<PAGE> 1
Outside front cover
The background of the page includes a large airplane.
The Travelocity.com Inc. logo is on the upper left-hand side of the page.
The Preview Travel, Inc. logo is on the upper right-hand side of the page.
The following text appears in the middle of the page:
Proxy Statement / Prospectus
The merger of Travelocity.com Inc. and Preview Travel, Inc.
Travelocity.com Inc. has applied to have its common stock listed on the Nasdaq
National Market under the symbol "TVLY."
Before you make a decision, we encourage you to carefully read this proxy
statement/prospectus, in particular the "Risk Factors" beginning on page __ of
this proxy statement/prospectus.
Neither the SEC nor any state securities has approved or disapproved the
securities to be issued under this proxy statement/prospectus or determined if
this proxy statement/prospectus or determined if this proxy
statement/prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
This proxy statement/prospectus is dated January __, 2000, and is first being
mailed to stockholders on January __, 2000.
The bottom of the page includes three symbols. The first symbol is an airplane
with an arrow pointing towards it. The second symbol is a car and the third
symbol is a hotel.
<PAGE> 2
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-95757
PREVIEW TRAVEL LOGO
February 4, 2000
Dear Preview Travel Stockholder:
We are pleased to send you this proxy statement/prospectus for a special
meeting of Preview Travel's stockholders. At the meeting, you will be asked to
approve a merger of Preview Travel with Travelocity.com Inc., which is currently
owned by Sabre Holdings Corporation. As a result of the merger, Preview Travel's
separate existence will cease, and you will receive common stock of
Travelocity.com Inc.
You will receive one share of Travelocity.com Inc. common stock for each
share of Preview Travel common stock that you own. In the merger,
Travelocity.com Inc. will issue approximately 14,018,000 shares of its common
stock to Preview Travel stockholders, all of which shares are being registered.
In addition, Sabre will receive shares of Travelocity.com Inc. preferred stock,
which have economic rights equivalent to approximately 3 million shares of
Travelocity.com Inc. common stock. None of the shares of Travelocity.com Inc.
preferred stock are being registered.
Travelocity.com Inc. will be a holding company whose sole asset will be
units in the Travelocity.com partnership that, after the merger, will own and
operate Sabre's Travelocity business and Preview Travel's business. After the
merger, Preview Travel stockholders will own approximately 30% of this
partnership through their ownership of Travelocity.com Inc. common stock. Sabre
will own the remaining 70%. The partnership will be governed by a board of
directors, and Travelocity.com Inc. will have the power to elect a majority of
these directors. The Preview Travel stockholders will hold approximately 30% of
the voting power in Travelocity.com Inc. and Sabre will hold 70% of the voting
power in Travelocity.com Inc.
For a limited period of time after the merger, Travelocity.com Inc. may
require Sabre to invest an additional $50 million in Travelocity.com Inc. at the
market price of Preview Travel common stock at the time of the merger. If
Travelocity.com Inc. requires Sabre to make this investment, Sabre's percentage
ownership of the partnership and its voting power in Travelocity.com Inc. would
increase from approximately 70% to approximately 71%, assuming that the price of
Preview Travel common stock at the time of the merger is $32.6875 per share,
which is a recent price of Preview Travel common stock. The Preview Travel
stockholders' percentage ownership of the Travelocity.com partnership and their
voting power in Travelocity.com Inc. would decrease to approximately 29%.
PREVIEW TRAVEL'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE MERGER AGREEMENT. IN
ADDITION, JAMES J. HORNTHAL, AMERICA ONLINE, INC. AND MEDIA ONE INTERACTIVE
SERVICES, INC. HAVE AGREED TO VOTE ALL SHARES OF PREVIEW TRAVEL COMMON STOCK
THAT THEY BENEFICIALLY OWN IN FAVOR OF THE MERGER AGREEMENT.
Please use this opportunity to take part as a Preview Travel stockholder by
voting at this special meeting. Whether or not you plan to attend, please
complete, sign, date and return the accompanying proxy card in the enclosed
self-addressed stamped envelope to ensure that your shares are voted at the
meeting. YOUR VOTE IS VERY IMPORTANT, SO PLEASE TAKE THE TIME TO VOTE YOUR
SHARES.
Sincerely,
[JIM HORNTHAL SIGNATURE]
James J. Hornthal
Founder and Chairman of the Board
[CHRISTOPHER E. CLOUSER SIGNATURE]
Christopher E. Clouser
President and Chief Executive Officer
<PAGE> 3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 7, 2000
---------------------
To the stockholders of Preview Travel, Inc.:
A special meeting of the stockholders of Preview Travel, Inc. will be held
at the Park Hyatt San Francisco, 333 Battery Street, San Francisco, California
94111, on March 7, 2000, at 10:00 a.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt an Agreement and Plan
of Merger, dated as of October 3, 1999, between Travelocity.com Inc.,
certain of its affiliates and Preview Travel, Inc. providing for the merger
of Preview Travel into Travelocity.com Inc. with Travelocity.com Inc. being
the surviving entity. In the merger, Preview Travel stockholders will
receive one share of Travelocity.com Inc. common stock for each share of
Preview Travel common stock, as described in the attached proxy
statement/prospectus.
2. To conduct such other business as may properly be brought before
the special stockholders meeting or any adjournment or postponement.
Please read this proxy statement/prospectus carefully for a description of
the merger agreement. Only stockholders of record at the close of business on
January 20, 2000 are entitled to notice of, and to vote at, the meeting or any
adjournment or postponement. Under Delaware law, holders of Preview Travel
common stock are not entitled to appraisal rights in connection with the merger.
In accordance with the General Corporation Law of the State of Delaware, Preview
Travel shall make available a complete list of the stockholders of Preview
Travel entitled to vote at the special meeting at Preview Travel's principal
office at least ten days prior to the date of the special meeting.
You are cordially invited to attend the special stockholders meeting.
Whether or not you plan to attend, please act promptly to vote your shares with
respect to the proposals described above. You may vote your shares by
completing, signing, dating and returning the enclosed proxy card as promptly as
possible in the enclosed postage-paid envelope. If you attend the special
stockholders meeting, you may vote your shares in person even if you have
previously submitted a proxy. PLEASE DO NOT SEND YOUR STOCK CERTIFICATE WITH
YOUR PROXY CARD.
By Order of the Board of Directors,
/s/ LEONARD R. STEIN
Leonard R. Stein
Executive Vice President, Business
Affairs and General Counsel,
Corporate Secretary
San Francisco, California
February 4, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER................................ 1
SUMMARY OF ADDITIONAL TERMS............. 8
The Companies......................... 8
Reasons for the Merger................ 8
The Special Stockholders Meeting...... 8
Interests of Directors and Officers in
the Merger......................... 9
Tax Consequences of the Merger........ 9
No Appraisal or Dissenters' Rights.... 9
Accounting Treatment of the Merger.... 9
Opinion of Financial Advisor.......... 10
Per Share Market Price Information.... 10
The Merger Agreement.................. 10
Related Agreements.................... 11
Your Rights as a Stockholder
Will Change........................ 11
Regulatory Matters.................... 11
SUMMARY SELECTED PRO FORMA AND
HISTORICAL FINANCIAL
DATA.................................. 12
How We Prepared the Financial
Statements......................... 12
Accounting Treatment.................. 12
Summary Selected Unaudited Pro Forma
Combined Financial Data............ 13
Summary Selected Unaudited Pro Forma
Combined Financial Data............ 14
Summary Selected Historical
Consolidated Financial Data of
Preview Travel..................... 15
Comparative Per Share Data............ 16
Capitalization........................ 16
RISK FACTORS............................ 18
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS............ 23
THE SPECIAL STOCKHOLDERS MEETING........ 24
Date, Time and Place.................. 24
Matters to be Considered at the
Special Stockholders Meeting....... 24
Record Date; Stock Entitled to Vote;
Quorum............................. 24
Votes Required; Voting Agreements..... 25
Share Ownership of Management......... 25
Preview Travel Board Recommendation... 25
How You Can Vote...................... 26
THE TRANSACTIONS........................ 27
Prior to the Merger................... 27
The Merger............................ 27
Immediately After the Merger.......... 28
Governance............................ 29
Reasons for the Structure of the
Transactions....................... 30
THE MERGER.............................. 30
General............................... 30
Background of the Merger.............. 30
Sabre's and the Travelocity Division's
Reasons for the Merger............. 34
Recommendation of the Preview Travel
Board of Directors; Preview
Travel's Reasons for the Merger.... 34
Opinion of Hambrecht & Quist.......... 36
Material Federal Income Tax
Consequences....................... 41
Regulatory Matters.................... 42
Accounting Treatment.................. 43
No Appraisal or Dissenters' Rights.... 43
Listing of Travelocity.com Inc.'s
Common Stock....................... 43
Delisting and Deregistration of
Preview Travel Common Stock........ 44
Federal Securities Laws Consequences;
Stock Transfer Restrictions........ 44
INTERESTS OF DIRECTORS AND OFFICERS IN
THE MERGER............................ 44
Employment Agreements................. 44
Effects of the Merger Under Preview
Travel's Stock Option Plans........ 45
Director's and Officer's Liability
Insurance; Indemnification
Agreements......................... 46
PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION........................... 46
Market Prices and Dividends........... 46
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION................. 47
Notes to Travelocity.com Inc.
Unaudited Pro Forma Condensed
Combined Financial Statements...... 54
MANAGEMENT DISCUSSION AND ANALYSIS OF
PRO FORMA FINANCIAL INFORMATION OF
TRAVELOCITY.COM INC. ................. 59
Overview.............................. 59
Results of Operations................. 60
Liquidity and Capital Resources....... 61
THE TRAVELOCITY.COM BUSINESS............ 62
Overview.............................. 62
Industry Background................... 62
The Travelocity.com Business'
Solution........................... 64
The Travelocity.com Business'
Strategy........................... 66
</TABLE>
i
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<TABLE>
<S> <C>
Strategic Relationships............... 67
Technology............................ 71
Consumer Marketing.................... 71
Sales and Supplier Relations.......... 72
Competition........................... 72
Government Regulation................. 73
Intellectual Property................. 73
MATERIAL TERMS OF THE MERGER
AGREEMENT............................. 75
General............................... 75
Closing; Effective Time............... 75
Consideration to be Received in the
Merger............................. 75
Procedures for Surrender of
Certificates....................... 75
Representations and Warranties........ 76
Covenants............................. 77
No Solicitation....................... 78
Additional Agreements................. 79
Conditions to Completion of the
Merger............................. 80
Termination of the Merger Agreement... 81
Termination Fee....................... 82
Amendments............................ 82
THE TRAVELOCITY.COM BUSINESS'
RELATIONSHIP WITH SABRE............... 82
Governance............................ 83
Noncompetition Agreement.............. 83
Conflict of Interest Arrangements..... 84
MATERIAL TERMS OF RELATED AGREEMENTS.... 87
Partnership Agreement................. 87
Management Services Agreement......... 89
Contribution Agreements............... 90
Registration Rights Agreement......... 90
Intercompany Agreements............... 90
MANAGEMENT OF TRAVELOCITY.COM FOLLOWING
THE MERGER............................ 94
Executive Officers and Directors...... 94
Compensation of Directors............. 96
Board Committees...................... 96
Stock Plans........................... 97
Other Benefit Plans of Travelocity
Holdings........................... 101
Other Benefit Plans of the
Travelocity.com Partnership........ 103
Certain Relationships and Related
Transactions....................... 104
SABRE'S TRAVELOCITY DIVISION............ 105
Overview.............................. 105
The Travelocity Division's Strategy... 105
Web Sites............................. 106
Strategic Relationships............... 108
Intellectual Property and Property
Rights............................. 109
Licensing of Products and
Technology......................... 109
Competition........................... 109
Legal Proceedings..................... 109
Employees............................. 109
Properties............................ 110
THE TRAVELOCITY DIVISION SELECTED
HISTORICAL FINANCIAL DATA............. 111
THE TRAVELOCITY DIVISION'S MANAGEMENT
DISCUSSION AND ANALYSIS............... 113
Overview.............................. 113
Results of Operations................. 114
Liquidity and Capital Resources....... 117
Inflation............................. 117
New Accounting Pronouncements......... 118
Quantitative and Qualitative
Disclosure About Market Risk....... 118
TRAVELOCITY.COM EXECUTIVE
COMPENSATION.......................... 118
Long-Term Incentive Plan Awards in
Last Fiscal Year................... 121
Employment Agreements................. 121
COMPARISON OF STOCKHOLDER RIGHTS........ 124
DESCRIPTION OF TRAVELOCITY.COM INC.'S
CAPITAL STOCK......................... 128
General............................... 128
Common Stock.......................... 128
Dividend Limitations.................. 128
Additional Series of Preferred
Stock.............................. 128
Series A Preferred Stock.............. 129
Class B Common Stock.................. 130
Anti-Takeover Effects of Provisions of
Travelocity.com Inc.'s Restated
Certificate of Incorporation and
Restated Bylaws.................... 130
WHERE YOU CAN FIND MORE INFORMATION..... 131
FUTURE STOCKHOLDER
PROPOSALS............................. 133
EXPERTS................................. 133
LEGAL MATTERS........................... 133
INDEPENDENT PUBLIC ACCOUNTANTS.......... 133
INDEX TO FINANCIAL
STATEMENTS............................ F-1
</TABLE>
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<PAGE> 6
LIST OF ANNEXES
<TABLE>
<S> <C> <C>
ANNEX A Agreement and Plan of Merger................................ A-1
ANNEX B-1 Voting Agreement with James J. Hornthal..................... B-1
ANNEX B-2 Voting Agreement with MediaOne Interactive Services,
Inc. ....................................................... B-7
ANNEX B-3 Voting Agreement with America Online, Inc................... B-13
ANNEX C Opinion of Hambrecht & Quist................................ C-1
ANNEX D Restated Certificate of Incorporation of Travelocity.com.... D-1
ANNEX E Restated Bylaws of Travelocity.com.......................... E-1
ANNEX F Amended and Restated Agreement of Limited Partnership of
Travelocity.com, L.P........................................ F-1
</TABLE>
iii
<PAGE> 7
Preview Travel files reports and other information with the SEC. You may
read and copy this information at the SEC's public reference facilities. Please
call the SEC at 1-800-SEC-0330 for information about these facilities. This
information is also available at the Internet Web site the SEC maintains at
www.sec.gov.
This document incorporates important business and financial information
about Preview Travel from documents it has filed with the SEC, but that we have
not included in or delivered with this document. Preview Travel will provide you
with copies of the information relating to Preview Travel, without charge, upon
written or oral request to:
Preview Travel, Inc.
747 Front Street
San Francisco, California 94111
Attention: Casey Cotter
Telephone number: (415) 439-1200
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
SPECIAL STOCKHOLDERS MEETING, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN
FEBRUARY 29, 2000. If you request any incorporated documents from us, Preview
Travel will mail them to you by first class mail, or another equally prompt
means, within one business day after Preview Travel receives your request.
For more information on the matters incorporated by reference in this
document, see "Where You Can Find More Information" on page 131.
We have not authorized anyone to give any information or make any
representation about the merger of our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers of exchange, or to buy the securities offered by this
proxy statement/prospectus, or to ask for proxies, or if you are a person to
whom it is unlawful to direct these activities, then the offer presented by this
proxy statement/prospectus does not extend to you.
The information contained in this proxy statement/prospectus speaks only as
of its date unless the information specifically indicates that another date
applies. Travelocity.com Inc. has supplied all information contained in this
proxy statement/prospectus relating to AMR Corporation, Sabre Holdings
Corporation, Sabre Inc., Sabre's Travelocity Division, Travelocity Holdings,
Inc., Travelocity.com Inc. and Travelocity.com LP. Preview Travel has supplied
all information in this proxy statement/prospectus relating to Preview Travel.
This document contains trademarks of Travelocity.com Inc., Preview Travel,
and Sabre and its affiliates.
iv
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY AM I RECEIVING THESE MATERIALS?
A: We are sending you these materials to help you decide how to vote your shares
with respect to the merger of Preview Travel with Travelocity.com Inc. In the
merger, Preview Travel stockholders will receive Travelocity.com Inc.'s
common stock. The merger requires the approval of holders of a majority of
the outstanding shares of Preview Travel common stock. If you do not vote
your Preview Travel shares, the effect will be a vote against the merger.
Q: WHICH BUSINESSES ARE MERGING?
A: The Travelocity Division and Preview Travel are merging. The Travelocity
Division provides consumer-direct travel services on the Internet. It is
owned by Sabre Holdings Corporation. We refer to the business conducted as a
separate division of Sabre before the merger as the "Travelocity Division."
Q: WHAT WILL HAPPEN TO PREVIEW TRAVEL AND THE PREVIEWTRAVEL.COM WEB SITE AFTER
THE MERGER?
A: Preview Travel will be integrated with the Travelocity Division. The
Previewtravel.com Web site will be integrated with the Travelocity.com Web
site under the "Travelocity.com" brand, as soon as practicable.
Q: WHAT DO I NEED TO DO NOW?
A: Carefully read this document and indicate on your enclosed proxy card how you
want to vote. Sign and mail the proxy card in the enclosed prepaid return
envelope as soon as possible. You should indicate your vote now even if you
expect to attend the special stockholders meeting and vote in person.
Indicating your vote now will not prevent you from later canceling or
revoking your proxy right up to the day of the special stockholders meeting
and will ensure that your shares are voted if you later find you cannot
attend the special stockholders meeting. If you do not vote, this will have
the same effect as a vote against the merger agreement.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: You may change your vote:
- by sending a written notice to the corporate secretary of Preview Travel
prior to the special stockholders meeting stating that you would like to
revoke your proxy;
- by signing a later-dated proxy card and returning it by mail in time to be
received prior to the special stockholders meeting; or
- by attending the special stockholders meeting and voting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: If you provide your broker with instructions on how to vote, your broker will
vote your shares. Otherwise, your broker will not be permitted to vote your
shares. This will have the same effect as a vote against the merger
agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After we complete the merger, Travelocity.com Inc. will send Preview
Travel stockholders written instructions for exchanging their stock
certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger immediately upon the approval of Preview
Travel stockholders at the special stockholders meeting and after we obtain
necessary regulatory clearances.
Q: HOW WILL THE TRAVELOCITY DIVISION AND PREVIEW TRAVEL BE COMBINED?
A: The two businesses will be combined in three steps. These three steps are
illustrated in the following three diagrams.
1
<PAGE> 9
- STEP ONE: before the merger, Sabre will contribute the Travelocity Division
and $50 million in cash to a partnership in return for partnership units.
We refer to this partnership as the "Travelocity.com Partnership."
[TRAVELOCITY CHART]
2
<PAGE> 10
- STEP TWO: Preview Travel will merge into Travelocity.com Inc. In the
merger, the former Preview Travel stockholders will receive Travelocity.com
Inc.'s common stock and Sabre will receive Travelocity.com Inc.'s preferred
stock.
[TRAVELOCITY CHART]
3
<PAGE> 11
- - STEP THREE: immediately after the merger, Travelocity.com Inc. will contribute
the Preview Travel business to the Travelocity.com Partnership in return for
partnership units, where it will be combined with the Travelocity Division. We
refer to the combined business of the Travelocity Division and Preview Travel
after the merger as the "Travelocity.com Business." The Travelocity.com
Partnership will operate the Travelocity.com Business.
[TRAVELOCITY CHART]
4
<PAGE> 12
Q: WHO WILL OWN THE TRAVELOCITY.COM PARTNERSHIP?
A: Sabre will own approximately 64% of the Travelocity.com Partnership's equity.
Travelocity.com Inc. will own approximately 36% of the Travelocity.com
Partnership's equity. The partnership will be governed by a nine member board
of directors. Sabre will have the right to elect four of these directors, and
Travelocity.com Inc. will have the right to elect the remaining five
directors.
Q: WHAT WILL THE FORMER PREVIEW TRAVEL STOCKHOLDERS OWN AFTER THE MERGER?
A: The former Preview Travel stockholders will beneficially own approximately
30% of the equity of the Travelocity.com Partnership. They will receive
approximately 14 million shares of Travelocity.com Inc.'s common stock, which
will represent approximately 82% of Travelocity.com Inc.'s equity. Their
approximate 82% equity interest in Travelocity.com Inc. will equal
approximately 30% of the equity of the Travelocity.com Partnership, because
82% (their equity in Travelocity.com Inc.) of 36% (Travelocity.com Inc.'s
equity interest in the Travelocity.com Partnership) is approximately 30%.
Q: WHAT WILL SABRE OWN?
A: Sabre will beneficially own approximately 70% of the equity of the
Travelocity.com Partnership. Sabre will receive 33 million shares of
Travelocity.com Inc.'s preferred stock. The preferred stock will have
economic rights equivalent to 3 million shares of Travelocity.com Inc.'s
common stock, and will represent approximately 18% of Travelocity.com Inc.'s
equity.
Sabre's equity interest in the Travelocity.com Partnership will be comprised
of:
- Sabre's approximate 64% equity interest in the Travelocity.com Partnership
held directly; and
- an approximate 6% interest in the Travelocity.com Partnership (that is, 18%
of Travelocity.com Inc.'s 36% equity interest in the Travelocity.com
Partnership) represented by Sabre's equity interest in Travelocity.com Inc.
Q: WHAT VOTING POWER IN TRAVELOCITY.COM INC. WILL THE FORMER PREVIEW TRAVEL
STOCKHOLDERS AND SABRE HOLD?
A: The former Preview Travel stockholders will hold approximately 30% of the
total voting power in Travelocity.com Inc. Sabre will hold approximately 70%
of the total voting power in Travelocity.com Inc. Thus, your voting power in
Travelocity.com Inc. will mirror your equity interest in the Travelocity.com
Partnership.
5
<PAGE> 13
This structure is illustrated in the following diagram:
[TRAVELOCITY CHART]
6
<PAGE> 14
Q: WILL THE EQUITY INTERESTS OF SABRE AND THE FORMER PREVIEW TRAVEL STOCKHOLDERS
IN THE TRAVELOCITY.COM PARTNERSHIP BE FIXED?
A: No. Travelocity.com Inc. has the right to cause Sabre to invest up to an
additional $50 million in cash during the ten days following the merger, at
the average market price of Preview Travel common stock for the ten days
prior to the merger. If Travelocity.com Inc. exercises this right, Sabre's
equity interest in the Travelocity.com Partnership will be increased. Also,
the equity interests of former Preview Travel stockholders and Sabre in the
Travelocity.com Partnership will be changed if there are other future stock
issuances or repurchases, including when employees exercise options to
acquire Travelocity.com Inc.'s common stock.
Q: WILL SABRE CONTROL TRAVELOCITY.COM INC. AND THE TRAVELOCITY.COM PARTNERSHIP?
A: Yes. As long as Sabre beneficially owns a majority of the total voting power
in Travelocity.com Inc., Sabre will have the ability to elect all of the
members of the Travelocity.com Inc. board of directors and to control its
management and affairs. Sabre's control of Travelocity.com Inc. will give
Sabre the practical ability to elect all of the Travelocity.com Partnership's
board of directors and thereby to control its management and affairs. The
designees to the initial board and the executive officers of each of
Travelocity.com Inc. and the Travelocity.com Partnership are identified on
page 94.
Q: WHO WILL MANAGE THE TRAVELOCITY.COM PARTNERSHIP AFTER THE MERGER?
A: The Travelocity.com Partnership's board of directors will be responsible for
managing the Travelocity.com Partnership. Travelocity.com Inc. will have the
right to appoint five of the nine directors, and Sabre will have the right to
appoint the remaining four directors of the Travelocity.com Partnership.
Employees of a Sabre subsidiary will manage the Travelocity.com Partnership
on a day-to-day basis, under the oversight of the Travelocity.com
Partnership's board of directors.
Q: HOW WILL SABRE, TRAVELOCITY.COM INC. AND THE TRAVELOCITY.COM PARTNERSHIP
ADDRESS CONFLICTS OF INTEREST?
A: Two of the nine directors of Travelocity.com Inc. and the Travelocity.com
Partnership must be independent of Sabre. That is, they cannot be employees,
officers or directors of Sabre or its affiliates, and they must not have any
material business relationship with Sabre or its affiliates. Initially,
however, we intend to have three independent directors on both boards. For
two years after the merger, at least one independent director of
Travelocity.com Inc. and the Travelocity.com Partnership must approve any
transactions with Sabre or any of Sabre's material customers or suppliers. In
addition, Sabre will agree not to compete with Travelocity.com Inc. or the
Travelocity.com Partnership for the same two-year period. Travelocity.com
Inc. and the Travelocity.com Partnership will also have policies to address
conflicts of interest and allocation of business opportunities as described
on page 84.
WHO CAN ANSWER YOUR QUESTIONS?
If you have additional questions, you should contact:
<TABLE>
<S> <C> <C>
Preview Travel, Inc. MacKenzie Partners, Inc.
747 Front Street 156 Fifth Avenue
San Francisco, California 94111 or New York, New York 10010
Attention: Casey Cotter Telephone Number: (212) 929-5500
E-mail: [email protected] or
Telephone Number: (415) 439-1200 (800) 322-2885
</TABLE>
7
<PAGE> 15
SUMMARY OF ADDITIONAL TERMS
This summary and the preceding questions and answers highlight selected
information from this proxy statement/prospectus. They do not contain all of the
information that is important to you. To understand the proposed transactions
fully and the consequences to you, and for a more complete description of the
legal terms of the merger and related transactions, we urge you to read
carefully the entire proxy statement/prospectus and the documents we refer to in
this document. See "Where You Can Find More Information" on page 131. We have
included page references directing you to a more complete description of each
item presented in this summary.
THE COMPANIES (PAGES 62 AND 105)
TRAVELOCITY.COM INC.
4200 Buckingham
MD 1400
Fort Worth, Texas 76155
(817) 963-2923
Travelocity.com Inc. will be a holding company whose sole asset will be
units in the Travelocity.com Partnership, which after the merger will own the
Travelocity.com Business. The Travelocity Division, currently an operating
division of Sabre, is a leading provider, in terms of travel bookings and
monthly visitors, of consumer-direct travel reservation services and travel
content on the Internet. Sabre is the world leader in the electronic
distribution of travel services, with the largest worldwide market share of
global distribution systems, and a leader in travel technology services.
The Travelocity.com Business will be the world's largest online travel
agency, with more travel bookings and more monthly visitors to its Web site than
any competitor. On a combined basis giving effect to the merger:
- visitors would have booked over $1 billion in travel services on the
Travelocity.com Web site in 1999; and
- the Travelocity.com Business would have had over 6.6 million different
visitors to its Web sites during the month of November 1999, as measured
by Media Metrix.
PREVIEW TRAVEL, INC.
747 Front Street
San Francisco, California 94111
(415) 439-1200
Preview Travel is a leading provider, based on the number of different
visitors to its Web site in a given month, of online travel reservation services
and content for leisure and small-business travelers.
REASONS FOR THE MERGER (PAGE 34)
We believe that the merger will:
- create the leader in the online travel category with significant portal
presence, greater branding strength and the largest online travel
customer base in terms of persons who visit our Web sites in a typical
month;
- combine Preview Travel's marketing and content strengths with the
Travelocity Division's travel industry knowledge and technology
expertise; and
- create additional stockholder value by exploiting the strategic
advantages that inure to online market leaders.
THE SPECIAL STOCKHOLDERS MEETING; SHARE OWNERSHIP BY PREVIEW TRAVEL MANAGEMENT
(PAGES 24 AND 25)
At the special stockholders meeting, Preview Travel will ask you to approve
the merger agreement. Approval of the merger agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of Preview Travel
common stock.
Preview Travel stockholders may vote at the special stockholders meeting if
they owned shares of common stock at the close of business on January 20, 2000,
the record date. Each share has one vote. On the record date, approximately
14,018,000 shares of Preview Travel common stock were outstanding. On the record
date, Preview Travel's directors and officers were entitled to vote
approximately 7.3% of Preview Travel's outstanding shares.
The founder and chairman of Preview Travel's board and two Preview Travel
stockhold-
8
<PAGE> 16
ers, America Online, Inc. and MediaOne Interactive Services, Inc., have agreed
to vote their shares in favor of the merger. These shares represent 18.8% of
Preview Travel's outstanding shares on the record date.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER (PAGE 44)
When you consider the merger agreement and the recommendation of the
Preview Travel board of directors that you vote in favor of the merger, you
should be aware that officers and directors of Preview Travel may have interests
in the merger that may be different from yours.
Fifty percent of the unvested Preview Travel options that officers of
Preview Travel hold will vest immediately before the merger. Travelocity.com
Inc. will convert the remainder of their Preview Travel options into options to
acquire Travelocity.com Inc.'s common stock that will vest in equal monthly
increments over the 12 months following the merger. In addition, all of the
options that Preview Travel granted to its directors under the directors' stock
option plan will vest immediately before the merger. Preview Travel will also
pay severance benefits to officers whose employment is terminated as a result of
the merger.
In particular:
- Christopher Clouser, the Chief Executive Officer, President and a
director of Preview Travel, holds unvested options with an aggregate in
the money value of $6.4 million: under his employment agreement, half of
these options will vest immediately before the closing of the merger, and
the other half will vest over the 12 months following the merger;
- the executive officers of Preview Travel as a group, other than Mr.
Clouser, hold unvested options with an aggregate in the money value of
$20.3 million: pursuant to a resolution that Preview Travel's board of
directors adopted before signature of the merger agreement, half of these
options will vest immediately before the closing of the merger, and the
other half will vest over the 12 months following the merger;
- the directors of Preview Travel as a group hold unvested options with an
aggregate in the money value of $1.8 million that will vest immediately
before the closing of the merger under Preview Travel's directors' stock
option plan;
- the officers of Preview Travel as a group, including Mr. Clouser, would
be eligible to receive severance benefits of $750,000 if their employment
is terminated as a result of the merger.
We based all of the values of Preview Travel options that we list above on
the price of Preview Travel common stock of $39.25 per share as of January 20,
2000.
TAX CONSEQUENCES OF THE MERGER (PAGE 41)
You generally will not recognize any gain or loss for United States federal
income tax purposes on the exchange of your Preview Travel shares for shares of
Travelocity.com Inc.'s common stock in the merger. Tax matters are very
complicated, and the tax consequences of the merger to you will depend on your
particular situation. You should consult your tax advisor for a full
understanding of the tax consequences of the merger to you.
NO APPRAISAL OR DISSENTERS' RIGHTS (PAGE 43)
Under Delaware law, holders of Preview Travel common stock are not entitled
to dissenters' or appraisal rights in connection with the merger, which means
you do not have any right to an appraisal of the value of your Preview Travel
shares. Accordingly, if you vote against the adoption of the merger agreement
but the agreement is adopted by the holders of a majority of the Preview Travel
common stock, you will become a stockholder of Travelocity.com Inc.
ACCOUNTING TREATMENT OF THE MERGER (PAGE 43)
As a result of the merger, the Travelocity.com Partnership will record on
its balance sheet:
- the fair market value of Preview Travel's assets and liabilities; and
- the historical net book value of the Travelocity Division's assets and
liabilities.
The Travelocity.com Partnership will record approximately $215 million of
intangible assets and goodwill in the merger. After the merger, intangible
assets and goodwill will be approxi-
9
<PAGE> 17
mately 65% of the Travelocity.com Partnership's pro forma total assets.
The Travelocity.com Partnership will amortize the intangible assets and
goodwill acquired in the merger over a 3-year period, resulting in an
approximate $72 million charge per year that will negatively affect the
Travelocity.com Partnership's net income.
Sabre has a majority equity interest in the Travelocity.com Partnership and
the general presumption would be for Sabre to consolidate the Travelocity.com
Partnership into its financial statements. Although Travelocity.com Inc. does
not have a majority equity interest in the Travelocity.com Partnership,
Travelocity.com Inc. controls the Travelocity.com Partnership through the
Travelocity.com Partnership's board of directors since Travelocity.com Inc. has
the right to appoint a majority of the directors. Accordingly, we believe the
general presumption is overcome and Travelocity.com Inc. will consolidate the
Travelocity.com Partnership into its financial statements. Furthermore, although
Travelocity Holdings, Inc., a Sabre subsidiary, will manage the day to day
operations of the Travelocity.com Partnership pursuant to the management
services agreement, it is subject to the direction and oversight of the
Travelocity.com Partnership's board of directors. As such, the Travelocity.com
Partnership's board of directors has the unilateral ability to control the
management of the Travelocity.com Partnership, thereby enabling Travelocity.com
Inc. to consolidate the Travelocity.com Partnership in its separate financial
statements. Travelocity.com Inc.'s consolidated financial statements will
include the financial statements of Travelocity.com Inc. and the Travelocity.com
Partnership, with Sabre's interest in the Travelocity.com Partnership deducted
as a single line item.
OPINION OF FINANCIAL ADVISOR (PAGE 36)
Preview Travel retained Hambrecht & Quist LLC as its financial advisor in
connection with the merger to render a financial fairness opinion to the Preview
Travel board of directors.
In deciding to approve the merger, the Preview Travel board of directors
considered Hambrecht & Quist's opinion, which stated that as of its date and
subject to the considerations described in the opinion:
- the merger of Preview Travel with and into Travelocity.com Inc.,
- Travelocity.com Inc.'s contribution of Preview Travel's assets to the
Travelocity.com Partnership, and
- Sabre's contribution of the Travelocity Division to the Travelocity.com
Partnership,
taken together, are fair, from a financial point of view, to Preview Travel
stockholders. We have attached this opinion as Annex C to this proxy
statement/prospectus.
PER SHARE MARKET PRICE INFORMATION (PAGE 46)
Preview Travel shares are traded on the Nasdaq National Market. On October
1, 1999, the last full trading day prior to our announcement of the signing of
the merger agreement, the closing price of the Preview Travel common stock was
$17.625 per share, the high price was $17.6875 per share and the low price was
$16.125 per share. On February 2, 2000, the last practicable trading day for
which information was available prior to the date of this proxy statement/
prospectus, the closing price of the Preview Travel common stock was $32.6875
per share, the high price was $34.6875 per share and the low price was $32.50
per share. The market price of shares of Preview Travel common stock fluctuates.
As a result, you should obtain current market quotations.
THE MERGER AGREEMENT (PAGE 75)
We have attached the merger agreement as Annex A to this proxy
statement/prospectus. We encourage you to read the merger agreement because it
contains important terms of the merger, including conditions to the merger and
termination rights.
Conditions to the Merger
We will complete the merger only if the conditions specified in the merger
agreement are satisfied or waived, including that the holders of a majority of
Preview Travel's outstanding common stock approve the merger agreement.
10
<PAGE> 18
Termination of the Merger Agreement and
Termination Fees
Preview Travel and Sabre can jointly agree to terminate the merger
agreement at any time without completing the merger. In addition, either Preview
Travel or Sabre can terminate the merger agreement in circumstances specified in
the agreement.
Preview Travel must pay Sabre a $10 million termination fee, less any
reimbursed expenses, if the merger agreement terminates in circumstances that
are specified in the agreement. The merger agreement also requires the parties
to reimburse each other for expenses they incur in connection with the merger if
the merger agreement terminates in circumstances that are specified in the
agreement.
RELATED AGREEMENTS (PAGE 87)
In addition to the merger agreement, Travelocity.com Inc., the
Travelocity.com Partnership, Sabre and several Sabre subsidiaries will enter
into agreements governing the Travelocity.com Partnership, the management of the
Travelocity.com Partnership by a wholly owned subsidiary of Sabre, the
contributions of the Travelocity Division and Preview Travel businesses to the
Travelocity.com Partnership, and other agreements related to the separation of
the Travelocity Division from Sabre.
YOUR RIGHTS AS A STOCKHOLDER WILL CHANGE
(PAGE 124)
Your rights as a Preview Travel stockholder are determined by Delaware law
and by Preview Travel's certificate of incorporation and bylaws. When the merger
is completed, your rights as a Travelocity.com Inc. stockholder will be
determined by Delaware law and by Travelocity.com Inc.'s restated certificate of
incorporation and restated bylaws.
