoemann, Sr.
--------------------------------
RODNEY R. SCHOEMANN, SR.
Managing Member
5
<PAGE>
SCHEDULE A
WARRANTS
Effective Date of
Original Issuance No. of Warrants Exercise Price
----------------- --------------- (as amended)
1. January 15, 1999 250,000 $0.25
2. April 23, 1999 750,000 $0.25
3. June 1, 1999 750,000 $0.25
4. June 10, 1999 2,750,000 $0.25
5. December 20, 1999 1,950,000 $0.25
6
<PAGE>
Exhibit 4.16
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of an
amended and restated warrant to purchase 250,000 shares of common stock of
Affinity International Travel Systems, Inc. (the "Company"). Such amended and
restated warrant amends and restates the warrant originally issued January 15,
1999, as amended on January 31, 1999. The consideration for the warrants was the
execution on January 15, 1999 of a subscription for securities, including such
warrants, of the Company and payment by the undersigned of the purchase price
therefor. The warrants and the underlying common shares are collectively
referred to as the "Securities". The Securities are being issued to the
undersigned in full and complete satisfaction of all amounts owing by the
Company to the undersigned through the date hereof.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
-1-
<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. Schoemann Venture Capital, L.L.C.
By:/s/ D.G. Brandano By: /s/ Rodney R. Schoemann
--------------------------------- -----------------------
Daniel G. Brandano, Rodney R. Schoemann,
President Managing Member
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
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<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
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<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.17
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of an
amended and restated warrant to purchase 750,000 shares of common stock of
Affinity International Travel Systems, Inc. (the "Company"). Such amended and
restated warrant amends and restates the warrant originally issued April 23,
1999. The consideration for the warrants was the execution on April 23, 1999 of
a subscription for securities, including such warrants, of the Company and
payment by the undersigned of the purchase price therefor. The warrants and the
underlying common shares are collectively referred to as the "Securities". The
Securities are being issued to the undersigned in full and complete satisfaction
of all amounts owing by the Company to the undersigned through the date hereof.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
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<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. Schoemann Venture Capital, L.L.C.
By:/s/ D.G. Brandano By: /s/ Rodney R. Schoemann
--------------------------------- -----------------------
Daniel G. Brandano, Rodney R. Schoemann,
President Managing Member
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
-2-
<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
-3-
<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.18
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of an
amended and restated warrant to purchase 750,000 shares of common stock of
Affinity International Travel Systems, Inc. (the "Company"). Such amended and
restated warrant amends and restates the warrant originally issued June 1, 1999
in connection with the Consulting Agreement between the Company and the
undersigned. The consideration for the warrants was the execution of that
certain Consulting Agreement dated April 23, 1999 as amended on June 1, 1999 by
and between the undersigned and the Company dated the date hereof. The warrants
and the underlying common shares are collectively referred to as the
"Securities". The Securities are being issued to the undersigned in full and
complete satisfaction of all amounts owing by the Company to the undersigned
through the date hereof.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
-1-
<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. Schoemann Venture Capital, L.L.C.
By:/s/ D.G. Brandano By: /s/ Rodney R. Schoemann
--------------------------------- -----------------------
Daniel G. Brandano, Rodney R. Schoemann,
President Managing Member
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
-2-
<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
-3-
<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.19
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of an
amended and restated warrant to purchase 2,750,000 shares of common stock of
Affinity International Travel Systems, Inc. (the "Company"). Such amended and
restated warrant amends and restates the warrant originally issued June 10,
1999. The consideration for the warrants was the execution on June 10, 1999 of a
subscription for securities, including such warrants, of the Company and payment
by the undersigned of the purchase price therefor. The warrants and the
underlying common shares are collectively referred to as the "Securities". The
Securities are being issued to the undersigned in full and complete satisfaction
of all amounts owing by the Company to the undersigned through the date hereof.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
-1-
<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. Schoemann Venture Capital, L.L.C.
By:/s/ D.G. Brandano By: /s/ Rodney R. Schoemann
--------------------------------- -----------------------
Daniel G. Brandano, Rodney R. Schoemann,
President Managing Member
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
-2-
<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
-3-
<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.20
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of warrants
to purchase 1,950,000 shares of common stock of Affinity International Travel
Systems, Inc. (the "Company"). The purchase price for the warrants shall be
$250,000.00 and was paid to the Company in consideration of a subscription for
714,286 shares of AFFT, which has been voided ab initio. The warrants and the
underlying common shares are collectively referred to as the "Securities". The
Securities are being issued to the undersigned in full and complete satisfaction
of all amounts owing by the Company to the undersigned through the date hereof
and amends and restates that certain Subscription Agreement dated December 20,
1999 between the undersigned and the Company.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
-1-
<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. Schoemann Venture Capital, L.L.C.
By:/s/ D.G. Brandano By: /s/ Rodney R. Schoemann
--------------------------------- -----------------------
Daniel G. Brandano, Rodney R. Schoemann,
President Managing Member
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
-2-
<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
-3-
<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.21
Name: GCD Investments, LLC
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100S
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale up to 2,142,857 shares
of its Common Stock, $0.001 par value per share (the "Common Stock") for the
Purchase Price set forth in Section 4 hereof.
The undersigned further understands that the offering is being made without
registration of the Common Stock under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on the exemption contained in Rule 504 of
Regulation D under the Securities Act for transactions by an issuer not
involving a public offering and the undersigned further understands that the
undersigned is purchasing the Common Stock without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that this offering
is being made only to "accredited investors" (as defined in Rule 501 of
Regulation D under the Securities Act).
These securities have not been registered with or approved by the Securities
Division of the Attorney General's Office in Delaware. They are offered and sold
pursuant to the Accredited Investor exemption provided by Section 503 of the
Securities Rules and Regulations of the State of Delaware. Sales may only be
made to accredited investors. Resale or disposal of these securities within
Delaware may only be made pursuant to an exemption or an effective registration
statement.
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the undersigned hereby irrevocably subscribes for
that number of shares of Common Stock set forth in Appendix A, which is payable
as described in Section 4.
2. Acceptance of Subscription and Issuance of Shares. It is understood and
agreed that the Company has the right to accept or reject this subscription, in
whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
1
<PAGE>
3. The Closing. The closing of the purchase and sale of the Common Stock
(the "Closing") shall take place at the offices of the Company or such other
mutually acceptable place on or before December 20, 1999 or at such time and
place as the Company and the undersigned shall mutually agree upon. The Company
may, at its option, elect to close the purchase and sale of the shares in one or
more Closings.
4. Payment for Shares. The undersigned shall make payment in the amount of
Four Hundred Ninety Nine Thousand Nine Hundred Ninety Nine and 85/100 Dollars
($499,999.85) (the "Purchase Price"), for the Common Stock, less the costs,
expenses, fees and commissions set forth on the attached Appendix B. The
Purchase Price shall be paid to the Company via certified check, personal check,
or wire transfer to the account designated by the Company. The Purchase Price,
less any and all deductions therefrom as provided for herein, shall be paid in
full to the Company not later than Friday, December 24, 1999 as set forth on
Appendix B.
5. Representations of the Company. As of the date of the Closing (the
"Closing Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock, when issued and paid for, will
represent validly authorized, duly issued and fully paid and
non-assessable shares of the Company, and the issuance thereof will
not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive
right or commitment of any type relating to the Company's capital
stock.
(b) No Transfer Restrictions. Upon issuance to the undersigned, the
Common Stock will be free from any and all restrictions on transfer,
including pursuant to Rule 144 of the Securities Act except as
agreed to by and between the undersigned and the Company herein;
provided, however, that the undersigned must be in full compliance
with all requirements of Rule 504 of Regulation D under the
Securities Act, Rule 144 of the Securities Act and all state
securities laws.
(c) Other Representations and Agreements.
i) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company shall maintain adequate current
public information in satisfaction of the requirements for
resales of restricted stock pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended, and Rule
15c-2(11) promulgated under the Exchange Act, including, but
not limited to, the publication over a nationally recognized
reporting service or newswire of annual audited financial
statements and semi-annual interim unaudited balance sheets
and income statements, it being
2
<PAGE>
understood that the Company does not currently have audited
financial statements for the year ended June 30, 1998. After
the Company becomes a fully reporting company, the Company
shall file all reports required under the Exchange Act.
6. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company and to each officer, director, and
agent of the Company that:
(a) Authority. The undersigned has all requisite authority to enter into
this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the business
and financial condition, properties, operations and prospects of the
Company. The undersigned has been furnished copies of the financial
statements of the Company and all other documents requested by it
and has had an opportunity to discuss the Company's business and
financial condition, properties, operations and prospects with the
Company's management. The undersigned has also had an opportunity to
ask questions of officers of the Company, which questions were
answered to his satisfaction. The undersigned understands that such
discussions were intended to describe certain aspects of the
Company's business and financial condition, properties, operations
and prospects, but were not a thorough or exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's
representations and warranties contained in this Agreement will be
deemed to have been reaffirmed and confirmed as of the Closing,
taking into account all information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of the
Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such knowledge,
skill and experience in business, financial and investment matters
so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned
has retained, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The undersigned has
completed an Accredited Investor Questionnaire, a copy of which is
attached hereto as Appendix C
3
<PAGE>
(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for its own beneficial account, for investment purposes, and
not with a view to, or for immediate resale in connection with, any
improper distribution of the Common Stock. The undersigned
understands that the Common Stock has not been registered under the
Securities Act or any State Securities Laws by reason of specific
exemptions under the provisions thereof which depend in part upon
the investment intent of the undersigned and of the other
representations made by the undersigned in this Agreement. The
undersigned understands that the Company is relying upon the
representations and agreements contained in this Agreement (and any
supplemental information) for the purpose of determining whether
this transaction meets the requirements for such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (i) that it
will not sell, assign, pledge, give, transfer or otherwise dispose
of the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a
registration of the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt
from the registration provisions of the Securities Act and all
applicable State Securities Laws; and (ii) that the Company and any
transfer agent for the Common Stock shall not be required to give
effect to any purported transfer of any of the Common Stock except
upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the number of shares of
Common Stock specified herein and of the Company to sell the Common Stock are
subject to the satisfaction at or before the Closing of the following condition
precedent:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the
Closing in all respects with the same effect as though such
representations and warranties had been made on and as of the
Closing.
(b) Payment of Third Party Payables. At or prior to the Closing Date,
the Company shall have paid those certain third party payables set
forth on the Appendix D attached hereto and made a part hereof.
8. Additional Agreements.
(a) Lock-Up Agreement. Without the prior written consent of the Company,
which consent shall not be unreasonably withheld, the undersigned
agrees not to sell any of the shares of Common Stock in a
transaction on the public markets, whether through registration,
sale pursuant to Rule 144 of the Securities Act, or otherwise, for a
period of ninety (90) days following the Closing Date. It is
acknowledged that any breach of this provision will cause
irreparable harm to the Company for which there will be no adequate
remedy at law and the Company shall be entitled,
4
<PAGE>
in addition to other remedies at law or in equity, to specific
performance of this provision by the undersigned. In the event that
the undersigned sells, transfers, assigns or otherwise disposes of
any of the Common Stock in a non-public transaction, the purchaser
or transferee of such Common Stock must agree to be bound by the
provisions of this paragraph and must attest to such agreement in
writing, a copy of which must be provided to the Company upon
request.
(b) Shareholders' Meetings. For so long as the undersigned or any
affiliate or assignee of the undersigned is a shareholder of the
Company, the Company shall notice and hold a general meeting of the
shareholders of the Company not less than once every calendar year
for the purpose of electing directors of the Company.
9. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 5:00 p.m.
EDT, December 20, 1999.
10. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
11. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
12. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
13. Expenses. The Company shall pay all actual expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate invoices and receipts. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
5
<PAGE>
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
15. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
17. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the Company, to it at the following address:
100 Second Avenue South
Suite 1100S
St. Petersburg, Florida 33701
Attention: Daniel G. Brandano
FAX: (727) 896-1403
with a copy, which shall not constitute notice, to
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: John Nossiff, Esq.
Fax: (617) 856-8201
(b) If to the undersigned:
GCD, LLC
1209 Orange Street
Wilmington, Delaware 19801
and
Gordon C. Dumont
4821 Sheridan
Metairie, Louisiana 70002
6
<PAGE>
with a copy, which shall not constitute notice, to:
Locke Liddell & Sapp, LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Attention: William C. Perez, Esq.
FAX: (214) 740-8800
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the shares of Common Stock.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the Common Stock pursuant to this Agreement which would cause any
representation, warranty, or covenant of the undersigned contained in this
Agreement to be false or incorrect.
[The immediately following page contains the signatures of the parties]
7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 20th day of December, 1999.
Name: GCD, LLC,
a Delaware limited liability company
BY: GCD, LP,
a Delaware limited partnership,
its sole member
BY: /s/ Gordon C. Dumont
-----------------------------
Gordon C. Dumont,
General Partner
Accepted as of
December 20, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ D.G. Brandano
-----------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
8
<PAGE>
APPENDIX A
CONSIDERATION TO BE DELIVERED
- -------------------------------------------------------------------------------
Shares of Common Stock to be Acquired Aggregate Amount to Be Paid
------------------------------------- ---------------------------
At Closing
----------
1,428,571 $499,999.85 less the amount of all
expenses set forth on Appendix B hereto
(the purchase price, exclusive of
expenses, shall be paid to the Company
in two (2) installments as follows: (1)
$249,999.85 not later than Friday,
December 24, 1999, and (2) $250,000.00
not later than January 5, 2000)
- -------------------------------------------------------------------------------
9
<PAGE>
APPENDIX B
COSTS AND EXPENSES
See attached.
10
<PAGE>
APPENDIX C
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
___ a. any natural person whose individual net worth,
or joint net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000;
___ b. any natural person who had an individual income
in excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching the
same income level in the current year;
___ c. any bank as defined in section 3(a)(2) of the
Securities Act of 1933, as amended (the "Act"), or any
savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section
2(13) of the Act; any investment company registered under
the Investment Company Act of 1940 (the "1940 Act") or a
business development company as defined in section 2(a)(48)
of the 1940 Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment Act
of 1958; any plan established and maintained by a state, its
political subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary, as defined
in section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a self-directed
plan,
11
<PAGE>
with investment decisions made solely by persons that are
accredited investors;
___ d. any private business development company as
defined in section 202(a)(22) of the Investment Advisers Act
of 1940;
___ e. any organization described in section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000;
___ f. any director, executive officer, or general
partner of the Company;
X g. any entity in which all of the equity owners
are accredited investors; or
___ h. any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a
sophisticated person as described in section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 20th day of December, 1999.
GCD Investments, LLC,
a Delaware limited liability company
BY: GCD Investments, LP,
a Delaware limited partnership,
its sole member
BY: /s/ Gordon C. Dumont
-----------------------------
Gordon C. Dumont,
General Partner
12
<PAGE>
APPENDIX D
THIRD PARTY PAYABLES
1. Technology Consulting Partners in the amount of $30,000.00
2. Xiotech in the amount of $25,000.00
3. Purchase of Sun server from GCA in the amount of $31,000.00
4. Sabre installation and upgrade fee in the amount of $40,000.00
13
<PAGE>
Exhibit 4.22
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
100 Second Avenue South
Suite 1100 S
St. Petersburg, Florida 33701
January 26, 2000
Mr. Gordon C. Dumont
GCD Investments, LLC
RE: Termination of Agreements by and
between Affinity International Travel Systems, Inc.
and GCD Investments, LLC
Dear Mr. Dumont:
Thank you for participating in our recent telephone conferences regarding
the proposed termination and waiver of that certain Subscription Agreement by
and between Affinity International Travel Systems, Inc. ("AFFT") and GCD
Investments, L.L.C. ("GCD") dated December 20, 1999 (the "Subscription
Agreement").
As we discussed, both AFFT and GCD desire to terminate the Subscription
Agreement ab initio, and enter into the Warrant Subscription Agreement to be
effective as of December 20, 1999, on substantially the terms and conditions
contained on the form attached hereto as Exhibit A. As such, this letter, with
your consent, evidenced by your execution of this letter where indicated below,
will vitiate the Subscription Agreement and all terms and conditions contained
therein.
As consideration for the termination of the rights afforded to GCD in the
Subscription Agreement, AFFT hereby agrees and covenants to the following:
A. AFFT will file, and will use its best efforts to cause to become
effective, a registration on Form S-1 or SB-1 under the Securities Act of 1933,
as amended (the "Act"), of all shares of common stock underlying all warrants
purchase and/or granted and/or issued to GCD.
B. Beginning on February 25, 2000 and until the effective date of the
aforementioned registration statement, AFFT will maintain adequate current
public information in satisfaction of the requirements for resales of restricted
stock pursuant to Rule 144 under the Act ("Rule 144") and Rule 15c-2(11) under
the Exchange Act, including, but not limited to, the publication over a
nationally recognized reporting service or newswire of annual audited financial
statements and semi-annual interim unaudited balance sheets and income
statements. Additionally, if it becomes necessary for GCD to utilize Rule 144
for a resale of such common stock, AFFT will cause its legal counsel to promptly
provide the necessary opinion to the transfer agent for AFFT, but in no event
later than ten (10) business days from the provision of all
<PAGE>
required documents to such counsel, allowing such resale in reliance on Rule
144. Notwithstanding the foregoing sentence, such legal counsel will not be
required to issue any such opinion if it has determined in good faith that Rule
144 is not available for the contemplated resale.
C. AFFT will promptly pay all reasonable legal fees, costs and expenses of
GCD incurred in connection with the transactions contemplated hereby and/or
referred to herein (including expenses (exclusive of underwriting discounts and
commissions) in connection with the registration of the shares to be registered
pursuant to Paragraph A above).
Each party hereto acknowledges that a refusal without just cause by such
party to consummate the transactions contemplated hereby will cause irreparable
harm to the other party, for which there may be no adequate remedy at law. A
party not in default at the time of such refusal shall be entitled, in addition
to other remedies at law or in equity, to specific performance of the agreement
contained herein by the party that so refused or failed to consummate the
transactions contemplated hereby. In any action to enforce the terms hereof, the
successful party shall be entitled to recover its reasonable attorneys' fees,
costs and expenses from the party who refused or failed to perform this
Agreement.
Nothing in this letter nor any provisions hereof shall be modified,
changed, discharged or terminated except by an instrument in writing, signed by
both parties.
The provisions of this agreement may be specifically assigned,
transferred, pledged, encumbered, mortgaged or otherwise alienated by GCD, and
AFFT shall be bound by the terms hereof to such assignee or transferee.
The consummation of the transactions contemplated herein is conditioned on
the receipt of all necessary approvals of the board of directors of AFFT.
It is specifically agreed that this letter may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which together shall be deemed to be one and the same
agreement.
<PAGE>
If you agree with the foregoing, please execute this letter where
indicated below to evidence your (i) consent to terminate the Subscription
Agreement and (ii) acceptance of the terms and conditions as contained herein.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
-----------------------------
DANIEL G. BRANDANO
President and
Chief Executive Officer
Consented to and accepted this 26th day of January, 2000.
Name: GCD INVESTMENTS, LLC
BY: GCD INVESTMENTS, L.P.
BY: /s/ Gordon C. Dumont
------------------------
GORDON C. DUMONT
General Partner
<PAGE>
EXHIBIT A
<PAGE>
Exhibit 4.23
WARRANT SUBSCRIPTION AGREEMENT
Date: January 26, 2000
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of warrants
to purchase 2,300,000 shares of Common Stock of Affinity International Travel
Systems, Inc. (the "Company"). The purchase price for the warrants shall be
$500,000.00 and was paid to the Company in consideration of a subscription for
1,428,572 shares of AFFT, which has been voided ab initio . The warrants and the
underlying common shares are collectively referred to as the "Securities". The
Securities are being issued to the undersigned in full and complete satisfaction
of all amounts owing by the Company to the undersigned through the date hereof
and amends and restates in its entirety that certain Subscription Agreement
dated December 20, 1999 between the undersigned and the Company.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in
an unlawful distribution of the Securities and not with an improper view to
resale or any improper distribution of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
-1-
<PAGE>
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems,Inc. GCD Investments, L.L.C.
By:/s/ D.G. Brandano By: GCD Investments, L.P.
---------------------------------
By: /s/ Gordon C. Dumont
-----------------------
Daniel G. Brandano, Gordon C. Dumont,
President General Partner
Dated: February 15, 2000 Dated: February 15, 2000
----------------------------- --------------------
-2-
<PAGE>
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
-3-
<PAGE>
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
-4-
<PAGE>
Exhibit 4.24
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS,
OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. AMENDED AND RESTATED No. of Shares 250,000
- ----------------- STOCK PURCHASE WARRANT ---------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, SCHOEMANN VENTURE CAPITAL, L.L.C.
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"),
at the price hereinafter set forth in Section 2, up to 250,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock"). This Amended and Restated Warrant dated
January 26, 2000 amends and restates the warrant to purchase 250,000 shares of
common stock of the Company originally issued to the Holder on January 15, 1999
(the "Original Issuance Date").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on the Original
Issuance . The purchase rights represented by this Warrant shall expire five (5)
years from the Original Issuance Date.. This Warrant may be exercised for Shares
at a price of twenty-five cents (US$0.25) per share, subject to adjustment as
provided in Section 6 (the "Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of
<PAGE>
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the Warrant Purchase Price per share multiplied by the number of Shares then
being purchased or via "cashless exercise" as provided hereinafter. Upon
exercise, the Holder shall be entitled to receive, within a reasonable time, but
in no event later than ten (10) business days from the date of exercise, a
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
-2-
<PAGE>
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
-3-
<PAGE>
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: January 15, 1999.
AMENDED AND RESTATED AS OF: January 26, 2000.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
-------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
-4-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
________________________________
Name:
Address:________________________
________________________
________________________
________________________________
(Signature)
________________________________
(Date)
-5-
<PAGE>
Exhibit 4.25
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR STATE
SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR
SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO UNDER APPLICABLE SECURITIES LAWS, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. AMENDED AND RESTATED No. of Shares 750,000
- ----------------- STOCK PURCHASE WARRANT ---------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, SCHOEMANN VENTURE CAPITAL, L.L.C.
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"),
at the price hereinafter set forth in Section 2, up to 750,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock"). This Amended and Restated Warrant dated
January 26, 2000 amends and restates the warrant to purchase 750,000 shares of
common stock of the Company originally issued to the Holder on April 23, 1999
(the "Original Issuance Date").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on the Original
Issuance The purchase rights represented by this Warrant shall expire five (5)
years from the Original Issuance Date. This Warrant may be exercised for Shares
at a price of twenty-five cents (US$0.25) per share, subject to adjustment as
provided in Section 6 (the "Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of
<PAGE>
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the Warrant Purchase Price per share multiplied by the number of Shares then
being purchased or via "cashless exercise" as provided hereinafter. Upon
exercise, the Holder shall be entitled to receive, within a reasonable time, but
in no event later than ten (10) business days from the date of exercise, a
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
-2-
<PAGE>
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
-3-
<PAGE>
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: April 23, 1999.
AMENDED AND RESTATED AS OF: January 26, 2000.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
-------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
-4-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
________________________________
Name:
Address:________________________
________________________
________________________
________________________________
(Signature)
________________________________
(Date)
-5-
<PAGE>
Exhibit 4.26
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS,
OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. AMENDED AND RESTATED No. of Shares 750,000
- ----------- STOCK PURCHASE WARRANT ---------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, SCHOEMANN VENTURE CAPITAL, L.L.C.
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"),
at the price hereinafter set forth in Section 2, up to 750,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock"). This Amended and Restated Warrant dated
January 26, 2000 amends and restates the warrant to purchase 750,000 shares of
common stock of the Company originally issued to the Holder on June 1, 1999 (the
"Original Issuance Date").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on the Original
Issuance The purchase rights represented by this Warrant shall expire five (5)
years from the Original Issuance Date. This Warrant may be exercised for Shares
at a price of twenty-five cents (US$0.25) per share, subject to adjustment as
provided in Section 6 (the "Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of
<PAGE>
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the Warrant Purchase Price per share multiplied by the number of Shares then
being purchased or via "cashless exercise" as provided hereinafter. Upon
exercise, the Holder shall be entitled to receive, within a reasonable time, but
in no event later than ten (10) business days from the date of exercise, a
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
-2-
<PAGE>
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
-3-
<PAGE>
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: June 1, 1999.
AMENDED AND RESTATED AS OF: January 26, 2000
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
---------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
-4-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
-5-
<PAGE>
Exhibit 4.27
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS,
OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. AMENDED AND RESTATED No. of Shares 2,750,000
- ----------- STOCK PURCHASE WARRANT -----------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, SCHOEMANN VENTURE CAPITAL, L.L.C.
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"),
at the price hereinafter set forth in Section 2, up to 2,750,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock"). This Amended and Restated Warrant dated
January 26, 2000 amends and restates the warrant to purchase 2,750,000 shares of
common stock of the Company originally issued to the Holder on June 10, 1999
(the "Original Issuance Date").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing the Original
Issuance Date. The purchase rights represented by this Warrant shall expire five
(5) years from the Original Issuance Date. This Warrant may be exercised for
Shares at a price of twenty-five cents (US$0.25) per share, subject to
adjustment as provided in Section 6 (the "Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of
-6-
<PAGE>
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the Warrant Purchase Price per share multiplied by the number of Shares then
being purchased or via "cashless exercise" as provided hereinafter. Upon
exercise, the Holder shall be entitled to receive, within a reasonable time, but
in no event later than ten (10) business days from the date of exercise, a
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
-2-
<PAGE>
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
-3-
<PAGE>
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: June 10, 1999.
AMENDED AND RESTATED AS OF: January 26, 2000.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
-------------------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
-4-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
-5-
<PAGE>
Exhibit 4.28
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS,
OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. STOCK PURCHASE WARRANT No. of Shares 1,950,000
- ----------- -----------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, SCHOEMANN VENTURE CAPITAL, L.L.C.
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"),
at the price hereinafter set forth in Section 2, up to 1,950,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on date hereof. The
purchase rights represented by this Warrant shall expire five (5) years from the
date hereof. This Warrant may be exercised for Shares at a price of twenty-five
cents (US$0.25) per share, subject to adjustment as provided in Section 6 (the
"Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of Exercise (the form of which is
attached as Exhibit A) at the principal office of the Company and by the payment
to the Company, by check, of an amount equal to the Warrant Purchase Price per
share multiplied by the number of Shares then being purchased or via "cashless
exercise" as provided hereinafter. Upon exercise, the Holder shall be entitled
to receive, within a reasonable time, but in no event later than ten (10)
business days from the date of exercise, a
<PAGE>
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by
-2-
<PAGE>
the fair market value of such shares of Common Stock, as determined in good
faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the
-3-
<PAGE>
Company or in the case of the Company, at the address indicated therefor on the
signature page of this Warrant, or, if different, at the principal office of the
Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE EFFECTIVE AS OF: December 20, 1999.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
-----------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
-4-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
-5-
<PAGE>
Exhibit 4.29
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS,
OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS AVAILABLE.
