<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHEAP TICKETS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
N/A
(2) Form, Schedule or Registration Statement no.:
N/A
(3) Filing Party:
N/A
(4) Date Filed:
N/A
<PAGE>
CHEAP TICKETS, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
DATE: May 9, 2000
TIME: 8:30 AM
PLACE: Hawaii Prince Hotel
<PAGE>
[CHEAP TICKETS LOGO APPEARS HERE]
April 7, 2000
Dear Stockholders:
It is my pleasure to invite you to Cheap Tickets' 2000 Annual Meeting of
Stockholders.
We will hold the meeting on May 9, 2000, at the Hawaii Prince Hotel at 100
Holomoana Street, Honolulu, Hawaii. In addition to the formal items of
business, we will review the major developments of 1999 and answer your
questions.
This booklet includes the Notice of Annual Meeting and the Proxy Statement.
The Proxy Statement describes the business that we will conduct at the meeting
and provides information about Cheap Tickets.
Your vote is important. Whether you plan to attend the meeting or not,
please complete, date, sign and return the enclosed proxy card promptly. If
you received more than one proxy card because you own shares registered in
different names or at different addresses, please be sure to separately
complete and return each proxy card. If you attend the meeting and prefer to
vote in person, you may do so.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Michael J. Hartley
Michael J. Hartley
Chairman of the Board and Chief
Executive Officer
<PAGE>
CHEAP TICKETS, INC.
1440 Kapiolani Boulevard
Honolulu, Hawaii 96814
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 9, 2000 at 8:30 AM, Local Time
----------------
DATE: May 9, 2000
TIME: 8:30 AM
PLACE: Hawaii Prince Hotel
Dear Stockholders:
At our annual meeting, we will ask you to:
1. Elect seven directors for terms expiring in 2000.
2. Approve and ratify amendments to our 1999 Stock Incentive Plan to (1)
increase the number of shares of common stock issuable under the 1999
Stock Incentive Plan and (2) adopt a limit on the maximum number of
shares with respect to which options may be granted to any optionholder
in any fiscal year and other administrative provisions to comply with
the "performance-based compensation" exception to the deduction limit of
Section 162(m) of the Internal Revenue Code of 1986, as well as other
amendments which do not require stockholder approval.
3. Ratify the selection of PricewaterhouseCoopers LLP, independent
certified public accountants, as our auditors for the year ending
December 31, 2000.
4. Transact such other business as may properly come before the meeting, or
any adjournment or adjournments thereof.
For ten days prior to the annual meeting, a complete list of our
stockholders entitled to vote at the meeting will be available for inspection
by any stockholder for any purpose relating to the meeting during ordinary
business hours at our offices at 1440 Kapiolani Boulevard, Honolulu, Hawaii.
This list will also be available for inspection at the annual meeting.
If you were a stockholder of record at the close of business on March 13,
2000, you may vote at the annual meeting.
By order of the board of directors,
/s/ Sandra T. Hartley
Sandra T. Hartley
Secretary
April 7, 2000
Honolulu, Hawaii
<PAGE>
CHEAP TICKETS, INC.
1440 Kapiolani Boulevard
Honolulu, Hawaii 96814
PROXY STATEMENT
----------------
Annual Meeting of Stockholders to be held May 9, 2000
----------------
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why Did You Send Me this Proxy Statement?
We sent you this proxy statement and the enclosed proxy card because our
board of directors is soliciting your proxy to vote at the 2000 annual meeting
of stockholders. This proxy statement summarizes the information you need to
know to cast a vote at the annual meeting. However, you do not need to attend
the annual meeting to vote your shares. Instead, you may simply complete, sign
and return the enclosed proxy card.
Who is Entitled to Vote?
We will begin sending this proxy statement, the attached notice of annual
meeting and the enclosed proxy card on or about April 7, 2000, to all
stockholders entitled to vote. Stockholders who owned Cheap Tickets common
stock at the close of business on March 13, 2000, are entitled to vote. On
this record date, there were 24,158,316 shares of Cheap Tickets common stock,
par value $0.001 per share, outstanding. Cheap Tickets' common stock is our
only class of voting stock. We are also authorized to issue up to 10,000,000
shares of preferred stock, par value $0.01 per share, of which no shares are
presently issued and outstanding. We are also sending along with this proxy
statement, the Cheap Tickets 1999 Annual Report, which includes our financial
statements.
What Constitutes a Quorum?
The holders of a majority of the outstanding shares of Cheap Tickets common
stock entitled to vote at the meeting must be present, in person or by proxy,
in order to constitute a quorum. We can conduct the business of the meeting
only if a quorum has been established. We will include proxies marked as
abstentions and broker non-votes in determining the number of shares present
at the meeting.
How Many Votes Do I Have?
Each share of Cheap Tickets common stock that you own entitles you to one
vote. The proxy card indicates the number of shares Cheap Tickets common stock
that you own.
How Do I Vote By Proxy?
Whether you plan to attend the annual meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in
the postage-prepaid envelope provided. Returning the proxy card will not
affect your right to attend the annual meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares as recommended by the board
of directors as follows:
. ""FOR'' the election of all seven nominees for director (see pages 17
and 18);
. ""FOR'' the approval and ratification of the amendments to our 1999
Stock Incentive Plan (see page 18 to 22); and
. ""FOR'' the ratification of the selection of PricewaterhouseCoopers LLP
as independent public accountants for 2000 (see page 22 ).
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<PAGE>
If any other matter is presented, your proxy will vote in accordance with
the recommendation of the board of directors or, if no recommendation is
given, in their own discretion. At the time this proxy statement went to
press, we knew of no matters which needed to be acted on at the annual
meeting, other than those discussed in this proxy statement.
May I Change My Vote After I Return My Proxy?
Yes. If you give a proxy, you may change your vote at any time before it is
exercised. You may change your vote in any one of three ways:
. You may send our Corporate Secretary another proxy with a later date.
. You may notify our Corporate Secretary in writing before the annual
meeting that you have revoked your proxy.
. You may attend the annual meeting and vote in person.
How Do I Vote in Person?
If you plan to attend the annual meeting and vote in person, we will give
you a ballot form when you arrive. However, if your shares are held in the
name of your broker, bank or other nominee, you must bring the proxy card, an
account statement or a letter from the nominee indicating that you are the
beneficial owner of the shares on March 13, 2000, the record date for voting,
and a written instruction from the nominee authorizing you to vote the shares.
What Vote Is Required to Approve Each Proposal?
Proposal 1: The seven nominees for director who receive the
Elect Seven Directors most votes will be elected. So, if you do not vote
for a particular nominee, or you indicate "WITHHOLD
AUTHORITY" to vote for a particular nominee on your
proxy card, your vote will not count either "for"
or "against" the nominee.
Proposal 2:
Approve and Ratify The affirmative vote of a majority of the votes
Amendments to our cast at the annual meeting on this proposal is
1999 Stock Incentive required to approve and ratify the amendments to
Plan our 1999 Stock Incentive Plan. So, if you "ABSTAIN"
from voting, it has the same effect as if you vote
"against" this proposal.
Proposal 3: The affirmative vote of a majority of the votes
Ratify Selection of cast at the annual meeting on this proposal is
Independent Public required to ratify the selection of independent
Accountants public accountants. So, if you "ABSTAIN" from
voting, it has the same effect as if you voted
"against" this proposal.
The Effect of Broker Non-Votes
If your broker holds your shares in its name, the
broker will be entitled to vote your shares on both
Proposals 1 and 3 even if it does not receive
instructions from you. Your broker is not entitled
to vote on Proposal 2 unless it receives
instructions from you.
If your broker does not vote your shares on
Proposal 1, such "broker non-votes" will have no
effect on the outcome since only a plurality of
votes actually cast is required to elect a
director.
If your broker does not vote your shares on
Proposals 2 and 3, such "broker non-votes" do not
count as "shares present." This means that a broker
non-vote would reduce the number of affirmative
votes that are necessary to approve this proposal.
2
<PAGE>
What Are the Costs of Soliciting these Proxies?
We will pay all the costs of soliciting these proxies. In addition to
mailing proxy soliciting material, our directors, officers and employees also
may solicit proxies in person, by telephone or by other electronic means of
communications for which they will receive no compensation. We will ask banks,
brokers, and other institutions, nominees and fiduciaries to forward the proxy
material to their principals and to obtain authority to execute proxies. We
will then reimburse them for their reasonable expenses. In addition, we may
pay for and use the services of individuals or companies that we do not
regularly employ in connection with the solicitation of proxies if the board
of directors determines this is advisable.
How Do I Obtain an Annual Report on Form 10-K?
If you would like a copy of our Annual Report on Form 10-K for the year
ended December 31, 1999, that we filed with the SEC, we will send you one
without charge. Please write to:
Cheap Tickets, Inc.
1440 Kapiolani Boulevard, Suite 800
Honolulu, Hawaii 96814
Attention: Lisa A. Menor
INFORMATION ABOUT CHEAP TICKETS' COMMON STOCK OWNERSHIP
Which Stockholders Own at Least 5% of Cheap Tickets?
The following table shows, as of March 13, 2000, all persons or entities we
know to be "beneficial owners" of more than five percent of our common stock.
The information on Capital Group International, Inc. and Capital Group Trust
Company below is based on a Schedule 13G report filed with the SEC. If you
wish, you may obtain this report from the SEC.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(1)(2)
---------------------------
Number of Percent of
Name and Address of Beneficial Owner Shares Class
------------------------------------ --------- ----------
<S> <C> <C>
Michael J. Hartley(3)........................ 11,833,407 49.0%
Sandra T. Hartley(4)......................... 11,833,407 49.0%
Capital Group International, Inc.(5)......... 1,750,000 7.2%
Capital Group Trust Company(6)............... 1,750,000 7.2%
Donald J. Phillips(7)........................ 1,399,956 5.8%
Cece Smith(8)................................ 1,399,956 5.8%
</TABLE>
- --------
(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Cheap Tickets common stock not only if you hold it
directly, but also if you directly or indirectly (through a relationship,
a position as a director or trustee, or a contract or understanding),
have, (or share) the power to vote the stock, to invest it, to sell it, or
you currently have the right to acquire it or the right to acquire it
within 60 days of March 13, 2000.