REGULATORY MATTERS (PAGE 42)
U.S. antitrust laws prohibit us from completing the merger until we have
furnished notice and information about Preview Travel and the Travelocity
Division to the Federal Trade Commission and the Antitrust Division of the
Department of Justice, and a required waiting period has ended. We furnished the
required notice and information on October 12, 1999 and the waiting period ended
on November 11, 1999.
11
<PAGE> 19
SUMMARY SELECTED PRO FORMA AND HISTORICAL FINANCIAL DATA
HOW WE PREPARED THE FINANCIAL STATEMENTS
We are providing the information on the following pages regarding the
Travelocity.com Business on a pro forma basis and Preview Travel on a historical
basis to aid you in your analysis of the financial aspects of the merger. We
derived this information from:
- the audited financial statements of the Travelocity Division for the year
ended December 31, 1998 and the unaudited financial statements of the
Travelocity Division for the nine months ended September 30, 1998 and
1999, and
- the audited consolidated financial statements of Preview Travel for the
years 1996 through 1998 and the unaudited consolidated financial
statements of Preview Travel for the nine months ended September 30, 1998
and 1999.
Historical information for the Travelocity Division is presented starting
on page 111. Before the merger, the Travelocity Division was an operating
division of Sabre and was not conducted as a separate business. The historical
financial information for the Travelocity Division does not include the impact
of the contribution agreements and the intercompany agreements that the
Travelocity.com Partnership and Sabre will enter into, and does not indicate the
results of the Travelocity.com Business after the merger is completed.
The information on the following pages is only a summary and you should
read it together with the Unaudited Pro Forma Condensed Combined Financial
Information of Travelocity.com Inc. and related notes starting on page F-2, the
Travelocity Division Selected Historical Financial Data starting on page 111,
the historical financial statements and related notes of the Travelocity
Division starting on page F-7, and the historical financial statements and
related notes contained in the annual reports, quarterly reports and other
information that Preview Travel has filed with the SEC and incorporated in this
proxy statement/prospectus by reference. For information on how to obtain
materials incorporated by reference, see "Where You Can Find More Information"
on page 131.
ACCOUNTING TREATMENT
Sabre has a majority equity interest in the Travelocity.com Partnership and
the general presumption would be for Sabre to consolidate the Travelocity.com
Partnership into its financial statements. Although Travelocity.com does not
have a majority equity interest in the Travelocity.com Partnership,
Travelocity.com Inc. controls the Travelocity.com Partnership through the
Travelocity.com Partnership's board of directors since Travelocity.com Inc. has
the right to appoint a majority of the directors. Accordingly, we believe the
general presumption is overcome and Travelocity.com Inc. will consolidate the
Travelocity.com Partnership into its financial statements. Furthermore, although
Travelocity Holdings, a Sabre subsidiary, will manage the day to day operations
of the Travelocity.com Partnership pursuant to the management services
agreement, it is subject to the direction and oversight of the Travelocity.com
Partnership's board of directors. As such, the Travelocity.com Partnership's
board of directors has the unilateral ability to control the management of the
Travelocity.com Partnership, thereby enabling Travelocity.com Inc to consolidate
the Travelocity.com Partnership in its separate financial statements.
Travelocity.com Inc.'s consolidated financial statements will include the
financial statements of Travelocity.com Inc. and the Travelocity.com
Partnership, with Sabre's 64% interest in the Travelocity.com Partnership's
results of operations presented as a single line item, "Sabre's interest in
partnership," in Travelocity.com Inc.'s statement of operations. Travelocity.com
Inc.'s consolidated results of operations and financial position will consist of
the total of 36% of the Travelocity.com Partnership's results and 100% of
Travelocity.com Inc.'s results.
12
<PAGE> 20
Travelocity.com Inc. will account for the merger as a purchase of Preview
Travel's assets and liabilities. As a result of the merger, the Travelocity.com
Partnership will record on its balance sheet:
- the fair market value of Preview Travel's assets and liabilities;
- the historical net book value of the Travelocity Division's assets and
liabilities that Sabre contributes; and
- the direct costs of the acquisition incurred by Sabre and Travelocity.com
Inc.
The Travelocity.com Partnership will allocate the excess of the purchase
price over the fair market value of the acquired tangible assets and liabilities
to intangible assets and goodwill. The Travelocity.com Partnership will amortize
the intangible assets and goodwill acquired in the merger over a 3-year period.
SUMMARY SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
Summary pro forma combined financial data of Travelocity.com Inc. for
specified periods and dates appear on the next page. You should read this
information in conjunction with the historical financial statements of the
Travelocity Division and related notes starting on page F-7 and of Preview
Travel and the related notes, "The Travelocity Division's Management Discussion
and Analysis" starting on page 113, the Unaudited Pro Forma Condensed Combined
Financial Information of Travelocity.com Inc. and related notes on page 47, and
"Management Discussion and Analysis of Pro Forma Financial Information of
Travelocity.com Inc." starting on page 59. The pro forma financial information
below assumes the merger and the contribution agreements and the intercompany
agreements were completed on January 1, 1998 with respect to the statement of
operations data and at September 30, 1999 with respect to the balance sheet
data. The pro forma information is presented for illustrative purposes only. The
companies may have performed differently had they been combined at the assumed
dates. You should not rely on this information as an indication of the operating
results or financial position that would have occurred if the transactions had
been completed at the assumed dates, and it does not indicate future results of
operations.
13
<PAGE> 21
SUMMARY SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------------
1998 1998 1999
-------------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Transaction revenue...................................... $ 29,326 $ 20,337 $ 46,885
Advertising revenue...................................... 6,162 3,392 13,580
Licensing and royalty fees............................... 47 72 258
--------- -------- --------
Total revenues........................................ 35,535 23,801 60,723
Gross profit............................................. 10,635 6,838 33,628
Operating expenses....................................... 55,397 37,286 68,448
Amortization of intangibles(1)........................... 71,870 53,903 53,903
Operating loss from continuing operations................ (116,632) (84,351) (88,723)
Sabre interest in partnership losses(2).................. 72,990 52,842 55,614
Loss from continuing operations.......................... (41,057) (29,723) (31,283)
Pro forma basic and diluted loss from continuing operations
per share(3)............................................. $ (3.21) $ (2.37) $ (2.27)
========= ======== ========
Weighted average shares used in basic and diluted per share
calculations............................................. 12,796 12,528 13,806
========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities(4)....... $ 87,793
Working capital(4)........................................ 70,197
Intangible assets and goodwill............................ 220,312
Total assets.............................................. 337,326
Sabre interest in partnership(5).......................... 61,474
Stockholders' equity...................................... 254,486
</TABLE>
- ---------------
(1) Represents an estimate of the amortization of goodwill and other intangible
assets recorded in the merger.
(2) Represents Sabre's 64% share of the Travelocity.com Partnership's losses.
(3) The pro forma basic and diluted loss from continuing operations per share is
calculated using the one-to-one exchange ratio of Preview Travel stock to
Travelocity.com Inc.'s stock in the merger. As pro forma losses exist for
each period presented, the calculation of pro forma loss per share excludes
the effects of stock options and the 33 million shares of preferred stock
Travelocity.com Inc. issues to Sabre.
(4) Includes the contribution of $50 million in cash by Sabre in conjunction
with the contribution of the Travelocity Division to the Travelocity.com
Partnership.
(5) Represents Sabre's net investment in the Travelocity.com Partnership at
September 30, 1999.
14
<PAGE> 22
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PREVIEW TRAVEL
Preview Travel derived the following selected historical consolidated
financial data for each of the years ended December 31, 1996 through 1998 from
Preview Travel's audited consolidated financial statements and the related
notes. Preview Travel derived the selected historical consolidated financial
data for the nine months ended September 30, 1998 and 1999 from its unaudited
interim consolidated financial statements. In the opinion of management, Preview
Travel prepared the unaudited interim consolidated financial statements on a
basis consistent with its audited financial statements and they include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the selected historical consolidated financial data.
Results for interim periods are not necessarily indicative of the results to be
expected for the full year. This information is only a summary and you should
read it together with Preview Travel's historical consolidated financial
statements and related notes contained in the annual reports, quarterly reports
and other information that Preview Travel has filed with the SEC and that we
have incorporated in this proxy statement/prospectus by reference. For
information on how to obtain materials incorporated in this proxy
statement/prospectus by reference, see "Where You Can Find More Information" on
page 131.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Transaction revenue.................... $ 2,338 $ 5,430 $ 10,667 $ 7,629 $ 14,106
Advertising revenue.................... 235 580 3,341 1,806 7,795
------- -------- -------- -------- --------
Total revenues...................... 2,573 6,010 14,008 9,435 21,901
Gross profit........................... 265 2,362 7,915 5,142 14,307
Operating expenses..................... 5,569 12,470 32,578 20,719 40,445
Loss from continuing operations........ (5,395) (9,844) (22,078) (13,791) (24,312)
Net loss............................... (5,592) (10,168) (26,961) (14,432) (24,312)
Basic and diluted net loss per share..... $ (3.43) $ (3.54) $ (2.11) $ (1.15) $ (1.76)
======= ======== ======== ======== ========
Weighted average shares used in basic and
diluted per share calculations......... 1,631 2,869 12,796 12,528 13,806
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.......... $37,793
Working capital........................................... 22,501
Total assets.............................................. 54,665
Stockholders' equity...................................... 41,165
</TABLE>
15
<PAGE> 23
COMPARATIVE PER SHARE DATA
Net loss and book value per common share data for Preview Travel on an
historical basis and for Travelocity.com Inc. on a pro forma combined basis per
Preview Travel equivalent share are listed below. The exchange ratio for the
merger is one share of Travelocity.com Inc.'s common stock for each share of
Preview Travel common stock.
The unaudited pro forma combined data below is for illustrative purposes
only. The companies may have performed differently had they been combined at the
assumed dates. You should not rely on this information as an indication of the
historical results that would have been achieved had the companies been combined
at the assumed dates or the future results that the combined company will
experience after the merger.
You should read the information below together with the historical
financial statements of the Travelocity Division and Preview Travel, the related
notes, and the "Unaudited Pro Forma Condensed Combined Financial Information"
and related notes starting on page 47.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
PREVIEW TRAVEL HISTORICAL PER COMMON SHARE DATA:
Loss from continuing operations per common share basic and
diluted(1)............................................. $(1.73) $(1.76)
Book value per share(2)................................... $ 4.59 $ 2.95
TRAVELOCITY.COM INC. PRO FORMA COMBINED PER COMMON SHARE
DATA
Net loss per common share -- basic and diluted(3)......... $(3.21) $(2.27)
Book value per share(4)................................... $15.02
</TABLE>
- ---------------
(1) Preview Travel historical loss from continuing operations per common share
data -- basic and diluted is calculated by dividing Preview Travel's loss
from continuing operations by the weighted average number of common shares
outstanding for the periods presented.
(2) Preview Travel book value per share is computed by dividing stockholders'
equity by the number of shares outstanding at December 31, 1998 and
September 30, 1999.
(3) Net loss per common share -- basic and diluted is computed by dividing pro
forma net loss by the weighted average number of shares of Preview Travel
common stock outstanding for the respective periods presented, using a
one-to-one exchange ratio in the merger. As pro forma net losses exist for
each period presented, the calculation of pro forma loss per share excludes
the effects of stock options and the 33 million shares of preferred stock
that Travelocity.com Inc. issues to Sabre.
(4) The pro forma combined book value per share is computed by dividing pro
forma stockholders' equity by the sum of the pro forma number of shares of
Travelocity.com Inc.'s common stock outstanding as of September 30, 1999,
assuming the merger had occurred as of that date and a one-to-one exchange
ratio in the merger, and the number of shares of Travelocity.com Inc.'s
preferred stock as if they had been converted to 3 million shares of common
stock.
CAPITALIZATION
The following table sets forth information regarding the capitalization of
Travelocity.com Inc.:
- historical at September 30, 1999; and
- as adjusted to reflect the issuance of shares pursuant to the
contribution agreements and the merger.
You should read the information below together with the historical
financial statements of Travelocity.com Inc., the Travelocity Division and
Preview Travel, the related notes, and the "Unaudited
16
<PAGE> 24
Pro Forma Condensed Combined Financial Information" and related notes starting
on page 47, and "Description of Travelocity.com Inc.'s Capital Stock" starting
on page 128.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------
TRAVELOCITY.COM
INC. COMBINED
HISTORICAL PRO FORMA(2)
---------- ---------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Preferred stock, $.001 par value(1)......................... $-- $ 33
Class A Common Stock, $.001 par value(1).................... 3 14
Class B Common Stock, $.001 par value(1).................... -- --
Stock subscription receivable from affiliate................ (3) --
Additional paid-in capital.................................. -- 325,269
Accumulated deficit......................................... -- (70,830)
--- --------
$ $254,486
=== ========
</TABLE>
- ---------------
(1) Share information (in thousands):
<TABLE>
<S> <C> <C>
Shares authorized:
Preferred Stock.......................................... -- 40,000
Class A Common Stock..................................... 3,000 --
Class B Common Stock..................................... 1,500 75,000
Common Stock............................................. -- 135,000
Shares issued and outstanding:
Series A Preferred Stock................................. -- 33,000
Class A Common Stock..................................... 3,000 --
Class B Common Stock..................................... -- --
Common Stock............................................. -- 13,939
</TABLE>
(2) Excludes the following:
- options to purchase Preview Travel's common stock that Preview Travel
granted under its stock option plans which Travelocity.com Inc. will
convert in the merger into options to purchase Travelocity.com Inc.'s
common stock;
- options to purchase Travelocity.com Inc.'s common stock granted to
Travelocity Division employees;
- unvested options to purchase Sabre Common Stock that Travelocity.com Inc.
will convert in the merger into options to purchase Travelocity.com
Inc.'s common stock; and
- shares of common stock that Travelocity.com Inc. will issue if it
exercises its right to cause Sabre to invest up to an additional $50
million in cash during the ten days following the merger.
17
<PAGE> 25
RISK FACTORS
You should carefully consider the following risks and the other information
in this proxy statement/ prospectus, including the financial statements, before
deciding whether to vote for the merger.
IF WE ARE UNSUCCESSFUL IN INTEGRATING THE TRAVELOCITY DIVISION AND PREVIEW
TRAVEL, THE VALUE OF THE COMBINED COMPANY MAY BE LESS THAN INVESTORS EXPECT.
We may not realize the anticipated benefits and value of the merger if we
fail to successfully integrate the business of the Travelocity Division and
Preview Travel. For example,
- our customer service may suffer through the transition which could reduce
our revenues;
- we may also incur unanticipated integration related costs;
- some key employees may leave or may be distracted by the integration
process;
- our existing relationships with customers and suppliers may be impaired;
and
- we may not realize the economies of scale we anticipate from our
operations, which would result in higher than expected costs and could
reduce our revenues.
BECAUSE PREVIEW TRAVEL AND THE TRAVELOCITY DIVISION HAVE SHORT OPERATING
HISTORIES, IT IS DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS.
Preview Travel and the Travelocity Division have short operating histories
and therefore the information available to evaluate the Travelocity.com Business
and its prospects is limited. Sabre's consumer-direct online travel business was
established as a separate operating division of Sabre in January 1995. Preview
Travel initiated its reservations operations in 1994, first recognized revenues
from its reservations operation in the first quarter of 1995 and booked its
first airline ticket reservations online in the second quarter of 1996.
Travelocity.com Inc. was incorporated on September 30, 1999 and has no operating
history.
WE EXPECT TO CONTINUE TO INCUR NET LOSSES FOR THE FORESEEABLE FUTURE AND WE
CANNOT PREDICT WHEN WE WILL OPERATE PROFITABLY.
We anticipate Travelocity.com Inc. will incur future losses. The
Travelocity Division incurred net losses of $13.0 million, $18.7 million, $21.3
million and $15.1 million in 1996, 1997, 1998 and the nine months ended
September 30, 1999, respectively. As of September 30, 1999, the Travelocity
Division had an accumulated deficit of approximately $70.8 million. Preview
Travel incurred net losses of $5.6 million, $10.2 million, $27.0 million and
$24.3 million in 1996, 1997, 1998 and the nine months ended September 30, 1999,
respectively. As of September 30, 1999, Preview Travel had an accumulated
deficit of approximately $77.1 million.
We expect to incur a non-cash charge associated with the exchange of
unvested Sabre options for Travelocity.com Inc.'s options between $1.5 million
to $4.5 million, which will be amortized over the remaining vesting period of
the converted options. Goodwill and other intangible assets of approximately
$215 million recorded by the Travelocity.com Partnership for accounting purposes
as a result of the merger will be amortized over the next 3 years. The non-cash
charges associated with the options, goodwill and other intangible assets will
increase operating losses by approximately $72 million per year.
We expect our operating expenses to increase significantly as we integrate
Preview Travel and the Travelocity Division, develop and expand our services,
expand our sales and marketing operations, enhance the Travelocity.com brand,
fund site and content development and invest in operating infrastructure. We
will need to grow our revenues significantly in order to become profitable.
18
<PAGE> 26
A DECLINE IN COMMISSION RATES OR THE ELIMINATION OF COMMISSIONS BY TRAVEL
SUPPLIERS WOULD REDUCE OUR REVENUES.
If airlines, hotel chains or other travel suppliers reduce current industry
commission rates or eliminate commissions entirely, our revenues would be
reduced significantly. A substantial portion of our revenue comes from the
commissions paid by travel suppliers for bookings made through our online travel
service. Consistent with industry practices, these travel suppliers are not
obligated to pay any specified commission rates for bookings made through us or
to pay commissions at all. Over the last several years travel suppliers have
reduced commission rates substantially. For a description of historical
reductions in commission rates, see "The Travelocity.com Business -- Industry
Background" on page 62.
REVENUES DERIVED FROM OUR RELATIONSHIPS WITH YAHOO! INC., AMERICA ONLINE, INC.
AND EXCITE INC. MAY NOT BE SUFFICIENT TO OFFSET OUR SIGNIFICANT FINANCIAL
COMMITMENTS TO THEM.
We cannot assure you that we will achieve sufficient online traffic, travel
bookings or commissions to justify our significant financial obligations to
Yahoo!, AOL and Excite. In addition, our financial obligations under these
agreements may limit our operational flexibility in the future. Under these
agreements, we expect to pay at least $28 million to Yahoo! over three years, at
least $200 million to AOL over five years, including $40 million on the date of
the merger, subject to AOL achieving specified revenue goals, and at least $11
million to Excite over five years. For additional information on the Yahoo!
Agreement, the AOL Agreement, and the Excite Agreement, see "The Travelocity.com
Business -- Strategic Relationships" on page 67.
OUR FINANCIAL PERFORMANCE COULD DETERIORATE IF WE LOSE MARKET SHARE TO OUR
COMPETITORS.
If we do not compete successfully for customers in the intensely
competitive online travel services market, we will lose customers and our
operating results could deteriorate. Some competitors have greater brand
recognition and greater financial, technological, marketing and other resources
than we have. We compete with a variety of companies including online travel
agents such as Expedia, a majority-owned subsidiary of Microsoft Corporation.
Microsoft has the ability to integrate Expedia into its personal computer
operating system, which currently has a monopoly 90% market share. This could
confer significant marketing and technical advantages on Expedia. For a further
description relating to the competition we face, see "The Travelocity.com
Business -- Competition" on page 72.
ADVERSE CHANGES OR INTERRUPTIONS IN OUR RELATIONSHIPS WITH TRAVEL SUPPLIERS,
DISTRIBUTION PARTNERS AND OTHER THIRD PARTY SERVICE PROVIDERS COULD REDUCE OUR
REVENUES.
If we are unable to maintain or expand our relationships with travel
suppliers, our ability to offer and expand our travel service offerings or offer
the lowest-priced travel inventory could be reduced and our sales and revenue
could decrease substantially. Travel suppliers, including travel content
providers, may not make their services and products available to us on
satisfactory terms or at all, or may choose to provide their products and
services only to our competitors. In addition, we cannot assure you that our
travel suppliers will continue to sell services and products through global
distribution systems on terms satisfactory to us. Because we are affiliated with
Sabre, some potential strategic suppliers may not wish to enter into strategic
relationships with us. If many potential strategic suppliers decline to do so,
it could have an adverse impact on our strategy and business development.
We rely on Yahoo!, AOL, Excite and other distribution partners for a
significant amount of our visitors. If we are unable to maintain satisfactory
relationships with Yahoo!, AOL or Excite, or if these companies are unable to
maintain their positive market presence and reputation and steer online traffic
to our Web sites, our sales and revenue could decline.
Any discontinuance in the services provided to us by third parties, such as
global distribution systems providers, or any deterioration or interruption of
their services would prevent customers from accessing or purchasing particular
travel services through our site, which would reduce our sales and revenues.
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IF WE FAIL TO INCREASE OUR BRAND RECOGNITION AMONG CONSUMERS, WE MAY NOT BE ABLE
TO EXPAND OUR ONLINE TRAFFIC.
If we fail to promote and enhance our brand, we may fail to differentiate
ourselves from our competition. This could impact our ability to retain existing
customers, attract new customers and encourage repeat purchases. Increasing the
public's awareness of our brand name is important for expanding our business
because offering travel services online is a new industry that competes against
traditional providers of travel-related services and a number of Internet sites
offering competing services.
RAPID TECHNOLOGICAL CHANGES MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE
ATTRACTIVENESS OF OUR SERVICES TO CONSUMERS.
If we fail to continually improve our site's speed, personalization and
customer service, we could lag behind competitors or our site could become
obsolete. As a result, we could lose market share and our revenues would
decline. In addition, our services depend on complex search mechanisms to find
the best available fares. If competitors develop technology to help users find
the best fares more quickly or easily, or at a cheaper cost to the company, we
may also lose market share. We may have to incur substantial expenses to respond
to the increasingly sophisticated requirements of online customers and
suppliers.
SECURITY BREACHES IN OUR SYSTEMS COULD DAMAGE OUR REPUTATION AND CAUSE US TO
LOSE CUSTOMERS.
The security of our customers' confidential transaction data could be
jeopardized as a result of the accidental or intentional acts of Internet users,
current and former employees or others or computer viruses. We could lose
customers and be liable for damages caused by these security breaches, which
could result in poor operating results. Security breaches experienced by other
electronic commerce companies could reduce consumers' confidence in the
Travelocity.com Web sites. Although we plan to continue to use encryption and
authentication technology, these measures can be circumvented. The costs
required to continually upgrade our security measures could be prohibitively
expensive and could result in delays or interruption of service that could
result in a loss of customers.
OUR COMPUTER SYSTEMS MAY SUFFER SYSTEM FAILURES, CAPACITY CONSTRAINTS AND
BUSINESS INTERRUPTIONS WHICH COULD INCREASE OUR OPERATING COSTS AND CAUSE US TO
LOSE CUSTOMERS.
The interruption, impaired performance or insufficient capacity of our
systems could lead to interruptions or delays in our service, loss of data or
our inability to process reservations, which could cause us to lose customers.
Our systems and operations can be damaged or interrupted by fire, flood, power
loss, telecommunications failure, earthquake, tornado and similar events and our
redundant systems or disaster recovery plans may not be adequate. In the past,
we have experienced infrequent system interruptions, which may recur. We must
devote substantial financial, technical and operational resources to expand and
upgrade our systems and infrastructure.
OUR ABILITY TO INCREASE OUR REVENUES DEPENDS ON THE CONTINUED USE AND GROWTH OF
THE INTERNET AND ELECTRONIC COMMERCE SINCE THAT IS THE COMMERCIAL MEDIUM THROUGH
WHICH WE PROVIDE OUR SERVICE.
Our sales and revenues will decline if consumers do not purchase
significantly more travel services online than they do currently and if the use
of the Internet as a medium of commerce does not continue to grow or grows more
slowly than expected. Rapid growth in the use of the Internet and online
services is a recent development which may not continue. Furthermore, consumers
have traditionally relied on travel agents and travel suppliers and are
accustomed to a high degree of human interaction in purchasing travel services.
OUR STOCK PRICE COULD FLUCTUATE SIGNIFICANTLY.
We are an Internet-related company engaged in electronic commerce and as a
result the market price of our common stock could experience extreme price
fluctuations. Market prices for stocks of these types of companies have been
volatile. If revenues or earnings are less than expected for any quarter, the
market
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price of our common stock could significantly decline, even if the decline in
our revenues or earnings is not reflective of any long-term problems with our
business.
The market price of our common stock could also fluctuate significantly as
a result of sales or distributions by Sabre of substantial amounts of our common
stock and the fact that only a small portion of our total equity will be
represented by publicly traded common stock.
EVOLVING GOVERNMENT REGULATION COULD IMPOSE TAXES OR OTHER BURDENS ON OUR
BUSINESS WHICH COULD INCREASE OUR COSTS OR DECREASE DEMAND FOR OUR PRODUCTS.
Increased regulation of the Internet or different applications of existing
laws might slow the growth in the use of the Internet and commercial online
services, which could decrease demand for our services, increase the cost of
doing business or otherwise reduce our sales and revenues.
Federal legislation imposing limitations on the ability of states to tax
Internet-based sales was enacted in 1998. The Internet Tax Freedom Act exempts
specific types of sales transactions conducted over the Internet from multiple
or discriminatory state and local taxation through October 21, 2001. If this
legislation is not renewed when it terminates, state and local governments could
impose taxes on Internet-based sales, and these taxes could decrease the demand
for our products and services or increase our costs of operations. For a further
description of laws and regulations that may apply to us, see "The
Travelocity.com Business -- Government Regulation," on page 73.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER COULD HARM OUR BUSINESS. IF WE DO NOT
CONTINUE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, WE WILL NOT BE ABLE TO
EXPAND OUR OPERATIONS.
The loss of the services of Terrell B. Jones, our President and Chief
Executive Officer, could harm our ability to execute our business strategy and
expand our operations. Mr. Jones may not be able to fulfill his responsibilities
or may choose to leave us.
Our success also depends on our ability to hire, train, retain, and manage
highly skilled employees. There is a significant shortage of, and intense
competition for, personnel who are technically skilled. We cannot assure you
that we will be able to attract and retain a sufficient number of qualified
employees or that we will successfully train and manage the employees we hire.
DECLINES OR DISRUPTIONS IN THE TRAVEL INDUSTRY COULD REDUCE OUR REVENUES.
Our sales and revenue would be reduced by reduced travel by consumers.
Events that tend to reduce travel would reduce our sales and revenues,
including:
- price escalation in the airline industry or other travel-related
industries;
- airline or other travel related strikes;
- political instability and hostilities;
- bad weather;
- fuel price escalation;
- increased occurrence of travel-related accidents; and
- economic downturns and recessions.
IF MORE MONEY IS NOT AVAILABLE TO US WHEN WE NEED IT ON FAVORABLE TERMS, WE MAY
NOT BE ABLE TO COMPETE AND EXPAND.
If we are unable to raise additional financing when necessary, we may not
be able to market our services and products, maintain and upgrade our Web sites
and technical infrastructure and expand our operations. Additional financing may
not be available to us in sufficient amounts or on favorable terms. If we raise
additional funds by issuing equity or convertible debt securities, these
issuances will dilute the
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percentage ownership of our stockholders. In addition, any new securities we
issue could have rights, preferences and privileges senior to those of our
common stock. We believe that Sabre's $50 million contribution to us at
completion of the merger and the additional $50 million which we may require
Sabre to contribute to us after the merger, together with our existing funds and
ability to borrow, will be sufficient to meet our capital requirements for the
next 24 months.
CONFLICTS OF INTEREST BETWEEN SABRE AND TRAVELOCITY.COM INC. AND THE
TRAVELOCITY.COM PARTNERSHIP COULD IMPEDE OUR BUSINESS STRATEGY AND HURT OUR
BUSINESS.
We cannot assure you that Sabre, the Travelocity.com Partnership, and
Travelocity.com Inc. will be able to fairly resolve any potential conflict of
interest that may arise between them, or that any resolution will be as
favorable to Travelocity.com Inc. or the Travelocity.com Partnership as if it
were dealing with an unaffiliated party. Because Sabre controls Travelocity.com
Inc. and, through Travelocity.com Inc., the Travelocity.com Partnership, various
conflicts of interest may arise including under the agreements entered into
between the Travelocity.com Partnership and Sabre in connection with the
separation of the Travelocity Division from Sabre. For a description of the
arrangements between Sabre, Travelocity.com, Inc. and the Travelocity.com
Partnership addressing potential conflicts of interest, see "The Travelocity.com
Business' Relationship with Sabre -- Conflict of Interest Arrangements" on page
84.
OUR ABILITY TO PROMOTE OUR SERVICES IN SOUTHEAST ASIA, AUSTRALIA, NEW ZEALAND,
JAPAN, INDIA AND OTHER NEARBY REGIONS IS RESTRICTED.
An agreement between Sabre and Abacus International Pte Ltd., the operator
of a global distribution system, will restrict us from directing promotions of
our services specifically to consumers in Southeast Asia, Australia, New
Zealand, Japan, India and other nearby regions. The agreement also will require
that we permit Abacus to have the first opportunity to market our underlying
technology to Internet service providers in the restricted area. In addition,
after we become profitable, we will be required to transfer a proportional
amount of revenues based upon the percentage of bookings made in the restricted
marketing area to a joint venture between Sabre and Abacus. We will be able to
deduct all direct and indirect costs from bookings made from the restricted
area. Although revenues from customers in the restricted marketing area are
currently immaterial to the Travelocity Division, these restrictions may in the
future limit us from expanding our operations in Southeast Asia, Australia, New
Zealand, Japan, India and other nearby regions.
WE MAY SUFFER ADVERSE CONSEQUENCES IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY.
If Travelocity.com Inc. were to cease to have the right to elect a majority
of the Travelocity.com Partnership's directors, its interest in the
Travelocity.com Partnership could be deemed an investment security for purposes
of the Investment Company Act of 1940, as amended, which could result in
Travelocity.com Inc. being an investment company and becoming subject to the
registration and other requirements of the Act. If Travelocity.com Inc. is
deemed an investment company, contracts it entered into at a time that it was an
unregistered investment company may be unenforceable. The Act imposes
substantive requirements on registered investment companies including
limitations on capital structure, restrictions on certain investments,
prohibitions on transactions with affiliates (including Sabre) and compliance
with reporting, recordkeeping, voting, proxy disclosure and other rules and
regulations. Registration as an investment company would make it impractical for
Travelocity.com Inc. to continue its business as currently conducted and would
harm its business and results of operations.
The regulatory scope of the Act, extends generally to companies engaged
primarily in the business of investing, reinvesting, owning, holding or trading
in securities. The Act also may apply to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities that bring it within the Act's definition of an investment company.
Generally, a company is an investment company if it owns investment securities
having a value exceeding 40% of the value of its total assets (excluding
government securities and cash items) on an unconsolidated basis, unless a
particular
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exemption or safe harbor applies. Securities issued by a majority-owned
subsidiary are generally excluded from the definition of investment securities
for purposes of the Act.
As soon as practicable following the merger, Travelocity.com Inc.'s sole
asset will be its interest in the Travelocity.com Partnership. Travelocity.com
Inc. will hold this interest directly and through a wholly owned subsidiary. We
believe that Travelocity.com Inc. is not and will not be an investment company
because Travelocity.com Inc. will have the right to appoint five of the nine
directors of the Travelocity.com Partnership, making the Travelocity.com
Partnership a majority-owned subsidiary of Travelocity.com Inc. for purposes of
the Act. Sabre will control Travelocity.com Inc. and, through its control of
Travelocity.com Inc., Sabre will also effectively control the Travelocity.com
Partnership.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document and in documents
that are incorporated by reference in this document that are subject to risks
and uncertainties. Forward-looking statements include information that is not
purely historic fact, including statements concerning the financial outlook for
1999 and estimates for 2000, and Preview Travel's and the Travelocity.com
Business' possible or assumed future results of operations generally.
Forward-looking statements also include more specific statements and information
regarding assumptions about earnings per share, capital and other expenditures,
financing plans, cash flow, capital structure, pending legal proceedings and
claims, future economic performance, the regulatory environment, operating
income, management's plans, goals and objectives for future operations and
growth and markets for Travelocity.com Inc.'s and Preview Travel's stock.
The sections of this document which contain forward-looking statements
include "Questions and Answers About the Merger" - "Summary" - "Summary Selected
Pro Forma and Historical Financial Data" - "The Merger -- Background of the
Merger" - "The Merger -- Preview Travel's Reasons for the Merger" - "The
Merger -- Sabre's and the Travelocity Division's Reasons for the Merger"
- - "Unaudited Pro Forma Condensed Combined Financial Information" - "Management
Discussion and Analysis of Pro Forma Financial Information of Travelocity.com
Inc." - "Opinion of Hambrecht & Quist" - "The Travelocity.com Business" - "The
Travelocity Division's Management Discussion and Analysis." We also identify our
forward-looking statements by words such as "believes," "expects,"
"anticipates," "intends," "estimates" or similar expressions. You should
understand that these forward-looking statements are necessarily estimates
reflecting the judgment of the Travelocity.com Business and Preview Travel, not
guarantees of future performance. They are subject to a number of assumptions,
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the forward-looking statements.
You should understand that the following important factors, in addition to
those discussed in "Risk Factors" and in the documents which are incorporated by
reference, could affect the future results of the Travelocity Division and
Preview Travel, and of the Travelocity.com Business after the closing, and could
cause those results or other outcomes to differ materially from those expressed
or implied in our forward-looking statements:
Economic and Industry Conditions
- competition and technological innovation by our competitors
- seasonality of the travel industry and booking revenues
- sensitivity to general economic conditions and events that affect the
travel industry and airlines in particular
- business combinations and strategic alliances by other industry
participants
- growth in commerce conducted over the Internet
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Operating Factors
- changes in the Travelocity.com Business' relationship with Sabre and its
affiliates
- changes in our relationships with travel suppliers and other strategic
partners
- risks associated with international operations
- legal and regulatory issues
Transaction Factors
- the risk that we may not be able to successfully integrate the
Travelocity Division and Preview Travel
Accordingly, you should not place undue reliance on forward-looking
statements, which speak only as of the date of this proxy statement/prospectus,
or, in the case of documents incorporated by reference, the date of those
documents.
All subsequent written and oral forward-looking statements attributable to
Travelocity.com Inc. or Preview Travel or any person acting on their behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. Neither Travelocity.com Inc. nor Preview Travel
undertakes any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this proxy statement/prospectus or to reflect the occurrence of unanticipated
events.
THE SPECIAL STOCKHOLDERS MEETING
DATE, TIME AND PLACE
Preview Travel will hold the special stockholders meeting at the Park Hyatt
San Francisco, 333 Battery Street, San Francisco, California 94111, at 10:00
a.m., local time, on March 7, 2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL STOCKHOLDERS MEETING
At the special stockholders meeting, Preview Travel will ask its common
stockholders to approve the merger agreement and to transact the other business
that may properly come before the special meeting or any postponement or
adjournment of the special meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Holders of record of Preview Travel common stock at the close of business
on January 20, 2000, the record date for the special stockholders meeting, are
entitled to receive notice of and to vote at the special stockholders meeting.
On the record date, approximately 183 holders of record held approximately
14,018,000 issued and outstanding shares of Preview Travel common stock.
A majority of the shares of Preview Travel common stock issued and
outstanding and entitled to vote on the record date must be represented in
person or by proxy at the special stockholders meeting in order for a quorum to
be present for purposes of transacting business at the meeting. In the event
that a quorum is not represented at the special stockholders meeting, Preview
Travel expects that the meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of Preview Travel common stock on the
record date are each entitled to one vote per share with respect to approval of
the merger.
Preview Travel is not aware of, and does not expect, any other matters to
come before the special stockholders meeting. However, if any other matters are
properly presented at the special meeting for consideration, the persons named
in the enclosed form of proxy will have discretion to vote or not vote on those
matters in accordance with their best judgment, unless you withhold
authorization to use that discretion. If a proposal to adjourn the special
meeting is properly presented, however, the persons named in the enclosed form
of proxy will not have discretion to vote in favor of the adjournment proposal
any shares which have been voted against the proposal(s) to be presented at the
special meeting.