Warrant No. STOCK PURCHASE WARRANT No. of Shares 2,300,000
- ----------- -----------------------
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, GCD INVESTMENTS, LLC (together
with any subsequent transferees of all or any portion of this Warrant, the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"), at the
price hereinafter set forth in Section 2, up to 2,300,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $0.001 par
value per share (the "Common Stock").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on date hereof. The
purchase rights represented by this Warrant shall expire five (5) years from the
date hereof. This Warrant may be exercised for Shares at a price of twenty-five
cents (US$0.25) per share, subject to adjustment as provided in Section 6 (the
"Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above and the further
provisions of this Section 3, the purchase rights represented by this Warrant
may be exercised, in whole or in part and from time to time, by the surrender of
this Warrant and the duly executed Notice of Exercise (the form of which is
attached as Exhibit A) at the principal office of the Company and by the payment
to the Company, by check, of an amount equal to the Warrant Purchase Price per
share multiplied by the number of Shares then being purchased or via "cashless
exercise" as provided hereinafter. Upon exercise, the Holder shall be entitled
to receive, within a reasonable time, but in no event later than ten (10)
business days from the date of exercise, a
<PAGE>
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased. The
Shares so purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised.
The Company has agreed, and does hereby covenant to, use its best faith
efforts to have all of the Shares registered under the Act such that upon
exercise of this warrant, the Holder shall receive the Shares free from any and
all restrictions on transfer or sale, including, but not limited to,
restrictions imposed by Rule 144 under the Securities Act of 1933, as amended.
If a registration statement pertaining to the Shares is not declared effective
by the United States Securities and Exchange Commission ("SEC") by June 20,
2000, at any time thereafter, the warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company's common stock equal to (x) the
number of shares as to which the warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
average of the closing sale price per share of the common stock on the principal
stock exchange or market on which the common stock is then quoted or traded on
each of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the SEC with respect to all of the shares underlying
this warrants.
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by
-2-
<PAGE>
the fair market value of such shares of Common Stock, as determined in good
faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE SECURITIES LAWS.
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the
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Company or in the case of the Company, at the address indicated therefor on the
signature page of this Warrant, or, if different, at the principal office of the
Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Nevada.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE EFFECTIVE AS OF: December 20, 1999.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ D.G. Brandano
---------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
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EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable securities laws or (ii) or an exemption from applicable registration
requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
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-----------------------
-------------------------------
(Signature)
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(Date)
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Exhibit 4.30
INVESTOR SUBSCRIPTION AGREEMENT
Date: ____________________
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
ATTN: Daniel Brandano
Re: Affinity International Travel Systems, Inc.
Ladies and Gentlemen:
The undersigned hereby subscribes to the immediate acquisition of _____
units, at $1.00 per unit, each unit consisting of one share of common stock, par
value $.001 per share (the "Common Stock"), of Affinity International Travel
Systems, Inc. (the "Company") and a warrant to purchase one share of Common
Stock of the Company at a purchase price of $.75 per share, for an aggregate
purchase price of $__________. The Common Stock, the warrants and the underlying
common shares of the warrants are collectively referred to as the "Securities".
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities and not with a view to resale or any distribution
of the Securities, or any portion thereof.
2. The undersigned (either alone or with its purchaser representative) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of this investment and has consulted
with its own professional representatives as he has considered appropriate to
assist in evaluating the merits and risks of this investment. The undersigned
has had access to and an opportunity to question the officers of the Company, or
persons acting on their behalf, with respect to material information about the
Company and, in connection with its evaluation of this investment, has, to the
best of its knowledge, received all information and data with respect to the
Company that the undersigned has requested. The undersigned is acquiring the
Securities solely upon his independent examination and judgment as to the
prospects of the Company.
3. The Securities were not offered to the undersigned by means of publicly
disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale. The transferability of the Securities is restricted by
applicable federal and state securities laws and may be restricted under the
laws of other jurisdictions.
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5. The undersigned acknowledges that the Securities are being sold in
connection with a private placement of securities exempt from registration under
the Securities Act of 1933, as amended (the "Private Placement"), and that such
exemption is dependent, in part, on the accuracy of the undersigned's
representations and warranties contained in this Agreement.
6. The undersigned is an "accredited investor" as such term is defined in
Appendix A and is capable of evaluating the merits and risks of an investment in
the Company.
7. The undersigned understands and agrees that attendant to an investment
in the Securities are certain risk factors which the undersigned should and has
considered and reviewed in evaluating an investment in the Company, including,
but not limited to, those risk factors described in Appendix B attached hereto.
8. The undersigned is able financially to bear the risk of losing his
entire investment, has adequate means of providing for his current needs and
possible personal contingencies, and has no need for liquidity of this
investment.
9. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to an effective registration
under the federal and state securities law or other jurisdiction applicable to
the transaction, an exemption available under such laws, or a transaction that
is otherwise in compliance with such laws.
10. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Shares.
In connection with the purchase and sale of the Securities, the Company
agrees to include the Securities for registration in any registration statement,
other than in an Excluded Registration (as defined below), that is filed by the
Company under the Securities Act. An "Excluded Registration" includes a
registration statement filed to register those shares issued solely in
connection with any acquisition of any entity or business, shares issuable
solely upon the exercise of stock options, or shares issuable solely pursuant to
employee benefit plans, including registration statements on Form S-4, S-8 or
any successor form. Securities issued in connection with this Agreement shall
cease to be registrable securities upon (1) any sale pursuant to a registration
statement under the Securities Act, or Section 4(1) of the Securities Act, (2)
any sale, transfer or assignment in any manner to any person who is not entitled
to the rights provided by this Agreement, or (3) such time as such Shares become
eligible for resale under Rule 144 promulgated under the Securities Act.
The undersigned acknowledges that the Company's capitalization is as
follows: As of January 27, 2000, the authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $.001 per share, and
100,000,000 shares of Preferred Stock, par value $.001 per share, of which
13,880,828 shares of Common Stock are presently issued and outstanding and no
shares of Preferred Stock are presently issued and outstanding. In addition, as
of January 27, 2000, the Company is committed to issue or has issued warrants to
purchase 8,750,000 shares of Common Stock at a purchase price of $.25 per share,
and there are outstanding options to purchase 2,015,000 shares of Common Stock
at a weighted average exercise price of $.50 per share. For purposes of this
subscription agreement and the risk factors attached, the total number of
outstanding warrants (i.e., warrants to purchase 8,750,000 shares) includes our
commitment to issue warrants to purchase 4,250,000 shares of our common stock to
certain investors. If the transactions involving the issuance of warrants to
purchase 4,250,000 shares are not completed, the number of shares outstanding or
the number of shares subject to outstanding warrants
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could be significantly different, which could have a substantial dilutive effect
on a stockholder's interest in Affinity.
The undersigned further acknowledges that he will suffer immediate and
substantial dilution upon the issuance of additional Securities in connection
with the Company's Private Placement in which the undersigned's investment is a
part. The issuance of additional shares of Common Stock that are currently
subject to outstanding warrants and options to purchase shares of the Company's
Common Stock will further dilute the undersigned's ownership interest in the
Company.
The undersigned agrees to indemnify and hold harmless the Company and its
officers, directors, stockholders, employees, agents and attorneys from and
against any and all costs, liabilities and expenses (including attorneys' fees)
arising out of or related in any way to any breach of any representation or
warranty contained herein.
ACCEPTANCE OF SUBSCRIPTION: SUBSCRIBER:
Affinity International Travel Systems, Inc.
By:
------------------------------------ ---------------------------------
Daniel G. Brandano, President
Address:
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---------------------------------
Dated:
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APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, and (iii) whose purchase
is directed by a person who, either alone or with his purchaser representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
Individuals
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
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APPENDIX B
RISK FACTORS
You should carefully consider the following factors before deciding to
invest in the shares of common stock. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us, that we currently deem immaterial or that are similar to
those faced by other companies in our industry or business in general, may also
impair our business operations. If any of the following risks actually occurs,
our business, financial condition or results of future operations could be
materially and adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment. These risk
factors also contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
the risks faced by us described below
RISKS RELATED TO OUR BUSINESS
Our business is difficult to evaluate because we have only recently launched our
new Internet business model.
Our market may not develop as anticipated, and we may not successfully
execute our Internet based business strategy. We have a limited operating
history upon which you can evaluate our business. We have only recently launched
the FarAway.com web site. In 1999, we began transitioning our business model to
online sales of travel related products and services. You must consider the
challenges, risks and difficulties frequently encountered by early stage
companies using new and unproven business models in new and rapidly evolving
markets. Some of these challenges relate to our ability to:
o increase our brand name recognition;
o expand our customer base;
o manage our supplier/distributor relationships; and
o upgrade our web site, transaction-processing systems, fulfillment
infrastructure and inventory management systems.
We cannot be certain that our business strategy will be successful or that
we will successfully address these and other challenges, risks and
uncertainties.
Our limited operating history makes forecasting difficult.
As a result of our limited operating history with our current Internet
business model, it is difficult to accurately forecast future revenues. We may
be unable to adjust our spending in a timely manner to compensate for any
unexpected revenue shortfall. Also, we have limited meaningful historical
financial data upon which to base planned operating expenses. We base our
current and future expense levels on our operating plans and estimates of future
revenue. Revenue and operating results are difficult to forecast because they
generally depend on the volume and timing of the orders we receive. As a result,
we may be unable to adjust our spending in a timely manner to compensate for any
unexpected revenue shortfall, which would result in further substantial losses.
We may also be unable to expand our operations in a timely manner to adequately
meet customer demand to the extent it exceeds our expectations.
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Our historical financial results are not meaningful to an analysis of our
current business.
The financial data included in this document covers periods prior to our
transition to our current Internet business strategy and is not necessarily
meaningful to an analysis of our current business. Since our incorporation, we
have completed several acquisitions and subsequently divested or sold some
wholly owned subsidiaries. One of these entities, Prestige Travel, accounted for
a substantial portion of our revenue in 1998 and 1999.
We have a history of net losses.
On a historical basis, we have had operating losses in each of the three
fiscal years ending June 30, 1997, 1998 and 1999. For these periods, we had net
losses totaling $6,669,694. For the fiscal year ended June 30, 1999, we had a
net loss of $5,183,368.
We expect operating losses and negative cash flow to continue for the
foreseeable future. We anticipate our losses will increase significantly from
current levels because we expect to incur significant additional costs and
expenses related to:
o brand development, advertising, marketing and promotional
activities, including product discounts;
o expansion of our supplier/distributor relationships;
o expansion of our order fulfillment infrastructure;
o continued development of our web site, transaction-processing
systems, fulfillment capabilities and network infrastructure;
o expansion of our product offerings and web site content; and
o employment of additional personnel as our business expands.
Our ability to become profitable depends on our ability to generate and
sustain substantially higher revenue while maintaining reasonable expense
levels. In particular, although we intend to increase significantly our spending
on marketing and promotional activities, these efforts may not be effective in
converting a large number of customers from traditional shopping methods to
online shopping for travel products and services or attracting online customers
to our web site. In addition, we may be obligated to pay commissions, based on a
percentage of revenue, to companies with whom we have online marketing
relationships. These costs will increase as our revenues and orders increase. If
we do achieve profitability, we cannot be certain that we will be able to
sustain or increase profitability on a quarterly or annual basis in the future.
We have been unable to fund our operations with the cash generated from our
business. If we do not generate cash sufficient to fund our operations, we may
need additional financing to continue our growth or our growth may be limited.
We require substantial working capital to fund our business. Since our
inception, we have experienced negative cash flow from operations and expect to
experience significant negative cash flow from operations for the foreseeable
future. We currently anticipate that we need to raise approximately $6.0 million
within the next three months. If we raise additional funds through the issuance
of equity or debt securities, those securities may have rights senior to those
of our stockholders, and our stockholders may experience additional dilution. We
cannot be certain that additional financing will be available to us on favorable
terms when required, or at all.
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The failure or malfunction of our technology or the technology of third parties
upon which our systems rely would have a material adverse effect on our
business.
We are currently dependent upon a number of different information and
telecommunication technologies to facilitate our access to information and
manage a high volume of inbound and outbound calls. Any failure of this
technology would have a material adverse effect on our business, financial
condition and results of operations. In addition, we are dependent upon certain
third party vendors, including central reservation systems, such as Logibro,
formerly The SABRE Group, and Amadeus for access to certain information. Any
failure or malfunction of these systems or restricted access by us would have a
material adverse effect on our business, financial condition and results of
operations.
Our new technology may not be successfully developed, installed or implemented
without disrupting our business.
We are currently replacing many of our existing computer systems and web
sites with systems designed to operate with our new web site, FarAway.com. There
can be no assurance that these new systems will be successfully developed,
installed according to the expected time frame or within the anticipated budget,
implemented without any disruption to our business or result in the intended
operational benefits and cost efficiencies.
If we do not respond to rapid technological changes, our services could become
obsolete and we could lose customers.
To remain competitive, we must continue to enhance and improve the
functionality and features of our online technology. The Internet and the online
commerce industry are rapidly changing. If competitors introduce new products
and services embodying new technologies, or if new industry standards and
practices emerge, our existing web site and proprietary technology and systems
may become obsolete. Our future success will depend on our ability to do the
following:
o both license and internally develop leading technologies useful in
our business;
o enhance our existing services;
o develop new services and technologies that address the increasingly
sophisticated and varied needs of our prospective customers; and
o respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
Ongoing development of our web site and other proprietary technology
entails significant expense and technical risks. We may use new technologies
ineffectively or we may fail to adapt our web site, transaction-processing
systems and network infrastructure to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements, our customers may forego the use of our services and those of our
competitors.
We may fail to compete effectively in our market.
The travel service industry is extremely competitive and has relatively
low barriers to entry. We primarily compete with:
o other distributors of travel services;
o travel providers;
o travel agents;
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o tour operators; and
o central reservation service providers.
Some of our competitors have greater experience, brand name recognition
and/or financial resources than we do.
There is the risk that our travel providers may decide to compete more
directly with us and restrict the availability and/or preferential pricing of
their capacity. In addition, other distributors may have relationships with
travel provider that provide better availability or more competitive pricing
than that offered by us. Furthermore, some travel agents have a strong presence
in their geographic area that may make it difficult for us to attract customers
in those areas.
Competition within the travel service industry is increasing as some of
our competitors are expanding their size and financial resources through
consolidation. Consolidation among travel suppliers has left the remaining
suppliers in a stronger position relative to providers of travel products and
services such as Affinity.
As a result of competitive pressures, we may suffer reduced revenues and
operating margins, loss of market share and diminished brand awareness. We may
be unable to compete successfully and our failure to compete successfully may
have a material adverse effect on our business, financial condition and results
of operations.
Intellectual property claims against us can be costly and result in the loss of
significant rights.
We regard trademarks, copyrights, service marks, trade secrets, patents
and similar intellectual property as important to our success. We rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers and others to protect our
proprietary rights.
Other parties may assert infringement or unfair competition claims against
us. If we are forced to defend against any claims of infringement, whether they
are with merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, and product
shipment delays. If there is a successful claim of infringement against us and
we are unable to develop non-infringing technology or license the infringed or
similar technology on a timely basis, or if we are required to cease using one
or more of our business or product names due to a successful trademark
infringement claim against us, it could adversely affect our business.
In addition, effective trademark, service mark, copyright, trade secret
and patent protection may not be available in every country in which we sell our
products and services online. Therefore, the steps we take to protect our
proprietary rights may be inadequate and our business could be adversely
affected.
If we are unable to retain or acquire the necessary domain names, our brand and
reputation could be damaged and we could lose customers.
We currently hold the Web domain names Affinityinternational.com,
FarAway.com, Sunstyle.com. The acquisition and maintenance of domain names
generally is regulated by governmental agencies and their designees.
In the United States, the National Science Foundation has appointed
Network Solutions, Inc., and recently several others, as the current registrars
for the ".com", ".net" and ".org" generic top-level domains. The regulation of
domain names in the United States and in foreign countries is subject to
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change in the near future. As a result, we may be unable to acquire or maintain
relevant domain names in all countries in which we conduct business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. Therefore,
we may be unable to prevent third parties from acquiring domain names that are
similar to, infringe upon or otherwise decrease the value of our trademarks and
other proprietary rights. In addition, if other parties acquire domain names
that are similar to ours and confuse our web site with another party's, our
brand could diminish.
Internet users may make online purchases of travel products and services on the
web sites of travel suppliers rather than the web site of a vacation provider
such as Affinity.
Innovations in online 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 these products and services
directly from suppliers, thereby bypassing vacation providers such as Affinity.
Although we have a strategy to capitalize on the emergence of the Internet as a
primary distribution channel, our strategy may be unsuccessful and may
negatively impact our relationship with retail travel agents if Internet users
go directly to travel suppliers' web sites.
Our failure to maintain our relationships with travel suppliers would materially
and adversely affect our business.
We are dependent upon travel suppliers for access to their products and
services. Our travel suppliers generally can cancel or modify their agreements
with us 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 our reputation. Any of the
following could have a material adverse effect on our business, financial
condition and results of operation:
o loss of travel supplier contracts;
o changes in our preferred pricing agreements, commissions schedules
or commission arrangements;
o more restricted access to travel suppliers' products and services;
or
o less favorable public opinion of certain travel suppliers and
resulting low demand for the products and services of such travel
suppliers.
Our rapid growth involves a number of risks that could have a negative impact on
our results of operations.
We have grown very rapidly, and we expect to continue to grow quickly in
our current fiscal year as we implement our Internet-based travel service
strategy. Our management group has been assembled only recently and, as a
result, our management group may be unable to manage effectively our
organization and or implement our Internet-based strategy. In addition, the
rapid pace of our growth has, and will continue to, put pressure on our
personnel, accounting, management information, technology and corporate support
systems. Any inadequacy of these systems to manage the increased size and scope
of operations resulting from our growth or our inability to integrate
successfully any future acquisition could materially adversely affect our
business, financial condition and results of operations.
If we are unable to manage our growth and the related expansion in our
operations effectively, our business may be harmed.
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We expect to continue to grow internally and through acquisitions. We
expect to spend significant time and effort expanding our existing businesses
and identifying, completing and integrating acquisitions. There can be no
assurance that our systems, procedures and controls will be adequate to support
our operations as they expand. Any future growth also will impose significant
added responsibilities on members of our senior management, including the need
to identify, recruit and integrate new senior level managers and executives.
There can be no assurance that such additional management will be identified or
retained by us. To the extent that we are unable to manage our growth
efficiently and effectively, or are unable to attract and retain qualified
management, our business, financial condition and results of operations could be
materially adversely affected.
Factors affecting our ability to experience internal growth include, but
are not limited to:
o the ability to expand the travel services offered;
o continued relationships with certain travel providers and travel
agents;
o the ability to recruit and retain qualified sales personnel;
o the ability to cross-sell services; and
o continued access to capital.
The success of our business depends on the continuing contribution of our key
personnel, including Mr. Daniel Brandano, our President and Chief Executive
Officer, and our other executive officers.
Our operations are dependent on the efforts and relationships of Daniel
Brandano and the other executive officers as well as the senior management of
our organization. We will likely be dependent on the senior management of our
organization for the foreseeable future. If any of these individuals becomes
unable to continue in their role, our business or prospects could be adversely
affected. For example, the loss of Mr. Brandano could inhibit the development
and enhancement of our web site and could damage customer relations and our
brand. Although we have entered into an employment agreement with several of our
executive officers, including Mr. Brandano, there can be no assurance that these
individuals will continue in their present capacity for any particular period of
time. We do not maintain key man life insurance covering any of our executive
officers or other members of senior management.
Our operating results may fluctuate due to seasonality and other factors.
The domestic and international leisure travel industry is seasonal. Our
historical results have been subject to quarterly fluctuations caused primarily
by the seasonal variations in the travel industry, especially the leisure travel
segment. Our revenues have historically been higher in the second and third
quarters. We expect seasonality to continue in the future.
Quarterly results of operations may also be subject to fluctuations as a
result of a number of other factors including:
o the timing and cost of acquisitions;
o changes in the mix of services offered by us as a result of
acquisitions;
o internal growth rates among various travel segments;
o fare wars by travel providers;
o changes in relationships with certain travel providers;
o the timing of the payment of overrides by travel providers;
o extreme weather conditions; and o other factors affecting travel.
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Unexpected variations in quarterly results could also adversely affect the
price of our common stock, which could limit our ability to make acquisitions or
raise additional equity capital and or debt.
Changes in consumer preferences or discretionary consumer spending could
negatively impact our results.
Our continued success depends, in part, upon the popularity of vacations
to Hawaii, Mexico, the Caribbean and Florida. A downturn in the overall United
States economy or shifts in consumer vacation preferences could materially
adversely affect our business, financial condition and results of operations.
Also, our success depends to a significant extent on numerous factors affecting
discretionary consumer spending, including economic conditions, disposable
consumer income and consumer confidence. Adverse changes in these factors could
reduce our sales or impose practical limits on pricing, either of which could
have a material adverse effect on our business and results of operations.
The travel industry is subject to extensive government regulation and taxation.
Many travel suppliers, particularly airlines, are subject to extensive
regulation by federal, state and foreign governments. In addition, the travel
services 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 and
changes in tax policy could have an adverse impact on the travel service
industry in general and could have a material adverse affect on our business,
financial condition, and results of operations. Changes in tax policy for online
purchases, including travel purchases, could also have a material adverse affect
on our business, financial conditions and results of operations.
The travel industry is subject to numerous risks that may also affect our
business, financial condition and result of operations.
Our results of operations will depend upon factors affecting the vacation
industry in general. Our 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 could result in a temporary
or long-term overall decline and demand for packaged vacations, including:
o political instability;
o armed hostilities;
o international terrorism;
o labor disturbances;
o a rise and fuel prices or other travel costs, or a surcharge imposed
by a travel provider to offset rising fuel prices;
o excessive inflation;
o currency fluctuations;
o extreme weather conditions; and
o concerns about passenger safety.
We believe that price-based competition will continue for the foreseeable
future. The continuation of such competition and the occurrence of any of the
events mentioned above could have a material adverse effect on our business,
financial condition and results of operations. In addition, demand for our
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 down turn or any
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recession in the United States or these other markets could have a material
adverse effect on our business, financial condition in the result operations.
We may be unable to make attractive acquisitions or integrate acquired
companies.
We plan to acquire or make investments in complementary businesses,
products, services or technologies. However, we cannot assure you that we will
be able to identify suitable acquisition or investment candidates.
Even if we do identify suitable candidates, we cannot assure you that we
will be able to make acquisitions or investments on commercially acceptable
terms. If we buy a business, we could have difficulty in assimilating that
company's personnel, operations, products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur debt or issue equity securities to pay
for any future acquisitions. The issuance of equity securities would dilute our
existing stockholders interest in Affinity.
Any future acquisitions we make may not be profitable.
Part of our business strategy is to identify and acquire travel related
Internet organizations in the travel services industry. Future acquisitions may
involve a number of risks that could adversely affect our business, results of
operations and financial condition. These could include adverse short-term
effects on our 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 the change of control, as well as non-recurring
acquisition costs. Acquisitions may also 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 we conduct due diligence and generally require
representations, warranties and indemnification from the former owners of
acquired companies, those former owners may not accurately represent the
financial and operating conditions of their companies and may not 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 affect on our business, financial condition and results of operations.
Financing of future acquisitions will dilute existing stockholder ownership.
We intend to finance future acquisitions by using shares of our common
stock for a substantial portion of the consideration to be paid. This reliance
upon the use of common stock as consideration may cause shareholders dilution of
ownership.
RISKS RELATED TO THE OFFERING
We may be removed from the OTC Bulletin Board.
Our common stock is currently quoted on the OTC Bulletin Board, which is
administered by the National Association of Securities Dealers, Inc. The Board
of Governors of the NASD recently enacted a rule which provides for the removal
from the OTC Bulletin Board of the stock of any company that does not file
periodic reports with the SEC pursuant to the Exchange Act before a specified
date. We do not currently file periodic reports with the SEC because our common
stock is not registered under the Exchange Act. We intend to register our common
stock under the Exchange Act and commence filing
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periodic reports with the SEC upon the effectiveness of this registration
statement. If we fail to register our common stock under the Exchange Act prior
to May 3, 2000, then our common stock will be removed from the OTC Bulletin
Board and quotations for our common stock would no longer be available on the
OTC Bulletin Board. The removal of our common stock from the OTC Bulletin Board
would have a material adverse effect on the price of and any trading market for
our common stock. In addition, the removal of our common stock from the OTC
Bulletin Board would have a material adverse effect on our ability to raise
additional capital.
We have never paid dividends and we do not expect to pay any dividends in the
near future.
We intend to retain any future earnings in order to finance our planned
operations and to implement our business plan. A potential purchaser of the
common stock should not rely on dividends from the common stock offered hereby
as a possible source of income.
The market price of our common stock may fluctuate due to low trading volume.
Historically, the trading volume of our common stock on the OTC Bulletin
Board has been low compared with many other OTC Bulletin Board companies. Due to
its low trading volume, the market price of our common stock may fluctuate
significantly. Attempts to purchase or sell relatively small amounts of our
common stock could cause the market price of our common stock to fluctuate. Low
trading volume levels may also affect our stockholders' ability to sell shares
of our common stock quickly at the current market price. In addition, sales of
substantial amounts of our common stock, or the perception that such sales could
occur, could adversely affect the prevailing market prices for our common stock.
Market prices of emerging Internet companies have been highly volatile, and the
market for our common stock may by highly volatile as well. Litigation may be
instituted following severe market price volatility.
The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies, particularly
Internet companies, have been highly volatile. The market price of our common
stock may be subject to significant fluctuations in response to numerous
factors, including:
o variations in our annual or quarterly financial results or its
competitors;
o changes by financial research analysts in their estimates of our
earnings or our failure to meet such estimates;
o conditions in the economy in general or in the travel industry in
particular; and
o unfavorable publicity or changes in applicable laws and regulations
(or judicial or administrative interpretations thereof) affecting us
or the travel service industry.
In the past, following periods of volatility in the market price of a
public company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs and a diversion of management's attention and resources.
The interests of our controlling stockholder may conflict with your interests.
As of February 1, 2000, Schoemann Venture Capital, LLC and trusts
controlled by his spouse, beneficially own approximately 60.1% of our
outstanding common stock, which includes outstanding warrants to purchase
6,450,000 shares of our common stock at a purchase price of $.25 per share. As a
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result, in practical effect, they control the election of our board of
directors, all matters requiring approval by our stockholders, including
approval of significant corporate transactions, and the directions of our
business. Schoemann Venture Capital, LLC and trusts controlled by his spouse
could exercise their voting control in ways which adversely affect your
interests.
A substantial number of our securities may be sold in the market in the future.
This could cause our stock price to decline significantly, even if our business
is doing well.
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in the
market after this offering or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. As of February 1,
2000, we have approximately 13,880,828 shares of common stock outstanding. Of
those shares, approximately 4,331,114 shares will effectively be freely tradable
without restriction under the Securities Act of 1933, as amended. Approximately
3,034,300 shares are eligible for sale under Rule 144, subject to certain
restrictions on affiliates of Affinity under Rule 144, and approximately
6,515,414 shares will be eligible for sale in the public market without
registration at different times during the next twelve months, subject to
certain volume and other limitations, pursuant to Rule 144 under the Securities
Act. We plan to register a substantial number of shares that are not currently
eligible for sale without restriction under Rule 144. In addition, there are
outstanding warrants to purchase 8,750,000 shares of Common Stock at a purchase
price of $.25 per share, and there are outstanding options to purchase 2,015,000
shares of Common Stock at a weighted average exercise price of $.50 per share.
The sale of even a small number of the outstanding shares of common stock may
have a material adverse effect on the quoted price of our common stock. The sale
of any such shares may also have a material adverse effect on our ability to
raise capital.