(2) Based on 24,158,316 shares of common stock outstanding. Shares of our
common stock issuable upon exercise of stock options currently exercisable
or exercisable within 60 days of March 13, 2000 are considered outstanding
for computing the percentage of the person or entity holding those options
but are not considered outstanding for computing the percentage of any
other person or entity.
(3) Includes 1,122,698 shares of common stock held by the Michael J. Hartley
Revocable Trust, as amended, 4,794,006 shares of common stock held by the
Hartley Investments Limited Partnership (held for the benefit of Michael
J. Hartley) and 5,916,703 shares of common stock held by Sandra T.
Hartley. Mr. Hartley is the
3
<PAGE>
husband of Sandra T. Hartley, Cheap Tickets' Vice President, Employee
Relations who owns 5,916,703 shares of common stock. Mr. Hartley's address
is 1440 Kapiolani Boulevard, Honolulu, Hawaii 96814. See note (4).
(4) Includes 1,122,697 shares of common stock held by the Sandra Tatsue
Hartley Revocable Trust, as amended, 4,794,006 shares of common stock held
by the Hartley Investments Limited Partnership (held for the benefit of
Sandra T. Hartley) and 5,916,704 shares of common stock held by Michael J.
Hartley. Ms. Hartley is the wife of Michael J. Hartley, Cheap Tickets'
Chairman of the Board and Chief Executive Officer who owns 5,916,704
shares of common stock. Ms. Hartley's address is 1440 Kapiolani Boulevard,
Honolulu, Hawaii 96814. See note (3).
(5) Based on a Schedule 13G filed with the SEC on February 11, 2000. Capital
Group International, Inc. is the parent holding company of a group of
investment management companies that hold investment power and, in some
cases, voting power over the securities reported in its Schedule 13G. The
investment management companies, which include a "bank" as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934 and several
investment advisers registered under Section 203 of the Investment
Advisers Act of 1940, provide investment advisory and management services
for their respective clients which include registered investment companies
and institutional accounts. Capital Group International, Inc. does not
have investment power or voting power over any of the securities reported
in its Schedule 13G; however, Capital Group International, Inc. may be
deemed to "beneficially own" such securities by virtue of Rule 13d-3 under
the Securities Exchange Act of 1934. It's address is 11100 Santa Monica
Boulevard, Los Angeles, California 90025. See Note (6).
(6) Based on a Schedule 13G filed with the SEC on February 11, 2000. Capital
Guardian Trust Company, a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, is deemed to be the beneficial owner of
1,750,000 shares as a result of its serving as the investment manager of
various institutional accounts. It's address is 11100 Santa Monica
Boulevard, Los Angeles, California 90025. See Note (5).
(7) Includes vested stock options to purchase 500 shares of common stock. Mr.
Phillips is a co-founder and general partner of Phillips-Smith Specialty
Retail Group III, L.P. Mr. Phillips' address is c/o Phillips-Smith
Specialty Retail Group, 5080 Spectrum Drive, Suite 805, West Addison,
Texas 75001. See Note (8).
(8) Includes vested stock options to purchase 500 shares of common stock. Ms.
Smith is a co-founder and general partner of Phillips-Smith Specialty
Retail Group III, L.P. Ms. Smith's address is c/o Phillips-Smith Specialty
Retail Group, 5080 Spectrum Drive, Suite 805, West Addison, Texas 75001.
See Note (7).
4
<PAGE>
How Much Stock is Owned by Directors and Executive Officers?
The following table shows, as of March 13, 2000, the Cheap Tickets common
stock that our directors and executive officers beneficially own and those
shares of common stock owned by all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(1)(2)
---------------------------
Number of Percent of
Name of Beneficial Owner Shares Class
------------------------ --------- ------------
<S> <C> <C>
Michael J. Hartley(3)........................... 11,833,407 49.0%
Sandra T. Hartley(4)............................ 11,833,407 49.0%
Cece Smith(5)................................... 1,399,956 5.8%
Tammy A. Ishibashi(6)........................... 599,248 2.5%
F. Michael Bartholomew(7)....................... 119,000 *
Sam Galeotos(8)................................. 61,000 *
George R. Mrkonic(9)............................ 30,109 *
Dale K. Jorgenson(10)........................... 26,100 *
Giles H. Bateman(11)............................ 11,109 *
A. Maurice Myers................................ 518 *
All directors and executive officers as a group
(14 persons)(12)............................... 13,390,569 55.3%
</TABLE>
- --------
* Less than 1%.
(1) See footnote 1 in the table included above at page 3, under "Which
Stockholders Own at Least 5% of Cheap Tickets?"
(2) Based on 24,158,316 shares of common stock outstanding. Shares of our
common stock issuable upon exercise of stock options currently
exercisable or exercisable within 60 days of March 13, 2000 are
considered outstanding for computing the percentage of the person holding
those options but are not considered outstanding for computing the
percentage of any other person.
(3) Includes 1,122,698 shares of common stock held by the Michael J. Hartley
Revocable Trust, as amended, 4,794,006 shares of common stock held by the
Hartley Investments Limited Partnership (held for the benefit of Michael
J. Hartley) and 5,916,703 shares of common stock held by Sandra T.
Hartley. Mr. Hartley is the husband of Sandra T. Hartley, Cheap Tickets'
Vice President, Employee Relations who owns 5,916,703 shares of common
stock. See note (4).
(4) Includes 1,122,697 shares of common stock held by the Sandra Tatsue
Hartley Revocable Trust, as amended, 4,794,006 shares of common stock
held by the Hartley Investments Limited Partnership (held for the benefit
of Sandra T. Hartley) and 5,916,704 shares of common stock held by
Michael J. Hartley. Ms. Hartley is the wife of Michael J. Hartley, Cheap
Tickets' Chairman of the Board and Chief Executive Officer who owns
5,916,704 shares of common stock. See note (3).
(5) Includes vested stock options to purchase 500 shares of common stock. Ms.
Smith is a co-founder and general partner of Phillips-Smith Specialty
Retail Group III, L.P.
(6) Ms. Ishibashi is the niece of Michael J. Hartley, Cheap Tickets' Chairman
of the Board and Chief Executive Officer, and Sandra T. Hartley, Cheap
Tickets' Vice President, Employee Relations. See notes (3) and (4).
(7) Mr. Bartholomew served as Chief Operating Officer through November 1999.
Effective November 12, 1999, Mr. Bartholomew resigned from all positions
with Cheap Tickets.
(8) Includes vested stock options to purchase 60,000 shares of common stock.
(9) Includes vested stock options to purchase 500 shares of common stock.
(10) Represents 25,900 shares of common stock held by Mr. Jorgenson and 200
shares of common stock held by Mr. Jorgenson's minor child and deemed to
be beneficially owned by him.
5
<PAGE>
(11) Includes vested stock options to purchase 500 shares of common stock.
(12) Where more than one person or entity is the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934) of the same
shares listed in the table, such shares are counted only once in
determining the totals listed in the table.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between Cheap Tickets' executive
officers, board of directors or compensation committee and any executive
officer or member of the board of directors or compensation committee of any
other company, nor has any such interlocking relationship existed in the past.
Did Directors, Executive Officers and Greater-Than-10% Stockholders Comply
With Section 16(a) Beneficial Ownership Reporting in 1999?
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, officers, and greater-than-10% stockholders to file with the
SEC and the NASDAQ Stock Market on changes in their beneficial ownership of
Cheap Tickets common stock and to provide Cheap Tickets with copies of the
reports. Based on our review of these reports, we believe that all of those
reporting persons complied with their filing requirements for 1999, except for
Giles H. Bateman, George R. Mrkonic, A. Maurice Myers and Cece Smith who each
filed one late report on Form 4 involving shares of our common stock that they
received for director fees.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors
The board of directors oversees our business and affairs and monitors the
performance of management. In accordance with corporate governance principles,
the board does not involve itself in day-to-day operations. The directors keep
themselves informed through, among other things, discussions with the
chairman, other key executives and our principle external advisers (legal
counsel, outside auditors, investment bankers and other consultants), reading
reports and other materials that we send them and participating in board and
committee meetings.
The board met five times during fiscal 1999. Each incumbent director
attended at least 75% of the total number of board and committee meetings, of
which the director was a member, held in fiscal 1999.
The Committees of the Board
The board has an audit committee and a compensation committee. The full
board of directors nominates our officers and directors for election.
<TABLE>
<C> <S>
The Audit Committee The audit committee monitors our corporate
financial reporting and internal and external
audits. Directors Bateman, Mrkonic and Smith serve
as members of the audit committee. The audit
committee met one time during fiscal 1999.
The Compensation Committee The compensation committee makes recommendations
regarding our employee stock plans and makes
decisions concerning salaries and incentive
compensation for employees and consultants of Cheap
Tickets. Directors Bateman, Mrkonic and Smith
currently serve as members of the compensation
committee. The compensation committee did not meet
during fiscal 1999.
</TABLE>
6
<PAGE>
How Do We Compensate Directors?
In 1999, we paid our non-employee directors $2,500 for each board meeting
and $1,000 for each committee meeting attended in person for their services as
directors. Beginning in October 1999, we have, in lieu of cash, paid our non-
employee directors with our common stock based on the fair market value per
share on the date each meeting was held. Further, directors are reimbursed for
certain reasonable expenses incurred in attending board or committee meetings.
Upon joining Cheap Tickets, each non-employee director receives an option to
acquire 1,500 shares of common stock at an exercise price equal to the then
fair market value. These options vest in equal increments over three years. In
addition, following each annual stockholders' meeting commencing with this
annual meeting, each non-employee director who continues as a director
following the meeting and who has served as a director for at least eight
months will receive an option to acquire the number of shares equal to $25,000
divided by the fair market value per share on the date of such annual meeting.
