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As filed with the Securities and Exchange Commission on September 1, 1999
SEC Registration No. 333-78443
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. ONE
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
TRAVELNSTORE.COM, INC.
(Name of Small Business Issuer in its Charter)
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California 7399 77-0507163
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation) Classification Identification Code Identification Number)
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1320 Flynn Road, Suite 402
Camarillo, California 93012
(805) 388-9004
(Address and Telephone Number of Principal Executive Offices and
Principal Place of Business)
Jim B. Tyner, Chief Executive Officer
1320 Flynn Road, Suite 402
Camarillo, California 93012
(805) 388-9004
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Bruce W. McRoy, Esq.
Reicker, Clough, Pfau & Pyle, LLP
1421 State Street, Suite B
Santa Barbara, California 93101
(805) 966-2440 - TEL
(805) 966-3320 - FAX
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PER SHARE OFFERING REGISTRATION FEE
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common stock, no par value 1,000,000 shares $ 6.50 $6,500,000 $1,807*
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common stock, no par value 153,847 shares** $0.001 $ 100 $ 1*
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* Estimated solely for the purpose of calculating the registration fee,
of which $1,390.00 was previously paid.
** Shares issuable upon exercise of stock option (See, "CERTAIN TRANSACTIONS -
Option Sweepstakes".)
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities & Exchange Commission, acting pursuant
to said Section 8(a), may determine.
PROSPECTUS SUBJECT TO COMPLETION; DATED SEPTEMBER 1, 1999
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PROSPECTUS
INITIAL PUBLIC OFFERING PROSPECTUS
1,000,000 shares of common stock
$6.50 per share
TravelnStore.com, Inc.
1320 Flynn Road, Suite 402
Camarillo, California 93012
(805) 388-9004
We operate a Web site on the Internet through which users of travel services
access travel service providers and retail travel agencies.
The Offering
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OFFERING PROCEEDS
PER --------------------------
SHARE MINIMUM MAXIMUM
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Public offering price $6.50 $2,000,000 $6,500,000
Underwriting discounts $0.00 $ 0.00 $ 0.00
and commissions
Proceeds to us $6.50 $2,000,000 $6,500,000
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This is our initial public offering. TravelnStore.com, Inc. will offer
and sell the shares covered by this offering directly to the investors. Our
officers and directors who will participate in the offer and sale of the shares
of common stock on behalf of the Company are Jim B. Tyner, Chairman and Chief
Executive Officer, John R. Toal, President and Chief Operating Officer, and
Peggy Murray, Director of Investors Relations. (See, "MANAGEMENT" and "PLAN OF
DISTRIBUTION".) We have not retained any underwriter or broker/dealer to assist
in the offer and sale of the shares. However, we reserve the right to engage one
or more broker/dealer(s) to assist in the offer and sale of the shares.
This Prospectus also covers 153,847 shares of common stock issuable upon
exercise of a Stock Option granted by us in a Sweepstakes conducted on our Web
site. (See, "CERTAIN TRANSACTIONS-OPTION SWEEPSTAKES.")
There is no public market for the shares covered by this offering. After
the offering, the shares initially will not be listed on any exchange or through
Nasdaq or any other quotation source. Depending on the aggregate net proceeds to
us from this offering, we may seek to list our common stock on the Philadelphia
Stock Exchange or another regional stock exchange. If our application for
listing on the Philadelphia Stock Exchange is denied, we will seek to list the
common stock on another regional stock exchange or on the OTC Electronic
Bulletin Board. (See, "PLAN OF DISTRIBUTION - Secondary Market".)
The price at which the shares of common stock may be resold after the
offering may not reflect the market price of our shares after the offering.
----------------
INVESTING IN COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 10
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
We cannot sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities in any state where such an offer or sale is not permitted.
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TRAVELNSTORE.COM, INC.
LOGO
REPLICATION OF SELECTED SCREENS FROM TRAVELNSTORE.COM WEBSITE
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY....................................................... 6
RISK FACTORS............................................................. 10
DIVIDENDS................................................................ 21
USE OF PROCEEDS.......................................................... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 24
BUSINESS................................................................. 28
MANAGEMENT............................................................... 43
PRINCIPAL STOCKHOLDERS................................................... 47
CERTAIN TRANSACTIONS..................................................... 48
DESCRIPTION OF CAPITAL STOCK............................................. 50
LEGAL MATTERS............................................................ 56
EXPERTS.................................................................. 57
ADDITIONAL INFORMATION................................................... 57
INDEX TO FINANCIAL STATEMENTS............................................ F-1
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
Prospectus. This summary may not contain all of the information that you should
consider before investing in the common stock. You should read the entire
Prospectus carefully, including "Risk Factors" and the financial statements,
before making an investment decision.
OUR BUSINESS
We created, maintain and promote the TravelnStore.com Web site which
acts as a navigational site to the Web sites created by a wide array of travel
service providers, such as cruise lines, tour companies, car rental firms,
destination resorts and hotel groups. Visitors to the TravelnStore.com Web site
can print out Certificates of Value for various travel services to which our
site provides links. These Certificates may be redeemed for discounts, upgrades
or other premiums designed to encourage the visitor to book a particular travel
service. Certificates may be redeemed at any of the 29,000 retail travel
agencies in the United States. We receive a commission or override from the
travel service provider for each Certificate that is redeemed. We also recruit
individual travel agencies to co-host our Web site within their market areas.
Agencies subscribe for ZIP codes within their market. When a visitor to our Web
site logs in from a subscribed ZIP code, that agency is graphically presented as
the local TravelnStore.com co-host agency. While Certificates may be redeemed at
any agency, a local co-host agency is presented as a preferred redemption
location. Using these methodologies, we are able to link the graphic
presentation of travel services on the Internet with the existing, retail
distribution infrastructure represented by the 29,000 retail travel agencies in
the United States.
Unlike other Internet travel companies, we do not directly sell travel
services over the Internet. The first part of the selling is done by the Web
sites of the travel service providers. The second part, which includes answering
specific questions and the paperwork, is done by the agents in the local, retail
travel agencies. For our business, this is very important. First, we do not have
to employ people to create content for our Web site because the content is
provided by the Web sites of the travel service providers. Second, we do not
have to employ people to answer phones, sell travel and create travel
documentation. We have employees who recruit and retain the co-host agencies,
work with the travel service providers to negotiate the Certificates of Value
and perform accounting functions to keep track of the Certificates and
commissions.
We think that it is a good idea to use the power of the Internet to
graphically present a lot of information about travel so that people can decide
where they want to go and what they want to do. We know that once a person has
used the Internet to research their trip they like to use a travel agent to
complete their purchase. Our goal is to tie the two together in creative and
productive ways.
We intend to use the majority of the money that we raise from this
Offering to implement our marketing strategies which are designed to:
- Generate consumer traffic to the TravelnStore.com Web site by
implementing a comprehensive advertising and promotional program
using both online and offline media;
- Establish and expand relationships with travel service providers;
and to increase the depth and scope of the TravelnStore.com Web
site;
- Expand our existing network of our 300+ TravelnStore.com co-host
agencies towards an ultimate goal of 2000+ co-host agencies.
We also plan to invest in expanding our operational capacities in the
following areas.
- TECHNOLOGY. Involvement in e-commerce requires a continuing
commitment to keep abreast of technological developments and
opportunities in the rapidly evolving Internet arena. To do this,
we will need to invest in new software, Web site design and
equipment.
- MANAGEMENT. We must recruit, develop and retain management team
members who are experienced, committed and aggressive to drive
the growth of TravelnStore.com.
- OPERATIONS. We must recruit, develop and retain trained staff
members to operate efficiently within their individual
capabilities and must provide a productive work environment to
maximize our operational productivity.
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We also want to grow the business by establishing strategic
relationships with both Internet and travel related firms. These relationships
may include:
- Joint ventures designed to take advantage of the blending of our
strengths with the strengths of the joint venture partner;
- Long-term marketing relationships to enhance our presence on the
Internet or within the travel industry; and
- Acquisitions of companies whose market position or expertise will
better enhance our growth and/or operations.
TravelnStore.com was initially organized as a limited liability company
on August 18, 1998. Effective as of April 15, 1999, the limited liability
company was merged into the TravelnStore.com, Inc., a California corporation,
incorporated March 4, 1999. (See "CERTAIN TRANSACTIONS".) TravelnStore.com's
principal executive offices are located at 1320 Flynn Road, Suite 402,
Camarillo, California 93012 and its telephone number is (805) 388-9004.
OUR OFFERING
We are offering shares of our common stock directly to you without using
an underwriter. Normally a company at our stage is being funded by venture
capital. Venture capitalists take higher risks in search of higher rewards. We
are asking you to assume that higher degree of risk by investing in our company
at this stage. However, you should read carefully the rest of this Prospectus so
you can determine if you are willing to take the risk of losing part or all of
your investment. If there are items that are unclear please contact our Investor
Relations Department at the above address. We want you to understand our
company, our challenges and our opportunity. (See, "PLAN OF DISTRIBUTION".)
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Type of Securities Common Stock
Minimum Shares to be Offered 308,000
Maximum Shares to be Offered 1,000,000
Maximum Shares Outstanding after this 10,424,462 shares of common stock and 8,154 shares of Series
Offering A Preferred Stock
Minimum Subscription The investor must purchase at least 300 shares of common
stock for a minimum investment of $1,950
Suitability Standards Each individual investor must have a net worth of at least
$250,000 or a net worth of at least $150,000 and gross income
for each of the last two years of at least $50,000, and
anticipates having at least that level of gross income for
the current tax year. For an investor who is not an
individual, either the entity must have total assets of at
least $250,000 or the amount of the investment must not
exceed 5% of the entity's total assets. In addition, the
amount of the investment by any investor may not exceed 10%
of the net worth of the investor.
Interim Closing TravelnStore.com will not close on any subscriptions until it
has received subscriptions for at least 308,000 shares. If it
does not receive such subscriptions by ________________,
_______, TravelnStore.com will promptly refund all monies,
without interest, and terminate this offering. After accepting
subscriptions for a minimum of 308,000 shares, TravelnStore.com
may accept subscriptions for additional shares as they are
received. TravelnStore.com will not accept any subscriptions
after ___________ , ____________.
There can be no assurance that TravelnStore.com will be able to
sell more than the minimum number of shares covered by this
offering. (See, "USE OF PROCEEDS".)
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Use of Proceeds Enhancement and marketing of the TravelnStore.com Web site;
recruitment of co-host travel agencies, expansion of
facilities, additional staff and management, acquisition of
computer-related equipment, establishment of strategic
relationships, payment of trade payables, retirement of debt,
general and administrative purposes, and working capital.
No Current Trading Market There is no public market for the shares covered by this
offering. After the offering, the shares initially will not
be listed on any exchange or through Nasdaq or any other
quotation source. Depending on the aggregate net proceeds to
us from this offering, we may seek to list our common stock
on the Philadelphia Stock Exchange or another regional stock
exchange. If our application for listing on the Philadelphia
Stock Exchange is denied, we will seek to list the common
stock on another regional stock exchange or on the OTC
Electronic Bulletin Board. (See, "PLAN OF DISTRIBUTION -
Secondary Market".)
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* Based upon shares outstanding as of August 25, 1999. Includes 24,462 shares of
common stock reserved for issuance upon conversion of 8,154 shares of Series A
Preferred Stock currently outstanding. Excludes: (i) 1,000,000 shares of
common stock reserved for issuance under TravelnStore.com's 1999 Equity
Incentive Plan; (ii) 346,146 shares of common stock reserved for issuance upon
conversion of promissory notes for which holders have tendered notice of
conversion, and (iii) up to 153,847 shares of common stock issuable upon
exercise of outstanding Stock Option. (See "MANAGEMENT -- Stock Option Plans"
and "DESCRIPTION OF SECURITIES.")
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SUMMARY FINANCIAL DATA
The selected historical financial data presented below are derived from
the financial statements of TravelnStore, LLC, at the end of this Prospectus.
The financial statements for the period August 18, 1998 (date of inception) to
May 31, 1999 have been audited by Farber & Hass LLP, independent accountants.
The selected financial data set forth below and the financial statements at the
end of this prospectus for the period through December 31, 1998, are for
TravelnStore.com, LLC, a California limited liability company. Effective as of
April 15, 1999, the limited liability company was merged into TravelnStore.com,
Inc., a California corporation and the Registrant. The corporation had no
operations prior to its acquisition of the limited liability company.
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AT DECEMBER 31, AT MAY 31,
1998 1999
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Balance Data Sheet
Cash, cash equivalents and
short-term Investments $ 19,045
Total Assets $ 81,970 $ 218,743
Current Liabilities $ 296,847 $ 463,728
Working Capital $(214,877) $(262,864)
Long-Term Debt $ 225,000 $ 310,000
Stockholders' Equity $(307,914) $(556,075)
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FOR THE PERIOD
AUGUST 18, 1998 FOR THE
(DATE OF INCEPTION) FIVE MONTHS
THROUGH ENDED
DECEMBER 31, 1998 MAY 31, 1999
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Statement of Operations Data
Revenues $ 23,128 $ 21,386
Operating Expenses $ 326,356 $ 257,059
Other Income (Expense) $ (904,082) $(437,496)
Net Income (Loss) $(1,208,110) $(673,165)
Net Income (Loss)
Per Common Share* $ (0.27) $ (0.15)
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* Based on 4,500,000 and 4,700,000 shares of common stock issued and outstanding
as of December 31, 1998 and May 31, 1999, respectively.
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RISK FACTORS
Investing in common stock is risky. You should carefully consider the following
risk factors and all other information contained in this Prospectus before
purchasing our common stock. Additional risks and uncertainties that are not yet
identified or that we currently think are immaterial may also materially
adversely affect our business and financial condition in the future. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.
RISKS ASSOCIATED WITH OUR COMPANY
WE WERE ORGANIZED IN JULY 1998, AND HAVE A LIMITED OPERATING HISTORY.
We are subject to all the risks inherent in the establishment and
expansion of a new business enterprise. These include problems of entering new
markets, marketing of an innovative service, hiring and training personnel,
acquiring reliable computer systems and software, and implementing operational
controls.
In general, startup businesses are subject to risks and/or levels of
risk that are often greater than those encountered by companies with established
operations and relationships. Startups often require significant capital from
sources other than operations. The management and employees of startup business
shoulder the burdens of the business operations and a workload associated with
company growth and capitalization that is disproportionately greater than that
for an established business. Any or all of the foregoing can have a material,
adverse effect on our business, financial condition and our operating results.
WE ARE AN EARLY STAGE COMPANY AND HAVE BEEN IN OPERATION FOR A SHORT
PERIOD OF TIME.
Our business plan is unproven and we must be able to adapt as we grow.
Companies at this point in their business life seldom seek to register and offer
stock in a public offering. Consequently, you are being asked to invest at an
earlier stage in our growth than is typically the case in an initial public
offering. This Offering carries a higher degree of risk than a typical initial
public offering of stock.
WE EXPECT THAT OUR OPERATING LOSSES WILL CONTINUE AND THAT WE WILL NOT
OPERATE PROFITABLY IN THE NEAR FUTURE.
There is no assurance that revenue generated by our sales will be
sufficient to fund operations. We expect to incur losses for the foreseeable
future due to the significant costs associated with the development and
marketing of our services. We expect our operating losses to continue until such
time as our sales generate sufficient revenues to generate a profit.
OUR ABILITY TO ATTAIN PROFITABILITY WILL DEPEND, IN PART, UPON OUR
ABILITY TO SUCCESSFULLY DEVELOP AND MARKET OUR SERVICES.
We may not be able to successfully transition from our current stage of
development to stabilized operational revenues sufficient to cover our expenses.
While attempting to make this transition, we will be subject to all the risks
inherent in a growing business, including the needs to adequately service and
expand our customer base and to maintain and enhance our current services. Our
future profitability will be affected by all the risk factors listed here.
OUR ABILITY TO ACCOMPLISH OUR PLANS IS DEPENDENT UPON OUR CLOSING OF
THIS OFFERING FOR NO LESS THAN $2,000,000.
We believe that this will be sufficient to meet our capital requirements
for a minimum of twelve months. If we do not raise our minimum goal of
$2,000,000 in this Offering and we are unable to arrange alternative financing,
there will most likely be substantial doubt as to our ability to continue as a
going concern. Consequently our independent auditors have qualified their report
on our financial condition because there is substantial doubt as to our ability
to continue as a going concern. See "Management Discussion and Analysis of
Financial Condition and Results of Operation."
WE MUST HIRE AND RETAIN RELIABLE PERSONNEL IN ORDER TO BE ABLE TO
ACHIEVE OUR PLAN.
We anticipate that we must rapidly expand our operations to establish an
adequate customer base, and reliable market for our services. We have added a
number of key managerial and technical employees, and we expect to add
additional key personnel in the future. This expansion has placed, and is
expected to continue to place, a significant strain on our management and our
operational and
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financial resources. In addition to addressing usual operations, management must
expand, train and manage our growing employee base.
STAFF. Our future success depends upon our ability to identify, attract,
hire, train, retain and motivate skilled technical, marketing,
accounting and customer service employees. Competition for such
personnel is intense and there can be no assurance that we will be able
to successfully attract, assimilate and/or retain qualified staff
personnel. If we fail to acquire a productive staff, it will adversely
affect our business, operating results and financial condition.
KEY PERSONNEL. We are dependent on the efforts and relationships of Jim
Tyner, John Toal and other executive officers currently engaged or to be
engaged at some future date. If any of these individuals become unable
to continue in their role, our business or prospects could be adversely
affected. We have entered into written employment agreements with any of
these key personnel. However, there can be no assurance that any of
these individual(s) will continue in their present capacity for any
particular period of time. We do not maintain key man life insurance
covering any of our executive officers or other members of senior
management. If we are unable to obtain and maintain an effective team of
key employees to operate and manage our growth, our business, operating
results and financial condition could be materially and adversely
affected.
CHIEF FINANCIAL OFFICER. Richard Bush is our Chief Financial Officer.
Mr. Bush currently serves as the Vice President of Finance of Fairfield
Manufacturing, Inc. which is located in West Lafayette, Indiana. Mr.
Bush has agreed to serve as our Chief Financial Officer until such time
as we are able to identify and retain a full-time Chief Financial
Officer. We propose to begin actively looking for a full-time C.F.O.
promptly after the completion of this Offering.
WE REQUIRE CAPITAL IN ADDITION TO THE PROCEEDS OF THIS OFFERING TO FUND
OUR OPERATIONS.
We currently anticipate that the net proceeds of the Offering will be
sufficient to meet our capital requirements for a minimum of 12 months. If we
need additional capital to establish our desired market position or for other
reasons, there can be no assurance that such capital will be available or will
be available on terms that are acceptable to TravelnStore.com. We anticipate
that we will not be able to obtain such additional capital from banks or similar
financial institutions.
OUR FINANCIAL FORECASTS ARE ONLY OUR BEST ESTIMATES OF THE EXPECTED
PERFORMANCE BASED UPON ASSUMPTIONS THAT WE BELIEVE ARE REASONABLE.
We can give you no assurance, however, regarding the attainability of
the forecasts or the reliability of such assumptions. Certain of the assumptions
inevitably will not materialize and unanticipated events will occur for any
number of reasons, including the following:
- Changes in general economic conditions and other factors that
affect demand for travel services;
- Changes in the travel industry itself;
- Changes in our relationships with travel suppliers;
- Competitive factors including changes in travel services
distribution and payment methods; and
- The success of TravelnStore.com's operating and growth
strategies.
Therefore, the actual results of operations likely will vary from the
forecasts and the variations may be material. The forecasts are included solely
to give you information concerning our best estimates of future operating
results based upon certain assumptions. We are making no representation that
such results will be achieved. Our independent accountants have not compiled or
examined these forecasts and are not offering an opinion or any form of
assurance of their accuracy. We can give you no assurance that our operating
results will in any way approximate these projected results.
WE MAY SEEK TO ACHIEVE OUR PLAN THROUGH THE ACQUISITION OF ONE OR MORE
EXISTING BUSINESSES.
We may seek to increase our revenues, expand our markets or increase our
products and services in part through the acquisition of existing travel or
Internet related businesses. Recent experience shows that businesses that
operate primarily through an Internet presence may need to acquire or combine
with other businesses in order to maintain or enhance market position.
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Acquisitions would expose us to increased risks, including, but not
limited to:
- Risks associated with assimilating the new operations and
personnel;
- The diversion of resources from our existing operations;
- The inability to generate revenues from such new acquisitions
sufficient to offset associated acquisition costs;
- The establishment and maintenance of uniform standards,
procedures and policies and the impairment of relationships with
employees and customers as a result of the integration of new
operations and employees;
- Additional expenses associated with amortization of acquired
intangible assets or potential businesses; and
- Customer dissatisfaction or performance problems at an acquired
company could have an adverse effect on our reputation.
Decisions regarding acquisitions are the sole prerogative of our
management. We will use our best efforts to undertake a thorough due diligence
review of any acquisition candidate prior to committing to the acquisition.
However, there can be no assurance that businesses we acquire will achieve the
anticipated revenues and earnings.
Should we elect to undertake acquisitions, part or all of the funds
utilized for those acquisition(s) may come from funds generated by this
Offering. We may elect to use other consideration for acquisitions such as stock
and/or other securities. If we issue additional stock or securities to make an
acquisition, your share position likely will be diluted.
There are no assurances that, if we seek to pursue any acquisition, we
will be able to assemble the stock, securities or other consideration needed to
complete the acquisition. If we are unable to assemble the needed consideration,
we may be unable to implement an acquisition strategy. You should not subscribe
to this Offering with the expectation that we will be able to grow based upon an
acquisition strategy.
IT IS IMPORTANT TO OUR SUCCESS THAT WE SECURE OUR RIGHT TO USE THE
SERVICE MARK "TRAVELNSTORE.COM."
We have applied to the U.S. Patent and Trademark Office to register the
service marks "TravelnStore" and "TravelnStore.com." We also have registered our
Web site "TravelnStore.com." We have not applied to register or otherwise
protect either of such marks or our Web site domain name in any country other
than the United States. There are no assurances that the applications will be
approved and the registrations granted or that any other person will not
challenge the registration or attempt to infringe upon our marks.
OUR SUCCESS IS DEPENDENT ON OUR CONTINUED FAVORABLE RELATIONSHIPS WITH
TRAVEL INDUSTRY SUPPLIERS, AGENCIES AND CONSUMERS.
Our growth is keyed to our relationships with travel consumers, retail
travel agencies and travel industry suppliers, such as airlines, hotels and
rental car companies. We strive to negotiate and maintain our relationships so
that they are secure and long term. These relationships and agreements generally
are terminable by either party on short notice and without cause. Consequently
we cannot guarantee that any particular relationship or agreement will endure
for any specific period of time. Changes within the travel industry may make our
agreements and relationships less attractive in the future as the industry
adapts to meet challenges posed by competition and technological advances. We
may experience loss of contracts, changes in our pricing agreements, commission
structures or incentive override arrangements. We may experience restricted
access to travel suppliers' products and services.
In addition, diminished demand for the products and services of our
travel suppliers could have a material adverse effect on our business, financial
condition and operations. An actual or perceived decline in the quality of
travel products and services provided by suppliers could adversely affect our
reputation.
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OUR ABILITY TO ACHIEVE OUR PLAN IS DEPENDENT ON OUR ACQUIRING AND
MAINTAINING AN EFFECTIVE INFORMATION MANAGEMENT SYSTEM.
We use computer technology to communicate information to, and to provide
services for, our customer base. We also use it to communicate with our
suppliers, vendors and others with whom we interact. A reliable and effective
information system is critical to our operating results. Any system
interruptions that result in the unavailability of our online sites or other
services could have a material, adverse effect on our business, operating
results and financial condition.
RISKS ASSOCIATED WITH OUR BUSINESS
Our business bridges the travel and online commerce industries. Risks of
doing business within the travel industry may be clearly stated in terms of a
historical perspective. Risks of operating within the emerging industry of
online commerce are not as clear. Our management team and staff have experience
in the travel industry. This experience may not be applicable or transferable to
the online commerce industry. We will have to be able to quickly recognize and
adapt to the changes as they occur in both industries, but particularly in the
online commerce industry.
OUR RISKS ASSOCIATED WITH THE TRAVEL INDUSTRY
HISTORICALLY, THE TRAVEL INDUSTRY HAS BEEN SUBJECT TO CYCLICAL TRENDS THAT
IMPACT THE PERFORMANCE OF BUSINESSES OPERATING IN THE TRAVEL INDUSTRY.
There are traditional cycles and fluctuations that can adversely affect
the travel industry. Leisure travel is dependent upon personal discretionary
spending levels and is sensitive to changes in economic conditions. Travel
purchases tend to decline during general economic downturns and recessions. The
travel industry is highly susceptible to unforeseen events such as political
instability, regional hostilities, fuel price escalation, travel-related
accidents and unusual weather patterns. Also, governmental regulations can
directly or indirectly increase the cost of travel or influence the way people
travel and/or their respective destinations. Any event which results in
decreased travel generally would not be good for our business.
THE TRAVEL INDUSTRY IS CHANGING IN RESPONSE TO NEW COMPETITIVE PRESSURES.
The traditional way the travel industry has marketed its products is being
challenged on two new fronts.
- There is increasing competition directly from travel service
providers, such as airlines, hotels, cruise ships and car rental
firms. They are seeking new and innovative ways to market their
products directly to the travel consumer via online commerce and
by other means.
- There are emerging Internet businesses whose focus is to compete
directly with the traditional travel agency by marketing travel
products through online commerce. Our core business involves
encouraging the travel consumer to patronize retail travel
agencies. Any trends that direct consumers away from agency
patronage would not be good for our business.
TRAVEL SERVICE PROVIDERS DO NOT HAVE TO MAKE THEIR SERVICES AVAILABLE TO
VISITORS TO TRAVELNSTORE.COM.
If there were a substantial change in the marketing methodology of a
supplier or suppliers, we may not be able to offer their services through our
Web site. If this were to happen, it could severely restrict the scope of travel
services which could be accessed through TravelnStore.com. This could reduce the
volume of our business.
A MAJORITY OF OUR PROJECTED REVENUE WILL BE COMMISSIONS AND OVERRIDES
PAID BY TRAVEL SERVICE PROVIDERS BASED ON TRAVEL SALES.
There is no requirement on the part of travel service providers to
continue to pay commissions and overrides for travel sales in general and to us
specifically. They also may elect to reduce the commission and/or override
rates. Airlines have reduced their commission rates dramatically in the past few
years. Other travel service providers may also seek to reduce their distribution
costs by reducing their commission rates. Reduction in these rates would reduce
our income.
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THE TRAVEL INDUSTRY EXPERIENCES SEASONALITY IN THE DEMAND FOR TRAVEL
SERVICES.
This means that during certain parts of the year travel sales, and
particularly leisure travel sales, are reduced. Generally, the months of the
year are more productive as people invest in their summer vacations. This
seasonality produces fluctuations in the income of all companies in the travel
industry to varying degrees. Our company will not be immune to these
fluctuations. As the stock price of a public company is often affected by the
most recent quarterly results, our stock price may be adversely affected at
certain times of the year as the seasonality of the travel industry affects our
quarterly results.
OUR RISKS ASSOCIATED WITH THE ONLINE COMMERCE INDUSTRY
The online commerce industry is an emerging industry that is growing and
rapidly changing. Like other Internet related businesses, we must be able to
develop our business so that it will be profitable. There are few proven online
commerce business models which we can emulate. We also must be able to compete
effectively for Internet users. We cannot be successful unless we are able to
define an effective business strategy, implement it and continually adapt it as
the Internet matures.
MARKET COMPETITION
OUR BUSINESS WILL COMPETE DIRECTLY WITH TRADITIONAL RETAIL TRAVEL
AGENCIES.
Certain emerging Internet businesses use the Internet to redirect
consumers from traditional travel agencies. Our business uses the Internet to
direct consumers to traditional retail travel agencies. While projections of
Internet travel sales within the next two years only approach 5% of the volume
of travel sales conducted by the 29,000 existing retail travel agencies, this 5%
could adversely affect retail travel agencies and our business.
WE WILL COMPETE WITH COMPANIES THAT ARE ESTABLISHED AND BETTER FINANCED.
Many of the travel related Web sites on the Internet are owned and
operated by companies who are established and better financed than are we. Many
have already obtained exclusive agreements with the large portal sites and have
already invested considerably in establishing their brand names on the Internet.
We must invest in advertising, promotion and establishing any strategic
relationships to effectively compete for Internet consumers. We may not be able
to compete at a level that will be sufficient to execute our business plan.
WE WILL COMPETE WITH THE INTERNET SITES OPERATED BY THE TRAVEL SERVICE
PROVIDERS WITH WHOM WE WILL DO BUSINESS.
Our Web site, TravelnStore.com acts as a navigational site to the
proprietary sites of various travel service providers. These sites, to varying
degrees, compete for Internet users and for Internet travel sales. If consumers
increase their purchases directly from these proprietary Web sites without
navigating through TravelnStore.com our business will be adversely affected.
TECHNOLOGY COMPETITION
WE MUST BE ABLE TO RESPOND TO AND ACCOMMODATE THE RAPID TECHNOLOGICAL
CHANGES ON THE INTERNET AND IN E-COMMERCE.
The Internet is a rapidly evolving technology. We must keep abreast of
this technological evolution. To do so, we must continually improve the
performance, features and reliability of our online services and equipment. If
we fail to maintain a competitive level of technological expertise we will not
be able to compete in our market.
WE MUST CONTINUE TO DEVELOP AND ENHANCE OUR WEB SITE IN ORDER TO ATTRACT
AND RETAIN USERS AND TO MAINTAIN OUR RELATIONSHIP WITH OUR TRAVEL
SERVICE PROVIDERS.
New technologies and the emergence of new industry standards and
practices could render our existing online sites and our proprietary technology
obsolete. The development of Web sites and related technology entails
significant technical and business risks and can require substantial
expenditures and lead time. Our success will depend, in part, on our ability to
enhance our existing services, and to develop new Web site services and
technology that address the increasingly sophisticated and varied needs of
Internet users.
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WE MUST BE ABLE TO RESPOND TO TECHNOLOGICAL ADVANCES AND EMERGING
INDUSTRY STANDARDS AND PRACTICES ON A COST-EFFECTIVE AND TIMELY BASIS.
We can offer no assurance that we will be able to successfully use new
technologies effectively or adapt our Web sites in a timely manner to a
competitive standard. If we are unable to adapt in a timely manner to changing
technology, market conditions or customer requirements we may not be able to
successfully compete in our market.
OUR BUSINESS RELIES ON THE AVAILABILITY AND CAPACITY OF BOTH OUR
INTERNET SERVICE PROVIDER AND THE INTERNET.
Any interruptions in the availability of our Web sites may reduce our
revenue. If these interruptions are prolonged or repetitive, they could
materially and adversely affect our revenue. Interruptions in our services may
be beyond our control if they take place on the Internet in general. Any failure
by our Internet service provider to maintain our server in an operationally
satisfactory manner may reduce our revenue.
Any significant failure on our part to adapt and compete effectively in
the online commerce arena would likely have a material, adverse affect on our
business, results of operations and financial position.
OUR SUCCESS IS DEPENDENT ON THE CONTINUED GROWTH AND ACCEPTANCE OF THE
INTERNET AS AN EFFECTIVE MEANS OF COMMERCE.
Our business is directing Internet consumers to retail travel agents. As
such, we are not dependent on the Internet for the sale of our services directly
to consumers. Nonetheless, our revenues and any future profits are substantially
dependent upon the widespread acceptance and use of the Internet as an effective
medium of commerce by consumers. For us to be successful, these consumers must
accept and use new ways of conducting business and exchanging information. Rapid
growth in the use of the Internet is a recent phenomenon, and there can be no
assurance that a sufficiently broad base of consumers will adopt, and use, the
Internet as a medium of commerce, particularly in the travel industry.
OUR ABILITY TO ACHIEVE OUR PLAN IS DEPENDENT ON THE CONTINUED GROWTH OF
E-COMMERCE, AN EVENT OVER WHICH WE HAVE NO CONTROL.
Generally, demand for recently introduced services and products over the
Internet has been subject to a high level of uncertainty and there exist few
proven profitable services and products in this relatively new field of
commerce. The development of the Internet as a viable, commercial marketplace is
subject to a number of factors including continued growth in the number of
users, concerns about privacy, continued development of the necessary
technological infrastructure and the development and acceptance of complementary
products and services. If the Internet does not become a viable, commercial
marketplace, our business, operating results and financial condition could be
materially, adversely affected.
THE GROWTH OF THE INTERNET AND E-COMMERCE MAY BE ADVERSELY EFFECTED OR
RESTRICTED BY GOVERNMENT REGULATIONS OR TAXES THAT ARE ADOPTED IN THE
FUTURE.
Currently there are few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. Several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online services providers in a manner similar to
long distance telephone carriers and to impose access fees on these companies.
Any imposition of access fees could increase the cost of transmitting data over
the Internet. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as property ownership, libel and personal
privacy are applicable to the Internet. Any new laws or regulations relating to
the Web could adversely affect our business.
WE RELY ON THIRD PARTY SERVICE PROVIDERS TO MAINTAIN OUR WEB SITE AND DO
NOT HAVE AN IN-HOUSE STAFF WHO ARE CAPABLE OF MAINTAINING OUR WEB SITE
OR INFORMATION SYSTEMS.
We rely on third parties for our Web site operations. If our Web site or
information systems fail, they could disrupt or delay user traffic, which could
impair our business. Substantially all of our Web site communications hardware
and computer hardware operations are located at Zest.Net's facilities in
Ventura, California. Zest.Net provides Web site hosting services. Fire, floods,
earthquakes, power loss, telecommunications failures, break-ins and similar
events could damage these systems and cause interruptions in our services.
Computer viruses, electronic break-ins or other similar disruptive problems
could result in reduction or termination of our services by our customers or
otherwise adversely affect our Web site. Our business could be adversely
affected if our systems were affected by any of these occurrences. We currently
do not maintain insurance to cover these business risks. We do not presently
have a formal disaster recovery plan.
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Our Web site must be able to accommodate a high volume of traffic and
deliver frequently updated information. Our Web site has experienced in the past
and may in the future experience slower response times or decreased traffic for
a variety of reasons. In addition, our users depend on Internet service
providers, online service providers and other Web site operators for access to
our Web site. Many of them have experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems. Moreover, the Internet network infrastructure may not
be able to support continued growth. Any of these problems could adversely
affect our business.
RISKS ASSOCIATED WITH THIS OFFERING
WE ARE OFFERING AND SELLING THE SHARES COVERED BY THIS OFFERING
OURSELVES AND DO NOT HAVE THE BENEFIT OF DEALING WITH AN UNDERWRITER OR
BROKER/DEALER TO ASSIST IN THE PLACEMENT OF THE SHARES.
We are making this Offering without the benefit of an underwriter.
Underwriters typically review a company in great detail as part of their due
diligence process. No underwriter has reviewed TravelnStore.com, our management,
business plan, operations, financials or competitiveness in our marketplace.
Consequently, you must rely solely on your own due diligence and review of such
matters and judge the likelihood of our success in our marketplace and
opportunity for profitable operation.
THIS IS A "MINIMUM/BEST EFFORTS" OFFERING AND THERE CAN BE NO ASSURANCE
THAT WE WILL BE ABLE TO SELL ALL OF THE SHARES COVERED BY THE OFFERING.
We are making this Offering on a minimum/best efforts basis. This means
that we must sell a minimum amount of stock but we may not sell all of the stock
that is being offered. If we sell only the minimum number of shares, this
Offering will only raise sufficient capital for us to operate for twelve (12)
months. With only the minimum offering, we may not generate sufficient capital
to execute our plan of business at a level that will generate a profit.
We have set a minimum of $2,000,000 of stock to be sold in this
Offering. Until acceptable subscriptions for such minimum amount have been
received, all subscriptions will be held in an escrow account. Once deposited,
these funds will only be returned to the investor if the minimum amount of
$2,000,000 is not subscribed in the 90 day Offering period.
Investors who subscribe for shares in the earlier stages of the
Offering, will assume a greater risk than investors who subscribe for shares
later in the Offering as subscriptions approach the maximum level of $6,500,000.
This is because as we approach the maximum level we have more promotional and
operating capital to use.
OUR EFFORTS TO SELL THE SHARES COVERED BY THIS OFFERING WILL DISTRACT
FROM OUR NORMAL BUSINESS OPERATIONS.
In addition to running our business, we also must market this Offering
effectively. To do this, we must implement a comprehensive program to make a
sufficient number of potential investors aware of this Offering. We must be able
to produce and distribute the Offering materials in a cost effective manner. We
must establish and maintain an Investor Relations Department. We must comply
with all applicable federal and state securities regulations. The success of
this Offering is in part dependent upon our ability to implement our plan of
distribution. If we are unable to do this, for any reason, we may not be able to
raise sufficient capital to implement our business plan.
EVEN IF WE SELL ALL OF THE SHARES COVERED BY THIS OFFERING AND RAISE THE
MAXIMUM PROCEEDS, SUCH PROCEEDS MAY BE INSUFFICIENT TO IMPLEMENT OUR
BUSINESS PLAN TO THE POINT THAT WE ACHIEVE PROFITABILITY.
There is no guarantee that the funds generated by this Offering will be
sufficient to cover operating losses or to address the financial requirements
for our growth. (See "Use of Proceeds"). The failure of operating revenues
and/or funds from this Offering to meet the expenses associated with our
operations and growth, could have a material, adverse impact on our business,
our financial condition and your investment.
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WE ARBITRARILY SET THE PRICE OF THE SHARES WE ARE OFFERING BASED UPON
THE AMOUNT OF CAPITAL WE WISHED TO RAISE AND THE PERCENTAGE OF OUR
COMPANY THAT WE WERE WILLING TO SELL AT THIS POINT IN OUR DEVELOPMENT.
We established the price of the shares and the value of our Company
without independent appraisal. The price has no relationship to book value per
share, current earnings or other generally accepted measurements of value. You
should only invest if you agree the price we have set is reasonable based upon
our prospects.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET BOOK VALUE
PER SHARE AS A RESULT OF OUR PRIOR ISSUANCE OF SHARES OF COMMON STOCK AT
A PRICE LOWER THAN THE OFFERING PRICE FOR THE SHARES COVERED BY THIS
OFFERING.