Investors will suffer immediate and substantial dilution.
Investors will suffer immediate and substantial dilution upon the issuance
of additional shares of common stock that are currently subject to outstanding
warrants and options to purchase shares of our common stock.
Anti-takeover provisions in our charter document could prevent or delay a change
in control of our company.
Our articles of incorporation, as amended, may discourage, delay or
prevent a merger or acquisition that a stockholder may consider favorable by:
o Authorizing blank check preferred stock, a type of stock with terms
and conditions set by the board of directors alone without further
stockholder approval; such preferred stock could be issued with more
voting power than the common stock, effectively giving control of
the company to the holders of preferred stock. An issuance of this
type of preferred stock could make it more difficult for a third
party to acquire, or discourage a third party from attempting to
acquire, a majority of our outstanding voting stock. The existence
of blank check preferred stock could facilitate the introduction of
a poison pill rights distribution which could discourage or delay a
merger or acquisition.
RISKS RELATED TO THE INTERNET INDUSTRY
We depend on the Internet and the development of the Internet infrastructure.
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Our success will depend in large part on continued growth in, and the use
of, the Internet for commerce. The electronic commerce market is new and rapidly
evolving, and the extent of consumer acceptance is uncertain. The issues
concerning the commercial use of the Internet that we expect to affect the
development of the market for our services include security, reliability, cost
of access, ease of access, ease of use, speed and quality of service.
In addition, popular companies that provide access to Internet
transactions through network access or web browsers, such as America Online,
Yahoo, Lycos and Microsoft, could promote our competitors or charge us a
substantial fee for connection to our web site. Either of these developments
could adversely affect our business.
Our business is subject to government regulation of the Internet and other legal
uncertainties which could negatively impact our operations.
Specific laws and regulations concerning the use of the Internet have been
enacted. In particular, as directed by Congress in the Children's Online Privacy
Protection Act, also known as COPPA, the Federal Trade Commission recently
adopted regulations, effective April 21, 2000, prohibiting unfair and deceptive
acts and practices in connection with the collection and use of personal
information obtained from children under 13 years old on the Internet. Because
our web site is not directed at children and we do not anticipate its widespread
use by children, COPPA and the FTC's regulations should not have a significant
effect upon our business. While we expect to have a privacy policy designed to
enhance the protection of the privacy of our users, there can be no assurance
that these programs will conform with any regulations which have been adopted by
the FTC. Nevertheless, the FTC has strongly advocated that general audience web
sites establish privacy policies that include procedures to disclose and notify
users of privacy and security policies, obtain consent from users for collection
and use of information, and provide users with the ability to access, correct
and delete personal information stored by the company. While we expect to adopt
a privacy policy regarding use of personal user information and expect to post
this policy on our web site, there can be no assurance that we will adopt
policies that conform with the regulations adopted or policies advocated by the
FTC or any other federal or state governmental entity.
It is also possible that cookies, or information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, which are used to track demographic information and to target
advertising, may become subject to laws limiting or prohibiting their use.
Limitations on or elimination of our use of cookies could limit the
effectiveness of our ability to market to certain users, which could have a
material adverse effect on our business, results of operations and financial
condition.
The European Union has adopted a directive that imposes restrictions on
the collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could, among other things, adversely affect
U.S. companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standards in the United States. We may ultimately
engage in data collection from users in EU member countries. If we do, we would
be subject to the EU directive.
We intend to take the necessary measures to ensure that our web site
complies with industry standards relating to user privacy.
The U.S. Omnibus Appropriations Act of 1998 places a moratorium on taxes
levied on Internet access from October 1, 1998 to October 21, 2001. However,
states may place taxes on Internet access if taxes had already been generally
imposed and actually enforced prior to October 1, 1998. States which can
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show they enforced Internet access taxes prior to October 1, 1998 and states
after October 21, 2001 may be able to levy taxes on Internet access resulting in
increased cost to access to the Internet, resulting in a material adverse effect
on our business.
The laws governing the use of the Internet, in general, remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. This occurrence may impose additional burdens on companies
conducting business online by limiting how information can flow over the
Internet and the type of information that can flow over the Internet. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business.
We may be liable for the content we provide on our web site or which is accessed
from our web site.
We believe that our future success will depend in part upon our ability to
deliver original and compelling descriptive content on the Internet. As a
publisher of online content, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. In the
past, plaintiffs have brought such claims and sometimes successfully litigated
them against online services. Although we carry general liability insurance, our
insurance may not cover claims of these types or may be inadequate to indemnify
us for all liability that may be imposed on us. If we face liability,
particularly liability that is not covered by our insurance or is in excess of
our insurance coverage, then our reputation and our business may suffer.
Our revenues and reputation would be adversely affected if our security measures
fail.
Consumer concerns regarding the security of transactions conducted on the
Internet and users' privacy may inhibit the growth of use of the Internet and
electronic commerce. To securely transmit confidential information, such as
customer credit card numbers, we rely on encryption and authentication
technology that we license from third parties. We cannot predict whether we will
experience compromises of, or breaches in, the technologies we use to protect
customer transaction data.
We may need to expend significant additional capital and other resources
to protect against security breaches or alleviate problems caused by any such
breaches. We cannot guarantee that security breaches will not occur. If our
security measures fail, our business could be harmed. Any penetration of our
network security or misappropriation of our users' personal or credit card
information could subject us to liability. Claims could also be based on other
misuses of personal information, including the use of this information for
unauthorized marketing purposes. These claims could result in litigation.
Our revenues and reputation would be adversely affected if we experience
significant credit card fraud.
Under current credit card practices, merchants are liable for fraudulent
credit card transactions where, as is the case with the transactions we process,
the merchant does not obtain a cardholder's signature. We may be liable for
claims based on unauthorized purchases with credit card information,
impersonation or other similar fraud claims. A failure to adequately control
fraudulent credit card transactions would harm our business.
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Exhibit 4.31
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH LAWS IS
AVAILABLE.
Warrant No. STOCK PURCHASE WARRANT No. of Shares
To Subscribe for and Purchase Common Stock of
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
THIS CERTIFIES that, for value received, _____________________ (together
with any subsequent transferees of all or any portion of this Warrant, the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, to subscribe for and purchase from AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC., a Nevada corporation (hereinafter called the "Company"), at the
price hereinafter set forth in Section 2, up to _________ fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $.001 par
value per share (the "Common Stock").
1. Definitions. As used herein the following term shall have the following
meaning:
"Act" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. Purchase Rights. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on date hereof. The
purchase rights represented by this Warrant shall expire three (3) years from
the date hereof. This Warrant may be exercised for Shares at a price of
____________________________________ per share, subject to adjustment as
provided in Section 6 (the "Warrant Purchase Price").
3. Exercise of Warrant. Subject to Section 2 above, the purchase rights
represented by this Warrant may be exercised, in whole or in part and from time
to time, by the surrender of this Warrant and the duly executed Notice of
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the then applicable Warrant Purchase Price per share multiplied by the number of
Shares then being purchased. Upon exercise, the Holder shall be entitled to
receive, within a reasonable time, a certificate or certificates, issued in the
Holder's name or in such name or names as the Holder may direct, for the number
of Shares so purchased. The Shares so purchased shall be deemed to be issued as
of the close of business on the date on which this Warrant shall have been
exercised.
<PAGE>
4. Shares to be Issued; Reservation of Shares. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. Adjustments of Warrant Purchase Price and Number of Shares. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. No Rights as Shareholders. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. Sale or Transfer of the Warrant and the Shares; Legend. The Warrant and
the Shares shall not be sold or transferred unless either (i) they first shall
have been registered under applicable Federal and State Securities laws, or (ii)
such sale or transfer is exempt from the registration requirements of such laws.
Each certificate representing any Warrant shall bear the legend set out on page
1 hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
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The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
9. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
IN WITNESS WHEREOF, AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: __________________
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
---------------------------------------
By: Daniel G. Brandano, President
Address: Affinity International Travel Systems, Inc.
100 Second Avenue South, Suite 1100 South
St. Petersburg, FL 33701
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EXHIBIT A
NOTICE OF EXERCISE
To: AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable federal and state securities laws or (ii) or an exemption from
applicable federal and state registration requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
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Exhibit 4.32
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
( Daniel Brandano )
Incentive Stock Option Agreement (the "Option") made effective as of the
1st day of July, 1999 between Affinity International Travel Systems, Inc., a
Nevada corporation (the "Corporation"), and Daniel Brandano (the "Recipient"),
an employee of the Corporation, a Parent or a Subsidiary, pursuant to the
Corporation's 1999 Stock Option Plan, as it may be amended from time to time
(the "1999 Plan").
W I T N E S S E T H:
-------------------
WHEREAS, on July 1, 1999, the Corporation adopted the 1999 Plan which
provides, for the issuance of stock options including stock options intended to
qualify as "incentive stock options", as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (The "Code"), and
WHEREAS, the Corporation and the Recipient desire to enter into an
agreement whereby the Corporation will grant the Recipient an option to purchase
shares of the Common Stock, $.001 par value, of the Corporation (the "Stock"),
and this Option is intended to qualify as an incentive stock option;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Corporation and the Recipient
agree as follows:
1. Grant of Option.
Pursuant to the terms and conditions of the 1999 Plan and this Option, the
Corporation hereby grants to the Recipient an Option to purchase, as provided in
Section 3 hereof, all or any part of a total of 2,000,000 shares of Stock (the
"Option Shares").
2. Purchase Price.
The price at which the Option Shares may be purchased shall be US$.50 per
share (the "Option Exercise Price"). This price is not less than 110% of the
Fair Market Value of the Stock on the date of this Option.
3. Exercise of Option.
Subject to the provisions of Section 4, this Option shall be immediately
exercisable by the Recipient. Notwithstanding any provision of this Option to
the contrary, in no event may this Option be exercised after 10 years from the
date of this Option (the "Expiration Date").
<PAGE>
4. Termination of Employment.
If the Recipient ceases to be employed by the Corporation, a Parent, or a
Subsidiary (a "Termination"), then this Option may be exercised as to all shares
with respect to which Recipient could exercise this Option on the date of
Termination, and which shares have not been previously purchased, until the
earlier of the Expiration Date or one year after termination of employment.
The Recipient acknowledges that following the date which is three months
after termination of Recipient's employment (other than by reason of death or
Permanent and Total Disability), this Option will no longer qualify as an
Incentive Stock Option.
5. Nontransferability; Persons Able to Exercise.
The Option may not be transferred other than by will or the laws of
descent and distribution. During the life of the Recipient, only the Recipient
may exercise this Option. If the Recipient dies while still employed by the
Corporation, or the periods specified in Section 4, this Option may be exercised
by his executors, administrators, legatees or distributees, provided that such
person or persons comply with the provisions of this Option applicable to the
Recipient.
6. Method of Exercising Option.
The Option may be exercised, in whole or in part, by written notice
to the Corporation, containing an executed Notice of Exercise in the form of
Attachment A, provided that the Corporation, in its discretion, may modify or
augment these requirements as provided in Section 9 of this Option, or where
appropriate because a person other than the Recipient is exercising the Option
pursuant to Section 5. The written notice specified in this Section must be
accompanied by payment of the Option Exercise Price for the shares being
purchased. Payment may, at the option of the Recipient, be made in cash, or with
shares of Stock issuable upon exercise of this Option, which shares of Stock
shall be valued at the Fair Market Value (defined below) of the Stock on the
date of exercise (a "cashless exercise"). In the event of a cashless exercise,
the number of shares of Stock issuable to the Recipient shall be determined
using the following formula:
X = Y ((A-B)/A)
WHERE: X = the number of shares to be issued to the Recipient
Y = the number of shares purchasable under the Option (or portion of
the Option) surrendered
A = the Fair Market Value of the Stock on the date of exercise; and
B = the then current exercise price of the Option.
For purposes hereof, the "Fair Market Value" of the Stock shall mean the last
reported sale price per share of Stock, as reported on the OTC Bulletin Board,
or in the event the Stock is listed on a national securities exchange, or on the
Nasdaq Stock Market (or any successor stock market), the closing price of the
Stock on such exchange or stock market, for the day on which the notice of
exercise is sent or delivered or, in the event sales of the Stock are not
reported on the OTC Bulletin Board and the Stock is not listed on a national
securities exchange or on the Nasdaq Stock Market (or any successor stock
market), the Fair Market Value per share as determined by the Board of Directors
of the Company in good faith. As soon as practical after receipt of this notice
and payment, the Corporation shall deliver a certificate or certificates
representing the purchased shares registered in the name of the person or
2
<PAGE>
persons exercising this Option. In the event this Option is exercised by any
person other than the Recipient, the notice shall be accompanied by appropriate
proof of the right of such person to exercise this Option. All shares purchased
upon the exercise of this Option and payment of the full Option Exercise Price
will be fully paid and nonassessable.
7. Stock Adjustments.
If there shall be any change in the Stock through merger,
consolidation, reorganization, recapitalization, or other change in the
corporate structure of the Corporation, appropriate adjustments in the total
number and kind of shares subject to this Option, consistent with the
requirements of the Code to insure that this Option will qualify as an Incentive
Stock Option, shall be made by the Corporation as provided in the 1999 Plan.
Such adjustments may include the elimination of any fractional shares that might
otherwise be subject to this Option.
8. No Rights Other Than Those Expressly Created.
Neither this Option nor any action taken hereunder shall be
construed as (i) giving the Recipient any right to be retained in the employ of,
or continue to be affiliated with, the Corporation, (ii) giving the Recipient
any equity or interest of any kind in any assets of the Corporation, or (iii)
creating a trust of any kind or a fiduciary relationship of any kind between the
Recipient and the Corporation. As to any claim for any unpaid amounts under this
Option, any person having a claim for payments shall be unsecured creditor. The
Recipient shall not have any of the rights of a stockholder with respect to any
Option Shares until such time as this Option has been exercised and Option
Shares have been issued.
9. Compliance with Laws.
(a) Withholding of Taxes. Pursuant to applicable federal, state,
local or foreign laws, the Corporation may be required to collect or withhold
income or other taxes from Recipient upon the grant of this Option, the exercise
of this Option, or at some other time. The Corporation may require, as a
condition to the exercise of this Option, or demand, at such other time as it
may consider appropriate, that the Recipient pay the Corporation the amount of
any taxes which the Corporation may determine is required to be collected or
withheld, and the Recipient shall comply with the requirement or demand of the
Corporation.
(b) Securities Law Compliance. Upon exercise (or partial exercise)
of this Option, the Recipient shall make such representations and furnish such
information as may, in the opinion of counsel for the Corporation, be
appropriate to permit the Corporation to issue or transfer the Option Shares in
compliance with the provisions of applicable federal or state securities laws.
The Corporation, in its discretion, may postpone the issuance and delivery of
Option Shares upon any exercise of this Option until completion of such
registration or other qualification of such shares under any federal or state
laws, or stock exchange listing, as the Corporation may consider appropriate.
The Corporation may require that prior to the issuance or transfer of Option
Shares upon exercise of this Option, the Recipient enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder may bear a legend
reflecting such restrictions.
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<PAGE>
(c) General. No Option Shares shall be issued upon exercise of this
Option unless and until the Corporation is satisfied, in its sole discretion,
that there has been compliance with all legal requirements applicable to the
issuance of such Option Shares.
10. Miscellaneous.
(a) Provisions of the Plan. This Option is expressly subject to all
of the terms and conditions contained in this Option and in the 1999 Plan,
except those terms and conditions which are expressly applicable only to options
which are not "1999 Plan ISOs", and the 1999 Plan is hereby incorporated herein
by reference. All capitalized terms not defined in this Option have the meanings
specified in the 1999 Plan.
(b) Discretion of the Committee. Unless otherwise explicitly
provided herein, the Committee, as defined in the Plan, shall make all
determinations required to be made hereunder, including determinations required
to be made by the Corporation, and shall interpret all provisions of this
Option, as it deems necessary or desirable, in its sole and unfettered
discretion. Such determinations and interpretations shall be binding and
conclusive to the Corporation and the Recipient. The Committee, in its sole
discretion, is authorized (i) to convert the unexercised portion of this Option
to an option which is not an incentive stock option by written notice to the
Recipient, and (ii) to accelerate the time at which this Option may be
exercised.
(c) $100,000 Limitation. As provided in Section IV(d) of the Plan,
if the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to Section IV(d) of the Plan) are
exercisable for the first time by the Recipient during any calendar year exceeds
$100,000, a portion of such Corporation ISOs (which may include this Option)
shall be treated as options which are not Incentive Stock Options. For purposes
of this limitation, (i) options shall be taken into account in the order
granted, and (ii) the Committee may designate that portion of any Corporation
ISO (including this Option) that shall be treated as not an Incentive Stock
Option if the provisions of this paragraph apply to a portion of any option,
unless another treatment is required by the Code or regulations of the Internal
Revenue Service. The foregoing designation may be made at such time as the
Committee considers appropriate, including after the issuance of this Option or
at the time of its exercise. For the purpose of this section, Fair Market Value
shall be determined as of the time the option with respect to such stock is
granted.
(d) Limitations on Disposition of Option Shares. It is understood
and intended that this Stock Option shall qualify as an "Incentive Stock Option"
as defined in Section 422 of the Code. Accordingly, the Recipient understands
that in order to obtain the benefits of an Incentive Stock Option under Section
421 of the Code, no sale or other disposition may be made of any Option Shares
within one year after the day after the transfer of such Option Shares to the
Recipient, nor within two years after the grant of the Stock Option. If the
Recipient intends to dispose, or does dispose of any such Option Shares within
said periods (whether by sale, exchange, gift, transfer or otherwise, including,
if authorized by the Corporation, paying the exercise price of a Stock Option by
transfer of Option Shares), then Recipient will notify the Corporation in
writing within ten days after such disposition.
(e) Reservation of Shares. During the term of this Option, the
Corporation shall at all times reserve and keep available shares of Stock
sufficient to satisfy the requirements of this Option.
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<PAGE>
(f) Amendment. This Option may only be modified or amended by a
writing signed by both parties.
(g) Notices. Any notices required to be given under this Option
shall be sufficient if in writing and if hand-delivered or if sent by first
class mail and addressed as follows:
if to the Corporation:
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
if to the Recipient:
Daniel Brandano
336 4th Avenue North
Tierra Verde, FL 33715
or to such other address as either party may designate under the provisions
hereof.
(g) Successors and Assigns. The rights and obligations of the
Corporation under this Option shall inure to the benefit of and be binding upon
the successors and assigns of the Corporation.
(h) Applicable Law. All rights and obligations under this Option
shall be governed by the laws of the State of Nevada.
(i) Paragraph Headings. The paragraph headings used in this Option
are for convenience or reference, and are not to be construed as part of this
Option.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Option as an instrument
under seal effective as of the date written on the first page of this Option.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
/s/ Gerard LaMontagne
-------------------------------------------------
By: Gerard LaMontagne, Chief Financial Officer
/s/ Daniel Brandano
-------------------------------------------------
Daniel Brandano
6
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
[Recipient's Address]
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
Attention: Treasurer
Gentlemen:
Pursuant to our Incentive Stock Option Agreement dated as of
_______________ __, 1999, I hereby elect to exercise this Stock Option to the
extent indicated:
_________________________ x _____________________ = _______________________
Number of Shares Option Exercise Price Total Option Exercise
Which I Elect to Purchase Per Share Price
Enclosed with this letter is full payment of the total price of the shares
described above in the following form:
(1) a check in the amount of $______ payable to the order of the
Corporation; and/or
[method 2, below, must be authorized in advance by the Corporation]
(2) shares of Stock of the Corporation properly endorsed and having a
fair market value equal to $______ . Include if appropriate: These
shares [were/were not] acquired by exercise of an incentive stock
option, and are now being disposed of within one year after the
transfer of such Stock to me, or within two years after the grant of
the Stock Option by which I acquired such Stock. I understand that
if I am transferring shares of Stock that were acquired by exercise
of an incentive stock option within the time periods specified in
the preceding sentence, then such transferred Stock will not be
eligible for treatment as an "incentive stock option" pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended.
Kindly issue a certificate or certificates to me representing the shares
which I am acquiring by this exercise, and deliver it to the address provided
above.
Very truly yours,
/s/ Daniel Brandano
-----------------------------------
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<PAGE>
Exhibit 10.1
NOTICE TO PROSPECTIVE TENANTS
THE ATTACHED DOCUMENT IS A DRAFT LEASE. PLEASE KEEP IN MIND THAT THE SUBMISSION
OF THE DOCUMENT IS FOR EXAMINATION AND REVIEW AND SHOULD NOT BE CONSIDERED AS A
BINDING OFFER TO LEASE SPACE OR CONSTITUTE A MEETING OF THE MINDS WITH RESPECT
TO THE CONTENTS. THE DOCUMENT WILL NOT HAVE A BINDING EFFECT ON THE PARTIES
UNLESS AND UNTIL EXECUTED AND DELIVERED BY BOTH LANDLORD AND TENANT.
<PAGE>
LEASE
Between
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
("TENANT")
and
CITY CENTER ASSOCIATES, LTD.
("LANDLORD")
DATE: May 27, 1999
<PAGE>
LEASE
THIS LEASE AGREEMENT ("Lease") is made this 27th day of May, 1999 between
"Landlord" and "Tenant," as hereafter defined.
WITNESSETH:
WHEREAS, Tenant desires to lease from Landlord, and Landlord desires to
lease to Tenant, certain commercial office space set forth herein.
NOW, THEREFORE, for and in consideration of the rents and all other
charges and payments hereunder and of the covenants, agreements, terms,
provisions and conditions, Landlord and Tenant hereby agree as follows:
1. DEFINITIONS. For purposes of this Lease, the following terms shall have the
meanings set forth in this section, unless the context clearly requires
otherwise:
(a) "Landlord": CITY CENTER ASSOCIATES, LTD.
Address: 100 2nd Avenue South, Suite 201S
St. Petersburg, Florida 33701
(b) "Tenant": AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC., a Nevada
Corporation
Address: 100 2nd Avenue South, Suite 1100
St. Petersburg, Florida 33701
(c) "Premises": Suite No. 1100 consisting of approximately 10,815 square
feet of net rentable area, which the parties agree are contained in
the Premises, as outlined in red on the attached Exhibit "A",
expressly made a part hereof. The Premises are located on the 11th
floor of the south tower of the structure, hereinafter called the
"Building" located at 100 2nd Avenue South, St. Petersburg, Florida.
(d) "Use of Premises": General office use and related uses only.
(e) "Commencement Date": June 1, 1999.
(f) "Term": Sixty (60) months commencing on the Commencement Date,
ending on May 31, 2004.
<PAGE>
(g) "Rent": Rent shall be the amounts set forth in, and shall be paid in
accordance with, Section 3 of this Lease. Rent and all other sums
payable by Tenant to Landlord under this Lease, plus any applicable
tax, shall be paid to Landlord, without demand, deduction or offset,
at its management office presently located at 100 Second Avenue
South, Suite 201S, St. Petersburg, Florida 33701, or at such other
place as Landlord may hereafter specify in writing.
(h) "Security Deposit": N/A
(i) "Operating Expense Base": $6.50 per rentable square foot of Premises
per annum.
(j) "Proportionate Share": Rentable areas in the Premises (10,815 square
feet) divided by the rentable area in the Building (238,388 square
feet) which equals 4.54 percent. If the size of the Premises is for
any reason adjusted, Tenant's Proportionate Share shall be likewise
adjusted accordingly.
2. PREMISES AND TERM. Landlord, in consideration of the Rent hereinafter
reserved to be paid and of the covenants, conditions and agreements to be kept
and performed by Tenant, hereby leases, lets and demises to Tenant, and Tenant
hereby leases and hires from Landlord, that certain space called the Premises as
described above in Section 1(c).
(a) Tenant's obligation to perform this Lease shall be conditioned upon
Landlord obtaining possession of the Premises from the tenant under
the lease agreement to which the Premises is currently subject. If
Landlord, for any reason whatsoever, cannot deliver possession of
the Premises to Tenant on or before the Commencement Date described
above, this Lease shall not be void or voidable, nor shall Landlord
be liable to Tenant for any loss or damage resulting therefrom, but,
in that event, there still shall be an abatement of Rent covering
the period between the Commencement Date and the time when Landlord
can deliver possession, the date when Landlord can deliver
possession being deemed to be the "Commencement Date". The ending
date of this Lease shall be extended for not less than an identical
period of time that transpired between the anticipated Commencement
Date and the actual Commencement Date, it being the parties intent
that this Lease have not less than a complete Term as described and
contemplated in Section 1(f) above. To this end, if the actual
Commencement Date is a day other than the first day of a particular
month, the Term of this Lease shall not expire until the last day of
the last month of the proposed Term as described in Section 1(f). If
the Commencement Date is other than the anticipated Commencement
Date, the parties representatives shall execute a letter amendment
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<PAGE>
to this Lease (which they are hereby authorized to do) whereby the
Commencement Date and expiration date of this Lease will be
specified. By occupying the Premises, Tenant shall be conclusively
deemed to have accepted the Premises as complying fully with
Landlord's covenants and obligations.
3. RENT.
(a) Rent for the Term of this Lease shall be in the following amounts:
YEAR 1: 6/1/99 through 12/31/99
Rate - $15.70 per rentable square foot
Total Base Rent for Period - $99,047.38
Months 1 through 7 - $14,149.63 per month
1/1/00 through 5/31/00
Rate - $16.00 per rentable square foot
Total Base Rent for Period - $72,100.00
Months 8 through 12 - $14,420.00 per month
YEAR 2: Rate - $16.50 per rentable square foot
Total Base Rent for Year 2 - $178,447.50
Months 13 through 24 - $14,870.63 per month
YEAR 3: Rate - $17.00 per rentable square foot
Total Base Rent for Year 3 - $183,855.00
Months 25 through 36 - $15,321.25 per month
YEAR 4: Rate - $17.75 per rentable square foot
Total Base Rent for Year 4 - $191,966.25
Months 37 through 48 - $15,997.19 per month
YEAR 5: Rate - $18.50 per rentable square foot
Total Base Rent for Year 5 - $200,007.50
Months 49 through 60 - $16,673.13 per month
(b) Tenant covenants and agrees to pay, without demand, deduction, or
offset, Rent, as described above, and Additional Rent, as described
below, plus all applicable sales tax, to Landlord, at its management
office at the address shown in Section 1(a), or at such other
address as Landlord shall designate in writing from time to time, on
or before the first (1st) day of the first (1st) full calendar month
of the Term hereof and on or before the first (1st) day of each and
every successive calendar month thereafter during the full Term of
this Lease, subject to the
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<PAGE>
adjustments as provided hereinafter along with any applicable tax,
at the then current rate. In the event the Commencement Date occurs
on a day other than the first (1st) day of a calendar month, the
first Rent payment shall be in the amount of the Rent for one (1)
full calendar month plus the prorated Rent for the calendar month in
which the Term of this Lease commences, such payment to be due on
the Commencement Date.
(c) Whenever under the terms of this Lease any sum of money is required
to be paid by Tenant in addition to the Rent herein reserved,
whether or not such sum is herein described as "Additional Rent" or
a provision is made for the collection of said sum as "Additional
Rent," said sum shall nevertheless, at Landlord's option, if not
paid when due, be deemed Additional Rent, and shall be collectible
as such with the first installment of Rent thereafter falling due
hereunder. In the event any installment or increment of Rent or
Additional Rent payable under this Lease shall not be paid within
three (3) business days after the date due, a "late charge" of five
percent (5%) of the amount overdue may be charged (as Additional
Rent) by Landlord for the purpose of defraying the expense incident
to handling such overdue payment and for the purpose of compensating
Landlord for its attendant loss of cash flow.