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VOTES REQUIRED; VOTING AGREEMENTS
The approval of the merger agreement requires the affirmative vote of the
holders of record of a majority of the shares of Preview Travel common stock
outstanding on the record date. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
As an inducement and condition to Sabre's and Travelocity.com Inc.'s
willingness to enter into the merger agreement, three holders of Preview Travel
common stock have entered into binding agreements with Sabre and Travelocity.com
Inc. to vote their shares in favor of the merger. The voting agreements are
included as Exhibits B-1, B-2 and B-3 to this proxy statement/prospectus.
Stockholders who have signed voting agreements are:
- James J. Hornthal, Chairman of the Board of Preview Travel;
- Media One Interactive Services, Inc.; and
- America Online, Inc.
As of January 20, 2000, these three stockholders owned 18.8% of the common
stock of Preview Travel. Under the voting agreements Mr. Hornthal, Media One
Interactive Services and AOL have each:
- agreed to vote all of the shares of Preview Travel common stock that they
own or over which they exercise voting control in favor of the merger
agreement and against any competing acquisition proposal; and
- granted to Sabre an irrevocable proxy to vote in favor of the merger and
against any competing acquisition proposal.
The voting agreements expire when the merger has been approved or upon
termination of the merger agreement, whichever comes first.
SHARE OWNERSHIP OF MANAGEMENT
On January 20, 2000, Preview Travel's directors and executive officers were
entitled to vote approximately 1,026,000 shares of Preview Travel common stock.
These shares represent approximately 7.3% of the outstanding shares of Preview
Travel common stock. Of these directors and executive officers, James Hornthal
is a party to a voting agreement and accordingly has agreed to vote his shares
of Preview Travel common stock in favor of the merger. His shares represent 6.0%
of the votes of the Preview Travel common stock on the record date.
The directors' and executive officers' affiliates were entitled to vote
approximately 933,000 shares of Preview Travel common stock on January 20, 2000.
These shares represent approximately 6.7% of the outstanding shares of Preview
Travel common stock. The holder of these shares is party to a voting agreement
and accordingly will vote these shares in favor of the merger.
PREVIEW TRAVEL BOARD RECOMMENDATION
THE PREVIEW TRAVEL BOARD HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN
THE BEST INTERESTS OF ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
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HOW YOU CAN VOTE
Attending Meeting or Submitting Proxies
You may vote either by:
- attending the special stockholders meeting and voting your shares in
person at the meeting, or
- completing the enclosed proxy card, signing and dating it and mailing it
in the enclosed postage pre-paid envelope.
If you sign a written proxy card and return it without instructions, the
persons authorized in the proxy will vote your shares for each of the proposals
presented at the special stockholders meeting.
If your shares are held in "street name," which means the shares are held
in the name of a broker, bank or other record holder, you must either direct the
record holder of your shares as to how to vote your shares or obtain a proxy
from the record holder to vote at the special stockholders meeting.
Stockholders who submit proxy cards should not send in any stock
certificates with their proxy cards. Travelocity.com Inc. will mail a
transmittal form with instructions for the surrender of certificates
representing shares of Preview Travel stock to former Preview Travel
stockholders shortly after the merger.
Revoking Proxies
If you are a stockholder of record, you may revoke your proxy at any time
prior to the time it is voted at the special stockholders meeting. You may
revoke your proxy:
- by sending written notice, including by telegram or telecopy, to the
Corporate Secretary of Preview Travel;
- by signing and returning a later-dated proxy by mail to the Corporate
Secretary of Preview Travel; or
- by attending the special stockholders meeting and voting in person.
Attendance at Preview Travel's special stockholders meeting will not in and
of itself constitute a revocation of a proxy. You must send any written notice
of a revocation of a proxy so as to be delivered before the taking of the vote
at the special stockholders meeting to:
Preview Travel, Inc.
747 Front Street
San Francisco, California 94111
Telecopy: (415) 439-1200
Attention: Casey Cotter
If you require assistance in changing or revoking a proxy, you should
contact:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Telephone: (212) 929-5500
or (800) 322-2885
General Proxy Information
Brokers who hold shares in street names for customers who are the
beneficial owners of those shares are prohibited from giving a proxy to vote on
the merger unless they receive specific instructions from the customer. These
so-called broker non-votes will have the same effect as a vote against the
merger.
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You may specify an abstention on the merger. If you submit a proxy with an
abstention, you will be treated as present at the special stockholders meeting
for purposes of determining the presence or absence of a quorum for the
transaction of all business. An abstention will have the same effect as a vote
against the merger.
Solicitation of Proxies; Expenses
Preview Travel will bear the cost of solicitation of proxies. In addition
to solicitation by mail, the directors, officers and employees of Preview Travel
may also solicit proxies from stockholders by telephone, telecopy, telegram or
in person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners; and Preview Travel will, upon request, reimburse those brokerage houses
and custodians for their reasonable expenses in so doing.
Preview Travel has retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies and to verify certain records related to the
solicitation. MacKenzie Partners will receive a fee of $7,500 as compensation
for its services and reimbursement for its related out-of-pocket expenses.
Preview Travel has agreed to indemnify MacKenzie Partners and its employees
against liabilities arising out of or in connection with its engagement that are
not the result of bad faith or willful misconduct on the part of MacKenzie
Partners or its employees.
THE TRANSACTIONS
Sabre plans to combine the Travelocity Division and Preview Travel in a
holding company/ partnership structure. When the transactions are completed,
Travelocity.com Inc. will be a holding company whose sole asset will be units
issued by a partnership named Travelocity.com LP, which we refer to as the
Travelocity.com Partnership. Sabre will own the remaining partnership units. The
Travelocity.com Partnership will ultimately own all of the assets and have all
of the liabilities of the Travelocity Division and Preview Travel, and it will
conduct the Travelocity.com Business.
PRIOR TO THE MERGER
Sabre has offered consumer-direct online travel services since 1985. In
January 1995, Sabre established this business as a separate operating division.
On September 30, 1999, Sabre formed Travelocity.com Inc. in anticipation of the
merger, and Sabre and Travelocity.com Inc. formed the Travelocity.com
Partnership to hold the Preview Travel and Travelocity Division assets and
liabilities.
Contribution of the Travelocity Division to the Travelocity.com Partnership
Currently, Sabre owns all the assets and has all the liabilities of the
Travelocity Division. Immediately prior to the merger, Sabre will contribute the
Travelocity Division's assets and liabilities and $50 million in cash to the
Travelocity.com Partnership and receive partnership units in exchange for this
contribution.
As a result, immediately prior to the merger, Sabre and Travelocity.com
Inc. will own the Travelocity.com Partnership, and the Travelocity.com
Partnership will own the Travelocity Division and $50 million in cash.
THE MERGER
In the merger, Preview Travel will be merged with and into Travelocity.com
Inc., and Preview Travel's separate existence will cease. The merger will
convert each share of Preview Travel common stock into one share of
Travelocity.com Inc.'s common stock. In total, Travelocity.com Inc. will issue
approximately 14 million shares of common stock to former Preview Travel
stockholders.
The merger will convert the shares of Travelocity.com Inc.'s common stock
that Sabre owns into 33 million shares of Travelocity.com Inc.'s Series A
Preferred Stock. The preferred stock is convertible
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into 3 million shares of Travelocity.com Inc.'s common stock, and the preferred
stock receives dividends and distributions on a basis as if it were converted
into common stock. Sabre also has the right to exchange one partnership unit and
one share of preferred stock for one share of Travelocity.com Inc.'s common
stock, at any time.
After the merger, Travelocity.com Inc. will have approximately 17 million
common stock equivalent shares outstanding:
- the shares of common stock it issues to former Preview Travel
stockholders will represent approximately 82% (14 million out of 17
million shares) of its equity, and
- the shares of preferred stock it issues to Sabre will represent
approximately 18% (3 million out of 17 million shares) of its equity.
IMMEDIATELY AFTER THE MERGER
Contribution of Preview Travel's Assets and Liabilities to the Travelocity.com
Partnership
Immediately after the merger, Travelocity.com Inc. will contribute all of
Preview Travel's assets and liabilities to the Travelocity.com Partnership in
exchange for partnership units. After the merger, Travelocity.com Inc. will have
an approximate 36% equity interest in the Travelocity.com Partnership.
Ownership of Travelocity.com Inc. and the Travelocity Partnership After the
Merger
As a result of the merger, the current Preview Travel stockholders will own
shares of Travelocity.com Inc.'s common stock that represent approximately a 30%
equity interest in the Travelocity.com Partnership -- that is, 82% (their equity
interest in Travelocity.com Inc.) of the 36% equity interest in the
Travelocity.com Partnership held by Travelocity.com Inc.
Sabre will beneficially hold an approximate 70% equity interest in the
Travelocity.com Partnership -- that is:
- an approximate 64% equity interest in the Travelocity.com Partnership
held directly, plus
- an approximate 6% equity interest held through Travelocity.com
Inc. -- that is, 18% (its equity interest in Travelocity.com Inc.) of 36%
(Travelocity.com Inc.'s equity interest in the Travelocity.com
Partnership).
Voting Power
Sabre's preferred stock will vote with the common stock. Each share will be
entitled to one vote and holders of preferred stock and common stock will vote
together as a single class on all matters, including the election of directors.
Therefore, Sabre's preferred stock will represent approximately 70% (33 million
out of 47 million shares) of the combined voting power of Travelocity.com Inc.'s
voting stock. The common stock that Travelocity.com Inc. issues to former
Preview Travel stockholders will represent approximately 30% (14 million out of
47 million shares) of the combined voting power of Travelocity.com Inc.'s voting
stock. As a result, Sabre will be able to exercise control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions.
The Travelocity.com Partnership will be governed by a nine member board of
directors. Sabre will have the right to elect four directors, and
Travelocity.com Inc. will have the right to elect the remaining five directors
of the Travelocity.com Partnership.
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Thus, Sabre's and the former Preview Travel stockholders' voting power in
Travelocity.com Inc. will mirror their equity interests in the Travelocity.com
Partnership, as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE APPROXIMATE EQUITY
EQUITY INTEREST IN VOTING POWER IN INTEREST IN THE
TRAVELOCITY.COM TRAVELOCITY.COM TRAVELOCITY.COM
INC. INC. PARTNERSHIP
------------------ --------------- ------------------
<S> <C> <C> <C>
Sabre................................. 18% 70% 70%
Former Preview Travel stockholders.... 82% 30% 30%
</TABLE>
Additional Sabre Investment for Common Stock
Travelocity.com Inc. has the right to cause Sabre to purchase with cash up
to an additional $50 million in Travelocity.com Inc.'s common stock.
Travelocity.com Inc. may exercise this right during the ten days following the
merger. If it exercises this right:
- Travelocity.com Inc. will determine the number of shares of common stock
to issue to Sabre by dividing the amount of the investment by the average
closing price per share of Preview Travel's common stock for the ten
trading days immediately before the merger;
- Travelocity.com Inc. will transfer the $50 million in cash to the
Travelocity.com Partnership;
- Sabre's equity interest and voting power in Travelocity.com Inc. and its
equity interest in the Travelocity.com Partnership will increase.
For example, assuming that the average closing price per share of Preview
Travel's common stock for the ten trading days immediately before the merger is
$32.6875 per share, which is a recent price of Preview Travel common stock, the
equity interests and voting power would be as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE APPROXIMATE EQUITY
EQUITY INTEREST IN VOTING POWER IN INTEREST IN THE
TRAVELOCITY.COM TRAVELOCITY.COM TRAVELOCITY.COM
INC. INC. PARTNERSHIP
------------------ --------------- ------------------
<S> <C> <C> <C>
Sabre................................. 24% 71% 71%
Former Preview Travel stockholders.... 76% 29% 29%
</TABLE>
GOVERNANCE
A board of directors will be responsible for the business and affairs of
the Travelocity.com Partnership. The Travelocity.com Partnership's board of
directors will initially consist of nine members, five designated by
Travelocity.com Inc. and four designated by Sabre. Through its voting control of
Travelocity.com Inc., Sabre will also control the Travelocity.com Partnership.
The board of directors of each of Travelocity.com Inc. and the Travelocity
Partnership will each initially consist of nine directors, and we anticipate
that the membership of each board will be the same. The governing documents of
both Travelocity.com Inc. and the Travelocity.com Partnership will require that
at least two directors be independent of Sabre. That is, these directors cannot
be employees, officers or directors of Sabre or persons who have a material
business relationship with Sabre or its affiliates. Initially, however, we
intend to have three independent directors on both boards. We also expect that
the executive officers of Travelocity.com Inc. and the Travelocity.com
Partnership will be the same.
The Travelocity.com Partnership will conduct the business of and employ all
the employees of the Travelocity.com Business, except for the senior management
team and approximately ten other persons who will be employed by Travelocity
Holdings, Inc., a wholly owned subsidiary of Sabre. Travelocity Holdings will
manage the day-to-day business of the Travelocity.com Partnership, under the
supervision of the Travelocity.com Partnership's board of directors, in
accordance with a management services agreement. For a description of the
management services agreement, see "Management Services Agreement" on page 89.
The Travelocity.com Partnership's board of directors will oversee these
Travelocity Holdings employees and may discharge them with or without cause.
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<PAGE> 37
REASONS FOR THE STRUCTURE OF THE TRANSACTIONS
The structure is tax efficient for several reasons. First, the structure
permits each of the partners, including Sabre, to include its allocable share of
the Travelocity.com Partnership's results with its other income for tax
reporting purposes. This allows each partner to offset its share of the
Travelocity.com Partnership's losses against its income, and thereby possibly to
reduce its liability for taxes. Second, although Sabre has not decided whether
it will distribute its equity interest in the Travelocity.com Partnership to its
stockholders in a transaction known as a spin-off, and it is not obligated to do
so, the structure maintains Sabre's ability to effect a spin-off of its equity
interest in the Travelocity.com Partnership on a tax-free basis both under
current law and under recently proposed legislative amendments to the spin-off
provisions of the federal tax code. Third, the structure provides state tax
benefits. Finally, because of the flow-through nature of a partnership for tax
purposes, the structure may provide benefits to some types of future investors
in the Travelocity.com Business who prefer to invest at the Travelocity.com
Partnership level.
THE MERGER
GENERAL
The Preview Travel board of directors is using this proxy
statement/prospectus to solicit proxies from the holders of Preview Travel
common stock for the approval of the merger at Preview Travel's special
stockholders meeting.
The merger agreement provides for the merger of Preview Travel into
Travelocity.com Inc. Upon consummation of the merger, the separate existence of
Preview Travel will cease and Preview Travel stockholders will have the right to
receive shares of Travelocity.com Inc.'s common stock. For a description of the
merger agreement, see "Material Terms of the Merger Agreement" on page 75.
BACKGROUND OF THE MERGER
The following describes events leading to the execution of the merger
agreement by Sabre, Travelocity.com Inc. and Preview Travel.
In September 1998, James J. Hornthal, Chairman and Founder of Preview
Travel, spoke with Michael Durham, Sabre's Chief Executive Officer at that time,
by telephone to propose a business combination of Preview Travel and Sabre's
Travelocity Division. Sabre's senior management team met to consider the concept
of a business combination with Preview Travel. At that time, Sabre was
considering a variety of other strategic options for the Travelocity Division,
such as an initial public offering of stock in a new company, a possible
alliance with other Internet companies, or the operation of the Travelocity
Division as a separate legal entity wholly owned by Sabre.
Over the following four months:
- Sabre developed a plan to establish the Travelocity Division as a
separate legal entity wholly owned by Sabre, and retained the investment
bank Goldman, Sachs & Co. to help Sabre to evaluate a potential
transaction between the Travelocity Division and Preview Travel and to
assist with any transaction that Sabre chose to pursue, and
- Preview Travel retained the investment bank Hambrecht & Quist to act as
its financial advisor regarding structures for a potential transaction.
In addition to the proposed transaction with Sabre and the Travelocity
Division, Preview Travel's senior management considered potential strategic
alliances, investments, mergers, acquisitions or combinations with other
parties. These transactions included potential mergers with other companies, as
well as potential acquisitions of travel-related companies. Preview Travel's
senior management was unable to reach agreement with such third parties on terms
that senior management believed would result in
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<PAGE> 38
benefits to Preview Travel's stockholders greater than the benefits that the
stockholders might realize through continued operation of the business on an
independent basis. In one case, senior management concluded that the
consideration sought by an acquisition candidate was substantially greater than
the fair value of its underlying business. In another case, senior management
concluded that there were substantial risks that the proposed transaction could
not close and that even if it did close, Preview Travel's stockholders
ultimately would not realize a benefit from it. Senior management also had
serious concerns about the valuation that the third party had placed upon
portions of its business. As a result of these and other factors, senior
management was unable to reach agreement on the terms of a potential transaction
with this third party. Senior management believed that each of these
transactions were inferior to the merger, in view of:
- the amount of the consideration that Preview Travel stockholders will
receive in the merger;
- the opportunity to create a clear leader in online travel;
- the benefits that might be achieved through a combination with the
Travelocity Division and an ongoing relationship with Sabre;
- the benefits to be achieved through combination of the businesses; and
- the other factors set forth in "-- Preview Travel's Reasons for the
Merger" beginning at page 34.
On December 4, 1998, Hambrecht & Quist presented an analysis to Preview
Travel senior management evaluating potential business combinations including
with Sabre and with third parties other than Sabre. During December 1998 and
January 1999, Preview Travel held discussions with several third parties
pursuant to mutual confidentiality agreements.
On January 12, 1999, Mr. Hornthal and other members of Preview Travel's
senior management team met with Sabre's senior management at Sabre's
headquarters in Fort Worth, Texas, to explore a possible transaction or
agreement between Preview Travel and the Travelocity Division. The parties
discussed the strategic merits of a business combination and various transaction
structures to achieve the desired objectives. On or about January 18, 1999,
Sabre and Preview Travel executed a mutual confidentiality agreement and agreed
to exchange non-public information.
On January 19, 1999, the Sabre board was briefed about the possibility of a
business combination between the Travelocity Division and Preview Travel, and
the board discussed Preview Travel's proposal and preliminary options for the
structure of the combination. Also on that date, Preview Travel's senior
management reviewed with its board of directors the status of strategic
opportunities that Preview Travel was pursuing, including a potential business
combination with Sabre as well as opportunities with other parties.
On February 1, 1999, Mr. Durham and other Sabre executives met with Preview
Travel's senior managers in San Francisco. During this meeting, the parties
chose to cease further discussion of the proposed business combination because
of divergent views on transaction terms.
On February 27, 1999, Preview Travel's senior management reviewed with the
Preview Travel board of directors ongoing discussions related to potential
business combinations involving Preview Travel and entities other than Sabre.
On April 23, 1999, Preview Travel's senior management and its legal and
financial advisors reviewed with the board of directors potential partnering
opportunities. An extensive discussion ensued, and the board directed management
to pursue additional information regarding these opportunities. Through July
1999, Preview Travel's senior management continued to explore and hold
discussions with a number of third parties regarding potential business
combinations or other transactions.
On May 13, 1999, Mr. Hornthal met with Terrell B. Jones, President of
Sabre's Travelocity Division and Executive Vice President and Chief Information
Officer of Sabre. Mr. Hornthal proposed that the parties renew consideration of
a potential business combination. On May 18, 1999, Mr. Hornthal informed
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<PAGE> 39
Preview Travel's board of directors that the company was in the process of
re-engaging Sabre in discussions regarding a potential business combination.
In late May 1999, Mr. Hornthal, Leonard R. Stein, then Preview Travel's
Senior Vice President and General Counsel, Thomas Cardy, then Preview Travel's
Chief Financial Officer and a director, and representatives of Hambrecht & Quist
met with Mr. Jones and Jeffery M. Jackson, Executive Vice President and Chief
Financial Officer of Sabre, Jon Woodruff of Goldman, Sachs, and other Sabre
managers to discuss renewed consideration of a combination of Preview Travel and
the Travelocity Division, the companies' relative strengths and the process and
framework for pursuing the potential combination of the businesses.
In the ensuing weeks Sabre and Preview Travel continued to discuss the
structure and terms of the transaction. The parties exchanged non-binding
proposals and conducted their respective due diligence reviews under the
parties' existing mutual confidentiality agreement.
On June 30, 1999 and July 1, 1999, Sabre's senior management and
representatives of Preview Travels' senior management met to discuss further the
outline of a possible business transaction that would combine the Travelocity
Division and Preview Travel. Because of the importance of Preview Travel's
relationship with AOL to its overall business, Sabre wished to ensure that this
relationship would be preserved if Preview Travel and Sabre ultimately were able
to reach agreement on a combination of the Travelocity Division and Preview
Travel.
On July 7, 1999, Preview Travel's board of directors met with
representatives of Hambrecht & Quist to discuss a number of Preview Travel's
alternatives. The board of directors concluded that a potential business
combination with the Travelocity Division was the most attractive option and
that senior management should continue to pursue this option. On the same date,
representatives of Sabre met with representatives of Preview Travel to discuss
Sabre's requirements with respect to Preview Travel's ongoing relationship with
AOL.
On July 8 and July 15, 1999, representatives of Sabre, Preview Travel, and
AOL met to discuss AOL's long-term vision for the AOL travel channel and related
properties. As negotiations regarding a potential business combination of the
Travelocity Division and Preview Travel continued, representatives of Sabre and
AOL negotiated the terms of a new agreement that would become effective only if
the merger agreement combining the Travelocity Division and Preview Travel were
signed and closed.
Sabre's board met on July 21, 1999 to discuss the advantages of a business
combination of the Travelocity Division and Preview Travel, the estimated value
of the combined company, the structure, and preliminary terms.
Over the next two months, the executives, senior managers and advisors of
Preview Travel and Sabre met to negotiate details of the structure and
documentation, and complete due diligence.
On August 3, 1999, Preview Travel's board of directors discussed the
ongoing negotiations with Sabre with senior management and representatives of
Hambrecht & Quist. Thereafter, representatives of Simpson Thacher & Bartlett,
counsel to Preview Travel, reviewed with the board the directors' fiduciary
duties in connection with the proposed transaction. An extensive discussion
ensued, with management and the representatives of Hambrecht & Quist and Simpson
Thacher & Bartlett responding to numerous questions from the board members.
At board meetings on August 12, 19, 26 and September 2, 1999, Preview
Travel's senior management provided an update to the board of directors on the
ongoing negotiations with Sabre, the remaining open issues and the anticipated
timing for the transaction, and the board discussed the proposal in detail with
its advisors.
On September 14 and 15, 1999, Mr. Jackson, James E. Murphy, Senior Vice
President of Corporate Development and Treasurer of Sabre Inc., and other
managers of the Travelocity Division met with Mr. Cardy and Mr. Stein, at
Sabre's Fort Worth headquarters. During this meeting the parties engaged in
further negotiation of terms and discussions with their respective legal and
financial advisors.
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<PAGE> 40
On September 16, 1999, Preview Travel's senior management provided a
telephonic update to Preview Travel's board of directors on the two day
negotiating session with Sabre, the issues that remained open, and the
anticipated timing for the transaction.
On September 21, 1999, Sabre's board of directors met to discuss further
potential benefits of a business combination of the Travelocity Division and
Preview Travel, including value, terms, the likely reaction of the stock market,
and the plan to integrate the two businesses.
Between September 16 and September 30, 1999, representatives of Sabre and
Preview Travel, along with representatives of Fried, Frank, Harris, Shriver &
Jacobson, counsel to Sabre, and Simpson Thacher & Bartlett, counsel to Preview
Travel, continued to negotiate open issues in the merger agreement and the
related transaction documents.
On September 30, 1999, Preview Travel's senior management updated the board
of directors regarding the status of the negotiations with Sabre.
Representatives of Hambrecht & Quist reviewed in detail with the board of
directors their financial and valuation analysis of Sabre's merger proposal.
This presentation included a valuation of Preview Travel as a stand alone
business, a valuation of the Travelocity Division on a stand alone basis, and a
valuation of the combined company. Hambrecht & Quist's analysis reflected the
$14.875 per share stock price of Preview Travel as of September 22, 1999, the
date on which the presentation was sent to the board of directors.
Representatives of Simpson Thacher & Bartlett once again reviewed the directors'
duties in connection with the consideration of the merger proposal and responded
to the directors' questions. The board discussed the proposed merger with
Travelocity.com Inc. and authorized senior management and the financial and
legal advisors to pursue discussions to finalize a definitive merger agreement.
On October 1, 1999, Sabre's board of directors held a special meeting by
teleconference and unanimously approved the merger and related transactions. At
that meeting, Goldman Sachs presented to Sabre's board their financial
assessment of the transaction and the anticipated market reaction.
On October 1 and October 2, 1999, representatives of Preview Travel and AOL
negotiated an amendment to their existing agreements. The purpose of the
amendment was to secure Preview Travel's consent to AOL's new agreement with the
Travelocity.com Business and to enable Preview Travel to facilitate AOL's launch
of a redesigned travel channel on the AOL service and AOL.com. On October 2,
1999, the new agreement with AOL was executed.
On October 3, 1999, the Preview Travel board of directors met to review the
terms of the proposed merger. At the meeting, Simpson Thacher & Bartlett advised
the board of directors regarding their fiduciary duties in connection with the
transaction, and reviewed with the board the material terms of the proposed
merger agreement and the ancillary agreements to be entered into in connection
with the merger. Senior management updated the board on the negotiations that
had taken place since the previous board meeting. In addition, representatives
of Hambrecht & Quist updated their financial and valuation analysis for the
board to reflect the closing price of Preview Travel common stock on October 1,
1999 and rendered an oral opinion that the proposed transaction was fair from a
financial point of view to Preview Travel stockholders. Taking into
consideration the closing price of Preview Travel common stock on October 1,
1999, which was $17.625 per share, Hambrecht & Quist stated that the analysis
and opinions presented to the Preview Travel board on September 30, 1999 had not
changed. Other than updating the analysis to adjust for the change in the price
of Preview Travel common stock, there were no material differences between the
September 30, 1999 and October 3, 1999 presentations. After further discussion
and consideration, the Preview Travel board of directors unanimously determined
that the merger was fair to, and in the best interests of Preview Travel and its
stockholders and adopted the merger agreement and approved the merger and the
transactions contemplated by the merger agreement.
On October 3, 1999, following the approval of Sabre's and Preview Travel's
respective boards of directors, the parties executed the merger agreement and
the related documents. Prior to the commencement of trading on October 4, 1999,
Sabre and Preview Travel issued a joint press release announcing the execution
of the merger agreement.
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SABRE'S AND THE TRAVELOCITY DIVISION'S REASONS FOR THE MERGER
Sabre and the Travelocity Division believe that the merger will:
- create the leader in the online travel category with a significant portal
presence, greater branding strength, and the largest online travel
customer base in terms of the number of different visitors to our sites
in a given month;
- combine Preview Travel's marketing and content strengths with the
Travelocity Division's travel industry knowledge and technology
expertise;
- create additional stockholder value by exploiting the strategic
advantages that inure to online market leaders;
- enable investment directly in the Travelocity.com Business, which we
expect to increase the value of the Travelocity.com Business and thereby
increase the total value of Sabre;
- enhance partnering opportunities through the Travelocity.com Business'
leadership position in the online travel category;
- allow increased spending on brand awareness and marketing to levels
typical of online businesses;
- result in operational synergies that will provide cost savings and
improved margins over time;
- allow for the Travelocity.com Business to access the capital markets,
which may increase its liquidity and financing flexibility;
- create a stock currency to attract, motivate and retain key employees;
- provide a means to use publicly-traded stock in acquisitions of other
businesses; and
- expand Sabre's position as the most widely used Internet booking engine.
RECOMMENDATION OF THE PREVIEW TRAVEL BOARD OF DIRECTORS; PREVIEW TRAVEL'S
REASONS FOR THE MERGER
Preview Travel's directors believe that the merger offers Preview Travel
stockholders an opportunity to receive significant value for their shares of
Preview Travel common stock and to participate in a combined company that will
be the leading online travel service and that will be well positioned to compete
effectively in the largest retail electronic commerce category. The Preview
Travel board of directors:
- has carefully considered the terms of the proposed merger and has
determined that the merger and the merger agreement are fair to, and in
the best interests of, Preview Travel stockholders;
- has adopted the merger agreement and approved the merger and the other
transactions contemplated by the merger agreement; and
- RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
In reaching its decision, the Preview Travel board of directors consulted
with its financial and legal advisors and with senior management and considered
the following material factors:
- the opportunity for Preview Travel stockholders to participate, as
holders of approximately 30% of the Travelocity.com Partnership's equity,
in a larger company with more users, products and services, which should
allow the combined company to compete more effectively in an industry
where size and scale are important competitive factors;
- the importance that the stock market has historically placed upon a
market leadership position and the corresponding higher multiple that may
accrue to the combined company's stock price due to its position as the
largest provider of online travel services;
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<PAGE> 42
- the expectation that the combined company will have greater technology,
sales, distribution, marketing, customer service and content resources,
general management depth and an increased global presence;
- the potential benefits of the merger to
- Preview Travel's customers, who will benefit from the combined company's
superior technology, expanded product offering and increased purchasing
power;
- Preview Travel's strategic partners, who will be able to reach a greater
combined audience; and
- Preview Travel's employees, who will be employed by the leading online
travel agency with greater opportunities for career development;
- that Preview Travel's strategic and financial alternatives to the merger,
including remaining an independent company, are not as attractive to
Preview Travel as a combination with the Travelocity.com Business;
- the prospects of augmenting strategic partnerships with
- AOL through a new long-term agreement to provide services on the U.S.
versions of AOL, AOL.com, the CompuServe Service, Netscape Netcenter,
Digital City and, for a one-year term, AOL Plus, and share specified
revenues generated as a result of the AOL partnership, and
- Yahoo! through an extension of the agreement to provide travel-related
services to its Yahoo! Travel resource and an investment by Yahoo! in
the combined company;
- the information and presentations by Preview Travel's management and
legal and financial advisors concerning the terms of the merger and the
business, technology, operations, financial condition, management and
competitive industry position and prospects of Preview Travel and the
Travelocity.com Business;
- the oral presentations of Hambrecht & Quist and its oral opinion dated
October 3, 1999, later confirmed in writing (a copy of which is attached
as Annex C to this proxy statement/prospectus) that, as of the date of
this opinion and subject to the assumptions and limitations described in
the opinion, the proposed transactions were fair from a financial point
of view to the holders of Preview Travel common stock;
- the merger will be a tax-free exchange to Preview Travel stockholders;
and
- the rate of growth of Preview Travel's competitors and the need to
increase expenditures on marketing and brand promotion in the Internet
industry.
Preview Travel's board of directors also took into account potential risks
associated with the merger and the combined company and concluded that the
potential benefits of the merger outweighed the potential risks. The principal
risks that the Preview Travel board considered concerned the potential failure
to successfully integrate Preview Travel and the Travelocity Division after the
merger, including the possibility that Preview Travel's customer service could
suffer through the transition, the costs associated with integration, the risk
that Preview Travel's key employees would depart or be distracted by the
integration process, the risk that Preview Travel's existing relationships with
suppliers and customers could be impaired, the risk that the combined company
would not realize economies of scale anticipated by the merger and the operation
of the much larger combined company after the merger.
In view of the variety of material factors considered in connection with
its evaluation of the merger, the Preview Travel board of directors did not find
it practicable to quantify or otherwise assign relative weights to the specific
factors considered in reaching its recommendation. Instead, the Preview Travel
board of directors made its recommendation based on the totality of the
information presented and considered by it.
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<PAGE> 43
There can be no assurance that any of the expected results, efficiencies,
opportunities or other benefits described in this section will be achieved as a
result of the merger. For a discussion of the interests of some members of
Preview Travel's management and the Preview Travel board of directors, see
"Interests of Directors and Officers in the Merger" on page 44.
OPINION OF HAMBRECHT & QUIST
Preview Travel engaged Hambrecht & Quist to act as its exclusive financial
advisor in connection with the merger and to render an opinion that the Proposed
Transactions, which are comprised of the following:
- the issuance of Travelocity.com Inc.'s common stock to Preview Travel
stockholders in the merger,
- the contribution by Travelocity.com Inc. of Preview Travel's assets and
liabilities to the Travelocity.com Partnership, and
- the contribution by Sabre of the Travelocity Division's assets and
liabilities to the Travelocity.com Partnership
were fair, from a financial point of view, to the Preview Travel stockholders.
Hambrecht & Quist was selected by the Preview Travel board of directors based on
Hambrecht & Quist's qualifications, expertise and reputation, as well as
Hambrecht & Quist's past investment banking relationship and familiarity with
Preview Travel. On October 3, 1999, Hambrecht & Quist rendered its oral opinion,
subsequently confirmed in writing, to the Preview Travel board of directors
that, as of that date, the Proposed Transactions were fair, from a financial
point of view, to the Preview Travel stockholders.
THE FULL TEXT OF THE OPINION DELIVERED BY HAMBRECHT & QUIST TO THE PREVIEW
TRAVEL BOARD OF DIRECTORS, DATED OCTOBER 3, 1999, WHICH SETS FORTH THE
ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY HAMBRECHT & QUIST IN RENDERING
ITS OPINION, IS ATTACHED AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED IN THIS PROXY STATEMENT/PROSPECTUS BY REFERENCE. THE HAMBRECHT &
QUIST OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY PREVIEW TRAVEL
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
THE SUMMARY OF THE HAMBRECHT & QUIST OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE FAIRNESS OPINION. PREVIEW TRAVEL
STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In reviewing the Proposed Transactions, and in arriving at its opinion,
Hambrecht & Quist, among other things:
- reviewed the financial statements of the Travelocity Division for recent
years and interim periods to date and other relevant financial and
operating data of the Travelocity Division made available to Hambrecht &
Quist from the internal records of the Travelocity Division;
- reviewed internal financial and operating information, including
projections, relating to the Travelocity Division prepared by the
Travelocity Division's management;
- discussed the Travelocity Division's business, financial condition and
prospects with members of its senior management;
- reviewed the publicly available consolidated financial statements of
Preview Travel for recent years and interim periods to date and other
relevant financial and operating data of Preview Travel made available to
Hambrecht & Quist from published sources and from the internal records of
Preview Travel;
- reviewed internal financial and operating information, including
projections, relating to Preview Travel prepared by Preview Travel's
management;
- discussed Preview Travel's business, financial condition and prospects
with members of its senior management;
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<PAGE> 44
- reviewed the recent reported prices and trading activity for Preview
Travel's common stock and compared that information and financial
information with similar information for other companies engaged in
businesses with characteristics Hambrecht & Quist considered comparable;
- reviewed the financial terms, to the extent publicly available, of
comparable merger and acquisition transactions;
- reviewed the merger agreement, the partnership agreement, the
contribution agreement and related agreements; and
- performed other analyses and examinations and considered other
information, financial studies, analyses and investigations and
financial, economic and market data as Hambrecht & Quist deemed relevant.
In rendering its opinion, Hambrecht & Quist assumed and relied on the
accuracy and completeness of all of the information concerning Preview Travel
and the Travelocity Division it considered in connection with its review of the
Proposed Transactions. Hambrecht & Quist did not assume any responsibility for
independent verification of this information. Hambrecht & Quist did not prepare
any independent valuation or appraisal of any of the assets or liabilities of
Preview Travel or the Travelocity Division, nor did it conduct a physical
inspection of the properties and facilities of Preview Travel or the Travelocity
Division. Hambrecht & Quist assumed that the financial forecasts and projections
made available to it and used in its analysis reflected the best currently
available estimates and judgments of the expected future financial performance
of Preview Travel and the Travelocity.com Business. For purposes of its opinion,
Hambrecht & Quist assumed that neither Preview Travel nor the Travelocity
Division was a party to any pending transactions, including external financings,
recapitalizations or material merger discussions, other than the Proposed
Transactions and activities undertaken in the ordinary course of conducting
their respective businesses. Hambrecht & Quist's opinion is based on market,
economic, financial and other conditions as they existed and could be evaluated
as of the date of the opinion, and any change in these conditions would require
a reevaluation of the opinion. Hambrecht & Quist expressed no opinion as to the
price at which Travelocity.com Inc.'s common stock will trade subsequent to the
giving of its opinion. For purposes of its opinion, Hambrecht & Quist assumed
that the Proposed Transactions would be entered into substantially on the terms
discussed in the merger agreement and related agreements, without any waiver of
any material terms or conditions by any of the parties to the merger agreement,
the partnership agreement, the contribution agreement and related agreements.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses below is not a complete description of the
presentation by Hambrecht & Quist to the Preview Travel board of directors. In
arriving at its opinion, Hambrecht & Quist did not attribute any particular
weight to any analyses or factors it considered, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Hambrecht & Quist believes that its analyses and the summary set forth below
must be considered as a whole and that selecting portions of its analyses or of
the following summary, without considering all factors and analyses, could
create an incomplete view of the processes underlying the analyses set forth in
the Hambrecht & Quist presentation to Preview Travel's board of directors and in
its opinion. In performing its analyses, Hambrecht & Quist made numerous
assumptions about industry performance, general business and economic conditions
and other matters, many of which are beyond Preview Travel and the Travelocity
Division's control. The analyses summarized below are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Additionally, analyses relating to the
values of businesses do not purport to be appraisals or to reflect the prices at
which businesses actually may be acquired.