Such options will also vest in equal increments over three years. For more
information on Cheap Tickets' 1999 Stock Incentive Plan please refer to the
description under "Proposal 2" on page 18.
We have also entered into agreements with all directors pursuant to which we
have agreed to indemnify them against certain claims arising out of their
services as directors. Directors are also entitled to the protection of
certain indemnification provisions in our Certificate of Incorporation and
Bylaws.
Certain Relationships and Related Transactions
During the last fiscal year, we entered into an employment agreement with
our President and Chief Operating Officer, Sam Galeotos, that provides for a
loan of $400,000 bearing no stated interest until maturity. At each of the
first three anniversaries of the loan, we will forgive one-third of the
principal amount as long as Mr. Galeotos is employed with us on such
anniversary. In addition, under the Agreement we have agreed to pay Mr.
Galeotos an amount such that, after the payment of federal, state and local
taxes, Mr. Galeotos shall have received amounts free and clear of such taxes
equal to the amounts for the forgiveness of his loan and moving expenses
should such amount be considered compensation by us and not deductible by Mr.
Galeotos.
We have an arrangement with Mr. A. Maurice Myers, one of our non-employee
directors, which was initially entered into in December 1995 under which Mr.
Myers has agreed to provide us with consulting services associated with
helping us develop business relationships with various airlines. Under this
arrangement, we have agreed to pay Mr. Myers commissions of $2.00 per ticket
written on America West Airlines and $1.00 per ticket on domestic, unpublished
fares, we issue on United Airlines, for his services in helping us obtain
airfare contracts with these airlines. These commissions for tickets on
America West Airlines will end on December 31, 2000 and on United Airlines
will end July 1, 2002. In 1999, we paid Mr. Myers $154,959 in commissions he
earned under this arrangement during that year.
7
<PAGE>
Executive Officers
Name and Age Principal Occupation and Business Experience
------------ --------------------------------------------
Michael J. Hartley
(50)................. Michael J. Hartley, a co-founder of Cheap Tickets, has
served as Chief Executive Officer and director of the
Company since Cheap Tickets' inception in August 1986,
and has served as Chairman of the Board since January
1999. Mr. Hartley served as President from inception
until October 1999. Mr. Hartley is the husband of
Sandra T. Hartley, Cheap Tickets' Vice President of
Employee Relations and the uncle of Tammy A. Ishibashi,
Cheap Tickets' Executive Vice President of Ticket
Distribution. Prior to founding Cheap Tickets, Mr.
Hartley founded and sold one charter airline and served
as an organizer of two other airlines.
Sam Galeotos (41).... Sam Galeotos joined Cheap Tickets in October 1999 as
President and Chief Operating Officer. Prior to joining
Cheap Tickets, from 1980 to 1999, Mr. Galeotos worked
for WORLDSPAN Travel Information Systems in a variety
of capacities, eventually serving as Co-Chief Executive
Officer. Previously, he held management positions at
Delta Air Lines, Inc. and DatasLink Business Systems.
Mr. Galeotos earned his bachelor's degree in business
administration with emphasis on Accounting and
Management Information Systems from the University of
Arizona and is a graduate of the Wharton School of
Business advanced management program at the University
of Pennsylvania.
Dale K. Jorgenson
(61)................. Dale K. Jorgenson joined Cheap Tickets in May 1998 as
Chief Financial Officer and Vice President of Finance.
Prior to that, from 1988 to 1998, he was Chief
Financial Officer and Vice President of Finance, of
Interpacific Hawaii Retail Group and DFS, Ltd. Hawaii
Region, both large retail chains in Hawaii. Prior to
that, he held similar positions for 14 years with
Castle & Cooke, Inc., now Dole Food Co. Mr. Jorgenson
holds a B.A. degree in Business Administration from the
University of Washington and an M.B.A. degree from
Golden Gate University. He is a certified public
accountant.
Tammy A. Ishibashi
(33)................. Tammy A. Ishibashi has served as Executive Vice
President of Ticket Distribution since February 1995
and is responsible for managing the retail stores and
ticket distribution process, which includes fare
filings with the Airline Tariff Publishing Corporation,
ticket distribution, refunds and ARC reporting, and for
overseeing the five departments necessary to accomplish
this process. She joined Cheap Tickets as Treasurer in
September 1990, a position she held until November 1993
when she was appointed to Second Vice President.
Ms. Ishibashi served as a Director of Cheap Tickets
from September 1990 until February 1999. Ms. Ishibashi
is the niece of Michael J. Hartley, Cheap Tickets'
Chairman of the Board and Chief Executive Officer, and
Sandra T. Hartley, Cheap Tickets' Vice President of
Employee Relations.
Ronald L. McElfresh
(50)................. Ronald L. McElfresh joined Cheap Tickets in January
1998 as Vice President of Online Services, to design,
develop, implement and maintain Cheap Tickets' website.
From 1996 to 1997, he worked at Digital Island, a
global Internet service provider, as the Director of
Marketing. From June 1995 to June 1996, he served as
general manager at Hawaiian On-Line GTE, an Internet
company. From October 1994 to June 1995, he worked at
GTE, a telecommunications company, as an international
services product manager, where he developed and
managed telephony and worked on product development for
GTE's original
8
<PAGE>
Name and Age Principal Occupation and Business Experience
------------ --------------------------------------------
Internet services. From April 1989 to July 1993, Mr.
McElfresh was the Director of Product Marketing of
Brite Voice Systems, Inc., a telecommunications
company. In October 1981, Mr. McElfresh co-founded
INFOCOM, a multimedia development company, where he
held various product development and marketing
positions, most recently as General Manager, until
October 1987. Mr. McElfresh holds a B.A. degree from
Blackhawk College.
Sandra T. Hartley
(50)................ Sandra T. Hartley, a co-founder of Cheap Tickets, has
served as Vice President of Employee Relations since
January 1999 and as a director since Cheap Tickets'
inception in August 1986. Her responsibilities include
employee relations and benefits, corporate functions
and public relations. She served as Chief Executive
Officer of Cheap Tickets from August 1986 until
September 1998. From August 1986 until January 1999,
she has served as Chairman of the Board of Directors.
Ms. Hartley is the wife of Michael J. Hartley, Cheap
Tickets' Chairman of the Board and Chief Executive
Officer, and the aunt of Tammy A. Ishibashi, Cheap
Tickets' Executive Vice President of Ticket
Distribution.
Lester R. Stiefel
(48)................ Lester R. Stiefel joined Cheap Tickets in April 1998 as
Vice President of Human Resources, to head the human
resources function and to ensure that policies and
practices comply with employment laws and regulations
and company standards. Prior to joining the company he
worked at Citibank, a financial institution, as Vice
President of Senior Resources Manager from 1986 to
1998, and at The Bank of Nova Scotia, a financial
institution, from 1984 to 1986. Mr. Stiefel holds a
B.A. degree from Herbert Lehman College and a Masters
degree from Yeshiva University.
Paul B. Halstead
(51)................ Paul B. Halstead joined Cheap Tickets in January 2000
as Chief Technology Officer. His responsibilities
include managing the development of new products for
e-commerce and call centers, and for managing the
operation of Cheap Tickets' systems and voice and data
communication networks. Prior to joining the company he
worked at Bass Hotels & Resorts as Senior Vice
President, Corporate Systems from April 1997 to January
2000 and at WORLDSPAN as Vice President, Distributed
Systems Development from February 1990 to September
1996. Mr. Halstead holds a B.S. degree in Mathematics
from Samford University.
Jason D. Horstman
(37)................ Jason D. Horstman joined Cheap Tickets in January 2000
as Vice President, Business Development. His
responsibilities include overseeing business
partnerships, company affiliations and strategic
alliances. Prior to joining the company, he worked as
Vice President of Sales & Marketing for both
Northwestern Travel Management, a corporate travel
agency, from August 1998 until January 2000, and at
TravelCorp, Inc., a travel agency, from February 1995
until August 1998. Mr. Horstman holds a B.A. degree in
Business Economics from Northwestern College.
9
<PAGE>
How Do We Compensate Executive Officers?
The following table sets forth all compensation paid by Cheap Tickets during
1999, 1998, and 1997 to (1) our Chief Executive Officer and President during
fiscal 1999, and (2) the four other most highly compensated executive officers
during fiscal 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- ----------------
Securities
Name and Principal Underlying All Other
Position Year Salary ($) Bonus ($) Options/SARs (#) Compensation ($)
- ------------------ ---- ---------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Michael J. Hartley...... 1999 401,260 357,000 -- --
Chairman of the Board
and Chief Executive 1998 243,783 50,000 -- --
Officer 1997 229,090 -- -- --
Sandra T. Hartley....... 1999 119,690 -- -- --
Vice President,
Employee Relations 1998 235,500 12,500 -- --
1997 233,050 -- -- --
Sam Galeotos (1)........ 1999 61,154 -- 600,000 400,000(4)
President and Chief
Operating Officer 1998 -- -- -- --
1997 -- -- -- --
F. Michael Bartholomew
(2).................... 1999 172,693 -- -- 754,320(5)
Former Chief Operating
Officer 1998 165,000 41,250 140,000 --
1997 6,875 -- -- --
Dale K. Jorgenson (3)... 1999 172,917 70,000 -- 50,085(6)
Chief Financial Officer
and Vice President, 1998 78,366 21,875 140,000 --
Finance 1997 -- -- -- --
Tammy A. Ishibashi...... 1999 122,921 37,500 -- --
Executive Vice
President, Tickets 1998 100,008 25,000 -- --
Distribution 1997 73,110 -- -- --
</TABLE>
- --------
(1) The annual salary of Mr. Galeotos for 1999 would have been $450,000 if he
had been with Cheap Tickets for the entire year. He joined Cheap Tickets
in October 1999.
(2) The annual salary of Mr. Bartholomew, our former Chief Operating Officer,
for 1997 would have been $165,000 if he had been with Cheap Tickets for
the entire year. He joined Cheap Tickets in December 1997.