4. INTENTIONALLY LEFT BLANK.
5. OPERATING EXPENSE ADJUSTMENTS.
(a) The parties each acknowledge that the Rent specified in Section 3 of
this Lease does not provide for increases in Operating Expenses,
Real Estate Taxes, and Utility Costs which may hereafter affect the
Premises or the Building; accordingly, during the Term of this
Lease, and any renewals thereof, Tenant shall pay to Landlord, in
the form of Additional Rent (plus any applicable tax), its
Proportionate Share of increased expenses over the Operating Expense
Base.
(b) to implement and effect the foregoing obligation of Tenant to pay
its Proportionate Share of the expenses, taxes and costs referenced
in this Section 5, the parties agree that Tenant shall pay Landlord
on or before the first day of each calendar month one-twelfth (1/12)
of the amount of Tenant's estimated annualized liability for such
expenses, taxes and costs for the coming calendar year. Any amount
paid by Tenant which exceeds the correct amount due shall be
credited to the next succeeding payment due under this Section 5. If
Tenant has paid less than the correct amount due, Tenant shall pay
the balance within ten (10) days of receipt of notice from Landlord.
If the Term of this Lease shall begin or end other than on the first
day or last day of a calendar year, the foregoing expenses, taxes
and costs shall be billed and adjusted on the basis of such fraction
of a calendar
4
<PAGE>
year. Tenant's obligation to pay the adjustments described in this
Section 5 shall survive the expiration of this Lease. Tenant shall
have thirty (30) days following the submission to it by Landlord of
each applicable adjustment calculation to object to each such
calculation. Should Tenant fail duly and timely to review such
calculation, which objection, to be effective, must be in writing
and must state the particulars of such objection, then, the parties
understand and agree, Landlord's calculation shall be conclusively
deemed to be correct.
(c) The term "Real Estate Taxes" shall mean the annual taxes and any
special assessments or other charges levied against the real
property of which the Premises are a part by any authority having
the direct power so to tax, including any city, county, state or
Federal government, or any school, agricultural, transportation or
environmental control agency, lighting, drainage, or other
improvement district thereof, and shall include the expense of
contesting the amount or validity of any such taxes, charges or
assessments. The term "Operating Expenses" shall include the annual
expenses of Landlord for the operation, maintenance and repair of
the Premises and Building which are reasonable or customary for the
operation of this type of Premises and Building and shall include,
but not be limited to, management salaries, consultants' fees,
maintenance and janitorial expense, administrative salaries, costs
and fees, insurance, security and landscaping. The term "Utility
Costs" shall include Landlord's annual expenses for the operation
and maintenance of the Building and the Premises with respect to
utility charges for furnishing heat, air-conditioning, electricity,
water, sewerage, gas, garbage removal, etc.
6. USE OF PREMISES. The Premises shall be used by Tenant as described above in
Section 1(d), and for no other purpose without the prior written discretionary
consent of Landlord. Tenant shall not do or permit to be done in or about the
Premises, nor bring or keep or permit to be brought or kept therein, anything
which is prohibited by or will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated, or which is prohibited by any standard form of fire
insurance policy or will in any way increase the existing rate of or affect any
fire or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy covering the Building or any part thereof
or any of its contents. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants of the Building, or injure or annoy them or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable purpose
(as determined by Landlord); nor shall Tenant cause, maintain, or permit any
nuisance (as determined by Landlord or by law) in or about the Premises or
commit or suffer to be committed any waste in, on, or about the Premises.
Tenant, at Tenant's expense, shall comply with all laws, rules, orders,
statutes, ordinances, directions, regulations and requirements of all federal,
state, county and municipal authorities pertaining to Tenant's use of the
Premises and with the recorded
5
<PAGE>
covenants, conditions and restrictions pertaining thereto, regardless of when
they become effective or applicable, including, without limitation, all
applicable federal, state and local laws, regulations or ordinances pertaining
to air and water quality, hazardous materials, waste disposal, air emissions and
other environmental matters, all zoning and other land use matters, and the
Americans with Disabilities Act of 1990 and Florida Americans With Disabilities
Accessibility Implementation Act, as both may be amended from time to time
(collectively "ADA") and with any direction of any public officer or officials
which shall impose any duty upon Landlord or Tenant with respect to the use or
occupation of the Premises.
7. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not assign the right of occupancy under this Lease, or
any other interest therein, or sublet the Premises, or any portion
thereof, without the prior written consent of Landlord, which
consent shall not unreasonably be withheld. If the proposed
sublessee or assignee is an existing tenant in the Building,
Landlord shall not be required to consent to the proposed sublease
or assignment if there is existing space in the Building not then
subject to a lease, and Landlord's withholding of consent on that
basis shall not be considered unreasonable. When Tenant requests
Landlord's consent to such assignment or sublease, Tenant shall
notify Landlord in writing of the name and address of the proposed
assignee or subtenant and the nature and character of the business
of the proposed assignee or subtenant and shall provide financial
information including financial statements of the proposed assignee
and subtenant. Tenant shall also provide Landlord with a copy of the
proposed sublease or assignment agreement. Tenant absolutely shall
have no right of assignment or subletting if Tenant is or has ever
been in default of this Lease. Should Landlord elect to grant its
written consent to any proposed assignment or sublease (whether by
Tenant or by others claiming by or through Tenant), Tenant or such
others agree to pay Landlord an administrative fee for each
transaction in a reasonable amount (but not less than $250.00), plus
reasonable attorneys' and paralegals' fees to process and approve
such assignment or sublease, and Landlord may prescribe the
substance and form of such assignment or sublease.
(b) Notwithstanding any assignment of the Lease, or the subletting of
the Premises, or any portion thereof, Tenant shall continue to be
liable for the performance of the terms, conditions and covenants of
this Lease, including, but not limited to, the payment of Rent and
Additional Rent. Consent by Landlord to one or more assignments or
sublettings shall not operate as a waiver of Landlord's rights as to
any subsequent assignments' or sublettings. Landlord shall have the
additional option, which shall be exercised by providing Tenant with
written notice, of
6
<PAGE>
terminating Tenant's rights and obligations under this Lease rather
than permitting any assignment or subletting by Tenant.
(c) Should Landlord permit any assignment or subletting by Tenant and
should the monies received as a result of such assignment or
subletting (when compared to the monies still payable by Tenant to
Landlord) be greater than would have been received hereunder had not
Landlord permitted such assignment or subletting, then the excess
shall be payable by Tenant to Landlord, it being the parties'
intention that Landlord, and not Tenant, in consideration for
Landlord's permitting such assignment or subletting, shall be the
party to receive any profit from any such assignment or subletting.
If there are one or more assignments or sublettings by Tenant to
which Landlord consents, then any and all renewal options to be
exercised subsequent to the date of such assignment or subletting
and any options to lease additional space in the Building to be
exercised subsequent to the date of such assignment or subletting
are absolutely waived and terminated at Landlord's sole discretion.
In the event of transfer and assignment by Landlord of its interest
in this Lease and/or sale of the Building containing the Premises,
either of which it may do at its sole option, Landlord shall thereby
be released from any further obligations hereunder, and Tenant
agrees to look solely to such successor in interest of Landlord for
performance of such obligations. The provisions of Section 37
hereafter dealing with "Notices" shall be amended to provide the
correct names and addresses of the assignee or sublessee. If Tenant
is a corporation whose stock is not regularly traded on a bona fide
public exchange, and if any transfer, sale, pledge or other
disposition of the common stock shall occur which changes the power
to vote the majority of the outstanding capital stock of the
company, such action shall be considered an assignment under the
terms of this Lease. Any breach of this Section 7 by Tenant will
constitute a default under the terms of this Lease, per Section 20
hereof.
7
<PAGE>
8. ACCESS TO PREMISES. Landlord or its authorized agent or agents shall have the
right to enter upon the Premises at all reasonable times for the purposes of
inspecting the same, preventing waste, making such repairs as Landlord may
consider and showing the Premises to prospective tenants, mortgagees and/or
purchasers. If during the last month of the Term, Tenant shall have removed all
or substantially all of Tenant's property therefrom, Landlord may immediately
enter and alter, renovate and redecorate the Premises without elimination or
abatement of Rent or incurring liability to Tenant for any compensation or
offsets in Rent and charges owed and such acts shall have no effect upon this
Lease.
9. LANDLORD'S SERVICES.
(a) Landlord shall, at its expense, furnish the Premises with (i)
electricity subject to Section 10 of this Lease (ii) heat and
air-conditioning during reasonable and usual business hours (defined
to be 8:00 a.m. until 6:00 p.m. Monday through Friday, and 8:00 a.m.
until 12:00 noon Saturday), except on Federal holidays, reasonably
required for the occupation of the Premises, such heat and air
conditioning to be provided by utilizing the existing systems in the
Building, it being expressly understood and agreed by the parties
that Landlord specifically shall not be liable for any losses or
damages of any nature whatsoever incurred by Tenant due to any
failure of the equipment to function properly, or while it is being
repaired, or due to any governmental laws, regulations or
restrictions pertaining to the furnishing or use of such heat and
air conditioning; (iii) elevator service; (iv) lighting replacement
for Building Standard lights; (v) toilet room supplies; (vi) daily
janitor service during the time and in the manner that such janitor
service is customarily furnished in first class office buildings in
the metropolitan area where the Building is located; (vii) water;
and (viii) sewerage. The foregoing services are designated "Building
Standard."
(b) Tenant agrees that Landlord is only responsible for Building
Standard maintenance and Building Standard services. If other, more
complete or special services and maintenance (over Building
Standard) are required, then Tenant solely shall be and is
responsible for same and for any expenses and costs of any nature
whatsoever associated with same. To this end, Tenant is and shall be
solely responsible for any expenses and costs of any nature
whatsoever associated with, among other things, maintaining upgraded
tenant improvements in the Premises, replacing non-Building Standard
lighting fixtures and bulbs in the Premises, servicing, operating
and maintaining any separate and non-Building Standard HVAC systems
and facilities serving the Premises, etc.
(c) Landlord shall not be liable for any damages directly or indirectly
resulting from, nor shall any Rent herein set forth be reduced or
abated by reason of (1)
8
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installation, use, or interruption of use of any equipment in
connection with the furnishing of any of the foregoing services, or
(2) failure to furnish, or delay in furnishing, any such services
when such failure or delay is caused by accident or any condition
beyond the reasonable control of Landlord or by the making of
necessary repairs or improvements to the Premises or to the Building
or because of any governmental laws, regulations or restrictions.
The temporary failure to furnish any such services shall not be
construed as an eviction of Tenant or relieve Tenant from the duty
of observing and performing any and all of the provisions of this
Lease.
(d) Landlord shall provide Tenant HVAC services to the Premises outside
reasonable and normal building hours at the request of Tenant, and
shall pay Landlord, as Additional Rent, a fee in the amount of
$25.00 per hour or part thereof for the time such services are
provided.
10. ELECTRICAL OVERLOAD; STRUCTURAL OVERLOAD.
(a) Tenant's use of electrical services furnished by Landlord shall be
subject to the following:
(1) Tenant's electrical equipment shall be restricted to
that equipment which individually does not have a rated
capacity greater than .5 kilowatts per hour and/or
require voltage other than 120/208 volts, single phase.
Collectively, Tenant's equipment shall not have an
electrical design load greater than an average of 3
watts per square foot (including overhead lighting).
(2) Tenant's overhead lighting shall not have a design load
greater than an average of 2 watts per square foot.
(3) If Tenant's consumption of electrical services exceeds
either the rated capacities and/or design loads as per
subsections (1) and (2) above, then Tenant shall remove
such equipment and/or lighting to achieve compliance
within ten (10) days after receiving notice from
Landlord. Or upon receiving Landlord's prior written
approval, such equipment and/or lighting may remain in
the Premises, subject to the following:
a. Tenant shall pay for all costs of installation and
maintenance of submeter, wiring, air conditioning
and other items
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required by Landlord, in Landlord's discretion, to
accommodate Tenant's excess design loads and
capacities.
b. Tenant shall pay to Landlord, upon demand, the
cost of the excess demand and consumption of
electrical service at rates determined by Landlord
which shall be in accordance with any applicable
laws.
c. Landlord may, at its option, upon not less than
thirty (30) days' prior written notice to Tenant,
discontinue the availability of such extraordinary
utility service. If Landlord gives any such
notice, Tenant will contract directly with the
public utility for the supplying of such utility
service to the Premises.
(b) Tenant shall not place a load upon any floor of the Premises
exceeding the floor load per square foot area which such floor was
designed to carry and which may be allowed by law. Landlord reserves
the right to prescribe the weight and position of all heavy
equipment and similar items and any reinforcement deemed by Landlord
to be required under the circumstances, such reinforcement to be at
Tenant's pre-paid expense.
11. PARKING AREAS. Landlord shall keep and maintain in good condition
any parking areas that may be provided. Landlord reserves the right to control
the method, manner and time of parking in parking spaces. During the Term of
this Lease, Landlord shall make available for Tenant's use eleven (11) assigned
parking spaces in the Garage adjacent to the Building. Tenant shall pay
Landlord, as Additional Rent, in advance on or before the first day of each
calendar month, the building standard monthly charge, as determined by Landlord
from time to time, for each parking space. Subject to availability, as
determined by Landlord in its sole discretion, Landlord may make additional
parking spaces in the Garage available for Tenant's use on a month-to-month
basis in addition to the eleven assigned spaces described above. Landlord may
terminate Tenant's use of any month-to-month parking space so provided at the
end of any calendar month by giving Tenant written notice of such termination no
later than the fifteenth day of that calendar month. Tenant shall pay Landlord,
as Additional Rent, in advance on or before the first day of each calendar month
for which any month-to-month parking space use is provided, the building
standard monthly charge, as determined by Landlord in its sole discretion, for
each parking space so provided for that calendar month. Tenant acknowledges that
use of assigned parking spaces can only be guaranteed during normal business
hours, and that the Garage is available for public parking outside normal
business hours.
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12. LEASEHOLD IMPROVEMENTS.
(a) The Premises are rented "as is", without any additional services or
improvements to be rendered by Landlord other than those services
described in Section 9 and such other services or improvements as
are described in Exhibit "B" attached hereto and expressly made a
part hereof. If Landlord is to additionally alter, remodel, improve,
or do any physical act or thing to the Premises other than the work
described in Exhibit "C", same shall be at the sole expense of
Tenant and shall be effected only by an "Extra Work Agreement"
signed by the parties, the monies due Landlord from Tenant for which
shall be deemed "Additional Rent" hereunder. In the absence of an
"Extra Work Agreement" signed by the parties, Landlord is under no
obligation to make any such alteration, remodeling or improvement or
do any physical act or thing to the Premises.
(b) Any and all extraordinary expenses and costs of any nature
whatsoever attributable to the installation, maintenance and/or
removal of telephone equipment, computer equipment and the like
shall be borne solely by Tenant and may be deemed by Landlord to be
"Additional Rent" hereunder.
13. REPAIRS AND MAINTENANCE. Landlord will, at its own cost and expense, except
as may be provided elsewhere herein, make necessary repairs of damage to the
Building corridors, lobby, structural members of the Building, and equipment
used to provide the Building Standard services referred to in Section 9, unless
any such damage is caused by acts or omissions of Tenant, its agents, customers,
employees, principals, contractors, consultants, assigns, subtenants or
invitees, in which event Tenant will bear the cost of such repairs. Tenant will
not injure the Premises or the Building but will maintain the Premises in a
clean, attractive condition and in good repair, except as to damage to be
repaired by Landlord as provided above. Upon termination of this Lease, Tenant
will surrender and deliver the Premises to Landlord in the same condition in
which they existed at the commencement of this Lease, excepting only ordinary
wear and tear and damage arising from any cause not required to be repaired by
Tenant. This Section 13 shall not apply in the case of damage or destruction by
fire or other casualty which is covered by insurance maintained by Landlord on
the Building (as to which Section 16 hereof shall apply) or damage resulting
from an Eminent Domain taking (as to which Section 18 hereof shall apply).
14. ALTERATIONS AND IMPROVEMENTS. Tenant shall make no alterations, additions or
improvements to the Premises without the prior written approval of Landlord,
unless in each instance and for each such alteration, addition or improvement
Landlord or a contractor approved by Landlord is hired to do such alterations,
additions or improvements. Such approval shall not be unreasonably withheld in
the case of alterations, additions or improvements to the interior of
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the Premises if such alterations, additions, or improvements are normal for the
use described in Section 1(d) of this Lease, do not adversely affect the utility
of the Premises for future tenants, do not alter the exterior of the Building,
and are accompanied by prepayment or bond provisions or waivers by the
contractor in form satisfactory to Landlord sufficient to protect the Building
from claims of lien of any sort; otherwise, such approval may be withheld for
any reason whatsoever. Furthermore, such alterations, additions or improvements
absolutely shall not affect the plumbing, electrical and HVAC systems in the
Premises or the Building and shall not be of a structural nature. Tenant shall
conduct its work in such a manner as to maintain harmonious labor relations and
as not to interfere with the operation of the Building and shall, prior to the
commencement of the work, submit to Landlord copies of all necessary permits.
Landlord reserves the right to have final approval of the contractors hired by
Tenant. All such contractors hired by Tenant shall be, at levels and coverages
prescribed by Landlord, bonded and insured, and Landlord may require evidence of
same, which Tenant agrees to secure and provide Landlord prior to the
commencement of any work by such contractors. All alterations, additions or
improvements, whether temporary or permanent in character, made in or upon the
Premises, either by Landlord or Tenant, shall be Landlord's property and at the
end of the Term hereof shall remain in or upon the Premises without compensation
to Tenant. If, however, Landlord shall request in writing, Tenant will, prior to
expiration or earlier termination of this Lease, remove any and all alterations,
additions and improvements placed or installed by Tenant in the Premises, and
will repair any damage caused by such removal. All of Tenant's furniture,
movable trade fixtures and equipment not attached to the Building may be removed
by Tenant at the termination of this Lease, if Tenant so elects, and shall be so
removed, if required by Landlord, and, if not so removed, shall, at the option
of Landlord, become the property of Landlord. To the extent Tenant makes any
alterations, additions or improvements and/or to the extent Landlord on behalf
of Tenant under "Extra Work Agreement" makes such alterations, additions or
improvements, and as a result thereof it can be determined that such
alterations, additions or improvements caused an increase in real estate taxes
or insurance premiums, then Tenant shall be responsible for reimbursing Landlord
for such increases as Landlord may pay. Tenant shall keep the Premises and
Building free from any liens arising from any work performed in accordance with
this Lease. Any such alterations, additions or improvements conducted by Tenant
shall be in accordance with all federal, state and local laws, rules and
regulations, including, without limitation, the ADA.
15. INDEMNITY. Landlord shall not be liable for, and Tenant will indemnify and
save Landlord harmless of and from, all fines, suits, damages, claims, demands,
losses and actions (including reasonable attorneys' fees and paralegals' fees
(whether incurred in court, out of court, on appeal or in bankruptcy or
administrative proceedings) for any injury to person or damage to or loss of
property on or about the Premises and Building caused by the negligence or
misconduct or breach of this Lease by Tenant, its employees, agents, principals,
contractors, consultants, assigns, subtenants, invitees or by any other person
entering the Premises or the Building under express or implied invitation of
Tenant, or arising out of Tenant's use of the
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Premises, unless such injury or damage was caused solely by Landlord's gross
negligence. Landlord shall not be liable or responsible for any loss or damage
to any property or the death or injury to any person occasioned by theft, fire,
act of God, public enemy, injunction, riot, strike, insurrection, war, court
order, requisition of a governmental body of authority, by other tenants of the
Building or by any other matter beyond the absolute control of Landlord, or for
any injury or damage or inconvenience which may arise through repair or
alteration of any part of the Building, or failure to make repairs, or from any
cause whatsoever except Landlord's negligence or intentional act. It is
specifically understood and agreed that there shall be no personal liability on
Landlord with respect to any of the covenants, conditions or provisions of this
Lease; in the event of a breach or default by Landlord of any of its obligations
under this Lease, Tenant shall look solely to the equity of Landlord in the
Building for the satisfaction of Tenant's remedies. Separate from and in
addition to any consideration for the execution of this Lease, Landlord has paid
to Tenant the sum of $50.00 as consideration for Tenant's indemnification under
this Lease.
16. DAMAGE BY FIRE OR THE ELEMENTS.
(a) In the event that the Building should be totally destroyed by fire,
tornado or other casualty, or in the event the Premises or Building
should be so damaged that rebuilding or repairs cannot be completed
within one hundred eighty (180) days after the date of such damage,
either Landlord or Tenant may, at its option, by written notice to
the other given not more than thirty (30) days after the date of
such fire or other casualty, terminate this Lease. In such event,
the Rent shall be abated during the unexpired portion of this Lease
effective with the date of such fire or other casualty.
(b) In the event the Building or the Premises should be damaged by fire,
tornado, or other casualty covered by Landlord's insurance but only
to such extent that rebuilding or repairs can be completed within
one hundred eighty (180) days after the date of such damage, or if
the damage should be more serious but neither Landlord nor Tenant
elects to terminate this Lease, then Landlord shall, within thirty
(30) days after the date of such damage or such election, commence
to rebuild or repair the Building and/or the Premises and shall
proceed with reasonable diligence to restore the Building and/or the
Premises to substantially the same condition in which it/they
was/were immediately prior to the happening of the casualty, except
that Landlord shall not be required to rebuild, repair or replace
any part of the furniture, equipment, fixtures and other
improvements which may have been placed by Tenant or other tenants
within the Building or Premises. Landlord shall, unless such damage
is the result of the negligence or willful misconduct of Tenant or
Tenant's employees, agents, principals, contractors, consultants,
assigns, subtenants or invitees, allow Tenant a fair diminution of
Rent during the time of such rebuilding or repairs. In the event any
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mortgagee, or the holder of any deed of trust, security agreement or
mortgage on the Building, requires that the insurance proceeds be
used to retire the mortgage debt, Landlord shall have no obligation
to rebuild and this Lease shall terminate upon notice to Tenant. Any
insurance which may be carried by Landlord or Tenant against loss or
damage to the Building or to the Premises shall be for the sole
benefit of the party carrying such insurance and under its sole
control.
17. BUILDING RULES AND REGULATIONS. Tenant shall faithfully observe and comply
with the Rules and Regulations printed on or annexed to this Lease and all
reasonable modifications of and additions thereto from time to time put into
effect by Landlord. Landlord shall not be responsible to Tenant for the
nonperformance of any said Rules and Regulations by any other tenant or occupant
of the Building. Tenant shall and does hereby have an affirmative obligation (to
include indemnification of Landlord, per Section 15 hereof) to notify its
agents, employees, principals, assigns, subtenants and invitees of the contents
of such Rules and Regulations and of this Lease and to assure their compliance
therewith.
18. EMINENT DOMAIN. If the whole or a portion of the Building shall be taken for
any public or quasi-public use under any statute or by right of Eminent Domain
or private purchase in lieu thereof, then at Landlord's option, but not
otherwise, the term hereby demised and all rights of Tenant hereunder shall
immediately cease and terminate and the Rent shall be adjusted as of the date of
such termination. Tenant shall be entitled to no part of the award made for such
condemnation (or other taking) or the purchase price thereof. Nevertheless,
anything to the contrary notwithstanding, likewise at Landlord's option, but not
otherwise, if the Premises are unaffected by such condemnation (or other
taking), then this Lease and each and every one of its provisions shall continue
in full force and effect.
19. SIGNS AND ADVERTISING. Without the prior written approval of Landlord, which
may be withheld at Landlord's discretion, Tenant shall not permit the painting
or display of any signs, placard, lettering, or advertising material of any kind
on or near the exterior of the Premises or the Building. Notwithstanding the
foregoing, Tenant may, with Landlord's prior approval, display Tenant's name on
or near the entrance to the Premises, in a manner prescribed by Landlord.
20. TENANT'S DEFAULT.
(a) Landlord, at its election, may exercise any one or more of the
options referred to below upon the happening, or at any time after
the happening, of any one or more of the following events, to wit:
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(1) Tenant's failure to pay the Rent, Additional Rent, or
any other sums payable hereunder for a period of three
(3) days after written notice by Landlord;
(2) Tenant's failure to observe, keep or perform any of the
other terms, covenants, agreements or conditions of this
Lease or in the Building Rules and Regulations for a
period of ten (10) days after written notice by
Landlord;
(3) The bankruptcy of Tenant;
(4) Tenant making an assignment for the benefit for
creditors;
(5) A receiver or trustee being appointed for Tenant or a
substantial portion of Tenant's assets;
(6) Tenant's voluntary petitioning for relief under, or
otherwise seeking the benefit of, any bankruptcy,
reorganization, arrangement or insolvency law;
(7) Tenant's deserting, vacating or abandoning any
substantial portion of the Premises or attempting to
mortgage or pledge or otherwise encumber in any way its
interest hereunder;
(8) Tenant's interest under this Lease being sold under
execution or other legal process;
(9) Tenant's interest under this Lease being modified or
altered by an unauthorized assignment or subletting or
by operation of law;
(10) Any of the goods or chattels of Tenant used in, or
incident to, the operation of Tenant's business in the
Premises being seized, sequestered, or impounded by
virtue of, or under authority of, any legal proceeding.
(11) Tenant's failure to pay timely the Rent, Additional
Rent, or any other sums payable hereunder when due for
two (2) consecutive months or for a total of four (4)
months in any lease or calendar year, no notice
whatsoever to be due Tenant from Landlord;
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(12) Tenant's failure to operate continuously during normal
business hours from the Premises in a fully staffed,
fully equipped manner and/or as contemplated by Section
1(d) of this Lease; or
(13) Tenant's failure to take occupancy of the Premises when
same is tendered by Landlord to Tenant, unless Rent has
been prepaid to cover the applicable period of
non-occupancy.
(b) In the event of any of the foregoing happenings, Landlord, at its
election, may exercise any one or more of the following options, the
exercise of any of which shall not be deemed to preclude the
exercise of any others herein listed or otherwise provided by
statute or general law at the same time or in subsequent times or
actions;
(1) Terminate Tenant's right to possession under the lease
and re-enter and retake possession of the Premises and
relet or attempt to relet the Premises on behalf of
Tenant at such rent and under such terms and conditions
as Landlord may deem best under the circumstances for
the purpose of reducing Tenant's liability. Landlord
shall not be deemed to have thereby accepted a surrender
of the Premises, and Tenant shall remain liable for all
Rent, Additional Rent, or other sums due under this
Lease and for all damages suffered by Landlord because
of Tenant's breach of any of the covenants of the Lease.
(2) Declare this Lease to be terminated, ended and null and
void, and re-enter upon and take possession of the
Premises whereupon all right, title and interest of
Tenant in the Premises shall end.
(3) Accelerate and declare the entire remaining unpaid Rent
and Additional Rent for the balance of this Lease to be
immediately due and payable forthwith, and may, at once,
take legal action to recover and collect the same.
(c) No re-entry or retaking possession of the Premises by Landlord shall
be construed as an election on its part to terminate this Lease,
unless a written notice of such intention be given to Tenant, nor
shall pursuit of any remedy herein provided constitute a forfeiture
or waiver of any Rent or other monies due to Landlord hereunder or
of any damages accruing to Landlord by reason of the violations of
any of the terms, provisions, and covenants herein contained.