In performing its analyses, Hambrecht & Quist used published Hambrecht &
Quist research estimates of Preview Travel's calendar year 2000 financial
performance and estimates by the Travelocity Division's management of the
Travelocity.com Business' calendar year 2000 financial performance.
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The following discussion summarizes the material financial analyses
performed by Hambrecht & Quist in connection with its written opinion. The
summary of financial analyses includes information presented in tables. You
should read these tables together with the text of each summary.
Valuation Analysis of Preview Travel
Analysis of Selected Transactions. Hambrecht & Quist compared the Proposed
Transactions with selected mergers and acquisitions transactions. This analysis
included eighteen transactions involving companies in the Internet electronic
commerce industry. The Internet transactions that Hambrecht & Quist deemed
comparable to the proposed transactions were (listed as acquiror/target):
- - AOL/MovieFone Communications
- - Rosenbluth International/Biztravel.com
- - E*Trade/TIR Holdings
- - E*Trade/Telebanc Financial
- - CVS/Soma.com
- - Amazon.com/Exchange.com
- - USA Networks/Hotel Reservation Network
- - Hollywood Entertainment/Reel.com
- - CDNow/N2K
- - Walt Disney/Toysmart.com
- - OnSale/Egghead
- - Columbia House/CDNow
- - Real Select/Springstreet.com
- - Getty Images/Art.com
- - EToys/BabyCenter
- - Beyond.com/BuyDirect.com
- - SportsLine USA/GolfWeb
- - Micro Warehouse/Online Interactive
In examining these transactions, Hambrecht & Quist analyzed, among other
things, the multiples of offer prices to revenues and gross profits for the last
twelve-month period and projected revenues and gross profits for the next twelve
months for the acquired companies. By applying these multiples to Preview
Travel's revenues and gross profits for the last twelve-month period and the
projected revenues and gross profits for the next twelve-month period, Hambrecht
& Quist calculated the ranges of per share equity values of Preview Travel
implied by this analysis set forth in the following table:
<TABLE>
<S> <C>
Historical Multiples.............................. $21.85 - $23.70
Forward Multiples................................. $10.14 - $15.87
</TABLE>
Premium Analysis. Hambrecht & Quist compared the implied premium in the
merger as of October 3, 1999 to similar premiums for the following comparable
public company transactions (listed as acquiror/target):
- - CMGI/Adforce
- - OnSale/Egghead
- - DoubleClick/Netgravity
- - Excite@Home/iMall
- - Columbia House/CDNow
- - Walt Disney/Infoseek
- - DoubleClick/Abacus Direct
- - NBC Interactive/Xoom.com
- - Yahoo!/Broadcast.com
- - AOL/MovieFone Communications
- - Yahoo!/Geocities
- - @Home/Excite
- - AOL/Netscape Communications
- - CDNow/N2K
- - E*Trade/Telebanc Financial
By applying the average one and twenty trading day premiums (excluding the
high and low trading prices) to Preview Travel's closing price on October 1,
1999, Hambrecht & Quist calculated a range of per share equity values of Preview
Travel implied by this analysis of $20.36 to $23.05.
Hambrecht & Quist compared these ranges of per share equity values of
Preview Travel to the ranges of per share equity values of the Travelocity.com
Business, described below and summarized in the chart under "-- Valuation
Analysis of the Travelocity.com Business." Hambrecht & Quist observed that
Preview Travel stockholders will receive as consideration in the merger one
share of Travelocity.com Inc. common stock for each share of Preview Travel that
they hold at the time of the merger. Hambrecht & Quist also observed that the
ranges of per share equity values of the Travelocity.com Business were generally
higher than the ranges of per share equity values of Preview Travel.
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Valuation Analysis of the Travelocity Division
Initial Public Offering Valuation Analysis. Using Hambrecht & Quist
research and published Wall Street estimates, Hambrecht & Quist compared, among
other things, the market values based on revenue multiples at the time of filing
and at the time of offering of companies conducting their initial public
offerings, to the same comparables of the Travelocity Division.
The following group of companies was primarily used in this analysis:
- - Garden.com
- - homestore.com
- - Quotesmith.com
- - InsWeb
- - E-Loan
- - priceline.com
Hambrecht & Quist determined the average revenue multiples at the initial
filing of a registration statement for the initial public offering, and at the
actual initial public offering, of these companies. By applying these multiples
to the Travelocity Division's projected calendar year 2000 revenues, Hambrecht &
Quist calculated the following ranges of equity values of the Travelocity
Division implied by this analysis.
<TABLE>
<S> <C>
Filing................................ $722 million to $928 million
Offering.............................. $1,032 million to $1,238 million
</TABLE>
Hambrecht & Quist used these ranges of equity values for the Travelocity
Division in the valuation analysis of the Travelocity.com Business and in the
contribution analysis, which are described below. Because the Travelocity
Division is not publicly traded, Hambrecht & Quist believed that the initial
public offering valuation represented the best approximation of the value for
the Travelocity Division.
Valuation Analysis of the Travelocity.com Business
Component Analysis of the Travelocity.com Business. Using Preview Travel's
current market value and the valuation range determined above for the
Travelocity Division, Hambrecht & Quist calculated a range of per share equity
values of Travelocity.com Inc. implied by this analysis of $27.11 to $31.48.
Implied Valuation Based on Range of Multiples of the Travelocity.com
Business. Applying a range of forward revenue multiples from 7.5x to 12.5x to
projected calendar year 2000 revenues for the combined company and a range of
estimated revenue synergies, Hambrecht & Quist calculated a range of per share
equity values of Travelocity.com Inc. implied by this analysis of $25.26 to
$44.74.
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The chart below summarizes Hambrecht & Quist's comparison of the ranges of
per share equity values of Travelocity.com Inc., discussed above, to the ranges
of per share equity values of Preview Travel, also discussed above. Hambrecht &
Quist observed that Preview Travel stockholders will receive as consideration in
the merger one share of Travelocity.com Inc. common stock for each share of
Preview Travel common stock that they hold at the time of the merger. Hambrecht
& Quist also observed that the ranges of per share equity values of
Travelocity.com Inc. were generally higher than the ranges of per share equity
values of Preview Travel.
[CURRENT PRICE CHART]
Contribution Analysis
Hambrecht & Quist analyzed the contribution of each of Preview Travel and
the Travelocity Division to the projected equity value of the combined company.
Hambrecht & Quist compared the equity value of the Travelocity Division based on
its value calculated in the initial public offering analysis as described above
to the equity value of Preview Travel based on its market value as of October 1,
1999. Hambrecht & Quist observed that, based on the equity values of Preview
Travel and the Travelocity Division implied by these analyses, the percentage of
Preview Travel's contribution ranged from 16.6% to 19.3%. Hambrecht & Quist
further observed that on a fully-diluted basis, Preview Travel stockholders
would own 29.7% of the Travelocity.com Partnership's equity, which is greater
than the range of equity values contributed by Preview Travel to the
Travelocity.com Partnership.
No company or transaction used in the above analyses is identical to
Preview Travel, the Travelocity Division or the Proposed Transactions.
Accordingly, an analysis of the results of the foregoing analysis is not
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values of the companies or
company to which they are compared.
Hambrecht & Quist, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, strategic transactions, corporate restructurings,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Hambrecht & Quist has acted as the exclusive financial advisor to Preview
Travel's board of directors in connection with the Proposed Transactions.
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In the past, Hambrecht & Quist has provided investment banking and other
financial advisory services to Preview Travel and has received fees for these
services. Specifically, Hambrecht & Quist served as lead manager in Preview
Travel's November 1997 initial public offering, as lead manager in Preview
Travel's April 1998 follow-on offering and as financial advisor when Preview
Travel adopted a Stockholder Rights Plan in October 1998. In the ordinary course
of business, Hambrecht & Quist acts as a market maker and broker in Preview
Travel's publicly traded securities and receives customary compensation in
connection with these activities, and also provides research coverage for
Preview Travel. In the ordinary course of business, Hambrecht & Quist actively
trades in Preview Travel and Sabre's equity and derivative securities for its
own account and for the accounts of its customers, and may at any time hold a
long or short position in these securities. Hambrecht & Quist may in the future
provide investment banking or other financial advisory services to Preview
Travel, the Travelocity.com Business or Sabre.
In an engagement letter dated May 20, 1999, Preview Travel agreed to pay
Hambrecht & Quist a fee of $250,000 in connection with the delivery of the
fairness opinion given on October 3, 1999. Preview Travel also agreed to pay
Hambrecht & Quist, upon completion of the Proposed Transactions, a fee of 0.9%
of the value, at closing, of the aggregate consideration paid to Preview Travel
stockholders in the Proposed Transactions, less any fees previously paid and
subject to an aggregate cap of $7 million. Preview Travel also agreed to
reimburse Hambrecht & Quist for its reasonable out-of-pocket expenses and to
indemnify Hambrecht & Quist against specific liabilities, including liabilities
under the federal securities laws or relating to or arising out of Hambrecht &
Quist's engagement as Preview Travel's financial advisor.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The income tax discussion below represents the opinion of Fried, Frank,
Harris, Shriver & Jacobson, tax counsel to Travelocity.com Inc., and Simpson
Thacher & Bartlett, tax counsel to Preview Travel. This discussion is not a
comprehensive description of all of the tax consequences that may be relevant to
you. For example, we have not described tax consequences that arise from rules
that apply generally to all taxpayers or to some classes of taxpayers. We have
also not described tax consequences that we assume to be generally known by
investors. This discussion is based upon the Internal Revenue Code, the
regulations of the U.S. Treasury Department and court and administrative rulings
and decisions in effect on the date of this proxy statement/prospectus. These
laws may change, possibly retroactively, and any change could affect the
continuing validity of this discussion. This discussion is also based upon:
- customary representations of Travelocity.com Inc. and Preview Travel
contained in certificates signed by officers of Travelocity.com Inc. and
Preview Travel and provided to Fried, Frank, Harris, Shriver & Jacobson
and Simpson Thacher & Bartlett; and
- an assumption that the merger will be completed according to the terms of
the merger agreement.
This discussion assumes that you hold your shares of Preview Travel common
stock as a capital asset and does not address the tax consequences that may be
relevant to you if you receive special treatment under some federal income tax
laws. You may receive this special treatment if you are:
- a bank;
- a tax-exempt organization;
- an insurance company;
- a dealer in securities or foreign currencies;
- a Preview Travel stockholder who received your Preview Travel common
stock through the exercise of employee stock options or otherwise as
compensation;
- not a U.S. person; or
- a Preview Travel stockholder who holds Preview Travel common stock as
part of a hedge, straddle or conversion transaction.
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The discussion also does not address any consequences arising under the
laws of any state, locality or foreign jurisdiction. Travelocity.com Inc. and
Preview Travel have not and will not seek any ruling from the Internal Revenue
Service regarding any matters relating to the merger.
Based on the assumptions discussed above and upon representations and
assumptions contained in the certificates described above, it is the opinion of
each of Fried, Frank, Harris, Shriver & Jacobson, tax counsel to
Travelocity.com. Inc., and Simpson Thacher & Bartlett, tax counsel to Preview
Travel, that:
- the merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code;
- Travelocity.com Inc. and Preview Travel will not recognize gain or loss;
- you will not recognize gain or loss when you exchange your Preview Travel
common stock solely for Travelocity.com Inc.'s common stock;
- the aggregate tax basis of Travelocity.com Inc.'s common stock you
receive will be the same as the aggregate tax basis of the Preview Travel
common stock you surrender in exchange;
- the holding period of Travelocity.com Inc.'s common stock you receive
will include the holding period of shares of Preview Travel common stock
you surrender in exchange; and
- you must retain records and file with your United States federal income
tax returns a statement setting forth certain facts relating to the
merger.
It is a waivable condition to the merger that Travelocity.com Inc. and
Preview Travel each receive at the merger closing a tax opinion from its tax
counsel that the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. These opinions will be based upon
updated representations of Travelocity.com Inc. and Preview Travel contained in
certificates signed by officers of Travelocity.com Inc. and Preview Travel to be
delivered at the time of the merger closing. You cannot rely on the tax opinions
if any of these factual assumptions or representations is, or later becomes,
inaccurate. Preview Travel will resolicit the votes of its stockholders before
proceeding with the merger if the tax opinions cannot be issued and the material
federal income tax consequences of the merger are materially different from
those described in this document. The tax opinions are not binding upon the
Internal Revenue Service or the courts.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR PARTICULAR SITUATION. WE ENCOURAGE YOU TO
CONSULT YOUR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE
IN THE TAX LAWS.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
rules that the Federal Trade Commission promulgated under the Act, we cannot
complete the merger until we have given notification and furnish information
relating to the competitive nature of Preview Travel and the Travelocity
Division and the industries they operate in to the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice, and a
specified waiting period expires or is terminated. AMR, as the ultimate parent
entity of the Travelocity Division, and Preview Travel both filed notification
and report forms under the Hart-Scott-Rodino Act with the Federal Trade
Commission and the Antitrust Division on October 12, 1999 and the waiting period
expired on November 11, 1999. Even though the waiting period expired, the
Federal Trade Commission and the Antitrust Division retain the authority to
challenge the merger on antitrust grounds. In addition, each state in which the
Travelocity Division or Preview Travel operates may also seek to review the
merger. It is possible that some of these authorities may seek to challenge the
merger.
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Under the merger agreement, we have both agreed to use our reasonable best
efforts to take all actions to obtain all necessary regulatory and governmental
approvals necessary to complete the merger and to address concerns of regulators
and governmental officials.
The Travelocity Division and Preview Travel both conduct business outside
the United States. Although the merger does not require notification to or
approval of regulatory authorities outside the United States, those regulatory
authorities could seek to challenge the merger. We do not expect the closing of
the merger to be delayed by any such challenge.
ACCOUNTING TREATMENT
Sabre has a majority equity interest in the Travelocity.com Partnership and
the general presumption would be for Sabre to consolidate the Travelocity.com
Partnership into its financial statements. Although Travelocity.com does not
have a majority equity interest in the Travelocity.com Partnership,
Travelocity.com Inc. controls the Travelocity.com Partnership through the
Travelocity.com Partnership's board of directors since Travelocity.com Inc. has
the right to appoint a majority of the directors. Accordingly, we believe the
general presumption is overcome and Travelocity.com Inc. will consolidate the
Travelocity.com Partnership into its financial statements. Furthermore, although
Travelocity Holdings, a Sabre subsidiary, will manage the day to day operations
of the Travelocity.com Partnership pursuant to the management services
agreement, it is subject to the direction and oversight of the Travelocity.com
Partnership's board of directors. As such, the Travelocity.com Partnership's
board of directors has the unilateral ability to control the management of the
Travelocity.com Partnership, thereby enabling Travelocity.com Inc to consolidate
the Travelocity.com Partnership in its separate financial statements.
Travelocity.com Inc.'s consolidated financial statements will include the
financial statements of Travelocity.com Inc. and the Travelocity.com
Partnership, with Sabre's 64% interest in the Travelocity.com Partnership's
results of operations presented as a single line item, "Sabre's interest in
partnership," in Travelocity.com Inc.'s statement of operations. Travelocity.com
Inc.'s results of operations and financial position will consist of the total of
36% of the Travelocity.com Partnership's results and 100% of Travelocity.com
Inc.'s results.
Travelocity.com Inc. will account for the merger as a purchase of Preview
Travel's assets and liabilities. The Travelocity.com Partnership will record on
its balance sheet:
- the fair market value of Preview Travel's assets and liabilities; and
- the historical net book value of the Travelocity Division's assets and
liabilities that Sabre contributes; and
- the direct costs of the acquisition incurred by Sabre and Travelocity.com
Inc.
The Travelocity.com Partnership will record approximately $215 million of
intangible assets and goodwill in the merger. After the merger, intangible
assets and goodwill will be approximately 65% of the Travelocity.com
Partnership's pro forma total assets. The Travelocity.com Partnership will
amortize the intangible assets and goodwill acquired in the merger over a 3-year
period, resulting in an approximate $72 million charge per year that will
negatively affect the Travelocity.com Partnership's net income.
NO APPRAISAL OR DISSENTERS' RIGHTS
Preview Travel is organized under Delaware law. Under Delaware law, Preview
Travel stockholders do not have a right to dissent and receive the appraised
value of their shares in connection with the merger.
LISTING OF TRAVELOCITY.COM INC.'S COMMON STOCK
It is a condition to closing the merger that Travelocity.com Inc.'s common
stock held by the former Preview Travel stockholders be approved for quotation
on the Nasdaq National Market under the symbol "TVLY."
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The Series A Preferred Stock and any shares of Travelocity.com Inc.'s
common stock that may be acquired by Sabre will be "restricted" securities under
the Securities Act of 1933, as amended. This means that these shares may be
bought or sold only under very limited exemptions. Sabre and Travelocity.com
Inc. intend to enter into a Registration Rights Agreement that requires
Travelocity.com Inc. to register any common stock held by Sabre and its
affiliates. See "Material Terms of Related Agreements -- Registration Rights
Agreement" on page 90.
DELISTING AND DEREGISTRATION OF PREVIEW TRAVEL COMMON STOCK
If the merger is completed, Preview Travel common stock will be delisted
from the Nasdaq National Market and will be deregistered under the Securities
Exchange Act of 1934, as amended.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS
This proxy statement/prospectus does not cover any resales of
Travelocity.com Inc.'s common stock you will receive in the merger, and no
person is authorized to make any use of this proxy statement/prospectus in
connection with any such resale.
All shares of Travelocity.com Inc.'s common stock you will receive in the
merger will be freely transferable, except that if you are deemed to be an
"affiliate" of Preview Travel under the Securities Act at the time of the
special stockholders meeting, you may resell those shares only in transactions
permitted by Rule 145 under the Securities Act or as otherwise permitted under
the Securities Act. Persons who may be Preview Travel's affiliates for those
purposes generally include individuals or entities that control, are controlled
by, or are under common control with, Preview Travel, and would not include
stockholders who are not officers, directors or principal stockholders of
Preview Travel.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER
When you consider the recommendation of the Preview Travel board of
directors that you vote for the adoption of the merger agreement, you should be
aware that some of the Preview Travel directors and officers and their
associates have interests in the merger in addition to their interests solely as
Preview Travel stockholders, which are described below. These interests may
create potential conflicts of interest. Preview Travel's board of directors was
aware of each of these interests when it considered and adopted and approved the
merger agreement and the merger.
EMPLOYMENT AGREEMENTS
The merger will trigger change of control provisions in:
- the employment agreement between Preview Travel and Christopher Clouser,
who is the Chief Executive Officer, President and a director of Preview
Travel, and
- the advisory services agreement between Preview Travel and Thomas Cardy,
a director of Preview Travel.
Under Mr. Clouser's employment agreement, 50% of his unvested Preview
Travel stock options will vest immediately before the merger. After the merger,
one-twelfth of his remaining options will vest at the end of each successive
month. Mr. Clouser holds 400,000 unvested stock options, with an aggregate in
the money value of $6.4 million, based on the price of Preview Travel common
stock of $39.25 per share on January 20, 2000.
In addition, if the merger closes on or prior to July 27, 2000, Mr. Clouser
will be entitled to be reimbursed for living and commuting expenses for the 12
months after the merger as long as he remains an employee of the surviving
company.
If Preview Travel, or the Travelocity.com Partnership as the successor to
Preview Travel, terminates Mr. Clouser's employment due to circumstances
specified in his employment agreement, Preview Travel,
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and the Travelocity.com Partnership as the successor to Preview Travel, must
enter into a consulting agreement with Mr. Clouser. Some of those circumstances
are the following:
- the occurrence of a subsequent change of control within 12 months
following the merger, or
- Mr. Clouser's position with Preview Travel is materially reduced in
stature or responsibility, and he elects to voluntarily terminate his
employment within the 45 days after the change in his position. A
reduction in stature will not result if Mr. Clouser reports to the chief
executive officer of the Travelocity.com Business following the merger.
The consulting agreement terminates on the earlier of July 27, 2001 or the
first anniversary of the merger. During this term, Mr. Clouser is entitled to
receive the monthly salary and annual bonus he would have been entitled to under
his employment agreement, except as described in the agreement. However, Mr.
Clouser has the right, within 30 days following the commencement of the
consulting agreement, to request a lump sum payment equal to 50% of the salary
and annual bonus that he otherwise would have been paid during the term of the
consulting agreement. If Mr. Clouser exercised this option, neither Preview
Travel, nor the Travelocity.com Partnership as successor to Preview Travel,
would have any further obligation to pay Mr. Clouser the salary or annual bonus.
Under the consulting agreement, Mr. Clouser is not entitled to any
supplemental payments to compensate him for excise tax liability under sections
4999 and 280G of the Internal Revenue Code. However, if any portion of the
aggregate payments to Mr. Clouser following a change in control were an "excess
parachute payment" that would result in a liability for excise tax under section
4999, Mr. Clouser may either:
- pay the excise tax, or
- reduce the payment made to him so that the payments do not result in
liability for excise tax.
Under Mr. Cardy's advisory services agreement and under the 1997 Directors'
Stock Option Plan, all of his unvested Preview Travel stock options will vest
immediately before the merger. Mr. Cardy holds 15,000 unvested stock options,
with an aggregate in the money value of $321,000, based on the price of Preview
Travel common stock of $39.25 per share on January 20, 2000.
EFFECTS OF THE MERGER UNDER PREVIEW TRAVEL'S STOCK OPTION PLANS
The merger agreement provides that, when the merger is completed,
Travelocity.com Inc. will convert all vested and unvested options to purchase
Preview Travel common stock held by Preview Travel employees, directors or
consultants into options to acquire Travelocity.com Inc.'s common stock. These
options will remain exercisable for the same number of shares. The exercise
price per share will remain the same.
Travelocity.com Inc. has agreed to file a registration statement on or as
soon as practicable after the merger covering Travelocity.com Inc.'s common
stock subject to Preview Travel stock options, other Preview Travel stock-based
awards and various other stock options.
Under the terms of Preview Travel's 1997 Directors' Stock Option Plan, the
merger will result in an immediate vesting of all unvested stock options that
Preview Travel granted to its directors under the plan. The directors, including
Mr. Cardy, hold 65,000 unvested options granted under the plan, with an
aggregate in the money value of approximately $1.8 million, based on the price
of Preview Travel common stock of $39.25 per share on January 20, 2000, that
will vest immediately before the merger.
Prior to the signing of the merger agreement, Preview Travel's board of
directors adopted a resolution providing for the acceleration of vesting of
stock options held by Preview Travel's officers in the merger. The executive
officers, excluding Mr. Clouser, hold approximately 951,000 unvested options,
with an aggregate in the money value of approximately $20.3 million, based on
the price of Preview Travel common stock of $39.25 per share on January 20,
2000. The resolution provides that 50% of the unvested options held by each
officer as of October 4, 1999 will vest immediately prior to the merger. After
the
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merger, one-twelfth of the remaining unvested options held by officers of
Preview Travel will vest during each successive month, subject to specified
exceptions. The resolution does not apply to Messrs. Clouser and Cardy, whose
options will vest on and after the merger as described above.
The resolution also provides that 50% of the unvested options held by each
non-officer employee of Preview Travel as of October 4, 1999 will vest
immediately prior to the merger. The remaining 50% of unvested options held by
each non-officer employee will vest according to the terms of the initial grant
of the options.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE; INDEMNIFICATION AGREEMENTS
Travelocity.com Inc. and the Travelocity.com Partnership will indemnify, to
the fullest extent allowed under law, each individual who is or was an officer,
director or employee of Preview Travel for all actions taken by them in their
capacities at Preview Travel, or taken at the request of Preview Travel, at or
prior to the completion of the merger. Travelocity.com Inc. and the
Travelocity.com Partnership will honor all of Preview Travel's indemnification
obligations to those persons, whether created by Preview Travel's certificate of
incorporation, by-laws or an indemnification agreement. For six years after
completing the merger, Travelocity.com Inc. and the Travelocity.com Partnership
will also provide officers' and directors' liability insurance covering acts or
omissions prior to the completion of the merger for each individual covered
under the comparable Preview Travel policy as of the date of the merger
agreement. Travelocity.com Inc. and the Travelocity.com Partnership will not be
required to pay, in total, an annual premium for the insurance described in this
paragraph in excess of 200% of the current annual premium paid by Preview Travel
for its existing coverage prior to the merger. If the annual premiums of that
insurance coverage exceed that amount, Travelocity.com Inc. and the
Travelocity.com Partnership will be obligated to provide a policy with the best
coverage available for a cost up to but not exceeding 200% of the current annual
premium.
Agreements Involving Associates
AOL has agreed that the Travelocity.com Partnership will provide a booking
system for travel-related services on the U.S. versions of AOL, AOL.com, the
CompuServe Service, Netscape Netcenter, Digital City and, for a one-year term,
AOL Plus. In addition, the new agreement with AOL is anticipated to have a
revenue sharing structure between the parties. According to public filings it
has made, AOL owns approximately 6.2% of the common stock of Preview Travel.
Theodore J. Leonsis, who is a director of Preview Travel, is currently the
President of the Interactive Properties Group of AOL.
PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
On January 20, 2000, the record date for the special stockholders meeting,
Preview Travel estimates that there were approximately 183 holders of record and
over 8,200 beneficial owners of Preview Travel common stock.
MARKET PRICES AND DIVIDENDS
There is no established trading market for Travelocity.com Inc.'s common
stock. Preview Travel common stock has been traded on the Nasdaq National Market
under the symbol "PTVL" since November 19, 1997, the date of its initial public
offering. Travelocity.com Inc.'s common stock is expected to trade on the Nasdaq
National Market under the symbol "TVLY."
The table below sets forth, for the periods indicated, the high and low
bids for Preview Travel common stock as reported on the Nasdaq National Market,
in each case based on published financial
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sources. Preview Travel has never declared or paid dividends on its common stock
and does not expect to do so in the foreseeable future.
<TABLE>
<CAPTION>
PREVIEW TRAVEL
COMMON STOCK
------------------
HIGH LOW
-------- -------
<S> <C> <C>
1997:
Fourth Fiscal Quarter....................................... $11.9375 $ 6.875
1998:
First Fiscal Quarter........................................ 33.125 7.50
Second Fiscal Quarter....................................... 38.125 23.75
Third Fiscal Quarter........................................ 44.00 12.75
Fourth Fiscal Quarter....................................... 29.125 9.75
1999:
First Fiscal Quarter........................................ 36.00 15.50
Second Fiscal Quarter....................................... 29.375 14.625
Third Fiscal Quarter........................................ 25.125 14.25
Fourth Fiscal Quarter....................................... 60.75 16.125
2000:
First Fiscal Quarter (through February 2, 2000)............. 55.50 28.625
</TABLE>
The following table presents trading information for Preview Travel common
stock on October 1, 1999, the last full trading day prior to our announcement of
the signing of the merger agreement and February 2, 2000, the last practicable
trading day for which information was available prior to the date of this proxy
statement/prospectus.
<TABLE>
<CAPTION>
PREVIEW TRAVEL COMMON STOCK
-----------------------------
HIGH LOW CLOSING
-------- ------- --------
<S> <C> <C> <C>
October 1, 1999....................................... $17.6875 $16.125 $ 17.625
February 2, 2000...................................... 34.6875 32.50 32.6875
</TABLE>
The market price of shares of Preview Travel common stock fluctuates. As a
result, you should obtain current market quotations.
Post-Merger Dividend Policy. As a newly formed corporation, Travelocity.com
Inc. has not paid dividends on its common stock. It does not expect to do so
following the merger.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
present the effects of the proposed merger, the contribution agreements and
other agreements to be entered into at the effective time of the merger by the
Travelocity.com Partnership and Sabre. These agreements are an access agreement,
a technology services agreement, an intellectual property agreement, a
facilities agreement, an administrative services agreement and a cash and
short-term investments agreement. For a description of these agreements, which
we refer to as the intercompany agreements, see "Material Terms of Related
Agreements -- Intercompany Agreements" on page 90.
The unaudited pro forma condensed combined balance sheet presents the
combined financial position of the Travelocity Division and Preview Travel as of
September 30, 1999 assuming the proposed merger had occurred and the
contribution agreements and the intercompany agreements had been entered into as
of September 30, 1999. This pro forma information is based upon the historical
balance sheet data of Travelocity.com Inc. and the Travelocity Division,
starting on page F-1, and the historical balance sheet data of Preview Travel,
incorporated in this proxy statement/prospectus by reference, as of September
30, 1999.
47
<PAGE> 55
The unaudited pro forma condensed combined statements of operations give
effect to the proposed merger of the Travelocity Division and Preview Travel and
the contribution agreements and the intercompany agreements as if such
transactions had been entered into on January 1, 1998. This pro forma
information is based upon the historical results of operations of the
Travelocity Division, starting on page 111, and the historical results of
operations of Preview Travel, incorporated in this proxy statement/prospectus by
reference, for the nine months ended September 30, 1998 and 1999 and the year
ended December 31, 1998.
Sabre has a majority equity interest in the Travelocity.com Partnership and
the general presumption would be for Sabre to consolidate the Travelocity.com
Partnership into its financial statements. Although Travelocity.com does not
have a majority equity interest in the Travelocity.com Partnership,
Travelocity.com Inc. controls the Travelocity.com Partnership through the
Travelocity.com Partnership's board of directors since Travelocity.com Inc. has
the right to appoint a majority of the directors. Accordingly, we believe the
general presumption is overcome and Travelocity.com Inc. will consolidate the
Travelocity.com Partnership into its financial statements. Furthermore, although
Travelocity Holdings, a Sabre subsidiary, will manage the day to day operations
of the Travelocity.com Partnership pursuant to the management services
agreement, it is subject to the direction and oversight of the Travelocity.com
Partnership's board of directors. As such, the Travelocity.com Partnership's
board of directors has the unilateral ability to control the management of the
Travelocity.com Partnership, thereby enabling Travelocity.com Inc. to
consolidate the Travelocity.com Partnership in its separate financial
statements.
Travelocity.com Inc.'s consolidated financial statements will include the
financial statements of Travelocity.com Inc. and the Travelocity.com
Partnership, with Sabre's 64% interest in the Travelocity.com Partnership's
results of operations presented as a single line item, "Sabre's interest in
partnership," in Travelocity.com Inc.'s statement of operations. Travelocity.com
Inc.'s consolidated results of operations and financial position will consist of
the total of 36% of the Travelocity.com Partnership's results and 100% of
Travelocity.com Inc.'s results.
The columns in the pro forma condensed combined financial statements
present the following:
- TRAVELOCITY.COM INC. -- Represents the balance sheet of Travelocity.com
Inc., which was incorporated on September 30, 1999.
- TRAVELOCITY DIVISION HISTORICAL -- Represents the historical financial
position and results of operations of the Travelocity Division. The
Travelocity Division has funded its historical operations through
advances from affiliates. At December 31, 1997, September 30, 1998,
December 31, 1998 and September 30, 1999, advances from affiliates
totaled approximately $39.0 million, $50.4 million, $55.6 million and
$68.6 million, respectively. The Travelocity Division has not recorded
any interest expense attributable to these advances.
- PRO FORMA ADJUSTMENTS FOR THE AGREEMENTS -- Represents adjustments for
the impacts of the intercompany agreements and the contribution
agreements that Sabre and the Travelocity.com Partnership will enter
into.
- PRO FORMA TRAVELOCITY DIVISION AS ADJUSTED FOR THE
AGREEMENTS -- Represents the historical financial position and results of
operations adjusted for the pro forma impacts of the intercompany
agreements and the contribution agreements.
- PREVIEW TRAVEL HISTORICAL -- Represents the historical financial position
and results of operations of Preview Travel, Inc.
- PRO FORMA ADJUSTMENTS FOR THE MERGER -- Represents adjustments to reflect
the impacts of the merger and Sabre's interest in the Travelocity.com
Partnership.
- TRAVELOCITY.COM INC. COMBINED PRO FORMA -- Represents the financial
position and results of operations of Travelocity.com Inc. consolidated
with the Travelocity.com Partnership reflecting the pro forma impacts of
the merger and Sabre's interest in the Travelocity.com Partnership.
48
<PAGE> 56
The unaudited pro forma condensed combined financial statements are based
on the estimates and assumptions set forth in the notes. These estimates and
assumptions are preliminary and have been made solely for purposes of developing
this pro forma information. The unaudited pro forma condensed combined financial
statements are not indicative of what Travelocity.com Inc.'s actual financial
position or results of operations would have been had the merger and the
contribution agreements and intercompany agreements been entered into on the
dates described above, nor is it indicative of the future financial position or
results of operations of Travelocity.com Inc.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements and related notes
of the Travelocity Division starting on page 111, "The Travelocity Division's
Management Discussion and Analysis" starting on page 113, "Management Discussion
and Analysis of Pro Forma Financial Information of Travelocity.com Inc."
starting on page 59 and Preview Travel's historical consolidated financial
statements and related notes contained in the annual reports, quarterly reports
and other information that Preview Travel has filed with the SEC and that we
have incorporated in this proxy statement/prospectus by reference. For
information on how to obtain materials incorporated by reference, see "Where You
Can Find More Information" on page 131.
49
<PAGE> 57
TRAVELOCITY.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
TRAVELOCITY
PRO FORMA DIVISION
TRAVELOCITY ADJUSTMENTS AS ADJUSTED
TRAVELOCITY.COM DIVISION FOR THE FOR THE
INC. HISTORICAL AGREEMENTS AGREEMENTS
-------------------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents.............. $ -- $ -- $ 50,000(1) $50,000
Marketable securities.................. -- -- --
Accounts receivable, net............... -- 5,084 5,084
Other assets........................... -- 26 26
------- ------- -------- -------
Total current assets................. -- 5,110 50,000 55,110
Total property and equipment............. -- 2,011 5,228(1) 7,239
Intercompany investment.................. -- -- --
Intangible assets and goodwill........... -- 4,702 4,702
Marketable securities -- noncurrent...... -- -- --
Other assets............................. -- -- --
------- ------- -------- -------
Total assets..................... $ -- $11,823 $ 55,228 $67,051
======= ======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable....................... $ -- $ 4,353 $ -- $ 4,353
Other accrued liabilities.............. -- 1,434 607(1) 2,041
Payable to affiliates.................. -- 20 20
------- ------- -------- -------
Total current liabilities............ -- 5,807 607 6,414
Payable to affiliates.................... -- 68,553 (607)(1) --
(67,946)(1)
Other liabilities........................ -- 452 452
Sabre's interest in partnership.......... -- -- --
Commitments and contingencies............ -- -- --
Stockholders' equity
Preferred stock: $.001 par value....... -- -- --
Common stock: $.001 par value.......... -- -- --
Class A common stock: $.001 par
value................................ 3 -- 3
Class B common stock: $.001 par
value................................ -- -- --
Additional paid-in capital............. -- -- 50,000(1) 131,012
81,015(1)
(3)(1)
Other stockholders' equity............. -- -- --
Division equity (deficit).............. -- (70,830) 70,830(1) --
Contributions from affiliates.......... -- 7,841 (7,841)(1) --
Accumulated equity (deficit)........... -- -- (70,830)(1) (70,830)
Stock subscription receivable from
affiliate............................ (3) -- 3(1) --
------- ------- -------- -------
Total stockholders' equity....... -- (62,989) 123,174 60,185
------- ------- -------- -------
Total liabilities and
stockholders' equity........... $ -- $11,823 $ 55,228 $67,051
======= ======= ======== =======
<CAPTION>
PRO FORMA PRO FORMA
PREVIEW ADJUSTMENTS TRAVELOCITY.COM
TRAVEL FOR THE INC.
