<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
---------------
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
TRAVELNOW.COM INC.
(Name of Subject Company)
TRAVELNOW.COM INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
89490A 10 7
(CUSIP Number of Class of Securities)
------------------------
JEFFREY A. WASSON
CHIEF EXECUTIVE OFFICER
TRAVELNOW.COM INC.
318 PARK CENTRAL EAST, SUITE 418
SPRINGFIELD, MISSOURI 65806
(417) 864-3600
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications on Behalf of the Person(s) Filing
Statement)
COPIES TO:
KEVIN R. SWEENEY
SHOOK, HARDY & BACON L.L.P.
1010 GRAND BOULEVARD, FIFTH FLOOR
KANSAS CITY, MISSOURI 64106
(816) 474-6550
/ / CHECK THE BOX IF THE FILING RELATED SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
This Amendment No. 1 to the Solicitation/Recommendation Statement on
Schedule 14D-9 (as amended, the "Schedule14D-9") of TravelNow.com Inc., a
Delaware corporation (the "Company"), relates to the offer by WonSub, Inc., a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Hotel
Reservations Network, Inc., a Delaware corporation ("Parent"), to purchase all
outstanding shares of the common stock of TravelNow.com Inc., par value $0.01
per share, not owned by Parent, Purchaser or their affiliates, for a purchase
price of $4.16 per share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated January 12, 2001, and in the related Letter of Transmittal. This
Schedule 14D-9 is being filed on behalf of TravelNow.com Inc.
ITEM 1. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company is TravelNow.com Inc., a Delaware
corporation, and the address of the principal executive offices of the Company
is 318 Park Central East, Suite 418, Springfield, Missouri 65806 Telephone:
(417) 864-3600.
(b) The title of the class of equity securities to which this Statement
relates is the common stock, par value $0.01 per share, of the Company (the
"Common Stock"). As of January 8, 2001, there were 10,961,261 shares of Common
Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) The filing person is the Company. The Company's name, business address
and business telephone number are set forth in Item 1.
(d) This Schedule 14D-9 relates to the tender offer disclosed in a Tender
Offer Statement on Schedule TO dated January 12, 2001 (the "Schedule TO") of
Parent and Purchaser, to purchase all of the outstanding shares of Common Stock
not owned by Parent, Purchaser or their affiliates (the "Shares") at a price of
$4.16 per Share (the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated January 12, 2001, (the "Offer to Purchase") and the related
Letter of Transmittal and any supplement thereto (the "Letter of Transmittal",
which together with the Offer to Purchase constitute the "Offer"). A copy of the
Offer to Purchase and the related Letter of Transmittal is incorporated herein
by reference and copies have been filed with the Securities and Exchange
Commission (hereinafter referred to as the "Commission" or the "SEC") as
Exhibits (a)(1) and (a)(2) to the Schedule TO.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 3, 2001 (the "Merger Agreement"), among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things, that Purchaser
shall commence the Offer within 10 business days after the date of the Merger
Agreement, and as soon as practicable following the satisfaction or waiver of
the conditions set forth in the Merger Agreement (which includes consummation of
the Offer), but in no event less than 20 business days after the date the Offer
commences, Purchaser will be merged with and into the Company (the "Merger"),
and the Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Merger Agreement further provides that, in the Merger, those
Shares that are not acquired in the Offer will be converted into the right to
receive $4.16 per Share in cash (the "Merger Consideration").
As preconditions to the execution of the Merger Agreement by Parent and
Purchaser, Parent and Purchaser required that a group of holders of
approximately 40.6% of the Common Stock currently outstanding (the "Key
Stockholders") execute stockholder agreements with Parent and Purchaser (the
"Stockholder Agreements") pursuant to which, among other things, the Key
Stockholders agreed to tender their Shares into the Offer, to vote against any
other transaction not approved by the Board of Directors of the Company in
accordance with the termination provisions of the Merger Agreement, and to turn
over 90% of the profit received in any such alternative transaction by the Key
Stockholders
2
<PAGE>
above the Merger Consideration to Parent. The foregoing description is qualified
in its entirety by reference to the full text of the Stockholder Agreements,
which are incorporated herein by reference and copies of which have been filed
with the SEC as Exhibits (d)(2)-(d)(11) to the Schedule TO.
As further conditions to the execution of the Merger Agreement, Parent and
Purchaser required that four key executive officers of the Company enter into
the Amendments (as hereinafter defined), and that Jeffrey A. Wasson, the Chief
Executive Officer of the Company, enter into the Wasson Letter Agreement (as
hereinafter defined).
According to the Schedule TO, the address of the principal executive offices
of Parent are located at 8140 Walnut Hill Lane, Suite 800, Dallas, Texas 75231
and the principal executive offices of Purchaser are located at 8140 Walnut Hill
Lane, Suite 800, Dallas, Texas 75231.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Schedule 14f-1 (the "Information Statement") which is attached as Schedule II
hereto and is incorporated herein by reference. Except as described herein
(including in the Exhibits hereto and in Schedule II hereto) or incorporated by
reference herein, to the knowledge of the Company, as of the date hereof, there
exists no material agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and
(i) the Company's executive officers, directors or affiliates or (ii) Purchaser
or Purchaser's executive officers, directors or affiliates.
THE MERGER AGREEMENT. The summary of the Merger Agreement contained in the
Offer to Purchase, which has been filed with the Commission as Exhibit (a)(i) to
the Schedule TO, is incorporated herein by reference. Such summary should be
read in its entirety for a more complete description of the terms and provisions
of the Merger Agreement.
EXECUTIVE EMPLOYMENT AGREEMENTS. Mr. Wasson, H. Whit Ehrler, Michael Bauer,
and Chris Kuhn (collectively, the "Named Executive Officers") have each entered
into a Conditional Amendment to Employment Agreement (each an "Amendment", and
collectively the "Amendments") with the Company. Under their pre-existing
employment agreements with the Company, the Named Executive Officers are
entitled, upon a termination without cause, which includes a change of control,
to a lump sum cash payment equal to each respective base salary for the
remainder of the year in which termination occurs and various accrued expenses
within ten days after the termination occurs and a lump sum cash payment equal
to such base salary, to be paid on each anniversary date of the employment
agreement for the balance of the term (the "Special Payments"). The Amendments
provide that the Named Executive Officers shall be entitled to receive the
Special Payments in one lump sum on the 180th day following the consummation of
the Merger, except for Mr. Wasson, who has agreed to waive, upon consummation of
the Merger, all of his rights to receive the Special Payments, and who has
further agreed that his salary shall be paid into an escrow account for a period
of 180 days following the consummation of the Merger, to be released to him
after such time period has lapsed.
Following the consummation of the Merger, the employment of each Named
Executive Officer will be at-will employment, which may be terminated by such
Named Executive Officer or by the Surviving Corporation at any time; provided,
however, that in the event the Surviving Corporation terminates any such Named
Executive Officer's employment without cause, then such Named Executive Officer
shall be entitled to receive three months' severance pay.
The foregoing description is qualified in its entirety by reference to the
employment agreements, which are described in the Information Statement, and by
reference to the full text of the
3
<PAGE>
Amendments, which are incorporated herein by reference and copies of which have
been filed with the SEC as Exhibits (d)(12)-(d)(15) to the Schedule TO.
OPTIONS AND OTHER EQUITY-BASED AWARDS. Pursuant to the Merger Agreement and
by virtue of the Merger, (i) each outstanding option or similar right to acquire
shares under the Company's stock option plan of the Company (each an "Option"
and collectively the "Options), whether or not then exercisable or vested, will
be canceled and as to any such Options which are, according to their terms,
vested and exercisable as of the consummation of the Merger (a "Vested Option"),
the cancellation of any such Vested Option shall represent the right to receive,
for each share of Common Stock subject to such Vested Options, an amount
(subject to any applicable withholding tax) in cash equal to the difference
between the Merger Consideration and the per share exercise price of such Vested
Options, to the extent the difference is a positive number (the amount in cash
described above being hereinafter referred to as the "Option Consideration");
provided, however, that with respect to any person subject to Section 16(a) of
the Securities and Exchange Act of 1934, as amended, (the "Exchange Act"), any
such Option Consideration shall not be payable until the first date payment can
be made without liability to such person under Section 16(b) of the Exchange
Act, but shall be paid as soon as practicable thereafter. The surrender of a
Vested Option to the Surviving Corporation for the Option Consideration shall be
deemed a release of any and all rights the holder had or may have had with
respect to such Vested Options. All Options other than Vested Options shall
expire upon the consummation of the Merger. Pursuant to each unqualified stock
option agreement, all stock options issued under the Company's stock option plan
will become exercisable in full immediately prior to the consummation of the
Offer.
One director of the Company, H. Whit Ehrler, has received Options under the
Company's stock option plan that will convert into the right to receive cash
under the terms of the Offer.
INDEMNIFICATION. Pursuant to the Merger Agreement, Parent and Purchaser
have agreed to cause the Surviving Corporation to indemnify each director,
officer, employee, fiduciary or agent of the Company against any costs or
expense (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, including, without
limitation, liabilities arising out of the transactions contemplated by the
Merger Agreement, to the extent that they were based on the fact that such
person is or was a director, officer or employee of the Company and arising out
of actual or alleged actions or omissions occurring at or prior to the effective
time of the Merger (the "Effective Time"). Parent has also agreed to cause the
Surviving Corporation to maintain policies of directors' and officers' liability
insurance equivalent to the current policies of the Company, subject to certain
limitations, for six years after the Effective Time.
CONFIDENTIALITY AGREEMENTS. On May 23, 2000, the Company and Parent signed
a confidentiality agreement providing that, subject to the terms of such
agreement, Parent and its affiliates will keep confidential certain non-public
information provided by the Company. Additionally, in contemplation of a
possible acquisition transaction, on December 20, 2000, the Company and Parent
signed a confidentiality agreement (the "Confidentiality Agreement") providing
that, subject to the terms of the Confidentiality Agreement, Parent and its
affiliates will keep confidential certain non-public information provided by the
Company. On the same day, Company and Parent entered into a letter agreement
modifying the terms of the Confidentiality Agreement with respect to certain
specific confidential information. The foregoing description is qualified in its
entirety by reference to the full text of the Confidentiality Agreement, which
is incorporated herein by reference and a copy of which has been filed with the
SEC as Exhibit 1 to the Company's Form 8-K, dated January 10, 2001.