Landlord's acceptance of Rent or Additional Rent or other monies
following any event of default hereunder shall not be construed as
Landlord's waiver of such event of default. No forbearance by
Landlord of action upon any violation or breach of any of the terms,
provisions, and covenants herein contained shall be
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deemed or construed to constitute a waiver of the terms, provisions,
and covenants herein contained. Forbearance by Landlord to enforce
one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of any other
violation or default. Legal actions to recover for loss or damage
that Landlord may suffer by reason of termination of this Lease or
the deficiency from any reletting as provided for above shall
include the expense of repossession or reletting and any repairs or
remodeling undertaken by Landlord following repossession.
(d) The parties hereto shall, and they hereby do, waive trial by jury in
any action, proceeding, or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising
out of, or in any way connected with, this Lease, the relationship
of landlord and tenant, Tenant's use or occupancy of the Premises
and/or Building, and/or claim or injury or damage. In the event
Landlord commences any proceeding to enforce this Lease or the
landlord/tenant relationship between the parties or for non-payment
of Rent (of any nature whatsoever) or additional monies due Landlord
from Tenant under this Lease, Tenant will not interpose any
counterclaim of whatever nature or description in any such
proceedings. In the event Tenant must, because of applicable court
rules, interpose any counterclaim or other claim against Landlord in
such proceedings, Landlord and Tenant covenant and agree that, in
addition to any other lawful remedy of Landlord, upon motion of
Landlord, such counterclaim or other claim asserted by Tenant shall
be severed out of the proceedings instituted by Landlord (and, if
necessary, transferred to a court of different jurisdiction), and
the proceedings instituted by Landlord may proceed to final judgment
separately and apart from and without consolidation with or
reference to the status of each counterclaim or any other claim
asserted by Tenant.
(e) The parties hereto agree that any and all suits for any and every
breach of this Lease shall be instituted and maintained only in
those courts of competent jurisdiction in the county or municipality
in which the Building is located. In the event it shall become
necessary (as determined by Landlord) for Landlord at any time to
institute or defend any legal action or proceedings of any nature
for the enforcement of, or as regards, this Lease, or any of the
provisions hereof, or any of its statutory or common law rights as
concern Tenant, or to employ an attorney therefor, Tenant agrees to
pay all court costs and reasonable attorneys' and paralegal' fees
(whether incurred in court, out of court, on appeal or in bankruptcy
or administrative proceedings) incurred by Landlord.
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21. CONTRACTUAL LANDLORD'S LIEN.
(a) Landlord shall have, at all times, a valid security interest to
secure payment of all Rent, Additional Rent and other sums of money
becoming due hereunder from Tenant, and to secure payment of any
damages or loss which Landlord may suffer by reason of the breach by
Tenant of any covenant, agreement or condition contained herein,
upon all goods, wares, equipment, fixtures, furniture, improvements
and other personal property of Tenant presently or which may
hereinafter be situated in the Premises, and all proceeds therefrom,
and such property shall not be removed therefrom without the consent
of Landlord until all arrearages in Rent as well as any and all
other sums of money then due to Landlord hereunder shall first have
been paid and discharged and all of the covenants, agreements, and
conditions hereof have been fully complied with and performed by
Tenant. In consideration of this Lease, upon the occurrence of an
event of default by Tenant, Landlord may, in addition to any other
remedies provided herein, enter upon the Premises and take
possession of any and all goods, wares, equipment, fixtures,
furniture, improvements, and other personal property of Tenant
situated on or in the Premises, without liability for trespass or
conversion, and sell the same at public or private sale, with or
without having such property at the sale, after giving Tenant
reasonable notice of the time and place of any public sale or of the
time after which any private sale is to be made, at which sale
Landlord or its assigns may purchase unless otherwise prohibited by
law. Unless otherwise provided by law, and without intending to
exclude any other manner of giving Tenant reasonable notice, the
requirement of reasonable notice shall be met if such notice is
given in the manner prescribed in Section 37 dealing with "Notices"
in this Lease at least five (5) days before the time of sale. The
proceeds from any such disposition, less any and all expenses
connected with the taking of possession, holding and selling of the
property (including reasonable attorneys' and paralegals' fees
(whether incurred in court, out of court, on appeal or in bankruptcy
or administrative proceedings) and other expenses) shall, be applied
as a credit against the indebtedness secured by that security
interest granted in this Section 21. Any surplus shall be paid to
Tenant or as otherwise required by law, and Tenant shall pay any
deficiencies forthwith. Upon request by Landlord, Tenant agrees to
execute and deliver to Landlord a financing statement in form
sufficient to perfect the security interests of Landlord in the
aforementioned property and proceeds thereof under the provisions of
the Uniform Commercial Code in force in the State of Florida.
(b) So long as Tenant is not in default of this Lease, if Tenant
requests Landlord to subordinate the lien granted herein to the lien
of a lender providing financing to Tenant related to Tenant's
business at the Premises, Tenant shall provide such information as
Landlord may reasonably require concerning the financing and
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lender to which Landlord's lien would become subordinate, and
Landlord shall not unreasonably withhold its consent to such
subordination.
22. SUBORDINATION; ESTOPPEL CERTIFICATES. In consideration of the execution of
this Lease by Landlord, Tenant accepts this Lease subject to any deeds of
conveyance and any deeds of trust, master leases, security interests or
mortgages and all renewals, modifications, extensions, consolidations and
replacements of the foregoing which might now or hereafter constitute a lien
upon the Building (or the land upon which it is situated) or improvements
therein or thereon or upon the Premises and to zoning ordinances and other
building and fire ordinances and governmental regulations relating to the use of
the property. Although no instruments or act on the part of Tenant shall be
necessary to effectuate such subordination, Tenant shall, nevertheless, for the
purpose of confirmation at any time hereafter, on demand in the form(s)
prescribed by Landlord, execute any instruments, estoppel certificates, release
or other documents that may be requested or required by any purchaser or any
holder of any superior interest for the purposes of subjecting and subordinating
this Lease to such deed or conveyance or to the lien of any such deed of trust,
master lease, security interest, mortgage, or superior interest. Tenant hereby
appoints Landlord attorney-in-fact, irrevocably, to execute and deliver any such
instrument or document for Tenant should Tenant fail or refuse to do so within
ten (10) days of Landlord's written request for such instrument or document. In
the event the Building is sold or subjected to foreclosure proceedings, Tenant
shall attorn to the purchaser and recognize same as Landlord under this Lease.
In the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by
Landlord covering the Premises, Tenant shall attorn to the purchaser at any such
foreclosure or to the grantee of a deed in lieu of foreclosure and recognize
such purchaser or grantee as Landlord under this Lease.
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23. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer(s) of
Landlord's interest in the Premises or the Building, other than a transfer for
security purposes only, the transferor shall be automatically relieved of any
and all obligations and liabilities on the part of Landlord accruing from and
after the date of such transfer, and Tenant agrees to attorn to the transferee.
24. QUIET ENJOYMENT. Provided Tenant has fully, duly and timely performed all of
the terms, covenants, agreements and conditions of this Lease on its part to be
performed, including the payment of Rent and all other sums due hereunder,
Tenant shall peacefully and quietly hold and enjoy the Premises, except as
described in Section 22 above, against Landlord and all persons claiming by,
through or under Landlord, for the Term herein described, subject to the
provisions and conditions of this Lease.
25. INTENTIONALLY LEFT BLANK.
26. CONSTRUCTION LIENS.
(a) Tenant is prohibited from making, and agrees not to make,
alterations in the Premises, except as permitted by Section 14, and
Tenant will not permit any construction lien or liens to be placed
upon the Premises or the Building or improvements thereon during the
Term hereof caused by or resulting from any work performed,
materials furnished or obligation incurred by or at the request of
Tenant, and in the case of the filing of any such lien Tenant will
promptly pay same. If default in payment thereof shall continue for
ten (10) days after written notice thereof from Landlord to Tenant,
Landlord shall have the right and privilege, at Landlord's option,
of paying the same or any portion thereof without inquiry as to the
validity thereof, and any amounts so paid, including expenses,
interest, and reasonable attorneys' and paralegals' fees (whether
incurred in court, out of court, on appeal or in bankruptcy or
administrative proceedings), shall be so much additional
indebtedness hereunder due from Tenant to Landlord and shall be
repaid to Landlord immediately on rendition of a bill therefor,
together with interest per annum at the maximum rate permitted by
law until repaid, and if not so paid within ten (10) days of the
rendition of such bill shall constitute a default under Section 20
hereof.
(b) The interest of Landlord shall not be subject to liens for
improvements made by Tenant in and to the Premises. Tenant shall
notify every contractor making such improvements of the provision
set forth in the preceding sentence of this paragraph. The parties
agree, should Landlord so request, to execute, acknowledge and
deliver, without charge to the other, a Short Form Lease in
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recordable form in accordance with Chapter 713, Florida Statutes,
containing a confirmation that the interest of Landlord shall not be
subject to liens for improvements made by Tenant to the Premises.
27. FORCE MAJEURE. Whenever a period of time is herein prescribed for action to
be taken by Landlord, Landlord shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, theft,
fire, public enemy, injunction, insurrection, court order, requisition of other
governmental body or authority, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
control of Landlord.
28. SEVERABILITY. If any clause or provision of this Lease is illegal, invalid
or unenforceable under present or future laws effective during the Term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby.
29. HOLDING OVER. The failure of Tenant to surrender the Premises on the date
provided herein for the expiration of the Term of this Lease (or at the time the
Lease may be terminated otherwise by Landlord), and the subsequent holding over
by Tenant, with or without the consent of Landlord, shall result in the creation
of a tenancy at will at double the Rent and Additional Rent payable at the time
of the date provided herein for the expiration of this Lease or at the time the
Lease may be terminated otherwise by Landlord. This provision does not give
Tenant any right to hold over at the expiration of the Term of this Lease, and
shall not be deemed, the parties agree, to be a renewal of the Lease Term,
either by operation of law or otherwise.
30. INTENTIONALLY LEFT BLANK.
31. RENT A SEPARATE COVENANT. Tenant shall not for any reason withhold or reduce
Tenant's required payments of Rent and other charges provided in this Lease, it
being expressly understood and agreed by the parties that the payment of Rent
and Additional Rent is a contractual covenant by Tenant that is independent of
the other covenants of the parties hereunder.
32. JOINT AND SEVERAL LIABILITY. If two or more individuals, corporations,
partnerships, or other business associations (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other
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<PAGE>
business association to pay Rent and perform all other obligations hereunder
shall be deemed to be joint and several. In like manner, if Tenant, is a
partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, the liability of each
such member shall be joint and several.
33. ABSENCE OF OPTION. The submission of this Lease for examination does not
constitute a reservation of or option for the Premises, and this Lease shall
become effective only upon execution and delivery thereof by Landlord.
34. CORPORATE TENANCY. If Tenant is a corporation, the undersigned officer of
Tenant hereby warrants and certifies to Landlord that Tenant is a corporation in
good standing and is authorized to do business in the State of Florida. The
undersigned officer of Tenant hereby further warrants and certifies to Landlord
that he or she, as such officer, is authorized and empowered to bind the
corporation to the terms of this Lease by his or her signature thereto.
Landlord, before it accepts and delivers this Lease, may require Tenant to
supply it with a certified copy of the corporate resolution authorizing the
execution of this Lease by Tenant. If Tenant is a corporation (other than one
whose shares are regularly and publicly traded on a recognized stock exchange),
Tenant represents that the ownership and power to vote its entire outstanding
capital stock belongs to and is vested in the officer or officers executing this
Lease or members of his, her or their immediate family. If there shall occur any
change in the ownership of and/or power to vote the majority of the outstanding
capital stock of Tenant, whether such change of ownership is by sale,
assignment, bequest, inheritance, operation of law or otherwise, without the
prior written consent of Landlord, then Landlord shall have the option to
terminate this Lease upon thirty (30) days' written notice to Tenant.
Furthermore, Tenant shall have an affirmative obligation to notify immediately
Landlord of any such change.
35. BROKERAGE COMMISSION. Tenant warrants that there are no claims for broker's
commissions or finder's fees in connection with its execution of this Lease,
except that which may be due to Delma Realty Services, Inc., and Vector Realty &
Management, Inc. (which Landlord agrees to pay), and agrees to indemnify and
save Landlord harmless from any liability that may arise from any such claim,
including reasonable attorneys' and paralegals' fees (whether incurred in court,
out of court, on appeal or in bankruptcy or administrative proceedings).
36. LANDLORD'S DEFAULT. Landlord shall in no event be charged with default in
the performance of any of its obligations under this Lease unless and until
Landlord shall have failed to perform such obligations within thirty (30) days
(or within such additional time as is reasonably required to remedy any such
default) after written notice to Landlord by Tenant properly specifying and
detailing the particulars of wherein and whereby Tenant claims Landlord has
failed to perform such obligations. No default by Landlord under this Lease
shall give
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<PAGE>
Tenant the right to terminate this Lease or withhold or otherwise abate Rent,
Additional Rent or any sums payable by Landlord to Tenant under this Lease. If
the holder of the first mortgage covering the Premises shall have given prior
written notice to Tenant that it is the holder of such first mortgage and such
notice includes the address at which notices to such mortgagee are to be sent,
then Tenant shall give such mortgagee notice simultaneously with any notice
given to Landlord to correct any default of Landlord as hereinabove provided.
Such mortgagee shall have the right within thirty (30) days (or within such
additional time as is reasonably required to correct any such default) after
receipt of such notice to correct or remedy such default before Tenant may take
any action under this Lease by reason of such default. Any notice of default
given Landlord by Tenant shall be null and void unless simultaneous notice has
been given by Tenant to said first mortgagee.
37. NOTICES. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered or given when (a) actually received or
(B) signed for or "refused" as indicated on the postal service return receipt.
Delivery may be by personal delivery or by United States mail, postage prepaid,
certified or registered mail, addressed to the parties hereto at the respective
addresses set out opposite their names below, or at such other address as they
may hereafter specify by written notice delivered in accordance herewith:
LANDLORD: CITY CENTER ASSOCIATES, LTD.
c/o Delma Realty Services, Inc.
100 2nd Avenue South, Suite 201S
St. Petersburg, Florida 33701
With a copy to:
Delma Properties, Inc.
444 Madison Avenue, 12th Floor
New York, New York 10022
TENANT: 100 2nd Avenue South, Suite 1100
St. Petersburg, Florida 33701
With a copy to:
Dan Brandano
336 4th Avenue North
Tierra Verde, Florida 33715-1727
23
<PAGE>
38. INSURANCE.
(a) Tenant shall not conduct or permit to be conducted any
activity, or place any equipment, materials or other items in,
on or about the Premises or the Building, which will in any
way increase the rate of fire or liability or casualty
insurance on the Building. Should Tenant fail to comply with
the foregoing covenant on its part to be performed, Tenant
shall reimburse Landlord for such increased amount upon
written demand therefor from Landlord, the same to be
considered Additional Rent payable hereunder.
(b) Tenant shall, at Tenant's sole expense, obtain and keep in
force at all times during the Term of this Lease,
comprehensive general liability insurance, including property
damage on an occurrence basis, with limits of not less than
One Million Dollars ($1,000,000.00) combined single limit,
insuring Landlord and Tenant against any liability arising out
of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Fire legal
liability insurance in an amount of not less than $50,000.00
shall also be obtained and kept in force during the Term of
this Lease at Tenant's expense. The limit of said insurance
shall not, however, limit the liability of Tenant hereunder.
Tenant may carry said insurance under a blanket policy,
provided an endorsement naming Landlord as an additional
insured is attached thereto.
(c) To the extent that such coverage is available in normal
commercial insurance markets, Tenant shall maintain insurance
upon Tenant's trade fixtures, merchandise and personal
property in the Premises in an amount not less than one
hundred percent (100%) of their full replacement cost, which
insurance shall provide protection against perils included
within the standard Florida form of fire and extended coverage
insurance policy, together with insurance against sprinkler
damage, vandalism and malicious mischief. Tenant shall
maintain insurance against such other perils and in such
amounts as Landlord may in writing from time to time require.
(d) All insurance policies required to be obtained and maintained
under this Lease shall be with a company or companies licensed
to issue the relevant insurance, licensed to do business in
the State of Florida, and reasonably acceptable to Landlord.
Such insurance company or companies shall each have a
policyholder's rating of no less than "A" in the most recent
edition of Best Insurance Reports. No policy shall be
cancelable or subject to reduction of coverage except after
thirty (30) day's prior written notice to Landlord. Landlord
shall receive written evidence of insurance upon
24
<PAGE>
request. All policies of insurance maintained by Tenant shall
be in a form and, shall have a substance, acceptable to
Landlord with satisfactory evidence that all premiums have
been paid. Tenant agrees not to violate knowingly or permit to
be violated any of the conditions or provisions of the
insurance policies required to be furnished hereunder, and
agrees to promptly notify Landlord of any fire or other
casualty. If Tenant fails to procure and maintain insurance as
required hereunder, Landlord may do so, and Tenant shall, on
written demand, as Additional Rent, reimburse Landlord for all
monies expended by Landlord to procure and maintain such
insurance.
(e) Tenant hereby waives and releases Landlord of and from any and
all liabilities, claims and losses for which Landlord is or
may be held liable to the extent Tenant receives insurance
proceeds on account thereof.
(f) Upon Landlord's written request for same, Tenant will provide
Landlord with written evidence of Tenant's compliance with its
obligations under this Section 38.
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<PAGE>
39. RECORDING. This Lease shall not be recorded without Landlord's prior written
consent.
40. STATUTORILY MANDATED NOTIFICATION. As required by F.S. 404.056(8), Landlord
notifies Tenant as follows: "RADON GAS: Radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from your county public health unit."
41. NON-DISCLOSURE. Tenant agrees that it will not divulge or disclose to third
parties the terms, provisions and conditions of this Lease; provided, however,
that Tenant may disclose the Lease to its attorneys. accountants and other
similar professional consultants. Tenant's breach of this Section 41 shall
constitute a default under Section 20 of this Lease, no curative notice to
Tenant from Landlord being required.
42. HAZARDOUS MATERIALS.
(a) Tenant shall not cause or permit any Hazardous Material (as
hereinafter defined) to be brought upon, kept or used in or
about the Premises or the Building by Tenant, its agents,
principals, employees, assigns, sublessees, contractors,
consultants or invitees without the prior written consent of
Landlord, which consent may be withheld for any reason
whatsoever or for no reason at all. If Tenant breaches the
obligations stated in the preceding sentence, or if the
presence of Hazardous Material on the Premises or around the
Building caused or permitted by Tenant (or the aforesaid
others) results in (a) any contamination of the Premises, the
Building, the surrounding area(s), the soil or surface or
ground water or (b) loss or damage to person(s) or property,
or if contamination of the Premises or the Building or the
surrounding area(s) by Hazardous Material otherwise occurs for
which Tenant is legally, actually or factually liable or
responsible to Landlord (or any party claiming, by through or
under Landlord) for damages, losses, costs or expenses
resulting therefrom, then Tenant shall be solely responsible
for all costs, expenses and amounts required to remediate,
clean up and correct such matter and Tenant shall further
fully and completely indemnify, defend and hold harmless
Landlord (or any party claiming by, through or under Landlord)
from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses [including, without limitation:
(i) diminution in the value of the Premises and/or the
Building and/or the land on which the Building is
26
<PAGE>
located and/or any adjoining area(s) which Landlord owns or in
which it holds a property interest; (ii) damages for the loss
or restriction on use of rentable or usable space of any
amenity of the Premises, the Building or the land on which the
Building is located; (iii) damages arising from any adverse
impact on marketing of space; and (iv) any sums paid in
settlement of claims, reasonable attorneys and paralegals'
fees, (whether incurred in court, out of court, on appeal or
in bankruptcy or administrative proceedings) consultants fees
and expert fees] which arise during or after the Term of this
Lease, as may be extended, as a consequence of such
contamination. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection
with any investigation or site conditions or any clean-up,
remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground
water on or under the Premises or the Building.
(b) Without limiting the foregoing, if the presence of any
Hazardous Material on, under or about the Premises, the
Building or the surrounding area(s) caused or permitted by
Tenant (or the aforesaid others) results in (a) any
contamination of the Premises, the Building, the surrounding
area(s), the soil or surface or ground water or (b) loss or
damage to person(s) or property, then Tenant shall immediately
notify Landlord of any contamination, claim of contamination,
loss or damage and, after consultation and approval by
Landlord, take all actions at Tenant's sole expense as are
necessary or appropriate to return the Premises, the Building,
the surrounding area(s) and the soil or surface or ground
water to the condition existing prior to the introduction of
any such Hazardous Material thereto, such that the
contaminated areas are brought into full compliance with all
applicable statutory regulations and standards. The foregoing
obligations and responsibilities of Tenant shall survive the
expiration or earlier termination of this Lease.
(c) As used herein, the term "Hazardous Material" means any
hazardous or toxic substance, material or waste, including,
but not limited to, those substances, materials, and wastes
listed in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40
CFR Part 302) and amendments thereto, or such substances,
materials and wastes that are or become regulated under any
applicable local, state or federal law. "Hazardous Material"
includes any and all material or substances which are defined
as "hazardous waste", "extremely hazardous waste" or a
"hazardous substance" pursuant to local, state or federal
governmental law.
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<PAGE>
"Hazardous substance" includes, but is not restricted to,
asbestos, polychlorobiphenyls ("PCB's"), petroleum, any and
all material or substances which are classified as
"biohazardous" or "biological waste" (as such terms are
defined by Florida Administrative Code ("F.A.C.") Chapter
17-712, as amended from time to time), and extremely
"hazardous waste" or "hazardous substance" pursuant to
federal, state or local governmental law.
(d) Landlord and its agents shall have the right, but not the
duty, to inspect the Premises at any time to determine whether
Tenant is complying with the terms of this Lease. If Tenant is
not in compliance with this Lease, Landlord shall have the
right to immediately enter upon the Premises to remedy at
Tenant's expense any contamination caused by Tenant's failure
to comply, notwithstanding any other provision of this Lease.
Landlord shall use its best efforts to minimize interference
with Tenant's business, but shall not be liable for any
interference caused thereby.
(e) Any non-compliance by Tenant with its duties, responsibilities
and obligations under this Section 42 shall be an "automatic"
(no notice of any nature from Landlord to Tenant being
required) default of this Lease (see Section 20).
43. RENT TAX. Tenant shall pay and be liable for all rental, occupancy, sales
and use taxes or other similar taxes, if any, levied or imposed by any city,
state, county or other governmental body having authority, in connection with
this Lease and/or any payments due by Tenant to Landlord pursuant to this Lease,
such payments to be in addition to all other payments required to be paid to
Landlord by Tenant under the terms of this Lease. Any such payment shall be paid
concurrently with the payment of the Rent, Additional Rent, operating expenses
or other charge upon which the tax is based as set forth above.
44. EXHIBITS; AMENDMENTS. All Exhibits attached to this Lease are hereby
incorporated into this Lease by this reference as if fully written herein. This
Lease, including the attached Exhibits, contains the entire agreement between
the parties hereto and may not be altered, changed or amended, except by written
instrument signed by both parties hereto. No provision of this Lease shall be
deemed to have been waived by Landlord unless such waiver is in writing signed
by Landlord and addressed to Tenant, nor shall any custom or practice which may
grow up between the parties in the administration of the provisions hereof be
construed to waive or lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms hereof. The terms,
provisions, covenants, and conditions contained in this Lease shall apply to,
inure to the benefit of, and be binding upon the parties hereto, and upon
28
<PAGE>
their respective successors in interest and legal representative, except as
otherwise herein expressly provided.
45. FINANCIAL STATEMENTS. Within thirty (30) days after Landlord's request,
Tenant and/or Guarantor(s) shall deliver to Landlord the current financial
statements of Tenant and/or Guarantor(s), as applicable, and financial
statements of the two (2) years prior to the current financial statements year,
prepared by a certified public accountant, including a balance sheet and profit
and loss statement for the most recent prior year, all prepared in accordance
with generally accepted accounting principles consistently applied.
46. LETTER OF CREDIT. As further guaranty for Tenant's performance of this
Lease, Tenant shall, simultaneously with the execution of this Lease, deliver to
Landlord an irrevocable standby letter of credit (the "LOC"), in form
satisfactory to Landlord, issued by a financial institution acceptable to
Landlord, meeting the following requirements:
(a) Amount of LOC. The total face value of the LOC at the
execution of this Lease shall be $150,000.00. Provided Tenant
shall at all times have timely paid all Rent, Additional Rent
and other charges due under the Lease and Tenant shall not
have otherwise defaulted under the terms of this Lease, on
each anniversary of the Commencement Date starting with the
anniversary one year after the Commencement Date, the total
face value of the LOC may be reduced by $30,000.00; i.e., on
the first anniversary of the Commencement Date, the total face
value of the LOC may be reduced to $120,000.00; on the
anniversary two years after the Commencement Date, the total
face value of the LOC may be reduced to $90,000.00; on the
third anniversary of the Commencement Date, the total face
value of the LOC may be reduced to $60,000.00; and on the
fourth anniversary of the Commencement Date, the total face
value of the LOC may be reduced to $30,000.00. If Tenant shall
have failed to timely pay Rent, Additional Rent or other
charges due under the Lease or Tenant shall have otherwise
defaulted under the Lease, then no reduction of the LOC shall
be permitted thereafter, and Tenant shall be obligated to keep
the LOC in that current face value in place for the balance of
the Term of this Lease.
(b) Terms of LOC. Any LOC to be provided hereunder shall comply
with the following:
(1) The LOC shall be payable to Landlord;
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(2) The LOC shall be issued by a banking institution
acceptable to Landlord and shall be irrevocable after
issue;
(3) The LOC shall be in a principal amount no less than the
total face amount described in paragraph a above;
(4) Landlord's access to the funds of the LOC shall be
conditioned only upon Tenant's default under the Lease
(not cured within applicable time limits, if any), and
access shall be available upon written notice by
Landlord to the issuer of the LOC of an uncured default
under the Lease by Tenant;
(5) If the LOC shall have a term which expires prior to the
expiration of this Lease, then Tenant shall have the
continuing obligation to renew the LOC, and to provide
Landlord evidence acceptable to Landlord of such
renewal, at least sixty (60) days prior to the LOC's
expiration date and any renewal expiration dates
thereafter, it being the intention of Tenant and
Landlord that the LOC shall be in full force for the
entire Term of this Lease, unless the obligation to
provide a LOC is released pursuant to the terms of this
Section 46.
(6) Upon renewal of the LOC from time to time, the principal
amount thereof may be reduced to an amount no less than
the amount as permitted in paragraph (a) above.
(7) At any time after an LOC has been delivered, Tenant may
substitute a new LOC for the existing LOC, so long as
the new LOC complies with the requirements of this
Section 46.
(8) The failure of Tenant to timely renew the LOC or to
timely provide Landlord evidence thereof shall
constitute a default under the Lease pursuant to Section
20(a)(2) of this Lease.
47. RIGHT OF REFUSAL.
(a) So long as Tenant shall not be in default under the terms of
this Lease, and subject to the other terms and conditions of
this Section, Tenant shall have a one-time Right of Refusal to
preempt a lease to a third person of all or any portion of the
remaining space on the eleventh floor of the south tower of
the Building (the "Remaining Space"). Such Right of Refusal
shall be
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subject to any and all rights currently existing in favor of
any other tenant as of the effective date of this Lease.