The offering price of the common stock is substantially higher than the
tangible book value per share of the outstanding common stock. If you purchase
shares in this Offering you will incur immediate and substantial dilution, and
our existing stockholders will receive a material increase in the tangible book
value per share of their shares of common stock. If we sell the maximum number
of shares in this Offering, the immediate dilution to new investors will be
$5.55 per share or 85% of the offering price of the shares.
WE HAVE THE RIGHT TO USE THE PROCEEDS FROM THIS OFFERING IN ANY MANNER
THAT WE DEEM MOST EFFECTIVE IN EXECUTING OUR BUSINESS PLAN.
We have set forth in the "Use of Proceeds" section the primary areas of
operation in which we expect to use the proceeds. The proportional amounts that
we allocate to each area will be determined as we encounter changing
circumstances and opportunities. We can make no guarantees that the decisions on
allocations will result in profitable operations. If we are unable to allocate
our capital effectively, it will adversely affect our business, revenues,
profitability and financial condition.
THIS IS OUR INITIAL PUBLIC OFFERING OF SHARES AND THERE IS NO PUBLIC
MARKET FOR OUR COMMON STOCK.
To this point, there has not been a market for our shares. We cannot
give any assurances that a market will develop, or, if such a market should
develop, that it will be sustained with sufficient liquidity to permit you to
sell your shares at any time. We also cannot give any assurance to you that your
shares could ever be sold at or near the offering price, or at all, even in an
emergency.
THERE WILL BE NO PUBLIC MARKET FOR RESALE OF OUR SHARES UNTIL OUR SHARES
ARE LISTED ON AN EXCHANGE OR QUOTED THROUGH NASDAQ.
Because we are directly selling our stock, we have provided that our
Offering may remain open for up to 90 days after our Offering becomes effective.
It is doubtful that you could sell your shares for more than the initial
offering price of $6.50 per share while our Offering is still open.
Provided we have reached a subscription amount sufficient to achieve a
minimum tangible net worth of $2,000,000, (approx. $2,500,000 in total net
proceeds), we intend to apply for a listing on the Philadelphia Stock Exchange.
However, there are many requirements which we may or may not be able to meet at
the time we wish to apply for listing. If our application for listing is
rejected we will seek to arrange trading for the shares on an alternate exchange
or through the OTCBB.
There are many requirements by various exchanges which we may or may not
be able to meet at the time we wish to list our stock for trading. If we are not
able to list our stock, or list our stock on an active exchange, or find
suitable market maker(s) for our stock, you may be unable to sell your stock at
or near your purchase price.
We do not anticipate applying to list our common stock on any exchange
or through the Nasdaq quotation system until we have received acceptable
subscriptions for at least the minimum amount of $2,000,000. We further
anticipate that we may not receive such minimum amount until the end of the
90-day offering period and that, if we are able to list our common stock on an
exchange or Nasdaq, such listing may not be effective until 30 days after we
file the application. Therefore, it is possible that even if we are able to list
our common stock on an exchange or Nasdaq such listing would not be effective
until four (4) months after the effective date of this registration statement.
WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS ON SHARES OF COMMON STOCK
IN THE FORESEEABLE FUTURE.
The future payment of dividends is directly dependent upon our future
earnings, our financial requirements and other factors to be determined from
time to time by our management. For the foreseeable future, we anticipate that
any earnings which may be generated from our operations, will be used to finance
the growth of TravelnStore.com even if our operations are profitable. Our
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issuance in the future of any shares of preferred stock may also effect our
ability to pay dividends on the common stock. (See, "Dividends" and "Description
of Securities")
OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO
RESELL YOUR SHARES AT OR ABOVE THE INITIAL-OFFERING PRICE.
Following this offering, the price at which our common stock will trade
may be extremely volatile and may fluctuate significantly. The public market may
not agree with or accept this valuation. In addition, the stock market has from
time to time experienced significant price and volume fluctuations that have
affected the market prices for the securities of technology companies,
particularly software and Internet companies. After this offering, therefore,
you might not be able to resell your shares at or above the initial public
offering price.
INTERNET RELATED STOCKS HAVE BEEN VERY VOLATILE.
Recent stock market activity shows that shares of businesses marketing
products or services through the online commerce industry can be subject to
greater volatility than those of businesses in more established fields such as
manufacturing or traditional forms of sales or services. Accordingly, many
analysts caution that stock investments within the online commerce industry,
where values have often risen out of proportion to historic price to earnings
ratios, should be considered highly speculative and are appropriate only for
investors who can bear significant risks.
EVEN IF WE SELL THE MAXIMUM NUMBER OF SHARES COVERED BY THIS OFFERING,
OUR CURRENT STOCKHOLDERS AND OUR MANAGEMENT TEAM WILL CONTINUE TO HOLD
APPROXIMATELY 90% OF THE OUTSTANDING COMMON STOCK.
This means that they will be able to elect a majority of our Board of
Directors and control other actions which require a vote of the stockholders.
GENERAL RISKS
WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS THAT EFFECT HOW WE DO
BUSINESS.
Our company may be directly affected by existing, or new regulations
concerning the travel industry, the Internet, and general business companies
with publicly traded securities.
- THE TRAVEL INDUSTRY. Certain segments of the travel industry are
heavily regulated, domestically by Federal and state governments,
and internationally, by foreign governments. Such regulation,
directly or indirectly, affects all businesses in the travel
industry. Fiscal regulations, mostly in the form of taxes or
other fees, are pervasive throughout the travel industry. Any
negative impact on the travel industry through existing or new
regulations may adversely affect our operations.
- THE INTERNET. National, state and local governments are
evaluating whether new laws should be enacted to regulate the
Internet and online commerce. These new laws and regulations
could address issues such as property ownership, sales and other
taxes and personal privacy of online customers and users.
Furthermore, the growth of online commerce may prompt calls for
more stringent consumer protection laws. It is impossible to
predict how any such laws and regulations may affect us and our
operations. Any such new laws and regulations could have a
material adverse effect on our business, operating results and
financial condition.
- GENERAL BUSINESS. We are subject to regulations applicable to
businesses generally. The adoption of any additional laws or
regulations may decrease the growth of our company, decrease the
demand for our services and increase our cost of doing business.
Changes in tax laws also could have a significant adverse effect
on our operating results and our financial condition.
- SECURITIES REGULATIONS. As a public company, we will be subject
to both state and federal securities regulations governing how we
structure our debt and equity securities, relate to our investors
and present our business to the public. We will assume increased
operating costs in regards to accounting, required securities
filings and legal matters that a private company does not incur.
Any failure on our part to conform to existing regulations may
subject us to sanctions and increased compliance costs. New
regulations may require us to expend additional time
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and money to comply. Money that we use complying with these
regulations reduces the amount of money we have available to
operate and grow our business.
WE MUST INSURE THAT OUR E-COMMERCE AND INFORMATION SYSTEMS WILL NOT BE
ADVERSELY EFFECTED BY THE MILLENNIUM DATE CHANGE THAT WILL OCCUR AT THE
END OF THIS YEAR.
We are aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 problem is
pervasive and complex. Virtually every computer operation will be affected in
some way by the rollover of the two digit year value to "00." The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. We are
reviewing both our information technology and our non-information technology
systems to determine which are not year 2000 compliant. We have not made any
material expenditures to address the year 2000 problem and we do not anticipate
that we will be required to make any such material expenditures in the future.
We are contacting all of our significant suppliers and service providers
to determine the extent to which we are vulnerable to their failure to address
the year 2000 problem. Although we do not believe our operations will be
significantly disrupted even if third-parties with whom we have relationships
are not year 2000 compliant, we can not guaranty that any year 2000 compliance
problems of third persons will not adversely affect our business or financial
performance. Because uncertainty exists concerning the potential costs and
effects associated with any year 2000 compliance, we intend to continue to make
efforts to ensure that third-parties with whom we have relationships are year
2000 compliant.
WE MUST MAINTAIN A PRICE FOR OUR COMMON STOCK IN EXCESS OF $5.00 IN
ORDER TO AVOID ADDITIONAL REGULATION BY THE SECURITIES AND EXCHANGE
COMMISSION.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) of less than $5.00 per share, subject to certain
exceptions, including an exception for any equity security that is quoted on The
Nasdaq Stock Market. Initially we will not be listed on The Nasdaq Stock Market
and this exemption will not be available. For transactions covered by these
rules, the broker-dealer must make a special suitability determination for the
purchaser of such securities and have received the purchaser's written consent
to the transactions prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the delivery, prior to
the transaction, of a disclosure schedule prepared by the Commission relating to
the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, among other requirements, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the "penny stock" rules may restrict the ability of purchasers in
this offering to sell the common stock offered hereby in the secondary market.
A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK COULD BE SOLD INTO
THE PUBLIC MARKET AFTER THIS OFFERING, WHICH SALES COULD DEPRESS OUR
STOCK PRICE.
All the 9,400,000 shares of common stock and 8,154 shares of Series A
Preferred Stock presently outstanding are "restricted securities" and under
certain circumstances may be sold in compliance with Rule 144 adopted under the
Securities Act of 1933, as amended. Future sales of such shares will in all
likelihood depress the market price of our Common stock.
WE HAVE AUTHORIZED A CLASS OF UNDESIGNATED PREFERRED STOCK WHICH WE
COULD ISSUE IN THE FUTURE WITHOUT STOCKHOLDER APPROVAL.
Our Articles of Incorporation authorize the issuance of up to 1,000,000
shares of preferred stock, the terms, preferences, rights and restrictions of
which may be established by its Board of Directors. We have issued 8,154 shares
of Series A Preferred Stock and 991,846 shares of undesignated preferred stock
remain available for future issuance. Other companies on occasion have issued
series of such preferred stock with terms, rights, preferences and restrictions
that could be considered to discourage other persons from attempting to acquire
control of such companies and thereby insulate incumbent management. It is
possible we could issue shares of our preferred stock for such a purpose.
Issuance of the preferred stock for such purposes could have a depressant effect
on the market value of the common stock.
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FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements," which may include
the following:
- our business strategy;
- timing of and plans for the introduction or phase-out of
products, services, enhancements;
- plans for hiring additional personnel;
- entering into strategic alliances; and
- the adequacy of anticipated sources of funds, including the
proceeds from this offering, to fund our operations for at least
the 12 months following the date of this prospectus.
Other statements about our plans, objectives, expectations and
intentions contained in this prospectus that are not historical facts may also
be forward-looking statements. When used in this prospectus, the words
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates"
and similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties, actual results could differ materially from those expressed or
implied by these forward-looking statements for a number of reasons, including
those discussed under "Risk Factors" and elsewhere in this prospectus. We assume
no obligation to update any forward-looking statements.
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DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors. No dividends have been paid on the common
stock and no dividends are anticipated to be paid in the foreseeable future. We
intend to retain all earnings to finance the development and expansion of our
operations.
We are authorized to issue shares of preferred stock and have issued
8,154 shares of Series A Preferred Stock. The shares of Series A Preferred Stock
are entitled to participated pro rata in any dividends paid on the common stock.
Any shares of additional preferred stock that we issue hereafter may preclude
the payment of any dividends on the common stock until dividends in a certain
amount have been paid on the preferred stock. We do not have any present plans
to issue any additional shares of preferred stock.
USE OF PROCEEDS
We estimate the net proceeds to TravelnStore.com from this Offering,
after deducting the expenses of the Offering, will be $1,841,840 if we raise
only the minimum amount, and $5,980,000, if we raise the maximum amount. Such
proceeds will be applied substantially as follows.
<TABLE>
<CAPTION>
APPROXIMATE DOLLAR AMOUNT
------------------------------
APPLICATION OF PROCEEDS MINIMUM MAXIMUM
- ----------------------- ---------- ----------
<S> <C> <C>
Enhance and Market Web site $ 883,840 $3,779,000
Officer Salaries(1) $ 276,000 $ 276,000
Co-host Agency Recruitment $ 125,000 $ 250,000
Additional Staff & Management $ 80,000 $ 285,000
Strategic Relationships(2) $ 50,000 $ 250,000
Payments to Principal Stockholders(3) $ 50,000 $ 50,000
Additional Equipment $ 20,000 $ 45,000
Facilities Expansion $ 15,000 $ 25,000
Retirement of Trade Debt $ 75,000 $ 75,000
Payment of Convertible Notes(4) $ 90,000 $ 90,000
Working Capital Reserves(5) $ 177,000 $ 855,000
TOTALS $1,841,840 $5,980,000
</TABLE>
(1) Officer Salaries include the salaries of Jim B. Tyner, CEO, John R. Toal,
President and Yula Greco, Vice President and Secretary who are also principal
stockholders. $32,000 of the proceeds will be used to pay deferred officer
salaries accrued through August 31, 1999. (See, "Executive Compensation" and
"Principal Stockholders.")
(2) Strategic Relationships may include establishing joint ventures, long-term
marketing relationships, web site links, and acquisition of companies or assets
in both the Internet and travel industries. It is typical for companies engaged
in e-commerce business on the Internet, a new and fast growing business medium,
to expand and solidify their market position through strategic alliances,
mergers and consolidations. We anticipate that we also might facilitate
achieving our business plan through strategic alliances or consolidation with
other companies operating in the travel industry or over the Internet.
Accordingly, we have targeted a portion of the proceeds of this offering for
such purposes.
(3) Payments to Principal Stockholders refer to compensation due two principal
stockholders under Consulting Agreements. (See "Certain Transactions-Consultancy
Agreements".)
(4) This assumes that the holders of the Notes do not convert the Notes to
shares of common stock. (See "Certain Transactions-Loan Transaction".)
(5) Working Capital Reserves are held against operating losses, non-budgeted,
extraordinary expenses and capital expenditures or to take advantage of
unforeseen opportunities as they may arise.
The amounts actually expended for any of the foregoing purposes may vary
significantly from those listed above, and will depend on a number of factors,
including the amount of our future revenues and other factors described under
"Risk Factors." Accordingly, we will retain broad discretion in the allocation
and application of the net proceeds of this offering. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses,
technologies, product lines or products. We currently
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have no agreements or commitments with respect to any such acquisitions. Pending
such uses, we intend to invest the net proceeds of the offering in
investment-grade, interest-bearing securities.
If we are able to raise only the minimum amount set forth above, our
ability to grow and expand our business may be significantly limited. A
significant portion of the proceeds of the offering will be used to enhance and
market our Web site, to hire additional staff and management personnel and to
develop strategic relationships with other Internet and travel service
companies. Our ability to accomplish these activities will contribute
significantly to our ability to achieve our business plan and to the overall
growth and success of the Company.
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DILUTION
At May 31, 1999, the pro forma net tangible book deficit of
TravelnStore.com, Inc. was ($556,075), or approximately ($0.12) per share of
common stock based on 4,700,000 shares of common stock outstanding. The net
tangible book deficit per share represents the amount of TravelnStore.com's
total assets less the amount of its intangible assets and liabilities, divided
by the number of shares of common stock outstanding. After giving effect to the
receipt of the maximum net proceeds (estimated to be approximately $5,980,000)
from the sale of the shares offered hereby, the pro forma net tangible book
value of TravelnStore.com at May 31, 1999, would be $5,423,925, or approximately
$0.95 per share of common stock. This would result in dilution to the public
investors (i.e., the difference between the estimated public offering price per
share and the net tangible book value per share after giving effect to this
offering) of approximately $5.98 per share. If we receive only the minimum
subscription our pro forma net tangible book value would be $1,285,765, or
approximately $0.27 per share, and the public investors would have dilution of
$6.23 per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C>
Assumed public offering price $ 6.50
Pro forma net tangible book deficit at May 31, 1999 $ (556,075)
Increase in pro forma net tangible book value
per share attributable to new investors $5,980,000
Adjusted pro forma net tangible book value
at May 31, 1999 $5,423,925
Shares outstanding 5,700,000
Pro forma net tangible book value per share
after this offering $ 0.95
Dilution of net tangible book value per shares
to new investors $ 5.55
</TABLE>
For purposes of the foregoing discussion we have assumed that the
offering price will be $6.50 per share. Per share amounts do not reflect the
2-for-1 stock split effected August 25, 1999.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and related notes included elsewhere in this
prospectus. Except for historical information contained herein, the discussion
in this prospectus contains certain forward-looking statements that involve
risks and uncertainties. TravelnStore.com's actual results could differ
materially from those discussed below. Factors that could cause or contribute to
such differences include, among others, those discussed below, in "Risk Factors"
and elsewhere in this prospectus. TravelnStore.com does not intend to update
these forward-looking statements.
OVERVIEW
TravelnStore.com was founded in July of 1998 as a limited liability
company. In April of 1999 it was acquired by a California corporation. We
created, maintain and promote the TravelnStore.com Web site which acts as a
navigational site to the Web sites created by a wide array of travel service
providers, such as cruise lines, tour companies, car rental firms, destination
resorts and hotel groups. Visitors to the TravelnStore.com Web site can print
out Certificates of Value for various travel services to which our site provides
links. These Certificates may be redeemed for discounts, upgrades or other
premiums designed to encourage the visitor to book a particular travel service.
Certificates may be redeemed at any of the 29,000 retail travel agencies
through-out the United States. We receive a commission or override from the
travel service provider for each Certificate that is redeemed. We also recruit
individual travel agencies to co-host our Web site within their market areas.
Agencies subscribe for ZIP codes within their market. When a visitor to our Web
site logs in from a subscribed ZIP code, that agency is graphically presented as
the local TravelnStore.com co-host agency. While Certificates may be redeemed at
any agency, a local co-host agency is presented as a preferred redemption
location. Using these methodologies, we are able to link the graphic
presentation of travel services on the Internet with the existing, retail
distribution infrastructure represented by the 29,000 retail travel agencies in
the United States.
RESULTS OF OPERATIONS
The financial statements contained in this prospectus represent our
operations from July 6, 1998 through December 31, 1998, and January 1, 1999
through May 31, 1999. As a new company, a significant portion of our operations
pertained to physically constructing our work environment, installing our
information systems, designing and testing our Web site and recruiting and
training employees. We also designed and structured our marketing program to
recruit our co-host agencies and designed and structured a development program
to negotiate agreements with various travel service providers to participate in
the TravelnStore.com Web site. These activities required the expenditure of
$326,356 through December 31, 1998 and an additional $257,059 from January 1,
1999 through May 31, 1999.
Because the TravelnStore.com Web site is a navigational site to the
proprietary sites of various travel service providers, its structure is
relatively simple. Consequently, we were able to have the first version
operational by November 1, 1998. The launch of the site coincided with the
appearance of our first advertisements in the in-flight magazines of United
Airlines, American Airlines, Delta Airlines, Southwest Airlines, U.S. Airways,
Continental Airlines, America West Airlines and TWA. We also promoted the launch
of the TravelnStore.com Web site by participating in two prestigious trade
shows, the ASTA World Congress in Los Angeles and the United States Tour
Operators Association show in Las Vegas.
In September of 1998, in advance of the launch of our Web site, we were
able to initiate recruitment of co-host agencies. Because of the simplicity and
compelling concept of the TravelnStore.com Web site, we were able to recruit
approximately 100 agencies prior to the launch of the Web site. Travel agencies
pay a minimum $60.00 registration fee and $36.00 quarterly fee to participate as
co-host agencies. Pricing for the co-host fees is designed to primarily offset
the direct costs of operating the TravelnStore.com Web site. We were pleased
that income from co-host agency fees generated $23,128 through December 31, 1998
and $ 21,390 from January 1, 1999 through May 31, 1999. This reduced our
operating loss to $303,228 through December 31, 1998 and to $235,669 for the
period January 1, 1999 through May 31, 1999.
During 1999, we have continued to expand our co-host agency network on a
selective basis and further develop our travel service provider relationships.
This has resulted in our being able to post a broader spectrum of Certificates
of Value. We have also invested in refining the database tracking methodologies
of TravelnStore.com to better implement targeted marketing opportunities with
individual travel service providers. We have also initiated a limited online
advertising program to test the efficiencies of various online advertising
opportunities.
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Our primary anticipated revenue model is reliant upon the receipt of
overrides and commissions through the use of our Certificates of Value. However,
we do not anticipate any significant income from the Certificates of Value prior
to first quarter 2000. This is because the overrides and commissions do not
become payable until after the related travel service is used by the purchaser
and we will not be able to build significant site traffic until the successful
completion of this Offering. Leisure travel purchases are often made 2 - 6
months in advance. Our overrides generally range from 1% to 5% of the total
travel purchase and our commissions generally range from 5% to 10% of the total
travel purchase.
SOURCE OF FUNDS
We were fortunate to initially maintain the integrity of our equity
structure by funding TravelnStore.com through a combination of straight debt and
convertible debt. Since September 1, 1998, we have borrowed a total of $490,000
through the issuance of 33 convertible promissory notes. However, through August
15, 1999 of the 33 convertible notes issued in these private placements, 29 have
already elected to convert to common shares effective as of the effective date
of this offering. We also have converted the original $140,000 of shareholder
loans to preferred stock. This has had the effect of transferring $570,000 from
debt to equity on our Balance Sheet. We undertook these conversions to improve
our financial position and to facilitate our efforts to list our common stock on
the Philadelphia Stock Exchange or another regional stock exchange. We
anticipate that the remaining four noteholders will also convert into shares
of common stock. However, we have made contingent allowances in both stock and
cash as may be required under terms of the remaining convertible notes.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have primarily financed our operations through
the issuance of debt instruments inclusive of straight notes and convertible
notes. In connection with this offering and in order to improve our financial
position, the holders of a total of $570,000 of debt payable by us have
converted such debt into an aggregate of 315,378 shares of common stock and
8,154 shares of Series A Preferred Stock. (See "CERTAIN TRANSACTIONS".) As a
result, as of August 25, 1999, our liability for borrowed money was limited to a
total of $60,000 in principal amount.
Since our initial organization, we have occupied offices for which World
Key, a related party, was the master lessee. We have been and continue to be
obligated to reimburse World Key for a portion of the leasehold rent, officers'
salaries and other facilities expenses. As of August 25, 1999, we were current
in our obligations to World Key and World Key owed us a total of $2,360 for cash
advances that we had made to it.
At the conclusion of this Offering, assuming we sell the minimum amount
of stock to close the offering, we will have approximately $1,841,840 of capital
to execute our business plan. If we sell the maximum amount of stock allowed in
this Offering, we will have approximately $5,980,000 of capital to execute our
business plan. The minimum amount is sufficient, in our opinion, to competently
execute our plan to achieve profitable operations. The majority of capital which
we raise over the minimum amount of the Offering will be used to further promote
the TravelnStore.com Web site. The accelerated promotion of the Web site should
accelerate the growth of our business requiring us to more rapidly expand our
physical work environment and add personnel. It is our goal to reach 300,000
visitors to the TravelnStore.com Web site each month and recruit a minimum of
2000 affiliated travel agencies. At our minimum funding, we believe we can reach
that goal within 12 months. At maximum funding, we believe we can reach our goal
considerably sooner due to the expanded promotion provided by the additional
marketing funds.
Should we reach our minimum funding prior to the expiration of 90 days
after our effective date, and if we perceive that there is continuing demand, we
intend to keep our Offering open for a period of time to fill that demand.
However, we will give serious consideration to the effort required to continue
marketing the Offering compared to the benefits of closing the Offering and
redirecting the time and resources invested in continuing the Offering to
executing the business plan.
We anticipate that our receipt of the minimum funding will provide
sufficient liquidity for our cash needs for a minimum of 12 months regardless of
cash flow and income generation from operations. We also anticipate that our
receipt of funding in excess of the minimum, up to and including the maximum
funding, will also provide sufficient liquidity for a minimum of 12 months
allowing for the increased investment in promotion and the resultant increased
operating expenses incurred to support the increased business activity which
should result from accelerated promotion.
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NEED FOR ADDITIONAL CAPITAL
In the event that the proceeds from this Offering are insufficient to
grow our business to the point of profitability, it would be doubtful that we
would be able to obtain substantial conventional loan financing to provide
additional liquidity. Should we require additional funding, it is more probable
that we would seek those funds in the form of additional equity investment from
public and/or private offerings of equity or convertible securities. The ability
to obtain additional equity investment is dependent upon many factors ranging
from the condition of the general economy to specific considerations about our
company, and its prospects, at the point in time which funding is sought. Many
of the factors are beyond our control. Consequently, there are substantial and
numerous uncertainties in satisfying future liquidity requirements through the
issuance of additional equity instruments. Further, the issuance of those
instruments would have the effect of diluting the positions of the existing
stockholders.
GOING CONCERN QUALIFICATION IN AUDITORS REPORT
Our plans are dependent upon our closing of this Offering for no less
than $2,000,000 in gross proceeds and $1,841,840 in net proceeds to us. We
believe that this will be sufficient to meet our capital requirements for a
minimum of twelve months. However, as an early stage Company we have yet to
generate sufficient operating revenue to offset our operating losses. To date,
we have funded our start-up costs and our operating losses from capital obtained
primarily through the issuance of straight and convertible debt instruments.
Because we have not raised sufficient capital, prior to this Offering, to
provide for our capital needs for a minimum of twelve months, our independent
auditors have qualified their report with inclusion of a "Going Concern"
statement. The purpose of this Offering is to raise sufficient capital to
continue our operations and execute our business plan. To assure that this
Offering raises the minimum capital which we believe is necessary to continue
operations and execute our business plan we set a minimum of $2,000,000. If we
do not reach this goal within 90 days from the effective date of this Offering,
all investor funds will be promptly returned without deduction.
YEAR 2000 COMPLIANCE
COMPLIANCE. Many currently installed computer systems and software
products are coded to accept or recognize only two digit entries in the date
code field. These systems and software products will need to accept four digit
entries to distinguish 21st century dates from 20th century dates. As a result,
computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with such Year 2000 requirements or
risk system failure or miscalculations causing disruptions of normal business
activities.
STATE OF READINESS. We have made a preliminary assessment of the Year
2000 readiness of our operating financial and administrative systems, including
the hardware and software that support our systems. We have developed an
assessment plan consisting of the following:
- quality assurance testing of our internal software;
- contacting third-party vendors and licensors of material
hardware, software and services that are related to the delivery
of our services;
- assessing repair or replacement requirements; and
- implementing repair or replacement.
COSTS. To date, we have not incurred any material expenditures in
connection with identifying, evaluating or addressing Year 2000 compliance
issues. Most of our expenses have related to, and are expected to continue to
relate to, the operating costs associated with time spent by employees in the
evaluation process and Year 2000 compliance matters generally. At this time, we
do not possess the information necessary to estimate the potential costs of
revisions to our systems should such revisions be required or of the replacement
of third-party software, hardware or services that are determined not to be Year
2000 compliant.
RISKS. We are not currently aware of any Year 2000 compliance problems
relating to our systems that would have a material adverse effect on our
business, results of operations and financial condition, without taking into
account our efforts to avoid or fix such problems. There can be no assurance
that we will not discover Year 2000 compliance problems in our systems that will
require substantial revision. In addition, there can be no assurance that
third-party software, hardware or services incorporated into our material
systems will not need to be revised or replaced, all of which could be
time-consuming and expensive. Our failure to fix or
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replace our internally developed systems or third-party software, hardware or
services on a timely basis could result in lost revenues, increased operating
costs, the loss of customers and other business interruptions, any of which
could have a material adverse effect on our business, results of operations and
financial condition. In addition, there can be no assurance that governmental
agencies, utility companies, Internet access companies, third-party service
providers and others outside of our control will be Year 2000 compliant. The
failure by such entities to be Year 2000 compliant could result in a systemic
failure beyond our control, such as a prolonged Internet, telecommunications or
electrical failure, which could also prevent us from providing our services,
decrease the use of the Internet or prevent users from accessing our Web site,
which could have a material adverse effect on our business, results of
operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standard Board ("FASB") recently issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes to equity (net assets)
during a period from non-owner sources. SFAS No. 130 is effective for financial
statements for fiscal years beginning after December 15, 1997. To date,
TravelnStore.com has not had any transactions that are required to be reported
in comprehensive income.
The FASB recently issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports. SFAS
No. 131 is effective for financial statements for fiscal years beginning after
December 15, 1997. TravelnStore.com has determined that it does not have any
separately reportable business segments.
The American Institute of Certified Public Accountants issued Statement
of Position ("SOP") No. 98-1, "Software for Internal Use," which provides
guidance on accounting for the cost of computer software developed or obtained
for internal use. SOP No. 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998. TravelnStore.com does not expect that
the adoption of SOP No. 98-1 will have a material impact on its financial
statements.
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BUSINESS
The following discussion contains forward-looking statements that
involve risks and uncertainties. These forward-looking statements are usually
accompanied by words such as "believes," "anticipates," "plans," "expects" and
similar expressions. Our actual results may differ materially from the results
discussed in the forward-looking statements because of factors such as the risks
described in "Risk Factors".
OUR BUSINESS
In July, 1998, we commenced operations through TravelnStore, LLC, a
California limited liability company. We launched the TravelnStore.com Web site
on November 1, 1998. In April, 1999 we completed a merger transaction in which
our new California corporation, TravelnStore.com, Inc acquired all of the
business, assets and liabilities of TravelnStore, LLC.
INTRODUCTION
Our founders backgrounds include experience in the retail travel agency
industry both at the individual agency level and at the national, multi-agency
and consortium level. We believed that if we linked the graphical presentation
of travel services on the Internet with the personalized service available from
professional, experienced travel agents working in the 29,000 retail travel
agencies in the U.S., consumers would receive maximum value in their travel
arrangements.
Studies which have been conducted by national research firms such as
Forrester Research and Jupiter Communications have shown that only a relatively
small percentage of Internet users actually book travel online. The majority use
the Internet to research their planned trips and comparison shop the various
travel service providers who offer travel services that meet their needs. Having
completed their research and shopping, the majority tend to book with a local
travel agent. The more complex or expensive their itinerary, the more likely
they are to use the services of a professional travel agent.
We designed the TravelnStore.com Web Site as a database driven site.
This means that the information that we present graphically on the site is
generated out of a database of information. This flexibility allows us to add,
change and delete information quickly and economically. While we developed the
site, we began recruiting travel agencies into our co-host agency program and
negotiating with travel service providers to enter into contracts that would pay
us commissions and/or overrides for sales of their services generated through
our Web Site. We also negotiated with the travel service providers for
discounts, gifts or upgrades to be used as incentives for consumers to use a
local, retail travel agency to complete their travel service purchase
transaction.
OUR CONCEPT
We created, maintain and promote the TravelnStore.com Web site as a
navigational site to the Web sites owned by a wide array of travel service
providers, such as cruise lines, tour companies, car rental firms, destination
resorts and hotel groups. Visitors to our Web site can print Certificates of
Value for travel services of the providers that are linked to our Web site.
These Certificates may be redeemed at the local retail travel agency for
discounts, upgrades or other premiums designed to encourage the visitor to book
a particular travel service. We receive a commission or override from the travel
service provider for each Certificate that is redeemed.
We also recruit individual travel agencies to co-host the
TravelnStore.com Web site within their own market areas. Agencies subscribe for
their local market ZIP codes so that when a visitor to our Web site logs in from
a subscribed ZIP code, that agency is graphically presented as the local co-host
agency. While Certificates may be redeemed at any agency, a local co-host agency
is presented as a preferred redemption location.
Using these methodologies, we are able to link the graphic presentation
of travel services on the Internet with the existing, retail distribution
infrastructure represented by the 29,000 retail travel agencies in the United
States.
OUR COMPETITION
We do not directly sell travel. However, our revenue is derived from
travel sales wherein Internet users print and redeem our Certificates of Value
at local, retail travel agencies. Consequently, we compete, directly or
indirectly, with every other travel services distributor. Because we bridge the
online presentation of travel services on the Internet with the brick and mortar
physical locations of
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retail travel agencies, we are competing with both online and offline
distribution channels. These channels include not only travel agencies but also
direct sales from travel service providers to the public.
While in the broadest sense, we compete with other travel sales
distribution channels, we have not been able to identify a direct competitor for
our online services. There is no proprietary nature to our methodologies. We
must rely on our first-to-market position and our ability to maintain our
first-to-market position as imitators launch competing Web sites.
ONLINE AGENCIES
Several companies, such as Preview Travel, Microsoft Expedia, and
Travelocity, have been established in the last three years to act as online
travel agencies. They primarily generate revenue by consumers making their own
bookings online by selecting the travel service, creating a record and
presenting payment. Through the investment of hundreds of millions of dollars to
generate consumer traffic to their Web sites, they sold on average, $250 million
in bookings of travel services in 1998.
To this point in time, none of the online travel agencies have achieved
profitability. A major reason for this is that over 80% of the sales which they
have generated have been airline tickets averaging about $350 per ticket.
Airlines have placed a limit of only $10.00 of commission for each ticket sold.
This amount is insufficient to cover their fully loaded transaction costs.
Consequently, we do not sell airline tickets. The balance of their bookings have
been hotel reservations and car rentals. These usually generate commissions
between 5% and 10% of the amount of the bookings which average about $200 for
hotel bookings and $150 for car rentals. Less than 3% of their bookings can be
classified as higher value and higher commission leisure travel bookings.
Online travel agencies have had to invest significant capital in
creating content for their Web sites. They have also had to design software and
hardware to process online bookings and integrate those with the reservation
systems used by various travel service providers. In addition they have had to
hire, train, equip and manage staff to become travel agents to interact with
consumers over the telephone.
OUR DIFFERENCE
We do not sell travel services directly to customers and therefore have
not incurred capital expenditures to set up an online travel agency. Because
TravelnStore.com is a navigation site that directs consumers to the proprietary
Web sites of various travel service providers, the travel service providers make
all of the investment in Web site content. Because TravelnStore.com is a
database driven site, we can add, change or delete a travel service provider in
a matter of minutes without requiring the skills of a graphic artist or
programmer.
All sales of products or services consist of two major components.
- The first part is the presentation and consideration of the various
attributes of the product or service and the determination by the
buyer that the product or service meets their needs.
- The second is the transactional part of the purchase where money is
exchanged for the product or service.
In effect, look in the barrel, pick out the apple that is most
appealing, take it to the counter, pay for it, have it put in a bag. This
presentation/decision, transaction/completion is often bridged by specific
questions that the purchaser has for the seller. The more complex the product or
service, the more likely the need for questions and answers. This is true of
Internet travel sales as well.
In the our system, the first part of the purchase is accomplished
primarily by the Web sites of the travel service providers. The second part,
which includes answering specific questions and the paperwork, is performed by
the experienced travel agents in the local, retail travel agencies.
We think the Internet can be used effectively to graphically present a
lot of information on which the user can make a decision about travel. We know
that once a person has used the Internet to research their trip, they prefer to
use a travel agent to complete their purchase. Our goal is to tie the two
together in creative and productive ways.
OUR MARKET CONSTITUENCIES.
To execute our business plan, we must continually expand and strengthen
our relationships with our three market constituencies. The three constituencies
are as follows.
- TRAVEL SERVICE PROVIDERS.Travel service providers include major hotel
chains, car rental agencies, cruise ship operators and tour companies. We
contract with these travel service providers to receive commissions and/or
overrides for travel sales
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resulting from consumers accessing their proprietary Web sites through our
TravelnStore.com Web site. Overrides typically range from 1% to 5% of the total
sale. Commissions typically range from 5% to 15% of the total sale. We
anticipate that the overrides will average about 2% and the commissions will
average about 10%.
These commissions and override contracts are a standard part of the
travel industry. They first came into being approximately 20 years ago as groups
of retail travel agencies were assembled into consortiums. These consortiums
negotiate with travel service providers for higher commission levels for their
member agencies and overrides for themselves based upon the volume of business
that is directed by the member agencies to that particular travel service
provider. Consortiums range from a few hundred agencies up to a few thousand.
Because our Certificates of Value can be redeemed at any of the 29,000 domestic
travel agencies, TravelnStore.com is like a cyber consortium with 29,000
physical locations.
We also negotiate with the travel service providers to underwrite our
Certificates of Value. Certificates can be printed directly from our Web site by
the consumer. They may represent a discount, an upgrade, or a premium on the
services purchased from the travel service providers. Travel service providers
provide the value of the Certificate to incentivize the consumer to purchase
their services. For example, a consumer might print a Certificate which they may
redeem for a two cabin upgrade at the retail agency of their choice. When the
consumer uses a Certificate, it places that sale into our consortium contract.
In so doing, we receive our negotiated override from that travel service
provider.
A simple example demonstrates the mechanics of this process.
A consumer accesses several competing travel service providers' Web
sites, navigating to those sites using our Web site. After comparison shopping,
the consumer selects a two-week stay at a resort hotel and prints out the
Certificate for the hotel. The consumer then takes the Certificate to a travel
agency. The agency books the hotel stay with the travel service provider. The
travel service provider flags its accounting system to pay us the override at
the conclusion of the trip. The agency receives the booking or confirmation
number from the travel service provider. The agency enters on the Certificate
the booking number and the agency identification information. The Certificate is
then faxed to us where it is entered into our accounting and tracking system.
Because the travel agency has used our Certificate procedure, it is entitled to
an enhanced commission from the service provider. When the consumer takes the
trip and the commission becomes due, we receive our override.
One of the reasons that travel service providers have accepted our
concept is that they have invested millions of dollars educating, cultivating
and motivating retail travel agencies to sell their services. Particularly in
the leisure segment of the industry, where products tend to be more complex and
more expensive, travel service providers realize that, while the Internet is
very good at graphically presenting their services to an unlimited number of
consumers, they are sensitive to their competing with their travel agency
distribution network by taking bookings directly over the Internet.
Our concept of bridging the distribution of information using the
Internet with the existing transactional infrastructure of the retail agency
industry allows travel service providers to enjoy the advantages of the Internet
while maintaining and protecting their substantial investments in their retail
travel agency distribution networks.
- TRAVEL AGENCIES. Our second constituency is the 29,000 domestic,
retail travel agencies. It has been speculated that the advent of the Internet
purchases of travel services online directly by consumers would have a profound
negative effect on retail travel agencies. This does not appear to be the case.