HISTORICAL MERGER COMBINED
---------- ----------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents.............. $ 422 $ -- $ 50,422
Marketable securities.................. 23,331 23,331
Accounts receivable, net............... 7,467 12,551
Other assets........................... 3,523 3,549
------- --------- --------
Total current assets................. 34,743 -- 89,853
Total property and equipment............. 5,089 12,328
Intercompany investment.................. -- 256,775(2) --
(256,775)(3)
Intangible assets and goodwill........... -- 215,610(3) 220,312
Marketable securities -- noncurrent...... 14,040 14,040
Other assets............................. 793 793
------- --------- --------
Total assets..................... $54,665 $ 215,610 $337,326
======= ========= ========
LIABIL LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable....................... $ 1,081 $ 1,000(2) $ 6,434
Other accrued liabilities.............. 11,161 13,202
Payable to affiliates.................. -- 20
------- --------- --------
Total current liabilities............ 12,242 1,000 19,656
Payable to affiliates.................... -- --
Other liabilities........................ 1,258 1,710
Sabre's interest in partnership.......... -- 61,474(5) 61,474
Commitments and contingencies............ -- --
Stockholders' equity
Preferred stock: $.001 par value....... -- 33(4) 33
Common stock: $.001 par value.......... 14 (14)(3) --
Class A common stock: $.001 par
value................................ -- 14(2) 14
(3)(4)
Class B common stock: $.001 par
value................................ -- --
Additional paid-in capital............. 119,801 255,761(2) 325,269
(119,801)(3)
(30)(4)
(61,474)(5)
Other stockholders' equity............. (1,594) 1,594(3) --
Division equity (deficit).............. -- -- --
Contributions from affiliates.......... -- -- --
Accumulated equity (deficit)........... (77,056) 77,056(3) (70,830)
Stock subscription receivable from
affiliate............................ -- --
------- --------- --------
Total stockholders' equity....... 41,165 153,136 254,486
------- --------- --------
Total liabilities and
stockholders' equity........... $54,665 $ 215,610 $337,326
======= ========= ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
50
<PAGE> 58
TRAVELOCITY.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
TRAVELOCITY
PRO FORMA DIVISION AS PRO FORMA PRO FORMA
TRAVELOCITY ADJUSTMENTS ADJUSTED PREVIEW ADJUSTMENTS TRAVELOCITY.COM
DIVISION FOR THE FOR THE TRAVEL FOR THE INC.
HISTORICAL AGREEMENTS AGREEMENTS HISTORICAL MERGER COMBINED
----------- ----------- ----------- ---------- ----------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATE)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Transaction revenue........ $ 18,370 $(2,714)(6) $ 15,656 $ 10,667 $ 3,003(12) $ 29,326
Advertising................ 2,821 2,821 3,341 6,162
Licensing and royalty
fees..................... 47 47 -- 47
-------- ------- -------- -------- -------- --------
Total revenues........... 21,238 (2,714) 18,524 14,008 3,003 35,535
Cost of revenues........... 19,067 (1,706)(7) 17,540 6,093 1,267(13) 24,900
179(8)
-------- ------- -------- -------- -------- --------
Gross profit (loss).......... 2,171 (1,187) 984 7,915 1,736 10,635
Operating expenses
Selling and marketing...... 10,608 35(9) 10,643 22,714 33,357
Technology and
development.............. 8,483 (2,053)(10) 6,470 3,706 10,176
40(9)
General and
administrative........... 4,360 28(9) 4,662 6,015 10,677
274(11)
Stock based compensation... -- -- 143 1,044(14) 1,187
Amortization of
intangibles.............. -- -- -- 71,870(15) 71,870
-------- ------- -------- -------- -------- --------
Total operating
expenses............... 23,451 (1,676) 21,775 32,578 72,914 127,267
-------- ------- -------- -------- -------- --------
Operating income (loss) from
continuing operations...... (21,280) 489 (20,791) (24,663) (71,178) (116,632)
Other, net................. -- -- -- 2,636 2,636
-------- ------- -------- -------- -------- --------
Loss from continuing
operations before Sabre
interest and income
taxes...................... (21,280) 489 (20,791) (22,027) (71,178) (113,996)
Sabre interest in
partnership................ -- -- -- 72,990(16) 72,990
-------- ------- -------- -------- -------- --------
Loss from continuing
operations before taxes.... (21,280) 489 (20,791) (22,027) 1,812 (41,006)
Provision for income taxes... -- -- (51) (51)
-------- ------- -------- -------- -------- --------
Loss from continuing
operations................. $(21,280) $ 489 $(20,791) $(22,078) $ 1,812 $(41,057)
======== ======= ======== ======== ======== ========
Loss from continuing
operations per share-basic
and
diluted(17)................ $ (1.73) $ (3.21)
======== ========
Weighted average shares used
in basic and diluted per
share calculations(17)..... 12,796 -- 12,796
======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
51
<PAGE> 59
TRAVELOCITY.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
TRAVELOCITY
PRO FORMA DIVISION AS PRO FORMA PRO FORMA
TRAVELOCITY ADJUSTMENTS ADJUSTED PREVIEW ADJUSTMENTS TRAVELOCITY.COM
DIVISION FOR THE FOR THE TRAVEL FOR THE INC.
HISTORICAL AGREEMENTS AGREEMENTS HISTORICAL MERGER COMBINED
----------- ----------- ----------- ---------- ----------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Transaction revenue........ $ 12,405 $(1,858)(6) $ 10,547 $ 7,629 $ 2,161(12) $ 20,337
Advertising................ 1,586 1,586 1,806 3,392
Licensing and royalty
fees..................... 72 72 -- 72
-------- ------- -------- -------- -------- --------
Total revenues........... 14,063 (1,858) 12,205 9,435 2,161 23,801
Cost of revenues........... 13,281 (1,602)(7) 11,811 4,293 859(13) 16,963
132(8)
-------- ------- -------- -------- -------- --------
Gross profit (loss).......... 782 (388) 394 5,142 1,302 6,838
Operating expenses
Selling and marketing...... 7,574 27(9) 7,601 14,016 21,617
Technology and
development.............. 6,181 (1,487)(10) 4,724 2,619 7,343
30(9)
General and
administrative........... 3,230 21(9) 3,459 3,976 7,435
208(11)
Stock based compensation... -- -- 108 783(14) 891
Amortization of
intangibles.............. -- -- -- 53,903(15) 53,903
-------- ------- -------- -------- -------- --------
Total operating
expenses............... 16,985 (1,201) 15,784 20,719 54,686 91,189
-------- ------- -------- -------- -------- --------
Operating income (loss) from
continuing operations...... (16,203) 813 (15,390) (15,577) (53,384) (84,351)
Other, net................. -- -- 1,822 1,822
-------- ------- -------- -------- -------- --------
Loss from continuing
operations before Sabre
interest and income
taxes...................... (16,203) 813 (15,390) (13,755) (53,384) (82,529)
Sabre interest in
partnership................ -- -- 52,842(16) 52,842
-------- ------- -------- -------- -------- --------
Loss from continuing
operations before taxes.... (16,203) 813 (15,390) (13,755) (542) (29,687)
Provision for income taxes... -- -- (36) (36)
-------- ------- -------- -------- -------- --------
Loss from continuing
operations................. $(16,203) $ 813 $(15,390) $(13,791) $ (542) $(29,723)
======== ======= ======== ======== ======== ========
Loss from continuing
operations per
share -- basic and
diluted(17)................ $ (1.10) $ (2.37)
======== ========
Weighted average shares used
in basic and diluted per
share calculations(17)..... 12,528 -- 12,528
======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
52
<PAGE> 60
TRAVELOCITY.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
TRAVELOCITY
PRO FORMA DIVISION AS PRO FORMA PRO FORMA
TRAVELOCITY ADJUSTMENTS ADJUSTED PREVIEW ADJUSTMENTS TRAVELOCITY.COM
DIVISION FOR THE FOR THE TRAVEL FOR THE INC.
HISTORICAL AGREEMENTS AGREEMENTS HISTORICAL MERGER COMBINED
----------- ----------- ----------- ---------- ----------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Transaction revenue........ $ 35,361 $(5,467)(6) $29,894 $ 14,106 $ 2,885(12) $ 46,885
Advertising................ 5,785 5,785 7,795 13,580
Licensing and royalty
fees..................... 258 258 -- 258
-------- ------- ------- -------- -------- --------
Total revenues........... 41,404 (5,467) 35,937 21,901 2,885 60,723
Cost of revenues........... 27,236 (9,680)(7) 17,732 7,594 1,769(13) 27,095
176(8)
-------- ------- ------- -------- -------- --------
Gross profit (loss).......... 14,168 4,037 18,205 14,307 1,116 33,628
Operating expenses
Selling and marketing...... 18,574 (9)(9) 18,565 29,418 47,983
Technology and
development.............. 7,337 (2,165)(10) 5,166 3,739 8,905
(6)(9)
General and
administrative........... 3,315 (9)(9) 3,489 5,742 9,231
183(11)
Stock based compensation... -- -- 1,070 783(14) 1,853
Merger expense............. -- -- 476 476
Amortization of
intangibles.............. -- -- -- 53,903(15) 53,903
-------- ------- ------- -------- -------- --------
Total operating
expenses............... 29,226 (2,006) 27,220 40,445 54,686 122,351
-------- ------- ------- -------- -------- --------
Operating income (loss)...... (15,058) 6,043 (9,015) (26,138) (53,570) (88,723)
Other, net................. -- -- -- 1,897 -- 1,897
-------- ------- ------- -------- -------- --------
Loss before Sabre interest
and income taxes........... (15,058) 6,043 (9,015) (24,241) (53,570) (86,826)
Sabre interest in
partnership................ -- -- 55,614(16) 55,614
-------- ------- ------- -------- -------- --------
Loss before income taxes..... (15,058) 6,043 (9,015) (24,241) 2,044 (31,212)
Provision for income taxes... -- -- (71) (71)
-------- ------- ------- -------- -------- --------
Net loss............ $(15,058) $ 6,043 $(9,015) $(24,312) $ 2,044 $(31,283)
======== ======= ======= ======== ======== ========
Net loss per share-basic and
diluted(17)................ $ (1.76) $ (2.27)
======== ========
Weighted average shares used
in basic and diluted per
share
calculations(17)........... 13,806 -- 13,806
======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
53
<PAGE> 61
TRAVELOCITY.COM INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE A. GENERAL
The Transaction
Sabre plans to combine the Travelocity Division and Preview Travel in a
holding company/ partnership structure. When the transactions are completed,
Travelocity.com Inc. will be a holding company whose sole asset will be units of
the Travelocity.com Partnership. Sabre will also own units of the
Travelocity.com Partnership. The Travelocity.com Partnership will ultimately own
all of the assets and have all of the liabilities of the Travelocity Division
and Preview Travel, and it will conduct the Travelocity.com Business.
Travelocity.com Inc. was incorporated on September 30, 1999 and is
currently beneficially owned by Sabre. Additionally, on September 30, 1999 the
Travelocity.com Partnership was formed. Currently, the Travelocity Division is
an operating division of Sabre. Immediately prior to the merger, Sabre and TSGL
Holding, Inc., a wholly owned subsidiary of Sabre, will contribute the
Travelocity Division and $50 million in cash to the Travelocity.com Partnership
and receive partnership units in exchange. Then Sabre will contribute
partnership units to Travelocity Holdings, and Travelocity Holdings will
contribute a portion of those partnership units to Travelocity.com Inc., so that
those entities become partners in the Travelocity.com Partnership.
As a result, immediately prior to the merger, the Travelocity.com
Partnership will own the Travelocity Division and $50 million in cash. Sabre
will own the Travelocity.com Partnership through a combination of its direct
interest, its interest held through TSGL Holding and through Travelocity
Holdings, and its interest held through Travelocity.com Inc.
In the merger, Preview Travel will be merged with and into Travelocity.com
Inc. Travelocity.com Inc. will be the surviving corporation. Each share of
Preview Travel common stock will be converted into one share of Travelocity.com
Inc.'s common stock. Travelocity.com Inc. will issue approximately 14 million
shares of common stock to former Preview Travel stockholders in the merger. The
shares of Travelocity.com Inc.'s common stock beneficially held by Sabre will be
converted in the merger into 33 million shares of Series A Preferred Stock.
The preferred stock is convertible into 3 million shares of Travelocity.com
Inc.'s common stock, and the preferred stock receives dividends and
distributions on a basis as if it were converted into common stock. The
preferred stock owned by Sabre will generally have voting rights identical to
Travelocity.com Inc.'s common stock. Each share of preferred stock and each
share of common stock will be entitled to one vote per share and holders of
preferred stock and common stock will vote together as a single class on all
matters, including the election of directors.
As a result, on an economic basis, Travelocity.com Inc. will have
approximately 17 million common stock equivalent shares outstanding after the
merger. The shares of common stock Travelocity.com Inc. issues to former Preview
Travel stockholders will represent an approximate 82% (14 million out of 17
million) equity interest in Travelocity.com Inc., and the shares of preferred
stock Travelocity.com Inc. issues to Sabre will represent an approximate 18% (3
million out of 17 million) equity interest in Travelocity.com Inc.
Immediately after the merger, Travelocity.com Inc. will contribute all of
the Preview Travel assets and liabilities to the Travelocity.com Partnership. In
exchange, Travelocity.com Inc. will receive additional units of the
Travelocity.com Partnership. In total, Travelocity.com Inc. will hold an
approximate 36% equity interest in the Travelocity.com Partnership.
54
<PAGE> 62
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As a result, the current Preview Travel stockholders will become
Travelocity.com Inc.'s public stockholders and will receive shares of common
stock in the merger that equate to approximately a 30% equity interest in the
Travelocity.com Partnership -- that is, 82% (their equity interest in
Travelocity.com Inc.) of the 36% equity interest Travelocity.com Inc. holds in
the Travelocity.com Partnership.
Sabre will beneficially hold an approximate 70% equity interest in the
Travelocity.com Partnership -- that is:
- a 64% equity interest held directly, plus
- a 6% equity interest held through Travelocity.com Inc. -- that is, 18%
(its equity interest in Travelocity.com Inc.) of 36% (Travelocity.com
Inc.'s equity interest in the Travelocity.com Partnership).
The Travelocity.com Partnership will be governed by a nine member board of
directors. Sabre will have the right to elect four directors, and
Travelocity.com Inc. will have the right to elect the remaining five directors
of the Travelocity.com Partnership.
Accounting for the Transaction
Sabre has a majority equity interest in the Travelocity.com Partnership and
the general presumption would be for Sabre to consolidate the Travelocity.com
Partnership into its financial statements. Although Travelocity.com does not
have a majority equity interest in the Travelocity.com Partnership,
Travelocity.com Inc. controls the Travelocity.com Partnership through the
Travelocity.com Partnership's board of directors since Travelocity.com Inc. has
the right to appoint a majority of the directors. Accordingly, we believe the
general presumption is overcome and Travelocity.com Inc. will consolidate the
Travelocity.com Partnership into its financial statements. Furthermore, although
Travelocity Holdings, a Sabre subsidiary, will manage the day to day operations
of the Travelocity.com Partnership pursuant to the management service agreement,
it is subject to the direction and oversight of the Travelocity.com
Partnership's board of directors. As such, the Travelocity.com Partnership's
board of directors has the unilateral ability to control the management of the
Travelocity.com Partnership, thereby enabling Travelocity.com Inc. to
consolidate the Travelocity.com Partnership in its separate financial
statements.
Travelocity.com Inc.'s consolidated financial statements will include the
financial statements of Travelocity.com Inc. and the Travelocity.com
Partnership, with Sabre's 64% interest in the Travelocity.com Partnership's
results of operations presented as a single line item, "Sabre's interest in
partnership," in Travelocity.com Inc.'s statement of operations. Travelocity.com
Inc.'s consolidated results of operations and financial position will consist of
the total of 36% of the Travelocity.com Partnership's results and 100% of
Travelocity.com Inc.'s results.
Travelocity.com Inc. will account for the merger as a purchase of Preview
Travel's assets and liabilities. As a result of the merger, the Travelocity.com
Partnership will record on its balance sheet:
- the fair market value of Preview Travel's assets and liabilities;
- the historical net book value of the Travelocity Division's assets and
liabilities that Sabre contributes; and
- the direct costs of the acquisition incurred by Sabre and Travelocity.com
Inc.
The Travelocity.com Partnership will record approximately $215 million of
intangible assets and goodwill in the merger. After the merger, intangible
assets and goodwill will be approximately 65% of the Travelocity.com
Partnership's pro forma total assets. The Travelocity.com Partnership will
amortize the intangible assets and goodwill acquired in the merger over a 3-year
period, resulting in an approximate $72 million charge per year that will
negatively affect the Travelocity.com Partnership's net income.
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Preliminary Purchase Price Allocation
The accompanying unaudited pro forma condensed combined financial
statements reflect an estimate of the purchase price of approximately $256.8
million, measured as the fair market value of Preview Travel's outstanding
common stock on October 1, 1999, the last trading day before the merger
agreement was announced plus the value of the vested options of Preview Travel
assumed by Travelocity.com Inc. in the merger, and other costs directly related
to the merger as follows (in thousands):
<TABLE>
<S> <C>
Fair market value of Preview Travel's common stock.......... $245,675
Fair market value of vested Preview Travel stock options.... 3,048
Investment advisor, legal, accounting and other professional
fees and expenses......................................... 7,052
Other costs directly related to the merger.................. 1,000
--------
Total............................................. $256,775
========
</TABLE>
For purposes of the accompanying unaudited pro forma condensed combined
balance sheet, Travelocity.com Inc. has allocated the preliminary purchase price
to the net assets acquired, with the remainder recorded as goodwill based on the
Travelocity Division management's preliminary estimates of fair values from
information furnished by Preview Travel. Travelocity.com Inc. will retain
independent valuation professionals to assist in the determination of the value
to be assigned to the acquired assets, including intangible assets.
Travelocity.com Inc. will base the final allocation of purchase price on a
complete evaluation of the assets and liabilities of Preview Travel. Although we
do not expect the final valuation of the assets to be acquired to result in
values that are significantly different from management's estimates included in
the unaudited pro forma condensed combined balance sheet, we cannot assure you
that they will not be.
NOTE B. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The accompanying unaudited pro forma condensed combined balance sheet
assumes the merger and intercompany agreements were signed on September 30, 1999
and reflects the following pro forma adjustments:
(1) To record each of the following actions taken in accordance with
the contribution agreements: the contribution of $50 million by Sabre to
the Travelocity.com Partnership and the contribution by Sabre to the
Travelocity.com Partnership of infrastructure assets and employee-related
liabilities that are not included in the Travelocity Division's historical
balance sheet in exchange for 3 million partnership units which are
contributed to Travelocity.com Inc. as additional paid in capital, and the
capitalization of the outstanding payable to Sabre. The pro forma
adjustment excludes the additional amount of up to $50 million that
Travelocity.com Inc. may cause Sabre to provide following the merger.
(2) To record the purchase price of Preview Travel of $256.8 million
resulting from the issuance of 14 million shares of Travelocity.com Inc.'s
common stock to former Preview Travel stockholders, based on the number of
shares outstanding at September 30, 1999, and related merger costs.
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) To record the allocation of the purchase price for the merger to
the assets and liabilities acquired as follows:
<TABLE>
<S> <C>
Working capital............................................. $ 22,501
Property and equipment...................................... 5,089
Marketable securities -- noncurrent......................... 14,040
Other assets................................................ 793
Noncurrent liabilities...................................... (1,258)
Intangible assets and goodwill.............................. 215,610
--------
Total............................................. $256,775
========
</TABLE>
(4) To record the conversion in the merger of Travelocity.com Inc.'s 3
million shares of Class A Common Stock into 33 million shares of Series A
Preferred Stock.
(5) To record Sabre's ownership interest in the Travelocity.com
Partnership, representing 64/70ths of the net book value of assets and
liabilities contributed by Sabre and the direct costs of the acquisition
that Sabre incurs.
NOTE C. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The accompanying unaudited pro forma condensed combined statements of
operations have been prepared as if the merger and intercompany agreements were
completed as of January 1, 1998 and reflect the following pro forma adjustments:
(6) To adjust historical booking fees paid by Sabre to the Travelocity
Division to the amount which would have been paid by Sabre to the
Travelocity.com Partnership under the terms of the access agreement. The
access agreement provides pricing and other terms for the booking services,
travel content and other services provided by Sabre to the Travelocity.com
Partnership.
(7) To record the reduction in data processing expense under the terms
of the access agreement with Sabre. The access agreement provides that the
Travelocity.com Partnership will pay Sabre a per-message fee for every
travel segment processed through the Travelocity.com Web site.
(8) To record the increase in desktop services, network services and
Web hosting expenses as a result of the technology services agreement with
Sabre. This agreement provides that Sabre will generally provide these
services to the Travelocity.com Partnership at market rates.
(9) To record the change in rent expense paid to Sabre under the terms
of the facilities agreement with Sabre due to rate changes and additional
employees. The facilities agreement provides that Sabre will charge rent
and related expenses to the Travelocity.com Partnership based on the number
of employees in the facilities.
(10) To record the reduction in the cost of development services
resulting from the Travelocity Division's employment of the developers
directly and the elimination of the intercompany charge from Sabre. Charges
from Sabre are based upon average rates used for internal allocations only.
Actual costs were calculated using salary information for the headcount to
be transferred.
(11) To record the increase in employee related and other general and
administrative expense under the terms of the administrative services
agreement with Sabre. Under the administrative services agreement, Sabre
will provide administrative services to the Travelocity.com Partnership at
Sabre's cost plus a specified margin.
(12) To adjust Preview Travel's transaction revenue to the terms of
the access agreement.
(13) To record the increase in expense for Preview Travel segments
under the access agreement.
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(14) To record compensation expense associated with the conversion of
existing unvested employee options to purchase Sabre stock to options to
purchase Travelocity.com Inc.'s stock. This expense will be recognized over
the remaining vesting period of the options, which is estimated to average
20 months. The adjustment excludes compensation expense to be recorded in
connection with the acceleration of 50% of Preview Travel unvested options
to cause them to vest over the 12 months following the merger.
(15) To record the amortization of goodwill and other intangibles
resulting from the purchase price allocation. The allocation of the
purchase price is preliminary and amounts are subject to adjustment based
on an independent valuation of Preview Travel's assets. Goodwill is being
amortized over three years.
(16) To record Sabre's 64% interest in the Travelocity.com
Partnership's losses.
NOTE D. UNAUDITED PRO FORMA COMBINED EARNINGS PER COMMON SHARE DATA
(17) We computed the unaudited pro forma net loss per share, basic and
diluted, by dividing the pro forma net loss by the weighted average number
of shares of Preview Travel common stock outstanding for the respective
periods presented, assuming a one-to-one exchange ratio. As pro forma net
losses exist for each period presented, we excluded the effects of stock
options and the 33 million shares of preferred stock issued to Sabre in the
merger from the calculation of pro forma loss per share.
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MANAGEMENT DISCUSSION AND ANALYSIS OF PRO FORMA
FINANCIAL INFORMATION OF TRAVELOCITY.COM INC.
OVERVIEW
The unaudited pro forma condensed combined financial statements are based
on the estimates and assumptions set forth in the notes to such statements,
which are preliminary and have been made solely for purposes of developing the
pro forma information. The unaudited pro forma condensed, combined financial
statements are not indicative of what Travelocity.com Inc.'s future financial
position or results of operations will be after the merger and the effectiveness
of the contribution agreements and intercompany agreements.
Gross Margins
Actual gross margins for the nine months ended September 30, 1999 for the
Travelocity Division and Preview Travel were 34.2% and 65.3%, respectively,
compared to the pro forma gross margin for Travelocity.com Inc. of 55.4%. The
combined gross margin percentage is higher than the Travelocity Division's
because, under the intercompany agreements, the Travelocity Division's data
processing expenses are reduced proportionately more than its transaction
revenue is reduced. The combined gross margin percentage is lower than Preview
Travel's because, under the intercompany agreements, Preview Travel's data
processing expenses are increased more than its transaction revenue is
increased. Travelocity.com Inc.'s actual gross margins may exceed pro forma
gross margins due to a higher mix of advertising revenue, which has a higher
gross margin, resulting from the AOL agreement. As revenues under the AOL
agreement are dependent on performance, the timing of the revenues from the
agreement are uncertain and may be sporadic, resulting in a fluctuating gross
margin.
Anticipated Losses
Travelocity.com Inc.'s operating losses may be significantly different than
the pro forma losses presented due to:
- the uncertain impact of the new AOL agreement,
- the integration of the two businesses (including cost synergies and
recognition of non-recurring items),
- the cost and uncertain success of branding initiatives, and
- the calculation of the purchase price and goodwill at the closing of the
merger which will be based on the number of shares of Preview Travel's
common stock outstanding and vested Preview Travel options that
Travelocity.com Inc. will exchange for its common stock and options.
Variability of Results
Factors that may adversely affect Travelocity.com Inc.'s quarterly
operating results include:
- its ability to retain existing customers, attract new customers and
encourage repeat purchases;
- its ability to adequately maintain and upgrade its Web sites and
technical infrastructure;
- its ability to obtain travel inventory on satisfactory terms from its
travel suppliers;
- fluctuating gross margins due to a changing mix of revenues;
- the amount and timing of operating costs related to expanding its
operations;
- general economic conditions or economic conditions specific to the
Internet, online commerce and the travel industry;
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- the seasonal nature of the travel industry, Internet and commercial
online service usage and advertising expenditures; and
- its ability to attract and retain advertisers on its sites.
RESULTS OF OPERATIONS
Revenues
Transaction Revenues. Actual transaction revenues for the nine months ended
September 30, 1999 for the Travelocity Division and Preview Travel were $35.4
million and $14.1 million, respectively, compared to pro forma transaction
revenue for Travelocity.com Inc. of $46.9 million, a decrease of $2.6 million,
5.2% from actual results. The decrease in combined revenues on a pro forma basis
results from the application of the intercompany agreements which adversely
impacts the Travelocity Division's transaction revenue, but favorably impacts
Preview Travel's transaction revenue, due to different rates and terms under the
intercompany agreements versus those included in the historically reported
periods. Additionally, factors such as transaction growth and variability in
commission rates may impact transaction revenues.
Advertising Revenue. Actual advertising revenues for the nine months ended
September 30, 1999 for the Travelocity Division and Preview Travel were $5.8
million and $7.8 million, respectively, and $13.6 million on a pro forma
combined basis for Travelocity.com Inc. Advertising revenue for Travelocity.com
Inc. is expected to be higher than the combined advertising revenue of the
Travelocity Division and Preview Travel, because our new advertising revenue
sharing agreement with AOL will give us a significantly larger share of the
advertising revenue AOL receives on its Travel Channel. Additionally,
Travelocity.com Inc. may experience more variability in advertising revenue,
over the short-term as its two sales channels, DoubleClick and an internal sales
force, are combined. Because of the structure of the agreement with DoubleClick,
the Travelocity Division records advertising revenue net of fees. Preview Travel
primarily utilizes an internal sales force so that revenues are not net of any
fees paid to an outside vendor.
Cost of Revenues
Actual cost of revenues for the nine months ended September 30, 1999 for
the Travelocity Division and Preview Travel were $27.2 million and $7.6 million,
respectively, compared to pro forma cost of revenues for Travelocity.com Inc. of
$27.1 million, a decrease of $7.7 million, 22.2% from actual results. The
decrease in combined cost of revenues on a pro forma basis results from the
application of the intercompany agreements, which decreases the Travelocity
Division's cost of revenues and increases Preview Travel's cost of revenues, due
to different rates and terms under the intercompany agreements versus those
included in the historically reported periods. Cost of revenues for
Travelocity.com Inc. are expected to increase from current pro forma levels as
the number of transactions processed on the site increases. However, we
anticipate that costs of revenues as a percentage of revenues will decrease due
to efficiencies gained in the ticket fulfillment process due to economies of
scale.
Operating Expenses
Selling and Marketing. Actual selling and marketing expenses for the nine
months ended September 30, 1999 for the Travelocity Division and Preview Travel
were $18.6 million and $29.4 million, respectively, and $48.0 million on a pro
forma combined basis for Travelocity.com Inc. Selling and marketing expenses in
the future will be higher for Travelocity.com Inc. We will be investing a
significant amount in advertising programs to build our brand. Additionally,
guaranteed payments under the new AOL agreement will result in significantly
higher distribution costs for Travelocity.com Inc. than reported in the pro
forma condensed combined statement of operations.
Technology and Development. Actual technology and development expenses for
the nine months ended September 30, 1999 for the Travelocity Division and
Preview Travel were $7.3 million and
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$3.7 million, respectively, compared to pro forma technology and development
expenses for Travelocity.com Inc. of $8.9 million, a decrease of $2.2 million,
19.6% from actual results. The decrease in combined expenses on a pro forma
basis results from employment of the developers directly, net of the elimination
of intercompany charges for development services from Sabre.
General and Administrative. Actual general and administrative expenses for
the nine months ended September 30, 1999 for the Travelocity Division and
Preview Travel were $3.3 million and $5.7 million, respectively, compared to pro
forma general and administrative expenses for Travelocity.com Inc. of $9.2
million, an increase of $174,000, 1.9% from actual results. General and
administrative expenses are expected to increase from current levels to support
Travelocity.com Inc.'s growth. However, we expect cost savings from the combined
operations to lower general and administrative costs as a percentage of revenue.
LIQUIDITY AND CAPITAL RESOURCES
Immediately prior to the merger, Sabre will contribute $50 million in cash
to the Travelocity.com Partnership and receive partnership units in exchange.
Sabre has also agreed to invest up to an additional $50 million in
Travelocity.com Inc. if requested by Travelocity.com Inc. during a 10 day period
after the merger. Travelocity.com Inc. would contribute those funds to the
Travelocity.com Partnership. Sabre is under no further obligation to fund the
Travelocity.com Partnership's capital requirements. We anticipate that Sabre's
$50 million contribution immediately prior to the merger and the additional $50
million that Travelocity.com Inc. may require Sabre to contribute after the
merger, together with our existing funds and ability to borrow, will be
sufficient to meet anticipated cash requirements for at least the next 24
months. Thereafter, we anticipate cash requirements will be funded by cash flows
from operating activities.
We cannot assure you that cash flows from operations of the Travelocity.com
Partnership will be sufficient to meet our cash requirements, such as
contractual commitments to our strategic distribution partners, including AOL,
or to make capital expenditures necessary to support the anticipated growth of
the business. In such event, we would be required to obtain financing from the
sale of equity securities or debt financing. We cannot assure you that any such
financing will be available or on terms acceptable to us.
Over the next two years, we will use funds to enhance brand awareness and
supplier relationships, perform product development and for working capital.
Payments due under our agreements with strategic distribution partners could
also impact liquidity. Revenues under the AOL agreement are based on performance
and are difficult to predict. Accordingly, they may not occur in the same time
periods as payments we must make to AOL. Additionally, agreements with Yahoo!,
Excite, Lycos and other distribution partners include guaranteed payments. In
connection with these agreements, we expect that the Travelocity.com Partnership
will make aggregate future payments in at least the following amounts (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000..................................................... $ 60,608
2001..................................................... 52,492
2002..................................................... 51,000
2003..................................................... 40,000
2004..................................................... 40,000
--------
$244,100
========
</TABLE>
As a result of the separation of the Travelocity Division from Sabre, the
Travelocity.com Partnership will directly incur capital expenditures that Sabre
previously incurred and charged to the Travelocity Division. We expect this
change to increase capital expenditures in 2000 by $10 to $12 million.
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THE TRAVELOCITY.COM BUSINESS
OVERVIEW
The Travelocity.com Business will be the largest online travel agency, with
more travel bookings and more different visitors to our Web sites in a given
month than any competitor. The Travelocity.com Web sites would have had, on a
combined basis giving effect to the merger, over 6.6 million different visitors
during the month of November 1999, based on data provided by Media Metrix. This
would have been 50% more different visitors during that month than our nearest
competitor, and would have made us the third most visited Web site in the
electronic commerce category, following Amazon.com and eBay.com, based on data
provided by Media Metrix. On a combined basis giving effect to the merger,
visitors would have booked $1.19 billion in travel services on the
Travelocity.com Web sites in 1999, making the Travelocity.com Business one of
the top ten travel agents in the U.S. According to Jupiter Communications,
people spend more money online in the travel category than in any other
electronic commerce category.
After the merger, we intend to combine the best features of the
Travelocity.com and Previewtravel.com Web sites to bring superior products and
services to our customers. The Travelocity.com Business will combine Preview
Travel's marketing and content strengths with the Travelocity Division's travel
industry knowledge and technology experience.
Through the Travelocity.com Business' online travel Web sites, which will
be accessible free of charge through the Internet and online services, leisure
and small business travelers can compare prices, make travel reservations and
obtain destination information. We will feature booking and purchase capability
for airlines, car rental and hotel companies, cruises and vacation packages, and
offer access to a database of information regarding specific destinations and
other information of interest to travelers. The Internet address for our main
Web site is www.travelocity.com.
In addition to the Travelocity.com Web site (www.travelocity.com), the
Travelocity.com Business will operate Web sites tailored to customers in the
United Kingdom (www.travelocity.co.uk) and Canada (www.travelocity.ca). In 1999,
AOL agreed that the Travelocity.com Business will be the travel booking system
for various AOL services, including AOL, AOL.com, Netscape, CompuServe and
Digital City. We will also be the provider of travel booking services on Web
sites operated by Yahoo!, Excite, Lycos and @Home Corporation, and on Web sites
operated by Infoseek Corporation under the brand GO Networks.
Travelocity.com Inc.'s principal corporate offices will be located at 4200
Buckingham Boulevard, Fort Worth, Texas 76155. Its telephone number will be
(817) 963-2923.
INDUSTRY BACKGROUND
Growth of the Internet and Online Commerce
The Internet and commercial online services have emerged as significant
global communications media enabling millions of people to share information and
conduct business electronically. A number of factors have contributed to the
growth of the Internet and commercial online services usage, including:
- the large and growing number of advanced personal computers in the home
and workplace;
- improvements in network infrastructure, making access to the Internet and
commercial online services, easier, faster and cheaper;
- increased acceptance of the Internet and commercial online services by
consumer and business users; and
- consumers' growing confidence in credit card transactions conducted
online.
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Jupiter Communications estimates that the number of persons in the United
States who use the Internet or other online services will grow from
approximately 83 million in 1998 to approximately 157 million in 2003.
The functionality and accessibility of the Internet and commercial online
services have made them an increasingly attractive commercial medium by
providing features that have not been available through traditional channels.
For example, the Internet and commercial online services provide users with
convenient access to large volumes of real-time data to support their
investment, purchase and other decisions. Online retailers are able to
communicate effectively with customers by providing frequent updates of featured
selections, content, pricing and visual presentations. Online retailers also
provide tailored services because they capture valuable data on customer tastes,
preferences, and shopping and buying patterns. Unlike most traditional
distribution channels, online retailers do not have the burden of managing and
maintaining numerous local facilities to provide their services on a global
scale. In contrast, online retailers benefit from the economies of scale in
reaching and electronically serving large numbers of customers worldwide from a
central location. Because of these advantages, an increasingly broad base of
products and services is being sold online, with travel services as the leading
category. Forrester Research estimates that the total value of online purchases
by U.S. consumers will be approximately $20 billion in 1999 and will increase to
approximately $184 billion by 2004.