(b) If Landlord receives a bona fide offer to lease all or a
portion of the Remaining Space from any prospective tenant,
Landlord shall deliver a notice to include all material terms
and conditions of such offer to Tenant, and Tenant shall have
ten (10) business days to exercise its Right of Refusal to
such space. Tenant shall exercise its Right of Refusal by
timely giving Landlord notice that Tenant shall lease such
space under the same terms and provisions as those included in
the offer from the third party, including Rent, Term and
tenant improvement allowance, if any, and the parties shall
enter into a modification of this Lease to incorporate the new
space into this Lease within thirty (30) days after giving
Landlord its notice exercising Tenant's Right of Refusal, the
effective date of the occupancy of such new space to be
mutually agreed by the parties.
(c) In the event Tenant shall decline its Right of Refusal, or it
shall not timely exercise its Right of Refusal, or it shall
have timely exercised its Right of Refusal, but shall not
timely enter into a modification of this Lease as required by
Paragraph (b) above, then the Right of Refusal shall terminate
as to the portion of the Remaining Space included in the offer
from the third party, so long as Landlord shall enter into a
lease agreement for that portion of the Remaining Space in
accordance with the offer from such third party.
48. EXTENSION OPTION.
(a) Provided that Tenant reasonably complies with the terms and
conditions contained in this Section 48, Tenant may extend the
term of this Lease for one (1) additional five (5) year period
beyond the end of the Lease by written notice of its election
to do so, given to Landlord not later than ninety (90) days
prior to the expiration of the Term. The extended term of the
Lease shall be on all the terms and conditions of the Lease
applicable at the expiration of the Term of the Lease, except
for the amount of Rent, which Tenant covenants and agrees to
pay as follows:
(1) the rental rate for the five (5) year renewal term shall
be equal to the fair market value for rental of similar
space in similar buildings located in the downtown St.
Petersburg area as of the first day of the renewal Term.
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(b) Tenant shall have no further right to extend the terms of the
Lease except as provided for herein. Tenant shall not have any
rights to extend the term of the Lease under this Section 48
if (i) Tenant has failed to perform its obligations under the
Lease or has otherwise defaulted under the initial term of
this Lease or any renewal thereof, and which has not been
cured within the applicable curative period provided herein,
or (ii) the event of default exists on the expiration date of
the initial Term or any renewal term thereof, or on the date
which Tenant gives notice of its intent to exercise its
renewal option, and which default has not been cured within
the applicable curative period provided herein; it being the
parties' agreement that items (i) and (ii) in this Paragraph
(b) are express conditions precedent to Tenant's right to any
extension option contained in this Section 47.
(c) The net fair market value for rental of similar space in the
marketplace contemplated by subparagraph (a) above shall be
determined by mutual agreement of the parties. The phrase net
fair market value as used in this Lease shall mean the annual
amount per rentable square foot that landlords have accepted
in current transactions between non-affiliated parties from
renewal, non-sublease, non-expansion, and non-equity tenants
for comparable space in comparable buildings in the downtown
St. Petersburg area, for a comparable period of time. In any
determination of net fair market value, appropriate
consideration shall be given to the annual rental rates per
rentable square foot, the standard of measurement by which the
rentable square footage is measured, the ratio of rentable
square feet to usable square feet, dollar amount expense stop,
length of lease term, size and location of premises being
leased, similar signage rights granted under this Lease, and
other generally applicable conditions of tenancy for such
comparable transactions but ignoring and not giving any
consideration to the presence or absence of the brokerage
commission. The intent is that Tenant will obtain the same
rent and other economic benefits that landlords would
otherwise have given tenants in comparable transactions and
that Landlord will make, and receive, the same economic
payments and concessions that landlords would otherwise make
to tenants in comparable transactions. The value so determined
shall be in writing and signed by the parties more than six
(6) months prior to the commencement of an option or renewal
term. If the parties cannot agree on such value prior to such
six (6) month period, then Landlord shall, at its sole cost,
engage a qualified real estate appraiser of Landlord's choice
with a MAI designation who shall, no later than five (5)
months prior to the expiration of the Term, determine the
value of the fair market rental of the Premises.
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The parties agree that the value so determined by such
appraiser shall be the value for the purposes of the extension
of this Lease.
The parties acknowledge that they have read this Lease (to include its
Exhibits and attachments) in its entirety, that they are familiar with all of
the terms, covenants, provisions and conditions set forth therein and that there
are no other representations, undertakings, warranties or agreements concerning
this Lease which do not appear in writing therein. The parties further
acknowledge that the terms and provisions contained within this Lease have been
fully, freely and fairly negotiated by and between them and shall not be
construed against either party as the drafter of this Lease.
IN WITNESS WHEREOF, the undersigned authorities have hereunto executed
this Lease, effective on the day and year first above written.
Signed, sealed and delivered
in the presence of:
TENANT:
AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC., a Nevada Corporation
/s/ Gerard J. LaMontagne By: D.G. Brandano
- -------------------------------------- --------------------------------
Print Name: Gerard J. LaMontagne Print Name: D.G. Brandano
--------------------------- --------------------------
Its: C.E.O.
---------------------------------
/s/ Rodney A. Schoemann
- --------------------------------------
Print Name: Rodney A. Schoemann
-------------------------
LANDLORD:
CITY CENTER ASSOCIATES, LTD., a
Florida Limited Partnership
By Its General Partner:
DELMA CITY CENTER CORP., a
Delaware Corporation
/s/ Suzanne Milana By: /s/ Patrick D. Barrett
- -------------------------------------- --------------------------------
Print Name: Suzanne Milana PATRICK D. BARRETT
------------------------- Its Executive Vice President
/s/ Maria Diaz
- --------------------------------------
Print Name: Maria Diaz
-------------------------
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<PAGE>
EXHIBIT "A"
TO LEASE AGREEMENT
BETWEEN
CITY CENTER ASSOCIATES, LTD. ("LANDLORD")
AND
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. ("TENANT")
DATED May 27, 1999
49. FLOOR PLAN
<PAGE>
EXHIBIT "B"
TO LEASE AGREEMENT
BETWEEN
CITY CENTER ASSOCIATES, LTD. ("LANDLORD")
AND
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. ("TENANT")
DATED May 27, 1999
LEASEHOLD IMPROVEMENTS
Landlord shall provide Tenant an allowance in the amount of
$108,150.00 ($10.00 per rentable square foot in the Premises) (the "Tenant
Allowance"). Landlord shall make all renovations, alterations and improvements
to the Premises in accordance with tenant renovation plan attached to this
Exhibit "B" (the "Initial Improvements"). Landlord shall be solely responsible
for providing all services, materials, labor, permits, architectural and
engineering services, construction drawings and mechanical/electrical drawings,
construction management and construction management fees, and all other items to
make the Initial Improvements, and shall bear all cost associated with such
renovation, alteration and improvement not to exceed the Tenant Allowance. Any
and all costs or renovation, alteration and improvement of the Premises in
excess of the Tenant Allowance shall be paid by Tenant prior to commencement of
construction and immediately upon presentation of an invoice therefor by
Landlord, and in all events prior to the commencement of construction. Any
portion of the Tenant Allowance not expended for construction of the Initial
Improvements shall be paid to Tenant upon completion of such construction, and
the cost of all further renovations, alterations or improvements to the Premises
thereafter shall be the sole obligation of Tenant, and shall be performed in
accordance with the further requirements of the Lease.
<PAGE>
EXHIBIT "C"
TO LEASE AGREEMENT
BETWEEN
CITY CENTER ASSOCIATES, LTD. ("LANDLORD")
AND
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC. ("TENANT")
DATED May 27, 1999
BUILDING RULES AND REGULATIONS
The following Building Rules and Regulations have been adopted by Landlord
for the care, protection and benefit of the Premises and the Building and for
the general comfort and welfare of all tenants.
1. The sidewalks, entrances, passages, halls, elevators and stairways
shall not be obstructed by Tenant or used by Tenant for any purpose other than
for ingress and egress to and from the Building and Tenant's Premises.
2. Restroom facilities, water fountains, and other water apparatus shall
not be used for any purpose other than those for which they were constructed.
3. Landlord reserves the right to designate the time when freight,
furniture, goods, merchandise and other articles may be brought into, moved or
taken from Tenant's Premises or the Building.
4. Tenant shall not put additional locks or latches upon any door without
the prior written discretionary consent of Landlord. Any and all locks so added
on any door shall remain for the benefit of Landlord, and the keys to such locks
shall be delivered to Landlord by and from Tenant.
5. Landlord shall not be liable for injuries, damage, theft, or other
loss, to persons or property that may occur upon, or near any parking areas that
may be provided by Landlord. Tenant, its agents, employees, and invitees are to
use same at their own risk, Landlord to provide no security with respect
thereto. The driveways, entrances, and exits upon, into and from such parking
areas shall not be obstructed by Tenant, Tenant's employees, agents, guests, or
invitees. Tenant, its employees, agents, guests and/or invitees shall not park
in space(s) that are identified as reserved for others.
6. Tenant shall not install in the Premises any heavy equipment or
fixtures or permit any concentration of excessive weight in any portion thereof
without first having obtained Landlord's written consent.
7. Landlord reserves the right at all times to exclude newsboys,
loiterers, vendors, solicitors, and peddlers from the Building and to require
registration or satisfactory identification or credentials from all persons
seeking access to any part of the Building outside ordinary business hours.
Landlord will exercise its best judgment in the execution of such control but
will not be liable for the granting or refusal of such access.
<PAGE>
8. Landlord reserves the right at all times to exclude the general public
from the Building upon such days and at such hours as in Landlord's sole
judgment will in the best interest of the Building and its tenants.
9. No wires of any kind or type (including but not limited to T.V. and
radio antennas) shall be attached to the outside of the Building and no wires
shall be run or installed in any part of the Building without Landlord's prior
written consent.
10. If the Premises are furnished with carpeting, Tenant shall provide a
plexiglass or comparable carpet protection mat for each desk chair customarily
used by Tenant. For default or carelessness in these respects, Tenant shall pay
Landlord the cost of repairing or replacing said carpet, in whole or in part, as
Additional Rent when, in Landlord's sole judgment, shall repair or replacement
is necessary.
11. Landlord shall furnish a reasonable number of door keys to Tenant's
Premises and/or the Building which shall be surrendered on termination or
expiration of the Lease. Landlord reserves the right to require a deposit for
such keys to insure their return at the termination or expiration of the Lease.
Tenant shall get keys only from Landlord and shall not obtain duplicate keys
from an outside source. Further, Tenant shall not alter the locks or effect any
substitution of such locks as are presently being used in Tenant's Premises or
the Building.
12. Tenant shall keep all doors to Premises closed at all times except for
ingress and egress to the Premises.
13. All installations in the Common Telephone/Electrical Equipment Rooms
shall be limited to terminal boards and connections. All other electrical
equipment must be installed within Tenant's Premises.
14. It is expressly understood and agreed that any items of any nature
whatsoever placed in Common Areas (i.e., hallways, restrooms, elevators, parking
garage, storage areas and equipment rooms) are placed at Tenant's sole risk and
Landlord assumes no responsibility whatsoever for any loss or damage as regards
same.
37
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
Agreement made as of this 1st day of July, 1999 by and between Affinity
International Travel Systems, Inc. (the "Company"), a Nevada corporation with
its principal place of business in St. Petersburg, Florida, and Daniel Brandano
(the "Employee").
WHEREAS, the Employee is the founder, and a principal stockholder,
executive officer and director of the Company; and
WHEREAS, in order to assure itself of the continued benefits to be
obtained from the special talents and abilities of Employee, the Company desires
to continue to employ Employee as an executive officer on the terms and
conditions contained herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, and intending to be legally bound, it is
hereby agreed by and between the parties as follows:
(1) Employment. Subject to the terms and conditions of this Agreement, the
Company hereby employs Employee as the President and Chief Executive Officer of
the Company. Employee shall have overall management and control of the business
and affairs of the Company in the ordinary course of business and such powers as
are provided for in the bylaws of the Company for such position, subject in all
instances to the general supervision and direction of the Board of Directors of
the Company. Employee hereby accepts such employment.
(2) Duties. Employee shall perform and discharge fully and faithfully such
duties concerning the operation and management of the Company as are consistent
with the duties typically provided by a president and chief executive officer of
a business of the type operated by the Company and Section 1 hereof.
(3) Term. Employee's employment pursuant to the terms of this Agreement
shall commence on the date hereof and, subject to the right of termination
provided for elsewhere herein, shall end on June 30, 2006 (the "Initial Term").
On or before May 1, 2006, Employee and the Company shall have negotiated in good
faith and by such date shall have determined whether this Agreement shall
thereafter be renewed on an annual basis for additional one-year periods (each a
"Renewal Term") unless and until otherwise terminated by the Company or Employee
upon written notice, given thirty (30) days prior to the end of any Renewal
Term. The Initial Term and the Renewal Terms are hereinafter collectively
referred to as the "Term". Nothing contained herein shall obligate either party
to extend this Agreement beyond the Initial Term.
(4) Salary. The Company shall pay Employee, during the Initial Term of
this Agreement, a fixed annual salary ("Base Salary") in accordance with the
schedule set forth
<PAGE>
below, before applicable withholding taxes, payable in accordance with normal
Company pay policies but in any event in installments no less often than
monthly.
July 1 - June 30, 2000 $120,000
July 1 - June 30, 2001 $132,000
July 1 - June 30, 2002 $145,200
July 1 - June 30, 2003 $159,500
July 1 - June 30, 2004 $175,000
July 1 - June 30, 2005 $185,000
July 1 - June 30, 2006 $200,000
(5) Bonus. Employee shall be eligible to participate in a bonus plan to be
established by the Board of Directors for the executive officers of the Company
for each year during the Term. Employee and the Board of Directors of the
Company shall agree on the bonus plan before June of each year during the Term
(provided that the Bonus Plan for the first year shall be decided by July 30,
1999). In the event Employee's employment hereunder terminates in the middle of
any bonus plan year, the amount of bonus, if any, to which Employee shall be
entitled under such plan shall be pro rated based on the number of full months
Employee is employed by the Company during the applicable plan year.
(6) Expenses. Employee shall be reimbursed for all reasonable, ordinary,
and necessary business expenses in accordance with Company policy. Employee
shall furnish the Company with the appropriate documentation relating to such
expenses and shall comply with any additional requirements of the Company
generally applicable to the Company's executive officers in connection
therewith.
(7) Automobile. The Company shall furnish to Employee, at its cost, an
automobile leased by the Company (monthly lease payment not to exceed $850.00)
and shall reimburse Employee for the cost related to maintenance, licensure,
repair, and fuel, and shall maintain related automobile insurance. At the end of
the Initial Term, Employee may purchase such automobile from the Company at book
value and during each subsequent Renewal Term (if any), the Company shall
furnish Employee with an automobile in accordance with Company policy.
(8) Fringe Benefits. During the Term, Employee shall be entitled to the
fringe benefits generally made available to executive officers of the Company
from time to time, as approved by the Board of Directors, but in any event at
levels at least substantially comparable to those in effect immediately prior to
the date hereof.
(9) Vacation. During each year during the Term, Employee shall be entitled
to five (5) weeks of paid vacation to be taken at such times as not to disrupt
unduly the business of the Company.
(10) Full-Time Duties. Employee shall devote his full working time,
attention and best efforts to fulfill his duties hereunder and, to the business
and interest of the Company and its affiliates during the Term of this
Agreement.
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Page 2
<PAGE>
(11) Termination of Employment and Severance Benefits. Notwithstanding the
provisions of Section 3 hereof, the Employee's employment hereunder shall
terminate prior to the expiration of the Term under the following circumstances:
(a) Retirement or Death. In the event of the Employee's retirement or
death during the Term, the Employee's employment hereunder shall immediately and
automatically terminate. During the Term, the Employee may elect to retire with
the prior written consent of the Board and, in that event, shall be paid any
earned and unpaid Base Salary and any incentive or bonus compensation that is
earned but unpaid pro-rated through the date of his retirement. In the event of
the Employee's death during the Term, the Company shall pay to the Employee's
designated beneficiary or, if no beneficiary has been designated by the
Employee, to his estate, any earned and unpaid Base Salary and any incentive or
bonus compensation that is earned but unpaid, pro-rated through the day of his
death.
(b) Disability.
i. The Company may terminate the Employee's employment hereunder,
upon notice to the Employee, in the event that the Employee
becomes disabled during his employment hereunder through any
illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder
for one hundred and eighty (180) days during any period of
three-hundred and sixty-five (365) consecutive calendar days.
ii. The Board may designate another employee to act in the
Employee's place during any period of the Employee's
disability. Notwithstanding any such designation, the Employee
shall continue to receive the Base Salary in accordance with
Section 4 and benefits in accordance with Section 8, to the
extent permitted by the then-current terms of any applicable
benefit plans, until the Employee becomes eligible for
disability income benefits under any disability income plan of
the Company or until the termination of his employment,
whichever shall first occur.
iii. While receiving disability income payments under any Company
disability income plan, the Employee shall not be entitled to
receive any Base Salary under Section 4 hereof, but shall
continue to participate in Company benefit plans in accordance
with Section 5 and the terms of such plans, until the
termination of his employment.
iv. If any question shall arise as to whether during any period
the Employee is disabled through any illness, injury, accident
or condition of either a physical or psychological nature so
as to be unable to perform substantially all of his duties and
responsibilities hereunder, the Employee may, and at the
request of the Company shall, submit to a
- --------------------------------------------------------------------------------
Page 3
<PAGE>
medical examination by a physician selected by the Company (to
whom the Employee or his duly appointed guardian, if any, has
no reasonable objection) to determine whether the Employee is
so disabled and such determination shall for the purposes of
this Agreement be conclusive of the issue. If such question
shall arise and the Employee shall fail to submit to such
medical examination, the Company's determination of the issue
shall be binding on the Employee.
(c) By the Company for Cause. The Company may terminate the Employee's
employment hereunder for Cause at any time after notice to the Employee setting
forth in reasonable detail the nature of such Cause and after the Employee has
been given the opportunity to be heard by the Board of Directors. The following
shall constitute "Cause" for termination:
i. Willful failure to perform, or gross negligence in the
performance of, the Employee's duties and responsibilities to
the Company and its Affiliates;
ii. Fraud, embezzlement or other material dishonesty with respect
to the Company or any of its Affiliates; or
iii. Conviction of, or plea of nolo contendere to, a felony or
other crime involving moral turpitude.
After the giving of notice of termination of the Employee's employment hereunder
for Cause (after notice to the Employee and after the Employee has been given
the opportunity to be heard by the Board of Directors), the Company shall have
no further obligation or liability to the Employee, other than for Base Salary
and bonus or incentive pay earned and unpaid at the date of termination.
(d) By the Company Other than for Cause. The Company may terminate the
Employee's employment hereunder other than for Cause at any time upon notice to
the Employee. In the event of such termination, then the Company shall pay the
Employee, within thirty (30) days of termination, a lump sum in an amount equal
to the aggregate amount of Base Salary payable to the Employee during the Term
and the Company shall continue to pay the cost of the Employee's participation
in the Company's group medical and dental insurance plans, provided that the
Employee is entitled to continue such participation under applicable law and
plan terms.
(e) By the Employee for Good Reason. The Employee may terminate his
employment hereunder for Good Reason, upon notice to the Company setting forth
in reasonable detail the nature of such Good Reason. The following shall
constitute "Good Reason" for termination by the Employee:
i. Failure of the Company to continue the Employee in the
position of President and Chief Executive Officer;
- --------------------------------------------------------------------------------
Page 4
<PAGE>
ii. Material diminution in the nature or scope of the Employee's
responsibilities, duties or authority; provided, however, the
Company's failure to continue the Employee's appointment or
election as a director or officer of any of its Affiliates and
any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer
of any or all of the assets of the Company or any of its
Affiliates, shall not constitute "Good Reason"; or
iii. Material failure of the Company to provide the Employee the
Base Salary, bonus and incentive compensation and benefits in
accordance with the terms of this Agreement.
In the event of termination in accordance with this Section 11(e), the Company
shall pay the Employee, within thirty (30) days of termination, a lump sum in an
amount equal to the aggregate amount of Base Salary payable to the Employee
during the Term and shall continue to contribute to the cost of the Employee's
participation in the Company's group medical and dental insurance plans provided
that the Employee is entitled to continue such participation under applicable
state and federal law and plan terms.
(f) By the Employee Other than for Good Reason. The Employee may terminate
his employment hereunder at any time upon sixty (60) days notice to the Company.
In the event of termination of the Employee pursuant to this Section 11(f), the
Board may elect to waive the period of notice, or any portion thereof, and, if
the Board so elects, the Company will pay the Employee his Base Salary for the
notice period (or any remaining portion of the period).
(g) Post-Agreement Employment. In the event the Employee remains in the
employ of the Company or any of its Affiliates following termination of this
Agreement, by the expiration of the Term or otherwise, then such employment
shall be at will.
(12) Effect of Termination. The provisions of this Section 12 shall apply
to termination due to the expiration of the Term, pursuant to Section 11 or
otherwise.
(a) Payment by the Company of any Base Salary and contributions to the
cost of the Employee's continued participation in the Company's group health and
dental plans that may be due the Employee in each case under the applicable
termination provision of Section 11 shall constitute the entire obligation of
the Company to the Employee under this Agreement. Acceptance by the Employee of
performance by the Company shall constitute full settlement of any claim that
the Employee might otherwise assert against the Company, its Affiliates or any
of their shareholders, directors, officers, employees or agents on account of
such termination excluding only any right of the Employee to payments in
accordance with the terms of this Agreement and the Employee under any stock
option agreement with the Company.
(b) Except for medical and dental insurance coverage continued pursuant to
this Agreement, benefits shall terminate pursuant to the terms of the applicable
benefit plans based
- --------------------------------------------------------------------------------
Page 5
<PAGE>
on the date of termination of the Employee's employment without regard to any
continuation of Base Salary or other payment to the Employee following such date
of termination.
(c) Provisions of this Agreement shall survive any termination if so
provided herein or if necessary or desirable fully to accomplish the purposes of
such provision.
(13) Confidential Information.
(a) The Employee acknowledges that the Company and its Affiliates
continually develop Confidential Information, that the Employee may develop
Confidential Information for the Company or its Affiliates and that the Employee
may learn of Confidential Information during the course of employment. The
Employee will comply with the policies and procedures of the Company and its
Affiliates for protecting Confidential Information and shall never disclose to
any Person (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Affiliates), or use
for his own benefit or gain, any Confidential Information obtained by the
Employee incident to his employment or other association with the Company or any
of its Affiliates. The Employee understands that this restriction shall continue
to apply after his employment terminates, regardless of the reason for such
termination.
(b) All documents, records, tapes and other media of every kind and
description relating to the business, present or otherwise, of the Company or
its Affiliates and any copies, in whole or in part, thereof (the "Documents"),
whether or not prepared by the Employee, shall be the sole and exclusive
property of the Company and its Affiliates. The Employee shall safeguard all
Documents and shall surrender to the Company at the time his employment
terminates, or at such earlier time or times as the Board or its designee may
specify, all Documents then in the Employee's possession or control.
(14) Indemnification. The Company shall indemnify the Employee to the
extent provided in its then current Articles or By-Laws. The Employee agrees to
promptly notify the Company of any actual or threatened claim arising out of or
as a result of his employment with the Company.
(15) Definitions. Words or phrases which are initially capitalized or are
within quotation marks shall have the meanings provided in this Section 15 and
as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or indirectly
controlling, controlled by or under common control with the Company, where
control may be by either management authority or equity interest.
(b) "Confidential Information" means any and all information of the
Company and its Affiliates that is not generally known by others with whom they
compete or do business, or with whom they plan to compete or do business and any
and all information, publicly known in whole or in part or not, which, if
disclosed by the Company or its Affiliates would assist in competition against
them. Confidential Information includes without limitation such
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Page 6
<PAGE>
information relating to (i) the development, research, testing, marketing and
financial activities of the Company and its Affiliates, (ii) the costs,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity and special needs of the customers and vendors of the Company
and its Affiliates and (iv) the people and organizations with whom the Company
and its Affiliates have business relationships and those relationships.
Confidential Information also includes comparable information that the Company
or any of its Affiliates have received belonging to others or which was received
by the Company or any or its Affiliates with any understanding that it would not
be disclosed.
(c) "Person" means an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization, other than
the Company or any of its Affiliates.
(16) Severability. The parties agree that each provision contained in this
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
(17) Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or (b) in the case of a letter,
three (3) business days shall have elapsed after the same shall have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested or forty eight (48) hours shall have elapsed
after the same shall have been sent by nationally recognized overnight courier,
or (c) when transmission acknowledged by telephonic receipt if sent by
facsimile:
If to Employee, to:
Daniel Brandano
336 Fourth Avenue North
Tierra Verde, FL 33715
If to the Company to:
Affinity International Travel Systems, Inc.
100 Second Avenue South
Suite 1100 South
St. Petersburg, FL 33701
Attn: Board of Directors
Tel: (727) 896-0192
Fax: (727) 896-1403
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Page 7
<PAGE>
with a copy to:
John G. Nossiff, Jr., Esq.
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Tel: (617) 856-8200
Fax: (617) 856-8201
and in any case at such other address as the addressee shall have specified by
written notice.
(18) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto have been expressed herein.
(19) Governing Law.
(a) This Agreement shall be deemed a contract made under the laws of
Florida and, together with the rights and obligations of the parties hereunder,
shall be construed under and governed by the laws of such state.
(b) Any claim, action, suit or other proceeding initiated under or in
connection with this Agreement may be asserted, brought, prosecuted and
maintained in any Federal or state court in the State of Florida, as the party
bringing such action, suit or proceeding shall elect, having jurisdiction over
the subject matter thereof, and the parties hereby waive any and all rights to
object to the laying of venue in any such court and to any right to claim that
any such court may be an inconvenient forum. Employer and the Company hereby
submit themselves to the jurisdiction of each such court and agree that service
of process on them in any such action, suit or proceeding may be effected by the
means by which notices are to be given to it under this Agreement.
(20) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(21) Effect of Headings. Any title of an article or section heading herein
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
(22) Successors and Assigns. All covenants, promises and agreements by or
on behalf of the parties contained in this Agreement shall inure to the benefit
of, and be binding upon, the successors and assigns of the parties hereto.
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Page 8
<PAGE>
(23) Confidentiality. Except as may be required for compliance by the
Company with any applicable stock exchange rules or securities laws or in
connection with the enforcement of the provisions hereof, the parties hereto
agree to maintain and treat as confidential the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
By:
------------------------------------
Name: Gerard LaMontagne
Title: Chief Financial Officer
EMPLOYEE
----------------------------------------
Daniel Brandano
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Page 9
<PAGE>
Exhibit 10.3
[LOGO]
AffINITY
INTERNATIONAL TRAVEL SYSTEMS
-------------------------------
"World Class Service Worldwide"
Amendment #1
2. Compensation. In consideration for Employee's fulfillment of his duties
hereunder the Company shall pay Employee, and Employee shall accept, an annual
Base Salary of Seventy Eight Thousand Dollars ($78,000.00), payable in
accordance with the Company's normal policies but in no event less often than
biweekly. This base salary will become effective February 1, 2000.
All other aspects of Section 2 will remain in force.
Accepted for Employer:
/s/ Daniel G. Brandano
- -----------------------------------
Name
C.E.O.