It is estimated that in 1998 approximately $2 billion of travel services were
booked online. This compares with approximately $135 billion of travel services
booked by retail travel agencies. It has been projected that in the year 2000 as
much as $7 billion of travel services may be booked online. However, sales by
retail agencies should surpass $145 billion in the year 2000. Clearly, retail
travel agencies will retain a vast majority of travel sales.
Our business plan includes retail travel agencies in two important ways.
- First, retail agencies represent the redemption site for our
Certificates of Value. As agencies come to recognize the Certificates
and become familiar with our program, we believe that agencies will
also use our Web site to generate Certificates for their clients who
do not use the Internet. This will expand the scope of our business
beyond just those consumers who use our Web site. It is in our best
interest to continue to educate a broad section of the retail travel
industry to our program through the use of trade publications, trade
shows and other marketing initiatives.
- Secondly, the agencies can participate in our Co-host Agency Program.
Our Web site is what is called a framed site. This means that as a
visitor navigates from one travel service provider site to another, a
thin band of information containing the TravelnStore.com logo always
remains at the top of the computer screen. This information band
contains buttons that allow the visitor to navigate back through our
Web site to other travel service provider sites. This band also
presents the names, addresses and
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telephone numbers of our co-host agencies. As a consumer visits the various
proprietary sites of travel service providers, the co-host agency is
continuously being presented as an immediate contact to purchase whatever travel
service the consumer is reviewing.
Travel agencies join our Co-host Program by subscribing for their local
market Zip codes. We usually limit an agency to three Zip codes. When a visitor
logs into our Web site, they are asked for a Zip code. If an agency has
subscribed that Zip code, then that agency is presented in the navigation band
as our local Co-host Agency. This gives an individual travel agency all the
market power of TravelnStore.com but is presented only to those consumers who
live or work in a physical proximity to that individual travel agency.
Our Certificate of Value redemption program and our Co-host Agency
Program allow us to achieve both a cyber presence on the Internet and a physical
presence on Main Street. We believe that, as the use of the Internet as a
commerce tool matures, this dual presence will give us additional business
opportunities that companies with just an Internet presence will not enjoy.
- CONSUMERS. Our third constituency is the consumers who use the
Internet to shop and purchase travel services. With annual Internet travel sales
estimated at $2 billion, travel became the number one consumer product purchased
on the Internet in 1998. While this is a fraction of the $135 billion annually
sold by retail travel agencies, it is a significant amount. By example, a 2%
override on $2 billion is $40 million. This $2 billion is expected to reach $7
billion in 2000. Clearly, our market is growing at a compound rate. We intend to
continue to position TravelnStore.com to take advantage of this growing market.
Because of the rapid growth of travel sales on the Internet, there have
been numerous studies conducted by major research organizations to define the
trends in this emerging business. The majority of this research has focused on
statistical analyses of what consumers are buying, how they are buying and from
whom they are buying. Not surprising, the statistical evidence relating to
Internet travel sales reflects the statistical profile of e-commerce in general.
Even in the relatively short period of time (three years) that travel sales have
been heavily promoted online, some very clear trends have been established.
In formulating the TravelnStore.com concept of using the Internet for
the presentation of travel services and connecting that presentation to the
transactional infrastructure of the retail agency industry, we have been able to
use these trends to structure our business plan. Following are some of the
trends which we believe to be very significant.
- Looks But Does Not Book. E-commerce sites that have tracked their
productivity have found that, on average, 2.7% of their site
visits actually result in a sale. Further, the more complex or
higher valued the product, the lower the purchase percentage. In
keeping with these statistical trends, online travel services
experience purchase percentages of 1% to 2%. This reflects that a
consumer may visit a site multiple times prior to actually
completing a transaction.
- Most Do Not Purchase Online. In the context of the online travel
industry, current statistics show that only 18% of travel site
visitors have ever made an online booking. Again, this reflects
general e-commerce findings. Reasons given for not booking online
are transactional security, which includes credit card fraud, and
concern that the product purchased will not be received, the lack
of personal attention and advice in relationship to a complex
product such as travel, and insecurity on the part of the
consumer that they will make a mistake in the selection process
or the transaction process.
- Most Purchase From Travel Agents. Out of every 100 travel site
visitors, 6% book online, 27% make no bookings, 28% contact the
supplier directly to make a booking and 39% take their business
to a travel agency. In general, this indicates that the online
looker/off-line booker market is 3.7 times larger than the online
booker market. It also indicates that travel agencies continue to
get the lion's share of this market.
- Online Bookings Are Heavily Weighted To Commodity Type Travel.
Major online travel sites such as Preview Travel, Travelocity and
Expedia, report that over 80% of their bookings are for airline
tickets with simple itineraries. These tickets average only
$350.00 per ticket. Only 3% of their bookings can be classified
as leisure travel services, such as cruises and tours. The
balance are for short-term car rentals and hotel stays.
- Leisure Sales Weighted Heavily To Travel Agencies. If only 3% of
online bookings represent leisure sales, then the 39% of online
lookers who book off-line are more likely booking the higher
value and higher commission rate leisure sales with their local
travel agent. This follows the general e-commerce profile of
higher value, more complex products being researched online but
actually purchased off-line.
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While the volume of on-line travel bookings has grown rapidly, the
statistics reflect that this growth has been primarily in low value, commodity
type bookings and that the retail travel agencies have retained substantially
all of the high value, complex leisure bookings.
Our conclusions are that consumers will increasingly use the Internet to
research their travel plans and comparison shop for travel services but that
their preference will be to complete their transactions off-line, enjoying the
transactional security of dealing with a local business and receiving the advice
and expertise of a professional travel agent.
OUR INDUSTRY
GENERAL OVERVIEW
- THE INTERNET. Initially, the Internet consisted of a linkage of
computers utilized by the U.S. government and certain academic institutions to
publish and exchange information and communicate via what is today known as
e-mail. Today, the Internet is a collection of computer networks linking
millions of public and private computers around the world.
- THE WORLDWIDE WEB (WWW). While the term Internet refers to the linkage
of computers enabling the free flow of information electronically, it is the
concept known as the Web which gives the Internet its content. A Web site refers
to a program of information developed, maintained and updated by its creator to
provide information to others who are able to access the site through the
Internet. The term "Internet" has become the inclusive term for both the
Worldwide Web and the Internet.
- GENERAL INTERNET USAGE TRENDS. Morgan Stanley Research estimates that
the number of Internet users will surpass 150 million worldwide by the year
2000. The United States accounts for a significant majority of the users. The
growth of the Internet has been facilitated by its ability to offer a more
appealing, efficient and less costly means of engaging in and performing a
myriad of functions traditionally the province of the telephone, television and
postal and courier services. However, the major, driving force behind the
explosive growth of the Internet has been the ability of the worldwide computer
industry to produce personal computers at a price point that allowed one out of
every three U.S. households in 1997 to own a personal computer. It is projected
that this will increase to 50% of all U.S. households by the year 2000, 98% of
all U.S. households within the next 10 to 20 years.
- E-COMMERCE. Our business is to bridge the presentation of travel
services on the Internet with the established, physical infrastructure of the
traditional retail travel industry. This opportunity has arisen due to the rapid
growth of the Internet as a vehicle for commerce in general and travel sales
specifically. Commonly called e-commerce, the selling of goods over the Internet
is creating new retailing and wholesaling business models in numerous fields. In
1998 the sale of travel services via the Internet became the largest segment of
e-commerce, surpassing computers and software.
- ONLINE TRAVEL SALES. The travel segment of the e-commerce industry has
encountered many of the same challenges faced by other categories of products
sold online. We believe that the continued growth and eventual success of
e-commerce, inclusive of travel sales, is dependent upon Internet users
adjusting to the limitations of e-commerce and the ability of e-commerce
companies to realistically assess how they can use the Internet to meet the
needs of consumers. There is perhaps no more graphic example of the inherent
limitations of e-commerce as a retail tool than in the travel sector wherein
consumers use the Internet to gather travel information but choose to book their
travel with an agency salesperson knowledgeable in the complexities of travel
services.
We believe that the ability to consummate a transaction for the purchase
of many kinds of goods and services is compromised because of the inability of
the Internet to provide the advantages of an interactive medium. Consequently,
we recognize that the Internet is an excellent medium for the graphic
presentation of travel services and that its interactive limitations can be
overcome by connecting the online marketing of travel services with the
transactional abilities of local, retail travel agents.
E-COMMERCE, THE ONLINE COMMERCE INDUSTRY
- RETAIL SALES COMPARISONS.The sale of goods and services online in the
U.S. during 1998 totaled approximately $13 billion. This figure must be
considered in light of the fact that overall personal consumption in the U.S.
during just the second quarter of 1998 reached an annual rate of $5.13 trillion.
While 25% of North American adults are "wired" or technologically capable of
purchasing online, only one-fifth of these adults did so in 1997. Most online
commerce is actually business to business, which accounted for $8 billion
(approximately 62%) of the 1998 sales and is projected to grow to $327 billion
in 2002, whereas retail or
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business to consumer sales totaled $4.8 billion in 1998 (approximately 37%) and
is projected to grow more modestly to $17.4 billion in 2002. Breaking down
retail sectors, it is estimated that 43% of online sales will be travel related
by 2002 with all other sectors accounting for the remaining 57%. This would
place the dollar amount of online sales of consumer travel services in the year
2002 in the range of $7.5 billion.
- WIRED CONSUMERS AND LOOK TO BOOK RATIOS. There are particularly
troubling issues facing the retail sector of the online commerce industry. These
issues involve what are known as "wired" customers or travelers and "look to buy
or book" ratios.
Wired customers are those who have Internet access, and, in the case of
the travel industry, and who are likely to travel.
To evaluate the Internet as a retail sales tool, a distinction must be
made between customers who purchase online ("buy") or, in the case of travel
purchases ("book"), and those who merely visit the Internet ("look") to seek
information or comparison shop after which they either make no purchase or book
off line. Online retailers who track both lookers and buyers report they average
a conversion rate of looker to buyers of only 2.7%. This means that, of 100
shoppers who visit an e-commerce site, less than three actually make a purchase.
The reasons given for such a low percentage of buyers are credit card
security, transactional security, unfamiliarity with anonymous Internet
companies, lack of personal attention, inefficiencies in delivery, and
inefficiencies in getting questions answered.
Industry recommendations to increase patronage of e-commerce sites
include making Web sites more user friendly, offering discounts as incentives to
purchase and, following the lead of the travel industry, rewarding repeat
customers for their patronage, such as, in the case of the airlines, frequent
flyer miles. As e-commerce develops, the industry must shift its focus from
customer acquisition to customer retention.
The TravelnStore.com concept of presenting information on the Internet,
but completing the transaction at a local travel agency directly answers many of
the reasons given for not buying online and implements many of the
recommendations to incentivize and retain online customers.
THE TRAVEL INDUSTRY
RETAIL TRAVEL INDUSTRY
- RETAIL TRAVEL AGENCIES. Historically, individual travel agencies have
been classified as commercial travel agencies or leisure travel agencies.
Commercial agencies tend to be larger and focus on commercial accounts whose
primary travel is for business purposes. Leisure agencies primarily deal with
the general public for personal travel needs.
- RETAIL AGENCY INDUSTRY PROFILE. The latest U.S. Travel Agency survey
reported that the number of retail agencies had declined between 1995 and 1997.
However, the survey also showed a 25% annual increase in travel agencies' gross
sales from 1995-1997. This dramatic increase in sales has occurred despite the
competitive threat posed by emerging online travel companies and a host of other
factors including reductions in commissions paid by airlines and many
initiatives undertaken by travel service providers to do business directly with
the travel consumer. Moreover, the number of travel agencies reported as
profitable has steadily increased from 71% in 1995 to 73% in 1996 to 76% in
1997.
The attrition rate for travel agencies is influenced primarily by sales
volume. In 1997, for example, 9 out of every 10 agencies with gross sales in
excess of $5 million were profitable; a number which fell to eight out of 10 for
agencies doing between $2 to $5 million and seven out of 10 for agencies in the
$1 to $2 million range. Only six out of 10 agencies selling less than $1 million
were profitable.
Not surprisingly, the greatest attrition has been with the smaller
travel agencies. In 1995, for example, 30% of the travel agencies had less than
$1 million in sales. While these agencies constituted the largest single
category of agencies, they only accounted for 6% of the total retail agency
sales. In contrast, in 1997, 19% of the travel agencies had less than $1,000,000
in sales and these agencies accounted for only 3% of the total retail agency
sales.
These figures reflect a strong consolidation trend in the retail travel
agency industry. Smaller agencies are disappearing to the benefit of larger
agencies. Larger agencies are enjoying increased profitability as their volumes
increase. We expect this consolidation to continue and view it as a positive
trend.
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- TRANSITION TO LEISURE TRAVEL. The travel agencies have responded to
these challenges by increasing their attention to the sale of the more lucrative
leisure and vacation travel. This has been particularly evident in the
commercial agency sector as agencies have expanded their leisure travel
offerings and targeted their corporate client bases. For example, air travel
sales by agencies have dropped as a percentage of gross sales from 61% in 1995
to 56% in 1997, while income from leisure travel sales increased from 49% in
1995 to 51% in 1997.
In 1997, for the first time since 1974, income from leisure travel sales
by agencies exceeded 50% of gross revenues. Agencies typically receive 12% to
20% commission on leisure sales. TravelnStore.com is specifically designed to
address the leisure travel market which continues to grow as the baby boom
generation matures and uses its discretionary income for travel purchases.
- CONSORTIUMS AND FRANCHISES. A recent survey by Travel Weekly showed
that in 1997, 54% of all agency locations were affiliated with a leisure
oriented consortium. Ten years earlier, in 1987, only 36% of agency locations
had such affiliations. In addition, 14% of agencies were affiliated with
franchises such as Uniglobe, Carlson Wagonlit Travel and American Express.
Consortiums are able to negotiate for travel service providers to pay higher
commission levels to their travel agency members.
In addition to the higher commission levels for the member agencies, the
consortium typically receives an override commission based upon the total sales
of its member agencies. These overrides typically range between 1% and 5% of
gross sales.
- BRICK AND MORTAR AGENCY SALES VS. ONLINE TRAVEL SALES. Just as online
retail sales compose only a small percentage of overall consumer spending,
online travel sales represent only a small portion of overall travel industry
gross receipts. For example, travel agents accounted for $126 billion in sales
in 1997 whereas online travel sales amounted to only $654 million (approximately
0.5% of total receipts). Just the annual growth in agency sales of 5% or $6.3
billion between 1997 and 1998, is more than three times 1998 total online travel
sales gross revenue. Many analysts have pointed out that rumors about the demise
of travel agencies in the face of online sales competition are greatly
exaggerated.
WHOLESALE TRAVEL INDUSTRY
- TRAVEL SERVICE PROVIDERS. Travel service providers include cruise
lines, package tour companies, car rental companies, hotel groups, destination
resorts and airlines. The retail travel agency industry has traditionally
supplied the major distribution infrastructure for travel service providers.
Consequently, travel service providers have invested heavily in cultivating,
educating and motivating travel agents to sell their products.
- AGENCY COMPETITORS. In most cases, travel service providers also
distribute their products directly to consumers. Traditionally this has been
accomplished through consumer direct advertising and the use of in-house
reservation centers or employees to field in-coming 800# telephone calls. This
direct competition has always been a point of contention between travel agencies
and travel service providers. Consequently, travel service providers have been
judicious in their use of direct consumer marketing, oftentimes referring
inquiries first to travel agencies and then to their own reservations staff.
- INTERNET MARKETING INITIATIVES. Virtually all types of travel service
providers are using online commerce to offer their services. The travel industry
has embraced the Internet because it is a perfect medium for the inexpensive
distribution of large amounts of information. Because the presentation of travel
services has always employed photographs and maps, the graphical nature of the
Internet is a perfect fit for the distribution of travel information.
However, the Internet is not a conversive medium. What is presented is
what is presented. To make an inquiry requires the use of email which usually
has a long response cycle or the consumer must make a direct telephone call to
the travel service provider. Consequently, only very simple travel services can
easily be sold online. For this reason, the more complex and expensive leisure
travel services continue to be sold by retail travel agencies on a person to
person basis.
- INTERNET COMPETITION SENSITIVITY. Internet market initiatives by
travel service providers have also been burdened by their desire to not appear
overly competitive with their existing retail travel agency distribution
networks. This is particularly true of leisure travel service providers.
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THE EMERGING ONLINE TRAVEL INDUSTRY
- MAJOR PLAYERS. The online commerce sector of the travel industry is
dominated by three companies, Preview Travel, Travelocity and Expedia.com. Each
of these recorded sales of approximately $250 million in 1998. Each of them also
lost tens of millions of dollars. Together they share 40% of a market projected
to grow to $7 billion in the year 2000. These three companies have rapidly
solidified their position of dominance by obtaining so-called "portal"
agreements to be the travel service providers for many of the major access sites
to the Internet. For example, Preview Travel has portal agreements with AOL.com,
Excite.com, Lycos.com and Webcrawler.com, Expedia is paired with Microsoft.com,
Infoseek.com and MSN.com and Travelocity links with Yahoo.com and Netscape.com.
All told, Web site portals garner over 150 million visits per month by
prospective consumers, any of whom, depending upon which site they have
accessed, can click directly into Preview, Expedia or Travelocity to make a
travel purchase or obtain travel related information.
- ONLINE LOSSES. The reasons online travel agencies have incurred
substantial losses is that they have substantial expenses. Multi-million dollar
costs associated with acquiring and maintaining portal agreements and other
advertising and promotional expenses to generate traffic volume to their sites
have insured that these large online agencies will not turn a profit in the
foreseeable future. In addition, they have incurred the expenses of setting up
the online agency, acquiring and training travel agents and other significant
operating expenses.
- ONLINE COMPETITION. Online travel companies must bear the burden of
both the competitive factors they share with brick and mortar travel agencies
and also the competitive factors unique to the Internet. For example, airlines
are encouraging consumers to purchase their tickets from their own Web sites by
offering increased frequent flyer miles for online purchases. Further, because
over 80% of online travel sales are airline tickets, continued erosion in this
segment of the online agency business is magnified as consumers purchase
directly from the airlines' Web sites.
- ONLINE CONSUMER PROFILES.To gauge the effectiveness of the Internet
for travel sales, the industry has measured the patronage of "wired travelers";
U.S. adults with Internet access who have traveled by air in the last year and
visited a Web site in the past month. In a recent survey of 500 wired travelers,
an independent research firm found that 80% of wired travelers visited at least
one Internet travel site, 58% went so far as to check prices and 18% actually
booked travel online. Of the 58% who looked but did not book online, 67% bought
services later from another source such as a travel agency or from the supplier.
What is significant is that 75% of these motivated lookers said they were
unlikely to use the Internet to actually purchase travel in the near future.
They cited concerns over credit card security (82%), personal privacy (79%) or
said they would rather speak with a knowledgeable salesperson (77%).
SUMMARY
Today's travel industry, can be summarized as follows.
- Sales of all categories of goods and services online represent
only a fraction of the total dollar volume of U.S. personal
consumption.
- While over 40% of online retail sales consist of travel products,
gross travel sales over the Internet currently represent less
than 2% of the sales recorded by travel agents.
- The vast majority of those who shop on the Internet look but do
not buy.
- Traditional travel agency business is generally strong. Travel
agents sold $132 billion of travel services in 1998, up over 30%
from 1995.
- Both traditional travel agencies and online agencies face
increasing competition directly from travel service providers.
- Travel agencies have moved away from lower commission travel
services and have focused increased attention on leisure travel.
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Our goal is to structure the TravelnStore.com concept to take aggressive
advantage both of the strengths of the Internet and the traditional travel
industry. Our concept answers specific needs of both our retail agency and
travel service provider constituencies. We believe that by pursuing these
advantages we are avoiding the weaknesses exhibited by the online travel agency
business of low look to book ratios and reduced commissions.
OUR COMPANY
OUR STRATEGY
For us to maintain and expand our unique position of linking Internet
travel shoppers to local travel agencies, we must continue to grow at an
increasing rate. Consequently, the major component of our business plan is our
growth strategy. We anticipate that we should be able to grow proportionately to
the compound growth rate of Internet usage. Our goal is to exceed that rate by
increasing traffic to our Web site by established Internet users.
GROWTH STRATEGY
As outlined above, our business addresses three constituencies; travel
service providers, retail travel agencies and consumers. To grow, we must grow
our relationships with these three constituencies. Each of these requires
specific marketing strategies. Because these constituencies are interactive,
success with each begets additional success with the others. Our Web site
provides both a contact point and an interface mechanism for these three
constituencies. As the volume of site participants from these three
constituencies increases, so will the use of our Certificates of Value. This
will result in increased revenues to TravelnStore.com.
- TRAVEL SERVICES PROVIDERS. Our smallest constituency is the travel
service providers. We have already established contractual and working
relationships with many of the major travel service providers. Consequently,
continued growth within this constituency will consist primarily of adding the
more specialized types of travel service providers or destination specific
travel service providers such as all-inclusive resorts.
Even though we will not be adding a significant number of additional
travel service providers, it is important that we continue to mature and expand
our relationships with our current travel service providers. This includes our
demonstration that our Web site is an increasingly important factor in their
overall Internet marketing programs. As our Web site adds value to their online
presence, we should be able to negotiate enhanced overrides and Certificates of
Value.
Because travel service providers provide the content for
TravelnStore.com and also the incentive of the Certificates of Value, they are a
key element in our success.
- RETAIL TRAVEL AGENCIES. Continued growth within the retail travel
agency constituency will come in the form of additional direct contractual
relationships with individual retail agencies to participate as co-host
agencies. Presently, over 300 travel agencies have joined as co-host agencies.
These agencies receive a guaranteed geographical territory based upon their
subscription for their local market Zip codes. We estimate that we may
eventually have as many as 2,500 agencies in this program.
Our Certificates of Value can be redeemed at any of the 29,000 travel
agencies in the United States. As Certificates are redeemed, more agencies will
become cognizant of our business. Even if an agency does not elect to join our
co-host program, that agency can still participate by proactively printing out
Certificates of Value for its clients as sales opportunities present themselves.
We believe that many agencies will take advantage of the availability of the
Certificates of Value to provide additional value to their existing and walk-in
clientele. We intend to encourage agencies to use the Certificates of Value for
their clients. In so doing, they will be generating income for us that is not
dependent upon consumers who are shopping for travel on the Internet.
Our growth strategy, as it pertains to retail travel agencies, is
focused on expanding our co-host agency network and encouraging all agencies to
use the Certificates for their existing clientele. Because the retail agency
industry is well-established in physical locations with readily available
telephone and fax numbers, marketing to travel agencies can be focused as to
geography and demographic profile of targeted agencies.
- CONSUMERS. The major growth we seek to generate is with the consumer
constituency. Regardless of the number of agencies or travel service providers
who participate with us, ultimately it is the use of the TravelnStore.com Web
site by consumers which will generate our revenue growth. Growth in this
constituency will be directly related to the amount of traffic that we can
generate to our Web site and how well those visitors accept the opportunities to
utilize the Certificates of Value.
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The most immediate methodology to generate traffic to the
TravelnStore.com site is to employ a comprehensive offline and online
advertising program. Funding of this advertising program is the primary use of
proceeds of this Offering. Advertising online includes using banner ads,
sponsorships and direct links and establishing relationships with non-competing,
high traffic volume sites. Advertising offline in various media, such as
in-flight magazines and publications, is designed to communicate to travelers
who use the Internet. Online advertising is more directed to Internet users who
travel. Both are important segments of the consumer constituency.
Our goal is to generate 300,000 unique visitors, per month, to our Web
site by the end of 1999. Success of our business plan is dependent on consumers
using the Certificates of Value as part of their travel purchases. Whatever
percentage of visitors to our Web site use the Certificates, the actual number
of Certificates used is directly related to the total traffic to the site.
Consequently, the main growth challenge that the we face is to generate as much
growth in our visitor counts as possible. Fortunately, it has been the
experience of most Web sites that given sufficient promotional funds, visitor
counts increase proportionately to the amount of money invested in advertising
and promoting the site.
MARKETING STRATEGY
Our marketing strategy can also be defined within the parameters of our
three constituencies. We have already successfully implemented marketing
strategies for the solicitation and acquisition of retail agencies to
participate in the co-host agency program. We have had a good response to our
invitations to agencies to co-host the TravelnStore.com Web site because most
agents realize that the Internet presents a good marketing opportunity. Further,
travel service providers are investing in the quality and quantity of their
proprietary Web sites. Because of this, we have enjoyed a good reception by
travel service providers. We are also confident that once consumers become
accustomed to using TravelnStore.com to navigate travel sites on the Internet,
they will return whenever they have need to purchase travel services.
- RETAIL TRAVEL AGENCIES. Central to our strategy is the operation of
our co-host agency sales team. Leads for the sales team are generated by a
variety of promotional activities, including of the use of broadcast faxes,
online advertising on selected Internet travel agency sites, traditional
advertising in trade publications, press releases, referrals from affiliated
organizations, and direct telephone solicitation. Part of the proceeds from this
offering will be directed to expanding the sales team and increasing these
promotional activities.
We will also undertake a major trade publication and broadcast fax
marketing program designed to make all agencies aware of the opportunity for
agencies to use our Certificates of Value for their non-Internet clientele. This
program should increase the awareness of the retail travel industry as to how
our Certificate program works and that agencies will receive enhanced
commissions on travel sales generated by TravelnStore.com.
- TRAVEL SERVICE PROVIDERS.Our marketing to the travel service providers
is designed to expand the scope of services and destinations represented on our
Web site. We have already participated as an exhibitor in major trade shows to
raise the awareness of the travel industry of the TravelnStore.com concept. We
will continue to develop new travel service provider relationships as an ongoing
strategy to broaden the appeal of our Web site. However, unlike many other
travel sites that seek to link to an endless chain of informational sites of
both a general and destination specific nature, we will retain our philosophy of
only linking to the proprietary sites of travel service providers.
- CONSUMERS. The majority of the proceeds from this offering are
earmarked for the promotion of our Web site to Internet users. While we will use
proven advertising strategies both in off-line publications and in the online
communities, we also have some unique strategies to generate new traffic to our
Web site and to build site loyalty. A key component of our non-advertising
strategies is our Affinity Program. Because our Web site is structured as a
database driven site, we are able to identify and track all registered visitors
to our Web site. This tracking extends to the eventual travel sales in which a
Certificate of Value is used. If the travel service purchaser has been
identified as part of a particular group or porting to our Web site from another
Web site, we have the capability to pay the group or the Web site a portion of
our commission or override.
Recently we launched THE TRAVELNSTORE.COM AFFINITY PROGRAM (TAP). The
goal of TAP is to substantially increase awareness of our Web site and provide
incentives for using the site by TAP members. TAP's initial focus is alumni
associations of major colleges and universities throughout the United States.
Under the TAP alumni program, an academic institution enters into a standard
agreement with us wherein our Web site is promoted by the institution in a
variety of ways. This includes being featured on the institution's Web site and
in campus and alumni publications to encourage those affiliated with the
institution to use
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our Web site for their travel needs. Under our agreement with a specific
institution, we remit to the institution a percentage of each commission or
override earned by TravelnStore.com as the result of the use of a Certificate of
Value by the institution's alumni or supporters.
While there are almost unlimited opportunities to expand TAP beyond the
alumni associations of colleges and universities, we selected such associations
for the initial launch of TAP for a number of significant reasons.
- Alumni associations have one of the highest percentages of
Internet users with a high demographic travel profile.
- Colleges and universities spend a great deal of time and money
keeping current with the whereabouts of their alumni. Therefore,
their publications have a high probability of reaching those who
previously attended the institution.
- By contracting with academic institutions, TAP facilitates the
exposure of our Web site to a substantial number of individuals.
- We are able to publicize TravelnStore.com to an institution's
alumni and resident population efficiently and inexpensively by
tagging onto existing programs the institution uses to
communicate with its affinity population; e.g. the institution's
Web site and campus and alumni newsletters, newspapers and
magazines, all of which are targeted to various sectors of the
institution's overall current and former population.
We believe that by the end of 2000 we can have agreements in place
promoting our Web site to several million TAP members. We also intend to use a
modified model of this program to enter into associate relationships with a wide
variety of Internet sites whereby users of those sites porting to our Web site
will generate revenue back to the originating Web site through the use of our
Certificates.
Overall, the growth of TravelnStore.com is clearly defined by the
requirements of marketing to our three constituencies. Fortunately, each of our
constituencies is easily identified and has well-established conduits of
contact. With the funding from this offering, we will be able to implement our
marketing strategies targeted at each of our constituencies. Provided our
efforts are effective, we should experience the growth necessary for our company
to be increasingly valuable to its customers, employees and stockholders.
OPERATIONS
Our operations are reasonably simple. They involve promoting our Web
site, providing our Web site and Certificate of Value services to our travel
agency and travel service provider constituencies, and accounting for our
revenues and expenses. As we do not provide travel services directly to
consumers, we avoid the most labor-intensive component of the travel service
business.
Our revenues will come primarily from the commissions and overrides from
the travel service providers who honor our Certificates of Value. We anticipate
having profitable operations by limiting the labor intensive services that we
provide and automating the processing and accounting for our Certificates of
Value. While we anticipate high volume use of our Certificates, the dollar
amount of each commission and override will be low (the overrides likely will be
between 2% and 5% of the cost of the travel service) and we must control the
cost of processing each Certificate. As we do not sell travel services directly
to consumers, we will avoid the high-cost, labor-intensive services of most
existing online travel service companies.
Our operational costs consist primarily of the following items:
- The cost of equipping our Web site and providing the bandwidth
needed for efficient and user friendly access to our Web site
information;
- The cost of the staff to deal with our customers, the retail
travel agencies and the travel service providers;
- The cost of processing and accounting for our Certificates of
Value; and
- The cost of promoting our Web site and increasing site traffic.
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Our business model should let us control and minimize these cost
components and maximize our profit potential.
Our equipment costs include primarily the costs of obtaining and
maintaining the computer servers and telecommunications equipment required to
maintain our Web site. As our Web site is a navigational site through which
consumers can access the database Web sites of the travel service providers, we
avoid the high equipment costs often associated with Internet e-commerce
companies. We have an extremely low cost of content, as the participating travel
service providers provide all content. Similarly, as we deliver only our
"frame", the bandwidth required for the consumer's efficient review of the
available travel services is provided primarily by the Web sites of the
participating travel service providers. This means that we can handle
significant site traffic with a minimum investment of Webmaster time and a
minimum investment in hardware and software. The major function of our Web site
is one of client database acquisition and management.
Similarly, as we do not provide reservation or similar service to the
travel consumer, we do not have to invest in the order-processing and
confirmation computer hardware and software and other ticketing equipment that
is required with these operations.
Our labor costs will consist primarily of the cost of the staff to
perform the following functions:
- Processing and accounting for our Certificates of Value;
- Developing and maintaining our relationships with our travel
agency and travel service provider constituencies; and
- Promoting our Web site and increasing site traffic.
As we do not sell travel services directly with consumers, our staff can
be compact and focused and we do not have to invest in training our staff on the
intricacies of travel services.
Because of the complexities of travel, companies that sell travel
services directly to consumers must have a highly trained, knowledgeable and
experienced staff who can efficiently explain the services to the consumer.
Companies that sell travel services online, such as Preview Travel, Travelocity
and Expedia, must have the same highly trained, knowledgeable and experienced
staff. These online companies have had to invest significant capital to equip
their operations and to acquire and train a workforce.
As we do not sell travel services directly to consumers, we have been
able to avoid the cost of training our staff in the intricacies of travel and
have been able to keep our labor costs low.
The processing and accounting for our Certificates of Value is primarily
a tracking function. We must properly record each Certificate that is sent to us
by a travel agent, must monitor our receipt of the commissions and overrides
from the travel service providers and must account to the travel agent for any
monies due to the agent from the travel service provider. These functions can be
automated with existing, off-the-shelf computer software. We do not anticipate
having to invest in proprietary hardware or software to handle these functions.
Through the automation of the processing and accounting for our
Certificates of Value, we anticipate that we can profitably operate a
high-volume, low-cost service business.
The costs of developing and maintaining our relationships with the
travel agencies and travel service providers can not be accurately predicted.
However, we anticipate that these costs can be managed so that they can be
covered through the net commissions and overrides realized from our Certificates
of Value. We will be facilitating the services provided by both the agencies and
the providers and will not be competing with either. As a result, we anticipate
that both constituencies will be receptive to our services and that we will not
have to invest significant sums in developing proprietary products or services
for either constituency.
Our principal labor cost will be the cost of promoting our Web site and
increasing site traffic. This cost is, in a sense, a discretionary cost and is
not directly tied to the cost of generating revenues from any particular
Certificate of Value. However, our revenues will be directly proportional to the
volume of Certificates that are used and such volume should also be proportional
to the amount of traffic to our site. We intend to devote substantial resources
to this function and anticipate that it will be our primary cost of operations.
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Studies of e-commerce have shown that site traffic is directly related
to the amount of promotion of the site. The more potential users who are aware
of the site, the greater the site traffic. So long as the site traffic generates
profitable operations, the cost of promoting the site can be managed within an
overall profitable operation. We anticipate that our processing of each
Certificate of Value can be done profitably through automation. Our challenge
then becomes one of sufficiently promoting our site to generate increased
traffic while keeping the promotional costs within the net profit realized from
processing the Certificates.
EXAMPLE OF POTENTIAL OPERATIONAL PERFORMANCE
The following example illustrates how our business model operates. This
is only an example and, because of the changing e-commerce market and the
vagaries of travel service in general, likely will not reflect actual
operations. The assumptions underlying our example are based on information from
various Internet travel industry research and financial reports of other
Internet travel sites.
Research indicates that approximately 67% of on-line travel shoppers
eventually book travel offline and that the type of travel that is booked
offline is significantly weighted towards more complex leisure travel, such as
cruises and tours. For this example we have made the following assumptions.
This example illustrates the total revenue that might be generated from
traffic to our Web site. As the example revenue would be generated from the
visitor eventually booking the travel services offline, the example can not be
used to illustrate our likely revenue for any particular month. Also, we are
developing traffic to our Web site and currently we have several thousand
visitors to our Web site each month. We do not anticipate averaging 100,000
visitors per month until at least the fourth quarter of 1999.
- AMOUNT OF AND REVENUE FROM TRAVEL SERVICES BOOKED OFFLINE
- 67% of the visitors to our Web site will eventually book
travel services offline;
- 10% of the on-line looker/off-line booker visitors to our
web site will use a certificate of value.
- The eventual offline bookings will be for the following
types of services:
- 65% for leisure travel at an average value of
$2,500;
- 20% for hotel accommodations at an average value of
$200; and
- 15% for car rentals at an average value of $150;
- 1.75% is the average net override payable to
TravelnStore.com from use of a Certificate; and
- Our revenues will be proportional regardless of the actual
amount of site traffic.
- DIRECT COSTS OF PROCESSING CERTIFICATES OF VALUE
- 10 minutes of processing time for each Certificate;
- $30 per hour as the cost of clerical labor to process
Certificates;
- $5 per Certificate as the labor for processing each
Certificate;
EXAMPLE:
- Of 100,000 visitors to our Web site, 67,000 will book travel
services offline;
- Of the 67,000 visitors who book services offline, 6,700 will use
a Certificate of Value;
- Of the 6,700 visitors who use a Certificate of Value, 4,355 (or
65%) will book leisure travel services;
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- Total bookings for leisure travel in which a Certificate is used
is $10,887,500 (i.e., 4,355 trips x $2,500 per trip);
- Total bookings for hotel accommodations in which a Certificate is
used is $268,000 (i.e., 1,340 bookings x $200 per booking);
- Total bookings for car rentals in which a Certificate is used is
$150,750 (i.e., 1,005 bookings x $150 per booking);
- Total amount of offline bookings is $11,306,250;
- Overrides paid to TravelnStore.com from offline bookings is
$197,860 (i.e., $11,306,250 x 1.75%); and
- Override per visitor is $1.97.
GOVERNMENTAL REGULATIONS
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. The United States Congress
has enacted Internet laws regarding children's privacy, copyrights and taxation.
Such legislation could dampen the growth in use of the Internet generally and
decrease the acceptance of the Internet as a communications, commercial and
advertising medium. Although our transmissions originate in California, the
governments of other states or foreign countries might attempt to regulate our
transmissions or levy sales or other taxes relating to our activities. The
European Union recently enacted its own privacy regulations that may result in
limits on the collection and use of certain user information. The laws governing
the Internet, however, remain largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy, libel and
taxation apply to the Internet and Internet advertising.
The growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet. Furthermore, the Federal Trade Commission has
recently investigated the disclosure of personal identifying information
obtained from individuals by Internet companies. In the event the Federal Trade
Commission or other governmental authorities adopt or modify laws or regulations
relating to the Internet, our business, results of operations and financial
condition could be adversely affected. See "Risk Factors -- Governmental
Regulation of the Web."
INTELLECTUAL PROPERTY RIGHTS
We have filed for registration of the service mark "TravelnStore.com"
with the United States Trademark Office. We are the registered owner of the
"TravelnStore.com" Internet domain name.
We have not filed for patent protection of any of our technology or
business systems with the United States Patent Office or any foreign patent
office. We believe that our success will be dependent on our operation of a
user-friendly Web site that offers superior services and information. We do not
believe that such user-friendly site or superior services and information are
dependent on our obtaining and enforcing patent protection for our technology
and business systems.
EMPLOYEES
As of April 30, TravelnStore.com had 12 employees consisting of 4
executive officers, and 8 administrative support personnel. We anticipate that
by December 31, 1999, we will have a total of approximately 16 employees
consisting of 6 executive officers and 10 administrative and support personnel.
FACILITIES/PROPERTIES
Our principal offices are located at 1320 Flynn Road, Suite 402,
Camarillo, California 93012. In anticipation of the need for additional space,
we executed only a twelve month lease in July of 1998 terminating June 30, 1999.
The monthly rental is $1,300. We have retained this space on a month to month
holdover arrangement pending the close of this Offering and a move to larger
facilities. We also lease office space at 900 Avenida Acaso, Suite J, Camarillo,
California 93012. This office is approximately three blocks from our principal
office and consists of approximately 650 square feet. We rent this office space
on a month to month basis for $700 per
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month from World Key, Inc., an affiliated company. We anticipate that we will
require additional office space of approximately 4,500 square feet within the
next six months. Office space of this size is readily available in the
proximity of our location.