As the number of online content, commerce and service providers has
expanded, strong brand recognition and strategic alliances have become critical
to the success of such companies. Brand development is especially important for
online retailers due to the need to establish trust and loyalty among consumers
in the absence of face-to-face interaction. In addition, some online retailers
have begun to establish long-term strategic partnerships and alliances with
content, commerce and service providers to rapidly build brand recognition and
trust, enhance their service offerings, stimulate traffic, build repeat
business, and take advantage of cross-marketing opportunities.
The Traditional Travel Industry
The travel and tourism industry is one of the largest industries in the
world. Travelers in the United States spent over $515 billion on travel and
tourism in 1998 according to the Travel Industry Association of America.
Historically, airlines, hotels, rental car agencies, cruise lines, vacation
packages and other travel suppliers have relied on internal sales departments
and travel agencies as their primary distribution channels. Travel agencies
typically book travel reservations through electronic global distribution
systems such as the Sabre(R) system and the Galileo system. Global distribution
systems provide real-time access to voluminous data on fares, availability and
other travel information.
Customers also traditionally have relied on travel agents to access and
interpret the rapidly changing information on global distribution systems by
using complex and proprietary interfaces. The global distribution systems store
over 20 million published fares that are updated five times daily. As a result,
the ability of customers to obtain the most favorable schedules and fares has
been subject to the skill and experience of individual travel agents, who may
not be available when the customer needs them.
Travel agencies are compensated primarily through commissions paid by
travel suppliers, such as airlines, hotels and car rental companies, on services
booked. Some travel agencies also charge service fees to their customers. In a
move to lower distribution costs, in September 1997 the major U.S. airlines
reduced the commission rate payable to traditional travel agencies from
approximately 10% to approximately 8% and imposed a cap of $50 on commissions
for round-trip ticket sales. These reductions were followed by similar
reductions made by other airlines. In the fourth quarter of 1999, several major
airlines further reduced their commission rates paid to traditional travel
agencies from 8% to 5%.
Paralleling these trends, the major U.S. airlines reduced the commission
rate payable to online travel services from approximately 8% to approximately 5%
in 1997 and early 1998. And since the first half of 1998, major airlines have
capped their fixed rate commission for online round-trip ticket sales to ten
dollars.
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Currently, typical standard base commission rates paid by travel suppliers
to traditional travel agents are approximately 5% for airline tickets (subject
to a maximum of $25 and $50 for one-way and round-trip tickets, respectively),
10% for hotel reservations, 5% to 10% for car rentals, and 10% to 15% for
cruises and vacation packages. In addition, travel agencies can earn performance
based incentive compensation (known as override commissions) from travel
suppliers, which can substantially impact financial performance. These
commission rates and override commissions are determined by travel suppliers.
Travel suppliers also pay booking fees to providers of global distribution
systems to compensate them for their services. The global distribution systems
may pay travel agents booking incentives based on negotiated terms.
According to Travel Weekly, travel agency sales in the United States grew
from $86 billion in 1991 to $126 billion in 1997, with more than half of those
amounts spent on leisure travel. The traditional travel agency distribution
channel is highly fragmented, with few nationally recognized brands. According
to Travel Weekly's 1998 U.S. Travel Agency Survey published in August 1999,
there are more than 33,000 travel agency locations in the United States, with
the average travel agency location generating $3.8 million in annual gross
bookings, i.e., the total purchase price of all travel services booked, per
location.
The Online Travel Market
The Internet is dramatically changing the way that consumers and businesses
communicate, share information and buy and sell goods and services. The Internet
reduces inefficiencies in markets characterized by the presence of large numbers
of geographically dispersed buyers and sellers and in purchase decisions
involving vast amounts of information from multiple sources. We believe that the
worldwide travel industry, which exemplifies these characteristics, is
especially well-suited to benefit from increased Internet and electronic
commerce adoption by consumers and businesses. As a result, travel has already
become the largest online retail category with estimated online transactions of
$4.2 billion in 1999, growing to $16.6 billion in 2003, according to Jupiter
Communications.
Recent trends in the traditional travel industry have contributed to a need
for a more effective and efficient means of purchasing and distributing travel
services to address the changing needs of consumers and travel suppliers. For
example, travel agencies are reducing their level of service in response to
lowered commissions or in some cases charging customers for services. At the
same time, many customers are demanding greater convenience and flexibility in
how, where and when they shop for travel services. In addition, travel suppliers
cannot use traditional travel agents to quickly implement effective marketing
programs targeted to specific customer segments because of the large number of
small travel agents.
As a result of these trends, the Internet and commercial online services
have emerged as an attractive means of purchasing travel. The Internet enables
online travel service providers to offer a marketplace that brings customers and
travel suppliers directly together. In this marketplace, customers may choose
from a diverse selection of travel options, suppliers may market and distribute
their products and services more efficiently, and online travel service
providers can obtain favorable pricing for their customers by aggregating
customer demand more effectively than traditional travel agents. This
marketplace also provides travel suppliers and other merchants with an effective
means of advertising to a targeted audience.
Although the online travel service market presents attractive
opportunities, there are challenges that must be overcome to enter the online
travel marketplace. We believe that, in order to succeed in this market, online
travel services providers must invest in technology and infrastructure, attract
a large number of customers to achieve economies of scale, establish strategic
relationships to drive online traffic, incur the costs of building a brand, and
obtain travel-related information and integrate it with booking capabilities.
THE TRAVELOCITY.COM BUSINESS' SOLUTION
After the merger, the Travelocity.com Business will be the leading online
travel agency with the most different visitors to its Web sites in a given month
and online travel sales. To address the market opportunity presented by changes
in the travel industry, the Travelocity.com Business plans to continue to
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satisfy customers' need for a convenient, comprehensive and personalized source
of travel services and information. Key features of the Travelocity.com
Business' solution include:
Convenience. The Travelocity.com Business' online travel services will
be accessible directly or through Yahoo!, AOL (including AOL, AOL.com,
Netscape, CompuServe and Digital City), Excite, Lycos, GO Network, @Home,
and several other co-branded Web sites. Both the Web site and our customer
service will operate 24 hours a day, seven days a week.
Ease of Use. The Travelocity.com Business' online solution will
include several features that allow users to easily search for information
and book travel online. For example, customers will be able to use Best
Fare Finder, a feature that interprets complicated fare rules and takes
customers directly from the fare to the flight by showing the customer
which days to travel in order to get the lowest fare. Customers can then
select their preferred travel dates from the graphical calendar display. If
the customer has problems, help is available on the Web site through the
Frequently Asked Questions feature and other help functions. Questions or
comments can be submitted via e-mail, with responses usually coming within
18 hours.
Speed. The Web site's ease of use and efficient architecture provide
the ability to book travel quickly and efficiently. In January 1999, the
Travelocity Division introduced Express Buy, which allows customers to make
an airline reservation with three clicks of the mouse. At that time, the
Travelocity Division also introduced an optional version of the Web site
with reduced graphics, which shortens the amount of time required to make a
reservation to less than two minutes.
Transaction Security and Privacy. The Travelocity.com Business will
use the Sabre(R) system that thousands of travel agents around the world
also use to process over $70 billion in travel-related products and
services annually. The Travelocity Division uses Secure Socket Layer
encryption technology, which is a proven coding system that lets a
customer's browser automatically encrypt data before it is transmitted to
the Travelocity.com Web site and that ensures the safe transmission of
credit card information. We will also continue to offer the Shop Safe
Guarantee feature. Under this feature, in the highly unlikely event that
credit card fraud were to occur, we will reimburse the customer up to $50,
the maximum amount for which the customer would generally be liable to a
credit card company. Historically, neither the Travelocity Division nor
Preview Travel has experienced a single reported case of credit card theft.
For customers who are not comfortable providing their credit card number
online, the Travelocity.com Business will accept that information by phone
or fax, toll-free. To avoid the need for retransmittal of the information
for future purchases, customers will have the option to keep the credit
card information on file, where it would be kept in an encrypted format on
servers protected by two levels of software designed to insulate them from
misuse, known as firewalls, and located in a secure computer complex. The
Travelocity Division and Preview Travel have taken steps to assure
customers that Travelocity meets strict online security and business
standards. The Travelocity Division and Preview Travel are members of the
Better Business Bureau's BBBOnline, which means that the Travelocity
Division and Preview Travel have agreed to abide by the BBB code of ethical
advertising. The Travelocity Division and Preview Travel are also licensees
of the TRUSTe's Privacy Program which requires its licensees to adhere to
established privacy principles and agree to comply with TRUSTe's oversight
and consumer resolution procedures.
Breadth of Offering. We will continue to offer one-stop travel
shopping and reservation services, providing reliable, real-time access to
schedule, pricing and availability information for over 95% of all airline
seats sold worldwide, 45,000 hotels, 50 car rental companies, and 70,000
vacation packages. In addition to our reservation and ticketing service,
the Travelocity.com Business will offer discounted and promotional fares,
travel news, destination information on hundreds of cities and countries
worldwide, weather information, maps and travel tips. After the merger, we
will integrate Preview Travel's Web site under the Travelocity.com brand.
Personalization. Each person who registers as a member on the Web
sites operated by the Travelocity.com Business will have a profile in our
customer database. Members can choose to provide us with travel preferences
(for example, frequent travel programs and seating preferences),
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credit card billing information, ticket delivery address and other personal
information. This information is primarily used to assist members in making
reservations quickly without having to provide the same information
repeatedly. In addition, this information allows us to contact our
customers for customer service, if necessary, and to inform them of
incentives and promotional offers. Customers may chose to terminate further
receipt of this information online. The Travelocity.com Business can
analyze the impact of each message or offer on booking behavior, providing
us with real-time feedback on the attractiveness of the offer to customers.
The Travelocity.com Web site will provide Fare Watcher E-mail, a feature
that allows members to track fare changes in travel markets of their choice
by receiving e-mail notification of those changes from the Travelocity.com
Business. The Travelocity.com Business will also provide Flight Pager, a
service that allows travelers to register flight information at its Web
site, and to receive changes to the flight time or gate via alphanumeric
pager.
Global Reach and Presence. Versions of our Web site tailored to
particular countries (known as localized Web sites) accommodate differences
in culture, travel purchase behavior, and supplier inventory preferences.
We will continue to operate localized Web sites in Canada
(www.travelocity.ca) and in the United Kingdom (www.travelocity.co.uk), two
of the largest international travel markets outside the United States.
Through its local customer service partners - Rider/BTI Travel in Canada
and Hillgate Travel in the United Kingdom - the Travelocity.com Business
will provide a full range of services to its customers. Additionally,
through the Agency Locator feature, customers worldwide can make
reservations on the Travelocity.com Web site and pick up their tickets at
participating Sabre travel agencies. Through this means, the Travelocity
Division has sold tickets in more than 90 countries around the world.
Appeal to Travel Suppliers. The Travelocity.com Business will help
travel suppliers to pursue a range of innovative, targeted merchandising
and advertising strategies designed to increase revenues, while reducing
overall transaction costs and customer service costs. Without revealing
individual customers' identities or jeopardizing their confidentiality, our
customer database will allow travel suppliers to implement targeted
promotions through the Travelocity.com Business. Travel suppliers may take
advantage of context-sensitive advertising to maximize the value of their
promotional message. They may contribute content such as photos, that
enrich the customer experience while also making their product more
visually compelling. Travel suppliers that offer Web-based fares that are
lower than published fares may use the Travelocity.com Business as an
additional distribution outlet, as do American Airlines and British
Airways.
THE TRAVELOCITY.COM BUSINESS' STRATEGY
We will combine the strongest features of the Travelocity Division and
Preview Travel Web sites to enhance the Travelocity.com Business' position as
the leader in online travel services. Our strategy will be to:
Continually improve the customer's buying experience. We plan to
introduce products and services that will better enable the Travelocity.com
Business' customer to shop and buy travel products. We will use our
significant travel industry expertise, combined with our nearly 15 years of
experience in selling travel online, to continually work to bring our
customer a unique travel shopping experience.
Increase brand awareness. We plan to invest in expanding awareness of
the Travelocity.com brand through an advertising program that utilizes both
off-line and online media, including television, print, radio, and the
Internet. We believe that word-of-mouth is an effective means of attracting
new customers. So, we strive to ensure that our customers have a positive
experience with a convenient, user friendly Web site, which features many
time-saving tools and responsive customer service. We also plan to continue
joint promotions with travel service suppliers.
Expand our business to business focus. We plan to expand our focus on
the business to business sector through further targeting the unmanaged
business traveler. On a combined basis we project
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that business to business gross bookings for the Travelocity.com Business
would represent in excess of 30% of total gross bookings or $300 million
for 1999. Through the use of our online travel industry expertise we will
continue to provide products and services to meet the unique needs of the
unmanaged business traveler, a significant and growing sector of the online
travel market.
Enhance our technology platform and product functionality. We plan to
continue to increase the efficiency and effectiveness of our Web sites
through enhancement of the underlying infrastructure and investment in
improved technology to anticipate increased transaction volume. We will
also continue to develop the functionality, features, and content of our
Web sites, and in particular to increase the level of personalization.
Additionally, we will continually seek new distribution opportunities for
our product as technology evolves. Examples of this include our
relationship with 3Com Corporation to serve as a charter content provider
for the Palm VII product. Our relationship with Sabre uniquely positions us
to develop additional innovative functions and features.
Enhance supplier relationships. We plan to further invest in and build
upon strong supplier relationships. Drawing on our experience in technology
development, we plan to create new tools to integrate suppliers' products
and services into our Web sites. Additionally, we will continue to increase
the value we provide to suppliers by developing new ways for them to
effectively market and distribute their products to our customers.
Continue our international expansion. We will expand our international
presence after carefully evaluating the market for travel services and the
popularity of online commerce in particular countries. We will draw upon
our experience with our existing Web sites to tailor our international Web
sites to the specific characteristics of each local market and operate the
new Web sites more efficiently and effectively. Additionally, our existing
relationship with Abacus, Asia's leading global distribution system, offers
local product, distribution and marketing expertise in the potentially
large travel market in the Asian region. Abacus is owned by the principal
airlines of the region and Sabre owns a 35% interest. Together, Abacus and
the Travelocity.com Business are well-positioned to expand into key Asian
and Southern Pacific markets.
Expand our service offerings. We plan to continue to expand our travel
service offerings. We plan to derive more revenue from higher margin
product offerings such as hotel reservations, car rentals, cruises and
vacation packages. We also plan to expand the scope of destination
offerings to provide more travel options to our customers. We will also
evaluate ways to further enhance customers' experiences by incorporating
community aspects into our service offerings, such as bulletin boards and
chat rooms. We will consider other means of purchasing travel services,
such as purchasing through consolidators, purchasing wholesale inventory at
special prices, or by using an auction model.
STRATEGIC RELATIONSHIPS
The Travelocity.com Business will continue to pursue strategic
relationships to increase its access to online customers, to build brand
recognition and to expand our online presence. After the merger, we will have
alliances with strategic partners that are among the strongest and most
recognized brands associated with the Internet, including:
Yahoo!
We will be a provider of air, car and hotel booking services for Yahoo!,
one of the most recognized brands associated with the Internet. Over the
remaining term of our agreement with Yahoo! we expect to pay Yahoo! at least $28
million. Our agreement expires at the end of 2002. Yahoo! is a global Internet
media company that offers a branded network of media, commerce, and
communication services to users worldwide and is the leading Internet portal in
terms of traffic, advertising and household and business user reach. In
addition, Yahoo! has agreed to make an investment in Travelocity.com Inc. when
the merger is completed.
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We will provide a database containing schedule, availability and price
information that allows users of the Yahoo! Web site to book and pay for air,
car and hotel services. We will collaborate with Yahoo! to further develop,
promote and operate the Yahoo! Travel Web site and a Web site containing the
"Travelocity.com" and "Yahoo!" brands, known as a co-branded site. Users may
link to the Yahoo! Travel Web site from the Yahoo! home page, and to the
co-branded site from the "Air," "Car" and "Hotel" images in the "Make
Reservations" section of Yahoo! Travel.
America Online
On October 2, 1999, AOL agreed that the Travelocity.com Business will
become the exclusive travel booking system for the five years following the
merger on the U.S. versions of AOL, AOL.com, the CompuServe Service, Netscape
Netcenter, Digital City and, for a one-year term, AOL Plus. On each of these
services, the Travelocity.com Business and AOL will work together to create a
co-branded site which will provide access to the Travelocity.com Business'
services. We will also be a primary provider of travel information and other
related services through co-branded sites on these AOL services. We expect that
after the co-branded sites are launched, the AOL relationship will provide the
Travelocity.com Business with positive cash flow under the agreement.
Key terms of the agreement include:
- subject to AOL meeting specified revenue targets, a percentage of which
will be shared with the Travelocity.com Business, the Travelocity.com
Business will be obligated to pay AOL a total of $200 million over the
five-year term of the contract, including $40 million on the date of the
merger, as well as a percentage of all commissions received by us from
bookings made on the co-branded sites;
- AOL will pay us a percentage of all cash advertising revenue collected by
AOL from advertising on the co-branded sites, within AOL's travel
channels, on Web pages throughout the AOL properties on which our travel
booking system or our other travel-related information is located, or
sold by AOL to a specified group of travel providers and providers of
specified ancillary travel services;
- AOL will place promotions throughout the AOL properties that will permit
AOL users to link to the co-branded sites;
- our travel booking capability on the travel channels of various AOL
services must be integrated by April 1, 2000, otherwise our benefits will
be reduced or the agreement will be extended;
- we must include references to "Travel" as an AOL keyword in almost all of
our advertising; and
- AOL must meet cumulative advertising revenue and payment targets by the
end of the second, third and fourth years of the agreement.
If AOL does not meet the cumulative revenue targets, the Travelocity.com
Business may elect to operate under alternative terms and conditions set forth
in the agreement. If we elect to do so, AOL may terminate the agreement. The
alternate terms and conditions would be as follows:
- the Travelocity.com Business would no longer have any payment obligations
to AOL, would keep commission revenues from travel services booked on the
co-branded sites, and would receive a percentage of the advertising
revenues only from advertisements placed on Web pages that contain only
our travel-related information;
- we would continue to be required to maintain and operate the co-branded
sites, the travel booking system and our travel-related services; and
- AOL would no longer be obligated to promote our travel booking system and
travel-related information, and AOL could provide access to and promote
another travel booking system.
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At the end of the agreement's term, AOL can, annually for four years,
extend the agreement for an additional one-year term but the agreement would
contain the changes described above. AOL may terminate the agreement if the
merger fails to close by March 31, 2000. Either party may terminate the
agreement if the co-branded sites are not properly launched by September 1, 2000
as a result of the other party's non-performance of its obligations under the
agreement. In addition, AOL may terminate the agreement at any time during the
term of the agreement if we are acquired by an Internet service provider or
other specified types of AOL competitors.
If the merger is completed, the agreement will replace Preview Travel's
existing agreements with AOL, as well as Sabre's agreements with each of
Netscape and CompuServe, on April 1, 2000 or when the new co-branded sites are
operating on the AOL services, if later.
Although the agreement provides that our travel booking system will be the
only travel booking system on the AOL properties, this exclusivity is subject to
some exceptions. Also, although the agreement prohibits us from promoting any
other Internet site as a preferred provider of travel reservations or other
travel-related services, we would not normally promote other Internet sites in
this way.
Excite
We will be the exclusive provider of travel booking services for Excite's
Travel Channel (City.Net) in the United States and for the WebCrawler Travel
Channel. Excite is a leading Internet search engine provider.
Under our agreement with Excite, we will have a co-branded site that is
included on all travel channels within the Excite network. Also, we will have
travel-related content, such as travel news articles and travel specials, for
the Excite Travel Channel and other Excite services. In addition, Excite has
agreed to promote and advertise our services throughout the Excite network and
to display within the Excite network a minimum number of Internet links to our
travel site or to the co-branded site. We are also eligible to receive payments
from Excite representing a share of advertising revenues Excite receives in
connection with the online areas featuring our travel services. Additionally, we
have agreed to promote Excite's services on our Web sites.
Over the five-year term of the agreement, we will be obligated to pay $11
million to Excite, as well as to pay a percentage of commissions we earn in
excess of specified thresholds. In addition, we and Excite will cooperate in
selling and share revenues from advertising on the Excite Travel Channel. Our
arrangement with Excite expires in September 2002, or earlier in the event of a
material breach by either party.
Our exclusive arrangement is subject to specified exceptions. If Excite
decides during the term of the agreement to offer travel booking services or
travel-related Internet functions that we do not then provide, we have a right
of first refusal to negotiate our provision of these new services to the Excite
Travel Channel and the WebCrawler Travel Channel. We also have a right of first
refusal if Excite wishes to enter into an agreement with a third party that will
provide travel services on a co-branded site on the Excite network. If we enter
into an agreement with a third party with substantially the same scope as our
agreement with Excite and on terms which, taken as a whole, are more favorable
for the third party than the terms of our agreement with Excite, then we are
required to offer these more favorable terms to Excite.
Lycos
We will be the exclusive travel service provider of travel booking services
for Lycos' Travel Web Guide and Travel Network. Lycos is a leading Internet
search engine. Under this agreement, we will have a co-branded site that is
promoted throughout the Lycos Web site, and Lycos has agreed to display a
minimum number of Internet links to promote our Web site and the co-branded
site. We provide a variety of travel-related services and information for the
co-branded site, including fare finding, travel news stories,
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travel promotions and information regarding special travel fares. In addition,
we display links on the co-branded site to the Lycos Web site.
We are eligible to receive payments from Lycos representing a share of
advertising revenues Lycos receives in connection with the co-branded site. Over
the two-year term of the agreement, we are obligated to make minimum payments to
Lycos, as well as pay a portion of commissions we earn through the co-branded
site in excess of specified thresholds, and fees for providing links to our
services above specified thresholds. The agreement with Lycos expires on
September 15, 2000. The agreement will expire earlier if Lycos delivers the
contractually required number of impressions on or after March 15, 2000, or in
the event of a material breach by either party or the provisions of notice to
the other party that such party's services, viewed as a whole, are no longer
competitive with substantially similar services being offered by third parties.
Infoseek (GO Network)
We will be a preferred provider of air, car and hotel booking services on
the GO Network Travel Center. GO Network is one of the top five properties on
the Internet, according to Media Metrix.
We will be a co-branded provider of air, hotel and car services accessible
from the GO Network Travel Center home page. Infoseek has agreed not to sell any
banner ads for placement on the GO Network Travel Center home page to three
competitors identified in the agreement, with exceptions specified in the
agreement. As a preferred provider, we will be entitled to purchase the right to
cause specified key words to result in the display of our content or advertising
on GO Network in response to a search.
We have agreed to pay Infoseek a set percentage of all net revenues that we
receive for products and services sold to GO Network users or on GO Network
co-branded sites that we host. We must also purchase from Infoseek guaranteed
minimum advertising on GO Network during the term of the agreement. After March
2000, either party may terminate the agreement for convenience upon 90 days'
notice. The parties may renew the agreement for one year terms, subject to
mutual agreement of the parties.
@Home Network
We will be the exclusive air, car and hotel booking service provider for
@Home Network subscribers and will be the anchor tenant for the @Home Network's
shopping guide. Because @Home uses the broadband attributes of cable, we will be
able to provide multimedia services and content through this channel. @Home has
agreed not to create a channel or sub-channel that provides travel information
for any of our direct competitors or to allow any competitor to place any
promotional material on @Home Network Web pages on which we are featured.
We have agreed to make quarterly fixed payments to @Home, and to make
variable payments to @Home equal to a portion of our revenue from our
advertising on the and from sales of air tickets and other goods and services to
@Home subscribers. If the amount of the variable payment is greater than the
amount of the fixed payment, our variable payment will be reduced to the
difference between the variable payment and the fixed payment. Our fixed
payments to @Home will be reduced if, in any year, the total amount of variable
payments is less than the fixed payments made by us in that year and the average
number of @Home subscribers falls below a threshold amount.
Our agreement expires in 2001. If @Home ceases to offer access to online
travel services for a period of more than one year, the agreement will
terminate.
Road Runner
We will have a three-year alliance with Road Runner, a high-speed broadband
online service, which is expected to be launched in the first quarter of 2000.
Road Runner will provide our travel services with premier positioning and
promotion in all of its travel-related areas, enabling Road Runner subscribers
to
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easily research and book their travel arrangements through our service. In
addition, Road Runner has agreed to promote our service.
We have agreed to pay Road Runner a fixed amount for each person who visits
our Web site directly from the Road Runner service and completes a new member
registration form, provided the person is not already a present or past member
of our travel service. We have also agreed to pay Road Runner a fixed fee for
each airline ticket that these new members purchase through us. If the number of
new members of our travel service who join in this way during any year of the
agreement is less than an agreed amount, then we may either terminate the
agreement on six months' written notice or continue the agreement on revised
terms and conditions. Our agreement expires on December 20, 2002 and may be
renewed upon mutual agreement of the parties.
TECHNOLOGY
We expect that the Travelocity.com Business' travel planning and
reservation system will continue to be a strong platform for industry
innovation. Since its launch in March 1996, the Travelocity Division has
continually innovated and upgraded its systems to meet the expanding needs of
the online travel consumer. The Travelocity.com Web site is based on a carefully
chosen combination of commercial and proprietary tools.
Our multi-tiered system gives us the scalability and reliability to expand
to meet our current and future growth. Netscape, our server software, Vignette
Story Server, used for our content, and Tool Command Language, our user
interface programming language, handle the demands of serving Web pages. Our
proprietary application server executes business rules and directs messages
among our content sources. A third level of software accesses destinations,
profile and reservations content sources. The Sabre(R) system is our primary
source of reservations content.
The Travelocity.com Business' software and hardware will be located and
maintained at Sabre's computer center. Sabre has significant experience in
developing, operating and maintaining reliable, high volume online transaction
processing systems.
CONSUMER MARKETING
The Travelocity.com Business' relationship with its customers is key to the
success of our business. We will measure our success by our ability to attract
visitors to our Web sites, convert those visitors into buyers and convert those
buyers into repeat buyers. To help us do so, we will consult with focus groups
to refine and enhance our advertising efforts, product features and benefits,
and promotional offers. We plan to attract visitors to our Web sites and enhance
our brands through customer marketing efforts including advertising and public
relations.
Our strategy to convert visitors into buyers will use a combination of
incentives, including seasonal and purchase-related promotions that take
advantage of our customer database and Web site. As part of this effort, we plan
to negotiate special rates and benefits to obtain superior travel inventory for
our customers. We believe that our increasing scale will allow us to negotiate
on more favorable terms. Through our research with visitors and infrequent
purchasers, we are developing new programs and features (including
personalization and loyalty incentives) that will encourage purchases and repeat
use.
The Travelocity.com Business will maintain a proprietary database including
demographic profiles, customer preferences, shopping and buying patterns and
other key customer attributes. This data will enable the Travelocity.com
Business to track the effectiveness of promotions and incentives and to
understand seasonal and other trends in order to create and quickly implement
marketing programs targeted to specific customer segments. In addition, we plan
to regularly communicate with our customers through targeted e-mail.
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The Travelocity.com Business also plans to employ a variety of traditional
media programs and promotional activities to enhance the effectiveness of the
Travelocity.com Business' marketing initiatives:
- Advertising. As part of the Travelocity.com Business' strategic
alliances, the Travelocity.com Business plans to invest in both online
and off-line advertising to drive traffic to its Web sites. To generate
traffic to Travelocity.com Web sites in a cost efficient manner, we plan
to place advertisements on high volume Web sites and purchase targeted
keywords on popular search engines including Yahoo!, Alta Vista, Infoseek
and others. The Travelocity.com Business will also advertise in
traditional print and broadcast media to increase the awareness of its
service, product enhancements and promotional offerings.
- Public Relations. The core of the Travelocity.com Business' public
relations effort will be media relations, industry analyst relations and
speaking engagements. The Travelocity.com Business will maintain
relations with journalists and industry analysts to secure unbiased,
third-party endorsements for the Travelocity.com Business. In 1999, the
Travelocity Division has appeared in ten media reports each day, on
average. The Travelocity.com Business also plans to pursue coverage by
online publications, search engines and directories. In addition to media
and analyst relations, the Travelocity.com Business' employees will
actively participate in industry events and conferences.
- Co-marketing, Promotions and Loyalty Programs. The Travelocity.com
Business plans to continue to establish significant co-marketing
relationships to promote its service and to sponsor contests that offer
travel-related prizes. These programs typically involve participation
with airlines, hotels, car rental agencies and online service providers.
The Travelocity.com Business intends to enter into additional
co-marketing relationships in support of its marketing strategy. From
time to time, the Travelocity.com Business will offer various incentives
and awards to its customer base. These incentives are designed to
increase customer loyalty and awareness of the Travelocity.com Business'
brand and travel services. For example, the Travelocity.com Business
plans to continue to provide customers with bonus frequent flyer miles
and special companion fares during targeted promotional periods. On
December 9, 1999, the Travelocity Division, Preview Travel and
priceline.com announced their intention to create a mutual marketing and
customer referral arrangement, subject to agreement on definitive terms
and documentation. Any final arrangement between the parties may require
each to pay the other a fee for specified referred customers.
SALES AND SUPPLIER RELATIONS
The Travelocity.com Business plans to continue to build long-term
relationships with travel suppliers. We have contractual relationships with
travel suppliers in the air, car, and hotel sectors. These relationships allow
us to generate additional revenue through upfront payments or through payments
made on satisfying market share goals. In some cases, the Travelocity.com Web
site will be required to prominently display a supplier's brand or marketing
message. These contracts typically vary in length from one year to three years.
COMPETITION
The online travel services market is new, rapidly evolving and intensely
competitive. The Travelocity.com Business will compete with a variety of
companies with respect to each product or service that it offers, including:
- online travel agents such as Expedia, a majority-owned subsidiary of
Microsoft;
- consolidators and wholesalers of airline tickets and other travel
products, including shopping clubs and online consolidators such as
Cheaptickets.com, and priceline.com;
- individual airlines, hotels, rental car companies, cruise operators and
other travel service providers, some of which are suppliers to our Web
sites and many of whom offer travel services directly through their own
Web sites;
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- alliances by travel suppliers, such as the recently announced
multi-airline Web site for travel distribution; and
- local, regional, national and international traditional travel agencies.
Internationally, the Travelocity.com Business will compete with a different
set of participants in each national market, ranging from traditional travel
agents, market-specific Web sites, and global competitors, including Expedia,
GetThere.com and Leisure Planet, which have expanded beyond the United States
market. In the United Kingdom, local online competitors include Deckchair.com,
e-bookers and A2bTravel.com.
As the market for online travel services grows, we believe that the range
of companies involved in the online travel services industry, including travel
suppliers, traditional travel agencies, travel industry information providers,
online portals and e-commerce providers, will increase their efforts to develop
services that will compete with our Web sites. We will compete on the basis of
our comprehensive service offering, technological innovation, and customer
service.
GOVERNMENT REGULATION
We must comply with laws and regulations relating to our sales activities,
including those prohibiting unfair and deceptive practices and those requiring
us to register as a seller of travel services, comply with disclosure
requirements and participate in state restitution funds. In addition, many of
our travel suppliers and global distribution systems are heavily regulated by
the United States and other governments and we are indirectly affected by such
regulation.
The Department of Transportation is currently considering whether to extend
existing regulations to online travel services. The regulations currently apply
to global distribution systems that are owned by or affiliated with airlines and
that are marketed to travel agencies. We expect the Department of Transportation
to issue guidance on these regulations in 2000. If these regulations were
extended to online travel services, they could affect how the Travelocity.com
Business markets, displays and distributes its airline inventory, increase its
costs of doing business and reduce its sales and revenues.
Currently, relatively few laws and regulations directly apply to the
Internet and commercial online services. Federal, state and local governmental
organizations, as well as foreign governments, are considering legislative and
regulatory proposals that would regulate the Internet, and will likely consider
additional proposals in the future. We do not know how courts will interpret
laws governing the Internet or the extent to which they will apply existing laws
regulating issues such as property ownership, sales and other taxes, libel and
personal privacy, to the Internet. The growth and development of the market for
online commerce has prompted calls for more stringent consumer protection laws
that may impose additional burdens on companies that conduct business online.
Federal legislation imposing limits on the ability of states to tax
Internet-based sales was enacted in 1998 and will exempt some sales transactions
conducted over the Internet from multiple or discriminatory state and local
taxation through October 21, 2001. It is possible that this legislation will not
be renewed when it terminates. Failure to renew this legislation could allow
state and local governments to impose taxes on Internet-based sales, and these
taxes could hurt our business.
INTELLECTUAL PROPERTY
The Travelocity.com Business will rely on trademark, patent, copyright, and
trade secret laws and confidentiality and licensing agreements with employees,
customers, partners and others to protect our proprietary rights. Effective
trademark, patent, copyright and trade secret protection may not be available in
every country in which our services are available and policing unauthorized use
of our proprietary information is difficult and expensive.
The Travelocity.com Business will rely on licenses from third parties to
use their technology and information, which we incorporate and integrate into
our Web sites. We cannot assure you that these
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licenses will continue to be available to us on commercially reasonable terms.
The loss of these licenses could require us to obtain alternative technology and
information of lower quality or at greater cost. In addition, third parties that
develop new technology that would be useful to us may decline to grant us a
license to use that technology. Also, third parties may assert patent or other
intellectual property rights to technology that would otherwise be in the public
domain. In either case, we would not be able to use the technology, which may
prevent us from providing new and useful services to our customers.
The Travelocity.com Business also may grant licenses under some of our
proprietary rights, such as trademarks, patents or copyrighted materials to
third parties.
The Travelocity.com Business may become involved in litigation to enforce
our intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. We may be required
to indemnify travel suppliers and others with whom we do business for
intellectual property claims made against them in connection with the services
we provide.
The steps that we take to protect our proprietary rights may prove to be
inadequate and third parties may infringe or misappropriate our proprietary
rights. Licensees of our technology also could take actions that might decrease
the value of our proprietary rights or reputation. In addition, Sabre and the
Travelocity.com Business will agree to share some of their intellectual property
rights. Because this agreement will permit more than one entity to use these
intellectual property rights, this agreement may increase the chance that our
intellectual property could be misappropriated by a third party. If we have to
enforce our intellectual property rights in court, we may incur substantial
costs and divert our management's resources and attention.
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MATERIAL TERMS OF THE MERGER AGREEMENT
GENERAL
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A to this document. We encourage you to read the merger
agreement because it is the legal document that governs the merger. The parties
to the merger agreement are Sabre, Travelocity Holdings, Travelocity.com Inc.
and Preview Travel.
Under the merger agreement, Preview Travel will merge into Travelocity.com
Inc. As a consequence of the merger, the separate corporate existence of Preview
Travel will cease and Travelocity.com Inc. will continue as the surviving
corporation.
CLOSING; EFFECTIVE TIME
We will close the merger at 10:00 a.m., Eastern Time, on the second
business day after the conditions set forth in the merger agreement have been
satisfied or waived, unless we agree to another date and time.
On the date of closing, we will file a certificate of merger and other
appropriate documents with the Secretary of State of Delaware in accordance with
the relevant provisions of Delaware law. The merger will become effective when
the certificate of merger is filed with the Secretary of State of Delaware, or
at such later time as we specify in the certificate of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time of the merger:
- each outstanding share of Preview Travel common stock will be
automatically converted into one share of Travelocity.com Inc.'s common
stock; and
- the outstanding shares of Travelocity.com Inc.'s Class A Common Stock
(all of which are currently held by Travelocity Holdings) will be
automatically converted, in the aggregate, into 33 million shares of
Travelocity.com Inc.'s Series A Preferred Stock.
In addition, Travelocity.com Inc. granted options to acquire Class B Common
Stock to employees of the Travelocity Division immediately prior to execution of
the merger agreement. As a result of the merger, those options will become
options to acquire Travelocity.com Inc.'s common stock.
Any share of Preview Travel common stock held by Preview Travel as treasury
stock will be automatically canceled and retired in the merger and will cease to
exist. We will not exchange those shares for any securities of Travelocity.com
Inc. or other consideration.
PROCEDURES FOR SURRENDER OF CERTIFICATES
Promptly after the effective time of the merger, EquiServ, the exchange
agent for the merger, will send you a letter of transmittal. The letter of
transmittal will contain instructions with respect to the surrender of your
Preview Travel stock certificates. YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH
THE PROXY ENCLOSED WITH THIS PROXY STATEMENT/PROSPECTUS.