(3) Mr. Jorgenson's annual salary for 1998 would have been $150,000, if he had
been with Cheap Tickets for the entire year. He joined Cheap Tickets in
May 1998.
(4) Represents a loan bearing no stated interest until maturity, which we will
forgive one-third of the principal amount at each of the first three
anniversaries of the loan as long as Mr. Galeotos is employed with us on
such anniversaries.
(5) Represents the net gain on stock options exercised and sold in August of
1999.
(6) Represents the net gain on stock options exercised in November of 1999.
10
<PAGE>
Individual Option Grants to Executive Officers During Fiscal Year 1999
The following table sets forth certain information regarding stock options
granted in 1999 to the officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation
Underlying Granted to Price for Option Terms(4)
Options Employees in Per Expiration ---------------------
Name Granted(1) Fiscal Year(2) Share Date(3) 5% 10%
- ---- ---------- -------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sam Galeotos............ 600,000 79.3% $16.1875 10/28/2005 $3,303,689 $7,494,944
</TABLE>
- --------
(1) Options generally have a six-year or ten-year term and vest at a rate 20%
per annum.
(2) Cheap Tickets granted options for a total of 757,000 shares of common
stock to its employees during 1999.
(3) Options may terminate before their expiration dates if optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent Cheap Tickets' estimate or projection of future prices of its
common stock prices. Based on the public offering price, the actual values
realized may be substantially greater than those assumed under these
rules.
Aggregate Option Exercises in 1999 and Year-End Option Values
The following table sets forth for each of the officers named in the Summary
Compensation Table, certain information concerning the number of shares
subject to both exercisable and unexercisable stock options as of December 31,
1999. Also reported are values for "in-the-money" options that represent the
positive spread between the respective exercise prices of outstanding options
and the fair market value of Cheap Tickets' common stock as of December 31,
1999.
<TABLE>
<CAPTION>
Number of Securities
Value Realized Underlying Unexercised Value of Unexercised In-
Number of (Market Options at the-Money Options at
Shares Price at December 31, 1999 December 31, 1999(1)
Acquired on Exercise Less ------------------------- -------------------------
Name Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Hartley...... -- -- -- -- -- --
Sandra T. Hartley....... -- -- -- -- -- --
Sam Galeotos............ -- -- -- 600,000 -- --
F. Michael Bartholomew.. 21,000 $754,320 119,000 -- $1,607,563 --
Dale K. Jorgenson....... 3,000 $ 50,085 25,000 112,000 $ 337,723 $1,513,000
Tammy A. Ishibashi...... -- -- -- -- -- --
</TABLE>
- --------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at December 31, 1999 and the exercise
price of the named officer's option. The fair market value at December 31,
1999 was deemed to be $13.6875 as reported on the Nasdaq National Market.
11
<PAGE>
Stock Plans
1997 Stock Option Plan
Cheap Tickets' 1997 Stock Option Plan provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and for the granting of nonstatutory stock
options to employees, directors and consultants. The 1997 plan was approved by
the board of directors in February 1998 and by Cheap Tickets' shareholders in
April 1998. Unless terminated sooner, the 1997 plan will terminate
automatically in 2008. A total of 1,979,642 shares of common stock was
reserved for issuance pursuant to the 1997 plan. As of December 31, 1999,
options to purchase 601,440 shares of common stock were outstanding under the
1997 plan. No further options have been or will be granted under the 1997
plan.
The 1997 plan may be administered by the board of directors or a committee
of the board, which serves as the plan administrator. The plan administrator
has the power to determine the terms of the options granted, including the
number of shares subject to each option, the exercisability thereof, and the
form of consideration payable upon such exercise.
Options granted under the 1997 plan are not generally transferable by the
optionee. Generally each option is exercisable during the lifetime of the
optionee only by him or her. Unless otherwise specified in the option
agreement, options granted under the 1997 plan must be exercised within three
months of the end of the optionee's status as an employee or consultant of
Cheap Tickets, or within twelve months after his or her termination by death
or disability, but in no event later than the expiration of the option's term.
The exercise price of all incentive stock options granted under the 1997
plan must be at least equal to the fair market value of the common stock on
the date of the grant. The exercise price of nonstatutory stock options must
be at least equal to 85% of the fair market value of the common stock on the
date of the grant. With respect to any optionee who owns stock possessing more
than 10% of the voting power of all classes of Cheap Tickets' outstanding
capital stock, the exercise price of any option must equal at least 110% of
the fair market value of the common stock on the date of the grant and the
term of any option may not exceed five years. The term of other options under
the 1997 plan may not exceed ten years. The consideration to be paid for the
shares of common stock upon exercise of an option will be determined by the
plan administrator and may include, cash, check, promissory note, shares of
common stock, or the assignment of part of the proceeds from the sale of
shares acquired upon exercise of the option.
The 1997 plan provides that in the event of a merger or a sale of all or
substantially all of Cheap Tickets' assets the plan administrator has the
authority to provide for the full automatic vesting and exercisability of each
option, including shares as to which the option would not otherwise be
exercisable. If an option becomes exercisable in full in the event of a merger
or sale of assets, the plan administrator will notify the optionee that the
option is fully exercisable for a specified period from the date of the
notice, and the option will terminate upon the expiration of that period. To
the extent the option has not been previously exercised, each option will
terminate immediately prior to the consummation of the merger or sale of
assets.
During 1998, Cheap Tickets granted to F. Michael Bartholomew an option to
acquire 140,000 shares of common stock at an exercise price of $0.18 per
share. Upon the completion of Cheap Tickets' initial public offering, the
option became fully vested and exercisable.
For a description of the 1999 Stock Incentive Plan, see "Proposal 2" on page
18.
401(k) Plan
Cheap Tickets has a 401(k) plan pursuant to which eligible employees may
elect to reduce their current salary by up to the statutorily prescribed
annual limit and have the amount of such reduction contributed to the 401(k)
plan. Contributions to the 401(k) plan by Cheap Tickets are discretionary. The
401(k) plan is intended to qualify under Section 401 of the Internal Revenue
Code so that contributions by participants to the 401(k) plan, and income
earned on plan contributions, are not taxed to participants until withdrawn
from the 401(k) plan.
12
<PAGE>
Employment Agreements
Cheap Tickets has entered into an employment agreement with its President
and Chief Operating Officer, Sam Galeotos. The agreement provides for an
initial five year period of employment during which Mr. Galeotos will be paid
an initial annual salary of $450,000. Mr. Galeotos could potentially earn a
bonus equal to 75% of his annual salary if certain performance goals are met.
The Agreement also provides for a $400,000 loan to Mr. Galeotos, bearing no
stated interest until maturity. At each of the first three anniversaries of
the loan, we will forgive one-third of the principal amount as long as Mr.
Galeotos is employed with us on such anniversary. In addition, under the
Agreement we have agreed to pay Mr. Galeotos an amount such that, after the
payment of federal, state and local taxes, Mr. Galeotos shall have received
amounts free and clear of such taxes equal to the amounts for the forgiveness
of his loan and moving expenses should such amount be considered compensation
by us and not deductible by Mr. Galeotos.
Under the Agreement, Mr. Galeotos may terminate his employment if there is a
"change of control" of Cheap Tickets (as defined in the Agreement) or there is
a material change in his position, duties, responsibilities, or status with
us. In such event, we shall: (1) pay Mr. Galeotos' compensation through the
day on which he terminates his employment; (2) reimburse him for any expenses
properly incurred by him through the day on which he terminates his
employment; and (3) pay him a severance payment equal to two and one-half
times his annual salary at the time of termination.
Cheap Tickets does not have any employment agreements with any of its other
key personnel. Cheap Tickets has severance agreements with Michael J. Hartley
and Sandra T. Hartley. Each of the severance agreements requires Cheap Tickets
to pay the respective individual an amount equal to the lesser of (1) twice
his or her respective annual salary or (2) $400,000 in the event that their
employment is terminated either by Cheap Tickets without cause or by them for
good reason.
13
<PAGE>
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
The following Compensation Committee's Report on Executive Compensation
shall not be deemed to be "soliciting material" or to be "filed" with the SEC
or subject to Regulations 14A or 14C of the SEC or to the liabilities of
Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and shall not be deemed incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, notwithstanding any general
incorporation by reference of this proxy statement into any other document.
The Report
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
our executive officers during the fiscal year ended December 31, 1999. The
Committee is responsible for ensuring that we provide competitive compensation
practices and that those practices are in accordance with all legal
requirements and are of the highest quality. These responsibilities include
making recommendations to the board of directors regarding all forms of
compensation to be provided to the executive officers, senior executives and
directors of the corporation, and all bonus and stock compensation to all
employees.
General Compensation Policy
Under the supervision of the Committee, our compensation policy is designed
to attract and retain qualified key executives critical to the our growth and
long-term success. It is the objective of the Committee to have a portion of
each executive's compensation contingent upon our performance, as well as upon
the individual's personal performance. Accordingly, each executive officer's
compensation package is comprised of three elements: (1) base salary which
reflects individual performance and expertise; (2) variable bonus awards
payable in cash and tied to the achievement of certain performance goals, and
(3) long-term stock-based incentive awards which are designed to strengthen
the mutuality of interests between the executive officers and our
stockholders.
The following summary describes in more detail the factors, which the
Committee considers in establishing each of the three primary components of
the compensation package provided to the executive officers.
Base Salary
The level of base salary is established on the basis of the individual's
qualifications and relevant experience, the strategic goals for which she or
he has responsibility, compensation levels at companies which compete with us
for business and executive talent, and incentives necessary to attract and
retain qualified management. Base salary is adjusted annually to take into
account the individual's performance and to maintain a competitive salary
structure. The Committee reviews and approves base wage compensation proposals
for all executives earning $150,000 or more per annum.
Cash-Based Incentive Compensation
Cash bonuses are awarded to executive officers on the basis of their success
in achieving designated individual goals and our success in achieving specific
company-wide goals, such as the increase in gross bookings, reaching earnings
target goals, and maintaining a high level of customer service.