LETTER AGREEMENT. On January 3, 2001, the Company entered into an agreement
with Mr. Wasson (the "Wasson Letter Agreement") whereby the Company agreed to
reduce the debt obligation owed to
4
<PAGE>
it by Mr. Wasson by an amount of $15,000 and Mr. Wasson agreed to pay the
remaining $50,000 of his debt obligation to the Company upon consummation of the
Merger.
EXCLUSIVITY AGREEMENT. The Company entered into an agreement with Parent
dated December 29, 2000 (the "Exclusivity Agreement"), whereby the Company
agreed to negotiate exclusively with Parent during the period extending from
8:15 p.m. Central Standard Time on December 29, 2000 through 11:59 p.m. Central
Standard Time on January 2, 2001. The Company further agreed that, during such
period, it would promptly notify Parent of any unsolicited third party proposals
received by the Company, so long as such notification did not violate the terms
of any pre-existing agreement to which the Company was a party. The foregoing
description is qualified in its entirety by reference to the full text of the
Exclusivity Agreement, which is incorporated herein by reference and a copy of
which has been filed with the SEC as Exhibit 2 to the Company's Form 8-K, dated
January 10, 2001.
PRIOR OPERATING AGREEMENT. In 1998, the Company entered into an affiliate
agreement with Parent, whereby the Company agreed to market Parent's hotel and
other time-based lodging products through the Company's proprietary websites and
other third-party websites affiliated with the Company. In exchange, the Company
received a commission based on the gross revenues generated by the Parent from
hotel reservations made by visitors to the Company's and affiliated third
parties' websites. This agreement was amended and restated on May 31, 2000. The
May 31 amendment made a number of changes to the prior arrangement, including
the rate at which commissions were paid by Parent to the Company. On August 30,
2000 Parent and the Company entered into another amendment to the agreement.
This amendment was principally to define and clarify certain marketing
obligations of the parties and covered the time period from August 30, 2000 to
December 31, 2000. The foregoing description is qualified in its entirety by
reference to the full text of the affiliate agreement, which is incorporated
herein by reference and a copy of which has been filed with the SEC as
Exhibit (d)(17) to the Schedule TO.
5
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
THE COMPANY'S BOARD OF DIRECTORS (1) HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS (OTHER THAN PARENT, PURCHASER AND THEIR AFFILIATES AND THE KEY
STOCKHOLDERS), (2) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (3)
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT,
PURCHASER AND THEIR AFFILIATES AND THE KEY STOCKHOLDERS) ACCEPT THE OFFER AND
TENDER ALL OF THEIR SHARES PURSUANT THERETO.
The joint press release announcing the Merger Agreement and related
transactions is incorporated herein by reference and a copy of the joint press
release has been filed with the SEC as Exhibit 5 to the Company's Form 8-K,
dated January 10, 2001.
(b)(i) BACKGROUND OF THE OFFER; CONTACTS WITH PARENT
During the course of the negotiations to amend the Affiliate Agreement which
began in April 2000 and ended with the August 30, 2000, amendment, the parties
conducted general discussions regarding a possible business combination with
Parent, including a possible acquisition by Parent of the Company or another
type of combination of the Company with Parent. On or about May 19, 2000,
Parent's Chief Financial Officer requested that the Company provide to Parent
confidential, non-public information about the Company. The Company required
Parent to enter into a confidentiality agreement on May 23, 2000, before
providing the requested information. Although the parties continued discussions
and the Company continued to provide financial information to Parent, Parent did
not pursue those discussions or propose terms during this period.
In late October and early November 2000, the Chief Executive Officers of the
Company and Parent conducted additional discussions regarding each party's
interest in a potential transaction between the Company and Parent, including
the possibility of Parent's direct equity investment in the Company.
On November 29, 2000, the Company announced that it had engaged the
financial advisory firm of Legg Mason Wood Walker, Incorporated ("Legg Mason")
to explore on its behalf its strategic alternatives, including the possible sale
of the Company. Legg Mason and the Company compiled and ranked a list of
possible companies engaged in the on-line travel industry that might be
interested in a potential business combination or other transaction with the
Company. During the period from November 29, 2000, through December 29, 2000,
representatives of Legg Mason contacted, by telephone, eight of the
highest-ranked companies, including Parent, to inquire about those companies'
interest in a potential business combination or other transaction with the
Company. All of these eight companies expressed an interest in a possible
transaction with the Company and four companies, including Parent (the
"Potential Buyers"), executed Confidentiality Agreements with Legg Mason on
behalf of the Company. Legg Mason distributed confidential materials regarding
the Company to all Potential Buyers. Thereafter and through December 29, 2000,
representatives of Legg Mason and the Potential Buyers engaged in telephone
discussions regarding such materials and the Company's management participated
in various conference calls or meetings with the Potential Buyers.
On November 29, 2000, the Chief Executive Officer of Parent and the Chief
Executive Officer of the Company discussed the possibility of a business
combination between the two companies. In that conversation, Parent indicated an
interest in pursuing the matter further and engaging in more substantive
discussions. As a follow-up to this discussion, on December 3, 2000, Parent
delivered to the Company a request for specific information about the Company's
business and results of operations.
6
<PAGE>
Following the delivery of that request, representatives of Legg Mason advised
the Chief Financial and Strategic Officer of Parent of the sale process being
contemplated by the Company. That process included a requirement that Parent
enter into agreements with the Company regarding confidentiality and prohibiting
Parent's acquisition of securities of the Company without the prior consent of
the Company's board of directors (the "Confidentiality Agreements").
Between December 5 and December 19, 2000, representatives of Legg Mason
continued discussions with representatives of Parent and the other Potential
Buyers. During that same period, legal counsel for Parent and the Company
negotiated the terms of the Confidentiality Agreements. Parent entered into the
Confidentiality Agreements on December 19, 2000.
On December 19, 2000, representatives of Legg Mason began to distribute to
Parent preliminary information regarding the Company. The Company and Legg Mason
delivered to Parent a variety of due diligence materials over the two weeks
following the execution of the Confidentiality Agreements. On December 19, 2000,
Legg Mason discussed with Parent's Chief Financial and Strategic Officer, a
schedule for negotiating a possible transaction. Over the following three days,
management of the Company and its financial advisor met with representatives of
Parent in Springfield, Missouri to conduct on-site operational and financial due
diligence. On December 22, 2000, representatives of Legg Mason discussed with
representatives of Parent a possible business combination and various forms of
consideration. Discussions among management of Parent and the Company and its
financial advisor included major integration issues of the combined business and
continued by telephone through December 24, 2000.
On December 26, 2000, representatives of Legg Mason discussed with
representatives of Parent various options relating to the purchase price and the
form of consideration for Parent's acquisition of the Company. During the
negotiations, Parent made a preliminary proposal for a cash or a stock offer in
which the price for a stock offer was slightly higher than a cash offer. Parent
informed Legg Mason that its proposal at that time was subject to Parent's
further due diligence and that the price would depend, among other things, on
the financial impact on TravelNow of existing employment agreements that would
require, upon consummation of a transaction, a cash payment to certain
executives of the Company. On December 27, 2000, a representative of Legg Mason
contacted the Chief Financial and Strategic Officer of Parent to inform Parent
that the Company would prefer to consider relative speed with which a cash offer
could be completed and the uncertainty of the value of the Parent's stock,
resulting from the limited liquidity, volatility and limited trading history for
the Parent stock.
On December 28, 2000, Parent responded by increasing the cash consideration
proposed. Among other issues under discussion at this time, Parent indicated
that its revised proposal would be conditioned on the waiver by the Named
Executive Officers of the Company of change of control payments owed to them by
the Company under their employment agreements. Because the Company did not have
the ability to unilaterally modify these contractual obligations, it instructed
Legg Mason to request that Parent revise its offer to eliminate this contingency
for the Named Executive Officers, other than Mr. Wasson, who agreed to waive
these benefits for himself.
After further negotiations, on December 28, 2000, Parent offered to acquire
the Company for cash in an amount of $4.16 per share of the Company's Common
Stock. The proposal was contingent on, among other items, Mr. Wasson's agreement
to forego the cash payment that would have been required under his employment
agreement upon the consummation of a transaction with Parent and a modification
of the timing of the payments due to the other Named Executive Officers.
Parent's proposal also included a requirement that the Key Stockholders agree to
the transaction and that the Company agree to negotiate exclusively with Parent
for a limited period of time.
During the period from December 26 through December 29, 2000, Legg Mason
and management of the Company had further discussions with various of the other
Potential Buyers and determined that
7
<PAGE>
it was in the best interests of the Company and its stockholders to work
expeditiously to reach agreement with Parent, if possible.
At a meeting held on December 29, 2000, the Company's Board authorized the
negotiation of definitive merger documents based on Parent's revised offer of
$4.16 per share. At that meeting, the Company's Board also approved and
authorized entering into an exclusivity agreement with Parent, whereby the
Company agreed to negotiate exclusively with Parent until midnight on
January 2, 2001. The Company and Parent executed the exclusivity agreement later
on December 29, 2000.
Parent's legal counsel provided an initial draft of the Merger Agreement to
the Company and its financial and legal advisors on the evening of December 29,
2000. On December 30, 2000, Parent's counsel delivered an initial draft of the
form of Stockholder Agreement to the Company and its financial and legal
advisors. The Chief Financial and Strategic Officer of Parent and the Chief
Executive Officer and Chief Financial Officer of the Company met in Dallas,
Texas on that date to discuss certain information requests of Parent regarding
the business and operations of the Company.
On December 31, 2000, management of the two companies, their respective
legal advisors and Legg Mason commenced negotiations of the definitive Merger
Agreement and Stockholder Agreements. Management of Parent and the Company
continued due diligence discussions regarding the Company's business, operations
and agreements.
Negotiations between legal counsel for the Company and Parent continued in
Dallas from December 31, 2000, through January 2, 2001. On January 2, 2001,
after conducting additional due diligence regarding the Company, Parent's Chief
Financial and Strategic Officer informed the Company's Chief Executive Officer
that Parent was reducing its offer. The Company responded that it would not
accept the reduced offer. Parent's Chief Financial and Strategic Officer and the
Company's Chief Executive Officer then discussed Parent's reasons for the
reduced offer and the Company provided Parent with additional information that
resulted in Parent resubmitting its $4.16 offer.
On the evening of January 2, 2001, the Board of Directors of the Company met
again to discuss Parent's acquisition of the Company. The meeting adjourned late
in the evening of January 2, 2001 and reconvened the next morning. Following the
Board meeting, legal counsel for the Company conducted several conversations
with legal counsel for Parent regarding questions that had arisen in the Board
meeting.