Commencing immediately after the effective time of the merger, if you
surrender your stock certificates representing Preview Travel shares in
accordance with the instructions in the letter of transmittal, you will be
entitled to receive stock certificates representing the shares of
Travelocity.com Inc.'s common stock into which those Preview Travel shares are
converted in the merger.
After the merger, each certificate that previously represented shares of
Preview Travel stock will represent only the right to receive the shares of
Travelocity.com Inc.'s common stock into which the shares of Preview Travel
stock were converted in the merger.
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You will not be paid any dividends or distributions on Travelocity.com
Inc.'s common stock into which your Preview Travel shares have been converted
with a record date after the merger until you surrender your Preview Travel
certificates to the exchange agent. When you surrender those certificates, any
unpaid dividends payable as described below will be paid without interest.
We will close Preview Travel's transfer books at the effective time of the
merger and no further transfers of shares will be recorded on the transfer
books. If a transfer of ownership of Preview Travel stock that is not registered
in the records of Preview Travel's transfer agent has occurred, then, so long as
the Preview Travel stock certificates are accompanied by all documents required
to evidence and effect the transfer, as set forth in the transmittal letter and
accompanying instructions, and by evidence of payment of any applicable stock
transfer taxes, a certificate representing the proper number of shares of
Travelocity.com Inc.'s common stock will be issued to a person other than the
person in whose name the certificate so surrendered is registered, together with
payment of dividends or distributions, if any.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Preview Travel represents and warrants to Sabre,
Travelocity Holdings and Travelocity.com Inc., and each of Sabre, Travelocity
Holdings and Travelocity.com Inc. represent and warrant to Preview Travel, that:
- it is properly organized, qualified and in good standing as a Delaware
corporation, and its share capital is as stated in the merger agreement;
- it has properly authorized, executed, delivered and performed the merger
agreement;
- the merger agreement is enforceable against it, and required consents,
approvals, orders and authorizations of governmental authorities relating
to the merger agreement have been obtained;
- it will not contravene other agreements as a result of the merger
agreement;
- the information it supplied for inclusion in this proxy
statement/prospectus is accurate; and
- the votes of its stockholders that are required in connection with the
merger are as stated in the merger agreement.
In addition, Preview Travel represents and warrants to Sabre, Travelocity
Holdings and Travelocity.com Inc. that:
- documents it filed with the SEC do not contain untrue statements of
material fact or omit material facts;
- financial statements it filed with the SEC fairly present its financial
condition;
- the material changes or events specified in the merger agreement have not
occurred since December 31, 1998;
- its rights plan will not be applicable to the merger;
- it has complied with all material applicable laws and has disclosed all
material litigation;
- its employee benefit matters, labor matters, tax matters, intellectual
property matters and insurance matters all are as stated in the merger
agreement;
- its material contracts and debt instruments are as stated in the merger
agreement, and it will continue its business relationships as stated in
the merger agreement; and
- it has taken specified steps to prepare its information systems for the
Year 2000.
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In addition, Sabre, Travelocity Holdings and Travelocity.com Inc. represent
and warrant to Preview Travel that:
- annual financial statements for the years 1996, 1997 and 1998 fairly
present the financial condition of the Travelocity Division;
- the material changes or events specified in the merger agreement have not
occurred with respect to the Travelocity Division since December 31,
1998;
- the Travelocity Division has complied with all material applicable laws
and all material litigation involving the Travelocity Division has been
disclosed;
- the Travelocity Division's employee benefit matters, labor matters,
intellectual property matters and insurance matters all are as stated in
the merger agreement;
- the Travelocity Division's material contracts and debt instruments are as
stated in the merger agreement, and it will continue its business
relationships as stated in the merger agreement;
- the Travelocity Division's information systems are Year 2000 compliant
or, to the extent they incorporate third party products, are compliant to
Sabre's knowledge; and
- the assets contributed to the Travelocity.com Partnership are sufficient
to conduct the business of the Travelocity Division.
The representations and warranties are of no further force or effect after
the closing of the merger or termination of the merger agreement.
COVENANTS
The merger agreement requires that each party comply, from the date of the
merger agreement to the effective time of the merger, with agreements relating
to the conduct of its business, except as permitted by the merger agreement or
as consented to by the other party.
Requirements
Sabre (with respect to the Travelocity Division) and Preview Travel have
each agreed that it will:
- conduct its business in the ordinary course consistent with past
practice;
- use reasonable best efforts to keep available the services of its
officers and employees as a group; and
- use all reasonable efforts to maintain its existing relations with
customers, suppliers, regulators, distributors, creditors, lessors and
others having business dealings with it.
Preview Travel also has agreed that it will perform and comply with its
agreements with AOL.
Prohibitions
The merger agreement prohibits each of Sabre (with respect to the
Travelocity Division) and Preview Travel from taking any action outside of the
parameters specified in the merger agreement relating to the following matters:
- issuing, selling or granting options to acquire any shares of its capital
stock, except that Preview Travel may issue a specified number of stock
options;
- selling or buying assets or other business by merger, transfer of shares
of stock or otherwise;
- incurring additional debt;
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- changing its accounting policies, except as may be required by generally
accepted accounting principles;
- taking any action which would prevent the merger from being a
reorganization under the Internal Revenue Code; and
- taking any action that would be reasonably likely to result in any of the
conditions to the merger not being satisfied.
In addition, the merger agreement prohibits Preview Travel from taking any
action outside of the parameters specified in the merger agreement relating to
the following matters:
- declaring or paying dividends, or changing the terms of its outstanding
securities;
- amending its organizational documents;
- making any material tax election;
- taking any action to cancel its rights plan, except if, in light of a
superior proposal, the Preview Travel board decides that to do so is
necessary to comply with its fiduciary duties; and
- taking any action to change employee rights and benefits, except in the
ordinary course of business consistent with past practice.
NO SOLICITATION
Prohibitions
The merger agreement provides that, except as described below, Preview
Travel may not, directly or indirectly:
- solicit, initiate or knowingly encourage (including by furnishing
information), or take any other action knowingly to facilitate, any
acquisition proposal; or
- participate in any discussion or negotiation regarding any acquisition
proposal.
Preview Travel must promptly notify Sabre orally and in writing of any
acquisition proposal or any related inquiry. Preview Travel's notice must
identify the person making the proposal or inquiry and describe the material
terms of the proposal or inquiry, and describe any changes to the material
terms.
Except as described below, the Preview Travel board may not withdraw, or
modify in a manner adverse to Sabre, its recommendation to Preview Travel
stockholders to adopt the merger agreement.
Exceptions
The Preview Travel board may withdraw or modify its recommendation to
Preview Travel stockholders to adopt the merger agreement if the Preview Travel
board determines that an acquisition proposal constitutes a superior proposal,
and if:
- Preview Travel notifies Sabre;
- Preview Travel permits Sabre to propose adjustments to the terms and
conditions of the merger agreement that would enable Preview Travel,
Sabre and Travelocity.com Inc. to proceed with the merger on the adjusted
terms; and
- Preview Travel, Sabre and Travelocity.com Inc. do not reach agreement on
adjusted terms within three business days.
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If Preview Travel receives an unsolicited superior proposal and the Preview
Travel board determines, upon advice from outside legal counsel, that the
failure to negotiate in response to the superior proposal would result in a
breach of their fiduciary duties, Preview Travel may, after giving Sabre 24
hours' notice:
- furnish information to any person making a superior proposal in
accordance with a customary confidentiality agreement; and
- negotiate regarding the superior proposal.
Definitions
An acquisition proposal is broadly defined to include any inquiry, proposal
or offer from any third person relating to:
- any direct or indirect acquisition of a business or asset that
constitutes 20% or more of Preview Travel's consolidated net revenues or
assets;
- any direct or indirect acquisition of 20% or more of any class of Preview
Travel's equity securities;
- any tender offer or exchange offer that, if completed, would result in
any person beneficially owning 20% or more of Preview Travel's capital
stock; or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Preview Travel.
A superior proposal is defined as any offer to acquire, directly or
indirectly, more than 50% of the shares of Preview Travel's common stock that
is:
- made in writing and in good faith by a third party, and
- in the good faith judgment of the Preview Travel board, more favorable
from a financial point of view to Preview Travel stockholders than the
merger.
To make this determination, the Preview Travel board must consult a
financial advisor of nationally recognized reputation and take into account all
the terms and conditions of the offer, including:
- any break-up fee,
- any expense reimbursement provision,
- any condition to completion, and
- the third party's ability to obtain financing.
The Preview Travel board may also submit a single set of written questions
to the party making the proposal in order to aid in its determination.
ADDITIONAL AGREEMENTS
Stock Options
In the merger, Travelocity.com Inc. will convert options to purchase
Preview Travel common stock held by Preview Travel employees, consultants or
directors into options to acquire Travelocity.com Inc.'s common stock. These
options will remain exercisable for the same number of shares. The exercise
price per share will remain the same.
The merger will not affect currently exercisable options to purchase Sabre
common stock held by the Travelocity Division employees, consultants or
directors. In the merger, Travelocity.com Inc. will convert options to purchase
Sabre common stock that are held by Travelocity Division employees, consultants
or directors, but which are not yet exercisable, into options to acquire
Travelocity.com Inc.'s common stock if the optionee so elects. Travelocity.com
Inc. will adjust the number of shares subject to these options and
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the exercise price of these options by the ratio of the market price of Sabre
common stock to the market price of Preview Travel common stock at completion of
the merger.
Transfer of Employee Benefits
After the merger, the Travelocity.com Business will provide Preview Travel
employees with employee benefits that are no less advantageous in the aggregate
to either, at Sabre's discretion:
- the employee benefits they received before the merger; or
- the employee benefits other employees of the Travelocity.com Business
receive (that is, employees who are not former Preview Travel employees).
The merger agreement does not limit Sabre's or the Travelocity.com
Business' power to make changes to any employee benefits in order to comply with
applicable law, or to terminate the employment of any person after the merger.
Insurance and Indemnification
For six years after the merger, Travelocity.com Inc. and the
Travelocity.com Partnership will maintain in effect Preview Travel's current
directors' and officers' liability insurance, or policies containing no less
favorable coverage, covering acts or omissions occurring before the merger.
Travelocity.com Inc. and the Travelocity.com Partnership will not be required to
pay, in total, an annual premium for the insurance described in this paragraph
in excess of 200% of the current annual premium Preview Travel pays for its
existing coverage prior to the merger. If the annual premiums exceed that
amount, Travelocity.com Inc. and the Travelocity.com Partnership will be
obligated to obtain a policy with the best coverage available for a cost up to
but not exceeding that amount.
After the merger, Travelocity.com Inc. and the Travelocity.com Partnership
will, to the fullest extent permitted under applicable law, indemnify each
person who is, or has been, an officer, director or employee of Preview Travel
with respect to:
- all acts or omissions taken by them before the merger in their capacities
at Preview Travel, and
- all acts or omissions taken before the merger at the request of Preview
Travel.
The indemnified parties will, after the merger, be entitled to the benefit
of indemnification agreements and the provisions of Preview Travel's certificate
of incorporation and bylaws relating to indemnification.
Fees and Expenses
Whether or not the merger is completed, we will share the expense of this
proxy statement/prospectus and the SEC registration statement of which it is a
part, and we will each pay all of our own other costs and expenses incurred in
connection with the merger and the merger agreement, subject to the expense
reimbursement and termination fee provisions described under "-- Termination
Fee" on page 82.
CONDITIONS TO COMPLETION OF THE MERGER
Preview Travel, on the one hand, and Sabre, Travelocity Holdings and
Travelocity.com Inc., on the other, are not obligated to complete the merger
unless:
- the Preview Travel stockholders adopt the merger;
- no court issues an order and no law is enacted which would make the
completion of the merger illegal or otherwise prohibited;
- the SEC declares effective Travelocity.com Inc.'s Form S-4 registration
statement, of which this proxy statement/prospectus is a part;
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- the Nasdaq National Market approves for quotation the shares of
Travelocity.com Inc.'s common stock issuable in the merger;
- the representations and warranties made by the other party are true and
correct in all material respects on the date of the merger;
- the other party has performed in all material respects all agreements and
covenants that it must perform under the merger agreement before the
merger; and
- each has received opinions from its respective legal counsel that the
merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
Preview Travel's obligation to complete the merger is subject to the
further condition that Sabre form the Travelocity.com Partnership and complete
the other transactions related to the merger.
Sabre and Preview Travel currently believe that it is likely that all of
the conditions to the merger will be fulfilled. In the unlikely event that a
condition is not fulfilled, the parties may, but would not be required to, waive
the condition and complete the merger. If the waiver were to result in a
material change in the terms of the merger, then Preview Travel would resolicit
the votes of its stockholders to approve the merger.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated:
- by mutual written consent of Sabre and Preview Travel;
- by either Sabre or Preview Travel:
- if we do not complete the merger on or before March 31, 2000, except
that a party may not terminate the agreement if its failure to fulfill
its obligations is the cause of the merger not being completed by March
31, 2000;
- if the Preview Travel stockholders do not adopt the merger agreement;
- if a law makes the merger illegal or a court or other government
authority issues a final non-appealable ruling that permanently
prohibits the completion of the merger, unless the party seeking to
terminate the merger agreement has not used reasonable best efforts to
lift or vacate the court order;
- if the other party has breached any of its representations, warranties,
covenants or agreements contained in the merger agreement, and the
breach would result in the failure to satisfy one or more of the
conditions to the merger, and the breach is incapable of being cured or,
if capable of being cured, has not been cured within 20 days after
written notice;
- by Sabre, if the Preview Travel board:
- withdraws or modifies in any manner adverse to Sabre its approval or
recommendation of the merger;
- fails to call the special meeting of Preview Travel stockholders; or
- recommends any superior proposal; or
- by Preview Travel, if Preview Travel notifies Sabre of its intention to
accept a superior proposal and Sabre does not, within three business
days, make a proposal to Preview Travel that is at least as favorable to
Preview Travel stockholders, in the good faith judgment of the Preview
Travel board.
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TERMINATION FEE
Preview Travel must reimburse Sabre for up to $4 million of the expenses it
incurs in connection with the merger if Sabre terminates the merger agreement
because Preview Travel breaches any of its representations, warranties,
covenants or agreements contained in the merger agreement.
Preview Travel must pay Sabre a $10 million termination fee (less expenses
that Preview Travel reimburses when Sabre terminates the agreement) if:
- Sabre terminates the merger agreement because the Preview Travel board:
- withdraws or modifies in any manner adverse to Sabre its recommendation
of the merger,
- fails to call the Preview Travel stockholders meeting, or
- recommends any superior proposal;
- Sabre or Preview Travel terminates the merger agreement because the
Preview Travel stockholders fail to approve the merger agreement and:
- prior to the Preview Travel stockholders meeting, a third party had
publicly announced an acquisition proposal, and
- within six months after the termination of the merger agreement, Preview
Travel enters into a definitive agreement with respect to, or completes,
an acquisition proposal;
- Sabre terminates the merger agreement because Preview Travel breaches any
of its representations, warranties, covenants or agreements contained in
the merger agreement and:
- prior to the termination of the merger agreement, a third party had
publicly announced an acquisition proposal, and
- within six months after termination, Preview Travel enters into a
definitive agreement with respect to, or completes, an acquisition
proposal; or
- Preview Travel terminates the merger agreement after it notifies Sabre of
its intention to accept a superior proposal and Sabre does not, within
three business days, make a proposal to Preview Travel that is at least
as favorable to Preview Travel stockholders, in the good faith judgment
of the Preview Travel board.
Preview Travel will also reimburse Sabre for all payments Sabre makes to
AOL to discharge specified Preview Travel obligations to AOL, if the merger
agreement is terminated for any reason.
Sabre will reimburse Preview Travel for up to $3 million of the expenses it
incurs in connection with the merger if Preview Travel terminates the merger
agreement because Sabre breaches any of its representations, warranties,
covenants or agreements contained in the merger agreement.
AMENDMENTS
We may amend the merger agreement at any time before or after stockholder
approval of the merger agreement. After stockholder approval of the merger
agreement, we may not make any amendment that, by law or in accordance with the
rules of any stock exchange, requires further approval by Preview Travel
stockholders or approval by Travelocity.com Inc.'s stockholders, without the
approval of those stockholders.
THE TRAVELOCITY.COM BUSINESS' RELATIONSHIP WITH SABRE
Travelocity.com Inc. and the Travelocity.com Partnership were formed on
September 30, 1999 and are currently beneficially owned by Sabre. Currently, the
Travelocity Division is an operating division of Sabre. After the merger, Sabre
will beneficially own a majority of Travelocity.com Inc.'s total voting power
and control the management and affairs of Travelocity.com Inc.
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Sabre is a wholly owned subsidiary of Sabre Holdings Corporation, a
publicly traded company. Sabre is the world leader in the electronic
distribution of travel services, with the largest worldwide market share of all
global distribution systems. Sabre is also a leading provider, by revenue, of
information technology solutions for the travel and transportation industries.
AMR, the publicly traded parent of American Airlines, owns approximately 97.9%
of the total voting power in Sabre Holdings Corporation and approximately 82.6%
of its equity. On December 14, 1999, AMR publicly announced its intention to
distribute its entire equity interest in Sabre to AMR's public stockholders. AMR
expects to complete this transaction during the first quarter of 2000.
GOVERNANCE
Board of Directors
Travelocity.com Inc. expects to have a nine member board of directors.
Because Sabre will own a majority of the voting power in Travelocity.com Inc.,
it will have the ability to elect all of the board members. However,
Travelocity.com Inc.'s restated certificate of incorporation will require that
at least two directors be persons who are independent of Sabre. That is, they
cannot be employees, officers or directors of Sabre or its affiliates and must
not have any material business relationship with Sabre or its affiliates.
We anticipate that the same individuals who serve on Travelocity.com Inc.'s
board will also serve on the Travelocity.com Partnership board. Initially, the
Travelocity.com Partnership will have a nine member board of directors. Two
directors must be independent of Sabre, as described above. The partnership
agreement requires that Travelocity.com Inc. designate five of the nine
directors, including the independent directors. Sabre has the right to designate
the remaining four directors. Sabre, as a practical matter, will be able to
designate all of the directors on the Travelocity.com Partnership's board since
it also controls Travelocity.com Inc.
Executive Officers
We also anticipate that the same persons who serve as executive officers of
Travelocity.com Inc. will serve as executive officers of the Travelocity.com
Partnership. Under the management services agreement, Travelocity Holdings will
supply the services of the executive officers of the Travelocity.com
Partnership. In addition, Travelocity Holdings will have the right to designate
the Travelocity.com Partnership's executive officers, subject to the approval of
the Travelocity.com Partnership's board of directors. We anticipate that
Travelocity Holdings will employ and pay the senior executive officers of the
Travelocity.com Partnership under the management services agreement. In
addition, Travelocity Holdings will employ approximately ten other employees of
the Travelocity.com Business. For a description of the management services
agreement, see "Material Terms of Related Agreements -- Management Services
Agreement" on page 89.
NONCOMPETITION AGREEMENT
Sabre will enter into a noncompetition agreement with Travelocity.com Inc.
and the Travelocity.com Partnership. The noncompetition agreement generally
prohibits Sabre, subject to certain exceptions, from competing with the
Travelocity.com Business in the consumer-direct real-time travel reservations,
service and content business through the Internet for two years after the
merger. In addition, Sabre is prohibited from owning 20% or more of the stock of
any company over which Sabre has effective control if the company competes with
the Travelocity.com Business in the consumer-direct real-time travel
reservations, services and content business through the Internet unless Sabre
uses reasonable efforts to divest itself of the competing portion of the
business within one year. Despite the noncompetition agreement, Sabre may
continue to offer travel related reservations, services and content through and
to travel agencies, corporations and travel suppliers through which such
entities enable consumers to book reservations through the Internet.
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CONFLICT OF INTEREST ARRANGEMENTS
Because Sabre will control Travelocity.com Inc. and the Travelocity.com
Partnership, conflicts of interest may arise between Sabre and the two companies
in a variety of areas. These areas include potential competitive activities and
potential issues arising from the agreements between the Travelocity.com
Partnership and Sabre in connection with the separation of the Travelocity
Division from Sabre and the combination of the Travelocity Division and Preview
Travel. For a description of those agreements, see "Material Terms of Related
Agreements" on page 87.
Travelocity.com Inc.'s and the Travelocity.com Partnership's governing
documents will contain policies addressing these potential conflicts. These
policies will cover conflicts of interest between:
- Sabre and entities in which Sabre beneficially owns 50% or more of the
outstanding voting power, other than Travelocity Holdings,
Travelocity.com Inc. and the Travelocity.com Partnership, on the one
hand; and
- Travelocity.com Inc., the Travelocity.com Partnership, and entities in
which they beneficially own 50% or more of the outstanding voting power
on the other.
Conflict of Interest Policies
The conflict of interest policies will apply to transactions between
Travelocity.com Inc. or the Travelocity.com Partnership and any of the following
parties:
- Sabre;
- Sabre's customers or suppliers;
- other business entities in which any director of Travelocity.com Inc. or
the Travelocity.com Partnership has a financial interest;
- the directors and officers of business entities in which any director of
Travelocity.com Inc. or the Travelocity.com Partnership has a financial
interest; and
- Travelocity.com Inc.'s and the Travelocity.com Partnership's officers and
directors.
The policy will provide that if a transaction between one of these parties
and Travelocity.com Inc. or the Travelocity.com Partnership is approved in
compliance with any of the procedures listed below then the directors and
officers of Travelocity.com Inc. will be deemed to have satisfied their
fiduciary duties:
- the transaction's material facts are disclosed to Travelocity.com Inc.'s
or the Travelocity.com Partnership's board or board committee, and the
transaction is approved by a majority of the disinterested directors on
the board or the committee;
- the transaction's material facts are disclosed to the stockholders (or
the partners), and the transaction is approved by a majority of voting
power (excluding votes controlled by Sabre or a related entity);
- the transaction is completed according to guidelines approved by a
majority of the disinterested directors on Travelocity.com Inc.'s or the
Travelocity.com Partnership's board, or board committee, or by a majority
of voting power (excluding votes controlled by Sabre or a related entity)
after the transaction's material facts are disclosed; or
- the transaction is fair to Travelocity.com Inc. or the Travelocity.com
Partnership when approved by the board, board committee, stockholders or
partners, as relevant.
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If these policies are followed, the directors and officers of
Travelocity.com Inc. or the Travelocity.com Partnership shall be deemed, with
respect to the transaction:
- to have satisfied any fiduciary duty he or she may have to
Travelocity.com Inc. and its stockholders or the Travelocity.com
Partnership;
- not to be liable to Travelocity.com Inc. or its stockholders or the
Travelocity.com Partnership for breach of fiduciary duty;
- to have acted in good faith, not opposed to Travelocity.com Inc.'s or the
Travelocity.com Partnership's best interests, and in a manner entirely
fair to Travelocity.com Inc., its stockholders and the Travelocity.com
Partnership;
- not to have breached any duty of loyalty to Travelocity.com Inc., its
stockholders or the Travelocity.com Partnership; and
- not to have derived any improper benefit.
Travelocity.com Inc. and the Travelocity.com Partnership will not be
required to follow these policies. If Travelocity.com Inc. and the
Travelocity.com Partnership do not follow these policies, the duties of their
respective board of directors and officers will be governed by relevant law.
Business Opportunity Policies
A potential transaction or matter that may be a business opportunity for
both Sabre and the Travelocity.com Business may also create conflicts between
Sabre and Travelocity.com Inc. or the Travelocity.com Partnership. These
conflicts may arise where a director, officer, or employee of Travelocity.com
Inc. or the Travelocity.com Partnership who also serves as a director, officer
or employee of Sabre learns of a potential transaction or matter that may be a
business opportunity for both the Travelocity.com Business and Sabre. These
conflicts may also arise because Sabre is permitted to:
- engage in the same or similar business as the Travelocity.com Business,
after the term of the noncompetition agreement;
- do business with any potential or actual client, customer or supplier of
the Travelocity.com Business; and
- employ any officer or employee of Travelocity Holdings, Travelocity.com
Inc. or the Travelocity.com Partnership.
The business opportunities that may be allocated to the Travelocity.com
Business are business opportunities that it is financially able to undertake and
are in its line of business or a reasonable expansion of that line of business.
The policies contained in Travelocity.com Inc.'s and the Travelocity.com
Partnership's governing documents will provide that if an opportunity is
allocated as described below, then the directors, officers and employees of
Travelocity.com Inc. and the Travelocity.com Partnership shall be deemed:
- to have satisfied any fiduciary duty he or she may have to
Travelocity.com Inc. and its stockholders or the Travelocity.com
Partnership;
- not to be liable to Travelocity.com Inc. or its stockholders or the
Travelocity.com Partnership for breach of fiduciary duty because of
failure to communicate the business opportunity to Travelocity.com Inc.
or the Travelocity.com Partnership or for directing the business
opportunity to another person;
- to have acted in good faith, not opposed to Travelocity.com Inc.'s or the
Travelocity.com Partnership's best interests, and in a manner entirely
fair to Travelocity.com Inc., its stockholders and the Travelocity.com
Partnership;
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- to have not breached any duty of loyalty to Travelocity.com Inc., its
stockholders or the Travelocity.com Partnership; and
- to have not derived any improper benefit.
When an opportunity is presented to an officer or director in his or her
designated capacity with Travelocity.com Inc., the Travelocity.com Partnership
or Sabre, the opportunity will be allocated to the company so designated.
Otherwise, business opportunities will be allocated as described below.
<TABLE>
<CAPTION>
IF THE PERSON'S POSITION WITH
TRAVELOCITY.COM INC. OR THE AND THE PERSON'S THEN THE OPPORTUNITY
TRAVELOCITY.COM PARTNERSHIP IS: POSITION WITH SABRE IS: WILL BE ALLOCATED TO:
- ------------------------------- ----------------------------- -----------------------------
<S> <C> <C>
officer/employee director the Travelocity.com Business
officer/employee and director director the Travelocity.com Business
director officer/employee Sabre
director officer/employee and director Sabre
director director Sabre
officer/employee officer/employee the company to which the
person devoted a majority of
time over the last six months
officer/employee and director officer/employee and director Sabre
officer/employee officer/employee and director Sabre
officer/employee and director officer/employee the Travelocity.com Business*
</TABLE>
- ---------------
* If the person serves as a director of Travelocity Holdings but not of
Travelocity.com Inc. or the Travelocity.com Partnership, then the opportunity
will be allocated to Sabre.
If the party does not act within a reasonable time period or pursue the
opportunity diligently and in good faith, the other party may pursue the
opportunity or direct it to a third party. Either party may waive a business
opportunity in writing, in which case the other party may pursue the
opportunity. Business opportunities allocated to the Travelocity.com Business
will not be deemed to belong to Travelocity Holdings or any subsidiary of
Travelocity Holdings.
Travelocity.com Inc. and the Travelocity.com Partnership will not be
required to follow these policies. If Travelocity.com Inc. and the
Travelocity.com Partnership do not follow these policies, the duties of their
respective board of directors and officers will be governed by relevant law.
Independent Director Approval
In addition to the conflict of interest arrangements described above, for
two years after the merger, a majority of directors, including at least one
independent director of the Travelocity.com Partnership or Travelocity.com Inc.,
as appropriate, must approve any transaction with:
- Sabre or a Sabre affiliate, or
- any material customer or supplier of Sabre or a Sabre affiliate.
Alternatively, the transaction may be effected in accordance with
guidelines approved by a majority of the independent directors. This requirement
will apply, for example, to any amendment or waiver under any of the agreements
related to the separation of the Travelocity Division from Sabre, including the
noncompetition agreement.
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MATERIAL TERMS OF RELATED AGREEMENTS
Travelocity.com Inc. and the Travelocity.com Partnership will enter into
several agreements as a result of the separation of the Travelocity Division
from Sabre, and the combination of the Travelocity Division and Preview Travel
in a holding company/partnership structure.
PARTNERSHIP AGREEMENT
Travelocity.com LP is a Delaware limited partnership. Applicable Delaware
law and the Travelocity.com partnership agreement govern its operations. The
Travelocity.com Partnership will own the combined Travelocity Division and
Preview Travel business, and have full power and authority to operate the
Travelocity.com Business.
Partners
The partners in the Travelocity.com Partnership are:
- Travelocity.com Inc. and its wholly-owned subsidiary, Travelocity.com LP
Sub, Inc., and
- Sabre and its wholly-owned subsidiaries Travelocity Holdings and TSGL
Holding (we refer to these companies as the "Sabre Partners").
The general partners are Travelocity.com Inc. and Travelocity Holdings. The
other partners are limited partners.
Partnership Units Equivalent to Travelocity.com Inc.'s Common Stock
We intend that one partnership unit will be equivalent to one share of
Travelocity.com Inc.'s common stock. For this reason, the partnership agreement
provides that when Travelocity.com Inc. issues new common shares, the
Travelocity.com Partnership will issue additional partnership units to
Travelocity.com Inc., and when Travelocity.com Inc. acquires its own common
shares, it will return the same number of partnership units to the
Travelocity.com Partnership.
To enable the Sabre Partners to maintain their proportionate interest in
the Travelocity.com Partnership, Travelocity Holdings will have the right to
contribute cash or property to the Travelocity.com Partnership in exchange for
partnership units when the Travelocity.com Partnership issues additional
partnership units to Travelocity.com Inc. because Travelocity.com Inc. is
issuing new shares of common stock. However, the Sabre Partners will not have
this right when Travelocity.com Inc. issues its common stock to employees upon
the exercise of stock options. The Sabre Partners' equity interest in the
Travelocity.com Partnership, and the equity interest of Travelocity.com Inc.'s
public stockholders, will be diluted in that case. For a description of the
relationship between the Travelocity.com Partnership and Travelocity Holdings
under the management services agreement, see "-- Management Services Agreement"
on page 89.
Special Majority Approval Rights
As long as the Sabre Partners own 30% or more of the partnership units, a
special majority of the Travelocity.com Partnership's board, including at least
one director designated by Travelocity.com Inc. and one director designated by
Travelocity Holdings, must approve any action:
- to admit a new partner;
- to consolidate or merge the Travelocity.com Partnership with another
entity;
- to liquidate or dissolve the Travelocity.com Partnership, initiate
bankruptcy proceedings, or dispose of substantially all of the
Travelocity.com Partnership's assets;
- to enter into any line of business other than providing consumer-direct
travel content, travel reservation services and related goods and
services through Internet Web sites;
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- to issue, directly or indirectly, any partnership units other than as the
Travelocity.com partnership agreement expressly permits; or
- to make distributions of cash or property to partners, or acquire
partnership interests, except as the Travelocity.com partnership
agreement expressly permits.
Indemnification of Directors and General Partners
The Travelocity.com partnership agreement states that the directors and the
general partners (Travelocity.com Inc. and Travelocity Holdings) will not be
liable for monetary damages to the Travelocity.com Partnership or the partners
which result from their errors in judgment, mistaken acts or omissions, unless a
director or general partner commits fraud or willful misconduct or participates
in any transaction from which the director or general partner derived an
improper personal benefit.
Partners' Accounts and Distributions
The partnership agreement contains customary provisions regarding the
partners' capital accounts, the allocation of profits and losses, and
distributions to the partners. The Travelocity.com Partnership must reimburse
Travelocity.com Inc. for all of its expenses, including those relating to
operating as a public company, such as legal and accounting fees, filing fees,
printing costs, etc. The Travelocity.com Partnership will make distributions to
the partners so they may pay any taxes they incur in connection with the
Travelocity.com Partnership. As the tax matters partner, Travelocity Holdings
will make tax elections for the Travelocity.com Partnership and cause the
Travelocity.com Partnership to prepare tax returns.
As of September 30, 1999, Preview Travel had a net operating loss
carry-forward for federal income tax purposes of $77.1 million. The
Travelocity.com partnership agreement provides that Travelocity.com Inc. must
contribute to the Travelocity.com Partnership the tax benefit that
Travelocity.com Inc. realizes from net operating loss deductions inherited from
Preview Travel in the merger. As a result, the partners will share the benefit
associated with Preview Travel's losses in proportion to their ownership of the
Travelocity.com Partnership. In addition, the partnership agreement provides
that Travelocity.com Inc. must make additional contributions to the
Travelocity.com Partnership if Travelocity.com Inc. receives tax benefits
attributable to its share of the Travelocity.com Partnership's losses.
Transfer of Partnership Units
Except as described below, the partners may not transfer partnership units,
except to their affiliates. The following transfers are permitted:
- the Sabre Partners may exchange partnership units and the same number of
shares of Travelocity.com Inc.'s Series A Preferred Stock for
Travelocity.com Inc.'s newly-issued common stock on a one-for-one
basis -- that is one partnership unit and one share of Series A Preferred
Stock may be exchanged for one share of Travelocity.com Inc.'s
newly-issued common stock; and
- if Travelocity.com Inc. merges with another Sabre Partner to facilitate
distribution of Sabre's interest in the Travelocity.com Partnership to
Sabre's stockholders on a tax free basis, the Sabre Partners may
exchange:
- all of their partnership units, Series A Preferred Stock in
Travelocity.com Inc., common stock in Travelocity.com Inc. and, in
specified circumstances, cash,
for
- a number of shares of Travelocity.com Inc.'s Class B Common Stock equal
to the total number of partnership units and shares of Travelocity.com
Inc.'s common stock that the Sabre Partners held before the exchange.
If AMR holds more than 80% of the outstanding voting power for directors of
Sabre Holdings Corporation, a portion of the shares that the Sabre Partners will
receive in the exchange will be shares of
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Travelocity.com Inc.'s common stock rather than shares of Travelocity.com Inc.'s
Class B Common Stock. For a description of the terms of the Class B Common
Stock, see "Description of Travelocity.com Inc.'s Capital Stock -- Class B
Common Stock" on page 130.
Dissolution of the Travelocity.com Partnership
The Travelocity.com Partnership will dissolve if it disposes of
substantially all of its assets, or if Travelocity.com Inc. and Travelocity
Holdings both consent to the dissolution. The Travelocity.com partnership
agreement contains customary provisions for the payment, on dissolution, of the
Travelocity.com Partnership's debts, and the distribution of its assets to the
partners.
MANAGEMENT SERVICES AGREEMENT
In connection with the merger, Travelocity Holdings and the Travelocity.com
Partnership will enter into a management services agreement under which
Travelocity Holdings will supervise and manage the day-to-day operations of the
Travelocity.com Partnership, subject to the direction and oversight of the board
of directors of the Travelocity.com Partnership. As the Travelocity.com
Partnership's agent, Travelocity Holdings will act for the Travelocity.com
Partnership with respect to the management of the Travelocity.com Partnership's
operations, personnel, maintenance of accounting records, and execution and
performance of contracts and licenses, among other responsibilities. Travelocity
Holdings will not have the authority to act for the Travelocity.com Partnership
with respect to any agreement or transaction between the Travelocity.com
Partnership and Travelocity Holdings or any of its affiliates. In addition,
Travelocity Holdings will not have the authority to approve on the
Travelocity.com Partnership's behalf any decisions that would require a special
majority vote under the partnership agreement. Travelocity Holdings will agree
not to directly or indirectly conduct any business other than in connection with
the ownership, acquisition and disposition of interests in the Travelocity.com
Partnership and Travelocity.com Inc., and the management of the Travelocity.com
Partnership's day-to-day operations.
Travelocity Holdings will designate the executive officers of the
Travelocity.com Partnership, subject to the approval of the Travelocity.com
Partnership's board of directors. We anticipate that Travelocity Holdings will
employ and pay the senior executive officers of the Travelocity.com Business and
approximately ten other persons, and that the Travelocity.com Partnership will
employ the other employees of the Travelocity.com Business.
The Travelocity.com Partnership will pay Travelocity Holdings a fee equal
to its costs and expenses in performing services under the management services
agreement, including executive salaries, increased by 5%. The Travelocity.com
Partnership will also grant Travelocity Holdings options to acquire
Travelocity.com Inc.'s common stock so that Travelocity Holdings may
concurrently grant options to acquire Travelocity.com Inc.'s common stock to
Travelocity Holdings employees. When these options are exercised,
Travelocity.com Inc. will issue shares of its common stock and receive
additional partnership units. This will dilute Sabre's interest in the
Travelocity.com Partnership and Travelocity.com Inc.'s public stockholders'
interest in the Travelocity.com Partnership.