- -----------------------------------
Title
January 14, 2000
- -----------------------------------
Date
Accepted by Employee:
/s/ Mark S. Mandula
- -----------------------------------
Mark S. Mandula
<PAGE>
EMPLOYMENT AGREEMENT
Agreement entered into the 1st day of July, 1999, by and between SunStyle
International Holidays, Inc. (hereinafter referred to as "Company"), a
subsidiary of Affinity International Travel Systems, Inc. a Nevada corporation
(hereinafter referred to as "Employer"), and MARK S. MANDULA (hereinafter
referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer has acquired all of the assets of Integrity Credit
Services, Inc., a Delaware Corporation d/b/a/ Intrepid and or Goldmark Travel
(the "Company"), pursuant to a certain Asset Purchase Agreement by and among
Employer, the Company and all of the stockholders of the Company (the
"Agreement");
WHEREAS, prior to the closing of the transactions contemplated by the
Agreement, Employee was a stockholder, director, officer and key employee of the
Company; and
WHEREAS, the Company desires to assure itself of the benefits to be
obtained from the special talents and abilities of Employee relative to the
operation of the Company's business and, in connection therewith, to engage
Employee as the Chief Operating Officer of SunStyle International Holidays,
Inc.; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Employee agree
as follows:
1. Employment. The Company agrees to employ the Employee to serve as the
Chief Operating Officer of SunStyle International Holidays, Inc., to perform
such duties of such office as customarily associated therewith and as are
provided for in the bylaws of the Company, subject to the general supervision
and direction of the Chief Executive Officer of the Company, and any policies
and procedures established from time to time may be reasonably prescribed by,
the Board of Directors of the Company. Employee hereby accepts such employment.
2. Compensation. In consideration for Employee's fulfillment of his duties
hereunder the Company shall pay Employee, and Employee shall accept, an annual
Base Salary of Fifty Two Thousand Dollars ($52, 000.00), payable in accordance
with the Company's normal policies but in no event less often than biweekly. In
addition, Employee shall receive an increase in Base Salary for each year of the
Initial Term and any renewals of this Agreement at least substantially
comparable to other Officers and employees of Employer. Employee will be
eligible to participate in an Annual Bonus for each year of the Initial Term and
any renewals.
3. Expenses. Subject to the authority of the Board of Directors of the
Company to determine policies relating to such matters, the Company agrees to
reimburse Employee for all reasonable expenses incurred by him in connection
with the performance of Employee's duties for the Company, subject to provision
by Employee of reasonable supporting documentation.
4. Employee Benefits. Employee shall be entitled to receive or participate
in such additional benefits, if any, by way of participation in pension, profit
sharing or thrift plans and similar employee benefits as may from time to time
be made generally available to executive
<PAGE>
employees of the Company. All rights to participate in any such plans, and the
degree and amount of participation, shall be subject to the terms of the
applicable plan documents, generally applicable Company policies, and the
actions of the Board of Directors or any committee responsible for administering
the plan. A summary of the Employee Benefits is attached as Appendix A to this
Employment Agreement.
5. Vacation. Employee shall receive paid vacation in accordance with the
policies of the Company for employees generally, as summarized on Appendix A of
this Employment Agreement.
6. Term. This Agreement shall be for an Initial Term of three (3) years
commencing on July 1st, 1999 and ending on July 31st, 2002, and thereafter shall
continue on a month to month basis for an indefinite period until terminated by
either party upon thirty days' written notice.
7. Rights of Termination. The Company may terminate the Employee's
employment with the Company and this Agreement for "cause" at any time without
prior notice to the Employee. For purposes hereof, "cause" shall include,
without limitation:
(i) Employee's conviction of, or the entry by the Employee of a
plea of guilty or nolo contendere to any felony or crime under
any federal, state or local law;
(ii) Conduct by the Employee constituting an act of moral
turpitude;
(iii) Fraud, embezzlement, or similar act of dishonesty by the
Employee;
(iv) Incompetent performance or substantial or continuing
inattention to or neglect of duties and responsibilities
assigned to the Employee pursuant to this Agreement;
(v) The Employee's unfaithfulness or disloyalty to the Company;
(vi) The breach of the Employee of this Agreement or of that
certain Proprietary Information/Noncompetition Agreement
entered into between the Company and the Employee on the date
hereof (the "Noncompetition Agreement"); or
(vii) The death of the Employee or the inability of the Employee to
substantially perform his duties hereunder for three (3)
consecutive months or for six (6) months in any twelve (12)
month period.
8. Effect of Termination.
(a) If the Company terminates the Employee's employment with the
Company at any time for "cause", or if Employee terminates his employment for
any reason, the Company's obligation to make salary, performance bonus, or any
other payments, or to provide any benefits to the Employee hereunder, shall
immediately terminate without recourse to or
<PAGE>
liability of the Company notwithstanding any other provision of this Agreement,
except with respect to any salary accrued but unpaid through the termination
date.
(b) Notwithstanding the termination of this Agreement, the
Employee's obligations under the Noncompetition Agreement shall continue in full
force and effect following termination without regard to the reason or
circumstances of the termination or the party effecting such termination.
9. Non-Disclosure of Confidential Information. Employee recognizes and
acknowledges that Employer's trade secrets and proprietary information and
processes, as they may exist from time to time, are valuable, special, and
unique assets of Employer's business, access to and knowledge of which are
essential to the performance of employees duties hereunder. Employee shall not,
during or after the term of this Agreement, in whole or in part, disclose such
secrets information or process including, but not limited to, names of customers
and potential customers, names, locations and other identifying information
concerning Employer's vendors and suppliers, prospective and current business
transactions and arrangements, electronic processing, electronic data
processing, work processing and/or computer programs, runs and other electronic
products and records, price lists, training materials, business methods,
procedures and forms of Employer, and advertising and promotional materials and
sources, to any person, firm, corporation association or other entity for any
reason or purpose whatsoever, nor shall Employee make use of any property for
his own purposes or for the benefit of any person firm, corporation or other
entity (except Employer) under any circumstances during or after the term of
this Agreement; provided that after the term of this Agreement these
restrictions shall not apply to such secrets, information and processes which
are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as Employer's
property all memoranda, books, papers, letters, computer disks, computer lists,
price lists, advertising and promotional materials, contracts and other data,
and all copies thereof and therefrom, in any way relating to Employer's business
and affairs whether made by him or otherwise coming into his possession, and on
demand of Employer, at any time, to deliver the same to Employer.
10. Covenant Not to Compete. During the term hereof and for a period of
three (3) years thereafter in the event Employee's employment is terminated for
Cause, Employee shall not within a radius of fifty (50) miles of any geographic
area within which Employer, or any affiliate or subsidiary of Employer, has an
office, enter into or engage in any business in competition with the business of
Employer, as it now exists or may exist in the future, either as an individual
on his own account, or as a partner, or joint venturer, or as an officer,
director or stockholder of a corporation, or otherwise. It is agreed by the
parties hereto that if any portion of this covenant not to compete is held to be
unreasonable, arbitrary or against public policy, the covenant herein shall be
considered divisible both as to time and geographical area, and each month of
the specified period shall be deemed a separate period of time, and each county
or parish of each State in the United States of America shall be deemed a
separate geographical area, so that the lesser period of time or geographical
area shall remain effective so long as the same is not unreasonable, arbitrary,
or against public policy. The parties hereto agree that, in the event any court
determines the specified time period or the specified geographical area to be
unreasonable, arbitrary, or against public policy, a lesser time period or
geographical area which
<PAGE>
is determined to be reasonable, nonarbitrary and not against public policy may
be enforced against Employee.
11. Remedies. If there is such a breach or threatened breach of the
provisions of Sections 9 or 10 of this Agreement, Employer shall be entitled to
an injunction restraining Employee from such breach. Nothing herein shall be
construed as prohibiting Employer from pursuing any other remedies for such
breach or threatened breach.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, return receipt requested, to the parties at the following
addresses.
To Employer at: 100 Second Avenue South, Suite 1100S
St. Petersburg, FL 33701
Attn: Daniel G. Brandano
To Employee at: 1355 Brightwaters Boulevard, NE
St. Petersburg, FL 33704
13. Attorney's Fees. Should Employer or Employee institute legal action,
whether at law or in equity, to enforce any provision hereunder, the prevailing
party shall be entitled to receive from the other party all costs and
unreasonable attorney's fees, but not limited to, fees for trial and appeals or
other legal proceedings.
14. Consent to Jurisdiction and Venue. The parties hereby consent to
personal jurisdiction and venue, for any action brought by Employer or Employee
arising out of a breach or threatened breach of this Agreement, in Pinellas
County, Florida. The parties agreed that any action arising under this Agreement
or out of the relationship established by this Agreement shall be brought only
and exclusively in Pinellas County, Florida.
15. Severability. The Company and the Employee agrees that each provision
of this Agreement shall be treated as a separate and independent cause and
unenforceability of any one clause in those provisions shall not impair the
enforceability of any other clause in those provisions.
16. Miscellaneous.
(a) This Agreement contains the whole agreement between the parties
hereto and the parties expressly acknowledge that there are no inducements,
promises, terms, conditions or obligations made or entered into by the Company
or the Employee other than contained herein. This Agreement may not be amended
except by a writing signed by the party against whom enforcement is sought.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida, without giving consideration to the
conflict of law provisions thereof.
Executed by the Employee and the Company's duly authorized representative
effective as of the day and year set forth above.
<PAGE>
WITNESSES: EMPLOYER:
AFFINITY INTERNATIONAL TRAVEL SYSTEMS,
INC., a Nevada Corporation
BY: /s/ Daniel G. Brandano
- ------------------------ ------------------------------
As: Chief Executive Officer
- ------------------------ ------------------------------
EMPLOYEE:
/s/ Mark S. Mandula
- ------------------------ ----------------------------------
Mark S. Mandula
<PAGE>
Appendix A
Employer shall maintain and pay for 100% of the Employee's current dental,
medical, vision and other insurance, including fully paid coverage for all
dependents of Employee.
Employee shall be reimbursed for business travel, entertainment, lodging and the
like, and shall be reimbursed for all reasonable out of pocket expenses incurred
directly by Employee in performing services hereunder. Employers shall reimburse
Employee for all expenses on a monthly basis, after submission by Employee of
appropriate receipts, vouchers or other documents.
Employee shall provide Employee with an automobile allowance of at least $362.66
per month for each month of the Initial Term and any renewals.
Employee shall be entitled each year to a vacation of four (4) weeks during
which Employee's compensation will be paid in full. In addition, Employee shall
have such other days off as shall be determined by Employer and shall be
entitled to paid sick leave and paid holidays in accordance with Employer's
policy as established by Employer from time to time.
<PAGE>
Exhibit 10.4
EXHIBIT A
AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
1999 COMBINATION STOCK OPTION PLAN
Section I. Purpose of the Plan.
The purposes of this Affinity International Travel Systems, Inc. 1999
Combination Stock Option Plan (the "1999 Plan") are (i) to provide long-term
incentives and rewards to those key employees (the "Employee Participants") of
Affinity International Travel Systems, Inc. (the "Corporation") and its
subsidiaries (if any), and any other persons (the "Non-employee Participants")
who are in a position to contribute to the long-term success and growth of the
Corporation and its subsidiaries, (ii) to assist the Corporation in retaining
and attracting executives and key employees with requisite experience and
ability, and (iii) to associate more closely the interests of such executives
and key employees with those of the Corporation's stockholders.
Section II. Definitions.
"Code" is the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Common Stock" is the $.01 par value common stock of the
Corporation.
"Committee" is defined in Section III, paragraph (a).
"Corporation" is defined in Section I.
"Corporation ISOs" are all stock options (including 1999 Plan ISOs)
which (i) are Incentive Stock Options and (ii) are granted under any plans
(including this 1999 Plan) of the Corporation, a Parent Corporation and/or
a Subsidiary Corporation.
"Employee Participants" is defined in Section I.
"Fair Market Value" of any property is the value of the property as
reasonably determined by the Committee.
"Incentive Stock Option" is a stock option which is treated as an
incentive stock option under Section 422 of the Code.
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"1999 Plan" is defined in Section I.
"1999 Plan ISOs" are Stock Options which are Incentive Stock
Options.
"Non-employee Participants" is defined in Section I.
"Non-qualified Option" is a Stock Option which does not qualify as
an Incentive Stock Option or for which the Committee provides, in the
terms of such option and at the time such option is granted, that the
option shall not be treated as an Incentive Stock Option.
"Parent Corporation" has the meaning provided in Section 424(e) of
the Code.
"Participants" are all persons who are either Employee Participants
or Non-employee Participants.
"Permanent and Total Disability" has the meaning provided in Section
22(e)(3) of the Code.
"Rule 16b-3" means Securities and Exchange Commission Rule 16b-3.
"Section 16" means Section 16 of the Securities Exchange Act of
1934, as amended, or any similar or successor statute, and any rules,
regulations, or policies adopted or applied thereunder.
"Stock Options" are rights granted pursuant to this 1999 Plan to
purchase shares of Common Stock at a fixed price.
"Subsidiary Corporation" has the meaning provided in Section 424(f)
of the Code.
"Ten Percent Stockholder" means, with respect to a 1999 Plan ISO,
any individual who directly or indirectly owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation or any Parent Corporation or any Subsidiary Corporation at the
time such 1999 Plan ISO is granted.
Section III. Administration.
(a) The Committee. This 1999 Plan shall be administered by the Board of
Directors or by a compensation committee consisting solely of two or more
"non-employee directors", as defined in Rule 16b-3, who shall be designated by
the Board of Directors of the Corporation (the
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<PAGE>
administering body is hereafter referred to as the "Committee"). The Committee
shall serve at the pleasure of the Board of Directors, which may from time to
time, and in its sole discretion, discharge any member, appoint additional new
members in substitution for those previously appointed and/or fill vacancies
however caused. A majority of the Committee shall constitute a quorum and the
acts of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. No person shall be eligible
to be a member of the Committee if that person's membership would prevent the
plan from complying with Section 16, if applicable to the Corporation.
(b) Authority and Discretion of the Committee. Subject to the express
provisions of this 1999 Plan and provided that all actions taken shall be
consistent with the purposes of this 1999 Plan, and subject to ratification by
the Board of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine those
persons who shall constitute key employees eligible to be Employee Participants;
(ii) select the Participants to whom Stock Options shall be granted under this
1999 Plan; (iii) determine the size and the form of the Stock Options, if any,
to be granted to any Participant; (iv) determine the time or times such Stock
Options shall be granted including the grant of Stock Options in connection with
other awards made, or compensation paid, to the Participant; (v) establish the
terms and conditions upon which such Stock Options may be exercised and/or
transferred, including the exercise of Stock Options in connection with other
awards made, or compensation paid, to the Participant; (vi) make or alter any
restrictions and conditions upon such Stock Options and the Stock received on
exercise thereof, including, but not limited to, providing for limitations on
the Participant's right to keep any Stock received on termination of employment;
(vii) determine whether the Participant or the Corporation has achieved any
goals or otherwise satisfied any conditions or requirements that may be imposed
on or related to the exercise of Stock Options; and (viii) adopt such rules and
regulations, establish, define and/or interpret these and any other terms and
conditions, and make all determinations (which may be on a case-by-case basis)
deemed necessary or desirable for the administration of this 1999 Plan.
Notwithstanding any provision of this 1999 Plan to the contrary, only Employee
Participants shall be eligible to receive 1999 Plan ISOs.
(c) Applicable Law. This 1999 Plan and all Stock Options shall be governed
by the law of the state in which the Corporation is incorporated.
Section IV. Terms of Stock Options.
(a) Agreements. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. This
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1999 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive
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<PAGE>
Stock Option, but otherwise qualifies as an Incentive Stock Option, the
agreement shall include the following or a similar statement: "This stock option
is not intended to be an Incentive Stock Option, as that term is described in
Section 422 of the Internal Revenue Code of 1986, as amended."
(b) Term. Stock Options shall be for such periods as may be determined by
the Committee, provided that in the case of 1999 Plan ISOs, the term of any such
1999 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1999 Plan ISO that in the event of the
Permanent and Total Disability or death of the Participant, the 1999 Plan ISO
may be exercised by the Participant or his estate (if applicable) for a period
of up to one year after the date of such Permanent and Total Disability or
Death. In no event may a 1999 Plan ISO be exercisable (including provisions, if
any, for exercise in installments) subsequent to ten years after the date of
grant, or, in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
more than five years after the date of grant.
(c) Purchase Price. The purchase price of shares purchased pursuant to any
Stock Option shall be determined by the Committee, and shall be paid by the
Participant or other person permitted to exercise the Stock Option in full upon
exercise, (i) in cash, (ii) by delivery of shares of Common Stock (valued at
their Fair Market Value on the date of such exercise), (iii) any other property
(valued at its Fair Market Value on the date of such exercise), or (iv) any
combination of cash, stock and other property, with any payment made pursuant to
subparagraphs (ii), (iii) or (iv) only as permitted by the Committee, in its
sole discretion. In no event will the purchase price of Common Stock be less
than the par value of the Common Stock. Furthermore, the purchase price of
Common Stock subject to a 1999 Plan ISO shall not be less than the Fair Market
Value of the Common Stock on the date of the issuance of the 1999 Plan ISO,
provided that in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
the purchase price shall not be less than 110% of the Fair Market Value of the
Common Stock on the date of issuance of the 1999 Plan ISO.
(d) Further Restrictions as to Incentive Stock Options. To the extent that
the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to this section) are exercisable for
the first time by any Employee Participant during any calendar year exceeds
$100,000, such Corporation ISOs shall be treated as options which are not
Incentive Stock Options. For the purpose of this limitation, options shall be
taken into account in the order granted, and the Committee may designate that
portion of any Corporation ISO that shall be treated as not an Incentive Stock
Option in the event that the provisions of this paragraph apply to a portion of
any option, unless otherwise required by the Code or regulations of the Internal
Revenue Service. The designation described in the preceding sentence may be made
at such time as the Committee considers appropriate, including after the
issuance of the
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<PAGE>
option or at the time of its exercise. For the purpose of this section, Fair
Market Value shall be determined as of the time the option with respect to such
stock is granted.
(e) Restrictions. At the discretion of the Committee, the Common Stock
issued pursuant to the Stock Options granted hereunder may be subject to
restrictions on vesting or transferability. For the purposes of this limitation,
options shall be taken into account in the order granted.
(f) Withholding of Taxes. Pursuant to applicable federal, state, local or
foreign laws, the Corporation may be required to collect income or other taxes
upon the grant of a Stock Option to, or exercise of a Stock Option by, a holder.
The Corporation may require, as a condition to the exercise of a Stock Option,
or demand, at such other time as it may consider appropriate, that the
Participant pay the Corporation the amount of any taxes which the Corporation
may determine is required to be withheld or collected, and the Participant shall
comply with the requirement or demand of the Corporation. In its discretion, the
Corporation may withhold shares to be received upon exercise of a Stock Option
if it deems this an appropriate method for withholding or collecting taxes.
(g) Securities Law Compliance. Upon exercise (or partial exercise) of a
Stock Option, the Participant or other holder of the Stock Option shall make
such representations and furnish such information as may, in the opinion of
counsel for the Corporation, be appropriate to permit the Corporation to issue
or transfer Stock in compliance with the provisions of applicable federal or
state securities laws. The Corporation, in its discretion, may postpone the
issuance and delivery of Stock upon any exercise of this Option until completion
of such registration or other qualification of such shares under any federal or
state laws, or stock exchange listing, as the Corporation may consider
appropriate. Furthermore, the Corporation is not obligated to register or
qualify the shares of Common Stock to be issued upon exercise of a Stock Option
under federal or state securities laws (or to register or qualify them at any
time thereafter), and it may refuse to issue such shares if, in its sole
discretion, registration or exemption from registration is not practical or
available. The Corporation may require that prior to the issuance or transfer of
Stock upon exercise of a Stock Option, the Participant enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder shall bear a legend
reflecting such restrictions.
(h) Right to Stock Option. No employee of the Corporation or any other
person shall have any claim or right to be a participant in this 1999 Plan or to
be granted a Stock Option hereunder. Neither this 1999 Plan nor any action taken
hereunder shall be construed as giving any person any right to be retained in
the employ of the Corporation. Nothing contained hereunder shall be construed as
giving any person any equity or interest of any kind in any assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between
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<PAGE>
the Corporation and any such person. As to any claim for any unpaid amounts
under this 1999 Plan, any person having a claim for payments shall be an
unsecured creditor.
(i) Indemnity. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Corporation or any parent,
subsidiary, or other affiliate, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with their responsibilities with respect to this 1999 Plan, and the Corporation
hereby agrees to indemnify the members of the Board of Directors, the members of
the Committee, and the employees of the Corporation and its parent or
subsidiaries in respect of any claim, loss, damage, or expense (including
reasonable counsel fees) arising from any such act, omission, interpretation,
construction or determination to the full extent permitted by law.
(j) Participation by Foreigners. Without amending this 1999 Plan, except
to the extent required by the Code in the case of Incentive Stock Options, the
Committee may modify grants made to participants who are foreign nationals or
employed outside the United States so as to recognize differences in local law,
tax policy, or custom.
Section V. Amendment and Termination: Adjustments Upon Changes in Stock.
The Board of Directors of the Corporation may at any time, and from time
to time, amend, suspend or terminate this 1999 Plan or any portion thereof,
provided that no amendment shall be made without approval of the Corporation's
stockholders if such approval is necessary to comply with any applicable tax
requirement, any applicable rules or regulations of the Securities and Exchange
Commission, including Rule 16b-3 (or any successor rule thereunder), or the
rules and regulations of any exchange or stock market on which the Corporation's
securities are listed or quoted. Except as provided herein, no amendment,
suspension or termination of this 1999 Plan may affect the rights of a
Participant to whom a Stock Option has been granted without such Participant's
consent. The Committee is specifically authorized to convert, in its discretion,
the unexercised portion of any 1999 Plan ISO granted to an Employee Participant
to a Non-qualified Option at any time prior to the exercise, in full, of such
1999 Plan ISO. If there shall be any change in the Common Stock or to any Stock
Option granted under this 1999 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate structure of the Corporation, appropriate adjustments may be made
by the Committee (or if the Corporation is not the surviving corporation in any
such transaction, the Board of Directors of the surviving corporation, or its
designee) in the aggregate number and kind of shares subject to this 1999 Plan,
and the number and kind of shares and the price per share subject to outstanding
options, provided that such adjustment does not affect the qualification of any
1999 Plan ISO as an Incentive Stock Option. In connection with the foregoing,
the Committee may issue new Stock Options in exchange for outstanding Stock
Options.
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<PAGE>
Section VI. Shares of Stock Subject to the Plan.
The number of shares of Common Stock that may be the subject of awards
under this 1999 Plan shall not exceed an aggregate of 4,000,000 shares. Shares
to be delivered under this 1999 Plan may be either authorized but unissued
shares of Common Stock or treasury shares. Any shares subject to an option
hereunder which for any reason terminates, is canceled or otherwise expires
unexercised, and any shares reacquired by the Corporation due to restrictions
imposed on the shares, shares returned because payment is made hereunder in
stock of equivalent value rather than in cash, and/or shares reacquired from a
recipient for any other reason shall, at such time, no longer count towards the
aggregate number of shares which have been the subject of Stock Options issued
hereunder, and such number of shares shall be subject to further awards under
this 1999 Plan, provided, first, that the total number of shares then eligible
for award under this 1999 Plan may not exceed the total specified in the first
sentence of this Section VI, and second, that the number of shares subject to
further awards shall not be increased in any way that would cause this 1999 Plan
or any Stock Option to not comply with Section 16, if applicable to the
Corporation.
Section VII. Effective Date and Term of this Plan.
The effective date of this 1999 Plan is June , 1999 (the "Effective Date")
and awards under this 1999 Plan may be made for a period of ten years commencing
on the Effective Date. The period during which a Stock Option may be exercised
may extend beyond that time as provided herein.
DATE OF APPROVAL BY STOCKHOLDERS: As of June ____, 1999
DATE OF APPROVAL BY BOARD OF DIRECTORS: As of June ____, 1999
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<PAGE>
Exhibit 10.5
MANAGEMENT AGREEMENT AND OPTION TO PURCHASE
THIS AGREEMENT (the "Agreement") is entered into effective April 5, 1999, by and
among Affinity International Travel Systems, Inc. ("Affinity"), a Nevada
corporation with its principal place of business at 100 Second Avenue South,
Suite 303N, St. Petersburg, FL 33017, Prestige Travel Services II, Inc.
("Prestige"), a Florida corporation with its principal place of business at 4100
West Kennedy Boulevard, Suite 100, Tampa, FL 33609, Travel Systems
International, Inc. ("TSI"), a Florida corporation with its principal place of
business at 21 9th Street South, Suite A, St. Petersburg, FL 33705, Kenneth B.
Wiggins and Francine A. Wiggins (collectively, "Shareholders"), residing at 3174
Shoreline Drive, Clearwater, FL 33760.
W I T N E S S E T H
A. WHEREAS, Affinity is a publicly-traded company (OTC BB: TRIP) engaging in
a broad-based travel services business through various affiliates and
subsidiaries;
B. WHEREAS, Prestige is a wholly-owned subsidiary of Affinity with division
encompassing retail travel agency, outside agent, and cruise brokerage
operations;
C. WHEREAS, TSI is a retail travel agency that includes an outside agent
program (the "Assumed Business");
D. WHEREAS, Shareholder Kenneth B. Wiggins is the chief executive officer,
director, and the 51% shareholder of TSI; and
E. WHEREAS, the parties wish to enter into an arrangement whereby Prestige
will assume the operations of TSI pending an agreement for the eventual
acquisition of the assets of TSI by Affinity.
NOW THEREFORE, in consideration of the mutual covenants and undertakings herein
and of other good and valuable consideration, the receipt and sufficiency of
which being hereby acknowledged, the parties agree as follows:
1. Management of Assumed Business TSI hereby engages Prestige to manage the
Assumed Business and all of TSI's rights and duties therein as expressly
described herein to Prestige on the terms and conditions contained herein.
Prestige hereby accepts such management rights and duties in the Assumed
Business.
2. Rights and Obligations Assumed Prestige agrees to assume, so long as this
Agreement remains in effect, responsibility for the following obligations
relative to the Assumed Business:
a. the lease of premises at 21 9th Street South, Suite A, St.
Petersburg, Florida. A copy of such lease is attached hereto as
Exhibit "A";
b. employment of staff deemed by the parties hereto sufficient to
transact the Assumed Business in a manner consistent with its
operating standards heretofore;
<PAGE>
c. telephone numbers and associated directory advertising costs;
d. the existing contract for communications/booking services with
Amadeus, subject to Prestige's discretion in modifying, converting,
or terminating such agreement; provided, however, that Prestige and
Affinity shall indemnify TSI and its principals from any liability
arising out of any such action on the part of Prestige. A copy of
such agreement is attached hereto as Exhibit "B";
e. performance under any existing outside agent agreements, a standard
form of which agreement is attached hereto as Exhibit "C" and a
listing of agents subject to any such existing agreement is attached
as Exhibit "D";
f. forward bookings and any deposits and accounts, including bank
accounts, relative thereto but not including accounts receivables
(whether known or unknown) as of the date of this Agreement; and
g. the existing Airlines Reporting Corporation (ARC) appointment and
account of TSI, subject to Prestige's discretion in modifying,
converting, or deactivating such arrangement; provided, however,
that Prestige and Affinity shall indemnify TSI and its principals
from any liability of TSI or the Shareholders under the ARC account
arising out of any act or omission on the part of Prestige or
Affinity.