Upon the successful completion of this Offering, we expect to relocate
to a larger office facility. We are currently involved in lease negotiations on
two different locations both of which consist of approximately 5,000 square
feet. Upon completion of the negotiation we will select one of these two
locations from which to conduct our business. We anticipate that this amount of
space will be suitable for the foreseeable future. Based upon these
negotiations, we expect to sign a lease for a period of three to five years at
approximately $1.50 per square foot per month inclusive of all services and
utilities. Consequently, we anticipate that our annual facilities cost will be
approximately $7,500 per month or $90,000 per year.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
TravelnStore.com's officers and directors and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jim B. Tyner 50 Chairman, Chief Executive Officer and Director
John R. Toal 60 President, Chief Operating Officer and Director
Yula Greco 53 Vice President, Secretary, Controller and Director
Richard A. Bush 41 Vice President, Chief Financial Officer and Director
E. Heinz Niederhoff 60 Independent Director
James Kingzett 55 Independent Director
</TABLE>
JIM B. TYNER is a co-founder of TravelnStore.com. From 1969 to 1976, he was
involved in the brokerage and sale of homes and agricultural investment
properties. In 1976, he founded a California licensed, independent escrow
company, which he built into a multi-location firm. He sold the escrow company
in 1989, having completed over 20,000 real estate transactions. Mr. Tyner
purchased two general travel agencies in 1981, which he grew from $600,000
annual sales to $3.5 million in four years. Mr. Tyner sold these agencies in
1985. From 1990 to 1995, Mr. Tyner was involved in real estate development and
brokerage, and served as the Managing Partner of 250,000 square feet of office,
industrial and commercial buildings. Mr. Tyner founded World Key, Inc. in 1994
as a specialized travel agency for travel to Great Britain. He continues as
Chairman of World Key, Inc. Mr. Tyner has been active in community affairs,
serving on the Board of Regents of California Lutheran University, as President
of the Camarillo Chamber of Commerce, as President of the Ventura County Escrow
Association and the Independent Escrow Association and on the Executive Board of
the California Escrow Association. Mr. Tyner is a graduate of California
Lutheran University.
JOHN R. TOAL is a co-founder of TravelnStore.com and has served as President and
Chief Operating Officer of TravelnStore.com since its inception. Prior to
joining TravelnStore, Mr. Toal was a Director and President of Impactor
Environmental Products, Inc., a publicly held company and the parent company of
Environmental Glass, Inc. Prior to his involvement with Impactor Environmental
Products, Inc. he served as President of Toal and Associates, a media
advertising and design consulting firm, which he founded in 1960. He has
lectured at UCLA and other venues on the topics of Advertising and Marketing. He
is a graduate of the American Academy of Art in Chicago.
YULA GRECO is a co-founder of TravelnStore.com and has served as Vice President,
Controller and Secretary since its inception. She is a co-founder of World Key,
Inc. and has served as Controller and Secretary since its founding in 1994. From
1981 to 1989 she served as Controller of Coronado Escrow Inc. and World Key
Travel, Inc. From 1989 to 1996 she served as Controller for several real estate
partnerships controlled by Jim B. Tyner. She holds a degree in accounting from
Ventura Community College.
RICHARD A. BUSH graduated with honors from Indiana University in 1980. He
qualified as a Certified Public Accountant in 1980. He spent 10 years with
Arthur Andersen & Co. He held the position of Manager, in the Audit Financial
Consulting Practice in its Chicago office. Mr. Bush joined the Aerospace
Division of Abex, Inc. as Controller in 1990. He also served as a Co-General
Partner, with Mr. Tyner, in several, large commercial real estate syndication's.
He currently serves as Vice President of Finance of Fairfield Manufacturing
Company Inc., a $220 million manufacturing company located in Lafayette,
Indiana. He will serve as the interim CFO on a consulting basis until such time
as we require a full-time CFO.
E. HEINZ NIEDERHOFF served as a Vice President for Sitmar Cruises from
1976-1979. From 1980 through 1982 he held the position of Vice President,
Western U.S., for Kuoni Tours. From 1982 to 1996 he served as President of DER
Travel Service, Inc., Los Angeles. DER is a major European tour operator with
annual sales in excess of $75 million. At present, he serves as Vice President,
Sales and Marketing for Kemwel Holiday Autos, LLC, one of the largest rental car
marketing firms with offices worldwide. He is past Chairman and CEO of the
United States Tour Operators Association in 1994/1995.
JAMES M. KINGZETT is a graduate of Carroll College and the University of Montana
School of Law. He has over 25 years experience in real estate acquisition,
development, management and disposition with specialized experience in the
coordination of design, planning and permitting functions of real estate
development. He has founded and directed successful businesses, both on the U.S.
mainland and in the Pacific Basin. From 1992 to present, he is served as
President of Pro-United Inc., a Texas Corporation, involved in real estate
investment, development and brokerage in Texas and South Eastern United States.
From 1981 to present, he
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has also served as an officer and director of Pacific Endeavors, Ltd. which is
engaged in the export and brokerage of food and building materials throughout
the South Pacific. He is a resident of Gardnerville, NV.
We have not established separate Audit, Compensation or other Committees
of the Board of Directors. The functions of these Committees presently are being
performed by the full Board of Directors. We anticipate appointing such
Committees during calendar 1999.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Our only compensation obligation to any of our Executive Officers is to
pay them the salary compensation described below. We have not established any
employee benefit or insurance plans or other forms of long-term benefits for any
of our Executive Officers or other employees. Accordingly, we have not included
a Summary Compensation Table, which would include only the listed salary, and
instead have separately described the compensation payable to our Executive
Officers. We anticipate that, after the completion of this offer, we may
establish one or more employee benefit or insurance plans of the type that would
be disclosed in the Summary Compensation Table.
CASH COMPENSATION
Neither our Chief Executive Officer, President nor any other Executive
Officer received or is entitled to receive for either fiscal year 1998 or fiscal
year 1999 compensation of $100,000 or more. The compensation payable during
fiscal 1999 to our Executive Officers is as follows:
<TABLE>
<CAPTION>
COMPENSATION
NAME & POSITION FISCAL 1999
- --------------- ------------
<S> <C>
Jim B. Tyner, CEO $84,000
John R. Toal, President $72,000
Yula Greco, V.P., Controller and Secretary $72,000
Richard A. Bush, Vice President and CFO $48,000
</TABLE>
All of the foregoing compensation is payable as salary. We have no
obligation to pay any cash bonuses in fiscal 1999, although we may pay cash
bonuses in fiscal 1999 if our performance and the Executive Officer's
performance warrant a bonus.
STOCK OPTIONS
We have not granted any stock options, stock appreciation rights or
other stock incentives to any of the Executive Officers. (See, "Principal
Stockholders" and "Certain Transactions" for a discussion of the present stock
interests of the Executive Officers and Directors.) In the future we may grant
stock options, stock appreciation rights and other stock rights to any or all of
the Executive Officers. (See, "1999 Equity Incentive Plan.")
EMPLOYMENT AGREEMENTS
We have entered into written Employment Agreements with Jim Tyner, our
Chief Executive Officer, John Toal, our President, and Yula Greco, our
Secretary. The Employment Agreements are effective as of July 1, 1999 and
provide for the payment of the foregoing annual salaries from July 1, 1999. As
of the date of this Prospectus, we are obligated to pay to our officers total
deferred compensation of $32,000.
DIRECTORS' COMPENSATION
We do not pay any of the Directors any compensation, whether in cash or
other property, for their attendance at any meetings of the Board of Directors.
We provide cash reimbursements for each of the Directors for expenses incurred
in attending any such meetings. We anticipate that, after the closing of this
Offering and depending on our results of operations, we may compensate the
non-management Directors for their attendance at such meetings.
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STOCK OPTION PLANS
1999 EQUITY INCENTIVE PLAN
In April 1999, we adopted the 1999 Equity Incentive Plan (the "Plan").
The purposes of the Plan are to provide an additional incentive for directors,
employees and consultants to further our growth, development and financial
success by personally benefiting through the ownership of our securities, and to
enable us to obtain and retain the services of directors, employees and
consultants considered essential to our long-term success.
We have reserved a total of 1,000,000 shares of common stock for
issuance under the Plan (after giving effect to the 2-for-1 stock split effected
August 25, 1999) either upon the exercise of options or as shares of restricted
stock. The Plan provides for adjustment in the number of shares of common stock
covered by the Plan in the event of, among other things, any stock splits or
stock dividends and any combinations or reclassifications of our Common stock.
Currently the Plan is administered by the Board of Directors, although
the Board may appoint a Committee to administer the Plan. The administrator has
authority to construe and implement the Plan, to select the individuals eligible
for the grant of options and the award of stock, to determine the amount and
exercise price of options and other shares to be granted, to impose restrictions
on the transferability of the options and shares and to prescribe all other
terms and conditions of each option granted under the Plan.
The administrator may grant options and award shares to our employees,
officers, directors, non-employee directors and consultants. As of the date
hereof, no employees, Directors or consultants have been granted any options or
issued any shares under the Plan nor are they entitled to receive the grant of
an option or the award of any shares under the Plan.
STOCK OPTIONS
Options granted under the Plan may be incentive stock options or
non-statutory stock options for federal and state income tax purposes. Options
granted under the Plan are not transferable, except in the event of the
Optionee's death, and options may be exercised only within the period prescribed
by the administrator. The maximum term of any option is ten (10) years.
The administrator of the Plan has the discretion to establish the
vesting schedule for any options. Generally options will vest at the rate of 20%
after each year of employment but, in the event of our merger or reorganization,
the administrator may accelerate the vesting of the Options. The administrator
may provide that the option will become fully vested on the occurrence of a
Change in Control, which would generally include (a) a person's acquisition of
25% or more of our outstanding voting securities; (b) the stockholders' approval
of our merger or consolidation with or into another corporation in which our
existing stockholders do not own at least 65% of the voting securities of the
surviving entity; or (c) over any two (2) year period, a change in the majority
of our Board of Directors that is not approved by at least two-thirds (2/3) of
the Directors then in office.
The expiration of any option is accelerated if the optionee's
employment, status as a director or consultant terminates for any reason. The
option must be exercised within thirty (30) days following such termination,
unless the termination is as a result of the optionee's death or disability, in
which case the option must be exercised within one (1) year after the date of
termination.
The exercise price of an option is set by the administrator at the time of
grant. The option price may not be less than 100% of the fair market value of
common stock on the date of grant. Payment of the exercise price of an option
may be made in whole or in part in the form of cash or our stock (valued at its
then fair market value).
RESTRICTED STOCK
The administrator may award shares under the Plan on such terms and
conditions as it deems appropriate. The shares may be awarded either as a stock
bonus for which the recipient shall not be obligated to pay a purchase price or
as a stock purchase in which case the recipient shall be obligated to pay a
purchase price established by the administrator, which price may be less than
the then fair market value of the Common stock.
The recipient will be entitled to vote all of the shares immediately
upon the award of the shares. The Administrator may provide that the recipient's
economic interest in the shares will vest over a period of time; provided that
such period shall not be longer than 20% per year over five years.
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In the event of the termination of the stockholder's employment or
status as a director or consultant, we shall have the right to repurchase any
unvested shares at a price equal to the purchase price paid by the stockholder.
The administrator also may provide that, on the occurrence of any such
termination, we will have the right to repurchase, at its then fair market
value, any vested shares.
ANTI-TAKEOVER IMPACT OF CHANGE OF CONTROL PROVISION
The Plan permits the administrator to accelerate the vesting of any
option and any shares on the occurrence of a Change in Control. Such
acceleration of vesting could have an anti-takeover effect and could make it
more difficult for a third party to acquire TravelnStore.com. We are not
currently discussing or negotiating with any other person regarding the
acquisition of TravelnStore.com or any similar transaction that would result in
a Change in Control.
AMENDMENT AND TERMINATION
We may amend or terminate the Plan at any time, provided that no
outstanding option or shares may be adversely affected without the optionee's or
the stockholder's consent. The approval of our stockholders is required only for
amendments that increase the number of shares available for issuance under the
Plan other than as a result of stock split, recapitalization or other change in
our capital structure. The Plan will automatically terminate on December 31,
2009, unless it has previously been terminated; but options and shares then
outstanding may be exercised and will remain outstanding until they expire or
are terminated in accordance with their terms.
BENEFIT PLANS
We have not established any pension, profit-sharing, 401(k) or similar
benefit plans for our employees. We anticipate that we will establish one or
more of such plans after the completion of this Offering. Our provision of such
plans may be important in attracting and retaining the employees that we will
need to achieve our business plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Articles of Incorporation limits the liability of directors to the
maximum extent permitted by California law. California law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (a) any
breach of their duty of loyalty to the corporation or its stockholders, (b) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) unlawful payments of dividends or unlawful stock
repurchases or redemption's or (d) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Our Articles of Incorporation and Bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our Bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether or not California law would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for certain expenses, including attorneys fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of TravelnStore.com, arising
out of such person's services as an director or executive officer of
TravelnStore.com, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
TravelnStore.com pursuant to the provisions of our charter documents, California
law or the agreements described above, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common
stock as of August 25, 1999 and as adjusted to reflect the sale of the shares of
common stock offered hereby by:
- each person or entity who is known by us to beneficially own more
than 5% of our outstanding Common stock;
- the CEO, each of the named executive officers and each of our
directors; and
- all executive officers and directors as a group.
Unless otherwise indicated, the address for each of the named
individuals is c/o TravelnStore.com, Inc., 1320 Flynn Road, Suite 402,
Camarillo, California 93012. Except as otherwise indicated, and subject to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.
Applicable percentage ownership in the table is based on 9,400,000
shares of common stock and 8,154 shares of Series A Preferred Stock outstanding
as of August 25, 1999 and 10,400,000 shares of common stock and 8,154 shares of
Series A Preferred Stock outstanding immediately following the completion of
this offering. (See, "DESCRIPTION OF CAPITAL STOCK".) (All of the share figures
reflect the 2-for-1 stock split that we effected August 25, 1999.) Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. None of the persons listed below hold any options or other
rights to acquire any additional shares of our Common stock. There is one Stock
Option outstanding covering a total of 153,847 shares of common stock. We have
reserved for issuance upon conversion of the outstanding Convertible Notes for
which the holders have notified us of their intention to convert the Notes a
total of 315,378 shares of common stock. None of the shares of common stock
issuable or upon exercise of such Stock Option or conversion of the Notes are
deemed outstanding for the purpose of computing the percentage ownership of the
persons listed below. To the extent that any shares are issued upon exercise of
options, warrants or other rights to acquire our capital stock that are
presently outstanding or granted in the future or reserved for future issuance
under our stock plans, there will be further dilution to new public investors.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER THE OFFERING
EXECUTIVE OFFICERS, DIRECTORS ------------------------- -------------------------
AND 5% STOCKHOLDERS NUMBER PERCENTAGE NUMBER PERCENTAGE
- ----------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Jim B. Tyner 3,600,000 38.20% 3,600,000 34.53%
Scanlin 1989 Trust* 2,116,107 22.45% 2,116,107 20.30%
Stevan Saylor* 1,908,355 20.25% 1,908,355 18.31%
John R. Toal 900,000 9.55% 900,000 8.63%
Yula Greco 900,000 9.55% 900,000 8.63%
Richard Bush -0- 0.0% -0- 0.0%
E. Heinz Niederhoff -0- 0.0% -0- 0.0%
James Kingzett -0- 0.00% -0- 0.00%
All Executive Officers and
Directors as a group (6 persons) 9,424,462 100.00% 9,424,462 90.40%
</TABLE>
* Includes 16,107 and 8,355 shares of common stock issuable to the Scanlin 1989
Trust and Mr. Saylor, respectively, upon conversion of the shares of Series A
Preferred Stock held by them.
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CERTAIN TRANSACTIONS
TravelnStore, LLC, a California limited liability company, was organized
on August 18, 1998, and is our predecessor. By a merger of TravelnStore, LLC
into us effective as of April 15, 1999, we acquired all of its business, assets
and liabilities. In connection with the merger, we issued to the members of the
LLC a total of 4,500,000 shares of Common stock. The members of the LLC had made
an aggregate cash contribution to the LLC of $200 in exchange for their
membership interests in the LLC. The persons who were the members of the LLC
currently hold a majority of our outstanding Common stock. (See, "PRINCIPAL
STOCKHOLDERS.")
LOAN TRANSACTION
In separate private placements, we issued a total of 33 Convertible
Promissory Notes (the "Notes") in the aggregate principal amount of $490,000.
Each Note has a face value of $15,000, $85,000 of the Notes have a coupon rate
of 8% per annum, $405,000 of the Notes have a coupon rate of 6% per annum and
all of the Notes are all due and payable on December 31, 2000. We used the
proceeds of these Loans to cover our initial operating expenses and for general
working capital purposes, including the payment of officers salaries. No
significant portion of the proceeds were used to fund the acquisitions of
capital equipment. Each of the Notes was issued in exchange for cash, the
forgiveness of debt or a combination thereof in an amount equal to the principal
amount of the Note. The amount payable at December 31, 2000 on maturity of the
Notes will depend on whether or not we have affected a registered public
offering of our common stock. If we have not affected a registered public
offering of our common stock on or before December 31, 2000, we will be
obligated to pay an amount equal to the sum of the entire unpaid principal
balance of the Notes, all accrued interest thereon, and a premium equal to
$15,000. If we have affected a registered public offering of our common stock on
or before December 31, 2000, and have raised at least $2,000,000 in such
offering, we will be obligated to pay an amount equal to the sum of the entire
unpaid principal balance of the Notes, all accrued interest thereon, and a
premium equal to $7,500.
The Notes issued under both placements may be converted into shares of
common stock following the date on which a registered public offering of our
common stock is declared effective. For the Notes issued under the placement
commenced in September, 1998, the holder may convert the Note into that number
of shares of common stock determined by dividing the sum of $150,000 by the
price at which we issue the shares of common stock in the registered offering;
provided that the number of shares that are issuable upon such conversion shall
be appropriately pro-rated to reflect any partial payments on the Note prior to
the date of conversion. For the Notes issued under the placement commenced in
January, 1999, the holder may convert the Note into that number of shares of
common stock determined by dividing the sum of $50,000 by the price at which we
issue the shares of common stock in the registered offering; provided that the
number of shares that are issuable upon such conversion shall be appropriately
pro-rated to reflect any partial payments on the Note prior to the date of
conversion. In anticipation that the offering price for any shares issued in a
registered offering would be $6.50 per share, we had reserved for issuance on
conversion of the Notes a total of 338,454 shares of common stock. We will
appropriately adjust the number of shares reserved to reflect the actual
offering price and the then aggregate amount payable under the Notes.
Holders of 29 Notes in the aggregate principal amount of $430,000, have
committed to convert, as of the effective date of this offering, their Notes
into an aggregate of 315,378 shares of common stock. Such conversion will be
effected in order to improve our financial position and to facilitate this
offering. As of August 15, 1999, and after giving effect to the foregoing
conversions, there remained outstanding 4 Notes in the aggregate principal
amount of $60,000 and with respect to which we have reserved for issuance a
total of 30,768 shares of common stock.
OPTION SWEEPSTAKES
In connection with the commencement of our Web site, we conducted a
Sweepstakes under which we solicited entries from visitors to our Web site. We
granted to a visitor whose name we drew at random from the list of all
participating visitors an Option to purchase that number of shares of our common
stock as is determined by dividing $1,000,000 by the price at which the shares
of common stock covered by this offering are issued to the public. We have
reserved for issuance under the Option 153,847 shares of common stock. The
aggregate exercise price of the Option is $100.00. If we do not effect a public
offering of our common stock by December 31, 2000, the Option will expire on
December 31, 2000 and we shall pay the holder of the Option $25,000 in cash.
STOCKHOLDER LOANS
In connection with our borrowing a total of $140,000 from two
stockholders, we issued to such stockholders, as additional consideration for
the loans, a total of 200,000 shares of common stock. Notes issued for a total
of $100,000 were due and payable on
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<PAGE> 49
June 30, 1999, and bearing interest at the rate of 10% per annum. One of the
Notes issued for $40,000 was due and payable on December 31, 1999, bearing
interest at the rate of 10% per annum and is convertible at the holder's option
into Convertible Notes issued in the September 6, 1998 private placement (which
is described above) in the aggregate principal amount of $75,000. Effective as
of August 25, 1999, all of these Notes were converted into an aggregate of 8,154
shares of Series A Preferred Stock. Such conversion was effected in order to
improve our financial position and to facilitate this offering. (See,
"DESCRIPTION OF CAPITAL STOCK" for a description of the rights, preferences and
privileges of the Series A Preferred Stock.)
CONSULTANCY AGREEMENTS
On July 6, 1998, TravelnStore, LLC, the predecessor to TravelnStore.com,
entered into Independent Contractor Agreements with Stevan M. Saylor and Donald
G. Scanlin. Both Mr. Scanlin and Mr. Saylor were founders of TravelnStore LLC
and are principal stockholders of TravelnStore.com. Under these Agreements, Mr.
Scanlin and Mr. Saylor provided consultancy services to TravelnStore, LLC during
its formation and initial months of operations. Both Mr. Scanlin and Mr. Saylor
have significant business experience from which TravelnStore, LLC, and
subsequently TravelnStore.com, have benefited. Their duties under the
Agreements, were to provide general business and marketing advice at the request
and direction of the officers of TravelnStore.com. For their services, each is
to receive $25,000 payable on the successful completion of this Offering.
TravelnStore.com does not anticipate renewing or negotiating any further
consultancy agreements with either Mr. Scanlin or Mr. Saylor in that the
services which they have provided have or will be assumed by full-time employees
of the Company.
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DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will
consist of 20,000,000 shares of common stock, no par value, and 1,000,000 shares
of preferred stock, no par value. As of August 25, 1999, there were outstanding
9,400,000 shares of common stock held of record by 34 stockholders of record and
8,154 shares of Series A Preferred Stock held of record by 2 stockholders. Of
the 20,000,000 shares of common stock authorized, 1,000,000 shares are reserved
for issuance pursuant to the 1999 Equity Incentive Plan, 153,847 are reserved
for issuance on the outstanding Stock Option, 346,146 shares are reserved for
issuance on conversion of outstanding convertible promissory notes, and
1,000,000 are being offered herein. The foregoing number of shares reflect the
2-for-1 stock split on the common stock that was effected August 25, 1999.
COMMON STOCK
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of our stockholders. Subject
to preferences applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of any funds legally available. In the
event of our liquidation, dissolution or winding up, holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no preemptive rights and no right to convert their
common stock into any other securities. There are no redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon the closing of
this offering will be, fully paid and nonassessable. The rights, preferences and
privileges of holders of our common stock are subject to the rights of holders
of shares of any series of our preferred stock which we may designate and issue
in the future.
PREFERRED STOCK
Pursuant to our Articles of Incorporation, the Board of Directors has
the authority, without further action by the stockholders, to issue up to
1,000,000 shares of preferred stock in one or more series and to fix the rights,
preferences and privileges of such stock, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the common stock. Without
stockholder approval, we may issue preferred stock with voting, conversion or
other rights that could adversely affect the voting power and other rights of
the holders of common stock. Preferred stock could thus be issued quickly with
terms which could delay or prevent a change in control of TravelnStore.com or
make removal of management more difficult. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price of the common
stock and may adversely affect the voting and other rights of the holders of
common stock.
A total of 8,154 shares of preferred stock have been designated as
Series A Preferred Stock. There are no other shares of preferred stock
outstanding and there are no current plans to issue any shares of Preferred
Stock other than the shares offered hereby.
Holders of Series A Preferred Stock will have the following rights,
preferences and privileges:
- they will be entitled to receive non-cumulative dividends prior
and in preference to any payment of dividends (except dividends
payable in shares of Common Stock) on common stock, when, as, and
if declared by the Board of Directors;
- on liquidation of the TravelnStore.com, they will be entitled to
receive before any distribution to holders of common stock, an
amount equal to $20 per share of Series A Preferred Stock. After
provisions for payment of the preferential amounts to the holders
of Series A Preferred Stock, all remaining assets shall then be
distributed to the holders of common stock;
- each share of Series A Preferred Stock is convertible into three
(3) shares of common stock. The conversion rate is subject to
adjustment in certain events, including the issuance of common
stock as a stock dividend or combinations or subdivisions of
common stock; and
- in addition to voting rights given by law to the holders of
preferred stock, the holders of Series A Preferred Stock will be
entitled to the voting rights described below.
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VOTING RIGHTS
Except as otherwise required by law or as set forth in our Articles of
Incorporation, the holders of shares of common stock and the holders of shares
of Series A Preferred Stock will vote together as a single class on all matters
submitted for approval by the stockholders. The holders of common stock will be
entitled to our vote per share. The holders of the Series A Preferred Stock will
be entitled to that number of votes per share as equals the number of shares of
common stock into which the Series A Preferred Stock is then convertible.
Initially each share of Series A Preferred Stock is convertible into three
shares of common stock.
Prior to the election of directors, any stockholder may cumulate votes
for any nominees, if, prior to the voting, a stockholder has given notice that
he intends to cumulate his votes. In cumulative voting, each stockholder is
entitled in the election of directors to one vote for each voting share held by
him multiplied by the number of directors to be elected and may cast all such
votes for a single nominee for director or may distribute them among any two or
more nominees as he sees fit. Those receiving the highest number of votes up to
the number of directors to be elected are elected as directors.
Stockholder approval of most actions, other than election of directors,
requires the approval of a majority of the shares present, whether in person or
by proxy, assuming a quorum was present. A quorum is the representation at a
meeting of holders of more that 50% of the outstanding shares. California law
requires the approval of at least the holders of more than 50% of the
outstanding shares for certain matters, including certain reorganizations and
sales of all or substantially all of the Company's assets, the dissolution of
the Company and amendments to the Articles of Incorporation, certain amendments
to the Bylaws, and in certain cases, certain class votes.
In addition to the foregoing, so long as any shares of Series A
Preferred Stock shall be outstanding, the Company shall not take any of the
following actions without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least fifty percent (50%) of
the outstanding shares of Series A Preferred Stock:
- Alter or change the rights, preferences, or privileges of the
Series A Preferred Stock so as materially and adversely to affect
the Series A Preferred Stock; or
- Increase the authorized number of shares of Series A Preferred
Stock; or
- Create any new class or series of shares having preferences over,
or being on a parity with, Series A Preferred Stock then
outstanding; or
- Do any act or thing which would result in taxation of the holders
of shares of Series A Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any successor
provision thereof).
STOCKHOLDER PROPOSALS
Our Bylaws set forth specific procedures for a stockholder's submission
of any matter to be acted upon at any meeting of stockholders.
- If the stockholder wishes to nominate a person for election as a
director, the stockholder must deliver to us notice of the
nomination generally not less than thirty (30) days nor more than
sixty (60) days prior to the date of the meeting at which
Directors are to be elected. The stockholder must include with
the notice certain information about the nominee and his or her
prior experience.
- If the stockholder wishes to present any other matter for action
at the stockholder meeting, the stockholder must deliver to us
notice of such matter generally not less than thirty (30) days
nor more than sixty (60) days prior to the date of the meeting.
The stockholder must include with the notice certain information
about the matter to be acted upon and his or her interest in such
matter.
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CONVERTIBLE NOTES
We had issued in three private placements Convertible Promissory Notes
in the aggregate principal amount of $480,000. Effective as of August 15, 1999,
$435,000 in principal amount of such Convertible Promissory Notes were converted
into a total of 315,378 shares of Common Stock. (See, "CERTAIN TRANSACTION-Loan
Transactions".)
In connection with our borrowing of a total of $140,000 from two
stockholders, we issued to such stockholders, as additional consideration for
the loans, a total of 200,000 shares of Common stock. Effective as of August 25,
1999, the Promissory Notes evidencing the foregoing Loans were paid in full
through the issuance of 8,154 shares of Series A Preferred Stock. (See, "CERTAIN
TRANSACTIONS-Stockholder Loans".)
TRANSFER AGENT AND REGISTRAR
None of the shares of common stock covered by this offering will be listed
on any exchange or in the Nasdaq quotation service immediately after the
closing. Depending on the amount of the net proceeds realized by us from the
offering, we intend to seek to list our common stock on the Philadelphia Stock
Exchange or another regional stock exchange. Until such time as we list our
shares of common stock on an exchange or in the Nasdaq quotation service, we
will act as the transfer agent and registrar for our Common stock.
STOCKHOLDER COMMUNICATIONS
Following the completion of this offering, we will provide to our
stockholders the periodic reports required under the Securities Exchange Act of
1934, including quarterly and annual reports. We also intend to provide to our
stockholders prior to our merger with or acquisition of another business entity
complete disclosure documentation regarding such business entity, including
audited financial statements.
POTENTIAL ACQUISITION TRANSACTIONS
We anticipate that we may pursue one or more acquisitions or business
combinations for the purposes of facilitating our growth and our achievement of
our business plan. As is common in the e-commerce industry, the most effective
means for us to expand into particular industry segments may be for us to
combine with another company which is already operating in that segment.
We have not initiated any discussions with any other company regarding a
possible merger or acquisition. We have given preliminary consideration to the
possibility of developing an affiliation with an established group of retail
travel agencies as a means to enhance our market presence, to enhance our
attractiveness to travel service providers with whom we will do business and
to increase the traffic to our Web site. It is possible that we will pursue such
an affiliation with World Key, Inc., a California corporation and a related
party to TravelnStore.com, which focuses on travel to the British Isles. We have
not initiated any definite discussions with World Key, Inc. or any other
company.
Jim Tyner, John Toal and Yula Greco, all of whom are officers and
directors of TravelnStore, are also officers, directors and stockholders of
World Key, Inc. While we have not initiated definite discussions with World Key,
we and World Key have agreed that, if we do begin discussions about a possible
acquisition or affiliation between the two companies, the discussions on behalf
of World Key will be conducted by its independent directors and management and
that none of Messrs. Tyner and Toal and Ms. Greco will participate in such
discussions on behalf of World Key. Also, World Key has advised us that they
will not object to such persons' participation in the discussions on our behalf.
Prior to consummating any transaction with World Key, we will fully disclose the
terms of the transaction to our stockholders and likely will obtain an
independent appraisal and review of the terms of the transaction to confirm that
the transaction is fair to all of our stockholders.
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PLAN OF DISTRIBUTION
The shares of common stock covered by this Offering are being offered
directly by us. Our officers and directors who will act on our behalf in
connection will be Jim B. Tyner, Chairman and Chief Executive Officer. John R.
Toal, President and Chief Operating Officer, and Peggy Murray, Director of
Investor Relations. We have not employed the services of an underwriter to
market the shares, although we have reserved the right to employ one or more
underwriters and brokers. If we employ any broker/dealers to assist in the offer
and sale of the shares, we will employ only broker/dealers who are licensed with
the Securities and Exchange Commission and all applicable state securities
agencies and all are in good standing with the NASD. Prior to agreeing to pay
compensation to a broker/dealer, we will obtain from the NASD confirmation that
they have no objection to the terms of such compensation. If and when we employ
any broker/dealer, we will file a past-effective amendment to the registration
statement covering this offering to identify the broker/dealer and to disclose
the compensation payable to him. It is the position of the Commission's Division
of Corporation Finance that broker/dealers who we retain to assist in the offer
and sale of the shares will be deemed to be "underwriters" within the meaning of
Section 2(11) of the securities Act of 1933.
We have established the following procedures for directly offering and
selling the shares covered by this Offering.
- INVESTOR RELATIONS DEPARTMENT. Our Investor Relations Department
consists of a Director of Investor Relations and an Investor
Relations Associate. The Director and Associate have a
comprehensive understanding of TravelnStore.com, our operations,
market strategies, and the market in which we compete. The
Director and Associate have received specific training about this
offering and the rules under which we are making this offering.
- MARKETING. We intend to use the Internet, direct-mail and
traditional media to solicit investors using the following
strategies.
- THE INTERNET. We have established a procedure on our Web site
through which a prospective investor may download a copy of this
Prospectus and subscribe for shares by following the instructions
posted on the Web site. Our Investor Relations Department will
follow-up with each person who contacts the Web site to pursue
such person's investment in this offering.
- DIRECT-MAIL. We will use traditional surface mail and email to
contact retail travel agencies and travel service providers. We
believe that the owners, management and staff of travel agencies
and travel service providers are in a position to easily
understand our objectives and opportunities. We intend to contact
both agencies and providers with whom we have existing
relationships and those with whom we do not have relationships.
We will also use traditional surface mail and email to contact
other potential investors. We intend to limit such mail and email
contacts to potential investors and groups of investors who we
have pre-qualified as knowledgeable about the travel industry
and/or the conduct of the e-commerce on the Internet.
- TRADITIONAL MEDIA. We intend to use traditional media both in the
form of paid advertisements and press releases to promote the
availability of this Offering to potential investors.
- UP-DATED INFORMATION. We will post on our Web site copies of all
amendments and supplements to this Prospectus contemporaneously
with our filing of such amendments and supplements with the
Commission. In addition, and in order to insure that all
prospective investors timely receive a copy of each such
amendment and supplement, we will highlight on our Web site
notice of such filing and will send to each prospective investor
notice of such filing by mail or email, in accordance with our
prior means of communication with the investor. If we previously
have delivered to the investor only printed copies of the
Prospectus, we will send to the investor with the written notice
of the filing a printed copy of the amendment or supplement.
- ESCROW ACCOUNT. To reduce the risk to early investors, we have
set a minimum offering amount of $2,000,000. We anticipate that
amount will be sufficient to fund our operations for twelve (12)
months. Until the minimum subscriptions are received, all funds
received from investors will be placed in an escrow account with
Santa Barbara Bank & Trust, an FDIC insured commercial bank with
more than $50,000,000 in assets. The subscription funds will not
be released to us until we have received acceptable subscriptions
for at least $2,000,000. We will deliver the investor funds to
the escrow agent no later than 12:00 noon, California time, on
the business day following the date
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on which we receive the funds. If we have not received acceptable
subscriptions for at least $2,000,000 by __________, ________
(i.e., 90 days after the effective date of the offering), the
funds will be promptly returned to the investors, without
interest. We will not be deemed to have accepted any subscription
until we have accepted the subscription in writing and, if
appropriate, delivered instructions to the escrow agent to
release the funds from escrow. The escrow agreement provides that
once the account balance reaches $2,000,000, all funds will be
released to us and the escrow account closed. All charges and
fees associated with the escrowing of the funds will be paid by
us with no deductions or offsets available against the deposited
funds.
Once the minimum amount of $2,000,000 is met all further subscriptions
will be directly deposited for use by us.
SECONDARY MARKET
This is the initial public offering of our common stock. Currently our
common stock is neither traded on any national or regional stock exchange nor
listed Nasdaq or any other stock quotation service. We have not undertaken any
obligation to list our common stock or any national or regional stock exchange
or on Nasdaq or any other quotation service.
At such time as we have a minimum tangible net worth of at least
$2,000,000 and otherwise appear to satisfy the other listing requirements, we
will seek to list our common stock on the Philadelphia Stock Exchange. The
Exchange's acceptance of our application for listing will depend on our
satisfaction of all of the Exchange's listing criteria, rules and regulations
and the Exchange's discretion. If our application for listing on the
Philadelphia Stock Exchange is denied, we will seek to list the common stock on
another regional stock exchange or on the OTC Electronic Bulletin Board.
We do not intend to list on our Web site a list of potential buyers and
sellers of our common stock or to implement on our Web site a system for
matching potential buyers and sellers of our common stock.
MINIMUM INVESTMENT
Each investor must subscribe for at least Three Hundred (300) shares of
Common stock, for a minimum investment of $1.950.00
INTERIM CLOSINGS
We will not close on any subscriptions until we have received
subscriptions for at least 308,000 shares. If we do not receive such
subscriptions by _________, _______, we will promptly refund all monies, without
interest, and terminate this offering. After accepting subscriptions for a
minimum of 308,000 shares, we may accept subscriptions for additional shares as
they are received. We will not accept any subscriptions after ________,
________.
THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO SELL MORE THAN THE
MINIMUM NUMBER OF SHARES COVERED BY THIS OFFERING. (SEE "USE OF
PROCEEDS".)
SUITABILITY STANDARDS
We have determined that investment in the shares of common stock covered
by this offering is suitable only for persons of adequate financial means who
have no need for liquidity with respect to this investment and who can bear the
economic risk of loss of their investment. The shares will be sold only to
investors who are or whom we reasonably believe satisfy one or more of the
standards described below. These suitability standards represent minimum
suitability standards for prospective investors. The satisfaction of such
standards by a prospective investor does not necessarily mean that the shares
are a suitable investment for such prospective investor and does not obligate us
to accept any subscription. We may reject subscriptions, in whole or in part, in
our absolute discretion.
We will require each investor to represent in writing, among other
things, that:
- either alone or with investor's professional advisors, the
investor is capable of evaluating the merits and risks of an
investment in the shares and of protecting his or her own
interests in connection with the transaction;
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<PAGE> 55
- (ii) the investor is acquiring the shares for his or its own
account, for investment only and not with a view toward the
resale or distribution thereof; and
- (iii) the investor meets the suitability standards set forth
below.
Each investor must represent in writing that such investor satisfies one
or more of the following:
- INDIVIDUAL INVESTOR: if the investor is an individual, either
alone or jointly with his or her spouse, one or more of the
following and the total investment does not represent more than
10% of the investor's net worth:
- The investor has a net worth of at least $250,000.00
exclusive of personal residence, home furnishings and
automobiles ; or
- The investor has a net worth of at least $150,000.00 and
had gross income for each of the 1997 and 1998 tax years
of at least $50,000.00 and the investor anticipates having
at least that level of gross income for the 1999 tax year;
or
- ENTITY INVESTOR: if investor is not an individual, that either
the entity's total assets exceed $250,000 or that the amount of
the investment does not exceed 5% of the entity's total assets;
and
- PERCENTAGE OF NET WORTH: the amount of the investment by any
investor may not exceed 10% of such investor's net worth. We
reserve the right, in our sole discretion, to approve or
disapprove each investor and to reject subscriptions in whole or
in part for any reason.