Negotiations continued throughout the day on January 3, 2000. As part of
these negotiations, the Company's Chief Executive Officer agreed to enter into
an agreement with the Company to reduce the amount of indebtedness owed by him
to the Company by $15,000 and to provide for his accelerated repayment of the
remaining $50,000 of indebtedness to the Company upon consummation of the
Merger. The Board adjourned its meeting in the afternoon of January 3 and
reconvened in the late afternoon of January 3. At this meeting the directors of
the Company received an opinion as to the fairness of the consideration to be
offered in the Offer and the Merger from a financial point of view, issued by
Legg Mason, and determined that the Offer and the Merger were fair to, and in
the best interests of, the Company and its stockholders (other than Parent,
Purchaser or their affiliates and the Key Stockholders) and unanimously approved
and declared advisable the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger. Following the Board's approval,
officers of the Company and Parent signed the final Merger Agreement and the Key
Stockholders of the Company signed their Stockholder Agreements with Parent.
The next morning, on January 4, 2001, Parent and the Company issued a joint
press release announcing the signing of the Merger Agreement.
8
<PAGE>
(b)(ii) REASONS FOR THE RECOMMENDATION BY THE BOARD OF DIRECTORS
In reaching its conclusions and recommendation described above, the Board
considered a number of factors, including without limitation the following
material factors:
1. Information with regard to the financial condition, results of
operations, competitive position, business and prospects of the Company, as
reflected in the Company's projections, current economic and market
conditions (including current conditions in the industry in which the
Company is engaged) and the going concern value of the Company.
2. The familiarity of the Board with the business, results of
operations, properties and financial condition of the Company and the nature
of the industry in which its operates.
3. The possible alternatives to the Offer and the Merger, including
continuing to operate the Company as an independent entity and the risk
associated therewith.
4. The limitations on public and private sources of capital for
technology companies in general, and for internet travel companies
specifically.
5. The Board's perception that changes that were occurring in the
business model for internet travel companies would require additional
capital in the near future for the Company to remain competitive and the
lack of assurance that such capital would be available on reasonable terms
or that the Company could successfully adapt to this changing business
environment even if additional capital was available.
6. The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement.
7. The small amount of outstanding publicly-traded Common Stock, the
lack of institutional stockholders, and the absence of coverage by stock
analysts, which limits the ability of the Company's stockholders to benefit
from a liquid trading market.
8. The historical market price of, and recent trading activity in, the
Shares, particularly the fact that the Offer and the Merger will enable the
stockholders of the Company to realize a premium of in excess of 33% over
the closing price of the Shares on January 3, 2001, the last trading day
prior to the public announcement, and a premium of in excess of 22% over the
average closing price of the Shares for the 60 trading days on which such
securities traded prior to January 3, 2001.
9. The relative high level of interest of the Parent in pursuing a
transaction on reasonable terms, as compared with other potential bidders
who either were unwilling to offer as much value for the Company as Parent
or who were unable to act in a timely manner to consider a possible bid for
the Shares.
10. The fact that the Key Stockholders, holding approximately 40.6% of
the outstanding Common Stock, had agreed to execute Stockholders Agreements
wherein they agreed to tender their shares to the Purchaser pursuant to the
Offer.
11. The opinion, dated January 3, 2001, to the Board, of Legg Mason, to
the effect that, as of that date and based upon and subject to the matters
described in such opinion, the $4.16 per Share cash consideration to be
received in the Offer and the Merger, taken together, by the holders of
Shares was fair, from a financial point of view, to such holders. The full
text of Legg Mason's written opinion dated January 3, 2001, which sets forth
the matters considered and limitations on the review undertaken by Legg
Mason is attached hereto as Schedule I and is incorporated herein by
reference. Legg Mason's opinion is directed only to the fairness, from a
financial point of view, of the $4.16 per Share cash consideration to be
received in the Offer and the Merger, taken together, by the holders of
Shares, other than the Key Stockholders and any
9
<PAGE>
other Stockholder that owns 9% or more of the Company, and is not intended
to constitute, and does not constitute, a recommendation as to whether any
stockholder should tender Shares pursuant to the Offer or as to any other
matter relating to the Offer or the Merger. HOLDERS OF SHARES ARE URGED TO
READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
12. The fact that the structure of the acquisition of the Company by
Purchaser and Parent as provided for in the Merger Agreement involves a cash
tender offer for all outstanding Shares to be commenced within ten business
days of the public announcement of the Merger Agreement to be followed as
promptly as practicable by a merger for the same consideration, thereby
enabling the Company's stockholders to obtain cash for their Shares at the
earliest possible time.
13. The fact that the obligations of Parent and Purchaser to consummate
the Offer and the Merger pursuant to the terms of the Merger Agreement are
not conditioned upon financing.
14. The fact that the terms of the Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent to
signing the Merger Agreement and, if any such proposal were made, the Board,
in the exercise of its fiduciary duties, could determine to provide
information to and engage in negotiations with any other third party.
15. The regulatory approvals required to consummate the Merger,
including any applicable antitrust approvals and the prospects for receiving
such approvals.
16. The fact that in the event that the Board decides to accept an
Acquisition Proposal from a third party, the Board may terminate the Merger
Agreement and pay Parent a termination fee of $2,750,000 inclusive of fees
and expenses. The Board did not believe that such termination provision
would be a significant deterrent to a higher offer by a third party
interested in acquiring the Company.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. The Board did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination.
(c) After reasonable inquiry and to the best of the Company's knowledge,
each executive officer, director and affiliate of the Company currently intends
to tender all Shares, held of record or beneficially owned by such person, to
Purchaser as of the expiration date of the Offer.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company has retained Legg Mason as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of Legg Mason's engagement,
the Company has agreed to pay Legg Mason for its services a financial advisory
fee which includes an initial fee of $75,000 (one-half of which is creditable
against the portion of the fee earned on any transaction consideration over
$50 million) plus $750,000 payable upon the consummation of a transaction, plus
an amount equal to 2% of that portion of the transaction consideration which
exceeds $50 million, plus $150,000 for the issuance of a fairness opinion
letter. The Company has also agreed to reimburse Legg Mason for reasonable
out-of-pocket expenses, including document and presentation material and
expenses of counsel, in an amount not to exceed $35,000, and to indemnify Legg
Mason and certain related parties against certain liabilities arising out of
Legg Mason's engagement.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
10
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
On November 22, 2000, Ross Summers, an executive officer of the Company,
purchased 1,000 shares of Common Stock from an unaffiliated party on the open
market for $1.968 per share. On the same date, William Perkin, a director of the
Company, purchased 2000 shares of Common Stock from an unaffiliated party on the
open market for $2.1875 per share.
On December 1, 2000, Jeff Wasson, Chief Executive Officer of the Company,
sold 53,333 shares of Common Stock to Mr. Summers, an executive officer of the
Company. On the same date, Mr. Wasson sold 53,333 shares of Common Stock to
Christopher Kuhn, an executive officer of the Company; and 66,667 shares to H.
Whit Ehrler, an executive officer and director of the Company; and 30,667 shares
to an unaffiliated party. All of these sales were at $0.75 per share, and were
privately negotiated transactions.
On December 22, 2000, Jerry Rutherford, a director of the Company, sold
40,000 shares of Common Stock to Mr. Ehrler, an executive officer and director
of the Company, and 10,000 shares of Common Stock to Michael Bauer, an executive
officer of the Company, for $1.00 per share, in a private transaction.
Except for the issuance of Shares upon exercise of outstanding options and
except as described in the foregoing paragraphs, no transactions in Shares have
been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by an executive officer, director or affiliate of the
Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
1. Except as set forth above or in this Schedule 14D-9, no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to: (1) a tender offer for or other acquisition of the Company's
securities by the Company, any subsidiary of the Company or any other person;
(2) any extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company; (3) any purchase, sale or transfer of a
material amount of assets of the Company; or (4) any material change in the
present dividend rate or policy, or indebtedness or capitalization, of the
Company.
2. Except as described in Item 3 or 4(a) or (b) above (the provisions of
which are hereby incorporated by reference), there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(1) above.
ITEM 8. ADDITIONAL INFORMATION.
1. The Information Statement attached as Schedule II hereto is being
furnished in connection with the possible designation by Purchaser, pursuant to
the Merger Agreement, of certain persons to be appointed to the Board other than
at a meeting of the Company's stockholders.
2. Minimum Condition
The Tender Offer is subject to numerous conditions, including a minimum
condition (the "Minimum Condition") that requires Parent, in response to the
Offer, to receive a number of shares which, together with the shares of Company
Common Stock already owned by Parent and Purchaser, would constitute a majority
of the Common Stock outstanding. As a prerequisite to Parent and Purchaser
signing the Merger Agreement, Parent and Purchaser required holders of
approximately 40.6% of the outstanding Common Stock to sign Stockholder
Agreements, which require the Key Stockholders to tender their shares to Parent
in response to the Offer. When added to the approximately 9.9% of the
outstanding Common Stock already held by Parent, these shares, if tendered
11
<PAGE>
in accordance with the Stockholder Agreements, would cause the Minimum Condition
to be met. Accordingly, Parent will have the ability to approve the Merger
without the affirmative vote of any other stockholder.
3. Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203
("Section 203") of the Delaware General Corporation Law ("DGCL"). Under
Section 203, certain "business combinations" between a Delaware corporation
whose stock is publicly traded or held of record by more than 2,000 stockholders
and an "interested stockholder" are prohibited for a three-year period following
the time that such a stockholder became an interested stockholder, unless
(i) the corporation has elected in its original certificate of incorporation not
to be governed by Section 203 (the Company did not make such an election),
(ii) the transaction in which the stockholder became an interested stockholder
or the business combination was approved by the Board of Directors of the
corporation before the other party to the business combination became an
interested stockholder, (iii) upon consummation of the transaction that made it
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan) or (iv) the business combination
was approved by the Board of Directors of the corporation and ratified by
66 2/3% of the voting stock which the interested stockholder did not own. The
term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an "interested stockholder's" percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with affiliates and associates, owns (or, if such stockholder is an affiliate of
the corporation, within three years prior, did own) 15% or more of a Delaware
corporation's voting stock.
In accordance with the Merger Agreement and Section 203, the Board approved
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement and, therefore, the restrictions of Section 203 are inapplicable to
the Offer, the Merger and the related transactions.
4. Short Form Merger
If Purchaser acquires, pursuant to the Offer or otherwise (including the
shares of Common Stock beneficially owned by Parent prior to the Offer), at
least 90% of the then-outstanding shares of Common Stock, under DGCL,
Purchaser's board of directors will be able to, and the Merger Agreement will
require it to, adopt a plan of merger to effect the Merger without a vote of the
Company's stockholders. If Purchaser does not acquire (including its prior
holdings and the prior holdings of Parent) at least 90% of the then-issued and
outstanding Shares pursuant to the Offer or otherwise, a vote of the
stockholders will be required under DGCL to effect the Merger, and a
significantly longer period of time will be required to effect the Merger.