Long-Term Incentive Compensation
We utilize our stock option plans to provide executive and other key
employees with incentives to maximize long-term stockholder values. Awards
under this plan take the form of incentive stock options designed to give the
recipient a meaningful stake in the equity in Cheap Tickets and thereby
closely align his or her interests with those of our stockholders.
14
<PAGE>
Compensation of the Chief Executive Officer
Michael J. Hartley, a co-founder of Cheap Tickets, has served as our Chief
Executive Officer and a director since our inception in August 1986 and has
served as Chairman of the Board since January 1999. His base salary for fiscal
1999 was $401,260.
The factors discussed previously in "Base Salaries" and "Cash-Based
Incentive Compensation," were also applied in establishing the amount of Mr.
Hartley's salary. The base salary was determined after considering a number of
our achievements in 1999, including the successful completion of our initial
public offering, the successful completion of a follow-on public offering
later in the year, significant year over year growth in gross bookings, growth
in on-line operations, including the amount of new registered users added in
1999 compared with the amount added in 1998, and growth in on-line revenues.
He was also successful in recruiting and hiring other key executives.
Deductibility of Executive Compensation
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993,
which section disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the chief
executive officer and the four other most highly compensated executive
officers, respectively, unless such compensation meets the requirements for
the "performance-based" exception to Section 162(m). As the cash compensation
paid by Cheap Tickets to each of its executive officers is expected to be
below $1 million and the Committee believes that options granted under our
1997, and 1999 Incentive Stock Option Plans to such officers will meet the
requirements for qualifying as performance-based, the Committee believes that
Section 162(m) will not affect the tax deductions available to us with respect
to the compensation of its executive officers. It is the Committee's policy to
qualify, to the extent reasonable, its executive officers' compensation for
deductibility under the applicable tax law. However, we may from time to time
pay compensation to our executive officers that may not be deductible.
SUBMITTED BY THE COMPENSATION COMMITTEE:
Cece Smith
George R. Mrkonic
Giles H. Bateman
Dated: April 7, 2000
15
<PAGE>
Performance Graph
The following graph compares, for the period from March 19, 1999 (the date of
our initial public offering) through December 31, 1999, the percentage change
in our cumulative total stockholder return of Cheap Tickets common stock with
the cumulative total return of the NASDAQ Total Return Index. The graph assumes
an initial investment of $100. The graph is not necessarily indicative of
future price performance.
The graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that we specifically incorporate the information by reference,
and shall not otherwise be deemed filed under such acts.
Comparison of Total Return to Stockholder Among Cheap Tickets
and NASDAQ Total Return Index.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period NASDAQ - CHEAP
(Fiscal Year Covered) TOTAL US* TICKETS, INC.
- -------------------- --------- -------------
<S> <C> <C>
Measurement Pt- 3/18/99 $100.00 $100.00
FYE 03/31/99 $224.17 $ 99.77
FYE 06/30/99 $243.33 $109.11
FYE 09/30/99 $215.83 $111.64
FYE 12/31/99 $ 91.25 $162.03
</TABLE>
16
<PAGE>
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
Proposal 1: Elect Seven Directors
Our bylaws provide that the exact number of directors will be fixed from
time to time by action of stockholders or board of directors. The number of
directors currently is fixed at seven.
The board has nominated seven directors for election at the annual meeting.
Each nominee is currently serving as one of our directors. If you re-elect
them, they will hold office until the annual meeting in 2001 or until their
successors have been elected or until they resign.
We know of no reason why any nominee may be unable to serve as a director.
If any nominee is unable to serve, your proxy may vote for another nominee
proposed by the board, or the board may reduce the number of directors to be
elected. If any directors resigns, dies or is otherwise unable to serve out
his or her term, or the board increases the number of directors, the board may
fill the vacancy until the next meeting.
These are the biographies of Cheap Tickets' nominees for directors, except
for Mr. Hartley, the Chairman, Mrs. Hartley, Vice President, Employee
Relations, and Mr. Galeotos, the President and Chief Operating Officer, whose
biographies are included above at page 8, under "Executive Officers."
Nominees
<TABLE>
<CAPTION>
Name and Age Principal Occupation and Business Experience
------------ --------------------------------------------
<C> <S>
Giles H. Bateman (55)... Mr. Bateman has been a director of Cheap Tickets
since the closing of our initial public offering. He
has served as a director of CompUSA Inc. since
December 1991 and as Chairman of the Board of
Directors since December 1993. Since January 1992,
Mr. Bateman has been an investor in and director of
other public and private companies, including
Boatracs, Inc., Beverages and More, Inc., Auto Expo,
Inc. and Advanced Remote Communication Solutions. The
assets of Auto Expo, Inc. were assigned for the
benefit of its creditors in 1995. In 1991,
Mr. Bateman was a visiting professor at the
University of San Diego Olin Hall School of Business
Administration. Mr. Bateman was co-founder of The
Price Company, the operator of The Price Club chain
of warehouse club retail superstores. He served as a
director and Chief Financial Officer of The Price
Company from 1976 to 1991 and as Vice Chairman from
1986 to 1991. Since 1998, Mr. Bateman has volunteered
as the Chairman of the Board of Trustees of The
Hoffman Institute in Northern California. Mr. Bateman
holds a B.A. degree from Oxford University and an
M.B.A. degree from Harvard University.
George R. Mrkonic (47).. Mr. Mrkonic has been a director of Cheap Tickets
since the closing of our initial public offering. He
has served as the Vice Chairman of Borders Group,
Inc. since December 1994, and a director since its
formation in August 1994. He also served as President
of Borders Group, Inc. from December 1994 until
January 1997. Prior to joining Borders, Mr. Mrkonic
served as Executive Vice President of Specialty
Retailing Group of Kmart Corporation, where he had
overall responsibility for the specialty retailing
operations of Kmart including, among others, Borders,
Inc. and Walden Book Company, Inc., from November
1990 to November 1994. Mr. Mrkonic is also a director
of Champion Enterprises, Inc., a manufacturer and
seller of manufactured homes, and Syntel, Inc., a
computer software and development company.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Name and Age Principal Occupation and Business Experience
------------ --------------------------------------------
<C> <S>
A. Maurice Myers (59)... Mr. Myers has been a director of Cheap Tickets since
September 1999. Since November 1999, Mr. Myers has
been the Chairman, President and Chief Executive
Officer for Waste Management, Inc., a provider of
integrated waste management services. From April 1996
to October 1999, he was Chairman, President and Chief
Executive Officer of Yellow Corp. Prior to that, Mr.
Myers was the President of America West Airlines,
Inc. from January 1994 to December 1995. Mr. Myers is
a director of Hawaiian Electric Industries, Inc., an
electric public utility service provider, and Waste
Management, Inc.
Cece Smith (55)......... Ms. Smith has been a director of Cheap Tickets since
July 1997. Since 1986, Ms. Smith has been a general
partner of Phillips-Smith Specialty Retail Group, a
retail venture capital investment firm. She
previously served as a director of publicly-held
retailers BizMart, Inc., A Pea in the Pod, Inc. and
Hot Topic, Inc. Ms. Smith holds a B.B.A. degree in
Business Administration from the University of
Michigan and an M.L.A. degree in Liberal Arts from
Southern Methodist University. Ms. Smith served as a
director from 1992 to 1997 and as Chairman from 1994
to 1996 of the Federal Reserve Bank of Dallas.
</TABLE>
The board recommends that you vote "FOR" the election of all seven nominees
for director.
Proposal 2: Approve and Ratify Amendments to our 1999 Stock Incentive Plan
You are being asked to approve amendments to our 1999 Stock Incentive Plan.
The proposed amendments to the 1999 Stock Incentive Plan will (a) increase the
number of shares reserved for issuance under the 1999 Stock Incentive Plan by
240,000 shares, from 1,260,000 to 1,500,000, and increase the maximum possible
annual increase of shares reserved for issuance from 2% to 3% of our
outstanding shares of common stock and (b) adopt a limit on the maximum number
of shares with respect to which options may be granted to any optionholder in
any fiscal year and other administrative provisions to comply with the
performance-based compensation exception to the deduction limit of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), as well
as other amendments which do not require stockholder approval.
The amendments to the 1999 Stock Incentive Plan will enable us to grant
awards as needed to attract employees and other service providers. The 1999
Stock Incentive Plan is intended to enhance our ability to provide individuals
with awards and incentives commensurate with their contributions and
competitive with those offered by other employers, and to increase stockholder
value by further aligning the interests of these individuals with the
interests of our stockholders by providing an opportunity to benefit from
stock price appreciation that generally accompanies improved financial
performance. The board of directors believes that our long term success is
dependent upon our ability to attract and retain highly qualified individuals
who, by virtue of their ability and qualifications, make important
contributions to us.
The board recommends that you vote "FOR" approval and ratification of the
amendments to our 1999 Stock Incentive Plan
The following summary of the 1999 Stock Incentive Plan, including the
proposed amendments, is subject in its entirety to the specific language of
the 1999 Stock Incentive Plan, as proposed to be amended, a copy of which is
attached hereto as Appendix A.
General Description
Our 1999 Stock Incentive Plan was adopted by the board of directors and
approved by Cheap Tickets' stockholders in March 1999. All option grants made
after the initial public offering were made solely under the 1999 Stock
Incentive Plan. The maximum number of shares available for grant of stock
options under the 1999 Stock Incentive Plan is 1,260,000 shares of common
stock, plus an increase to be added on the first day of our
18
<PAGE>
fiscal year beginning in 2000 equal to the lesser of (1) 2% of the number of
shares outstanding as of such date; or (2) a lesser number of shares
determined by the plan administrator of the 1999 Stock Incentive Plan. The
maximum number of shares available for grant of incentive stock options under
the 1999 Stock Incentive Plan initially is 1,260,000 shares of common stock,
plus an annual increase to be added on the first day of Cheap Tickets' fiscal
year beginning in 2000 equal to the lesser of (1) 700,000 shares of common
stock; (2) two percent of the number of shares outstanding as of such date; or
(3) a lesser number of shares determined by the plan administrator of the 1999
Stock Incentive Plan. At December 31, 1999, 508,000 shares remain available
for future grants under the 1999 Stock Incentive Plan.