SUBSCRIPTION PROCEDURE
An investor who desires to purchase any of the shares offered hereby
should do all of the following.
- Complete, date, execute, and deliver to us two copies of the
Subscription Agreement.
- Deliver to us a check payable to "TravelnStore.com Investor
Account" in the full amount of the offering price of the shares
the investor proposes to purchase.
Subscriptions will be accepted or rejected in our sole discretion. We
reserve the right to reject any subscription in whole or in part. All funds
received from investors will be held in an escrow account pending acceptance by
us of subscriptions in the amount of at least $2,000,000. Promptly after our
acceptance of any subscription, we will issue and deliver to the investor,
certificates for the shares.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have outstanding a total of
10,400,00 shares of common stock and 8,154 shares of Series A Preferred Stock,
assuming the sale of all of the shares covered by this offering. Of these
shares, the 1,000,000 shares offered hereby will be freely tradable without
restriction or further registration under the Securities Act 1933, as amended
(the "Act"), unless held by "affiliates" of TravelnStore.com, as that term is
defined in Rule 144 under the Act ("Rule 144"). The remaining 9,400,000 shares
of common stock and the 8,154 shares of Series A Preferred Stock outstanding
upon completion of the Offering are "restricted securities" as that term is
defined in Rule 144.
In additions, we have reserved a total of 346,146 shares of common stock
for issuance upon conversion of the outstanding Convertible Notes, 1,000,000
shares of common stock for issuance upon the exercise of options granted under
our 1999 Equity Incentive Plan, and 153,847 for issuance upon exercise of the
outstanding Stock Option. (See, "CERTAIN TRANSACTIONS".) The shares of common
stock issuable upon such conversion and exercise will be "restricted securities"
and may be resold upon compliance with the holding period, volume limitations,
manner of sale and other provisions of Rule 144. Generally, the holding period
for the shares issuable on such conversion or exercise will not begin until the
effective date of such conversion or exercise.
The principal stockholders of TravelnStore.com have entered into a
Lock-up Agreement in regards to the shares they hold in TravelnStore.com. In
addition to the provisions of Rule 144, the Agreement provides that, during the
term of their employment, principal stockholders who are also officers of
TravelnStore.com may not sell more than 2.5% of the shares which they
beneficially own, as of the close of this Offering, in any calendar quarter
during the first two years following the close of this Offering. Subsequently,
they may not sell more than 5% of such shares in any calendar quarter. Should a
principal stockholder who is an officer resign as an officer and terminate his
employment, then from that point forward, that principal stockholder shall be
governed by the provisions of the Lock-up Agreement which pertain to principal
stockholders who are not officers of the Corporation.
Principal stockholders who are not officers may not sell more than 2.5%
of shares which they beneficially own as of the close of this Offering, in any
calendar quarter during the first two years following the close of this
Offering. Subsequently, they may not sell more than 10% of such shares in any
calendar quarter.
The Lock-up Agreement provides that shares which are registered in a
subsequent public offering may be excluded from the lock-up provisions. However,
no principal stockholder may offer for sale, as a selling stockholder, in a
registered public offering, more than 15% of the shares which they own either
directly or beneficially at the time of the registration. The provisions of the
Lock-up Agreement encumber all shares beneficially owned by the principal
stockholders, as of the close of this Offering and any shares which they
transfer to an immediate family member or trust in which the principal
stockholder or immediate family members are the beneficiaries.
The Lock-up Agreement provides that should TravelnStore.com be acquired
by another Corporation, either through purchase or merger, in which the
principal stockholders are not principal stockholders in the acquiring
Corporation, then all lock-up provisions are terminated.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned the stock for at least one year is entitled to sell in
"broker's transactions" or to market makers, within any three-month period
commencing 90 days after the date of this Prospectus, a number of shares of
stock that does not exceed the greater of (a) one percent of the number of
shares of common stock then outstanding, or (b) the average weekly trading
volume in the common stock during the four calendar weeks preceding the required
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
generally subject to the availability of current public information about
TravelnStore.com. Persons other than affiliates who have beneficially owned such
stock for at least two years are not subject to the notice, manner of sale,
volume or public information requirements and may sell such shares immediately
following the Offering.
Prior to the Offering, there has not been any public market for the
Common stock. Future sales of substantial amounts of common stock in the public
market could adversely affect the prevailing market prices and impair our
ability to raise capital through the sale of equity securities.
LEGAL MATTERS
The legality of our securities offered will be passed on for
TravelnStore.com by Reicker, Clough, Pfau & Pyle, LLP, 1421 State Street, Suite
B, Santa Barbara, California 93101.
56
<PAGE> 57
EXPERTS
The audited financial statements of TravelnStore.com included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Farber & Hass,, LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 relating to the shares covered by this offering. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. For further information with respect to
TravelnStore.com and the shares offered hereby, reference is made to such
Registration Statement and such exhibits and schedules. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to TravelnStore.com and the shares, reference
is made to the Registration Statement and the exhibits and schedules thereto.
You may read any document we file with the Commission at its public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our filings with the Commission also are available to the
public from the Commission's Web site at http://www.sec.gov.
After the completion of this offering, we will be subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934, and in accordance therewith will file periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected or copied at the Commission's
public reference rooms and through the Commission's Web site
(http.//www.sec.gov).
57
<PAGE> 58
TRAVELNSTORE.COM, INC.
FINANCIAL STATEMENTS
AS OF MAY 31, 1999 AND
FOR THE PERIODS AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
AND JANUARY 1, 1999 TO MAY 31, 1999
AND INDEPENDENT AUDITORS' REPORT
<PAGE> 59
TRAVELNSTORE.COM, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheet, May 31, 1999 F-3 - F-4
Statements of Operations
for the Periods August 18, 1998 (Date of
Inception) to December 31, 1998 and
January 1, 1999 to May 31, 1999 F-5
Statements of Stockholders' Deficit
for the Periods August 18, 1998 (Date of
Inception) to December 31, 1998 and
January 1, 1999 to May 31, 1999 F-6
Statements of Cash Flows
for the Periods August 18, 1998 (Date of
Inception) to December 31, 1998 and
January 1, 1999 to May 31, 1999 F-7 - F-8
Notes to Financial Statements F-9 - F-16
</TABLE>
- --------------------------------------------------------------------------------
F-1
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Travelnstore.com, Inc.:
We have audited the accompanying balance sheet of Travelnstore.com, Inc. (the
"Company") as of May 31, 1999 and the related statements of operations,
stockholders' deficit and of cash flows for the periods August 18, 1998 (date of
inception) to December 31, 1998 and January 1, 1999 to May 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Travelnstore.com, Inc. as of May 31, 1999
and the results of its operations and its cash flows for the periods August 18,
1998 (date of inception) to December 31, 1998 and January 1, 1999 to May 31,
1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations since
inception, has a working capital deficit of $262,864 and has an accumulated
deficit of $556,275. These conditions raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Farber & Hass LLP
July 15, 1999, except for Note 12,
for which the date is August 27, 1999
Oxnard, California
F-2
<PAGE> 61
TRAVELNSTORE.COM, INC.
BALANCE SHEET
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable $ 185
Due from related parties 127,660
Prepaid and other current assets 73,019
---------
Total current assets 200,864
---------
PROPERTY AND EQUIPMENT 18,387
Less accumulated depreciation (3,204)
---------
Property and equipment, net 15,183
---------
OTHER ASSETS 2,696
TOTAL ASSETS $ 218,743
=========
</TABLE>
(Continued)
F-3
<PAGE> 62
TRAVELNSTORE.COM, INC.
BALANCE SHEET - CONTINUED
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 142,756
Accrued expenses 53,048
Income taxes payable 889
Notes payable, related parties 100,000
Convertible note payable, related party 40,000
Due to related party 1,050
Accrued expense, related party 110,250
Deferred income 15,735
-----------
Total current liabilities 463,728
-----------
CONVERTIBLE NOTES PAYABLE 310,000
-----------
OTHER LIABILITIES 1,090
-----------
STOCKHOLDERS' DEFICIT:
Preferred stock, no par value; 1,000,000 shares
authorized; no shares issued or outstanding
Common stock, no par value; 20,000,000 shares authorized; 4,700,000 shares
issued and outstanding; 500,000 shares reserved for
future issuance 1,325,200
Accumulated deficit (1,881,275)
-----------
Total stockholders' deficit (556,075)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 218,743
===========
</TABLE>
See independent auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
F-4
<PAGE> 63
TRAVELNSTORE.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIODS AUGUST 18, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998 AND
JANUARY 1, 1999 TO MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 31, December 31,
1999 1998
---- ----
<S> <C> <C>
SALES $ 21,390 $ 23,128
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 257,059 326,356
----------- -----------
LOSS FROM OPERATIONS (235,669) (303,228)
----------- -----------
OTHER EXPENSE:
Interest expense -
convertible debentures (425,004) (899,996)
Interest expense - other (12,492) (4,086)
----------- -----------
Total other expense (437,496) (904,082)
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (673,165) (1,207,310)
PROVISION FOR INCOME TAXES 800
----------- -----------
NET LOSS $ (673,165) $(1,208,110)
=========== ===========
BASIC LOSS PER COMMON SHARE $ (0.15) $ (0.27)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,600,000 4,500,000
=========== ===========
</TABLE>
See independent auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
F-5
<PAGE> 64
TRAVELNSTORE.COM, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIODS AUGUST 18, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998 AND
JANUARY 1, 1999 TO MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
--------------------------
Shares Accumulated
Outstanding Amount (Deficit) Total
----------- ------ --------- -----
<S> <C> <C> <C> <C>
BALANCE AT AUGUST 18, 1998
(DATE OF INCEPTION OF LLC) $ 200 $ 200
FAIR VALUE OF BENEFICIAL CONVERSION
FEATURE ON CONVERTIBLE DEBENTURES 899,996 899,996
NET LOSS $(1,208,110) (1,208,110)
--------- ---------- ----------- ----------
BALANCE AT DECEMBER 31, 1998 900,196 (1,208,110) (307,914)
COMMON STOCK ISSUED TO ACQUIRE
TRAVELNSTORE LLC 4,500,000
FAIR VALUE OF BENEFICIAL CONVERSION
FEATURE ON CONVERTIBLE DEBENTURES 425,004 425,004
STOCK DIVIDEND TO CONVERTIBLE NOTE
HOLDERS 200,000
NET LOSS (673,165) (673,165)
--------- ----------- ----------- -----------
BALANCE AT MAY 31, 1999 4,700,000 $1,325,200 $(1,881,275) $ (556,075)
========= =========== =========== ===========
</TABLE>
See independent auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
F-6
<PAGE> 65
TRAVELNSTORE.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIODS AUGUST 18, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998 AND
JANUARY 1, 1999 TO MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 31, December 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(673,165) $(1,208,110)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 1,532 1,672
Interest expense - convertible debentures 425,004 899,996
Changes in operating assets and
liabilities:
Accounts receivable (185)
Prepaid and other assets (72,769) (2,946)
Accounts payable 68,532 74,224
Accrued expenses 102,078 62,270
Income taxes payable 889
Deferred income (3,729) 19,464
Other liabilities (6,947) 8,037
--------- ------------
Net cash used by operating activities (159,464) (144,689)
--------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (18,387)
--------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable borrowings 225,000 85,000
Net borrowings (repayments) from
related parties (84,396) 96,736
Proceeds from issuance of common stock 200
--------- ------------
Net cash provided by financing activities 140,604 181,936
--------- ------------
NET INCREASE (DECREASE) IN CASH (18,860) 18,860
CASH, BEGINNING OF PERIOD 18,860 -0-
--------- ------------
CASH, END OF PERIOD $ -0- $ 18,860
========= ============
</TABLE>
(Continued)
F-7
<PAGE> 66
TRAVELNSTORE.COM, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE PERIODS AUGUST 18, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998 AND
JANUARY 1, 1999 TO MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 31, December 31,
1999 1998
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ -0- $ 4,086
Income taxes $ -0- $ 800
</TABLE>
See independent auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
F-8
<PAGE> 67
TRAVELNSTORE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Travelnstore.com, Inc. (the "Company") is a
provider of a specialized internet website, which acts as a
navigational site to other websites owned by an array of travel service
providers and agencies. The Company's fiscal year-end is December 31.
In March 1999, the Company acquired 100% of the members' interest in
Travelnstore LLC in exchange for 4,500,000 shares of the Company's
common stock. The Company's shareholders owned 100% of the members'
interest in Travelnstore LLC.
Because Travelnstore LLC was acquired from related parties, the
acquisition was reflected using the recorded assets and liabilities of
Travelnstore LLC and accounted for in a manner similar to a pooling of
interest. The Company had no operations prior to the acquisition of
Travelnstore LLC. The financial statements include the operational
results of Travelnstore LLC since inception (August 18, 1998).
The Company has incurred net operating losses since inception and
expects to continue to incur such losses unless and until its website
successfully achieves commercial viability. In addition, a significant
portion of its contributed capital was advanced to a related party (see
Note 2). These and other factors have caused a liquidity problem at the
Company. As discussed in Note 11, management of the Company plans to
make a Direct Public Offering ("DPO") of the Company's common stock to
raise between $2.0 million and $6.5 million.
The accompanying financial statements were prepared assuming the
company will continue to operate on a going concern basis and do not
include any adjustments to the recorded amounts of assets or to the
recorded amounts or classification of liabilities which would be
required if the Company were unable to realize its assets and satisfy
its liabilities and obligations in the normal course of business.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist
principally of advances which are due from a related party.
F-9
<PAGE> 68
PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Based on borrowing rates
currently available to the Company, the carrying value of all financial
instruments potentially subject to valuation risk (principally
consisting of accounts receivable, accounts payable, accrued expenses
and convertible notes payable) approximates fair value.
NET LOSS PER SHARE - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
that established standards for the computation, presentation and
disclosure of earnings per share ("EPS"), replacing the presentation of
Primary EPS with a presentation of Basic EPS. It also requires dual
presentation of Basic EPS and Diluted EPS on the face of the income
statement for entities with complex capital structures. Basic EPS is
based on the pro-forma weighted average number of common shares
outstanding during the period, which totalled 4,600,000 and 4,500,000
for 1999 and 1998, respectively. The Company did not present Diluted
EPS, since the result was anti-dilutive.
OPERATING SEGMENT INFORMATION - The Company predominantly operates in
one industry segment, travel industry websites. Substantially all of
the Company's assets and employees are located at the Company's
headquarters in Camarillo, California.
ACCOUNTING FOR CONVERTIBLE DEBT SECURITIES - The Company has issued
convertible debt securities with a non-detachable conversion feature
that was "in the money" at the date of issue. The Company accounts for
such securities in accordance with Emerging Issues Task Force Topic
D-60. The Company has recorded the fair value of the beneficial
conversion feature as a credit to common stock.
ACCOUNTING FOR STOCK BASED COMPENSATION - Stock option grants are set
by the Company's Board of Directors based upon their fair market
valuation of the Company's common stock on the day prior to the date of
grant. Therefore, under the principles of APB Opinion No. 25, the
Company does not recognize compensation expense associated with the
grant of stock options. SFAS No. 123, "Accounting for Stock-Based
Compensation," requires the use of option valuation models to provide
supplemental information regarding options granted after 1994.
F-10
<PAGE> 69
The fair value of the options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rates of 6.0%; dividend yields
of 0% for 1999 and 1998; volatility factors of the expected market
price of the Company's common stock of 50% for 1998 and 1997; and
expected life of the options of two years. These assumptions resulted
in weighted average fair values of $0.00 per share for stock options
granted in 1999 and 1998. Therefore, the Company has not presented
pro-forma information regarding net income and earnings per share.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's employee
stock options have characteristics significantly different from those
of traded options such as vesting restrictions and extremely limited
transferability.
Information regarding stock options outstanding as of May 31, 1999 is
as follows:
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------------------------
Weighted Weighted Average
Average Remaining
Price Range Shares Exercise Price Contractual Life
-----------------------------------------------------------------------
<S> <C> <C> <C>
$6.50 153,847 $6.50 0.6 years
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
----------------------------
Weighted
Average
Price Range Shares Exercise Price
-----------------------------------------------
<S> <C> <C>
N/A -0- N/A
</TABLE>
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost with
depreciation provided over the estimated useful life of 5 years using
the straight-line method.
INCOME TAXES - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards 109 ("SFAS
109"). The method of accounting for income taxes under SFAS 109 is an
asset and liability method. The asset and liability method requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax bases and
financial reporting bases of other assets and liabilities. The 1998
provision for income taxes represents the California corporate minimum
franchise tax.
F-11
<PAGE> 70
REVENUE RECOGNITION - The Company sells a monthly subscription to
participating travel agencies. The fee is billed in advance in
quarterly installments that allows online bookings through the
Travelnstore.com website. Revenues are deferred and amortized on a
straight-line basis over the remaining lives of the advanced fee
subscriptions.
NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 130, "Reporting Comprehensive
Income", establishes standards for reporting and displaying
comprehensive income and its components in financial statements. The
Company adopted the provisions of SFAS No. 130 in 1998, but has had no
elements of comprehensive income since inception.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", establishes a new model for segment reporting, called the
"management approach" and requires certain disclosures for each
segment. The management approach is based on the way the chief
operating decision-maker organizes segments within a company for making
operating decisions and assessing performance. The Company adopted the
provisions of SFAS No. 131 in 1998, but currently operates in one
industry segment.
2. DUE FROM RELATED PARTY
The Company makes periodic working capital advances to World Key, Inc.,
a related party. The advances are repaid when funds are available and
are payable upon demand. Certain shareholders and officers of the
Company are shareholders and officers of World Key, Inc.
3. PROPERTY AND EQUIPMENT
Property and equipment at May 31, 1999 consists of the following:
<TABLE>
<S> <C>
Furniture and fixtures $ 2,764
Office equipment 15,623
--------
Total property and equipment 18,387
Less accumulated depreciation (3,204)
--------
Property and equipment, net $ 15,183
========
</TABLE>
F-12
<PAGE> 71
<TABLE>
<S> <C> <C>
4. NOTES PAYABLE - RELATED PARTIES
Notes payable at May 31, 1999 consists of:
Two notes ($25,000 each) payable to stockholders, issued in July and
December 1998, respectively; unsecured; payable in full, including
interest
at 8%, due on demand $ 50,000
Two notes ($25,000 each) payable to two
stockholders; unsecured; payable in full,
including interest at 10%, due on demand 50,000
--------
Total $100,000
========
5. CONVERTIBLE NOTE PAYABLE - RELATED PARTY
Note payable to a stockholder; unsecured; payable in full on December
31, 1999 including accrued interest at 10%. The note may be converted,
at the noteholder's option, at any time prior to maturity, into 5
convertible notes issued by the Company during its September 15, 1998
Private Placement for
Convertible Notes (Note 6) $ 40,000
========
6. CONVERTIBLE NOTES PAYABLE
Six notes payable to individuals of various amounts ranging from $7,500
to $15,000 in connection with the Company's September 1998 Private
Placement Offering; unsecured; payable in full, with interest accruing
at 8%, upon the earlier of 1) public sale of registered shares of the
Company, or 2) December 31, 2000. The face value of the $15,000 note
may be converted into $150,000 of the Company's common stock at the
time of a successful public stock offering at the same per share price
as the offering price $ 85,000
</TABLE>
F-13
<PAGE> 72
<TABLE>
<S> <C>
Fifteen notes payable to individuals with an individual face value of
$15,000 in connection with the Company's January 1999 Private Placement
Offering; unsecured; payable in full, with interest accruing at 6%,
upon the earlier of 1) public sale of registered shares of the Company,
or 2) December 31, 2000. Each note may be converted into $50,000 of the
Company's common stock at the time of a successful public stock
offering at the same per share price as
the offering price 225,000
--------
Total $310,000
========
</TABLE>
7. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at May 31, 1999 are substantially
composed of the Company's net operating loss carryforward, for which
the company has made a full valuation allowance.
The valuation allowance increased approximately $100,000 since the
Company's inception, representing primarily net taxable loss. In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and
tax planning strategies in making this assessment.
At May 31, 1999, the Company had a net operating loss carryforward for
Federal and state income tax purposes of approximately $100,000 and
$50,000, respectively, which is available to offset future taxable
income, if any, through 2015.
The provision for income taxes in 1998 represents the California
Corporate minimum franchise tax.
8. RELATED PARTY TRANSACTIONS
For the period August 18, 1998 (date of inception) to May 31, 1999, the
Company accrued a management fee of $85,250 payable on demand to World
Key, Inc., a related party (see Note 2) for common overhead expenses
such as rent, utilities and payroll. Rent and utilities are allocated
based upon square foot utilization.
F-14
<PAGE> 73
Payroll expense for certain officers was paid by World Key, Inc., and
charged to the Company for reimbursement. Management believes that the
allocation method is appropriate based on time and resources used.
For the period August 18, 1998 (date of inception) to May 31, 1999, the
Company made periodic working capital advances to World Key Inc., a
related party (Note 2), totalling $217,845 and received repayments of
$91,175.
In December 1998, an officer of the Company made an unsecured working
capital loan to the Company in the amount of $1,050. The loan is
payable upon demand and bears no interest.
9. STOCK OPTIONS
In April 1999, the Board of Directors approved an incentive stock
option plan under which options to purchase up to 500,000 shares of the
Company's common stock may be granted to employees, directors and
consultants at not less than the fair market value on the date of
grant. Options granted under the Plan are generally exercisable five to
ten years after the date of grant and expire December 31, 2009. Options
are granted at the discretion of the Board of Directors or Committee.
No options have been issued since the Plan's inception.
On January 15, 1999, the Company initiated an Internet Stock Option
Sweepstakes. The winner of the sweepstakes was given the option to
purchase up to $1,000,000 of Company stock at the public issuing price.
Should the Company not make a public offering prior to December 31,
2000, the option may be redeemed for $25,000.
10. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company utilizes computer hardware and software in its operations.
Any of the Company's programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system
failures.
The Company has completed an evaluation of its computer hardware and
software and believes that its mission critical systems are year 2000
compliant.
F-15
<PAGE> 74
11. MANAGEMENT PLANS
Management has evaluated the Company's current financial position and
its available resources and plans to make a direct public offering
(DPO) of the Company's stock during the third quarter of 1999. The
Company plans to raise between $2.0 million and $6.5 million in the
offering by selling between 307,692 and 1 million shares of its common
stock. Should the Company be unsuccessful in raising the minimum
offering of $2.0 million, it is unlikely that the Company will continue
operations beyond December 31, 1999 without additional borrowings from
related or unrelated parties and the extension of the due dates on its
current debt.
12. SUBSEQUENT EVENTS (UNAUDITED)
In August 1999, the Company created a new class of preferred stock
entitled "Series A Preferred". The Company may issue up to 8,154 shares
of this new class. This class has a $20 per share liquidation
preference, receives dividends at the same rate as common shareholders,
has preferential voting rights on certain shareholder issues and
contains conversion rights at the preferred shareholders' option.
On August 25, 1999, the Company declared a 2 for 1 stock split for all
common shareholders of record at that date.
On June 15, 1999, the Company initiated the sale of a third series of
private placement convertible notes. Each note has a face value of
$15,000 and a coupon rate of 6%. A total of 12 notes were sold during
the offering which expired July 31, 1999. Half of one note has been
sold to an officer of the Company.
- --------------------------------------------------------------------------------
F-16
<PAGE> 75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 204(a)(10) of the California General Corporation Law (the "GCL")
permits corporations to eliminate the liability of a Director to the corporation
or its stockholders for monetary damages for breach of the Director's fiduciary
duty of care. Our Articles of Incorporation include such a provision eliminating
the liability of Directors to the fullest extent permissible under California
law. Under the GCL directors will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (a) any
breach of their duty of loyalty to the corporation or its stockholders, (b) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) unlawful payments of dividends or unlawful stock
repurchases or redemption's or (d) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Our Articles of Incorporation and Bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our Bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether or not California law would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for certain expenses, including attorneys fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of TravelnStore.com, arising
out of such person's services as an director or executive officer of
TravelnStore.com, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
We are not obligated to indemnify the indemnity with respect to (a)
acts, omissions or transactions from which the indemnity may not be relieved of
liability under applicable law, (b) claims initiated or brought voluntarily by
the indemnity and not by way of defense, except in certain situations, (c)
proceedings instituted by the indemnity to enforce the Indemnification
Agreements which are not made in good faith or are frivolous, or (d) violations
of Section 16(b) of the Securities Exchange Act of 1934 or any similar statute.
While not requiring the maintenance of directors' and officers'
liability insurance, if there is such insurance, the indemnity must be provided
with the maximum coverage afforded to Directors, officers, key employees, agents
or fiduciaries if indemnity is a Director, officer, key employee, agent or
fiduciary, respectively. Any award of indemnification to an agent would come
directly from our assets, thereby affecting a stockholder's investment.
These indemnification provisions and the Indemnification Agreements may
be broad enough to permit indemnification of our officers and Directors for
liabilities (including reimbursement of expenses) arising under the Securities
Act.
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<PAGE> 76
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by
the Registrant, are as follows:
<TABLE>
<S> <C>
SEC Filing Fee $ 1,808
Nasdaq Listing Fees $ 7,500
NASD Filing Fee $ 0
Underwriter's Expense Allowance $ 0
Printing Expenses $ 20,000
Accounting Fees and Expenses $ 20,000
Legal Fees and Expenses $ 65,000
Blue Sky Fees and Expenses $ 15,000
Registrar and Transfer Agent Fees $ 0
Miscellaneous $ 5,692
Total $135,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Loan Transaction
In separate private placements, we issued a total of 33 Convertible
Promissory Notes (the "Notes") in the aggregate principal amount of $490,000.
Each Note has a face value of $15,000, $85,000 of the Notes have a coupon rate
of 8% per annum, $405,000 of the Notes have a coupon rate of 6% per annum and
all of the Notes are all due and payable on December 31, 2000. We used the
proceeds of these Loans to cover our initial operating expenses and for general
working capital purposes, including the payment of officers salaries. No
significant portion of the proceeds were used to fund the acquisitions of
capital equipment. Each of the Notes was issued in exchange for cash, the
forgiveness of debt or a combination thereof in an amount equal to the principal
amount of the Note. Under both placements, the amount payable at December 31,
2000 on maturity of the Notes will depend on whether or not we have affected a
registered public offering of our common stock. If we have not affected a
registered public offering of our common stock on or before December 31, 2000,
we will be obligated to pay an amount equal to the sum of the entire unpaid
principal balance of the Notes, all accrued interest thereon, and a premium
equal to $15,000. If we have affected a registered public offering of our common
stock on or before December 31, 2000, and have raised at least $2,000,000 in
such offering, we will be obligated to pay an amount equal to the sum of the
entire unpaid principal balance of the Notes, all accrued interest thereon, and
a premium equal to $7,500.
The Notes issued under both placements may be converted into shares of
common stock following the date on which a registered public offering of our
common stock is declared effective. For the Notes issued under the placement
commenced in September, 1998, the holder may convert the Note into that number
of shares of common stock determined by dividing the sum of $150,000 by the
price at which we issue the shares of common stock in the registered offering;
provided that the number of shares that are issuable upon such conversion shall
be appropriately pro-rated to reflect any partial payments on the Note prior to
the date of conversion. For the Notes issued under the placement commenced in
January, 1999, the holder may convert the Note into that number of shares of
common stock determined by dividing the sum of $50,000 by the price at which we
issue the shares of common stock in the registered offering; provided that the
number of shares that are issuable upon such conversion shall be appropriately
pro-rated to reflect any partial payments on the Note prior to the date of
conversion. In anticipation that the offering price for any shares issued in a
registered offering would be $6.50 per share, we had reserved for issuance on
conversion of the Notes a total of 338,454 shares of common stock. We will
appropriately adjust the number of shares reserved to reflect the actual
offering price and the then aggregate amount payable under the Notes.
Holders of 27 Notes in the aggregate principal amount of $430,000 have
committed to convert, as of the effective date of this offering, their Notes
into an aggregate of 315,378 shares of common stock. Such conversion will be
effected in order to improve our financial position and to facilitate this
offering. As of August 15, 1999, and after giving effect to the foregoing
conversions, there remained outstanding 4 Notes in the aggregate principal
amount of $60,000 and with respect to which we have reserved for issuance a
total of 30,768 shares of common stock.
Option Sweepstakes
In connection with the commencement of our Web site, we conducted a
Sweepstakes under which we solicited entries from visitors to our Web site. We
granted to a visitor whose name we drew at random from the list of all
participating visitors an Option to
II-2
<PAGE> 77
purchase that number of shares of our common stock as is determined by dividing
$1,000,000 by the price at which the shares of common stock covered by this
offering are issued to the public. We have reserved for issuance under the
Option 153,847 shares of common stock. The aggregate exercise price of the
Option is $100.00. If we do not effect a public offering of our common stock by
December 31, 2000, the Option will expire on December 31, 2000 and we shall pay
the holder of the Option $25,000 in cash.
Stockholder Loans
In connection with our borrowing a total of $140,000 from two
stockholders, we issued to such stockholders, as additional consideration for
the loans, a total of 200,000 shares of common stock. Notes issued for a total
of $100,000 were due and payable on June 30, 1999, and bearing interest at the
rate of 10% per annum. One of the Notes issued for $40,000 was due and payable
on December 31, 1999, bearing interest at the rate of 10% per annum and is
convertible at the holder's option into Convertible Notes issued in the
September 6, 1998 private placement (which is described above) in the aggregate
principal amount of $75,000. Effective as of August 25, 1999, all of these Notes
were converted into an aggregate of 8,154 shares of Series A Preferred Stock.
Such conversion was effected in order to improve our financial position and to
facilitate this offering. (See, "DESCRIPTION OF CAPITAL STOCK" for a description
of the rights, preferences and privileges of the Series A Preferred Stock.)
Shares of Common Stock
Effective as of April 15, 1999, we acquired by merger all of the
business, assets and liabilities of TravelnStore.com, LLC, a California limited
liability company. In such merger we issued a total of 9,000,000 shares of
common stock to the Members of the LLC. The foregoing number of shares of Common
Stock reflects the 2-for-1 stock split on the common stock effected August 25,
1999.
TravelnStore.com's issuance of all of the foregoing securities were
effected in transactions exempt from registration under Section 4(2) of the
Securities Act of 1993 and Regulation D promulgated thereunder.
- The Convertible Promissory Notes were issued to a total of 32
persons, all of whom we reasonably believed to be accredited
investors within the meaning of Rule 501. In connection with the
conversion of the Notes, we provided to the Noteholders a copy of
the Registration Statement and other information about
TravelnStore.com.
- Both of the stockholders to whom Notes were issued in connection
with our borrowing of $140,000 are accredited investors" within
the meaning of Rule 501. In connection with the conversion of the
Notes, we provided to the stockholders a copy of the Registration
Statement and other information about TravelnStore.com.
- We issued shares of common stock to a total of 5 persons in
connection with our merger with TravelnStore.com, LLC. All of
such persons were either actively involved in the conduct of the
LLC's business and continue to be actively involved in our
business or are "accredited investors" within the meaning of Rule
501.
- We neither engaged in any general advertisement or solicitation
nor retained any broker dealers with respect to any of the
foregoing issuance's.
- Sweepstakes Option. The Option was granted pursuant to the
exemption in Rule 504 of Regulation D. The sweepstakes did not
require the entrant to pay any cash or other property. We
initially concluded that the grant of the Option was not a "sale"
within the meaning of the Securities Act. We subsequently became
aware of certain "no-action" letters in which the Securities and
Exchange Commission took a contrary position. If the grant of the
Option is a "sale", it is an exempt transaction under Rule 504.
This registration statement covers the issuance of the shares of
common stock on exercise of the Option.
- We have not timely filed a Notice of transaction under Rule 503.
We have concluded that our failure to file such Notices does not
pertain to requirement that is directly intended to protect the
issuees and that such failure is insignificant with respect to
the issuance's.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
II-3
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2 Merger Agreement dated April 15, 1999, between TravelnStore.com,
LLC, a California limited liability company, and
TravelnStore.com, Inc., a California corporation
3 Charter Documents
3.1 Articles of Incorporation as filed March 4, 1999**
3.2 Certificate of Amendment and Restatement of Articles of
Incorporation as filed August 25, 1999*
3.3 Bylaws**
4 Instruments defining rights of holders
4.1 Form of Convertible Promissory Note issued September
1998*
4.2 Form of Convertible Promissory Note issuable January
1999*
4.3 Subscription Agreement for this Offering**
4.4 Form of Certificate for Common Stock*
4.5 Form of Convertible Promissory Note issued June 1999*
5 Opinion of Reicker, Clough, Pfau & Pyle, LLP*
10 Material Contracts
10.1 Escrow Agreement with Santa Barbara Bank & Trust
applicable to this Offering*
10.2 Form of Agency Co-Host Agreement*
10.3 1999 Equity Incentive Plan**
10.4 Form of Officer and Director Indemnification Agreement**
10.5 Independent Contractor Agreement with Donald Scanlin*
10.6 Independent Contractor Agreement with Steven Saylor*
10.7 Stock Option granted to Stoltenberg**
10.8 Operating Agreement between TravelnStore.com, Inc, and
World Key, Inc. dated September 8, 1998*
10.9 Form of Lock-Up Agreement (principal stockholder)
between TravelnStore.com, Inc. and the following
principal stockholders: Scanlin 1989 Trust and Stevan
Saylor*
10.10 Employment Agreement with Jim Tyner dated August 1,
1999*
10.11 Employment Agreement with John Toal dated August 1,
1999*
10.12 Employment Agreement with Yula Greco dated August 1,
1999*
10.13 Form of Lock-Up Agreement (Employee) between
TravelnStore.com, Inc. and the following officers: Jim
B. Tyner, John R. Toal and Yula Greco.*
23 Consents of Experts and Counsel
23.1 Consent of Reicker, Clough, Pfau & Pyle, LLP (filed as
part of Exhibit 5 hereto)*
23.2 Consent of Farber & Hass, LLP*
</TABLE>
* Filed herewith
** Previously filed with this Registration Statement
*** To be filed by amendment
ITEM 28. UNDERTAKINGS.
We undertake to provide at the initial closing and each subsequent
interim closing of this offering stock certificates in such denominations and
registered in such names so as to permit our prompt delivery of the certificates
to the investors participating in such closing.
We will file, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
II-4
<PAGE> 79
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would exceed that which was registered)
and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) include any additional or changed material information on
the plan of distribution.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 80
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Camarillo, State of California, on August 30, 1999.
TRAVELNSTORE.COM, INC.
By: /s/ Jim B. Tyner
-------------------------------------
Jim B. Tyner, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jim B. Tyner, Yula Greco, John Toal and each of
them, such person's true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments, exhibits thereto, and other documents in
connection therewith to this Registration Statement and any subsequent
registration statement filed by the Registrant pursuant to Rule 462(b) of the
Securities Act, which relates to this Registration Statement) and to file the
same with exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or any of them,
or their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Jim B. Tyner Chairman of the Board, August 30, 1999
- ---------------------------------------- Chief Executive Officer and Director
Jim B. Tyner
/s/ John R. Toal President, Chief Operating Officer and Director August 30, 1999
- ----------------------------------------
John R. Toal
/s/ Yula Greco Vice President, Secretary and Director August 30, 1999
- ----------------------------------------
Yula Greco
/s/ Richard Bush Chief Financial Officer and Director August 30, 1999
- ---------------------------------------- (Principal Financial and Accounting Officer)
Richard Bush
/s/ Heinz Niederhoff Director August 30, 1999
- ----------------------------------------
Heinz Niederhoff
/s/ James Kingzett Director August 30, 1999
- ----------------------------------------
James Kingzett
</TABLE>
II-6
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2 Merger Agreement dated April 15, 1999, between TravelnStore.com,
LLC, a California limited liability company, and
TravelnStore.com, Inc., a California corporation
3 Charter Documents
3.1 Articles of Incorporation as filed March 4, 1999**
3.2 Certificate of Amendment and Restatement of Articles of
Incorporation as filed August 25, 1999*
3.3 Bylaws**
4 Instruments defining rights of holders
4.1 Form of Convertible Promissory Note issued September
1998*
4.2 Form of Convertible Promissory Note issuable January
1999*
4.3 Subscription Agreement for this Offering**
4.4 Form of Certificate for Common Stock*
4.5 Form of Convertible Promissory Note issued June 1999*
5 Opinion of Reicker, Clough, Pfau & Pyle, LLP*
10 Material Contracts
10.1 Escrow Agreement with Santa Barbara Bank & Trust
applicable to this Offering*
10.2 Form of Agency Co-Host Agreement*
10.3 1999 Equity Incentive Plan**
10.4 Form of Officer and Director Indemnification Agreement**
10.5 Independent Contractor Agreement with Donald Scanlin*
10.6 Independent Contractor Agreement with Steven Saylor*
10.7 Stock Option granted to Stoltenberg**
10.8 Operating Agreement between TravelnStore.com, Inc, and
World Key, Inc. dated September 8, 1998*
10.9 Form of Lock-Up Agreement (principal stockholder)
between TravelnStore.com, Inc. and the following
principal stockholders: Scanlin 1989 Trust and Stevan
Saylor*
10.10 Employment Agreement with Jim Tyner dated August 1,
1999*
10.11 Employment Agreement with John Toal dated August 1,
1999*
10.12 Employment Agreement with Yula Greco dated August 1,
1999*
10.13 Form of Lock-Up Agreement (Employee) between
TravelnStore.com, Inc. and the following officers: Jim
B. Tyner, John R. Toal and Yula Greco.*
23 Consents of Experts and Counsel
23.1 Consent of Reicker, Clough, Pfau & Pyle, LLP (filed as
part of Exhibit 5 hereto)*
23.2 Consent of Farber & Hass, LLP*
</TABLE>
* Filed herewith
** Previously filed with this Registration Statement
*** To be filed by amendment
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
TRAVELNSTORE.COM, INC.
a California corporation
Jim Tyner and Yula Greco hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of TravelnStore.com, Inc., a California corporation.
2. The Articles of Incorporation of this Corporation are amended and
restated to read as follows:
I.
The name of this Corporation is TravelnStore.com, Inc.
II.
The purpose of this Corporation is to engage in any lawful act or activity
for which a Corporation may be organized under the California General
Corporation Law (the "GCL"), other than the banking business, the trust company
business, or the practice of a profession permitted to be incorporated under the
GCL.