Parent, Purchaser and the Company have agreed to take all necessary and
appropriate action to cause the Merger to become effective as promptly as
practicable after the consummation of the Offer.
5. The Purchaser's Designation of Persons to be Elected to the Board of
Directors.
The Information Statement attached as Schedule II to this Statement is being
furnished in connection with the possible designation by the Purchaser, pursuant
to the terms of the Merger Agreement, of certain persons to be elected to the
Board other than at a meeting of the Company's stockholders.
12
<PAGE>
6. Appraisal Rights.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, Stockholders will have the rights under Section 262
of the DGCL to dissent and demand appraisal of, and to receive payment in cash
for the fair value of, their Shares. Such rights to dissent, if all statutory
procedures are complied with, could lead to a judicial determination of the fair
value (excluding any value arising from the Merger) required to be paid in cash
to dissenting stockholders for their Shares. Any judicial determination of the
fair value (excluding any value arising from the Merger) required to be paid in
cash to dissenting stockholders for their Shares. Any judicial determination of
the fair value of the Shares could be based upon considerations other than or in
addition to the Merger Consideration and the market value of the Shares,
including asset values and the investment value of the Shares. The value as so
determined could be more or less than the Merger Consideration and the market
value of the Shares, or less than the Merger Consideration. Failure to precisely
follow the steps required by Section 262 of the DGCL for the perfection of
appraisal rights may result in the loss of those rights.
If a stockholder who demands appraisal under Section 262 of the DGCL later
withdraws his demand for appraisal, the Shares of that stockholder will be
converted into the right to receive the Merger Consideration in accordance with
the Merger Agreement. A stockholder may withdraw his demand for appraisal by
delivering a written withdrawal of such demand for appraisal and acceptance of
the Merger to the Company.
ITEM 9. EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Offer to Purchase, dated January 12, 2001.(1)
Exhibit 2 Form of Letter of Transmittal.(1)
Exhibit 3 Merger Agreement, dated January 3, 2001, among Hotel
Reservations Network, Inc., Wonsub, Inc. and TravelNow.com
Inc.(2)
Exhibit 4 Joint Press Release of Hotel Reservations Network, Inc. and
TravelNow.com Inc., dated January 4, 2001.(2)
Exhibit 5 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Jeffrey
A. Wasson.(1)
Exhibit 6 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Jerry
Rutherford.(1)
Exhibit 7 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Ross
Summers.(1)
Exhibit 8 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Marvin
McDaniel.(1)
Exhibit 9 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Donna
McDaniel.(1)
Exhibit 10 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Jamie
Coppedge.(1)
Exhibit 11 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and
Christopher Lynch.(1)
Exhibit 12 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and William
Perkin.(1)
Exhibit 13 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and H. Whit
Ehrler.(1)
Exhibit 14 Stockholder Agreement, dated January 3, 2001 by and among
Hotel Reservations Network, Inc., Wonsub, Inc. and Chris
Kuhn.(1)
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Exhibit 15 Conditional Amendment to Employment Agreement, dated January
3, 2001 by and among TravelNow.com Inc., Hotel Reservations
Network, Inc. and Jeffrey A. Wasson.(1)
Exhibit 16 Conditional Amendment to Employment Agreement, dated January
3, 2001 by and among TravelNow.com Inc., Hotel Reservations
Network, Inc. and Whit Ehrler.(1)
Exhibit 17 Conditional Amendment to Employment Agreement, dated January
3, 2001 by and among TravelNow.com Inc., Hotel Reservations
Network, Inc. and Michael Bauer.(1)
Exhibit 18 Conditional Amendment to Employment Agreement, dated January
3, 2001 by and among TravelNow.com Inc., Hotel Reservations
Network, Inc. and Chris Kuhn.(1)
Exhibit 19 Exclusivity Agreement, dated December 29, 2000 by and among
TravelNow.com Inc. and Hotel Reservations Network, Inc.(2)
Exhibit 20 Confidentiality Agreement, dated December 20, 2000, by and
between Hotel Reservations Network, Inc. and TravelNow.com
Inc.(2)
Exhibit 21 Affiliate Agreement, dated May 31, 2000, between Hotel
Reservations Network, Inc. and TravelNow.com Inc.(1)
</TABLE>
------------------------
(1) Filed as an exhibit to Hotel Reservations Network, Inc. and Wonsub, Inc.'s
Tender Offer Statement on Schedule TO, dated January 12, 2001, and
incorporated herein by reference.
(2) Previously filed on January 10, 2001 as an exhibit to TravelNow.com Inc.'s
Form 8-K.
14
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C>
TRAVELNOW.COM INC.
/S/ JEFFREY A. WASSON
------------------------------------------------
Name: Jeffrey A. Wasson
Title: Chief Executive Officer
Dated: January 12, 2001
</TABLE>
15
<PAGE>
SCHEDULE I
January 3, 2001
The Board of Directors
TravelNow.com Inc.
318 Park Central East, Suite 418
Springfield, Missouri 65806
Attention: Jeffrey A. Wasson
Chief Executive Officer and Chairman of the Board of Directors
Members of the Board of Directors:
We are advised that TravelNow.com Inc. ("TNOW" or the "Company") is
considering entering into an Agreement and Plan of Merger (the "Agreement"), to
be dated the date hereof with Hotel Reservations Network, Inc. ("ROOM") and a to
be named subsidiary of ROOM ("Subsidiary"). Under the terms of the Agreement,
ROOM will commence a tender offer for all outstanding shares of TNOW common
stock for $4.16 per share in cash following which Subsidiary will merge with and
into TNOW, resulting in all untendered shares of TNOW common stock representing
the right to receive $4.16 in cash, all on terms and conditions more fully set
forth in the Agreement (the tender offer and merger are collectively referred to
herein as the "Transaction").
You have requested our opinion, as investment bankers, as to the fairness to
the stockholders of the outstanding common stock of the Company, other than the
stockholders entering into the Stockholder Agreement contemplated by the
Agreement and any other stockholder that owns 9% or more of the Company (the
"unaffiliated stockholders"), from a financial point of view, of the
consideration to be received by the stockholders of the Company in the
Transaction.
For purposed of rendering this opinion, we have, among other things:
(i) reviewed a draft of the form of the Agreement and certain related
documents;
(ii) reviewed the audited consolidated financial statements of TNOW for
the twelve-month periods ended March 31, 2000 and March 31, 1999;
(iii) reviewed the unaudited financial statements of TNOW for the
three-month and six-month periods ended September 30, 2000;
(iv) reviewed the unaudited and preliminary financial statements of TNOW
for the months ended October 31, 2000 and November 30, 2000 (which,
we have been informed by management of TNOW, are the most recent
available financial statements), and certain non-public financial
and other information concerning TNOW;
(v) reviewed certain publicly available information concerning TNOW, in
addition to those items specified in (ii) and (iii) above;
(vi) reviewed and analyzed certain publicly available financial and
stock market data with respect to operating statistics relating to
selected public companies that we deemed relevant to our inquiry;
(vii) review the reported prices and trading activity of the
publicly-traded securities of TNOW;
(viii) analyzed certain publicly available information concerning the
terms of selected merger and acquisition transactions that we
considered relevant to our inquiry;
(ix) held meetings and discussions with certain officers and employees
of TNOW concerning the operations, financial condition and future
prospects of TNOW; and
16
<PAGE>
(x) conducted such other financial studies, analyses and investigations
and considered such other information as we deemed necessary or
appropriate for purposes of our opinion.
In connection with our review, we have assumed and relied upon the accuracy
and completeness of all financial and other information supplied to us by TNOW
or publicly available, and we assume no responsibility for independent
verification of such information. We have further relied upon the assurances of
management of TNOW that they are unaware of any facts that would make such
information incomplete or misleading. We have also relied upon the management of
TNOW, as to the reasonableness and achievability of any and all projected
financial information (and the assumptions and bases therein) relating to TNOW,
and we have assumed that any financial projections have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management as to the future operating performance of TNOW. Any such financial
projections would be based on numerous variables and assumptions that are
inherently uncertain, including without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
We have not been requested to make, and have not made, an independent
appraisal or evaluation of the assets, properties or liabilities of TNOW and we
have not been furnished with any such appraisal or evaluation. We have not
reviewed any of the books and records of TNOW or assumed any responsibility for
conducting a physical inspection of the properties or facilities of TNOW.
Further, this opinion is based upon prevailing market conditions and other
circumstances and conditions existing on the date hereof. We have assumed that
the definitive Agreement will not differ materially from the draft we reviewed
and the Transaction will be consummated on the terms and conditions described in
the form of the Agreement reviewed by us. It is understood that subsequent
developments may affect the conclusions reached in this opinion and that we do
not have any obligation to update, revise or reaffirm this opinion.
It is understood that this letter is directed to the Company's Board of
Directors. The opinion expressed herein is provided for the use of the Company's
Board of Directors in its evaluation of the proposed Transaction and does not
constitute a recommendation to any stockholder of the Company either of the
Transaction or as to whether any stockholder should tender shares in the related
tender offer. In addition, this letter does not constitute a recommendation of
the Transaction over any other alternative transaction which may be available to
the Company to proceed with or effect the Transaction. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without the prior written consent of Legg Mason Wood Walker,
Incorporated; provided that this Opinion may be included in its entirety in any
filing made by the Company with the Securities and Exchange Commission with
respect to the Transaction.
Legg Mason is currently providing investment banking services to TNOW and
will receive a fee for its services upon the sale of the Company, which is
contingent upon the closing of the sale. In addition, Legg Mason will receive a
separate fee for providing this Opinion to the Board of Directors of TNOW.
17
<PAGE>
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the consideration to be received by the unaffiliated
stockholders of TNOW in the Transaction is fair to such stockholders from a
financial point of view.
<TABLE>
<S> <C>
Very truly yours,
/s/ LEGG MASON WOOD WALKER, INCORPORATED
---------------------------------------------
Legg Mason Wood Walker, Incorporated
</TABLE>
18
<PAGE>
SCHEDULE II
TRAVELNOW.COM INC.