On March 31, 2000, the board of directors approved amendments to the 1999
Stock Incentive Plan, conditioned upon and not to take effect until approved
by our stockholders, to (a) increase the number of shares of common stock
reserved for issuance under the 1999 Stock Incentive Plan by 240,000 shares,
from 1,260,000 to 1,500,000, and increase the maximum possible annual increase
of shares reserved for issuance from 2% to 3% of our outstanding shares of
common stock and (b) to adopt a limit on the maximum number of shares with
respect to which options may be granted to any optionholder in any fiscal year
and other administrative provisions to comply with the performance-based
compensation exception to the deduction limit of Section 162(m) of the Code,
as well as other amendments which do not require stockholder approval.
As of March 13, 2000, options to purchase a total of 1,413,200 shares held
by 59 optionees were outstanding as of such date at a weighted average
exercise price of $11.12 per share, and 738,508 shares remained available for
future grant under 1999 Stock Incentive Plan.
Amendment to Increase Shares Reserved. The current number of shares reserved
for issuance under the 1999 Stock Incentive Plan is 1,260,000 with a maximum
possible annual increase of 2% of our outstanding shares of common stock. The
proposed amendment to the 1999 Stock Incentive Plan provides that the number
of shares reserved for issuance will be increased by 240,000 shares, from
1,260,000 to 1,500,000, and the maximum possible annual increase of shares
reserved for issuance from 2% to 3% of our outstanding shares of common stock.
Amendment to Adopt Code Section 162(m) Limitations. The board, subject to
stockholder approval, adopted an amendment to the 1999 Stock Incentive Plan to
limit the number of options which may be awarded to an employee in any fiscal
year to 500,000 shares. However, in connection with his or her initial
commencement of services with us, a participant in the 1999 Stock Incentive
Plan may be granted stock options for up to an additional 500,000 shares,
which shall not count against the limit set forth in the previous sentence.
The purpose of the amendment is to ensure that any options granted under the
1999 Stock Incentive Plan after the 2000 stockholder's meeting will qualify as
"performance-based compensation" under Section 162(m) of the Code.
Under Code Section 162(m) no deduction is allowed in any taxable year for
compensation in excess of $1 million paid to our chief executive officer and
each of our four most highly paid other executive officers who are serving in
such capacities as of the last day of such taxable year. An exception to this
rule applies to compensation that is paid pursuant to a stock incentive plan
approved by our stockholders and that specifies, among other things, the
maximum number of shares with respect to which options may be granted to
eligible employees under such plan during a specified period. Compensation
paid pursuant to options granted under such a plan and with an exercise price
equal to the fair market value of our common stock on the date of grant is
deemed to be inherently performance-based, since such awards provide value to
employees only if the stock price appreciates. While Code Section 162(m)
generally became effective in 1994, a special rule allows options granted
under the 1999 Stock Incentive Plan to be treated as qualifying under Code
Section 162(m) without having a per-person share limit until stockholders
approve a material modification of the 1999 Stock Incentive Plan, after the
initial public offering occurs, such as the increase in the number of shares
of common stock which may be issued under the 1999 Stock Incentive Plan.
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If stockholders do not approve the Code Section 162(m) amendment, any
compensation expense of Cheap Tickets associated with the options granted
under the 1999 Stock Incentive Plan in excess of the shares currently
available for issuance (together with all other non-performance based
compensation) in excess of $1 million for any of our five highest paid
officers will not be deductible under the Code.
Other Amendments. The amendment and restatement of the 1999 Stock Incentive
Plan also includes the following other amendments which are not subject to
your approval. The current maximum number of shares available for grant of
incentive stock options under the 1999 Stock Incentive Plan initially is
1,260,000 shares of common stock, plus an annual increase to be added on the
first day of Cheap Tickets' fiscal year beginning in 2000 equal to the lesser
of (1) 700,000 shares of common stock; (2) 2% of the number of shares
outstanding as of such date; or (3) a lesser number of shares determined by
the plan administrator of the 1999 Stock Incentive Plan. The proposed
amendment increases the number of shares available for grant of incentive
stock options by 240,000 shares, from 1,260,000 to 1,500,000, and the maximum
possible annual increase of shares reserved for issuance shall be the lesser
of (1) 1,000,000 shares of common stock; (2) 3% of our outstanding shares of
common stock; or (3) a lesser number of shares determined by the plan
administrator of the 1999 Stock Incentive Plan.
Administration. The 1999 Stock Incentive Plan is administered, with respect
to grants to directors, officers, consultants, and employees, by the plan
administrator, which is defined as the board of directors or a committee
designated by the board of directors. The committee is constituted in such a
manner as to satisfy applicable laws, including Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). With respect
to the grant of stock options subject to Code Section 162(m), the committee
will be comprised solely of two or more "outside directors" as defined under
Code Section 162(m) and applicable tax regulations. For grants of stock
options to individuals not subject to Rule 16b-3 and Code Section 162(m), the
board of directors may authorize one or more officers to grant such options.
Amendment and Termination. The board of directors may at any time amend,
suspend or terminate the 1999 Stock Incentive Plan. To the extent necessary to
comply with applicable provisions of federal securities laws, state corporate
and securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any foreign jurisdiction applicable
to options granted to residents therein, the Cheap Tickets will obtain
stockholder approval of any amendment to the 1999 Stock Incentive Plan in such
a manner and to such a degree as required. The 1999 Stock Incentive Plan will
terminate in March 2009 unless previously terminated by the board of
directors.
Other Terms. Stock options granted under the 1999 Stock Incentive Plan may
be either incentive stock options under the provisions of Section 422 of the
Code, or non-qualified stock options. Incentive stock options may be granted
only to employees of the Company or any parent or subsidiary corporation of
the Company.
The 1999 Stock Incentive Plan authorizes the plan administrator to select
the employees, directors and consultants of Cheap Tickets to whom options may
be granted and to determine the terms and conditions of any option. The
exercise price of incentive stock options under the 1999 Stock Incentive Plan
must be at least equal to the fair market value of the common stock on the
date of grant, and the term of incentive stock options must not exceed six
years. With respect to an employee who owns stock possessing more than 10% of
the voting power of all classes of our outstanding capital stock, the exercise
price of any incentive stock option must equal at least 110% of the fair
market value of the common stock on the grant date and the term of the
incentive stock option must not exceed five years. The exercise price of stock
options intended to qualify as performance-based compensation for purposes of
Code Section 162(m) shall not be less than 100% of the fair market value. The
exercise price of non-qualified stock options will be determined by the plan
administrator. The consideration to be paid for the shares of common stock
upon exercise of an option will be determined by the plan administrator and
may include cash, check, promissory note, shares of common stock, or the
assignment of part of the proceeds from the sale of shares acquired upon
exercise of the option.
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Under the 1999 Stock Incentive Plan, incentive stock options may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised during the lifetime of the grantee only by the grantee. However, the
1999 Stock Incentive Plan permits the designation of beneficiaries by holders
of incentive stock options. Non-qualified stock options are transferable to
the grantee's immediate family to the extent provided in the award agreement
or in the manner and to the extent permitted by the plan administrator.
Pursuant to the 1999 Stock Incentive Plan, the board of directors has
adopted the 1999 Non-Employee Director Option Program. Under this program,
each non-employee director serving on our board of directors upon our initial
public offering and each non-employee director appointed to the board
following the initial public offering received an option to acquire 1,500
shares of common stock at an exercise price per share equal to the then fair
market value of the common stock at the date of grant. In addition, following
each annual stockholders' meeting commencing with this annual meeting, each
non-employee director who continues as a director following the meeting and
who has served as a director for at least eight months will receive an option
to acquire the number of shares equal to $25,000 divided by the fair market
value per share on the date of such annual meeting rounded down to the next
whole share in the case of any fractional share. These options will vest and
become exercisable in three equal installments on each yearly anniversary of
the grant date. In the event of a merger, sale of all or substantially all of
Cheap Tickets' assets, the liquidation or dissolution of Cheap Tickets, the
acquisition by any person or related groups of persons of securities
possessing more than 50% of the voting power of Cheap Tickets' outstanding
securities with certain exceptions, and certain changes in the composition of
the board of the directors over a period of 36 months, such options will vest
and become fully exercisable. The plan administrator may provide for the full
automatic vesting and exercisability of unvested options in anticipation of
such a transaction. Each automatic option grant will have a term of six years
and will be transferable to the extent provided in the agreement evidencing
the option.
Certain Federal Tax Consequences. The grant of a non-qualified stock option
under the 1999 Stock Incentive Plan will not result in any federal income tax
consequences to the optionee or to us. Upon exercise of a non-qualified stock
option, the optionee is subject to income taxes at the rate applicable to
ordinary compensation income on the difference between the option exercise
price and the fair market value of the shares on the date of exercise. This
income is subject to withholding for federal income and employment tax
purposes. We are entitled to an income tax deduction in the amount of the
income recognized by the optionee subject to possible limitations imposed by
Section 162(m) of the Code. Any gain or loss on the optionee's subsequent
disposition of the shares of common stock will receive long or short-term
capital gain or loss treatment, depending on whether the shares are held for
more than one year following exercise. We do not receive a tax deduction for
any such gain.