III.
(a) This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is 21,000,000 shares,
without par value, of which 20,000,000 shares shall be Common Stock and
1,000,000 shares shall be Preferred Stock. Upon the amendment and restatement of
this Article to read as set forth herein, every outstanding share of Common
Stock of this Corporation shall be converted into two (2) shares of Common
Stock. No fractional issues shall be issued in connection with such stock split.
(b) The Board of Directors of the Corporation (the "Board of Directors")
is expressly authorized to provide for the issue of all or any of the shares of
the Preferred Stock in one or more series, and to fix the number of shares and
to determine or alter for each such series, such voting powers, full or limited,
or no voting powers (other than as prescribed by law), and such designations,
preferences and relative, participating, optional or other rights, and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such shares and as may be permitted by the California
Corporations Code. The Board of Directors is also expressly authorized to
increase or decrease the number of shares of any series subsequent to the issue
of shares of that series (but not below the number of shares of such series then
outstanding). In case the number of shares of any such series shall be so
decreased, the shares constituting such decrease shall again be authorized for
issuance as Preferred Stock.
<PAGE> 2
(c) Except to the extent required by applicable law, the Corporation will
not issue fractional shares of stock, either originally or upon transfer,
including issuances required in connection with mergers, reorganizations or
reclassifications or the exercise of option, warrant, conversion or similar
rights. In connection with any issuance of shares which, in the absence of the
foregoing provision, would require the issuance of fractional shares, the
Corporation shall pay in cash to those entitled thereto the fair value of the
fractional shares they would otherwise have received.
IV.
8,154 shares of the Preferred Stock are hereby designated Series A
Preferred Stock. The rights, preferences, privileges and restrictions granted to
or imposed upon the Common Stock and Series A Preferred Stock are as follows:
1. Dividends. The holders of the Common Stock and Series A Preferred Stock
shall only be entitled, when and if declared by the Board of Directors of the
corporation, to dividends out of the retained earnings of the corporation,
provided that no such dividend or distribution may be declared or paid on any
share of Common Stock or Series A Preferred Stock unless at the same time an
equivalent dividend or distribution is declared or paid on all outstanding
shares of Common Stock and Series A Preferred Stock. The Series A Preferred
Stock dividend or distribution shall be payable at the same rate per share of
the Series A Preferred Stock as the rate per share of Common Stock, and shall be
based upon the shares of Common Stock or the securities which the holders of the
Series A Preferred Stock would be entitled to receive if they had converted the
Series A Preferred Stock into Common Stock immediately prior to the record date
of such distribution. The right to dividends on shares of the Common Stock or
Series A Preferred Stock shall not be cumulative, and no right shall accrue to
holders of Common Stock or Series A Preferred Stock by reason of the fact that
dividends on said shares are not declared in any prior period.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation, dissolution or
winding up of the corporation, either voluntarily or involuntarily, the holders
of Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock, an amount equal to Twenty Dollars
($20.00) per share (as such amount may be adjusted to reflect the effect of any
stock split, stock dividend, reverse stock split or similar change in the Series
A Preferred Stock other than a change which results only in the adjustment of
the Conversion Ratio, as that term is hereinafter defined), plus a further
amount equal to any dividends declared but unpaid on such shares.
All of the preferential amounts to be paid to the holders of Series
A Preferred Stock under this paragraph shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets of this Corporation to, the holders of Common Stock
in connection with such liquidation, dissolution or winding up. After the
payment or the setting apart of payment to the holders of the Series A Preferred
Stock of the preferential amounts so payable to them, the holders of Common
Stock shall be entitled to receive all remaining assets of this corporation.
If upon such liquidation, dissolution or winding up of the
corporation, the assets of the Corporation are insufficient to provide for the
cash payment of the full preferential amount for each share of Series A
Preferred Stock outstanding, such assets as are available shall be distributed
ratably among the holders of Series A Preferred Stock.
(b) Consolidation or Merger. A consolidation or merger of the
Corporation with or into any other Corporation or corporations, or a sale of all
or substantially all of the assets of the corporation, or a series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, shall not be deemed to be a liquidation, dissolution or winding up
within the meaning of this paragraph 2.
<PAGE> 3
(c) Noncash Distributions. If any of the assets of the Corporation
are to be distributed other than in cash under this paragraph 2, then the Board
of Directors of the Corporation shall promptly engage independent competent
appraisers to determine the value of the assets to be distributed to the holders
of Series A Preferred Stock or Common Stock. The Corporation shall, upon receipt
of such appraiser's valuation, give prompt written notice to each holder of
shares of Series A Preferred Stock or Common Stock of the appraiser's valuation.
(d) Consent for Certain Repurchase. Each holder of an outstanding
share of Series A Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the GCL, to distributions made by the
Corporation in connection with the repurchase of shares of Common Stock issued
to or held by employees or consultants upon termination of their employment or
services pursuant to agreements providing for the right of said repurchase
between the Corporation and such persons.
3. Conversion. The holders of the shares of Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights").
(a) Right to Convert. Each share of Series A Preferred Stock
initially shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the Corporation or any
transfer agent for the Series A Preferred Stock, into three (3) fully paid and
nonassessable shares of Common Stock (the "Conversion Ratio").
(b) Automatic Conversion.
(i) Each share of Series A Preferred Stock shall automatically
be converted into shares of Common Stock at the then effective Conversion Ratio
on the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
to the public at the public offering price of at least $7.50 per share of Common
Stock, appropriately adjusted for subdivisions and combinations of the Common
Stock and dividends on the Common Stock payable in shares of Common Stock, and
an aggregate offering price to the public of not less than fifteen million
dollars ($15,000,000).
(ii) In the event of such conversion, the person(s) entitled
to receive shares of Common Stock issuable upon such automatic conversion of
Series A Preferred Stock shall not be deemed to have converted such Series A
Preferred Stock until immediately prior to the event giving rise to such
conversion. Upon the occurrence of such event, the outstanding shares of Series
A Preferred Stock shall be converted automatically without further action by the
holders of said shares and whether or not the certificates representing said
shares are surrendered to the Corporation or its transfer agent; provided that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of any shares of Series A
Preferred Stock unless certificates evidencing such shares of Series A Preferred
Stock are either delivered to the Corporation or any transfer agent as
hereinafter provided, or the holder notifies the Corporation that said
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation for any loss
incurred by it in connection therewith. Upon the occurrence of the automatic
conversion of Series A Preferred Stock, the holders of Series A Preferred Stock
shall surrender the certificates representing said shares at the office of the
Corporation or of any transfer agent for the Series A Preferred Stock.
Thereupon, there shall be issued and delivered to such holder, promptly at such
office and in his name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series A Preferred Stock surrendered were convertible on the
date on which the event effecting the automatic conversion occurred.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred Stock and the number of
shares of Common Stock to be issued
<PAGE> 4
shall be rounded to the nearest whole share. Any conversion of shares of Series
A Preferred Stock pursuant to this paragraph 3 by any holder shall be done on an
aggregate basis taking into account all shares of Series A Preferred Stock held
by such holder (i.e., such holder shall have no more than one fractional share
upon such conversion). Before any holder of Series A Preferred Stock shall be
entitled to convert the same into full shares of Common Stock, he or she shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series A Preferred Stock,
and shall give written notice to the Corporation at such office that he or she
elects to convert the same, and shall state therein his or her name or the name
or names of his or her nominees in which he or she wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A Preferred Stock, or to his or her nominee or nominees, a certificate
or certificates for the number of shares of Common Stock to which he or she
shall be entitled as aforesaid. Except as set forth in paragraph 3 such
conversion shall be deemed to have been made immediately prior to the close of
business on the day of such surrender of the shares of Series A Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date. Upon
conversion of only a portion of the number of shares of Series A Preferred Stock
represented by a certificate so surrendered for conversion, the Corporation
shall issue and deliver to, or upon the written order of, the holder of the
certificate so surrendered for conversion, at the expense of the corporation, a
new certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(d) Adjustments to Conversion Price.
(i) Stock Dividends and Subdivisions. If, after the date of
the first issuance of shares of Series A Preferred Stock, the Corporation shall
issue additional shares of Common Stock, by reason of the declaration or payment
of any dividend on the Common Stock payable in Common Stock or by reason of a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock) without a corresponding subdivision or dividend with
respect to Series A Preferred Stock, the Conversion Ratio of Series A Preferred
Stock in effect immediately prior to such declaration or subdivision shall,
concurrently with the effectiveness of such declaration or subdivision, be
proportionately increased.
(ii) Combinations and Consolidations of Common Stock. In the
event the outstanding Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of common stock
without a corresponding combination or consolidation with respect to Series A
Preferred Stock, the Conversion Ratio of Series A Preferred Stock in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
decreased.
(iii) Mergers or Reorganizations. In the case of any merger of
the Corporation with or into another corporation or the conveyance of all or
substantially all of the assets of the Corporation into another corporation in
which the shareholders of the Corporation are to receive cash, securities or
other consideration for their shares, each share of Series A Preferred Stock
shall thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of Series A Preferred Stock would
have been entitled upon such merger or conveyance; and, in any such case,
appropriate adjustment (as determined by the Board) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of Series A Preferred Stock, to the end that
the provisions set forth herein (including all provisions with respect to
changes in and other adjustments of the Conversion Ratio) shall thereafter be
applicable as nearly as reasonably may be, in relation to any shares of stock or
other securities or property thereafter deliverable upon the conversion of
Series A Preferred Stock.
<PAGE> 5
(e) Transfer Costs. The Corporation shall pay any and all
documentary stamp and other transactional taxes attributable to the issuance or
delivery of shares of Common Stock of the Corporation upon conversion of any
shares of Series A Preferred Stock.
(f) No Impairment. The Corporation will not, without the approval of
the requisite number of Series A Preferred Shareholders by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this paragraph 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Series A Preferred Stock
against impairment.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Ratio for any share of Series A
Preferred Stock pursuant to this paragraph 3, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series A Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder, a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Ratio
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of Series A Preferred Stock.
(h) Common Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Series A Preferred Stock.
(i) Registration. If any shares of Common Stock to be reserved for
the purpose of conversion of shares of Series A Preferred Stock require
registration or listing with, or approval of, any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise, before such shares may be validly issued or delivered upon
conversion, the Corporation will, in good faith and as expeditiously as
possible, at its expense, endeavor to secure such registration, listing or
approval, as the case may be.
(j) Status of Shares. All shares of Common Stock which may be issued
upon conversion of the shares of Series A Preferred Stock will upon issuance by
the Corporation be validly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issuance thereof.
(k) Cancellation of the Shares. Upon conversion of any shares of
Series A Preferred Stock into Common Stock, said converted shares of Series A
Preferred Stock shall resume the status of authorized and unissued shares of
Preferred Stock of the corporation.
(l) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(m) Notices. Any notice required by the provisions of this paragraph
3 to be given to the holders of shares of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
<PAGE> 6
4. Redemption.
(a) Redemption. The Series A Preferred Stock is subject to
redemption as follows.
(i) Call by Stockholders. At any time on or after
December 1, 1999, the holders of a majority of the outstanding
shares of Series A Preferred Stock may deliver to the Corporation
a written request (the "Holders Request") that the Corporation
redeem all of the outstanding shares of Series A Preferred Stock
and the Corporation shall use its best efforts to effect such
redemption no later than ninety (90) days after its receipt of the
Holders Request; provided that the Corporation shall have no
obligation to redeem any or all of the Series A Preferred Stock
pursuant to this paragraph (i) unless, at the time of the delivery
of the Holders Request, the Corporation has funds in the amount of
not less than Two Million Five Hundred Thousand Dollars
($2,500,000) as determined by the Corporation's financial
statements from the most recent fiscal quarter using generally
accepted accounting practices legally available for use for the
redemption of the Series A Preferred Stock; and
(ii) Call by the Corporation. The Corporation may at any
time redeem all, but not less than all, of the outstanding shares
of Series A Preferred Stock by delivering to the holders of the
outstanding shares of Series A Preferred Stock written notice (the
"Corporation's Notice") of such redemption and otherwise effecting
such redemption in accordance with the provisions of this
paragraph 4.
(b) Redemption Notice. In connection with any redemption requested
under either paragraph 4(a)(i) or 4(a)(ii) above, the Corporation shall give
written notice of the proposed redemption (the "Redemption Notice") by mail,
postage prepaid, to all holders of outstanding shares of Series A Preferred
Stock to be redeemed at least thirty (30) days, but no more than sixty (60)
days, prior to the date specified for redemption (the "Redemption Date"). The
Corporation shall mail the Redemption Notice to the holders of the shares of
Series A Preferred Stock within ten (10) days after its receipt of the Holders
Request. The Redemption Notice shall be addressed to each holder of shares of
Series A Preferred Stock at the address of such holder appearing on the books of
the Corporation or given by such holder to the Corporation for the purpose of
notice, or if no such address appears or is so given, at the place where the
principal office of the Corporation is located. The Redemption Notice shall
state the Redemption Date, the Redemption Price (as hereinafter defined), and
the number of shares of Series A Preferred Stock to be redeemed, and shall call
upon such holders to surrender to the Corporation on the Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On the Redemption Date, each holder of
shares of Series A Preferred Stock called for redemption shall surrender the
certificate or certificates evidencing such shares to the Corporation at the
place designated in such notice and thereupon shall be entitled to receive
payment of the Redemption Price. If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, then the Corporation shall redeem a
pro rata portion from each holder of shares of Series A Preferred Stock
according to the respective number of shares of Series A Preferred Stock held by
such holder.
(c) Redemption Price. The redemption price (the "Redemption Price")
for each share of Series A Preferred Stock redeemed pursuant to this paragraph 4
shall be an amount equal to Twenty Dollars ($20.00) per share (as such amount
may be adjusted to reflect the effect of any stock split, stock dividend,
reverse stock split or similar change in the Series A Preferred Stock other than
a change which results only in the adjustment of the Conversion Ratio, as that
term is hereinafter defined), plus a further amount equal to any dividends
declared but unpaid on such shares. The Redemption Price shall be paid only from
funds legally available therefor. If the holders of the Series A Preferred Stock
request the redemption under paragraph 4(a)(i) above and there are not
sufficient funds legally available to redeem the
<PAGE> 7
total number of outstanding shares of Series A Preferred Stock required at any
time to be redeemed, the Corporation shall redeem the maximum number of shares
for which payment can legally be made and such redemption shall be made pro rata
among all of the holders of the outstanding shares of Series A Preferred Stock
based the number of shares of Series A Preferred Stock held by each holder. If,
because the Corporation does not have sufficient funds legally available
therefor, the Corporation does not redeem the whole number of outstanding shares
of Series A Preferred Stock required at any time to be redeemed hereunder, then
the unredeemed shares of Series A Preferred Stock shall remain outstanding and
not subject to any Redemption Notice until either the holders of Series A
Preferred Stock again request redemption under paragraph 4(a)(i) above or the
Corporation request the redemption of Series A Preferred Stock under paragraph
4(a)(ii) above.
(d) Payment of Redemption Price. The Corporation shall pay the
Redemption Price on the Redemption Date as follows.
(i) On the Redemption Date, the Corporation shall tender
to each holder of shares of Series A Preferred Stock payment of
the Redemption Price payable to such holder for the shares of
Series A Preferred Stock to be redeemed on such date.
(ii) Alternatively, at the Company's sole election, not
less than ten (10) days prior to the Redemption Date, the
Corporation shall deposit the Redemption Price of all outstanding
shares for Series A Preferred Stock designated for redemption in
the Redemption Notice and not yet redeemed with a bank or trust
company having aggregate capital and surplus in excess of
$50,000,000 as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet
redeemed. Simultaneously with its delivery of the Redemption Price
to such bank or trust company, the Corporation shall deposit
irrevocable instructions and authority to such bank or trust
company to publish the Redemption Notice (or to complete such
publication if theretofore commenced) and to pay, on and after the
Redemption Date, the Redemption Price for the shares of Series A
Preferred Stock to the holders thereof upon surrender of their
certificates. Any monies deposited by the Corporation pursuant to
this paragraph 4(d)(ii) remaining unclaimed at the expiration of
two (2) years following the Redemption Date shall thereafter be
returned to the corporation; provided that the holder to whom such
monies would be payable hereunder shall be entitled, upon proof of
his or her ownership of the shares of Series A Preferred Stock and
payment of any bond requested by the corporation, to receive such
monies, but without interest from the Redemption Date.
(e) Conversion Period. Prior to the close of business on the
business day prior to the Redemption Date, the holders of Series A Preferred
Stock called for redemption may convert such stock into Common Stock in
accordance with the conversion privileges set forth in paragraph 3 hereof. In
the event a holder of Series A Preferred Stock provides the Corporation with
notice of conversion of all or a portion of such Series A Preferred Stock into
shares of Common Stock on or after the Redemption Notice is provided and on or
before the business day prior to the Redemption Date, the holder shall have been
deemed to convert such shares of Series A Preferred Stock as of the Redemption
Date; provided that in the event the Corporation shall default in the payment of
the Redemption Price, the conversion shall not be effective unless the holder of
Series A Preferred Stock electing to convert provides written notice to the
Corporation within twenty (20) days after the purported Redemption Date of his
desire to effect such conversion.
(f) Effect of Redemption. Unless (i) the holder of the shares of
Series A Preferred Stock has exercised its rights to convert in accordance with
paragraph 3 hereof, or (ii) the Corporation shall default in the payment of the
Redemption Price, upon the Redemption Date (x) such holder shall no longer have
any voting or other rights with respect to the shares of Series A Preferred
Stock called for redemption, except the right to receive the Redemption Price
payable upon such redemption from the Corporation upon
<PAGE> 8
surrender (and endorsement, if required by the Corporation) of the certificates,
and (y) the shares represented thereby shall no longer be deemed to be
outstanding as of the Redemption Date. In the event a holder of Series A
Preferred Stock provides the Corporation with notice of conversion of all or a
portion of such Series A Preferred Stock into shares of Common Stock on or after
the Redemption Notice is provided, the holder shall have been deemed to convert
as of the Redemption Date; provided, however, that in the event the Corporation
shall default in the payment of the Redemption Price, the conversion shall not
be effective unless the holder of Series A Preferred Stock electing to convert
provides written notice to the Corporation within 20 days of the purported
redemption date of his desire to effect such conversion.
(g) Rights as Shareholders. So long as the Corporation has properly
tendered payment of the Redemption Price in accordance with paragraph 4(d) above
on the Redemption Date and otherwise is not in default of any of its obligations
under this paragraph 4, and regardless of the date on which any holder of Series
A Preferred Stock surrenders any stock certificates evidences any shares of
Series A Preferred Stock, the shares of Series A Preferred Stock be redeemed
shall for all purposes be deemed to have been redeemed on the Redemption Date
and shall not be deemed to be outstanding for any purposes on and after the
Redemption Date.
(h) Limitation on Redemption. Notwithstanding anything in this
paragraph 4 to the contrary, the Corporation shall have not obligation to redeem
any or all of the outstanding shares of Series A Preferred Stock if such
redemption would be in violation of applicable law.
(j) Cancellation of the Shares. Upon conversion of any shares of
Series A Preferred Stock into Common Stock, said converted shares of Series A
Preferred Stock shall resume the status of authorized and unissued shares of
Preferred Stock of the corporation.
5. Voting Rights. Except as otherwise required by law or set forth herein,
the shares of Series A Preferred Stock and the shares of Common Stock shall vote
together as a single class on all matters, including, but not limited to, the
election of directors, presented for action by stockholders of the Corporation,
whether by vote, written consent or otherwise, upon the following basis.
(a) Each holder of shares of Series A Preferred Stock shall be
entitled to cast such number of votes for each share of Series A Preferred Stock
held by such holder as shall be equal to the number of shares of the
Corporation's Common Stock into which each of such holder's shares of Series A
Preferred Stock is convertible immediately after the close of business on the
record date fixed for such vote, written consent or other action. Fractional
shares shall not be permitted, and any fractional voting rights resulting from
the foregoing formula (after aggregating all shares of Common Stock into which
shares of Series A Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
(b) Each holder of shares of Common Stock shall be entitled to one
(1) vote for each share of Common Stock held of record on the applicable record
date.
6. Protective Provisions. So long as any of the Series A Preferred Stock
shall be outstanding the Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least fifty percent (50%) of the outstanding Series A Preferred Stock:
(a) Change of Rights. Alter or change the rights, preferences, or
privileges of the Series A Preferred Stock so as to materially and adversely
affect the Series A Preferred Stock; or
(b) Authorized Number. Increase the authorized number of Series A
Preferred Stock; or
(c) Create New Class. Create any new class or series of shares
having preferences over, or being on a parity with, the Series A Preferred
Stock; or
<PAGE> 9
(d) Section 305. Do any act or thing which would result in taxation
of the holders of Series A Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any successor provision thereby).
V.
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
VI.
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the Corporation and its shareholders through bylaw provisions or through
agreements with the agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code.
VII.
Effective on the date that the Corporation first becomes required to file
periodical and other reports pursuant to Section 13 of the Securities Exchange
Act of 1934, and with respect to any actions to be taken thereafter, any action
required or permitted to be taken by shareholders of the Corporation must be
taken at a duly called annual meeting or a duly called special meeting of
shareholders of the Corporation, and no action may be taken by the written
consent of the shareholders. Any amendment of this Article Seventh shall require
the approval by the affirmative vote of not less than two-thirds of the shares
of the Corporation then issued and outstanding which have the right to vote on
the matter.
3. The foregoing Amendment and Restatement of the Articles of
Incorporation has been duly approved by the Board of Directors of this
corporation.
4. The foregoing Amendment and Restatement of the Articles of
Incorporation has been duly approved by the required vote of the shareholders of
this Corporation in accordance with Section 903 of the Corporations Code. The
Corporation has one class of stock outstanding. The total number of outstanding
shares of Common Stock entitled to vote is 4,700,00. There are no shares of
Series A Preferred Stock outstanding. The total number of shares voting in favor
of the Amendment and Restatement of the Articles of Incorporation equaled or
exceeded the vote required. The percentage vote required was more than 50% of
the outstanding shares of Common Stock.
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing Certificate of Amendment and Restatement of Articles of
Incorporation are true of their own knowledge. Executed at Camarillo, California
on August ___, 1999.
/s/ JIM B. TYNER
---------------------------------------
Jim B. Tyner, President
/s/ YULA GRECO
---------------------------------------
Yula Greco, Secretary
<PAGE> 1
EXHIBIT 4.1
TRAVELNSTORE LLC
CONVERTIBLE NOTE CERTIFICATE
This Note is issued by TravelnStore LLC, a California Limited Liability
Corporation. The Holder of the Note, having reviewed the Private Placement
Memorandum dated September 15, 1998 and by executing the Subscription Agreement
contained within the Private Placement Memorandum, agrees to be bound by the
terms and conditions contained herein and the terms and conditions set forth in
the Subscription Agreement.
GENERAL DESCRIPTION.
This Note is one of 15 total authorized Notes, which may be issued under the
Private Placement of September 15, 1998. The Company has sole discretion as to
how many and at what point in time each, any, or all of the Notes may be issued.
Each Note will have a face amount of $15,000 and shall bear interest at 8
percent from the date of subscription. Regardless of when issued, all Notes will
mature December 31, 2000, at which time the principal, accrued interest and
stock option repurchase will be due.
CONVERSION.
Only upon the registration/qualification of common shares to be issued by the
Company, in a public offering, by the governmental authorities of the
jurisdictions in which the shares are to be publicly offered, may this Note be
converted to equity in the Company. However, the Company may offer to accelerate
this conversion right. This conversion is through the exercise of the Stock
Option, set forth below. The Option provides that the holder of the Note may
elect to convert all sums due thereunder at the time of conversion to the number
of shares to be issued, that in aggregate total $150,000 at the price per share
set as the offering price under the registration.
STOCK OPTION.
The Holder of this Note is herein granted an exclusive option to purchase, in
aggregate, the required number of shares calculated at the public offering price
to equal a total value of $150,000 at such time as the Company registers and
offers for sale, common shares in the Company, to the public in a registered,
initial public offering. The Company acknowledges that it is granting this
Option for good value received from the subscriber of this Note. The total price
for the aforementioned shares will be the total amount due under the terms of
this Note, inclusive of principal, interest, and Option Repurchase Agreement".
STOCK OPTION REPURCHASE AGREEMENT.
Should the Company fail, for any reason, to make a registered initial public
offering of common stock prior to December 31, 2000, the Company agrees to
repurchase from the Holder of this Note, the Stock Option granted herein. The
price that the Company will be obligated to pay is $15,000, which will be due on
December 31, 2000. This amount is in addition to the principal and accrued
interest, which will be concurrently due on said date. Such repayment would be
inclusive of the original principal and all accrued interest
SUBORDINATION.
This Note is a general obligation of the Issuer. It will be subordinate to any
debt senior in status.
NO THIRD PARTY GUARANTY.
No third party has, is, or is expected to guarantee the repayment of this Note
or any interest accrued or due.
SECURITY.
This Note is a general obligation of the Issuer. No interest in any property,
either personal or real, is being pledged or assigned as collateral or security
for this Note.
JURISDICTION.
Any dispute arising from the granting or repayment of this Note shall be
adjudicated in the County of Ventura, State of California.
ATTORNEY FEES.
Should any action be required to enforce the provisions of this Note, the
prevailing party shall be entitled to reasonable attorney fees and costs.
In exchange for $15,000, receipt hereby acknowledged, TravelnStore LLC issues
to_____________________________ this Convertible Note this_______ day
of______________, 1998.
- -------------------------------- --------------------------------
Jim Tyner for Yula Greco for
TravelnStore LLC TravelnStore LLC
<PAGE> 1
EXHIBIT 4.2
TRAVELNSTORE LLC
CONVERTIBLE NOTE CERTIFICATE
This Note is issued by TravelnStore LLC, a California Limited Liability
Corporation. The Holder of the Note, having reviewed the Private Placement
Memorandum dated January 1, 1999 and by executing the Subscription Agreement
contained within the Private Placement Memorandum, agrees to be bound by the
terms and conditions contained herein and the terms and conditions set forth in
the Subscription Agreement.
GENERAL DESCRIPTION.
This Note is one of 15 total authorized Notes, which may be issued under the
Private Placement of January 1, 1999. The Company has sole discretion as to how
many and at what point in time each, any, or all of the Notes may be issued.
Each Note will have a face amount of $15,000 and shall bear interest at 6
percent from the date of subscription. Regardless of when issued, all Notes will
mature December 31, 2000, at which time the principal, accrued interest and
stock option repurchase will be due.
CONVERSION.
Only upon the registration/qualification of common shares to be issued by the
Company, in a public offering, by the governmental authorities of the
jurisdictions in which the shares are to be publicly offered, may this Note be
converted to equity in the Company. However, the Company may offer to accelerate
this conversion right. This conversion is through the exercise of the Stock
Option, set forth below. The Option provides that the holder of the Note may
elect to convert all sums due thereunder at the time of conversion to the number
of shares to be issued, that in aggregate total $50,000 at the price per share
set as the offering price under the registration.
STOCK OPTION.
The Holder of this Note is herein granted an exclusive option to purchase, in
aggregate, the required number of shares calculated at the public offering price
to equal a total value of $50,000 at such time as the Company registers and
offers for sale, common shares in the Company, to the public in a registered,
initial public offering. The Company acknowledges that it is granting this
Option for good value received from the subscriber of this Note. The total price
for the aforementioned shares will be the total amount due under the terms of
this Note, inclusive of principal, interest, and Option Repurchase Agreement".
STOCK OPTION REPURCHASE AGREEMENT.
Should the Company fail, for any reason, to make a registered initial public
offering of common stock prior to December 31, 2000, the Company agrees to
repurchase from the Holder of this Note, the Stock Option granted herein. The
price that the Company will be obligated to pay is $15,000, which will be due on
December 31, 2000. This amount is in addition to the principal and accrued
interest, which will be concurrently due on said date. Further, should the
Company subscribe a minimum of $2,000,000 in its initial public offering, the
Holder may request an early repayment of this Note. Such repayment would be
inclusive of the original principal and all accrued interest. Should Holder
request early repayment, the Stock Option Repurchase price shall be reduced to
$7,500.
SUBORDINATION.
This Note is a general obligation of the Issuer. It will be subordinate to any
debt senior in status.
NO THIRD PARTY GUARANTY.
No third party has, is, or is expected to guarantee the repayment of this Note
or any interest accrued or due.
SECURITY.
This Note is a general obligation of the Issuer. No interest in any property,
either personal or real, is being pledged or assigned as collateral or security
for this Note.
JURISDICTION.
Any dispute arising from the granting or repayment of this Note shall be
adjudicated in the County of Ventura, State of California.
ATTORNEY FEES.
Should any action be required to enforce the provisions of this Note, the
prevailing party shall be entitled to reasonable attorney fees and costs.
In exchange for $15,000, receipt hereby acknowledged, TravelnStore LLC issues
to_____________________________ this Convertible Note this_______ day
of______________, 1999.
- -------------------------------- --------------------------------
Jim Tyner for Yula Greco for
TravelnStore LLC TravelnStore LLC
<PAGE> 1
EXHIBIT 4.4
TRAVELNSTORE.COM, INC.
NUMBER SHARES
- ------ ------
BSE
SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS
OF THE STATE OF CALIFORNIA
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
------------------------------------------------------------
IS THE OWNER OF
----------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES, NO PAR VALUE PER SHARE, OF THE COMM0N STOCK
OF
TRAVELNSTORE.COM, INC.
(hereinafter the "Corporation")
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
TravelnStore.com, Inc.
/s/ Yula Greco Corporate Seal /s/ Jim B. Tyner
- -------------------------- -------------------------
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED
CONTINENTAL STOCK TRANSFER & TRUST COMPANY.
(JERSEY CITY, NJ)
TRANSFER AGENT
<PAGE> 2
AND REGISTRAR.
By
- -------------------------------------------
AUTHORIZED OFFICER
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences, and relative,
participating, optional or other special rights of each class and series of
stock of the Corporation and the qualifications, limitations or restrictions of
such preferences and/or rights. Such request may be made to the Corporation or
the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian under Uniform Gifts to Minors Act
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
Additional abbreviations may also be used though not in the above list.
<PAGE> 3
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
--------------------------------
- --------------------------------------
The signature to this assignment must
correspond with the name as written
NOTICE: upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
Signatures(s) Guaranteed:
--------------------------------------
The signatures(s) should be guaranteed
by an eligible guarantor institution
(banks, stockbrokers, savings and loan
associations and credit unions with
membership in an approved signature
guarantee medallion program), pursuant
to SEC Rule 17Ad-15
<PAGE> 1
EXHIBIT 4.5
TRAVELNSTORE LLC
CONVERTIBLE NOTE CERTIFICATE
This Note is issued by TravelnStore LLC, a California corporation. The Holder of
the Note, having reviewed the Private Placement Memorandum dated June 15, 1999
and by executing the Subscription Agreement contained within the Private
Placement Memorandum, agrees to be bound by the terms and conditions contained
herein and the terms and conditions set forth in the Subscription Agreement.
GENERAL DESCRIPTION.
This Note is one of 15 total authorized Notes, which may be issued under the
Private Placement of June 15, 1999. The Company has sole discretion as to how
many and at what point in time each, any, or all of the Notes may be issued.
Each Note will have a face amount of $15,000 and shall bear interest at 6
percent from the date of subscription. Regardless of when issued, all Notes will
mature December 31, 2000, at which time the principal, accrued interest and
stock option repurchase will be due.
CONVERSION.
Only upon the registration/qualification of common shares to be issued by the
Company, in a public offering, by the governmental authorities of the
jurisdictions in which the shares are to be publicly offered, may this Note be
converted to equity in the Company. However, the Company may offer to accelerate
this conversion right. This conversion is through the exercise of the Stock
Option, set forth below. The Option provides that the holder of the Note may
elect to convert all sums due thereunder at the time of conversion to the number
of shares to be issued, that in aggregate total $50,000 at the price per share
set as the offering price under the registration.
STOCK OPTION.
The Holder of this Note is herein granted an exclusive option to purchase, in
aggregate, the required number of shares calculated at the public offering price
to equal a total value of $50,000 at such time as the Company registers and
offers for sale, common shares in the Company, to the public in a registered,
initial public offering. The Company acknowledges that it is granting this
Option for good value received from the subscriber of this Note. The total price
for the aforementioned shares will be the total amount due under the terms of
this Note, inclusive of principal, interest, and Option Repurchase Agreement.
STOCK OPTION REPURCHASE AGREEMENT.
Should the Company fail, for any reason, to make a registered initial public
offering of common stock prior to December 31, 2000, the Company agrees to
repurchase from the Holder of this Note, the Stock Option granted herein. The
price that the Company will be obligated to pay is $15,000, which will be due on
December 31, 2000. This amount is in addition to the principal and accrued
interest, which will be concurrently due on said date. Further, should the
Company subscribe a minimum of $2,000,000 in its initial public offering, the
Holder may request an early repayment of this Note. Such repayment would be
inclusive of the original principal and all accrued interest. Should Holder
request early repayment, the Stock Option Repurchase price shall be reduced to
$7,500.
SUBORDINATION.
This Note is a general obligation of the Issuer. It will be subordinate to any
debt senior in status.
NO THIRD PARTY GUARANTY.
No third party has, is, or is expected to guarantee the repayment of this Note
or any interest accrued or due.
SECURITY.
This Note is a general obligation of the Issuer. No interest in any property,
either personal or real, is being pledged or assigned as collateral or security
for this Note.
JURISDICTION.
Any dispute arising from the granting or repayment of this Note shall be
adjudicated in the County of Ventura, State of California.
ATTORNEY FEES.
Should any action be required to enforce the provisions of this Note, the
prevailing party shall be entitled to reasonable attorney fees and costs.
In exchange for $15,000, receipt hereby acknowledged, TravelnStore.com, Inc.
issues to_____________________________ this Convertible Note this_______ day of
______________, 1999.
- -------------------------------- --------------------------------
Jim Tyner for Yula Greco for
TravelnStore.com, Inc. TravelnStore.com, Inc.
<PAGE> 1
EXHIBIT 5
July 7, 1999
TravelnStore.com, Inc.
1320 Flynn Road, Suite 402
Camarillo, California 93012
Re: TravelnStore.com, Inc.
Registration Statement on Form SB-2
We have acted as counsel to TravelnStore.com, Inc., a California
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 1,000,000 shares of the Company's Common Stock (the
"Shares") pursuant to the Company's Registration Statement on Form SB-2 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). This opinion is being
furnished in accordance with the requirements of Item 27 of Form SB-2 and Item
601(b)(5)(i) of Regulation S-B.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares. Based on such review, we are of the opinion that the Shares have been
duly authorized, and if, as and when issued in accordance with the Registration
Statement and the related prospectus (as amended and supplemented through the
date of issuance) will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-B. This opinion letter is rendered as of the date first
written above and we disclaim any obligation to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinion expressed herein.
Our opinion is expressly limited to the matters set forth above and we render no
opinion, whether by implication or otherwise, as to any other matters relating
to the Company or the Shares.
Very truly yours,
/s/ Reicker Clough Pfau & Pyle LLP
REICKER CLOUGH PFAU & PYLE LLP
<PAGE> 1
Exhibit 10.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of August 26, 1999, by
and between TRAVELNSTORE.COM, INC., a California corporation (the "Company") and
SANTA BARBARA BANK & TRUST, as escrow agent (the "Escrow Agent"), with reference
to the following facts.
A. The Company is proposing to issue to the public up to 1,000,000 shares
of its Common Stock (the "Offering") pursuant to a Registration Statement on
Form SB-2 (the "Registration Statement") filed with the Securities and Exchange
Commission. Pursuant to the Offering, the Company would realize proceeds of up
to $6,500,000.
B. As part of the Offering, the Company has agreed to deposit into escrow
(the "Escrow") the proceeds received from subscriptions for shares until it has
received acceptable subscriptions for shares with an aggregate subscription
price of not less than $2,000,000. The Company proposes that it will terminate
the Offering and return to the investors all funds previously deposited into the
Escrow if it has not received acceptable subscriptions for a total of $2,000,000
within 90 days after the date on which the Registration Statement is declared
effective.
C. The parties desire to enter into this Agreement for purposes of
establishing the Escrow to hold the subscription proceeds until the Company has
received at least $2,000,000 in proceeds received from subscriptions for shares.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Escrow Agent agree as follows:
1. ESCROW FUNDS.
1.1 DEPOSIT. During the term of this Agreement, the Company shall deposit
with Escrow Agent the funds (the "Escrow Funds") received from investors in
connection with the Offering. The Company shall use its best efforts to deposit
all Escrow Funds with Escrow Agent by 12:00 noon on the first business day
following the date on which the Company receives the Escrow Funds from the
investors. Escrow Agent shall have no obligation to verify whether or not the
Company has timely delivered any or all of the Escrow Funds and shall be
authorized to accept all Escrow Funds from the Company regardless of the date on
which the Escrow Funds are delivered to the Escrow Agent or the date on which
they were received by the Company from the investors.
1.2 RECEIPT OF ESCROW FUNDS. Escrow Agent shall have no obligation to
accept the Company's delivery of any Escrow Funds unless and until the Company
has delivered to Escrow Agent written notice under Section 5.1 that the
Registration Statement has been declared effective. If any check or wire
transfer for any Escrow Funds does not clear normal banking channels in due
course,
1
<PAGE> 2
Escrow Agent will promptly notify the Company and return such check to the
Company or cancel such wire transfer.
1.3 HOLDING AND INVESTMENT. Escrow Agent shall hold the Escrow Funds
pursuant to the terms hereof and shall invest the Escrow Funds only in (a)
interest-bearing savings accounts and bank money-market accounts, (b) short-term
certificates of deposit issued by a bank, (c) short-term securities issued or
guaranteed by the U.S. Government or (d) any combination of the foregoing.
Escrow Agent shall retain all interest upon invested Escrow Funds and shall
distribute such accumulated interest to the Company upon distribution of the
Escrow Funds. Escrow Agent shall not be required to set up individual escrow
accounts for each investor's funds, but shall deposit all of the Escrow Funds in
one general escrow account in the name of the Company.