318 PARK CENTRAL EAST, SUITE 418
SPRINGFIELD, MISSOURI 65806
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being furnished to holders of the common
stock, par value $0.01 per share ("Common Stock" or the "Shares"), of
TravelNow.com Inc., a Delaware corporation (the "Company"), in connection with
the possible designation by Wonsub, Inc., a Delaware corporation ("Purchaser")
and wholly-owned subsidiary of Hotel Reservations Network, Inc. a Delaware
corporation ("Parent"), of at least a majority of the board of directors of the
Company (the "Board") pursuant to the terms of an Agreement and Plan of Merger,
dated January 3, 2001 (the "Merger Agreement"), by and among the Company,
Purchaser and Parent. This Information Statement is part of the
Solicitation/Recommendation Statement on Schedule 14D-9 (as amended from time to
time, the "Schedule 14D-9") of the Company. Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the
Schedule 14D-9. THIS INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY STOCKHOLDERS.
Pursuant to the Merger Agreement, after Purchaser has accepted for payment,
and paid for, Shares pursuant to the Offer (the "Funding Date"), and from time
to time thereafter, Purchaser has the right to have persons designated by it
become directors of the Company (the "Purchaser Designees") so that the total
number of such persons equals the number, rounded up to the next whole number,
which is the product of (i) the total number of directors on the Board of
Directors of the Company and (ii) the percentage that such number of Shares so
purchased bears to the total number of Shares then outstanding. The Merger
Agreement provides that the Company will promptly take all actions necessary to
cause such Purchaser Designees to be so elected, including (a) increasing the
size of the Board or (b) using its reasonable efforts to seek the resignations
of one or more existing directors (except that there must be no fewer than two
Continuing Directors (as defined below)). Following the election or appointment
of Purchaser Designees and prior to the time the Merger becomes effective (the
"Effective Time") if any of the directors of the Company then in office is a
director of the Company on the date hereof (a "Continuing Director"), any
amendment or termination of the Merger Agreement which requires action by the
Company, any extension of time for the performance of any of the obligations or
other acts of Parent or Purchaser under the Merger Agreement and any exercise or
waiver of any of the provisions of the Merger Agreement providing rights or
remedies to the Company, will require the affirmative vote of a majority of the
Continuing Directors.
PURCHASER DESIGNEE BIOGRAPHICAL INFORMATION
Purchaser has informed the Company that it will choose the Purchaser
Designees from the individuals shown in the table below to serve on the Board.
The information contained herein has been furnished to the Company by Purchaser
and the Company assumes no responsibility for the accuracy or completeness of
such information. None of the Purchaser Designees is a director of, or holds any
position with, the Company. To the best of Purchaser's knowledge, except as set
forth under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and
in the accompanying Offer to Purchase, no Purchaser Designee or any of its
respective associates beneficially owns any equity securities or rights to
acquire securities of the Company, nor has any such
19
<PAGE>
person been involved in any transaction with the Company or any of its
directors, executive officers or affiliates that is required to be disclosed
pursuant to the rules and regulations of the Commission.
PROPOSED DIRECTOR LIST
<TABLE>
<CAPTION>
NAME AGE PRESENT OCCUPATION OR EMPLOYMENT
---- --- --------------------------------
<S> <C> <C>
Robert Diener............................. 42 President and Treasurer, Hotel
Reservations Network, Inc.
Victor Kaufman............................ 57 Vice Chairman, USA Networks, Inc.
Dara Khosrowshahi......................... 31 Executive Vice President, Operation and
Strategic Planning, USA Networks, Inc.
David Litman.............................. 43 Chief Executive Officer, Hotel
Reservations Network, Inc.
Jon Miller................................ 44 President and Chief Executive Officer of
USA Information and Services, a division
of USA Networks, Inc.
Greg Porter............................... 35 General Counsel and Secretary, Hotel
Reservations Network, Inc.
Mel Robinson.............................. 45 Chief Financial and Strategic Officer,
Hotel Reservations Network, Inc.
Michael Sileck............................ 41 Chief Financial Officer, USA Networks,
Inc.
</TABLE>
------------------------
Mr. Diener serves as Parent's President and as one of its directors. He
founded Parent's predecessor business with Mr. Litman in 1991 and previously
served as that entity's President and Treasurer.
Mr. Kaufman is a director of Parent. Since October 1999, Mr. Kaufman has
served as Vice Chairman of USA Networks, Inc. ("USAi"). From January 1997 until
October 1999, Mr. Kaufman served in the Office of the Chairman for USAi and,
from November 1997 until October 1999, he served as Chief Financial Officer for
USAi. Prior to that time, since 1992, he served as Chairman and Chief Executive
Officer of Savoy.
Mr. Khosrowshahi is a director of Parent. Mr. Khosrowshahi has served as
Executive Vice President, Operation and Strategic Planning and a director of
USAi since June 2000. Previously, from August 1999, Mr. Khosrowshahi was
President of USA Networks Interactive ("USANi"), a division of USAi. Mr.
Khosrowshahi was the Vice President of Strategic Planning for USAi and USANi LLC
from March 1998 to August 1999. Prior to joining USAi, from 1991 to 1998, he was
employed by Allen & Company Incorporated where he was a Vice President from 1995
to 1996 and Director from 1996 to 1998.
Mr. Litman serves as Parent's Chief Executive Officer and as one of its
directors. He co-founded Parent's predecessor business with Mr. Diener in 1991
and previously served as that entity's Chief Executive Officer.
Mr. Miller is a director of Parent. Since June 2000, Mr. Miller has served
as President and Chief Executive Officer of USA Information and Services, a
division of USAi. Previously, from October 1999, Mr. Miller served as the
President and Chief Executive Officer of USA Electronic Commerce and Services, a
division of USAi. From July 1997 to October 1999, Mr. Miller was a President and
Chief Executive Officer of USA Broadcasting, a division of USAi. Prior to July
1997, Mr. Miller was the Managing Director of Nickelodean International.
20
<PAGE>
Mr. Porter has served as Parent's General Counsel and Secretary since June
2000. Previously, from August 1999, Mr. Porter was an attorney with the law firm
of Baker & McKenzie. From 1995 to 1999, Mr. Porter was Vice President--Legal of
Harken Energy Corporation, an oil and gas exploration company.
Mr. Robinson has served as Parent's Chief Financial and Strategic Officer
since September 2000. Previously, from 1997, Mr. Robinson was Senior Vice
President of Travel Services International, a leisure travel distribution firm.
From 1994 to 1997, Mr. Robinson was Chief Financial Officer of Cruises Only.
Mr. Sileck is a director of Parent. Since October 1999, Mr. Sileck has
served as Chief Financial Officer of USA Networks, Inc. Before joining USAi, Mr.
Sileck was Vice President of Finance at Sinclair Broadcast Group from June 1996
to August 1999. From July 1990 to June 1996, he served as Director of Finance at
River City Broadcasting. L.P.
VOTING SECURITIES OF THE COMPANY
As of January 8, 2001, there were issued and outstanding 10,961,261 shares
of Common Stock, each of which entitles the holder to one vote.
BOARD OF DIRECTORS, ACQUISITION DESIGNEES
AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board. The following
sets forth as to each director his age (as of January 8, 2001), principal
occupation and business experience, the period during which he has served as a
director, any family relationship with any other director or executive officer
of the Company and the directorships currently held by him in corporations whose
shares are publicly registered.
<TABLE>
<CAPTION>
SERVED AS A
POSITION DIRECTOR YEAR TERM
NAME AGE WITH COMPANY SINCE EXPIRES
---- -------- ------------------------------ ----------- ----------
<S> <C> <C> <C> <C>
Jeffrey Alan Wasson........... 27 Chief Executive Officer & 1999 2001
Director
H. Whit Ehrler................ 59 Vice President & Chief 1999 2001
Financial Officer, Director
William Perkin (1)(2)(3)...... 44 Director 1999 2001
Jerry Rutherford (1)(2)(3).... 57 Director 1999 2001
Antoine Toffa (3)............. 35 Director 2000 2001
</TABLE>
------------------------
(1) Member of the Compensation Committee
(2) Member of the Stock Option Committee
(3) Member of the Audit Committee
Jeffrey Alan Wasson was a founding member of the Company in May 1995.
Mr. Wasson was elected to the Board of Directors on August 6, 1999. Currently,
Mr. Wasson serves as Chief Executive Officer of the Company. From August of 1991
until May of 1995, Mr. Wasson was a student at the University of Missouri in
Columbia, Missouri, majoring in Travel and Tourism.
H. Whit Ehrler joined the Company as Vice President & Chief Financial
Officer on August 23, 1999. Mr. Ehrler was elected to the Board of Directors on
October 22, 1999. Mr. Ehrler was Vice President, Finance & Administration of
Carrollton Graphics, Inc. in Carrollton, Ohio from June 1997 through
August 1999. From 1994 through June, 1997, Mr. Ehrler was with Helson Ehrler
Investment Partners in Stamford, Connecticut.
21
<PAGE>
William Perkin was appointed to the Company's Board of Directors on
October 22, 1999, to fill a newly created seat on the Board. Since February 1,
2000, Mr. Perkin has been the Chief Executive Officer of Eclectic
Enterprises, Inc. dba Way2bid.com. From 1988 to January 1999, Mr. Perkin was the
sole owner of Perkin Marketing Services, Inc., an advertising marketing company
with principal offices located in Springfield, Missouri.
Jerry Rutherford was appointed to the Company's Board of Directors on
October 22, 1999, to fill a newly created seat on the Board. Since March of
1995, Mr. Rutherford has operated several businesses owned entirely by
Mr. Rutherford, including ERA Rutherford Realtors, located in Springfield,
Missouri. Mr. Rutherford was a Vice President and General Manager of TeleCable
of Springfield, Inc. in Springfield, Missouri from April 19, 1979, until
March 1995, at the time of its acquisition by Telecommunications, Inc. in
February of 1995.
Antoine Toffa was appointed to the Company's Board of Directors on May 3,
2000, to fill a vacated seat on the Board. Mr. Toffa holds a Masters degree in
Business Administration from Harvard Business School. He is also a member of the
Board of Directors of 800 Travel Systems, Inc. In June 1996, Mr. Toffa founded
Trip.com, Inc., and acted as President and Chief Executive Officer of
Trip.com, Inc. until September 1999. Prior to June 1996, Mr. Toffa acted as a
consultant for Time Warner Interactive and Mars & Co. In January 2000,
Mr. Toffa was chosen as the Person of the Year in interactive travel by
Interactive Travel Report. Mr. Toffa was also voted one of 100 rising stars in
the travel industry by Travel Agent Magazine in April 1999.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings and acts by written consent when
important matters require Board action between scheduled meetings.
During the fiscal year ended March 31, 2000, the Board met five times.