The grant of an incentive stock option under the 1999 Stock Incentive Plan
will not result in any federal income tax consequences to the optionee or to
us. An optionee recognizes no federal taxable income upon exercising an
incentive stock option ("ISO") (subject to the alternative minimum tax rules
discussed below), and we receive no deduction at the time of exercise. In the
event of a disposition of stock acquired upon exercise of an ISO, the tax
consequences depend upon how long the optionee has held the shares of common
stock. If the optionee does not dispose of the shares within two years after
the ISO was granted, nor within one year after the ISO was exercised, the
optionee will recognize a long-term capital gain (or loss) equal to the
difference between the sale price of the shares and the exercise price. We are
not entitled to any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods, he
or she must recognize ordinary income in the year of the disposition (referred
to as a "disqualifying disposition"). The amount of such ordinary income
generally is the lesser of (i) the difference between the amount realized on
the disposition and the exercise price, or (ii) the difference between the
fair market value of the stock on the exercise date and the exercise price.
Any gain in excess of the amount taxed as ordinary income will be treated as a
long or short-term capital gain, depending on whether the stock was held for
more than one year. We, in the year of the disqualifying disposition, are
entitled to a deduction equal to the amount of ordinary income recognized by
the optionee.
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The "spread" under an ISO--i.e., the difference between the fair market
value of the shares at exercise and the exercise price--is classified as an
item of adjustment in the year of exercise for purposes of the alternative
minimum tax.
The foregoing is only a summary of the current effect of federal income
taxation upon the optionholder and us with respect to the shares purchased
under the 1999 Stock Incentive Plan. Reference should be made to the
applicable provisions of the Code. In addition, the summary does not discuss
the tax consequences of a optionholder's death or the income tax laws of any
municipality, state or foreign country to which the grantee may be subject.
Amended Plan Benefits. As of the date of this proxy statement, no executive
officer, director and no associates of any executive officer or director, has
been granted any options subject to stockholder approval of the proposed
amendment. The benefits to be received pursuant to the 1999 Stock Incentive
Plan amendments by our executive officers, directors and employees are not
determinable at this time.
Proposal 3: Ratify Selection of Independent Auditors for 2000
We are asking you to ratify the board's selection of PricewaterhouseCoopers
LLP, certified public accountants, as independent public accountants for 2000.
The audit committee recommended the selection of PricewaterhouseCoopers to the
board. All professional services PricewaterhouseCoopers rendered to us during
1999 were furnished at customary rates and terms. PricewaterhouseCoopers has
served as the independent public accountants of Cheap Tickets since August
1998.
A representative of PricewaterhouseCoopers will attend the Annual Meeting
and be able to make a statement and to answer your questions.
We are submitting this proposal to you because the board believes that such
action follows sound corporate practice. If you do not ratify the selection of
independent public accountants, the board will consider it a direction to
consider selecting other public accountants. However, even if you ratify the
selection, the board may still appoint new independent public accountants at
any time during the year if it believes that such a change would be in the
best interests of Cheap Tickets and our stockholders.
The board recommends that you vote "FOR" ratification of the selection of
PricewaterhouseCoopers
as Independent Public Accountants for 2000.
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INFORMATION ABOUT STOCKHOLDER PROPOSALS
If you wish to submit proposals to be included in our 2000 proxy statement,
we must receive them, in a form which complies with the applicable securities
laws, on or before December 8, 2000. In addition, in the event a stockholder
proposal is not submitted to us prior to February 21, 2001, the proxy to be
solicited by the board of directors for the 2001 annual meeting will confer
authority on the holders of the proxy to vote the shares in accordance with
their best judgment and discretion if the proposal is presented at the 2001
annual meeting without any discussion of the proposal in the proxy statement
for such a meeting. Please address your proposals to: Cheap Tickets, Inc.,
1440 Kapiolani Boulevard, Honolulu, Hawaii 96814, Attention: Corporate
Secretary.
By Order of the Board of Directors,
/s/ Sandra T. Hartley
Sandra T. Hartley
Secretary
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APPENDIX A
CHEAP TICKETS, INC.
1999 STOCK INCENTIVE PLAN
Adopted in March, 1999
Amended and Restated on March 31, 2000
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success
of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees appointed to
administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the
rules of any foreign jurisdiction applicable to Awards granted to residents
therein.
(d) "Award" means the grant of an Option under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant of an
Award executed by the Company and the Grantee, including any amendments
thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such termination is
for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in
the absence of such then-effective written agreement and definition, is based
on, in the determination of the Administrator, the Grantee's: (i) refusal or
failure to act in accordance with any specific, lawful direction or order of
the Company or a Related Entity; (ii) unfitness or unavailability for service
or unsatisfactory performance (other than as a result of Disability); (iii)
performance of any act or failure to perform any act in bad faith and to the
detriment of the Company or a Related Entity; (iv) dishonesty, intentional
misconduct or material breach of any agreement with the Company or a Related
Entity; or (v) commission of a crime involving dishonesty, breach of trust, or
physical or emotional harm to any person. At least 30 days prior to the
termination of the Grantee's Continuous Service pursuant to (i) or (ii) above,
the Administrator shall provide the Grantee with notice of the Company's or
such Related Entity's intent to terminate, the reason therefor, and an
opportunity for the Grantee to cure such defects in his or her service to the
Company's or such Related Entity's satisfaction. During this 30 day (or
longer) period, no Award issued to the Grantee under the Plan may be exercised
or purchased.
(h) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related group of
persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or
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exchange offer made directly to the Company's stockholders which a majority
of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members (rounded up
to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means any committee appointed by the Board to administer the
Plan.
(k) "Common Stock" means the common stock of the Company.
(l) "Company" means Cheap Tickets, Inc.
(m) "Consultant" means any person (other than an Employee or a Director,
solely with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(n) "Continuing Directors" means members of the Board who either (i) have
been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
(o) "Continuous Service" means that the provision of services to the Company
or a Related Entity in any capacity of Employee, Director or Consultant, is
not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity in any capacity of Employee, Director or
Consultant (except as otherwise provided in the Award Agreement). An approved
leave of absence shall include sick leave, military leave, or any other
authorized personal leave. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
(p) "Corporate Transaction" means any of the following transactions:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;
(iii) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger; or
(iv) an acquisition by any person or related group of persons (other than
the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.
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(q) "Covered Employee" means an Employee who is a "covered employee" under
Section 162(m)(3) of the Code.
(r) "Director" means a member of the Board or the board of directors of any
Related Entity.
(s) "Disability" means that a Grantee is permanently unable to carry out the
responsibilities and functions of the position held by the Grantee by reason
of any medically determinable physical or mental impairment. A Grantee will
not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.
(t) "Employee" means any person, including an Officer or Director, who is an
employee of the Company or any Related Entity. The payment of a director's fee
by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(v) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price
was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator
to be the primary market for the Common Stock or the Nasdaq National
Market, whichever is applicable or (B) if the Common Stock is not traded on
any such exchange or national market system, the average of the closing bid
and asked prices of a Share on the Nasdaq Small Cap Market for the day
prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock of the
type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(w) "Grantee" means an Employee, Director or Consultant who receives an
Award pursuant to an Award Agreement under the Plan.
(x) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(y) "Non-Qualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(z) "Officer" means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(aa) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(bb) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(cc) "Performance-Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
(dd) "Plan" means this 1999 Stock Incentive Plan.
(ee) "Registration Date" means the first to occur of (i) the closing of the
first sale to the general public of (A) the Common Stock or (B) the same class
of securities of a successor corporation (or its Parent) issued pursuant to a
Corporate Transaction in exchange for or in substitution of the Common Stock,
pursuant to a
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registration statement filed with and declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended; and (ii) in
the event of a Corporate Transaction, the date of the consummation of the
Corporate Transaction if the same class of securities of the successor
corporation (or its Parent) issuable in such Corporate Transaction shall have
been sold to the general public pursuant to a registration statement filed
with and declared effective by, on or prior to the date of consummation of
such Corporate Transaction, the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(ff) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which
the Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(gg) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company, a Parent or a Subsidiary of all or substantially
all of the interests of the Company, a Parent or a Subsidiary in any Related
Entity effected by a sale, merger or consolidation or other transaction
involving that Related Entity or the sale of all or substantially all of the
assets of that Related Entity.
(hh) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor thereto.
(ii) "Share" means a share of the Common Stock.
(jj) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, the maximum aggregate
number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is one million five hundred thousand (1,500,000)
Shares, plus an annual increase to be added on the first day of the Company's
fiscal year beginning in 2001 equal to three percent (3%) of the number of
Shares outstanding as of such date or a lesser number of Shares determined by
the Administrator. Notwithstanding the foregoing, subject to the provisions of
Section 10, below, of the number of Shares specified above, the maximum
aggregate number of Shares available for grant of Incentive Stock Options is
one million five hundred thousand (1,500,000), plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2001 equal to
the lesser of (x) one million (1,000,000) Shares, (y) three percent (3%) of
the number of Shares outstanding as of such date, or (z) a lesser number of
Shares determined by the Administrator. The Shares to be issued pursuant to
Awards may be authorized, but unissued, or reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise
price for such Award or any withholding taxes due with respect to such Award,
such retained Shares subject to such Award shall become available for future
issuance under the Plan (unless the Plan has terminated). Shares that actually
have been issued under the Plan pursuant to an Award shall not be returned to
the Plan and shall not become available for future issuance under the Plan,
except that if unvested Shares are forfeited, or repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers. With respect
to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in
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such a manner as to satisfy the Applicable Laws and to permit such grants
and related transactions under the Plan to be exempt from Section 16(b) of
the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until
otherwise directed by the Board.
(ii) Administration With Respect to Consultants and Other Employees. With
respect to grants of Awards to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee
shall be constituted in such a manner as to satisfy the Applicable Laws.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board.
(iii) Administration With Respect to Covered Employees. Notwithstanding
the foregoing, grants of Awards to any Covered Employee intended to qualify
as Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to
Covered Employees, references to the "Administrator" or to a "Committee"
shall be deemed to be references to such Committee or subcommittee.
(iv) Administration Errors. In the event an Award is granted in a manner
inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom Awards may
be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares to be covered by each Award
granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions of any Award granted hereunder;
(vi) to amend the terms of any outstanding Award granted under the Plan,
provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
(vii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan, including without limitation, any notice of Award or
Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with
the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms of the
Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Non-Qualified Stock Options may be granted to Employees,
Directors and Consultants. Incentive Stock Options may be granted only to
Employees of the Company, a Parent or a Subsidiary. An Employee, Director or
Consultant who has been granted an Award may, if otherwise eligible, be
granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
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6. Terms and Conditions of Awards.