1.4 GENERAL INSTRUCTIONS. Escrow Agent shall establish and maintain the
Escrow in accordance with and subject to Escrow Agent's general rules and
regulations applicable to this type of escrow account.
1.5 STOP ORDER. During the period from and after the date on which the
Company delivers to Escrow Agent written notice under Section 5.1 hereof that a
stop order has been entered with respect to the Registration Statement or the
effectiveness of the Registration Statement otherwise has been suspended and
through the date on which the Company delivers to Escrow Agent written notice
that the stop order or other suspension has been terminated (the "Suspension
Period"), Escrow Agent shall continue to hold any Escrow Funds previously
delivered by the Company, but shall have no obligation to accept the Company's
delivery of any additional Escrow Funds. During the Suspension Period, Escrow
Agent shall hold all Escrow Funds previously delivered to it in accordance with
the terms of this Agreement; provided that Escrow Agent shall not disburse any
of such Escrow Funds except in accordance with the provisions of Section 2.3
hereof.
1.6 ADDITIONAL ESCROW FUNDS. The parties intend that the Escrow will be
used for purposes of holding the Escrow Funds only until the Company has
received Escrow Funds in the amount of $2,000,000 which are sufficient to
satisfy the minimum offering requirements under the Registration Statement. Even
so, Escrow Agent agrees that Escrow Funds in excess of $2,000,000 may be
deposited into the Escrow and that the Escrow shall continue until terminated in
accordance with the provisions of Section 4 hereof.
2. PAYMENT OF ESCROW FUNDS.
2.1 CLOSING OF OFFERING.
2.1.1 INITIAL CLOSING. Subject to the provisions of Section 1.5 and
hereof, so long as:
A. the amount of the Escrow Funds, exclusive of any interest or
other amount accrued on the Escrow Funds, is then not less than Two
Million Dollars ($2,000,000); and
2
<PAGE> 3
B. the written instructions described below are delivered by the
Company to Escrow Agent no later than 90 days after the effective date of
the Registration Statement;
Escrow Agent shall disburse to the Company all of the Escrow Funds and all
interest and other amounts accrued thereon within five (5) days after its
receipt of written instructions from the President of the Company or issued by a
court of competent jurisdiction confirming that (i) the Company has accepted the
subscriptions for the Escrow Funds then held by Escrow Agent, (ii) the
Registration Statement is then effective and no stop order or other suspension
is then effective with respect to the Registration Statement or the offering,
and (iii) the other terms and conditions of the Offering relating to such Escrow
Funds have been fully satisfied. Escrow Agent may condition its disbursement of
the Escrow Funds on its receipt of such acknowledgments, receipts and other
documents as it reasonably may request for purposes of confirming compliance
with the terms of this Agreement.
2.2 ABANDONMENT OF OFFERING. In the event that the Company abandons or
otherwise fails to close the Offering, whether because the Company has not
timely raised the minimum investment or otherwise, the Company promptly shall
provide written notice thereof to Escrow Agent and, at Escrow Agent's election,
shall authorize Escrow Agent to disburse the Escrow Funds then held by Escrow
Agent either (a) directly to the investors or (b) to the Company for further
delivery to the investors. If Escrow Agent elects to disburse the Escrow Funds
directly to the investors, the Company shall promptly provide Escrow Agent with
a list of names, addresses and amounts of the investment by the Company's
President to be true, correct and complete. Promptly after its disbursal of the
Escrow Funds to the investors, Escrow Agent shall deliver to the Company a
written statement showing the amount disbursed to each investor. If Escrow Agent
delivers the Escrow Funds to the Company for further delivery to the investors,
the Company shall, within ten (10) business days after its receipt of the Escrow
Funds from Escrow Agent, (x) effect the delivery of the Escrow Funds and (y)
deliver to Escrow Agent written confirmation that the Company has delivered the
Escrow Funds to the investors; provided that Escrow Agent shall have no
obligation to confirm that the Escrow Funds have been delivered to the investors
or to compel the Company to provide the written confirmation to Escrow Agent.
2.3 90-DAY DATE. Promptly after the Registration Statement has been
declared effective, the Company shall advise Escrow Agent of the date 90 days
after such effective date (the "90-Day Date") by which the Company is obligated
to have received acceptable subscriptions for at least $2,000,000. If, on the
90-Day Date, Escrow Agent has not previously disbursed any of the Escrow Funds
to the Company under Section 2.1.1 above and does not then hold Escrow Funds,
exclusive of interest and other amounts accrued thereon, in the amount of at
least $2,000,000, Escrow Agent may, on five (5) days prior written notice to the
Company, terminate the Escrow and disburse the Escrow Funds to the Company for
the specific purposes of the Company's refund of the Escrow Funds to the
investors. If Escrow Agent delivers the Escrow Funds to the Company for refund
to the investors, the Company shall, within ten (10) business days after the
Escrow Agent's delivery of the Escrow Funds, (x) effect the refund of the Escrow
Funds to the investors and (y) deliver to Escrow Agent written confirmation that
the Company has refunded the Escrow Funds to the investors; provided that Escrow
Agent shall have no obligation to confirm that the Escrow Funds have been
delivered to the investors or to compel the Company to provide the written
confirmation to Escrow Agent.
3
<PAGE> 4
3. ESCROW AGENT.
3.1 COMPENSATION. The Company shall pay Escrow Agent such compensation and
shall reimburse the Escrow Agent for costs and expenses in accordance with
Escrow Agent's current fee schedule.
3.2 DUTIES OF ESCROW AGENT. Escrow Agent shall have no duties or
responsibilities under this Agreement other than those specifically set forth in
this Agreement, and will act only in accordance with the provisions of this
Agreement. Escrow Agent shall be protected in acting upon any document
reasonably believed by it to be genuine and containing what purports to be the
signature of the President of the Company or a certified copy of a final
nonappealable order issued by a court of competent jurisdiction.
3.3 INDEMNITY. The Company shall indemnify, defend and hold Escrow Agent,
and each of its officers, directors, employees and agents harmless from and
against any and all claims, costs, demands, judgments, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and disbursements) arising out of or in connection with any act or failure
to act (other than by reason of such person's willful misconduct or gross
negligence) on the part of such person in connection with any of the duties
required to be performed by Escrow Agent hereunder.
3.4 INTERPLEADER. In the event of any controversy arising hereunder,
Escrow Agent may (but shall not be required to) interplead the Escrow Funds with
a court of competent jurisdiction and, defer the distribution of any of the
Escrow Funds until its receipt of instructions from the court. The costs of such
interpleader shall be borne by the Company.
3.5 COMPLIANCE WITH INSTRUCTIONS. Escrow Agent does not have and shall not
be deemed to have any responsibility in respect of any instruction, certificate
or notice delivered to it other than faithfully to carry out the obligations
undertaken in this Agreement and to follow the directions in such instruction or
notice provided in accordance with the terms hereof.
3.6 LIMITATION. Escrow Agent is not and shall not be deemed to be liable
for any action taken or omitted by it in good faith and may relay upon, and act
in accordance with, the advice of its counsel without liability on its part for
any action taken or omitted in accordance with such advice. In any event, its
liability hereunder shall be limited to liability for gross negligence, willful
misconduct or bad faith on its part.
3.7 RELIANCE. Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter, facsimile, or
other written instrument believed by it to be genuine and to have been signed by
the proper party or parties.
3.8 LEGAL ACTION. Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject matter
of this Agreement unless requested to do so by the Company and indemnified by
the Company to Escrow Agent's satisfaction against the cost and expense of such
defense by the party requesting such defense. If any such legal proceeding is
4
<PAGE> 5
instituted against it, Escrow Agent shall promptly give notice thereof to the
Company. Escrow Agent shall not be required to institute legal proceedings of
any kind.
3.9 NO WAIVER. Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have either under
this Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by Escrow Agent, and only to the
extent expressly therein set forth. A waiver by Escrow Agent under any term of
this Agreement shall not be construed as a bar to, or waiver of, the same or any
other such right or remedy which it would otherwise have on any other occasion.
3.10 RESIGNATION. Escrow Agent may resign as such hereunder by giving
thirty (30) days written notice thereof to the Company. Within twenty (20) days
after receipt of such notice, the Company shall furnish to Escrow Agent written
instructions for the release of the Escrow Funds to a substitute Escrow Agent
which (whether designated by written instructions from the Company or, in the
absence thereof, by instructions to Escrow Agent from a court of competent
jurisdiction) shall be a bank or trust company organized and doing business
under the laws of the United States or any state thereof. Such substitute Escrow
Agent shall thereafter hold any Escrow Funds received by it pursuant to the
terms of this Agreement and otherwise act hereunder as if it were Escrow Agent
originally named herein. Escrow Agent's duties and responsibilities hereunder
shall terminate upon the release of all of the Escrow Funds then held in escrow
according to such written instruction or upon such delivery as herein provided.
This Agreement shall not otherwise be assignable by Escrow Agent without the
prior written consent of the Company.
4. MISCELLANEOUS PROVISIONS.
4.1 REGISTRATION STATEMENT. The Company shall promptly notify Escrow Agent
in writing of the date on which the Registration Statement has been declared.
The Company acknowledges that Escrow Agent has not participated in the
preparation of the Registration Statement. The Company shall promptly notify
Escrow Agent of the entry of any stop order or any other notion which suspends
the effectiveness of the Registration Statement. Escrow Agent may conclusively
rely on any such notice from the Company and shall have no obligation to
independently confirm the effectiveness of the Registration Statement or the
entry of any stop order or suspension.
4.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when actually received or on the
second business day after being mailed by certified or registered United States
mail, return receipted, addressed to the party to be notified at the address set
forth on the signature page of this Agreement or such other address as the party
may provide for such purpose.
4.3 PARTIAL INVALIDITY. Each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, then the
remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby.
5
<PAGE> 6
4.4 ARBITRATION. Unless the relief sought requires the exercise of the
equity powers of a court of competent jurisdiction, any dispute arising in
connection with the interpretation or enforcement of the provisions of this
Agreement, or the application or validity thereof, shall be submitted to
arbitration. Such arbitration proceedings shall be held in Santa Barbara,
California, in accordance with the rules then obtaining of the American
Arbitration Association. This agreement to arbitrate shall be specifically
enforceable. Any award rendered in any such arbitration proceedings shall be
final and binding on each of the parties hereto, and judgment may be entered
thereon in any court of competent jurisdiction.
4.5 GOVERNING LAW. All questions with respect to the construction of this
Agreement and the rights and liabilities of the parties with respect thereto
shall be governed by the laws of the State of California applicable to contracts
made and to be fully performed in the State of California.
4.6 ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties relating to the subject matter of this Agreement, and
supersedes any prior written or oral agreements between them respecting the
subject matter contained herein. There are no representations, agreements,
arrangements, or understandings, either oral or written, between or among any of
the Owners relating to the subject matter of this Agreement which are not fully
expressed herein.
4.7 BINDING NATURE. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, provided that Escrow Agent
may not assign its obligations hereunder without the written consent of Company.
4.8 REPORTS. Escrow Agent shall, on a monthly basis or otherwise as
reasonable requested by the Company, provide the Company with a report as to the
balance of the Escrow Funds and the interest earned thereon.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day and year first-above written.
SANTA BARBARA BANK & TRUST TRAVELNSTORE.COM, INC.
By: By:
--------------------------- ----------------------------------
Jim B. Tyner, President
6
<PAGE> 1
EXHIBIT 10.2
TRAVELNSTORE.COM, INC.
1320 Flynn Road, Suite 402 Camarillo, CA 93012
(888)335-9194 (805)388-9004 Fax (805)388-9897
CO-HOST AGENCY AGREEMENT
This Agreement is made by and between TravelnStore.com, Inc., a
California corporation (hereafter "TravelnStore.com"), and
{Company/Organization}, {City}, {State_/_Province} (hereafter "Co-Host Agency").
The purpose of this Agreement is to provide a basis by which the
parties can employ their respective resources to facilitate the marketing of
travel services over the Internet to their mutual benefit.
Recitals:
1. TravelnStore.com, Inc. has the proprietary ownership of the
TravelnStore.com domain address (URL).
2. This site is designed to act as a gateway to a wide array of travel
service providers' proprietary websites who have entered into
contractual relationships with TravelnStore.com to pay commissions for
sales generated by clients who have accessed their site through
TravelnStore.com.
3. {Company/Organization?} wishes to participate in the presentation and
promotion of the TravelnStore.com website.
Therefore, it is hereinafter agreed between the parties that:
1. The Co-Host Agency may subscribe up to three (3) zip codes. It will be
exclusively presented as the local Co-Host Agency to anyone accessing
the TravelnStore.com website who registers into the site using one of
the subscribed zip code(s). The Co-Host Agency agrees to pay a one time
registration fee of $ 60 and subscription fee of $12 per month, payable
quarterly.
2. Whenever a client accesses a travel service that allows online bookings
through the TravelnStore.com site and makes a booking, TravelnStore and
the Co-Host Agency will split 50/50 any commissions derived from the
transaction.
3. While TravelnStore.com will undertake reasonable efforts to establish
and implement necessary accounting controls with the various travel
service providers participating in the TravelnStore.com web site,
TravelnStore.com makes no guarantee as to the accuracy or veracity of
the transaction reports provided to TravelnStore.com by any third
party vendor.
<PAGE> 2
4. Sharing of commissions is limited only to the online sales of travel
services and does not extend to any other income derived directly or
indirectly from the TravelnStore.com web site by TravelnStore.com, Inc.
5. This Agreement is solely for the sharing of commissions between the
parties and the relationship between the parties should not be
construed as a partnership, joint venture, merger, or franchise
arrangement.
6. This Agreement may be terminated by either party, without demonstration
of cause, upon giving the other party thirty days' written notice.
Termination does not relieve either party of paying all sums which may
come due under this Agreement up through the date of termination.
7. It is agreed that TravelnStore has made no representations or
warranties as to the amount of increased business the Co-Host Agency
will generate from this relationship.
8. Should the Co-Host Agency cease to be a Co-Host Agency for any reason,
it is agreed that TravelnStore.com may subscribe the zip code to any
other travel agency it chooses.
9. This Agreement is to be interpreted by the laws and regulations of the
State of California.
Executed and dated: {Today's Date?}.
Zipcodes:
TravelnStore.com, Inc. {Company/Organization}
By:______________________ By:_________________________
John R. Toal {First Name} {Last Name}
President
<PAGE> 1
EXHIBIT 10.5
TRAVELNSTORE, LLC
INDEPENDENT CONTRACTOR AGREEMENT
AGREEMENT, dated July 6, 1998 between TravelnStore, LLC (hereinafter "the
Corporation") and Donald G. Scanlin (hereinafter "the Independent Contractor").
Now, therefore, the parties hereto agree as follows:
1. EMPLOYMENT. The Corporation shall employ the Independent Contractor, and the
Independent Contractor shall serve the Corporation upon the terms and conditions
hereinafter set forth.
2. TERM AND EXTENSION. The employment of the Independent Contractor hereunder
shall commence on July 15, 1998 and shall continue to and including June 30,
1999.
3. DUTIES. During the period or periods of his employment hereunder, the
Independent Contractor shall serve the Corporation and shall perform any and all
general business consulting services required or requested in connection with
their business. Within the limitations hereinabove provided, the Independent
Contractor will render such other advisory services in connection with the
marketing services of the Corporation as may be requested from time to time by
the officers or directors of the Corporation, without further compensation other
than that for which provision is made in this Agreement.
4. TIME REQUIREMENTS. The Independent Contractor shall devote during the period
ending June 30, 1999 not more than 20% of his entire time, energy and skill to
the duties of his employment hereunder and shall periodically, or at any time
upon the request of the Corporation, submit data as to the time performed.
5. COMPENSATION. The Corporation shall pay to the Independent Contractor for his
services sums in the aggregate amounting to $25,000, during the period of his
employment hereunder. Such aggregate sums shall be paid upon satisfactory
completion of any public stock offering and from the proceeds therefrom, or if
no successful offering is made, at the conclusion of the time period set forth
herein.
6. INDEMNIFICATION AND HOLD HARMLESS PROVISION. The Independent Contractor
agrees hereby to indemnify and hold harmless the Corporation from any and all
claims by the Independent Contractor which may arise out of and in the course of
the performance of his duties hereunder. Any and all claims for unemployment
benefits and or claims for workers' compensation benefits are hereby expressly
waived by the within Independent Contractor who agrees to maintain separate
policies of liability, health, and accident insurance as may be necessary or
required by the Corporation in connection with the performance of its duties
herein.
<PAGE> 2
7. RELATIONSHIP BETWEEN PARTIES. The Independent Contractor is employed by the
Corporation only for the purposes and to the extent set forth in this Agreement,
and his relation to the Corporation shall, during the period or periods of his
employment and services hereunder, be that of an independent contractor. The
Independent Contractor shall be free to dispose of such portion of his entire
time, energy, and skill during regular business hours as he is not obligated to
devote hereunder to the Corporation in such manner as he sees fit and to such
persons, firms, or corporations as he deems advisable. The Independent
Contractor shall not be considered as having an employee status or as being
entitled to participate in any plans, arrangements, or distributions by the
Corporation pertaining to or in connection with any insurance, pension, stock,
bonus, profit-sharing, or similar benefits for their regular employees.
8. PROFESSIONAL RESPONSIBILITY. Nothing in this Agreement shall be construed to
interfere with, or otherwise affect the rendering of services by the Independent
Contractor in accordance with his independent and professional judgment. The
Independent Contractor shall perform his services in a good and workmanlike
manner and in accordance with generally accepted business practices.
9. ENTIRE AGREEMENT. The within Agreement shall be construed in accordance with
California law and shall constitute the entire Agreement between the parties. In
witness whereof, TravelnStore has caused this Agreement to be executed in its
corporate name by its corporate officers, and Donald G. Scanlin, the Independent
Contractor hereunder, has set his hand and seal, as of this day and year first
above written.
/s/ JIM TYNER /s/ DONALD G. SCANLIN
- --------------------------------- ----------------------------------------
Jim Tyner, on behalf of Donald G. Scanlin
TravelnStore
<PAGE> 1
EXHIBIT 10.6
TRAVELNSTORE, LLC
INDEPENDENT CONTRACTOR AGREEMENT
AGREEMENT, dated July 6, 1998 between TravelnStore, LLC (hereinafter "the
Corporation") and Stevan M. Saylor (hereinafter "the Independent Contractor").
Now, therefore, the parties hereto agree as follows:
1. EMPLOYMENT. The Corporation shall employ the Independent Contractor, and
the Independent Contractor shall serve the Corporation upon the terms and
conditions hereinafter set forth.
2. TERM AND EXTENSION. The employment of the Independent Contractor hereunder
shall commence on July 15, 1998 and shall continue to and including June
30, 1999.
3. DUTIES. During the period or periods of his employment hereunder, the
Independent Contractor shall serve the Corporation and shall perform any
and all general business consulting services required or requested in
connection with their business. Within the limitations hereinabove
provided, the Independent Contractor will render such other advisory
services in connection with the marketing services of the Corporation as
may be requested from time to time by the officers or directors of the
Corporation, without further compensation other than that for which
provision is made in this Agreement.
4. TIME REQUIREMENTS. The Independent Contractor shall devote during the
period ending June 30, 1999 not more than 20% of his entire time, energy
and skill to the duties of his employment hereunder and shall
periodically, or at any time upon the request of the Corporation, submit
data as to the time performed.
5. COMPENSATION. The Corporation shall pay to the Independent Contractor for
his services sums in the aggregate amounting to $25,000, during the period
of his employment hereunder. Such aggregate sums shall be paid upon
satisfactory completion of any public stock offering and from the proceeds
therefrom, or if no successful offering is made, at the conclusion of the
time period set forth herein.
6. INDEMNIFICATION AND HOLD HARMLESS PROVISION. The Independent Contractor
agrees hereby to indemnify and hold harmless the Corporation from any and
all claims by the Independent Contractor which may arise out of and in the
course of the performance of his duties hereunder. Any and all claims for
unemployment benefits and or claims for workers' compensation benefits are
hereby expressly waived by the within Independent Contractor who agrees to
maintain separate policies of liability, health, and accident insurance as
may be necessary or required by the Corporation in connection with the
performance of its duties herein.
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7. RELATIONSHIP BETWEEN PARTIES. The Independent Contractor is employed by
the Corporation only for the purposes and to the extent set forth in this
Agreement, and his relation to the Corporation shall, during the period or
periods of his employment and services hereunder, are that of an
independent contractor. The Independent Contractor shall be free to
dispose of such portion of his entire time, energy, and skill during
regular business hours as he is not obligated to devote hereunder to the
Corporation in such manner as he sees fit and to such persons, firms, or
corporations as he deems advisable. The Independent Contractor shall not
be considered as having an employee status or as being entitled to
participate in any plans, arrangements, or distributions by the
Corporation pertaining to or in connection with any insurance, pension,
stock, bonus, profit-sharing, or similar benefits for their regular
employees.
8. PROFESSIONAL RESPONSIBILITY. Nothing in this Agreement shall be construed
to interfere with, or otherwise affect the rendering of services by the
Independent Contractor in accordance with his independent and professional
judgment. The Independent Contractor shall perform his services in a good
and workmanlike manner and in accordance with generally accepted business
practices.
9. ENTIRE AGREEMENT. The within Agreement shall be construed in accordance
with California law and shall constitute the entire Agreement between the
parties. In witness whereof, TravelnStore has caused this Agreement to be
executed in its corporate name by its corporate officers, and Stevan M.
Saylor, the Independent Contractor hereunder, has set his hand and seal,
as of this day and year first above written.
/s/ JIM TYNER /s/ STEVAN M. SAYLOR
- ------------------------------ -----------------------------------
Jim Tyner, on behalf of Stevan M. Saylor
TravelnStore
<PAGE> 1
EXHIBIT 10.8
OPERATING AGREEMENT
Purpose of this agreement is to define the working relationship between World
Key, Inc., a California corporation, and TravelnStore, LLC, a California Limited
Liability corporation.
RECITALS:
1. World Key, Inc. has established goodwill, relationships and contracts
throughout travel services industry.
2. TravelnStore, LLC has been formed to develop, implement and promote the
TravelnStore.com website and business model.
3. The concept and formation of TravelnStore, LLC has been in part the result of
time and investment on the part of officers and shareholders of World Key, Inc.
and TravelnStore, LLC can significantly benefit from the goodwill, relationships
and contracts which World Key, Inc. has established throughout travel services
industry.
4. The continued development of TravelnStore, LLC necessitates continued
involvement by officers and shareholders of World Key, Inc., and the utilization
of World Key, Inc. premises, equipment and personnel.
5. World Key, Inc. is willing to provide TravelnStore, LLC the use of a portion
of its premises, equipment and personnel provided that TravelnStore.com
reimburses and/or advances World Key, Inc. funds to compensate World Key, Inc.
for said uses.
THEREFORE, WORLD KEY, INC. AND TRAVELNSTORE, LLC AGREE TO THE FOLLOWING:
1. Jim Tyner, Chairman and President of World Key, Inc. will also serve as
Managing Member of TravelnStore, LLC. TravelnStore, LLC will reimburse World
Key, Inc. for his services at a rate which shall be determined by Jim Tyner
based upon his evaluation of his efforts managing and directing TravelnStore,
LLC.
2. Yula Greco, Vice President and Secretary of World Key, Inc. will act as
Controller for TravelnStore, LLC at the direction of Jim Tyner. Jim Tyner will
determine the reimbursement to World Key, Inc. from TravelnStore, LLC for the
services of Yula Greco. World Key Inc. shall also be reimbursed for the use of
any World Key, Inc. employee.
3. TravelnStore, LLC shall reimburse World Key, Inc. for a portion of the World
Key, Inc. premises located at 900 Acaso, Camarillo, California. Jim Tyner shall
determine the rental rate and utilities to be paid by TravelnStore, LLC for the
use of the premises.
4. Jim Tyner is also authorized to reimburse or advance World Key, Inc. funds
from TravelnStore, LLC as he may determine from time to time are in the best
interests of the shareholders of World Key, Inc. and the members of
TravelnStore, LLC.
5. Jim Tyner is authorized to advance or transfer funds between World Key, Inc.
and TravelnStore, LLC as may be required based upon his determination as to the
best interests of the shareholders of World Key, Inc. and the members of
TravelnStore, LLC. Any advances of services or cash to TravelnStore, LLC from
World Key, Inc. will be considered a general obligation of TravelnStore, LLC
payable to
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World Key, Inc. Any advances of services or cash to World Key, Inc. from
TravelnStore, LLC in excess of the reimbursements required by this Agreement
shall be considered a general obligation of World Key, Inc. payable to
TravelnStore, LLC.
GENERAL TERMS AND CONDITIONS:
1. This Agreement is to be executed on behalf of World Key, Inc. by Jim Tyner
and Yula Greco representing a majority of the shares of World Key, Inc. and on
behalf of TravelnStore, LLC by Jim Tyner, Yula Greco and John Toal representing
a majority of the membership interests of TravelnStore, LLC having received the
concurrence of Donald G.
Scanlin and Stevan M. Saylor.
2. This Agreement is made in the county of Ventura, state of California and
shall be governed by those legal jurisdictions.
3. This Agreement may be modified and amended from time to time by mutual
agreement of the parties.
4. This Agreement shall bind the parties and any successor entities of either.
This is Agreement is entered into September 8, 1998.
FOR WORLD KEY, INC.: FOR TRAVELNSTORE, LLC:
Signed Jim Tyner Signed Jim Tyner
Signed Yula Greco Signed Yula Greco
Signed John Toal
<PAGE> 1
EXHIBIT 10.9
LOCK-UP AGREEMENT
(Principal Stockholder)
This Lock-Up Agreement (the "Agreement") is made and entered as of
_____________, 1999, by and among TRAVELNSTORE.COM, INC., a California
corporation (the "Company"), and _____________ (the "Stockholder") with
reference to the following facts.
A. Stockholder is a principal stockholder in the Company and is not
an officer or employee of the Company.
B. The Company has filed a Registration Statement on Form SB-2
(Registration No. 333-78443) (the "Registration Statement") covering the offer
and sale of up to 1,000,000 shares of its Common Stock (the "Offering).
C. The parties agree that it is important to the success of the
Offering that Stockholder agree to the restrictions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, Stockholder hereby agrees for the benefit of the Company as
follows:
1. Restriction. Stockholder hereby agrees that, during the term of this
Agreement and except as otherwise specifically provided in this Agreement,
Stockholder shall not, with the prior written consent of the Company:
a. offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option to contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock beneficially owned by Stockholder as of
the effective date of the Registration Statement or any
securities convertible into or exercisable or exchangeable for
Common Stock (collectively the "Shares"); or
b. enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the Shares;
regardless of whether or not any transaction described in clause (a) or (b)
above is to be settled by delivery of shares of Common Stock or other
securities, in cash or otherwise. The Company shall have no obligation to
consent to a sale or transfer of any of the shares in a transaction described in
clause (a) or (b) above, unless, prior to such sale or transfer, the transferee
acknowledges in writing to the Company that he is recording and holding the
Shares subject to the provisions of this Agreement. This Section shall not apply
to transactions relating to shares of Common Stock or other securities acquired
in open market transactions after the completion of the Offering.
2. During Employment. The following restrictions shall apply during the
period that the Stockholder is employed as an officer of the Company.
2.1 First Two Years. During the period beginning as of the effective
date of the Registration Statement and ending on the second anniversary of such
effective date, Stockholder shall not sell, during any calendar quarter, more
than two and one-half percent (2.5%) of the total number of shares of Common
Stock of the Company beneficially owned by Stockholder as of the effective date
of the Registration Statement without the prior written consent of the Company.
1.1
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2.2 Thereafter. During the term of this Agreement from and after the
second anniversary of the effective date of the Registration Statement,
Stockholder shall not sell, during any calendar quarter, more than ten percent
(10.0%) of the Shares without the prior written consent of the Company.
3. Permitted Transfers. The restrictions set forth in Sections 1 and 2
above shall not apply to:
3.1 Corporate Transactions. Nothing in this Agreement shall prohibit
or restrict in any way Stockholder's right to sell any or all of the Shares on
the closing of any of the following transactions: (a) a merger or consolidation
in which the Company is not the surviving corporation (other than a
consolidation or merger with a wholly owned subsidiary of the Company in which
all shares of Common Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same number of shares of common
stock of such subsidiary); (b) the acquisition of eighty percent (80%) or more
of the Company's outstanding capital stock by a person or entity that is not a
principal stockholder; or (c) the acquisition of all or substantially all of the
Company's assets by a person or entity that is not a principal stockholder.
3.2 Subsequent Offering. Notwithstanding anything in Section 1 or 2
above to the contrary, Stockholder may sell Shares in a registered public
offering (a "Subsequent Offering") of the Company's Common Stock which is
effected for the benefit of the Company after the closing of the Offering;
provided that the total number of Shares that Stockholder may sell in a
Subsequent Offering shall not exceed fifteen percent (15%) of the Shares
beneficially owned by Stockholder on the effective date of the Subsequent
Offering.
3.3 Estate Planning Transfers. Notwithstanding anything in this
Agreement to the contrary, Stockholder may transfer any or all of the Shares
either during his or her lifetime or on his or her death by will or intestacy to
his or her immediate family or to a trust with beneficiaries who are exclusively
the undersigned and/or a member or members of his or her immediate family;
provided that no transfer described in this Section shall be effective unless
and until the transferee(s) execute an agreement stating that the transferee(s)
is/are receiving and holding the Shares subject to the provisions of this
Agreement. For purposes of this Section, "immediate family" shall mean and
include only the spouse, lineal descendants, father, mother, brothers or sisters
of the transferor.
4. Term. The term of this Agreement shall begin as of the day and year
first above written (the "Agreement Date") and, unless terminated earlier by the
Company, shall continue until the third anniversary of the Agreement Date. The
Company may, but shall not be obligated to, terminate this Agreement at any time
after the first anniversary of the Agreement Date by delivering to Stockholder
written notice of such termination.
5. Interpretation. The number of Shares "beneficially owned" by Stockholder
at any time shall be determined in accordance with the provisions of Section
13(d) of the Securities Exchange Act of 1934 and the Regulations promulgated
thereunder. The number of Shares beneficially owned by Stockholder as of the
effective date of the Offering shall be appropriately adjusted to reflect all
stock splits, reverse stock splits, stock dividends, recapitalizations and other
changes in the capital stock of the Company effected after the effective date of
the Offering. Promptly after the effective date of the Offering, Stockholder and
the Company shall confirm the number of Shares beneficially owned by Stockholder
as of the effective date of the Offering.
6. Legend. The following legend shall be placed on the face of the stock
certificates representing the Shares:
<PAGE> 3
THE TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A LOCK-UP AGREEMENT DATED
______________, 1999, BETWEEN THE ISSUER AND THE HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE GENERAL
OFFICE OF THE ISSUER HEREOF, AND NO TRANSFER OF THESE SHARES SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH
LOCK-UP AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
7. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the heirs, successors and assigns of each of the parties
hereto.
IN WITNESS WHEREOF the parties have entered into this Lock-Up Agreement
as of the day and year first above written.
"COMPANY" "STOCKHOLDER"
TRAVELNSTORE.COM, INC.,
a California Corporation
By:_____________________________________ ___________________________________
Jim B. Tyner, Chief Executive Officer
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of August 1, 1999, by and between
TRAVELNSTORE.COM, INC., a California corporation (the "Company") and Jim Tyner,
("Employee").
1. EMPLOYMENT. The Company hereby employs Employee to render exclusive and
full-time services subject to the terms, conditions and provisions of this
Agreement. Employee shall be an officer of the Company and shall have the title
"Chairman and Chief Executive Officer". Employee shall render his services at
such places in Camarillo, California and as the Company shall designate from
time to time
2. ACCEPTANCE OF EMPLOYMENT. Employee hereby accepts employment by the
Company subject to the terms, conditions and provisions of this Agreement, and
agrees to devote his entire working time and attention and best talents and
abilities exclusively to the service of the Company as the Company may direct
during the term hereof. It is expressly understood and agreed that in the
performance of his duties and obligations hereunder, Employee shall at all times
be subject to the control and direction of the Company's Board of Directors.
3. TERM. Notwithstanding the date on which this Agreement is actually
executed by the Company and Employee or the date on which Employee is actually
elected Chairman and Chief Executive Officer, the term of this Agreement shall
begin as of July 1, 1999, and shall continue until June 30, 2000, unless sooner
terminated as hereinafter provided. In the event that Employee shall continue in
the full-time employment of the Company after June 30, 2000, such continued
employment shall be subject to the terms and conditions of this Agreement. The
term of this Agreement shall include the period during which Employee in fact so
continues in such employment.
4. DUTIES. In his capacity as Chairman, he shall conduct all meetings of
the Board of Directors and Shareholders, interface with all Directors on
corporate matters between Board meetings, and be responsible for the conduct and
integrity of the Company in corporate matters. He will interface with all Board
Committees, recommend all executive officer appointments, interface with
attorneys, accountants and other professional, corporate level consultants and
recruit and recommend outside directors for election to the Board.
4.1 EXCLUSIVE EMPLOYMENT. Employee shall devote his full business
time and effort during normal business hours to the business and affairs of the
Company. Employee shall not be involved in any business activities other than
those performed for the Company except as shall be permitted by the Board of
Directors of the Company, as evidenced by resolution of the Board of Directors.
Nothing in this Section shall prevent Employee from making passive financial
investments. For purposes of this Agreement, "full business time" shall mean an
average minimum of forty (40) hours per week as such weekly average shall be
determined each month.
4.2 SERVICES. Employee shall perform the duties of the Chairman and
Chief Executive Officer of the Company, as defined in the Company's Bylaws in
effect from time to time.
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5. COMPENSATION.
5.1 SALARY. In full consideration for the services to be rendered by
Employee and in complete discharge of its salary obligations hereunder, the
Company shall pay to Employee and Employee shall accept from the Company the
following (subject to all withholding requirements which may be imposed by
applicable federal, state or local authorities):
5.1.1 a salary equal to Eighty-four Thousand Dollars
($84,000.00) per year, which salary shall be paid in accordance with the
Company's normal payment procedures;
5.1.2 reimbursement on a monthly basis for all reasonable
expenses incurred in connection with the performance of duties under this
Agreement, provided that such expenses are documented and approved by the
Company in each instance;
5.1.3 such fringe benefits (such as paid vacations and
participation in medical insurance plans and employee benefit plans) as may be
authorized from time to time by the Board of Directors and as are generally
available to all executive officers and senior employees of the Company; and
5.1.4 such other benefits (if any) as may be authorized from
time to time by the Board of Directors of the Company and as are generally
available to all executive officers and senior employees of the Company.
5.2 STOCK OPTION PLAN. Employee shall be eligible to participate in
the Company's 1997 Stock Option Plan and all other stock option, stock bonus and
other incentive plans here or hereafter adopted by the Company, and in which
executive officers and senior employees of the Company generally are eligible to
participate.
5.3 BONUS. Promptly after the end of each fiscal year, but in no
event later than June 30, the Company shall review Employee's performance during
such fiscal year and shall determine whether the Company shall pay Employee a
bonus with respect to such fiscal year and, if so, the amount of any such bonus.
Employee acknowledges and agrees that nothing in this Agreement or the Company's
general policies shall require the Company to pay Employee a bonus for any
fiscal year, to pay Employee a bonus in particular amount or to pay Employee a
bonus by reason of the Company's payment of a bonus to any other employees of
the Company. Notwithstanding anything in this Agreement to the contrary, the
Company shall have no obligation to pay Employee any bonus for any fiscal year
unless the amount and determination to pay the bonus has been approved by the
Board of Directors of the Company.
5.4 ANNUAL REVIEW. At the end of each fiscal year of the Company,
the Company's Board of Directors shall review the salary and other benefits
payable and provided to Employee under this Agreement and shall adjust such
compensation and benefits effective as of the first day of the succeeding fiscal
year to reflect employee's performance during the just-ended fiscal year.
6. POLICIES AND REGULATIONS. Employee shall observe, comply with and be
bound by all of the policies, rules and regulations established by the Company
with respect to its employees and otherwise, all of which are subject to change
by the Company from time to time.
7. TERMINATION.
7.1 TERMINATION BY THE COMPANY. The Company may terminate this
Agreement by
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giving to Employee thirty (30) days prior written notice of the resolution of
the Company's Board of Directors to discharge Employee for "cause". For purposes
of this Section, the term "cause" shall mean and include only (a) conviction of
or confession by Employee to theft, fraud, or embezzlement against the Company;
(b) Employee's refusal or failure, after specific notice and demand by the
Company, to diligently perform services for the Company as required by Section
hereof; and (c) the incapacity or disability of Employee, as a result of which
Employee is prevented from fully performing Employee's services under this
Agreement for a consecutive period of sixty (60) days or longer or an aggregate
of ninety (90) days or more during any twelve-month period. This Agreement shall
terminate automatically at the end of such 30-day period and the Company shall
have no further obligation to give Employee any further notice of termination.
7.2 TERMINATION BY EMPLOYEE. Employee may terminate this Agreement
for "cause" by giving the Company thirty (30) days prior written notice of
employee's intent to terminate his employment. For purposes of this Section, the
term "cause" shall include, but not be limited to the Company's breach or
failure to perform any of its material obligations under this Agreement. At the
end of such 30-day period, the Company's obligations to Employee under this
Agreement shall cease; except that the Company shall be required to pay Employee
any compensation that may be owing for services rendered under this Agreement
prior to the date of termination.
7.3 EMPLOYEE'S DEATH. This Agreement shall terminate automatically
as of the date of Employee's death.
7.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement and except as otherwise specifically provided in this Agreement, the
Company shall be released and discharged of and from all obligations under this
Agreement except for its obligation to pay to Employee monies due and owing to
Employee with respect to services performed prior to the date of termination of
this Agreement.
8. SUCCESSORS. This Agreement shall inure to the benefit of the Company's
successors, assigns, grantees, and its affiliated, subsidiary, and parent
companies. The Company may assign this Agreement and grant its rights hereunder
in whole or in part to any affiliate, subsidiary or parent of the Company, to
its successor or successors, or to a corporation with which it may be merged,
consolidated, or combined, or to a corporation which may acquire all or a major
portion of the Company's assets; provided that no such assignment shall be
effective unless and until any such assignee shall expressly assume all of the
Company's obligations hereunder.