During the fiscal year ended March 31, 2000, all directors attended more than
75% of all the meetings of the Board. The Board has an audit committee, a
compensation committee and a stock option committee, as described below. The
Board does not have a nominating committee or a committee performing the
functions of a nominating committee.
AUDIT COMMITTEE
In December 1999, the Board of Directors formed the audit committee for the
purpose of reviewing the Company's internal accounting procedures and consulting
with and reviewing the services provided by the Company's independent public
accountants, Deloitte & Touche LLP ("Deloitte & Touche"). Currently, the audit
committee consists of the three independent directors, William Perkin, Jerry
Rutherford and Antoine Toffa. All three members of the audit committee are
independent as independence is defined in Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. The audit committee did
not meet during the fiscal year ended March 31, 2000. The Board of Directors has
adopted a written charter for the audit committee, a copy of which charter was
attached as an appendix to the Company's Definitive Proxy Statement dated
September 6, 2000, and which is incorporated herein by reference.
COMPENSATION COMMITTEE
In December 1999, the Board of Directors formed the compensation committee.
The compensation committee reviews and recommends to the Board the compensation
and benefits of all of the officers of the Company and reviews general policy
relating to compensation and benefits of the Company's employees. The
compensation committee consists of two of the independent directors,
22
<PAGE>
William Perkin and Jerry Rutherford. The compensation committee met once during
the fiscal year ended March 31, 2000.
STOCK OPTION COMMITTEE
In May 2000, the Board of Directors formed the stock option committee. The
stock option committee administers the TravelNow.com Inc. 2000 Omnibus Stock
Incentive Plan and grants stock options pursuant to such plan. Currently, the
stock option committee consists of two of the independent directors, William
Perkin and Jerry Rutherford.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company receive no compensation in
their capacities as directors.
In exchange for agreeing to serve as a member of the Board of Directors,
Antoine Toffa was granted options exercisable at any time after May 3, 2000, to
acquire 20,000 shares of Common Stock at $8.25 per share. The Company's other
non-employee directors are not currently compensated for serving in their
capacity as directors.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth, as of January 8, 2001, certain information
regarding the Company's executive officers, each of whom is expected to serve in
such capacity until the consummation of the Merger. Officers are elected
annually by the Board of Directors and serve at its discretion.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Jeffrey A. Wasson......................... 27 Chief Executive Officer & Director
H. Whit Ehrler............................ 59 Vice President, Chief Financial Officer &
Director
Christopher R. Kuhn....................... 34 Vice President & Chief Information Officer
Ross E. Summers........................... 48 Vice President of Corporate Relations
Marvin McDaniel........................... 51 Vice President of Travel Services
Michael Bauer............................. 31 Vice President of Sales and Marketing &
Chief Operating Officer
</TABLE>
BUSINESS EXPERIENCE
See "Board Biographical Information" above for biographical information
regarding Messrs. Wasson and Ehrler.
Christopher R. Kuhn joined the Company on July 12, 1999, as Vice President
and Chief Information Officer. Prior to joining the Company, Mr. Kuhn was
Director of Web Development for Compaq Computer from August 1998 until
July 1999, Manager of Web Service Solutions with Digital Equipment from
April 1998 until August 1998 and Manager of Web Engineering for MCI
Telecommunications from November 1989 until April 1998.
Ross Summers joined the Company as General Manager in September 1999.
Mr. Summers was appointed Vice President of the Company on May 3, 2000 and
Secretary of the Company on June 7, 2000. Mr. Summers has 18 years of
telecommunications management experience, most recently as General Manager of
TCI and AT&T Cable Services. Mr. Summers was an original investor in the
Company. He is a graduate from the University of Missouri-Columbia.
Marvin McDaniel officially became an employee of the Company in
February 2000. Mr. McDaniel has more than 26 years of experience in the travel
industry as owner of McDaniel Travel, Inc., one of the largest full-service
travel agencies in southern Missouri. Prior to joining the Company,
23
<PAGE>
Mr. McDaniel was instrumental in the Company's growth, providing travel
expertise and a number of travel-related facilities in the early stages of the
Company's development. Mr. McDaniel is a graduate of Southwest Missouri State
University with a major in mathematics.
Michael Bauer joined the Company as Vice President of Sales & Marketing in
April 2000 and has six years of travel industry experience. Mr. Bauer was an
Account Executive for Ambassadors Performance Group from September 1998 through
April 2000. From 1994 through 1998, Mr. Bauer was with Maritz Travel Company
where he held various positions. From 1993 through 1994, Mr. Bauer was with
Marketsource in Chicago, Illinois. Mr. Bauer held various positions with Walt
Disney World, in Orlando Florida from 1991 through 1993. He attended the
University of Iowa in Iowa City, Iowa, majoring in Leisure Studies.
24
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 8, 2001, regarding
the beneficial ownership of Common Stock by (i) each person or group known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director and nominee for director of the Company, (iii) each of
the Company's Named Officers (as defined under "EXECUTIVE COMPENSATION--Summary
Compensation Table") and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
JANUARY 8, 2001 (1)
--------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- --------
<S> <C> <C>
Hotel Reservations Network, Inc (2)......................... 1,080,000 9.9
8140 Walnut Hill Lane, Suite 800
Dallas, Texas 75231
Jeffrey Wasson (3).......................................... 1,692,067 15.6
Jerry Rutherford (3)........................................ 1,296,569 11.9
Ross Summers (3)(4)......................................... 509,502 4.7
Marvin McDaniel (3)(4)...................................... 209,533 1.9
H. Whit Ehrler (3)(4)(5).................................... 173,334 1.6
Christopher R. Kuhn (3)(4)(6)............................... 120,000 1.1
Michael Bauer (3)(4)........................................ 10,000 0.1
William Perkin (3).......................................... 110,181 1.0
Antoine Toffa (3)(7)........................................ 20,000 0.2
All directors and executive officers as a group............. 3,987,852 36.7
</TABLE>
------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting and
investment power with respect to securities.
(2) Information based on a Report on Schedule 13D dated December 28, 2000, which
was filed jointly with the Commission by Parent and USA Networks, Inc.
("USAi"). All shares reflected in the table are beneficially owned by
Parent. As a majority owner of Parent, USAi may be deemed to be a beneficial
owner of such shares. Barry Diller, the Chairman and Chief Executive Officer
of USAi, Liberty Media Corporation, Universal Studios, Inc., The Seagram
Company Ltd. and USAi are parties to a stockholders agreement (the
"Stockholders Agreement") relating to USAi. Through his own holdings and the
Stockholders Agreement, Mr. Diller has the right, directly or indirectly, to
control approximately 74% of the outstanding total voting power of USAi. As
a result, except with regard to certain specified matters, Mr. Diller
generally has the ability to control the outcome of all matters submitted to
a vote of USAi's stockholders. Mr. Diller disclaims beneficial ownership of
any shares of Company stock beneficially owned by Parent and USAi. All
shares are held subject to shared voting power and dispositive power between
Parent and USAi.
(3) Messrs. Wasson, Summers, Ehrler, Kuhn, Bauer, McDaniel and Toffa have
elected to use as their address the address of TravelNow, 318 Park Central
East, Suite 418, Springfield, Missouri 65806. Mr. Rutherford's address is:
3222 S. Campbell Avenue, Suite MM, Springfield, Missouri 65807.
Mr. Perkin's address is: 3343 E. Montclair, Springfield, Missouri 65804.
(4) On May 3, 2000, the Board of Directors approved the TravelNow.com Inc. 2000
Omnibus Stock Incentive Plan and these individuals were granted stock
options equal to their respective annual salary, divided by the closing sale
price of the Company's common stock on May 3, 2000. The stock options vest
in three equal annual installments beginning on the first anniversary of the
initial grant date, which was May 3, 2000. Additionally, on December 1, 2000
these individuals were granted options in the same amount at a price of
$0.71875 and again on December 31, 2000
25
<PAGE>
at a price equal to their respective annual salary, divided by the closing
sale price of the Company's Common Stock on December 31, 2000.
(5) This number includes 66,667 shares of common stock which Mr. Ehrler has the
right to acquire from stock options, as of August 23, 2000.
(6) This number includes 66,667 shares of common stock which Mr. Kuhn has the
right to acquire from stock options, as of July 12, 2000.
(7) This amount represents 20,000 shares of common stock which Mr. Toffa has the
right to acquire from stock options, as of May 3, 2000.
Certain individual holders of the Company's Common Stock have entered into a
Standstill Agreement with the Company, effective July 13, 2000. The Standstill
Agreement provides that such individual holders shall not transfer or sell their
shares of common stock, except in privately negotiated transactions, for a
period of one year, beginning on the effective date of the Standstill Agreement.
The individual holders, however, may pledge or encumber up to 30% of their
shares of common stock during such one year period. This Standstill Agreement
affects approximately 7,300,000 shares of the Common Stock.
On December 18, 2000, certain individual holders of Common Stock entered
into a Letter Agreement which provides that such individual holders will hold
their Common Stock and will not vote or dispose of their Common Stock in any
transaction not approved by the Board of Directors of the Company, until
April 30, 2001. Accordingly, these individual holders may be deemed to be a
"group" for purposes of Section 13(d)(3) of the Exchange Act. This Letter
Agreement affects 4,453,884 shares, or 40.6% of the outstanding Common Stock.
MATERIAL ADVERSE INTERESTS
No director, officer or affiliate of the Company, or any owner of record or
beneficially or more than five percent of the Common Stock of the Company, or
any associate of any such director, officer, affiliate of the Company, or
security holder is a party adverse to the Company or has any material interest
adverse to the company.
CHANGES IN CONTROL
On July 23, 1999, an Agreement and Plan of Merger was consummated between
TravelNow.com Inc., a Missouri corporation ("TravelNow of Missouri"), and the
Company, which, at that time, was known as Sentry Accounting, Inc. ("Old
Sentry"). Pursuant to the Agreement and Plan of Merger, the Company acquired
100% of the issued and outstanding stock of TravelNow of Missouri in exchange
for 1,475,533 shares of restricted Common Stock of the Company. At the time of
the merger, 491,000 shares of Common Stock were freely transferable or
unrestricted and held by shareholders of the Company. After the merger, the
total number of shares of Common Stock issued and outstanding was 1,966,533. On
July 28, 1999, the Company issued a stock dividend of approximately 4.25 shares
for each share outstanding, increasing the total shares of Common Stock from
1,966,533 to 10,324,304 shares issued and outstanding. Pursuant to the merger,
the shareholders of TravelNow of Missouri received approximately 75% of the
Common Stock of the Company. At the time of the filing of the Articles of
Merger, the Company changed its name from Sentry Accounting, Inc. to
TravelNow.com Inc. The transaction consummated between TravelNow of Missouri and
the Company is generally known as a reverse merger. A reverse merger is normally
the result of a merger in which the acquiring corporation (the Company) has less
size and substance than the acquired company (TravelNow of Missouri). The
acquiring corporation (the Company) survives as a legal entity, but the
shareholders of the acquired company (TravelNow of Missouri) obtain a majority
of the voting rights of the combined entity. The substantive effect of the
transaction is thus reversed from the legal effect.