3. Rights and Obligations Not Assumed Except as expressly provided herein,
neither Prestige, Affinity, nor any affiliate or subsidiary of Affinity shall
have any obligation to assume any debt of TSI, including, by way of illustration
and not limitation, any debt to the U.S. Small Business Administration, Colonial
Bank (formerly First Central Bank), Tampa Bay Black Investment Corporation, or
any other lender. TSI and Shareholder each expressly agree that they shall be
bound to pay or otherwise satisfy all such debts, liens, and obligations timely
so as to fully discharge their obligations with respect thereto.
4. Consideration In addition to Prestige's assumption of those obligations
specified in section 2 above, the parties agree that each will receive the
following monetary benefits for the transaction contemplated hereunder:
a. Prestige and Affinity agree that each shall be obligated to pay to
TSI for the benefits derived hereunder the sum total of eighty-two
thousand dollars $82,000.00 (the "Cash Obligation"). To satisfy the
Cash Obligation, Affinity has advanced to TSI the sum of $10,000.00,
such advance taking the form of a promissory note (the "Note", a
copy of which is attached hereto as Exhibit "E") in said principal
amount, and further Prestige shall pay to TSI monthly a sum equal to
twenty percent (20%) of the Adjusted Gross Revenues (defined as
gross revenues less cost of sales and commissions paid to parties
other than Prestige, Affinity, or any of Affinity's affiliates or
subsidiaries) of the Assumed Business up to the sum of $72,000.00
(this payment obligation shall be deemed "Earned Revenue"). At such
time as TSI's Earned Revenue meets the sum of $72,000.00, all
further such Earned Revenue shall be applied against the Note until
the full principal amount of the Note has been satisfied. At that
time, the Cash Obligation will be deemed fully satisfied. It is
further provided that the
2
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Cash Obligation shall be paid in full within eighteen (18) months
from the date of this Agreement so long as TSI and Shareholder have
not materially breached this Agreement.
b. Prestige shall retain as its compensation for the management
services provided hereunder eighty percent (80%) of Adjusted Gross
Revenues until the Cash Obligation has been paid, after which time
Prestige shall retain one hundred percent of Adjusted Gross Revenues
subject to the termination provisions at paragraph 7 below.
5. Option to Purchase Assets In addition to the consideration above, Affinity
shall have the exclusive option to acquire the assets of TSI (the "Option") as
described at Exhibit "F" hereto for the amount of eighty-two thousand dollars
($82,000.00), which amount shall be payable in preferred convertible stock of
Affinity stock to TSI, Shareholders, or their designee.
6. Exercise of Option The Option must be exercised by Affinity, and Affinity
shall be obligated to purchase the assets of the Assumed Business, upon
satisfaction of the Cash Obligation unless:
a. TSI and/or Shareholders have failed to satisfy in full all liens
and/or debts related to the Assumed Business by the end of the 18th
month of this Agreement; or
b. If prior to exercise of the Option, there should arise a condition
or circumstance that adversely affects the Assumed Business which
condition or circumstance was known or should reasonably have been
known to TSI or Shareholders prior to execution of this Agreement.
The parties acknowledge that TSI and Shareholder have not disclosed
the existence of any such condition or circumstance as of the date
or execution of this Agreement.
If there exists a condition that relieves Affinity of its obligation to
exercise the Option, then Affinity, at its sole discretion, may terminate the
Option and this Agreement. Alternatively, if Affinity and TSI consent, the
parties may agree to extend the time for performance and the term of this
Agreement.
7. Term and Termination
a. This Agreement shall commence on the date written above and shall
terminate at the earlier of the time of the transaction completing
the exercise of the Option or on October 6, 2000.
b. This Agreement may be otherwise terminated only in the event of i) a
material breach hereunder following notice to the breaching party,
or ii) in the event that Affinity or Prestige shall terminate
without cause that certain employment agreement with Shareholder
Kenneth B. Wiggins (the "Employment Agreement") of even date in
which event TSI may terminate, in its sole discretion, this
Agreement upon notice to Prestige. Barring such termination by TSI,
this Agreement shall remain in full force and effect.
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c. Upon termination, Prestige and Affinity shall act deliberately and
promptly to reassign the rights and duties associated with the
Assumed Business to TSI or its designees and shall return to TSI or
its designee any and all rights in
[MISSING ORIGINAL PAGE 4]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered on the date
first written above.
WITNESSES: PRESTIGE TRAVEL SERVICES II, INC.
BY:
- -------------------------------- ----------------------------------
Anita LaScala, President
WITNESSES: AFFINITY INT'L TRAVEL SYSTEMS, INC.
/s/ Tracy Shelton BY: /s/ Daniel G. Brandano, Jr.
- -------------------------------- ----------------------------------
Daniel G. Brandano, Jr., Chief
Executive Officer
TRAVEL SERVICES INTERNATIONAL, INC.
/s/ Joan Brandano BY: /s/ Kenneth B. Wiggins
- -------------------------------- ----------------------------------
Kenneth B. Wiggins, President
/s/ Joan Brandano BY: /s/ Kenneth B. Wiggins
- -------------------------------- ----------------------------------
Kenneth B. Wiggins, individually
/s/ Francine A. Wiggins
- -------------------------------- ----------------------------------
Francine A. Wiggins, individually
5
<PAGE>
Exhibit 10.6
TERMINATION AND SETTLEMENT AGREEMENT
This Termination and Settlement Agreement (the "Agreement") is entered into by
and among Prestige Travel Services II, Inc. and Affinity International Travel
Systems, Inc. (collectively "Affinity"), Travel Systems International; Inc.
("TSF") and Kenneth B. Wiggins ("Wiggins").
RECITALS
A. Effective the 5th day of April, 1999, Affinity entered into a
management agreement (the "Management Agreement") with TSI.
B. Effective the 5th day of April, 1999, Affinity entered into an
employment agreement (the "Employment Agreement") with Kenneth B. Wiggins
("Wiggins").
C. TSI is a Florida corporation owned by Wiggins as to which Affinity
acquired an option to purchase as part of the Management Agreement.
D. A feature of the understanding among the parties includes an agreement
to account, each to the other, for income and expenses, which predated and
postdated the effective date of the Management Agreement. For ease of reference
and for purposes of this Agreement only TSI shall be referred to as "Old TSI"
for the period of time predating April 5, 1999 and post-dating August 29, 1999
and as "New TSI" for the period including April 5, 1999 through August 29, 1999.
E. The parties to this Agreement (collectively, the "Parties") have agreed
to amicably resolve their differences and to settle all existing disputes among
them, or have otherwise joined in this Agreement, on the terms and conditions
set forth below.
NOW, THEREFORE, for the representations, convenants and promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Parties stipulate and agree as
follows:
1. RECITALS AND EXHIBITS. The Parties acknowledge that the facts set forth
in the Recitals are true, correct and are an integral part of this Agreement.
2. TERMINATION. The parties stipulate and agree that the Management
Agreement and the Employment Agreement are terminated and of no further force
and effect. All rights and obligations existing thereunder are superseded by
this Agreement and any rights now existing by and among the parties are
described herein.
3. ACCOUNTING. The parties agree to appoint Peggy Elmer to serve as their
mutual accountant for purposes of this agreement. Ms. Elmer shall be charged
with the responsibility of conducting an accounting of the income and expenses
of TSI. The purpose of the accounting is to properly allocate income and
expenses attributable to Old TSI and to New TSI such that on the completion of
her work a determination can be made of any sums which
-1-
<PAGE>
may be owing by one party to the other. The operative understanding is that
Wiggins and TSI are entitled to receive the income generated by Old TSI and are
responsible for the expenses incurred by Wiggins and Old TSI--Affinity is
entitled to the income generated by the activities of Wiggins and New TSI and is
responsible for the expenses incurred in the ordinary course of business by New
TSI. The Accounting shall be paid for by Affinity and shall be conducted in
accordance with generally accepted accounting principles, except as expressly
modified by the parties. The Accounting shall produce a net number including the
following components:
A. the balance of the inter company account, representing income
and expenses received or paid by one company on behalf of the
other company as of the most recent financial statement
(expected to be received during the week of September 13,
1999); and
B. a credit to Wiggins and Old TSI of $9,000; and
C. a credit to Wiggins and Old TSI for 20% of the gross income -
after an accrual of $7,000 for August independent agent
commissions - earned by New TSI (representing the 80/20 split
contemplated by the Management Agreement); and
D. a credit to Wiggins of $500 (credit for start-up expenses)
Upon the completion of the Accounting, the party shown as owing funds shall pay
them to the party shown as entitled to funds within 5 days from the rendition of
the Accounting. The Accounting shall be incontestable, binding and absolutely
final so long as it includes each of the components described in Section 2 A-D
of this Agreement. Any party shall be entitled to consult with Ms. Elmer and
provide any input deemed important; all parties shall fully cooperate with the
conduct of the Accounting. The parties to this Agreement also agree to indemnify
Ms. Elmer from any claims which may arise as a result of her undertaking and
shall execute such further documents as may be necessary to reflect this
commitment to Ms. Elmer as she may require. Regarding any income received which
post-dates the Accounting, Wiggins may retain all income pertaining to Old TSI;
income belonging to New TSI will be deposited directly into the "SunStyle"
account (deposit slips will be supplied); income received which relates to both
Old TSI and New TSI will be deposited into the recipient's account and the
portion owing to the other party shall be remitted within 3 business days.
4. FORGIVENESS OF THE $10,000 NOTE. Incident to the dealings among the
parties Affinity made a loan to Wiggins in the amount of $10,000. The Note
evidencing that indebtedness including all unpaid principal and accrued
interest, if any, is hereby forgiven.
5. MOVING EXPENSES TRANSITION. Affinity shall pay certain moving expenses
of TSI to assist with the move of TSI to a location within the City of St.
Petersburg. Affinity shall bear the expense of moving the equipment known as the
"Amedeus" equipment and the TSI filing cabinets and furnishings located in the
offices of Affinity. These expenses will be paid directly by Affinity. Affinity
shall have no other responsibility for the payment of transition expenses
relating to the separation of TSI from the facilities of Affinity. TSI shall be
-2-
<PAGE>
entitled to continue to operate out of the Affinity facilities until such time
as the "Amedeus" move. Wiggins and TSI shall make their best efforts to expedite
the "Amadeus" move. The parties reasonably anticipate that such move will occur
on or before October 5, 1999. The entitlement to use the Affinity spaces, free
of rent, during the transition period is contingent upon the non-interference in
the business of Affinity and the strict adherence to the terms of this Agreement
by TSI and Wiggins.
6. MUTUAL RELEASES. Affinity hereby forever waives, discharges,
terminates, extinguishes, and otherwise releases all Claims (as hereinafter
defined) that it now has, has had or may hereafter have against TSI, Wiggins and
their and its respective officers, directors, shareholders, employees,
attorneys, agents, contractors, successors or assigns, past or present, or any
of them
TSI and Wiggins hereby forever waive, discharge, terminate,
extinguish, and otherwise release all Claims (as hereinafter defined) that they
or any of them now have, have had or may hereafter have against Affinity and all
of its subsidiaries and affiliates and their and its respective officers,
directors, shareholders, employees, attorneys, agents, contractors, successor or
assigns, past or present, or any of them.
The term "Claims" as used above includes any promises,
representations, causes of action, rights and other claims and defenses of any
kind (in the broadest sense of those words), whether presently known or unknown,
whether matured or not yet ripe, and whether discovered or undiscovered prior to
the execution hereof, in law or in equity, arising in whole or in part out of or
otherwise relating to anything that has or has not occurred, in whole or in
part, prior to the effective date of this Mutual Release, including, but not
limited to:
(A) all Claims made or which could have been made to date by or
against the parties to this Agreement.
(B) all Claims made or which could have been made to date by or
against the parties to this Agreement arising from any default
or termination letter which predates the effective date of
this Agreement;
(C) all Claims arising out of or relating to any breach of the
Management Agreement, if any;
(D) all Claims arising out of or relating to any breach of the
Management Agreement, if any;
(E) all libel and slander or other tort Claims arising out of any
statements made by or on behalf concerning any or all of the
parties to this Agreement; and
(F) all Claims arising from any and all alleged violations of any
federal, state or local statutes, ordinances, rules
administrative orders, or other forms of regulations, as well
as any other claims based on constitutional, statutory, common
law or regulatory grounds; and
-3-
<PAGE>
(G) all Claims, any portion or element of which began to accrue
prior to the date of this Agreement, even though other
portions or elements of which do not occur or accrue until
after the date of this Agreement;
The term "Claims," however, shall not include and specifically excludes (1) any
and all promises, agreements, representations, warranties contained in this
Agreement, (2) any and all causes, causes of action, rights and other claims and
defenses of any kind arising out of the future performance or non-performance of
the terms and conditions of this Agreement.
7. MISCELLANEOUS.
(A) The parties have negotiated the terms and provisions of this
Agreement, have consulted with such legal, tax, accounting,
financial and other advisors retained by them of their
personal choice as each considered necessary or advisable with
respect to this Agreement and the transactions contemplated
hereby, and this Agreement shall not be construed against any
party as the drafter hereof.
(B) This Agreement shall be governed, construed and enforced in
accordance with the internal laws of the State of Florida
without reference to its laws relating to the conflict of
laws. Each party irrevocably consents to personal jurisdiction
over that party by the courts of the State of Florida and the
court in the Pending Action for all purposes of this
Agreement.
(C) Time if of the essence under this Agreement.
(D) Each of the Parties shall execute and deliver such other
documents, certificates, agreements and other writings and
shall take such other actions to as may be reasonably
necessary to implement expeditiously or to consummate of this
Agreement.
(E) The Parties represent and warrant that each is duly
incorporated and in good standing in its state of
incorporation; that the signatories to this Agreement are duly
authorized to execute it; and that no undertakings, promises,
covenants or agreements of each party to this Agreement
constitute breach of its Articles of Incorporation, Bylaws or
covenants and agreements with any other party.
(F) This Agreement contains the complete agreement of the Parties
concerning the settlement of their disputes and supersedes all
prior agreements, promises, representations and warranties
that may have been made between the parties concerning that
subject, whether in connection with the negotiation of this
Agreement or otherwise.
(G) Wiggins affirmatively represents and warrants that he and TSI
will post the requisite bond with ARC and will hold Affinity
harmless from any
-4-
<PAGE>
claims which ARC may assert relating to business conducted by
TSI after August 29, 1999.
THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY
WAIVE FOR THEMSELVES AND THEIR
RESPECTIVE SUCCESSORS AND
ASSIGNS, ANY AND ALL RIGHTS THAT
THEY OR ANY OF THEM MIGHT
OTHERWISE HAVE HAD TO HAVE ANY
OF THE ISSUES (CLAIMS OR
DEFENSES) IN ANY ACTION ARISING
FROM OR RELATING TO THIS
AGREEMENT TRIED TO A JURY. THIS
PROVISION IS A MATERIAL
INDUCEMENT TO THE ENTRY OF THIS
AGREEMENT.
(THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
-5-
<PAGE>
PRESTIGE TRAVEL SERVICES II, INC.
By: /s/ D.G. Brandano
---------------------------------
Its: Director
--------------------------------
AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC.
By: /s/ Gerard LaMontagne
---------------------------------
Its: Chief Financial Officer
--------------------------------
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ Kenneth B. Wiggins
---------------------------------
Its: President
--------------------------------
KENNETH B. WIGGINS
/s/ Kenneth B. Wiggins
-------------------------------------
-6-
<PAGE>
Exhibit 10.9
CONSULTING AGREEMENT
THIS AGREEMENT (this "Agreement"), made this 20th day of December, 1999,
by and between JAMES E. HICKS ("Hicks"), a person of the full age of majority
and resident of the State of North Carolina, and AFFINITY INTERNATIONAL TRAVEL
SYSTEMS, INC. (the "Company"), a Nevada corporation.
WHEREAS, Hicks has certain expertise in financial and capital investment
matters which will be beneficial to the Company in the conduct of its business;
WHEREAS, the Company desires to retain Hicks as a consultant and advisor
to the Company in connection with certain financial and capital investment
matters of the Company and Hicks desires to be so retained and to enter into
such an agreement with the Company.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained and the consideration to be paid hereunder, and for other valuable
consideration, the parties agree as follows:
1. Recitals are True. The above recitals are true and correct and
incorporated herein.
2. Consulting Services. The Company agrees to retain Hicks and Hicks
agrees to be retained by the company to actively identify and solicit potential
investors for the Company, to help position the Company optimally for an
investment transaction, to assist in closing of any such investment transaction,
and identify, solicit and cultivate synergistic and strategic relationships for
the Company on an as-needed basis from and after the date hereof until
terminated in accordance with the provisions of Section 6 hereinbelow.
3. Devotion of Time to Consulting Services. Hicks shall devote such time
to rendering consulting and advising services as is reasonably requested from
time-to time by the Company. The services to be rendered by Hicks to the Company
hereunder may be rendered in person or by letter, telephone or other means of
communication as shall be appropriate under the circumstances. Hicks shall not
be required to observe any fixed schedule of attendance at the principal place
of business of the Company or any other person or entity for the rendition of
such services; provided, however, that Hicks shall commit sufficient time to the
business of the Company to generate gross investments in the Company as follows:
(a) $500,000.00 by January 31, 2000;
(b) an additional $1,000,000.00 by February 29, 2000;
(c) an additional $1,500,000.00 by March 31, 2000;
(d) an additional $1,500,000.00 by April 30, 2000; and
(e) an additional $1,500,000.00 by May 15, 2000.
<PAGE>
4. Consideration for Consulting Services. As consideration for Hicks
services hereunder during the term of this Agreement, the Company shall pay
Hicks and Hicks shall accept from the Company the following:
(a) A sum equal to five percent (5%) of the gross investment
proceeds received by the Company (i) from investor(s)
introduced to the Company by Hicks or (ii) in a transaction
with respect to which Hicks' efforts were instrumental in
negotiating and closing on behalf of the Company. In addition,
at the option of Hicks, Hicks may give notice to the Company
that it is his good faith belief that the offering price per
share of the common stock can be increased over and above the
initial offering price of $1.00 per share, for each $0.01 per
share increase in the actual selling price of the common
stock, the commission payable to Hicks pursuant to this
Section 4(a) shall be increased by one (1) basis point up to a
maximum of 10% (e.g., if the original offering price is $1.00
per share at a selling price of $2.00 per share, the
commission would be increased to 6% of the gross investment
proceeds received by the Company). Such sum shall be due and
payable by the Company within five (5) business days of
confirmation that the proceeds or consideration from such
investment transaction have been received by the Company; and
(b) Subject to the adjustment provisions set forth hereinbelow, up
to 630,343 shares of restricted common stock, prorated
according to the ratio of 315,172 shares of common stock for
each $3,000,000 of gross investment proceeds received by the
Company as a result of Hicks' efforts, for a maximum
investment of $6,000,000.00 (e.g., if the Company receives
$1,000,000.00 in gross investment proceeds, the Company will
issue Hicks 105,057 shares); and
(c) Subject to the adjustment provisions set forth hereinbelow,
warrants to purchase up to 252, 137 shares of restricted
common stock prorated according to the ratio of a warrant to
purchase 126,067 shares of common stock for each $3,000,000 of
gross investment proceeds received by the Company as a result
of Hicks' efforts, for a maximum investment of $6,000,000.00
(e.g., if the Company receives $1,000,000.00 in gross
investment proceeds, the Company will grant to Hicks a warrant
to purchase 42,023 shares). The exercise price of such
warrants shall be $2.00 per share, which upon exercise,
payment for the shares of common stock underlying the warrants
may be made through "cashless exercise", as defined
hereinbelow, and the warrants may be exercised at any time
from and after the date of receipt by Hicks for up to five (5)
years form such date.
In the event that the contemplated divestiture transaction with Prestige
Travel is not consummated by June 30, 2000, the maximum number of shares
available to be earned by Hicks pursuant to Section 4(b) hereinabove shall be
700,344 and the warrants to purchase shares of common stock pursuant to Section
4(c) hereinabove shall be for a maximum of 280,137 shares.
2
<PAGE>
If the divestiture of Prestige Travel is not consummated prior to June 30, 2000,
any additional shares or warrants to purchase shares owed to Hicks shall be
transferred to Hicks by the Company on July 1, 2000.
The term "cashless exercise" means in lieu of any cash payment required
hereunder for the exercise of the warrants, Hicks shall have the rights to
exercise the warrant in whole or in part by surrendering the warrant in exchange
for the number of shares of the Company's Common stock equal to (x) the number
of shares as to which the warrant is being exercised multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined below) of the
common stock less than the aggregate exercise price of the warrant being
exercised and the denominator of which is the Market Price. The term "Market
Price" means the average of the closing sale price per share of the common stock
on the principal stock exchange or market on which the common stock is then
quoted or traded on each of the ten (10) consecutive trading days preceding the
date on which written notice of election to exercise the warrants has been given
to the company. If hicks opts for a cashless exercise of the warrant, no other
consideration shall be paid to the Company, other than surrendering the warrant
itself, nor will there be paid any to the commission or other remuneration to
any other person or entity by Hicks.
5. Status as Independent Contractor. The parties agree that Hicks'
relationship with the Company will be that of independent contractor, and
nothing in this Agreement shall be deemed to create an employer - employee
relationship between the parties. As such, Hicks will not be entitled to any
compensation other than agreed upon herein.
6. Term of Agreement. The effective date of this Agreement shall be the
date hereof, and it shall remain effective and continue in force and effect
until terminated in accordance herewith; this Agreement may be terminated by
either party upon ten (10) business days prior written notice to the other
party. Termination of this Agreement pursuant to this Section 6 shall in no way
terminate the obligation of the Company to pay to Hicks any amounts accrued
under Section 4 hereof prior to termination. In the event that Hicks shall fail
to meet the specified gross investment goals set forth in Section 3 hereof, this
Agreement shall be immediately terminable at the option of the Company without
advanced notice to Hicks.
7. Obligations of the Company. During the term of this Agreement, the
President, Vice President, or another high level executive of the Company
familiar with the business plan of the Company shall be reasonably accessible to
Hicks for the purpose of presenting and explaining the business plan and
opportunities of the Company to potential investor contacts of Hicks and
providing other reasonably necessary assistance as requested by Hicks.
8. Compliance with Laws. Hicks shall at all times during this Agreement be
in material compliance with all federal and state laws, including, but not
limited to, all provisions of the Securities Act of 1933, as amended (the
"Securities Act") , the Securities Exchange Act of 1934, as amended, and in the
Investment Advisors Act of 1940 , as amended. Hicks specifically agrees not to
make any general solicitations or public advertisements in connection with any
offers to sell or sales of the securities of the Company since the offering is
being made without registration of the common stock under the Securities Act in
reliance on an exemption for transactions by an issuer not involving a public
offering and since the common stock is being sold without any investor being
furnished a prospectus setting forth all of the information that
3
<PAGE>
would be required to be furnished under the Securities Act and since the
purchasers are required to be "accredited investors" as defined in Rule 501 of
Regulation D under the Securities Act.
9. Severability. The parties hereto intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly,
should a court of competent jurisdiction determine that the scope of any
provision is too broad to be enforced as written the parties intend that the
court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future law, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance, except to the extent such remaining provisions constitute
obligations of another party to this Agreement corresponding to the
unenforceable provision.
10. Notices. Any and all notices, demands, requests, designations,
consents, offers, acceptances or any other communications that may be or are
required to be given, served or sent by any party to another party pursuant to
this Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or by verifiable overnight delivery postage prepaid, or
transmitted by hand delivery (against a signed receipt) or by facsimile with
confirmation of receipt addressed as follows: (a) if to Hicks at 3713 Eastover
Hills Court, Charlotte, North Carolina 28211; (b) if to the Company at 100
Second Avenue South, Suite 1100S, St. Petersburg, Florida 33701 FAX: (727)
896-1403 with a copy to John Nossiff, Brown, Rudnick, Freed & Gesmer, One
Financial Center, Boston, MA 02111 (FAX: (617) 856-8201 or to such other address
which may be designated by either the Company or Hicks.
11. Modification. No change or modification of this Agreement shall be
valid unless the same be in writing and signed by the parties hereto, other than
modification by a Court of law in accordance with Section 9 hereof.
12. Applicable Law and Binding Effect. This Agreement shall be construed
and regulated under and by the laws of the State of Nevada and shall inure to
the benefit of and be binding upon the parties hereto and their heirs, personal
representatives, successors and assigns.
13. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
14. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
4
<PAGE>
15. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company or Hicks without the prior written consent of the
undersigned.
16. Expenses. The Company and Hicks shall pay their own respective
expenses incurred in connection with this Agreement and the transactions
contemplated hereby. In any action to enforce the terms of this Agreement, the
successful party shall be entitled to recover its reasonable costs and expenses,
including reasonable attorneys' fees, from the party who refused or failed to
perform this Agreement.
17. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
19. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
20. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the shares of common stock.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Agreement to
be executed the day and year first above written.
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.,
a Nevada corporation
By: /s/ D.G. Brandano
--------------------------------
DANIEL G. BRANDANO
President
/s/ James E. Hicks
--------------------------------
JAMES E. HICKS
5
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
SunStyle International Holidays, Inc., a Florida corporation
SunStyle International Holidays of California, Inc., a Florida corporation
SunStyle International Holidays Limited, a United Kingdom company
Affinity International Travel Systems Limited, a United Kingdom company
Airline Travel Trust, Inc., a Florida corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of
this Form S-1 Registration Statement of our report dated September 3, 1999,
except for Note 12, as to which the date is March 7, 2000, relating to the
consolidated financial statements of Affinity International Travel Systems,
Inc. and subsidiaries, which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
/s/ BDO Seidman, LLP
Orlando, Florida
March 13, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of
this Form S-1 Registration Statement of our report dated December 30, 1998
relating to the financial statements of Affinity International Travel
Systems, Inc. (formerly Pay Dirt, Inc.), which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
/s/ Tubbs & Bartnick, P.A.
Boca Raton, Florida
March 10, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of
this Form S-1 Registration Statement of our report dated June 28, 1999
relating to the financial statements of Prestige Travel Services II, Inc.,
which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
/s/ Tubbs & Bartnick, P.A.
Boca Raton, Florida
March 10, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENT AS OF JUNE 30, 1999 AND DECEMBER 31, 1999 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> JUL-01-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 DEC-31-1999
<CASH> 1120 57
<SECURITIES> 195 184
<RECEIVABLES> 158 121
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1650 809
<PP&E> 399 1244
<DEPRECIATION> 131 196
<TOTAL-ASSETS> 3665 2002
<CURRENT-LIABILITIES> 1312 2162
<BONDS> 0 0
0 0
1 0
<COMMON> 12 14
<OTHER-SE> 2292 (190)
<TOTAL-LIABILITY-AND-EQUITY> 3665 2002
<SALES> 2325 2056
<TOTAL-REVENUES> 2325 2056
<CGS> 1586 1301
<TOTAL-COSTS> 1586 1301
<OTHER-EXPENSES> 2 2467
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2242 4
<INCOME-PRETAX> (5183) (3891)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5183) (3891)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5183) (3891)
<EPS-BASIC> (.82) (.29)
<EPS-DILUTED> (.82) (.29)
</TABLE>