(a) Designation of Award. Each Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
(b) Conditions of Award. Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights
of first refusal, forfeiture provisions, form of payment (cash, Shares, or
other consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, increase
in share price, earnings per share, total stockholder return, return on
equity, return on assets, return on investment, net operating income, cash
flow, revenue, economic value added, personal management objectives, or other
measure of performance selected by the Administrator. Partial achievement of
the specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.
(c) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or
a Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase,
asset purchase or other form of transaction.
(d) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards
to one or more classes of Grantees on such terms and conditions as determined
by the Administrator from time to time.
(e) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options may be granted to any Grantee in any fiscal year of
the Company shall be five hundred thousand (500,000) Shares. In connection
with a Grantee's commencement of Continuous Service, a Grantee may be granted
Options for up to an additional five hundred thousand (500,000) Shares which
shall not count against the limit set forth in the previous sentence. The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10, below. To the
extent required by Section 162(m) of the Code or the regulations thereunder,
in applying the foregoing limitations with respect to a Grantee, if any Option
is canceled, the canceled Option shall continue to count against the maximum
number of Shares with respect to which Options may be granted to the Grantee.
For this purpose, the repricing of an Option shall be treated as the
cancellation of the existing Option and the grant of a new Option.
(f) Term of Award. The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term of an Incentive Stock Option
shall be no more than six (6) years from the date of grant thereof. However,
in the case of an Incentive Stock Option granted to a Grantee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
(g) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's
Incentive Stock Option in the event of the Grantee's death on a
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beneficiary designation form provided by the Administrator. Other Awards shall
be transferable to the extent provided in the Award Agreement.
(h) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise Price, Consideration and Taxes.
(a) Exercise Price. The exercise price, if any, for an Award shall be as
follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share
on the date of grant; or
(B) granted to any Employee other than an Employee described in the
preceding paragraph, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share exercise
price shall be not less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant unless otherwise determined by the
Administrator.
(iii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(iv) Notwithstanding the foregoing provisions of this Section 7(a), in
the case of an Award issued pursuant to Section 6(c), above, the exercise
or purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration to be paid
for the Shares to be issued upon exercise of an Award including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant). In addition
to any other types of consideration the Administrator may determine, the
Administrator is authorized to accept as consideration for Shares issued under
the Plan the following, provided that the portion of the consideration equal
to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse, interest,
security, and redemption provisions as the Administrator determines as
appropriate;
(iv) if the exercise occurs on or after the Registration Date, surrender
of Shares or delivery of a properly executed form of attestation of
ownership of Shares as the Administrator may require (including withholding
of Shares otherwise deliverable upon exercise of the Award) which have a
Fair Market Value on the date of surrender or attestation equal to the
aggregate exercise price of the Shares as to which said Award shall be
exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used
to pay the exercise price unless otherwise determined by the
Administrator);
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(v) if the exercise occurs on or after the Registration Date, payment
through a broker-dealer sale and remittance procedure pursuant to which the
Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased Shares and (B) shall provide written directives
to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction;
or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or
other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to
pay the purchase price as provided in Section 7(b)(v). Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Shares subject to an
Award, notwithstanding the exercise of an Option. The Company shall issue
(or cause to be issued) such stock certificate promptly upon exercise of
the Award. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in the Award Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Continuous Service.
(i) An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided
in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term
of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the extent not
exercised within the time permitted by law for the exercise of Incentive
Stock Options following the termination of a Grantee's Continuous Service
shall convert automatically to a Non-Qualified Stock Option and thereafter
shall be exercisable as such to the extent exercisable by its terms for the
period specified in the Award Agreement.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
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(b) As a condition to the exercise of an Award, the Company may require
the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in
the opinion of counsel for the Company, such a representation is required
by any Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by
each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, the exercise price of each such
outstanding Award, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Shares or similar transaction affecting the Shares, (ii) any other
increase or decrease in the number of issued Shares effected without receipt
of consideration by the Company, or (iii) as the Administrator may determine
in its discretion, any other transaction with respect to Common Stock to which
Section 424(a) of the Code applies or similar transaction; provided, however
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator and its determination shall be
final, binding and conclusive. Except as the Administrator determines, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason hereof shall be made with respect to, the number or price of Shares
subject to an Award.
11. Corporate Transactions/Changes in Control/Related Entity
Dispositions. Except as may be provided in an Award Agreement:
(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change in Control
or Related Entity Disposition or at the time of an actual Corporate
Transaction, Change in Control or Related Entity Disposition and exercisable
at the time of the grant of an Award under the Plan or any time while an Award
remains outstanding, to provide for the full automatic vesting and
exercisability of one or more outstanding unvested Awards under the Plan and
the release from restrictions on transfer and repurchase or forfeiture rights
of such Awards in connection with a Corporate Transaction, Change in Control
or Related Entity Disposition, on such terms and conditions as the
Administrator may specify. The Administrator also shall have the authority to
condition any such Award vesting and exercisability or release from such
limitations upon the subsequent termination of the Continuous Service of the
Grantee within a specified period following the effective date of the
Corporate Transaction, Change in Control or Related Entity Disposition. The
Administrator may provide that any Awards so vested or released from such
limitations in connection with a Change in Control or Related Entity
Disposition, shall remain fully exercisable until the expiration or sooner
termination of the Award. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate unless
assumed by the successor company or its parent.
(b) The portion of any Incentive Stock Option accelerated under this Section
11 in connection with a Corporate Transaction, Change in Control or Related
Entity Disposition shall remain exercisable as an Incentive Stock Option under
the Code only to the extent the $100,000 dollar limitation of Section 422(d)
of the Code is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated excess portion of such Option shall be exercisable as a Non-
Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards
may be granted under the Plan upon its becoming effective.
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13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards
already granted, and such Awards shall remain in full force and effect as if
the Plan had not been amended, suspended or terminated, unless mutually agreed
otherwise between the Grantee and the Administrator, which agreement must be
in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall
not confer upon any Grantee any right with respect to the Grantee's Continuous
Service, nor shall it interfere in any way with his or her right or the
Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.
16. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Related
Entity, Awards shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a
Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The
Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee
Retirement Income Security Act of 1974, as amended.
17. Stockholder Approval. The Plan became effective when adopted by the
Board in March 1999. On March 31, 2000, the Board adopted and approved an
amendment and restatement of the Plan (a) to increase the number of Shares
available for issuance under the Plan and (b) to adopt a limit on the maximum
number of Shares with respect to which Options may be granted to any Grantee
in any fiscal year of the Company and certain other administrative provisions
to comply with the performance-based compensation exception to the deduction
limit of Section 162(m) of the Code, which amendments are subject to approval
by the stockholders of the Company. The amendment and restatement of the Plan
included the following other amendment which is not subject to approval by the
stockholders of the Company. The Board approved an amendment to the Plan to
increase the number of Shares available for grant of Incentive Stock Options.
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<PAGE>
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PROXY CARD
CHEAP TICKETS, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael J. Hartley and Sandra T. Hartley, and
each of them, the attorneys, agents and proxies of the undersigned, with full
powers of substitution to each, to attend and act as proxy or proxies of the
undersigned at the Annual Meeting of Stockholders of Cheap Tickets, Inc. to be
held at the Hawaii Prince Hotel, 100 Holomoana Street, Honolulu, Hawaii, on
Tuesday, May 9, 2000 at 8:30 AM, and at any and all adjournments thereof, and
to vote as specified herein the number of shares which the undersigned, if
personally present, would be entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS, "FOR" APPROVAL AND RATIFICATION OF THE
AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN AND "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS MADE YOUR VOTE WILL NOT COUNT "FOR" OR "AGAINST" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS. IF NO DIRECTION IS MADE YOUR VOTE WILL
HAVE THE SAME EFFECT AS IF YOU VOTED "AGAINST" APPROVAL AND RATIFICATION OF
THE AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN AND "AGAINST" RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
I (WE) WILL [_] WILL NOT [_]
ATTEND THE MEETING IN PERSON.
PLEASE SIGN AND DATE ON REVERSE SIDE
<PAGE>
Please mark your
[X] votes as in this
example.
WITHHOLD
FOR all nominees AUTHORITY
listed below (except to vote for all
as indicated to the nominees listed
contrary below.) below.
1. Election of Directors [_] [_]
Director nominees: Giles H. Bateman, George R. Mrkonic, A. Maurice Myers, Cece
Smith, Sam Galeotos, Michael J. Hartley and Sandra T. Hartley.
INSTRUCTION: To Withhold Authority to vote for any individual nominee, write
that nominee's name in the space below.
- --------------------------------------------------------------------------------
2. Approval and Ratification of the Amended and FOR AGAINST ABSTAIN
Restated 1999 Stock Incentive Plan. [_] [_] [_]
3. Ratification of Appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent [_] [_] [_]
public accountants of Cheap Tickets for the
year ending December 31, 2000.
4. Other Business. In their discretion, the proxies FOR AGAINST ABSTAIN
are authorized to vote upon such other business [_] [_] [_]
as may properly come before the meeting and at
any and all adjournments thereof. The Board of
Directors at present knows of no other
business to be presented by or on behalf of
Cheap Tickets or the Board of Directors at the
meeting.
The undersigned hereby ratifies and confirms all that the attorneys and
proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at the meeting. The undersigned acknowledges receipt
of the Notice of Annual Meeting and the Proxy Statement accompanying such
notice.
_________________________ ___________________________ Dated: ___________ , 2000
Signed Signed
Please date this proxy card and sign above exactly as your name appears on this
card. Joint owners should each sign personally. Corporate proxies should be
signed by an authorized officer. Executors, administrators, trustees, etc.,
should give their full titles.