26
<PAGE>
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of the directors or executive
officers of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 2000, the Company made a loan to each of its then Co-Chief
Executive Officers, Jeffrey A. Wasson and John Christopher Noble. Mr. Wasson
received $65,000, and Mr. Noble received $60,000. The loans were made to pay the
taxes related to the restricted stock award each Co-Chief Executive Officer
received on May 18, 1999. Mr. Wasson and Mr. Noble each executed a Promissory
Note in favor of the Company related to their respective loan. Each note is
payable on demand and has an interest rate of 8% per annum.
Since April 1, 1999, the Company has made payments of approximately $325,000
to McDaniel Travel, Inc., a corporation wholly owned by Marvin McDaniel, an
executive officer of the Company, and his wife. The Company made the payments to
purchase travel services, primarily airline tickets, for the Company's use and
for resale in the ordinary course of the Company's business. In the same time
period, the Company has received payments from McDaniel Travel, Inc., of
approximately $578,000, primarily for commissions earned by the Company on the
sale of airline tickets.
On January 2, 2000, TravelNow extended a loan to Whit Ehrler, a director and
officer of the Company, in the amount of $80,000 pursuant to the terms of his
current employment agreement effective August 23, 1999.
EXECUTIVE COMPENSATION
Donald R. Mastropietro served as Chief Executive Officer of Old Sentry from
its inception in June 1996 until September 30, 1998. Mr. Mastropietro did not
receive any compensation during fiscal year 1998. During the fiscal year ended
March 31, 1999, Mr. Mastropietro received compensation of $10,500. Ms. Teresa B.
Crowley served as Chief Executive Officer of Old Sentry from September 30, 1998,
until July 23, 1999. During the fiscal year ending March 31, 1999, Ms. Crowley
received compensation of $3,000. Ms. Crowley did not receive any compensation
during the fiscal year ended March 31, 2000.
The following table summarizes the annual compensation paid during the
fiscal year ended March 31, 2000, to the then Co-Chief Executive Officers.
Because none of the executive officers worked their entire term, no individuals
at the Company received compensation in excess of $100,000 in that fiscal year.
The following table also includes the actual compensation paid during the fiscal
year ended March 31, 2000, to the other executive officers whose salary and
bonus is anticipated to exceed $100,000 annually during the current fiscal year,
for services rendered in all capacities.
27
<PAGE>
ANNUAL SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ ------------------------
YEAR SECURITIES RESTRICTED
ENDED OTHER ANNUAL UNDERLYING STOCK
NAME AND PRINCIPAL POSITION MARCH 31 SALARY ($) BONUS ($) COMPENSATION($) OPTIONS (#) AWARDS (#)
--------------------------- -------- ---------- --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
John Christopher Noble............ 2000 $90,385.00(3) $2,969(9) (2)
Jeff Wasson,...................... 2000 $90,385.00(4) $4,000(9) (2)
Chief Executive Officer
H. Whit Ehrler,................... 2000 $73,500.00(7) (6) 250,000(8)
Vice President & Chief Financial
Officer
Christopher R. Kuhn,.............. 2000 $90,000.00(7) (5) 250,000(8)
Vice President & Chief
Information Officer
Michael Bauer (1)................. 2000 $ 0.00 (2)
Vice President of Sales &
Marketing & Chief Operating
Officer
Marvin McDaniel (1)............... 2000 $26,000.00 (2)
Vice President of Travel
Services
Ross Summers (1).................. 2000 $25,769.18 (2)
Vice President for Corporate
Relations
</TABLE>
------------------------------
(1) Marvin McDaniel, who joined the Company after January 1, 2000, was appointed
as an executive officer on May 3, 2000, and will receive an annual salary of
$104,000. Ross Summers, who joined the Company on September 15, 1999, was
appointed as an executive officer on May 3, 2000 and will receive an annual
salary of $104,000. Mr. Michael Bauer, who joined the Company on April 11,
2000 and was also appointed as an executive officer on May 3, 2000, will
receive an annual salary of $104,000.
(2) For the period covered by this information statement no other annual
compensation had been paid to these executive officers.
(3) John Christopher Noble was a founding member of the Company in May 1995. He
acted as Co-Chief Executive Officer, Secretary and served as a Director
until May 3, 2000, when he resigned from all positions at the Company.
Pursuant to the Mutual Release and Termination Agreement between Mr. Noble
and the Company, Mr. Noble will continue to receive his salary and certain
benefits for a period of 18 months. Direct payments, exclusive of benefits,
to Mr. Noble during this period will total approximately $267,000. Effective
January 1, 2000, Mr. Noble's Employment Agreement was amended to reflect an
increase in his salary to $150,000 per year, as recommended by the
Compensation Committee, comprised of two of the Company's independent
directors.
(4) Mr. Wasson's Employment Agreement has been amended to reflect an increase in
salary to $150,000 per year, effective January 1, 2000, as recommended by
the Compensation Committee, comprised of two of the Company's independent
directors.
(5) The employment agreement with Mr. Kuhn provides that he is eligible to
receive a non-interest bearing loan of $80,000 after the completion of the
first full year of his employment, which year ended July 12, 2000. Upon
completion of a second full year of employment, the loan of $80,000 will be
forgiven and all state and federal income taxes related to such forgiveness
will be grossed-up and paid by the Company at that time. If Mr. Kuhn
voluntarily leaves the Company or is terminated for cause or if he fails to
remain with the Company for the full two-year period, he is obligated to
repay the non-interest bearing loan in thirty-two equal monthly
installments.
(6) The employment agreement with Mr. Ehrler provides that he will receive a
non-interest bearing loan of $80,000 after the completion of his first full
year of employment, which is August 23, 2000. Upon completion of a second
full year of employment, the loan of $80,000 will be forgiven and all state
and federal income taxes related to such forgiveness will be grossed-up and
paid by the Company at that time. If Mr. Ehrler voluntarily leaves the
Company or is terminated for cause or if he fails to remain with the Company
for the full two-year period, he is obligated to repay the non-interest
bearing loan in thirty-two equal monthly installments.
(7) Mr. Kuhn joined the Company on July 12, 1999 and Mr. Ehrler joined the
Company on August 23, 1999.
(8) See the table following the caption "Option Grants as of March 31, 2000."
(9) On May 18, 1999, the Company granted to each of these individuals 792,823
shares of Common Stock, as a bonus for services provided. On the date of
this stock bonus there was no established market value for these securities.
28
<PAGE>
OPTION GRANTS AS OF MARCH 31, 2000.
The following table sets forth information with respect to stock options
granted to each of the named executive officers as of March 31, 2000, including
the potential realizable value over the 5 year term of the options based on
assumed rates of stock appreciation of 5% and 10% compounded annually with
respect to those options. The "Value of Unexercisable In-the-Money-Options" is
based upon a value of $10.25 per share which was the closing price of the
Company's shares on the OTC Bulletin Board on March 31, 2000, minus the per
share exercise price, multiplied by the number of shares underlying the option.
No executive officer exercised stock options during the fiscal year ended
March 31, 2000 and none of the stock options granted to the below named
executives were eligible to be exercised prior to July 12, 2000. These assumed
rates of appreciation comply with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of the Company's common stock. The options set forth below were
granted pursuant to separate stock option agreements executed in conjunction
with the employment agreements between the Company and the below named
executives.
OPTION GRANTS
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY OPTIONS AS OF
GRANTED WHICH MARCH 31, 2000(4)
WERE UNEXERCISED EXERCISE DATE EXERCISE PRICE ---------------------------
NAME (1) ON 03/31/00(2) (3) ($/ SHARE) 5% 10%
-------- ------------------ ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Christopher R. Kuhn (5)... 100,000 07/12/2000 $ 1.50 $1,116,746 $1,409,196
50,000 07/12/2002 $15.00
50,000 07/12/2000 $30.00
50,000 07/12/2000 $45.00
H. Whit Ehrler (5)........ 100,000 08/23/2000 $ 1.50 $1,116,746 $1,409,196
50,000 08/23/2002 $15.00
50,000 08/23/2000 $30.00
50,000 08/23/2000 $45.00
</TABLE>
------------------------
(1) In addition to the options granted to Messrs. Kuhn and Ehrler, set forth in
the table above, we have granted to Mr. Dayberry, our Database
Administrator, five separate options, each for 6,000 shares, to purchase a
total of 30,000 shares of our common stock. Each option may be exercised (or
will vest) in three equal annual installments commencing with the initial
exercise date. The exercise date of the first option covering the initial
underlying 6,000 shares was September 22, 2000, with exercise dates of the
remaining options being September 22 in each of the following years, 2001,
2002, 2003 and 2004. The option price or strike price for each 6,000 share
option on each of the exercise dates is $5.00 in 2000, $20.00 in 2001,
$35.00 in 2002, $50.00 in 2003, and $65.00 in 2004. All unexercised options
will expire on September 22, 2004, except for the option that may be
exercised on September 22, 2004. That option will not expire until
December 22, 2004. The initial option, with a strike price of $5.00 per
share, was considered an unexercisable in-the-money option as of March 31,
2000. The value of this unexercisable in-the-money option is based upon a
value of $10.25 per share, which was the closing price of our shares on the
OTC Bulletin Board on March 31, 2000, minus the per share exercise price,
multiplied by the number of shares underlying the option. The potential
realizable value of this unexercisable in the money option assuming an
annual rate of appreciation of 5% and 10% is $40,203 and $50,731
respectively.
29
<PAGE>
(2) All options are considered unqualified options under the Internal Revenue
Code; therefore, upon their exercise, the employee will realize taxable gain
equal to the difference between the fair market value as of the exercise
date and the exercise price.
(3) Options are exercisable in three equal installments (i.e., 33% of the shares
may be purchased per installment). The first installment may be exercised on
the exercise date set forth in the table above with the balance of the
options exercisable in two equal installments on the two succeeding
anniversary dates following the exercise date. Certain of the installments
are not exercisable until the end of Messrs. Kuhn and Ehrler's five year
option agreements. Messrs. Kuhn and Ehrler have an additional ninety days
after the end of the five-year period to exercise the options with respect
to those installments.