9. CONFIDENTIAL INFORMATION.
9.1 CONFIDENTIALITY. Employee shall not, either during the term of
this Agreement or thereafter, except in the proper course of his performance of
services under this Agreement, use or divulge, publish or disclose to any
person, firm or company whomsoever any confidential information of the Company
or any of its affiliate, subsidiary, or parent companies which he has heretofore
received or obtained or hereafter receives or obtains, in relation to (a) the
earnings, profits, costs, expenses or other financial aspects of the Company or
such other company, (b) the clients, customer lists, or marketing practices of
the Company or such other company, or (c) any other confidential information of
the Company or such other company. The term "confidential information" shall
mean all that information which here or hereafter is not generally known and
which is confidential or proprietary to the Company or such other company. All
information disclosed to Employee, or which Employee may obtain or have access
to by reason of his employment under this Agreement, whether such information is
originated by Employee or by others, which Employee reasonably should believe to
be confidential information, or
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which is treated by the Company as confidential information, shall be treated
for all purposes under this Agreement as confidential information. Immediately
upon termination of his employment hereunder Employee shall return to the
Company all records, files, documents and other materials (in whatever form or
media) and all copies thereof, which contain or relate to any confidential
information of the Company.
9.2 OWNERSHIP OF CONFIDENTIAL INFORMATION. Employee hereby
acknowledges that all Confidential Information is the property of the Company.
9.3 INJUNCTIVE RELIEF. Employee hereby acknowledges and agrees that
it would be difficult to fully compensate the Company for damages for a breach
or threatened breach of any of the provisions of Sections 10.1 and 10.2 or
hereof. Accordingly, Employee specifically agrees that the Company shall be
entitled to temporary and permanent injunctive relief to enforce the provisions
of Sections 10.1 and 10.2 and hereof and that such relief may be granted without
the necessity of proving actual damages. The foregoing provision with respect to
injunctive relief shall not, however, prohibit the Company from pursuing any
other rights or remedies available to the Company for such breach or threatened
breach, including, but not limited to, the recovery of damages from Employee or
any third parties.
10. MISCELLANEOUS PROVISIONS.
10.1 NOTICES. Any notice given pursuant to this Agreement may be
served personally on the party to be notified or may be mailed, with postage
thereon fully prepaid, by certified or registered mail with return receipt
requested, addressed to the person at the address set forth on the signature
page of this Agreement, or at such other address as such party may from time to
time designate in writing. Any notice shall be deemed delivered when given, if
personally served, and ten (10) business days after mailing, if mailed.
10.2 WAIVERS. All rights and remedies of the parties hereto are
separate and cumulative, and no one of them, whether exercised or not, shall be
deemed to limit or exclude any other rights or remedies which the parties hereto
may have. Neither party hereto shall be deemed to waive any rights or remedies
under this Agreement unless such waiver be in writing and signed by such party.
No delay or omission on the part of either party hereto in exercising any right
or remedy shall operate as a waiver of such right or remedy or any other right
or remedy. A waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any future
occasion.
10.3 SEVERABILITY. If any provision or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions and
portions thereof shall nevertheless be given and continue in full force and
effect.
10.4 SECTION HEADINGS. Section headings contained in this Agreement
are for convenience only and are not a part of this Agreement and do not in any
way limit or modify the provisions of this Agreement.
10.5 SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding anything to the
contrary contained herein, in the event of any termination of this Agreement,
the Company shall retain all of its rights under Sections 8.1, 8.2, 8.3 and 8.4,
and hereof.
10.6 AUTHORIZED REPRESENTATIVE OF COMPANY. Although Employee is an
officer of the
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Company, any and all actions and decisions to be taken or made by the Company
under this Agreement or with respect to the employment relationship described in
this Agreement, and any and all consents, approvals and agreements permitted or
required to be given or made on the part of The Company under this Agreement,
shall be made and accomplished by the Company only through the actions taken, in
writing, of its Chief Executive Officer or such other person or persons as the
Board of Directors of the Company may from time to time designate.
10.7 ARBITRATION. Except for any action for specific performance or
injunctive or other equitable relief, any controversy or claim between the
Company and Employee involving the construction or application of any of the
terms, provisions or conditions of this Agreement shall be settled by
arbitration conducted in the City of Camarillo in accordance with, and by an
arbitrator appointed pursuant to, the Rules of the American Arbitration
Association in effect at the time, and judgment upon the award rendered pursuant
thereto may be entered in any court having jurisdiction hereof, and all rights
or remedies of the parties hereto to the contrary are hereby expressly waived.
The arbitration will be conducted in private, and will not be open to the public
or the media. The testimony and other evidence presented, and the results of the
arbitration, unless otherwise agreed to by both parties, are confidential and
may not be made public or reported by any news agency or legal publisher or
service.
10.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto, and supersedes any prior written or
oral agreements between them respecting the subject matter contained herein.
There are no representations, agreements, arrangements, or understandings,
either oral or written, between or among any of the parties relating to the
subject matter of this Agreement which are not fully expressed herein.
10.9 AMENDMENT. This Agreement may be amended only in writing duly
executed by all of the parties hereto.
10.10 GOVERNING LAW. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties with respect
thereto shall be governed by the laws of the State of California.
10.11 ATTORNEY'S FEES. In any arbitration, suit or other action
between the parties seeking enforcement of any of the terms and provisions of
this Agreement, the prevailing party in such arbitration, suit or other action
shall be awarded, in addition to damages, injunctive or other relief, its
reasonable costs and expenses, not limited to taxable costs, and a reasonable
attorney's fees.
(Signatures appear on the following page)
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<PAGE> 6
IN WITNESS WHEREOF, the parties have entered into this Employment
Agreement as of the day and year first above written.
"Company" "Employee"
TRAVELNSTORE.COM, INC.
By: /s/ JOHN R. TOAL /s/ JIM TYNER
------------------------------ ------------------------------
John R. Toal, President Jim Tyner
ADDRESS FOR NOTICE ADDRESS FOR NOTICE
1320 Flynn Road, Suite 402 _____________________________
Camarillo, California 93012 _____________________________
Attn: President
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<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of August 1, 1999, by and between
TRAVELNSTORE.COM, INC., a California corporation (the "Company") and John Toal,
("Employee").
1. EMPLOYMENT. The Company hereby employs Employee to render exclusive and
full-time services subject to the terms, conditions and provisions of this
Agreement. Employee shall be an officer of the Company and shall have the title
"President". Employee shall render his services at such places in Camarillo,
California and as the Company shall designate from time to time
2. ACCEPTANCE OF EMPLOYMENT. Employee hereby accepts employment by the
Company subject to the terms, conditions and provisions of this Agreement, and
agrees to devote his entire working time and attention and best talents and
abilities exclusively to the service of the Company as the Company may direct
during the term hereof. It is expressly understood and agreed that in the
performance of his duties and obligations hereunder, Employee shall at all times
be subject to the control and direction of the Company's Board of Directors.
3. TERM. Notwithstanding the date on which this Agreement is actually
executed by the Company and Employee or the date on which Employee is actually
elected President, the term of this Agreement shall begin as of July 1, 1999,
and shall continue until June 30, 2000, unless sooner terminated as hereinafter
provided. In the event that Employee shall continue in the full-time employment
of the Company after June 30, 2000, such continued employment shall be subject
to the terms and conditions of this Agreement. The term of this Agreement shall
include the period during which Employee in fact so continues in such
employment.
4. DUTIES. In his capacity as President, he shall assist the Chief
Executive Officer, at his directions in the execution of the Company's business
plan.
4.1 EXCLUSIVE EMPLOYMENT. Employee shall devote his full business
time and effort during normal business hours to the business and affairs of the
Company. Employee shall not be involved in any business activities other than
those performed for the Company except as shall be permitted by the Board of
Directors of the Company, as evidenced by resolution of the Board of Directors.
Nothing in this Section shall prevent Employee from making passive financial
investments. For purposes of this Agreement, "full business time" shall mean an
average minimum of forty (40) hours per week as such weekly average shall be
determined each month.
4.2 SERVICES. Employee shall perform the duties of the President of
the Company, as defined in the Company's Bylaws in effect from time to time.
5. COMPENSATION.
5.1 SALARY. In full consideration for the services to be rendered by
Employee and in complete discharge of its salary obligations hereunder, the
Company shall pay to Employee and Employee shall accept from the Company the
following (subject to all withholding requirements which may be imposed by
applicable federal, state or local authorities):
5.1.1 a salary equal to Seventy-two Thousand Dollars
($72,000.00) per year, which salary shall be paid in accordance with the
Company's normal payment procedures;
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5.1.2 reimbursement on a monthly basis for all reasonable
expenses incurred in connection with the performance of duties under this
Agreement, provided that such expenses are documented and approved by the
Company in each instance;
5.1.3 such fringe benefits (such as paid vacations and
participation in medical insurance plans and employee benefit plans) as may be
authorized from time to time by the Board of Directors and as are generally
available to all executive officers and senior employees of the Company; and
5.1.4 such other benefits (if any) as may be authorized from
time to time by the Board of Directors of the Company and as are generally
available to all executive officers and senior employees of the Company.
5.2 STOCK OPTION PLAN. Employee shall be eligible to participate in
the Company's 1997 Stock Option Plan and all other stock option, stock bonus and
other incentive plans here or hereafter adopted by the Company, and in which
executive officers and senior employees of the Company generally are eligible to
participate.
5.3 BONUS. Promptly after the end of each fiscal year, but in no
event later than June 30, the Company shall review Employee's performance during
such fiscal year and shall determine whether the Company shall pay Employee a
bonus with respect to such fiscal year and, if so, the amount of any such bonus.
Employee acknowledges and agrees that nothing in this Agreement or the Company's
general policies shall require the Company to pay Employee a bonus for any
fiscal year, to pay Employee a bonus in particular amount or to pay Employee a
bonus by reason of the Company's payment of a bonus to any other employees of
the Company. Notwithstanding anything in this Agreement to the contrary, the
Company shall have no obligation to pay Employee any bonus for any fiscal year
unless the amount and determination to pay the bonus has been approved by the
Board of Directors of the Company.
5.4 ANNUAL REVIEW. At the end of each fiscal year of the Company,
the Company's Board of Directors shall review the salary and other benefits
payable and provided to Employee under this Agreement and shall adjust such
compensation and benefits effective as of the first day of the succeeding fiscal
year to reflect employee's performance during the just-ended fiscal year.
6. POLICIES AND REGULATIONS. Employee shall observe, comply with and be
bound by all of the policies, rules and regulations established by the Company
with respect to its employees and otherwise, all of which are subject to change
by the Company from time to time.
7. TERMINATION.
7.1 TERMINATION BY THE COMPANY. The Company may terminate this
Agreement by giving to Employee thirty (30) days prior written notice of the
resolution of the Company's Board of Directors to discharge Employee for
"cause". For purposes of this Section, the term "cause" shall mean and include
only (a) conviction of or confession by Employee to theft, fraud, or
embezzlement against the Company; (b) Employee's refusal or failure, after
specific notice and demand by the Company, to diligently perform services for
the Company as required by Section hereof; and (c) the incapacity or disability
of Employee, as a result of which Employee is prevented from fully performing
Employee's services under this Agreement for a consecutive period of sixty (60)
days or longer or an aggregate of ninety (90) days or more during any
twelve-month period. This Agreement shall terminate automatically at the end of
such 30-day period and the Company shall have no further obligation to give
Employee any further notice of termination.
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7.2 TERMINATION BY EMPLOYEE. Employee may terminate this Agreement
for "cause" by giving the Company thirty (30) days prior written notice of
employee's intent to terminate his employment. For purposes of this Section ,
the term "cause" shall include, but not be limited to the Company's breach or
failure to perform any of its material obligations under this Agreement. At the
end of such 30-day period, the Company's obligations to Employee under this
Agreement shall cease; except that the Company shall be required to pay Employee
any compensation that may be owing for services rendered under this Agreement
prior to the date of termination.
7.3 EMPLOYEE'S DEATH. This Agreement shall terminate automatically
as of the date of Employee's death.
7.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement and except as otherwise specifically provided in this Agreement, the
Company shall be released and discharged of and from all obligations under this
Agreement except for its obligation to pay to Employee monies due and owing to
Employee with respect to services performed prior to the date of termination of
this Agreement.
8. SUCCESSORS. This Agreement shall inure to the benefit of the Company's
successors, assigns, grantees, and its affiliated, subsidiary, and parent
companies. The Company may assign this Agreement and grant its rights hereunder
in whole or in part to any affiliate, subsidiary or parent of the Company, to
its successor or successors, or to a corporation with which it may be merged,
consolidated, or combined, or to a corporation which may acquire all or a major
portion of the Company's assets; provided that no such assignment shall be
effective unless and until any such assignee shall expressly assume all of the
Company's obligations hereunder.
9. CONFIDENTIAL INFORMATION.
9.1 CONFIDENTIALITY. Employee shall not, either during the term of
this Agreement or thereafter, except in the proper course of his performance of
services under this Agreement, use or divulge, publish or disclose to any
person, firm or company whomsoever any confidential information of the Company
or any of its affiliate, subsidiary, or parent companies which he has heretofore
received or obtained or hereafter receives or obtains, in relation to (a) the
earnings, profits, costs, expenses or other financial aspects of the Company or
such other company, (b) the clients, customer lists, or marketing practices of
the Company or such other company, or (c) any other confidential information of
the Company or such other company. The term "confidential information" shall
mean all that information which here or hereafter is not generally known and
which is confidential or proprietary to the Company or such other company. All
information disclosed to Employee, or which Employee may obtain or have access
to by reason of his employment under this Agreement, whether such information is
originated by Employee or by others, which Employee reasonably should believe to
be confidential information, or which is treated by the Company as confidential
information, shall be treated for all purposes under this Agreement as
confidential information. Immediately upon termination of his employment
hereunder Employee shall return to the Company all records, files, documents and
other materials (in whatever form or media) and all copies thereof, which
contain or relate to any confidential information of the Company.
9.2 OWNERSHIP OF CONFIDENTIAL INFORMATION. Employee hereby
acknowledges that all Confidential Information is the property of the Company.
9.3 INJUNCTIVE RELIEF. Employee hereby acknowledges and agrees that
it would be difficult to fully compensate the Company for damages for a breach
or threatened breach of any of the provisions of
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Sections 10.1 and 10.2 or hereof. Accordingly, Employee specifically agrees that
the Company shall be entitled to temporary and permanent injunctive relief to
enforce the provisions of Sections 10.1 and 10.2 and hereof and that such relief
may be granted without the necessity of proving actual damages. The foregoing
provision with respect to injunctive relief shall not, however, prohibit the
Company from pursuing any other rights or remedies available to the Company for
such breach or threatened breach, including, but not limited to, the recovery of
damages from Employee or any third parties.
10. MISCELLANEOUS PROVISIONS.
10.1 NOTICES. Any notice given pursuant to this Agreement may be
served personally on the party to be notified or may be mailed, with postage
thereon fully prepaid, by certified or registered mail with return receipt
requested, addressed to the person at the address set forth on the signature
page of this Agreement, or at such other address as such party may from time to
time designate in writing. Any notice shall be deemed delivered when given, if
personally served, and ten (10) business days after mailing, if mailed.
10.2 WAIVERS. All rights and remedies of the parties hereto are
separate and cumulative, and no one of them, whether exercised or not, shall be
deemed to limit or exclude any other rights or remedies which the parties hereto
may have. Neither party hereto shall be deemed to waive any rights or remedies
under this Agreement unless such waiver be in writing and signed by such party.
No delay or omission on the part of either party hereto in exercising any right
or remedy shall operate as a waiver of such right or remedy or any other right
or remedy. A waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any future
occasion.
10.3 SEVERABILITY. If any provision or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions and
portions thereof shall nevertheless be given and continue in full force and
effect.
10.4 SECTION HEADINGS. Section headings contained in this Agreement
are for convenience only and are not a part of this Agreement and do not in any
way limit or modify the provisions of this Agreement.
10.5 SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding anything to the
contrary contained herein, in the event of any termination of this Agreement,
the Company shall retain all of its rights under Sections 8.1, 8.2, 8.3 and 8.4,
and hereof.
10.6 AUTHORIZED REPRESENTATIVE OF COMPANY. Although Employee is an
officer of the Company, any and all actions and decisions to be taken or made by
the Company under this Agreement or with respect to the employment relationship
described in this Agreement, and any and all consents, approvals and agreements
permitted or required to be given or made on the part of The Company under this
Agreement, shall be made and accomplished by the Company only through the
actions taken, in writing, of its Chief Executive Officer or such other person
or persons as the Board of Directors of the Company may from time to time
designate.
10.7 ARBITRATION. Except for any action for specific performance or
injunctive or other equitable relief, any controversy or claim between the
Company and Employee involving the construction or application of any of the
terms, provisions or conditions of this Agreement shall be settled by
arbitration conducted in the City of Camarillo in accordance with, and by an
arbitrator appointed pursuant to, the Rules
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of the American Arbitration Association in effect at the time, and judgment upon
the award rendered pursuant thereto may be entered in any court having
jurisdiction hereof, and all rights or remedies of the parties hereto to the
contrary are hereby expressly waived. The arbitration will be conducted in
private, and will not be open to the public or the media. The testimony and
other evidence presented, and the results of the arbitration, unless otherwise
agreed to by both parties, are confidential and may not be made public or
reported by any news agency or legal publisher or service.
10.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto, and supersedes any prior written or
oral agreements between them respecting the subject matter contained herein.
There are no representations, agreements, arrangements, or understandings,
either oral or written, between or among any of the parties relating to the
subject matter of this Agreement which are not fully expressed herein.
10.9 AMENDMENT. This Agreement may be amended only in writing duly
executed by all of the parties hereto.
10.10 GOVERNING LAW. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties with respect
thereto shall be governed by the laws of the State of California.
10.11. ATTORNEY'S FEES. In any arbitration, suit or other action
between the parties seeking enforcement of any of the terms and provisions of
this Agreement, the prevailing party in such arbitration, suit or other action
shall be awarded, in addition to damages, injunctive or other relief, its
reasonable costs and expenses, not limited to taxable costs, and a reasonable
attorney's fees.
(Signatures appear on the following page)
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IN WITNESS WHEREOF, the parties have entered into this Employment
Agreement as of the day and year first above written.
"Company" "Employee"
TRAVELNSTORE.COM, INC.
By: /s/ JIM TYNER /s/ JOHN R. TOAL
---------------------------- -----------------------------
Jim Tyner, CEO John R. Toal
ADDRESS FOR NOTICE ADDRESS FOR NOTICE
1320 Flynn Road, Suite 402 _____________________________
Camarillo, California 93012
Attn: CEO _____________________________
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Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of August 1, 1999, by and between
TRAVELNSTORE.COM, Inc., a California corporation (the "Company") and Yula Greco,
("Employee").
1. EMPLOYMENT. The Company hereby employs Employee to render
exclusive and full-time services subject to the terms, conditions and provisions
of this Agreement. Employee shall be an officer of the Company and shall have
the title "Senior Vice President and Secretary of the Board". Employee shall
render her services at such places in Camarillo, California and as the Company
shall designate from time to time.
2. ACCEPTANCE OF EMPLOYMENT. Employee hereby accepts employment by
the Company subject to the terms, conditions and provisions of this Agreement,
and agrees to devote her entire working time and attention and best talents and
abilities exclusively to the service of the Company as the Company may direct
during the term hereof. It is expressly understood and agreed that in the
performance of her duties and obligations hereunder, Employee shall at all times
be subject to the control and direction of the Company's Board of Directors.
3. TERM. Notwithstanding the date on which this Agreement is
actually executed by the Company and Employee or the date on which Employee is
actually elected Senior Vice President and Secretary of the Board, the term of
this Agreement shall begin as of July 1, 1999, and shall continue until June 30,
2000, unless sooner terminated as hereinafter provided. In the event that
Employee shall continue in the full-time employment of the Company after June
30, 2000, such continued employment shall be subject to the terms and conditions
of this Agreement, and the term of this Agreement shall include the period
during which Employee in fact so continues in such employment.
4. DUTIES. In her capacity as Senior Vice President she shall
assist the Chief Executive Officer and President in the execution of the
Company's business plan. In her capacity as Secretary of the Board she shall
assist the Chairman in the operation of the Corporation and the conduct of all
official meetings of the Board and the Shareholders. She will maintain the
Corporate books and minutes and interface with professional services firms in
regard to corporate matters.
4.1 EXCLUSIVE EMPLOYMENT. Employee shall devote her full
business time and effort during normal business hours to the business and
affairs of the Company. Employee shall not be involved in any business
activities other than those performed for the Company except as shall be
permitted by the Board of Directors of the Company, as evidenced by resolution
of the Board of Directors. Nothing in this Section shall prevent Employee from
making passive financial investments. For purposes of this Agreement, "full
business time" shall mean an average minimum of forty (40) hours per week as
such weekly average shall be determined each month.
4.2 SERVICES. Employee shall perform the duties of the
Senior Vice President and Secretary of the Board of the Company, as defined in
the Company's Bylaws in effect from time to time.
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5. COMPENSATION
5.1 SALARY. In full consideration for the services to be
rendered by Employee and in complete discharge of its salary obligations
hereunder, the Company shall pay to Employee and Employee shall accept from the
Company the following (subject to all withholding requirements which may be
imposed by applicable federal, state or local authorities):
5.1.1 a salary equal to Seventy-two Thousand Dollars
($72,000.00) per year, which salary shall be paid in accordance with the
Company's normal payment procedures;
5.1.2 reimbursement on a monthly basis for all
reasonable expenses incurred in connection with the performance of duties under
this Agreement, provided that such expenses are documented and approved by the
Company in each instance;
5.1.3 such fringe benefits (such as paid vacations and
participation in medical insurance plans and employee benefit plans) as may be
authorized from time to time by the Board of Directors and as are generally
available to all executive officers and senior employees of the Company; and
5.1.4 such other benefits (if any) as may be
authorized from time to time by the Board of Directors of the Company and as are
generally available to all executive officers and senior employees of the
Company.
5.2 STOCK OPTION PLAN. Employee shall be eligible to
participate in the Company's 1997 Stock Option Plan and all other stock option,
stock bonus and other incentive plans here or hereafter adopted by the Company,
and in which executive officers and senior employees of the Company generally
are eligible to participate.
5.3 BONUS. Promptly after the end of each fiscal year, but
in no event later than June 30, the Company shall review Employee's performance
during such fiscal year and shall determine whether the Company shall pay
Employee a bonus with respect to such fiscal year and, if so, the amount of any
such bonus. Employee acknowledges and agrees that nothing in this Agreement or
the Company's general policies shall require the Company to pay Employee a bonus
for any fiscal year, to pay Employee a bonus in particular amount or to pay
Employee a bonus by reason of the Company's payment of a bonus to any other
employees of the Company. Notwithstanding anything in this Agreement to the
contrary, the Company shall have no obligation to pay Employee any bonus for any
fiscal year unless the amount and determination to pay the bonus has been
approved by the Board of Directors of the Company.
5.4 ANNUAL REVIEW. At the end of each fiscal year of the
Company, the Company's Board of Directors shall review the salary and other
benefits payable and provided to Employee under this Agreement and shall adjust
such compensation and benefits effective as of the first day of the succeeding
fiscal year to reflect employee's performance during the just-ended fiscal year.
6. POLICIES AND REGULATIONS. Employee shall observe, comply with
and be bound by all of the policies, rules and regulations established by the
Company with respect to its employees and otherwise, all of which are subject to
change by the Company from time to time.
7. TERMINATION.
7.1 TERMINATION BY THE COMPANY. The Company may terminate
this Agreement by giving to Employee thirty (30) days prior written notice of
the resolution of the Company's Board of Directors to discharge Employee for
"cause". For purposes of this Section , the term "cause" shall mean and include
only (a) conviction
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of or confession by Employee to theft, fraud, or embezzlement against the
Company; (b) Employee's refusal or failure, after specific notice and demand by
the Company, to diligently perform services for the Company as required by
Section 2 hereof; and (c) the incapacity or disability of Employee, as a result
of which Employee is prevented from fully performing Employee's services under
this Agreement for a consecutive period of sixty (60) days or longer or an
aggregate of ninety (90) days or more during any twelve-month period. This
Agreement shall terminate automatically at the end of such 30-day period and the
Company shall have no further obligation to give Employee any further notice of
termination.
7.2 TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement for "cause" by giving the Company thirty (30) days prior written
notice of employee's intent to terminate her employment. For purposes of this
Section, the term "cause" shall include, but not be limited to the Company's
breach or failure to perform any of its material obligations under this
Agreement. At the end of such 30-day period, the Company's obligations to
Employee under this Agreement shall cease; except that the Company shall be
required to pay Employee any compensation that may be owing for services
rendered under this Agreement prior to the date of termination.
7.3 EMPLOYEE'S DEATH. This Agreement shall terminate
automatically as of the date of Employee's death.
7.4 EFFECT OF TERMINATION. In the event of the termination
of this Agreement and except as otherwise specifically provided in this
Agreement, the Company shall be released and discharged of and from all
obligations under this Agreement except for its obligation to pay to Employee
monies due and owing to Employee with respect to services performed prior to the
date of termination of this Agreement.
8. SUCCESSORS. This Agreement shall inure to the benefit of the
Company's successors, assigns, grantees, and its affiliated, subsidiary, and
parent companies. The Company may assign this Agreement and grant its rights
hereunder in whole or in part to any affiliate, subsidiary or parent of the
Company, to its successor or successors, or to a corporation with which it may
be merged, consolidated, or combined, or to a corporation which may acquire all
or a major portion of the Company's assets; provided that no such assignment
shall be effective unless and until any such assignee shall expressly assume all
of the Company's obligations hereunder.
9. CONFIDENTIAL INFORMATION.
9.1 CONFIDENTIALITY. Employee shall not, either during the
term of this Agreement or thereafter, except in the proper course of his
performance of services under this Agreement, use or divulge, publish or
disclose to any person, firm or company whomsoever any confidential information
of the Company or any of its affiliate, subsidiary, or parent companies which
she has heretofore received or obtained or hereafter receives or obtains, in
relation to (a) the earnings, profits, costs, expenses or other financial
aspects of the Company or such other company, (b) the clients, customer lists,
or marketing practices of the Company or such other company, or (c) any other
confidential information of the Company or such other company. The term
"confidential information" shall mean all that information which here or
hereafter is not generally known and which is confidential or proprietary to the
Company or such other company. All information disclosed to Employee, or which
Employee may obtain or have access to by reason of his employment under this
Agreement, whether such information is originated by Employee or by others,
which Employee reasonably should believe to be confidential information, or
which is treated by the Company as confidential information, shall be treated
for all purposes under this Agreement as confidential information. Immediately
upon termination of his employment hereunder Employee shall return to the
Company all records, files, documents and other materials (in whatever form or
media) and all copies thereof, which contain or relate to any confidential
information of the Company.
9.2 OWNERSHIP OF CONFIDENTIAL INFORMATION. Employee hereby
acknowledges that all
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Confidential Information is the property of the Company.
9.3 INJUNCTIVE RELIEF. Employee hereby acknowledges and
agrees that it would be difficult to fully compensate the Company for damages
for a breach or threatened breach of any of the provisions of Section 10.1 and
10.2 or hereof. Accordingly, Employee specifically agrees that the Company shall
be entitled to temporary and permanent injunctive relief to enforce the
provisions of Section 10.1 and 10.2 and hereof and that such relief may be
granted without the necessity of proving actual damages. The foregoing provision
with respect to injunctive relief shall not, however, prohibit the Company from
pursuing any other rights or remedies available to the Company for such breach
or threatened breach, including, but not limited to, the recovery of damages
from Employee or any third parties.
10. MISCELLANEOUS PROVISIONS.
10.1 NOTICES. Any notice given pursuant to this Agreement may
be served personally on the party to be notified or may be mailed, with postage
thereon fully prepaid, by certified or registered mail with return receipt
requested, addressed to the person at the address set forth on the signature
page of this Agreement, or at such other address as such party may from time to
time designate in writing. Any notice shall be deemed delivered when given, if
personally served, and ten (10) business days after mailing, if mailed.
10.2 WAIVERS. All rights and remedies of the parties hereto
are separate and cumulative, and no one of them, whether exercised or not, shall
be deemed to limit or exclude any other rights or remedies which the parties
hereto may have. Neither party hereto shall be deemed to waive any rights or
remedies under this Agreement unless such waiver is in writing and signed by
such party. No delay or omission on the part of either party hereto in
exercising any right or remedy shall operate as a waiver of such right or remedy
or any other right or remedy. A waiver of any right or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right or
remedy on any future occasion.
10.3 SEVERABILITY. If any provision or portion thereof of
this Agreement is held to be unenforceable or invalid, the remaining provisions
and portions thereof shall nevertheless be given and continue in full force and
effect.
10.4 SECTION HEADINGS. Section headings contained in this
Agreement are for convenience only and are not a part of this Agreement and do
not in any way limit or modify the provisions of this Agreement.
10.5 SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding anything
to the contrary contained herein, in the event of any termination of this
Agreement, the Company shall retain all of its rights under Sections 8.1, 8.2,
8.3, and 8.4, and hereof.
10.6 AUTHORIZED REPRESENTATIVE OF COMPANY. Although Employee
is an officer of the Company, any and all actions and decisions to be taken or
made by the Company under this Agreement or with respect to the employment
relationship described in this Agreement, and any and all consents, approvals
and agreements permitted or required to be given or made on the part of The
Company under this Agreement, shall be made and accomplished by the Company only
through the actions taken, in writing, of its Chief Executive Officer or such
other person or persons as the Board of Directors of the Company may from time
to time designate.
10.7 ARBITRATION. Except for any action for specific
performance or injunctive or other equitable relief, any controversy or claim
between the Company and Employee involving the construction or application of
any of the terms, provisions or conditions of this Agreement shall be settled by
arbitration conducted in the City of Camarillo in accordance with, and by an
arbitrator appointed pursuant to, the Rules of the American
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Arbitration Association in effect at the time, and judgment upon the award
rendered pursuant thereto may be entered in any court having jurisdiction
hereof, and all rights or remedies of the parties hereto to the contrary are
hereby expressly waived. The arbitration will be conducted in private, and will
not be open to the public or the media. The testimony and other evidence
presented, and the results of the arbitration, unless otherwise agreed to by
both parties, are confidential and may not be made public or reported by any
news agency or legal publisher or service.
10.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto, and supersedes any prior written or
oral agreements between them respecting the subject matter contained herein.
There are no representations, agreements, arrangements, or understandings,
either oral or written, between or among any of the parties relating to the
subject matter of this Agreement which are not fully expressed herein.
10.9 AMENDMENT. This Agreement may be amended only in writing
duly executed by all of the parties hereto.
10.10 GOVERNING LAW. All questions with respect to the
construction of this Agreement and the rights and liabilities of the parties
with respect thereto shall be governed by the laws of the State of California.
10.11 ATTORNEY'S FEES. In any arbitration, suit or other
action between the parties seeking enforcement of any of the terms and
provisions of this Agreement, the prevailing party in such arbitration, suit or
other action shall be awarded, in addition to damages, injunctive or other
relief, its reasonable costs and expenses, not limited to taxable costs, and a
reasonable attorney's fees.
(Signatures appear on the following page)
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IN WITNESS WHEREOF, the parties have entered into this Employment
Agreement as of the day and year first above written.
"Company" "Employee"
TRAVELNSTORE.COM, INC.
By: /s/ JIM TYNER /s/ YULA GREEB
--------------------------- ------------------------------------
Jim Tyner, CEO Yula Greeb
ADDRESS FOR NOTICE ADDRESS FOR NOTICE
1320 Flynn Road ____________________________________
Camarillo, California 93012 ____________________________________
Attn: CEO
6
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EXHIBIT 10.13
LOCK-UP AGREEMENT
(Employee)
This Lock-Up Agreement (the "Agreement") is made and entered as of
_____________, 1999, by and among TRAVELNSTORE.COM, INC., a California
corporation (the "Company"), and _____________ (the "Stockholder") with
reference to the following facts.
A. Stockholder is employed as an officer of the Company.
B. The Company has filed a Registration Statement on Form SB-2
(Registration No. 333-78443) (the "Registration Statement") covering the offer
and sale of up to 1,000,000 shares of its Common Stock (the "Offering).
C. The parties agree that it is important to the success of the
Offering that Stockholder agree to the restrictions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, Stockholder hereby agrees for the benefit of the Company as
follows:
1. Restriction. Stockholder hereby agrees that, during the term of this
Agreement and except as otherwise specifically provided in this Agreement,
Stockholder shall not, with the prior written consent of the Company:
a. offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option to contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock beneficially owned by Stockholder as of
the effective date of the Registration Statement or any
securities convertible into or exercisable or exchangeable for
Common Stock (collectively the "Shares"); or
b. enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the Shares;
regardless of whether or not any transaction described in clause (a) or (b)
above is to be settled by delivery of shares of Common Stock or other
securities, in cash or otherwise. The Company shall have no obligation to
consent to a sale or transfer of any of the shares in a transaction described in
clause (a) or (b) above, unless, prior to such sale or transfer, the transferee
acknowledges in writing to the Company that he is recording and holding the
Shares subject to the provisions of this Agreement. This Section shall not apply
to transactions relating to shares of Common Stock or other securities acquired
in open market transactions after the completion of the Offering.
2. During Employment. The following restrictions shall apply during the
period that the Stockholder is employed as an officer of the Company.
2.1 First Two Years. During the period beginning as of the effective
date of the Registration Statement and ending on the second anniversary of such
effective date, Stockholder shall not sell, during any calendar quarter, more
than two and one-half percent (2.5%) of the total number of shares of Common
Stock of the Company beneficially owned by Stockholder as of the effective date
of the Registration Statement without the prior written consent of the Company.
<PAGE> 2
2.2 Thereafter. During the term of this Agreement from and after the
second anniversary of the effective date of the Registration Statement,
Stockholder shall not sell, during any calendar quarter, more than five percent
(5.0%) of the Shares without the prior written consent of the Company.
2.3 Termination or Resignation. Upon the termination or resignation
of Stockholder as an officer of the Company, the provisions of this Agreement
shall continue to apply with the same force and effect except for Section 2.2,
above, and during the term of this Agreement from and after the second
anniversary of the effective date of the Registration Statement, Stockholder
shall not sell, during any calendar quarter, more than ten percent (10.0%) of
the Shares without the prior written consent of the Company.
3. Permitted Transfers. The restrictions set forth in Sections 1 and 2
above shall not apply to:
3.1 Corporate Transactions. Nothing in this Agreement shall prohibit
or restrict in any way Stockholder's right to sell any or all of the Shares on
the closing of any of the following transactions: (a) a merger or consolidation
in which the Company is not the surviving corporation (other than a
consolidation or merger with a wholly owned subsidiary of the Company in which
all shares of Common Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same number of shares of common
stock of such subsidiary); (b) the acquisition of eighty percent (80%) or more
of the Company's outstanding capital stock by a person or entity that is not a
principal stockholder; or (c) the acquisition of all or substantially all of the
Company's assets by a person or entity that is not a principal stockholder.
3.2 Subsequent Offering. Notwithstanding anything in Section 1 or 2
above to the contrary, Stockholder may sell Shares in a registered public
offering (a "Subsequent Offering") of the Company's Common Stock which is
effected for the benefit of the Company after the closing of the Offering;
provided that the total number of Shares that Stockholder may sell in a
Subsequent Offering shall not exceed fifteen percent (15%) of the Shares
beneficially owned by Stockholder on the effective date of the Subsequent
Offering.
3.3 Estate Planning Transfers. Notwithstanding anything in this
Agreement to the contrary, Stockholder may transfer any or all of the Shares
either during his or her lifetime or on his or her death by will or intestacy to
his or her immediate family or to a trust with beneficiaries who are exclusively
the undersigned and/or a member or members of his or her immediate family;
provided that no transfer described in this Section shall be effective unless
and until the transferee(s) execute an agreement stating that the transferee(s)
is/are receiving and holding the Shares subject to the provisions of this
Agreement. For purposes of this Section, "immediate family" shall mean and
include only the spouse, lineal descendants, father, mother, brothers or sisters
of the transferor.
4. Term. The term of this Agreement shall begin as of the day and year
first above written (the "Agreement Date") and, unless terminated earlier by the
Company, shall continue until the third anniversary of the Agreement Date. The
Company may, but shall not be obligated to, terminate this Agreement at any time
after the first anniversary of the Agreement Date by delivering to Stockholder
written notice of such termination.
5. Interpretation. The number of Shares "beneficially owned" by Stockholder
at any time shall be determined in accordance with the provisions of Section
13(d) of the Securities Exchange Act of 1934 and the Regulations promulgated
thereunder. The number of Shares beneficially owned by Stockholder
<PAGE> 3
as of the effective date of the Offering shall be appropriately adjusted to
reflect all stock splits, reverse stock splits, stock dividends,
recapitalizations and other changes in the capital stock of the Company effected
after the effective date of the Offering. Promptly after the effective date of
the Offering, Stockholder and the Company shall confirm the number of Shares
beneficially owned by Stockholder as of the effective date of the Offering.
6. Legend. The following legend shall be placed on the face of the stock
certificates representing the Shares:
THE TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A LOCK-UP AGREEMENT DATED
______________, 1999, BETWEEN THE ISSUER AND THE HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE GENERAL
OFFICE OF THE ISSUER HEREOF, AND NO TRANSFER OF THESE SHARES SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH
LOCK-UP AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
7. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the heirs, successors and assigns of each of the parties
hereto.
IN WITNESS WHEREOF the parties have entered into this Lock-Up Agreement
as of the day and year first above written.
"COMPANY" "STOCKHOLDER"
TRAVELNSTORE.COM, INC.,
a California Corporation
By:_____________________________________ __________________________________
Jim B. Tyner, Chief Executive Officer
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 15, 1999, except for Note 12, for which the date
is August 27, 1999 in the Registration Statement (Form SB-2) and related
Prospectus of Travelnstore.com, Inc. for the registration of 1,000,000 shares
of its common stock.
/s/ Farber & Hass LLP
Oxnard, California
August 30, 1999