(4) The closing price of our shares on the OTC Bulletin Board on March 31, 2000,
was $10.25. The first installments of the initial options granted to
Messrs. Ehrler and Dayberry are exercisable on August 23, 2000 and
September 22, 2000, respectively. The first installment of the initial
options granted to Mr. Kuhn was exercisable on July 12, 2000.
(5) As of the end of our fiscal year 2000, we issued stock options covering
530,000 shares of our common stock, par value $0.01 per share, of which
Mr. Kuhn held 47% of those options, Mr. Ehrler held 47% of those options and
Mr. Dayberry held 6% of those options.
On May 3, 2000, the Board of Directors adopted the TravelNow.com Inc. 2000
Omnibus Stock Incentive Plan (the "Plan"). The Plan is designed to enable
employees and non-employee directors of the Company to acquire or increase their
equity interests in the Company on such reasonable terms as the Committee or the
Board determines. The Plan provides for administration by the Committee, or
another committee designated by the Board, consisting of two "non-employee
directors" as defined in Section 16 of the Exchange Act. The Board created a
stock option committee to administer the Plan, and elected two of our
non-employee directors, William Perkin and Jerry Rutherford, to serve on the
stock option committee. Among the powers granted to the Committee are the powers
to interpret the Plan, establish rules and regulations for its operation, select
employees of the Company and its subsidiaries to receive awards and determine
timing, form, amount and other terms and conditions pertaining to any award.
Awards may be granted under the Plan to any employee, consultant or
independent contractor of the Company or subsidiaries of the Company. Awards may
also be granted to directors who are not employees of the Company or its
subsidiaries, but only to the extent set forth in Section 6.3 or Article XII of
the Plan.
Approximately 1,552,395 shares are available for use in grants under the
Plan. The Board believes that the number of shares of common stock reserved for
issuance under the Plan is reasonable to achieve the goals of the Plan.
The Plan provides for the granting of any or all of the following types of
awards: (i) stock options, including non-qualified stock options and stock
options intended to qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code of 1986, as amended, (ii) performance shares,
(iii) restricted common stock, (iv) common stock, and (v) any other incentive
award of, or based on, the Company's common stock.
On September 26, 2000, at the annual stockholders meeting, the stockholders
approved the Plan.
On May 3, 2000, the stock option committee awarded stock options to all
Company's employees, except the CEO, employed on that date, equal to the
employee's annual salary, divided by the closing sale price of the Company's
common stock on May 3, 2000. Each employee is required to execute a non-compete
agreement with the Company prior to being awarded these stock options. In
addition, the stock option committee determined that the Company will offer
stock options to new employees four times a year on the last day of each
calendar quarter. Each employee will have a waiting period of
30
<PAGE>
ninety days before they become eligible to receive an award (an "Eligible
Employee"). The stock options vest in three annual installments beginning on the
first anniversary date of the Initial Grant Date or the Quarterly Grant Date.
On December 1, 2000 the stock option committee awarded stock options to all
Eligible Employees equal to the number of stock options already held by such
Eligible Employees, at an exercise price of $0.71875 per share.
ADJUSTMENTS IN THE EVENT OF RECAPITALIZATION, MERGER OF THE COMPANY.
Under our stock option agreements with the executives named above, in the
event of a change of control, the executives named above will have the right to
exercise any unexpired option whether currently exercisable or not as to any
installments.
EMPLOYMENT AGREEMENTS
AGREEMENT WITH JEFF WASSON, CHIEF EXECUTIVE OFFICER. Mr. Wasson's
Employment Agreement is for a term of five (5) years, from October 1, 1999, to
September 30, 2004 and calls for participation in all employee benefit programs.
Effective January 1, 2000, Mr. Wasson's Employment Agreement was amended to
include a base salary of $150,000 per year for the remainder of the term. In the
event of a Mr. Wasson's termination without cause, the Company will make a
lump-sum payment to Mr. Wasson equal to his base salary for the remainder of
that year. Thereafter, on each remaining anniversary date for the balance of the
term of the Employment Agreement, Mr. Wasson will be paid a lump-sum equal to
this base salary. In addition, Mr. Wasson agrees not to directly or indirectly
solicit or have contact with (1) the Company's travel suppliers, (2) GDS systems
or (3) the Company's employees or customers for two years after termination of
employment.
MUTUAL RELEASE AND TERMINATION AGREEMENT WITH JOHN CHRISTOPHER
NOBLE. Mr. Noble's Employment Agreement was for a term of five (5) years, from
October 1, 1999 to September 30, 2004 and called for participation in all
employee benefit programs. Effective January 1, 2000, Mr. Noble's Employment
Agreement was amended to include a base salary of $150,000 per year for the
remainder of the term. Mr. Noble resigned on May 3, 2000, from his positions at
the Company as Co-Chief Executive Officer, Secretary, Director and employee.
Pursuant to the Mutual Release and Termination Agreement between the Company and
Mr. Noble, Mr. Noble will continue to receive his salary and certain benefits
for a period of 18 months. Pursuant to a provision in Mr. Noble's Employment
Agreement, which survives termination, Mr. Noble agrees not to directly or
indirectly solicit or have contact with (1) the Company's travel suppliers,
(2) GDS systems or (3) the Company's employees or customers for two years after
termination of employment.
EMPLOYMENT AGREEMENT WITH CHRISTOPHER R. KUHN, VICE PRESIDENT & CHIEF
INFORMATION OFFICER. The term of Mr. Kuhn's agreement is for five (5) years,
from July 12, 1999, to July 11, 2004 and calls for participation in all employee
benefit programs. Mr. Kuhn's Employment Agreement calls for a base salary of
$130,000 per year and receipt of a non-interest bearing loan of $80,000 after
the completion of the first full year of continuous full-time employment. Upon
completion of a second full year of continuous full-time employment, the loan of
$80,000 will be forgiven and all state and federal income taxes related to such
forgiveness will be grossed-up and paid by the Company at that time. If
Mr. Kuhn voluntarily leaves, or is discharged for cause before the completion of
the two year period, he is obligated to repay the non-interest bearing loan in
equal monthly installments over a period of thirty-two (32) months. In the event
of a termination of executive by the Company without cause, the Company will
make a lump-sum payment to Mr. Kuhn equal to his base salary for the remainder
of that year. Thereafter, on each remaining anniversary date for the balance of
the term of the Employment Agreement, Mr. Kuhn will be paid a lump-sum equal to
his base salary. In addition, Mr. Kuhn agrees not to directly or indirectly
solicit or have contact with (1) the Company's travel
31
<PAGE>
suppliers, (2) GDS systems or (3) the Company's employees or customers for two
years after termination of employment.
EMPLOYMENT AGREEMENT WITH H. WHIT EHRLER, VICE PRESIDENT & CHIEF FINANCIAL
OFFICER. The term of Mr. Ehrler's agreement is for five (5) years from
August 23, 1999, to August 22, 2004 and calls for participation in all employee
benefit programs. Mr. Ehrler's Employment Agreement calls for a base salary of
$130,000 per year and receipt of a non-interest bearing loan of $80,000 after
the completion of the first full year of continuous full-time employment. Upon
completion of a second full year of continuous full-time employment, the loan of
$80,000 will be forgiven and all state and federal income taxes related to such
forgiveness will be grossed-up and paid by the Company at that time. If
Mr. Ehrler voluntarily leaves or is discharged for cause before the completion
of the two year period, he is obligated to repay the non-interest bearing loan
in equal monthly installments over a period of thirty-two months. In the event
of a termination of executive by the Company without cause, the Company will
make a lump-sum payment to Mr. Ehrler equal to his base salary for the remainder
of that year. Thereafter, on each remaining anniversary date for the balance of
the term of the Employment Agreement, Mr. Ehrler will be paid a lump-sum equal
to his base salary. In addition, Mr. Ehrler agrees not to directly or indirectly
solicit or have contact with (1) the Company's travel suppliers, (2) GDS systems
or (3) the Company's employees or customers for two years after termination of
employment.
EMPLOYMENT AGREEMENT WITH MICHAEL BAUER, VICE PRESIDENT OF SALES AND
MARKETING. The term of Mr. Bauer's agreement is for five years, from April 11,
2000, to April 11, 2005 and calls for participation in all employee benefit
programs. Mr. Bauer's Employment Agreement calls for a base salary of $104,000
per year. In the event of a termination of executive by the Company without
cause, the Company will make a lump-sum payment to Mr. Bauer equal to his base
salary for the remainder of that year. Thereafter, on each remaining anniversary
date for the balance of the term of the Employment Agreement, Mr. Bauer will be
paid a lump-sum equal to his base salary. In addition, Mr. Bauer agrees not to
directly or indirectly solicit or have contact with (1) the Company's travel
suppliers, (2) GDS systems or (3) the Company's employees or customers for two
years after termination of employment.
Mr. Wasson, Mr. Ehrler, Mr. Bauer, and Mr. Kuhn have each entered into a
Conditional Amendment to Employment Agreement (each an "Amendment", and
collectively the "Amendments") with the Company. Under their pre-existing
employment agreements with the Company, the Named Executive Officers are
entitled to certain payments under certain circumstances as a result of the
consummation of the Offer (the "Special Payments"). The Amendments provide that
the executive officers shall be entitled to receive the Special Payments in one
lump sum on the 180th day following the consummation of the Merger, except for
Mr. Wasson, who has agreed to waive, upon consummation of the Merger, all of his
rights to receive the Special Payments, and who has further agreed that his
salary shall be paid into an escrow account for a period of 180 days following
the consummation of the Merger, to be released to him after such time period has
lapsed.
Following the consummation of the Merger, the employment of each Named
Executive Officer shall be at-will employment, which may be terminated by such
Named Executive Officer or by the Surviving Corporation at any time; provided,
however, that in the event the Surviving Corporation terminates any such Named
Executive Officer's employment without cause, then such Named Executive Officer
shall be entitled to receive three months' severance pay.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Company's Common Stock (collectively, "Reporting Persons") to
file reports of ownership and changes in ownership of the Common Stock.
Reporting Persons are required by Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16(a) reports they file. Based
solely on its review of the copies of such reports received or written
representations from certain Reporting Persons, the Company believes that during
the fiscal year ended March 31, 1999 all Reporting Persons complied with all
applicable filing requirements, except that the following directors and officers
failed to file their Form 3 for fiscal year 2000: Jeff Wasson, H. Whit Ehrler,
William Perkin, Jerry Rutherford, John Christopher Noble and Christopher R.
Kuhn.
32