The parties will indemnify each other for losses resulting from their
breach of the management services agreement. Travelocity Holdings will indemnify
the Travelocity.com Partnership for losses resulting from its gross negligence
or willful misconduct.
The management services agreement will terminate:
- by the mutual consent of the parties;
- when the Travelocity.com Partnership is dissolved;
- if one party breaches the agreement and the other party elects to
terminate; or
- if Sabre Partners own less than 35% of the Travelocity.com Partnership
and Travelocity Holdings or the Travelocity.com Partnership elects to
terminate.
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CONTRIBUTION AGREEMENTS
Immediately prior to the merger, the Travelocity.com Partnership will enter
into contribution agreements with Sabre and TSGL Holding, Inc., a Sabre
subsidiary. TSGL Holding owns the trademarks used in the Travelocity Division
business.
Sabre will contribute to the Travelocity.com Partnership specified assets
used in the Travelocity Division and $50 million in cash. Sabre will also
transfer to the Travelocity.com Partnership all liabilities related to the
contributed assets, except for specific obligations the parties identify. Sabre
will represent that it is assigning all of the assets necessary to operate the
Travelocity Division, but will not make any other representation concerning the
assets. TSGL Holding will assign some of its intellectual property rights and
related liabilities to the Travelocity.com Partnership. TSGL Holding will not
make any representation regarding the assigned intellectual property.
Immediately after the merger, the Travelocity.com Partnership and
Travelocity.com Inc. will enter into a contribution agreement and
Travelocity.com Inc. will assign all of Preview Travel's assets and liabilities
it receives in the merger to the Travelocity.com Partnership. However, Sabre,
Preview Travel and Travelocity.com Inc. may need the consent of third parties,
including travel suppliers, in order to transfer some assets. We intend to seek
these consents, as soon as practicable after the merger. We cannot assure you
that we will be able to obtain these consents on satisfactory terms or at all.
Travelocity.com Inc. will not make any representation or warranty with respect
to these assets.
REGISTRATION RIGHTS AGREEMENT
Travelocity.com Inc. will enter into a registration rights agreement with
Sabre relating to the registration of all Travelocity.com Inc.'s common stock
that Sabre and its affiliates hold or acquire.
Under this agreement, Sabre will have the right to require Travelocity.com
Inc. to use its best efforts to register under the Securities Act of 1933, as
amended, all shares of Travelocity.com Inc.'s common stock Sabre holds,
including common stock Sabre receives on the conversion of the Series A
Preferred Stock, or on the exchange of partnership units owned by Sabre and its
affiliates. Travelocity.com Inc. will not be required to effect more than one
demand registration in any 12-month period. Sabre will also have the right to
participate, or piggy-back, in equity offerings initiated by Travelocity.com
Inc., subject to reduction of the size of the offering on the advice of the
managing underwriter. Sabre will pay all expenses relating to the demand
registration requests under the agreement, and Travelocity.com Inc. will pay all
expenses relating to piggy-back registrations under the agreement. In either
case, Sabre will be responsible for underwriters' discounts and selling
commissions with respect to the sale of the shares Sabre owns and the fees and
expenses of its counsel in connection with each registration.
INTERCOMPANY AGREEMENTS
The Travelocity.com Partnership intends to enter into a number of other
agreements with Sabre and its subsidiaries in order to separate the Travelocity
Division from Sabre and to facilitate the Travelocity.com Partnership's
operation of the Travelocity Division after the separation. The most significant
of these agreements are described below. Although the parties intend that the
terms of these agreements will be consistent with current market standards,
because Sabre controls Travelocity.com Inc. and the Travelocity.com Partnership,
the agreements have not been negotiated on an arm's-length basis. We cannot
assure you that the Travelocity.com Partnership would not have received more
favorable terms from an unaffiliated party. In addition to the terms summarized
below, the agreements include provisions for early termination, confidentiality,
indemnification, limitation of liability and other terms and conditions.
Access Agreement
The Travelocity.com Partnership and Sabre intend to enter into an access
agreement for the provision of booking services and travel content to the
Travelocity.com Partnership. The expected terms of this agreement are summarized
below.
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The agreement will generally restrict the Travelocity.com Partnership's use
of specified booking services that compete with Sabre's services. The agreement
will require the Travelocity.com Partnership to use the Sabre system, in any
particular year, for a number of bookings that is at least equal to a specified
percentage of its total bookings during the prior year. If the Travelocity.com
Partnership fails to meet this minimum booking threshold it will have to pay
Sabre liquidated damages. In addition, the Travelocity.com Partnership must use
its reasonable efforts to maintain a system on the Travelocity.com Partnership's
Web site that enables referrals of bookings for ticketing by Sabre agencies. The
parties will renegotiate the Travelocity.com Partnership's obligation to
maintain this referral system every four years.
Sabre will pay fees to the Travelocity.com Partnership based on:
- the gross number of travel segments that are booked through the
Travelocity.com Partnership in the Sabre system, and
- the gross number of passenger name records in the Sabre system which
originate through the Travelocity.com Partnership and are referred to a
Sabre travel agency for ticketing.
Sabre will also pay fees to the Travelocity.com Partnership for additional
marketing obligations undertaken by the Travelocity.com Partnership. The
Travelocity.com Partnership will pay fees to Sabre based on the Travelocity.com
Partnership's use of messages and terminal addresses in the Sabre system. The
pricing structure will be open for negotiation every four years, within
parameters appropriate for Sabre customers of similar size, configuration and
business activity to the Travelocity.com Partnership and other relevant market
comparisons.
The Travelocity.com Partnership will assume Sabre's obligations and
benefits relating to the exclusive marketing rights, sharing of revenues, and
licensing of technology as provided in two agreements between Sabre and Abacus.
The term of the agreement will be 15 years, although the Travelocity.com
Partnership may terminate the agreement earlier if Sabre fails to remain one of
the four largest global distribution systems in the North American market, as
determined by the number of air travel bookings in North America.
Technology Services Agreement
The Travelocity.com Partnership intends to enter into a technology services
agreement with Sabre for the provision of certain base services, including
desktop, voice and data management services, Web hosting services, and Sabre
development services relating to its global distribution system. The agreement
also covers nonvariable services which Sabre may provide at the Travelocity.com
Partnership's request. Sabre's charges for technology services may be reset
annually, based on current market rates. Sabre will have the exclusive right to
provide the base services, and specified variable services. The Travelocity.com
Partnership may have Sabre provide technology services with respect to the
current Preview Travel operations. The Travelocity.com Partnership intends to do
most of its own web development. We expect this agreement to cover the following
areas on the terms discussed below.
- Desktop. For one year, Sabre will provide to the Travelocity.com
Partnership's office employees standard desktop services such as the
servicing of software, hardware, and notebook computers, and other
desktop tools and functions. The Travelocity.com Partnership may
terminate the desktop services provision of this agreement on 60 days'
notice. Desktop services are priced on a per-device and per-function
basis. If, prior to the merger closing, the Travelocity.com Partnership
determines not to receive these services from Sabre, these services will
not be covered under this agreement.
- Data and Voice Management. For three years, Sabre will provide standard
data and voice management services including management of a domestic
data network, custom data network, remote connectivity, inbound/outbound
voice, voicemail and 800 services, among others. Data and voice
management services generally are priced as a pass-through of charges
assessed by third party network providers, together with a management fee
payable to Sabre.
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- Web Hosting. The Web hosting services are divided into standard and
optional services. The standard Web hosting services include Web Internet
access, data center and systems monitoring, and back-up services. The
optional Web hosting services include premium capacity planning, hardware
and software, asset management, technical consulting and change
management. Sabre will provide these services for an initial term of six
months, after which the Travelocity.com Partnership may terminate the
services or renew them for one six month term, during which either party
may cancel the services with 90 days' notice. If the Travelocity.com
Partnership elects to use a third party for this service, the
Travelocity.com Partnership will have to relocate its hardware and
infrastructure from Sabre's Tulsa facility. Web hosting services are
priced based on several factors including data center floor space
utilization, number of servers operated and monitored, number of network
devices, service functions, and other variable service charges.
- Development. The Travelocity.com Partnership will purchase systems
development resources relating to the Sabre(R) system from Sabre and
Sabre will provide related development services based on rolling annual
development requirements and project plans. In addition, each party must
allow the other party to bid for specified development projects of the
other party which are subject to bids, requests for proposals or other
competitive offer processes. The parties will establish guidelines to
protect and, in some cases, license and sublicense the intellectual
property developed through the provision of development services by Sabre
or by the Travelocity.com Partnership or through the joint development of
a project by Sabre and the Travelocity.com Partnership. The development
services provision will last for a period of 15 years.
Intellectual Property Agreement
Sabre and the Travelocity.com Partnership intend to execute an intellectual
property agreement, in which the rights granted and restrictions imposed on both
parties with respect to the pool of intellectual property subject to the
agreement will continue in perpetuity. Each party will agree, for a period of 15
years starting on the closing of the merger, to contribute any new intellectual
property that has application in the other party's business, whether developed
internally or acquired from a third party, to the pool of intellectual property
that will be freely and irrevocably available for use by the other in its own
business. The obligation of both parties to contribute newly acquired or
developed intellectual property to the pool:
- will automatically terminate in the event that Sabre no longer possesses
at least 20% of the Travelocity.com Partnership units or otherwise no
longer has control of the Travelocity.com Partnership;
- may be terminated by the Travelocity.com Partnership if, after expiration
of the two-year non-competition agreement, described above, Sabre enters
into a business that would have been subject to the non-competition
restriction; and
- may be terminated by Sabre if the Travelocity.com Business enters into
the business of distributing travel inventory directly to travel agents
or corporations or travel technology to any travel industry suppliers.
The agreement imposes no restrictions on a party's ability to license its
own intellectual property, except that certain intellectual property paid for by
the other party at specified rates may not be licensed to the other party's
competitors. Each party also may grant sublicenses under the other party's pool
intellectual property, but only to third parties who are not competitors of the
other party. Except under specific circumstances, neither party will be subject
to any licensing fee or royalty payment in connection with its use or permitted
sublicensing of the other party's intellectual property contributed to the pool.
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Other Intercompany Agreements
Sabre and the Travelocity.com Partnership anticipate that they will enter
into the following agreements:
- Facilities Agreement. Sabre intends to lease two premises to the
Travelocity.com Partnership for an initial term of one year with automatic
renewal. The Travelocity.com Partnership may terminate the entire lease
agreement on 60 days' notice and Sabre may terminate the agreement on one
year's notice. If, prior to the merger closing, the Travelocity.com
Partnership finds alternative premises, it may not lease these premises
from Sabre.
- Administrative Services Agreement. Sabre will offer and provide
administrative services to the Travelocity.com Partnership for a term of
15 years. The administrative services agreement categorizes the services
as optional administrative services, such as human resources
administration, legal, finance, accounting, facilities, corporate travel,
and executive support, and required services, such as tax administration
and human resources compliance service. Generally, any optional
administrative service may be terminated by either party on six months'
notice, effective as of June 1 or December 1 of the applicable calendar
year. Most of the optional services will be provided at Sabre's cost plus
a 10% margin and the required services will be provided at Sabre's cost.
- Cash and Short-Term Investments Agreement. Sabre will act as, or
outsource the function of, an investment adviser to manage and supervise
assets, including cash and marketable securities, and employee benefit
plan assets, which the Travelocity.com Partnership wishes to invest. The
agreement may be terminated by either party, with or without cause, upon
sixty days' notice. The Travelocity.com Partnership will pay market rates
for the investment services as determined by Sabre, except for services
passed through at Sabre's cost from AMR Investment Services, Inc., a
wholly-owned subsidiary of AMR.
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MANAGEMENT OF TRAVELOCITY.COM FOLLOWING THE MERGER
EXECUTIVE OFFICERS AND DIRECTORS
Initially and for the foreseeable future, Travelocity.com Inc.'s board of
directors and the Travelocity.com Partnership board of directors will be
identical, and will each consist of nine members. The board of directors of each
of Travelocity.com Inc. and the Travelocity.com Partnership will control the
appointment of their respective executive officers. The executive officers will
serve at the discretion of the board of directors which appointed them.
Initially and for the foreseeable future, the executive officers of
Travelocity.com Inc. and the Travelocity.com Partnership will be identical.
We have listed below biographical information for each person who is
expected to be a director or executive officer as of completion of the merger,
and the term of office to be served by each director. We also are engaged in an
active search for, and intend to name, the remaining executive officers in the
near future.
<TABLE>
<CAPTION>
POSITION AT TRAVELOCITY.COM INC. AND THE
NAME AGE TRAVELOCITY.COM PARTNERSHIP
- ---- --- ----------------------------------------
<S> <C> <C>
Terrell B. Jones................ 51 President and Chief Executive Officer and Director
whose term expires in 2002
James D. Marsicano.............. 56 Executive Vice President of Sales and Service
Andrew B. Steinberg............. 41 Executive Vice President Administration, General
Counsel and Corporate Secretary
Ramesh K. Punwani............... 57 Chief Financial Officer
William J. Hannigan............. 40 Chairman of the Board, whose term expires in 2003
James J. Hornthal............... 45 Vice-Chairman of the Board, whose term expires in
2002
Bradford J. Boston.............. 45 Director whose term expires in 2001
F. William Conner............... 40 Director whose term expires in 2003
Paul C. Ely, Jr. ............... 67 Director whose term expires in 2002
Jeffery M. Jackson.............. 44 Director whose term expires in 2001
Glenn W. Marschel, Jr. ......... 52 Director whose term expires in 2001
</TABLE>
In addition, we expect that Michael A. Buckman will be named to the boards
of directors of Travelocity.com Inc. and the Travelocity.com Partnership on
April 1, 2000. We expect that his term will expire in 2003.
Terrell B. Jones has served as President and Chief Executive Officer of
Travelocity.com Inc. and the Travelocity.com Partnership since September 30,
1999. From May 1999 until September 1999, Mr. Jones served as Executive Vice
President, Travelocity Division of Sabre Holdings Corporation, and President of
Sabre Inc.'s Travelocity Division. From July 1996 until October 1999, Mr. Jones
served as Senior Vice President -- Sabre Interactive and Chief Information
Officer at Sabre Holdings Corporation and President -- Sabre Interactive and
Chief Information Officer at Sabre Inc. From 1993 to 1996, Mr. Jones served as
President -- Sabre Computer Services, a division of The Sabre Group, and from
1995 to 1996, Mr. Jones served as President -- Sabre Interactive, a division of
The Sabre Group. Mr. Jones is also a director of Entrust Technologies Inc., a
digital security company.
James D. Marsicano has served as Executive Vice President of Sales and
Service of Travelocity.com Inc. and the Travelocity.com Partnership since
September 30, 1999. From July 1996 to September 1999, Mr. Marsicano served as
Senior Vice President and General Manager of Sabre's Travelocity Division. From
1992 to July 1996, Mr. Marsicano served as the Managing Director of Commercial
Sales at American Airlines.
Andrew B. Steinberg, will serve as Executive Vice President Administration,
General Counsel and Corporate Secretary of Travelocity.com Inc. and the
Travelocity.com Partnership on the closing of the merger. From October 1996, Mr.
Steinberg has served as Executive Vice President, General Counsel and Corporate
Secretary of Sabre Holdings Corporation. Mr. Steinberg previously served as
associate general
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counsel for American Airlines. Prior to joining American Airlines in 1990, Mr.
Steinberg was a litigation attorney with the law firm of Gibson, Dunn &
Crutcher.
Ramesh K. Punwani will serve as Chief Financial Officer of Travelocity.com
Inc. and the Travelocity.com Partnership on the closing of the merger. Since
September 1999, he has served as Director of Business Development and as Acting
Vice President of Cruise and Tour Relations for the Consumer Travel Executive
Team of American Express, a travel services company. He is also the former
Interim Chief Financial Officer of KIWI International Holdings, an airline
company, serving from April 1999 until September 1999. Prior to that, Mr.
Punwani was a consultant for Cambridge Partners, an investment advisory and
management firm, from January 1998 through June 1999, and North Atlantic
Aviation, a travel services company, from June 1998 through April 1999. He also
served as Vice President and Chief Financial Officer for Tower Air, an airline
company, from September 1996 through January 1998, and as Senior Vice President
and Chief Financial Officer for Empire Blue Cross Blue Shield, a health
insurance provider, from September 1993 through September 1996. Mr. Punwani
served in a variety of roles at Pan American, an airline company, since 1986,
culminating in his position as Senior Vice President and Chief Financial
Officer.
Bradford J. Boston has served as Executive Vice President -- Product
Development and Delivery of Sabre since July 1997. Previously he served as
Senior Vice President and President -- Sabre Computer Services from June 1996 to
July 1997. Prior to joining Sabre, he served as Senior Vice President for
American Express Travel Related Services, a travel services company, from 1994
to 1996, Senior Vice President for Visa International, a credit card provider,
from 1993 to 1994, and Vice President for United Airlines/Covia Partnership, an
airline company, from 1991 to 1993.
F. William Conner has served as Executive Vice President and President,
Enterprise Solutions, of Nortel Networks Corporation, a telecommunications
company, since November 1999. From September 1998 through October 1999, Mr.
Conner served as President of Nortel Networks' Enterprise Data Networks. Mr.
Conner was Executive Vice President, Sales and Marketing for Nortel Networks'
Enterprise Networks division from August 1995 until September 1998, and Vice
President from 1992 through August 1995. Mr. Conner also serves as a director of
Entrust Technologies, Inc., a digital security company, Williams Communications
Solutions, a business unit of Williams Communications that provides business
communications equipment and multimedia integration services, and the Dallas
Symphony Association.
Paul C. Ely, Jr. has served as President of Santa Cruz Yachts, a yacht
manufacturer in Santa Cruz, California, since 1995, and is a former General
Partner of Alpha Partners, a venture capital firm located in Menlo Park,
California. He is also a former Executive Vice President and a former director
of Hewlett-Packard Company, where he served from 1962 to 1984. He is a director
of Sabre Holdings Corporation, Parker Hannifin Corporation, a manufacturer of
motion control products, and Tektronix, Inc, a provider of measurement, color
printing and video and networking products.
Jeffery M. Jackson has served as Acting Chief Financial Officer of
Travelocity.com Inc. and the Travelocity.com Partnership since January 2000, and
as Executive Vice President and Chief Financial Officer of Sabre since August
1998. Prior to joining Sabre, he served as Vice President and Controller for
American Airlines from January 1998 to August 1998, and Vice
President -- Corporate Development and Treasurer for American Airlines from 1995
to 1998, and Vice President and Treasurer for American Airlines from 1992 to
1995. Mr. Jackson will resign from his position as Acting Chief Financial
Officer of Travelocity.com Inc. and the Travelocity.com Partnership once Mr.
Punwani joins Travelocity.com Inc. and the Travelocity.com Partnership, which we
anticipate will be at or prior to the closing of the merger.
William J. Hannigan was named Chief Executive Officer and President of
Sabre in December 1999. Prior to his appointment, he served as President of
Global Markets for SBC Communications Inc., a telecommunications company, since
1996. Prior to SBC, Mr. Hannigan spent 13 years at Sprint Corporation, also a
telecommunications company. He is also a director of Sabre Holdings Corporation.
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James J. Hornthal founded Preview Travel in 1985 and has served as its
Chairman since inception. Mr. Hornthal also served as President of Preview
Travel until April 1994 and as Chief Executive Officer until June 1997. Prior to
starting Preview Travel, Mr. Hornthal was a General Partner at Oak Grove
Ventures, a venture capital firm, and a Consultant for The Boston Consulting
Group, a management consulting firm. Mr. Hornthal is the co-chairman and a
director of HealthCentral.com, an online provider of healthcare content and
electronic commerce, and is a director of several other private companies.
Glenn W. Marschel, Jr. has served as Chief Executive Officer and
Co-Chairman of the Board of Faroudja, Inc., a video processing technology firm
in Sunnyvale, California, since October 1988, and as Executive Chairman of
Additech, Inc., a petrochemicals company located in Houston, Texas, since
October 1997. He is also the former President and CEO of Paging Network, Inc., a
telecommunications company, and the former Vice Chairman of First Financial
Management Corporation, a credit card processing firm. Mr. Marschel is also the
former Group President of Automatic Data Processing, an information systems
company. He is also a director of Sabre Holdings Corporation.
Michael A. Buckman has been President and Chief Operating Officer of
homestore.com, an online real estate services company, since 1996. Prior to
joining homestore.com, Mr. Buckman served as Chief Executive Officer for
Worldspan Travel Information Services, a worldwide travel reservation and
airline support services organization, since June 1995. From January 1992 to
June 1995, Mr. Buckman was Executive Vice President of American Express Company,
a financial services firm. Prior to American Express, he was Chief Operating
Officer of Lifeco Service Corporation, a travel services company, Vice President
of Sales at American Airlines, and President of the Sabre Travel Information
Network, a travel distribution company.
COMPENSATION OF DIRECTORS
All directors will be reimbursed for reasonable travel expenses related to
attendance at board and committee meetings. Only those directors who are not
employees of Sabre, Travelocity.com Inc., the Travelocity.com Partnership, or
Travelocity Holdings will receive the following stock option grants:
- upon election to the Travelocity.com Inc. board of directors, an option
to purchase 20,000 shares of Travelocity.com Inc. common stock under the
Travelocity.com LP 1999 Long-Term Incentive Plan. The options will not be
incentive stock options qualified under the Internal Revenue Code. The
board of directors may increase any initial grant in its discretion on a
case by case basis; and
- on the date of each annual stockholders meeting if, on the date of the
meeting, the director has served on the Travelocity.com Inc. board of
directors for at least six months, an option to purchase 5,000 shares of
Travelocity.com Inc. common stock.
Options granted to nonemployee directors will have an exercise price equal
to the fair market value of the underlying Travelocity.com Inc. common stock on
the grant date, will have a ten year term and will fully vest one year after the
grant date. Directors who retire from the Travelocity.com Inc. board after 5
years of service or reaching age 65 may exercise their options for 12 months
after retirement. Prior service with Sabre, Preview Travel or any of their
affiliates as a director or employee will count towards the service requirement.
Other than expense reimbursements, no other compensation will be paid to
directors for service on the board or on any board committee.
BOARD COMMITTEES
Travelocity.com Inc.'s restated bylaws authorize the board of directors to
authorize three committees: an executive committee, an audit committee and a
compensation/nominating committee. After the merger, the board will appoint an
audit committee and a compensation/nominating committee. In addition,
Travelocity.com Inc.'s board of directors may from time to time designate one or
more special
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committees, which shall have such duties and may exercise such powers as the
board of directors grants to it.
The executive committee may consist of four or more directors, including
the chairman of the board and the chief executive officer, if he or she is a
director. The executive committee may exercise all the powers and authority of
the board of directors in the management of the business and affairs of
Travelocity.com Inc., with the exception of such powers and authority as may be
specifically reserved to the board by law or by board resolution.
The audit committee will be composed of two or more independent directors.
The audit committee will review and recommend to the board of directors the
selection of independent auditors, the fees to be paid to such auditors, the
adequacy of the audit and accounting procedures of Travelocity.com Inc. and such
other matters as the board may specifically delegate to the audit committee. In
addition, the audit committee shall meet with representatives of the independent
auditors and with the financial officers of Travelocity.com Inc. separately or
jointly.
The compensation/nominating committee will be composed of three or more
directors who are neither employees nor officers of Travelocity.com. The
compensation/nominating committee will review and make recommendations with
respect to the management remuneration policies of the Travelocity.com Business,
including
- salary rates and fringe benefits of elected officers,
- other remuneration plans such as incentive compensation,
- deferred compensation and stock option plans,
- directors' compensation and benefits, and
- such other matters as the board may specifically delegate to the
committee. In addition, the compensation/nominating committee will make
recommendations to the board concerning suitable candidates for election
to the board, with respect to assignments to committees of the board and
with respect to the promotions, changes and succession among the senior
management of the Travelocity.com Business.
STOCK PLANS
The Travelocity.com Partnership and Travelocity Holdings have adopted
long-term incentive plans to attract, retain and motivate highly talented
employees critical to the long-term growth and success of the Travelocity.com
Business. The Travelocity.com Business operates in an extremely competitive
Internet market. Travelocity Holdings and the Travelocity.com Partnership view
the incentive plans as significant, critical elements of employees' total
compensation package. Travelocity.com Inc. has reserved 7 million shares of its
common stock, plus an additional 4% of the total outstanding shares as of
January 1 of each of 2001, 2002, and 2003, for issuance under both plans.
Travelocity Holdings and the Travelocity.com Partnership have similar plans, but
the plans have separate share limits. The number of shares set forth below to be
issued under each plan for converted options may vary depending on which
employees are ultimately employed by Travelocity Holdings, and which employees
are employed by the Travelocity.com Partnership, but the total aggregate number
of shares issued under both plans upon conversion of the options will not
change.
Fifty percent of the unvested options to purchase Preview Travel common
stock held by each optionee will vest immediately before completion of the
merger. For employees who are former Preview Travel officers, the remaining
unvested options will vest at the rate of 8.33% per month, so that all of the
converted Preview Travel options will fully vest one year following the merger.
In addition, if Travelocity Holdings or the Travelocity.com Partnership
terminates any former Preview Travel officer without cause within one year after
the merger, his or her remaining unvested options will immediately vest. For
former Preview Travel employees who are not former Preview Travel officers, 50%
of all unvested Preview Travel
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options will vest immediately before the merger. Vesting of the remaining
unvested Preview Travel options will continue according to the original vesting
schedule.
If any Preview Travel options are incentive stock options under the
Internal Revenue Code, then acceleration of vesting in the merger may cause such
options to lose their status as incentive stock options, to the extent
accelerated vesting causes any single person to become vested in options with a
fair market value as of the date of grant in excess of $100,000 in underlying
shares in any one year. All other incentive stock options shall cease to qualify
for incentive stock option status 90 days after their conversion to options to
purchase Travelocity.com Inc.'s common stock.
Employees of Travelocity Holdings and the Travelocity.com Partnership who
formerly were Sabre employees will have the right to elect whether to covert
their unvested options to purchase Sabre Class A Common Stock to options to
purchase shares of Travelocity.com Inc.'s common stock. Vested Sabre options
will not convert, and will vest according to their original vesting schedule.
Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan
Travelocity Holdings has adopted the Travelocity Holdings, Inc. 1999
Long-Term Incentive Plan, which provides for awards of options to purchase, or
stock appreciation rights with respect to, shares of Travelocity.com Inc.'s
common stock, to:
- the employees, directors and consultants of Travelocity Holdings;
- employees, directors and consultants of any other entity approved by the
Travelocity Holdings board of directors in which Travelocity Holdings
holds an interest of at least 20%;
- employees, directors and consultants of any entity approved by the
Travelocity Holdings board who holds an interest of at least 20% in
Travelocity Holdings.
Number of shares. Travelocity Holdings adopted the plan effective as of
October 1, 1999, and it will continue in effect for ten years. The plan allows
for grants of options or stock appreciation rights to purchase an aggregate of
4.5 million shares of Travelocity.com Inc.'s common stock. However, the total
awards issued under the plan and the Travelocity.com LP 1999 Long-Term Incentive
Plan may not exceed 7 million shares of Travelocity.com Inc.'s common stock.
456,400 option grants are currently outstanding under the plan. Twenty-five
percent of these options will vest on the first anniversary of the date of
grant, and the remainder will vest in equal increments over the following 36
months until fully vested on the fourth anniversary of grant. The options have
an exercise price of $23 per share. Travelocity Holdings will also grant options
to purchase shares of Travelocity.com Inc.'s common stock for converted Sabre
and Preview Travel options.
Travelocity Holdings will award its non-employee directors up to 20,000
nonqualified options when first appointed to the board of directors, and up to
an additional 10,000 nonqualified options at each annual stockholders' meeting,
provided the director has served at least six months from the initial date of
grant.
Beginning in 2001, the number of shares available for grant under the plan
will increase each year for three years by a number of shares equal to 3% of the
total number of shares of Travelocity.com Inc.'s stock outstanding. However, the
total combined annual increase under the Travelocity Holdings plan and the
Travelocity.com Partnership's Long-Term Incentive Plan may not exceed 4% of
Travelocity.com Inc.'s total outstanding shares on the date of each increase. In
addition, the number of shares available under the plan will increase over the
entire term of the plan by the number of shares subject to any forfeited or
expired awards, plus any shares withheld to pay the exercise price or taxes that
arise upon exercise of an award.
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Plan administration. A committee consisting of at least two members of the
Travelocity Holdings board of directors will administer the plan. However, the
committee may need the approval of the full board of directors or compensation
committee of Sabre or Travelocity.com Inc., in order to:
- qualify awards as performance based compensation under the Internal
Revenue Code,
- authorize the issuance of Travelocity.com Inc.'s shares, and
- exempt awards from the short-swing trading restrictions under the federal
securities laws.
Under the plan, the administration committee determines the employees
eligible to receive awards under the plan and the provisions of the agreements
governing the awards, including term, exercise price, and vesting schedule.
The plan limits the number of shares that may be granted to any employee to
1 million per year. Although the plan permits the granting of incentive stock
options under the Internal Revenue Code, none of the options awarded under the
plan will qualify as incentive stock options. All awards granted under the plan
will have a term of 10 years or less. The options will have a minimum exercise
price of 100% of the fair market value of the underlying shares on the grant
date, except that Travelocity Holdings may grant options with a discounted
exercise price to employees hired as a result of acquisitions or other business
combinations, or as a result of a transfer from an affiliate of Travelocity
Holdings.
Holders of awards under the plan may generally not transfer the awards
other than by will or the laws of descent and distribution, or pursuant to a
domestic relations order. However, the administration committee may approve gift
transfers to family members, family trusts, or other family controlled entities
to the extent permitted by federal securities laws.
The exercise price for an option and the withholding tax due upon exercise
of an award may be paid:
- in cash;
- by delivery of previously owned shares held for at least six months
(unless the administration committee permits otherwise);
- a broker-assisted sale on the open market; or
- any other method approved by the administration committee, including
share withholding.
A participant whose employment is terminated for cause would forfeit all
outstanding awards under the plan. Upon a participant's death, any portion of an
award that would have vested over the next 12 months shall immediately vest, and
the participant's estate may exercise vested awards for 18 months following the
participant's death. In the event of termination due to disability, any award
will continue to vest for 12 months and the participant may exercise vested
awards for 18 months from his termination of employment. Upon retirement, the
participant may exercise vested awards for 12 months following his termination
of employment. Upon termination for any other reason, a participant may exercise
vested awards for a period of three months. The administration committee can
determine that transferring employment to an affiliate of Travelocity Holdings
does not constitute termination.
Change in control. If a change in control occurs, the Travelocity Holdings
board of directors, in its discretion, may:
- provide for continuation of awards granted under the plan by substituting
on an equitable basis for the outstanding awards either the consideration
payable for the outstanding shares of common stock in connection with the
transaction, or securities of any successor or acquiring entity;
- upon written notice to the participants, provide that all awards will
immediately vest and expire if not exercised within a reasonable period
of time; or
- terminate all awards in exchange for a cash payment per option equal to
the difference between the fair market value of the underlying shares and
the exercise price.
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If the board of directors chooses the first alternative, and terminates an
employee for any reason other than cause within one year after a change in
control, the employee's unvested awards will immediately vest. If the board of
directors chooses the second or third alternatives, all unvested awards will
immediately vest, unless the vesting would prevent a desired pooling of interest
accounting treatment for the change in control transaction.
Change in control definition. Under the plan, a change in control occurs
if:
- without the prior approval of Travelocity.com Inc.'s board of directors,
and with specified exceptions, a person becomes the beneficial owner of
Travelocity.com Inc.'s voting securities representing both:
- 25% or more of the voting power of Travelocity.com Inc.'s then
outstanding voting securities and
- a percentage of the voting power of Travelocity.com Inc.'s then
outstanding voting securities which is equal to or greater than the
percentage of such voting securities owned by Sabre;
- the sale of substantially all the assets of Travelocity.com Inc.;
- a complete liquidation or dissolution of Travelocity.com Inc.; or
- any other event which, in the opinion of Travelocity.com Inc.'s board of
directors, is within the intent of the change in control definition, even
if not strictly within the definition.
A change in control also occurs if the members of Travelocity.com Inc.'s
board of directors at the time of the merger cease to constitute a majority of
Travelocity.com Inc.'s board of directors. However, any new director who is
approved by the majority of the directors is considered as if he or she were a
member of the original board of directors, unless his or her election occurs as
a result of a board contest or proxy contest.
A merger, consolidation, or similar reorganization of Travelocity.com Inc.
is also a change in control, unless:
- Travelocity.com Inc.'s stockholders continue to own at least 50% of the
voting power in the surviving corporation, and
- the members of Travelocity.com Inc.'s board of directors continue to
constitute at least a majority of the board of directors of the surviving
corporation.
However, a change in control does not include
- a distribution to Sabre's stockholders of any voting securities of
Travelocity.com Inc. or Travelocity Holdings;
- Sabre's public offering of any voting securities of Travelocity.com Inc.
or Travelocity Holdings; or
- the passing of a stock ownership threshold because Travelocity.com Inc.
acquires its own securities.
Travelocity.com LP 1999 Long-Term Incentive Plan
The Travelocity.com Partnership has adopted the Travelocity.com LP 1999
Long-Term Incentive Plan, which provides for awards of options to purchase, or
stock appreciation rights with respect to, shares of Travelocity.com Inc.'s
common stock, to:
- the employees, directors and consultants of the Travelocity.com
Partnership;
- employees, directors and consultants of any other entity approved by the
Travelocity.com Partnership board of directors in which Travelocity
Holdings holds an interest of at least 20%;
- employees, directors and consultants of any entity approved by the
Travelocity.com Partnership board of directors who holds an interest of
at least 20% in the Travelocity.com Partnership.
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The Travelocity.com Partnership adopted the plan effective as of October 1,
1999, and it will continue in effect for ten years. The plan allows for grants
of awards to purchase the lesser of:
- 4.5 million shares; or
- 7 million shares reduced by the number of awards issued under the
Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan.
286,000 option grants are currently outstanding under the plan. Twenty-five
percent of these options will vest on the first anniversary of the date of
grant, and the remainder will vest in equal increments over the following 36
months until fully vested on the fourth anniversary of grant. The options have
an exercise price of $23 per share. The Travelocity.com Partnership will grant
options to purchase shares of Travelocity.com Inc.'s common stock for converted
Sabre and Preview Travel options.
Beginning in 2001, the number of shares available for grant under the plan
will increase each year for three years by a number of shares equal to the
lesser of:
- 3% of the total number of shares of Travelocity.com Inc.'s stock
outstanding, or
- 4% of the total number of shares of Travelocity.com Inc.'s stock
outstanding on the date of increase, minus
- the number of additional shares issued or subject to awards under the
Travelocity Holdings plan in connection with the additional annual award
authorization under the Travelocity Holdings plan.
In addition, the number of shares available under the plan will increase
over the entire term of the plan by the number of shares subject to any
forfeited or expired awards, plus any shares withheld to pay the exercise price
or taxes that arise upon exercise of an award.
The other material terms of the plan are substantially the same as the
terms of the Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan. However,
the Travelocity Holdings plan permits Travelocity Holdings to issue options that
qualify as incentive stock options under the Internal Revenue Code, but the
Travelocity.com Partnership plan does not permit the Travelocity.com Partnership
to do so.
OTHER BENEFIT PLANS OF TRAVELOCITY HOLDINGS
Travelocity Holdings Retirement Savings Plan
Travelocity Holdings anticipates adopting a 401(k) retirement savings plan
for its employees, which will be a defined contribution plan qualified under the
Internal Revenue Code. Eligible employees could elect to defer up to 15% of
their compensation to the plan on a pre-tax basis. If the employee has not
elected or is not eligible to elect the Sabre Legacy Pension Plan as the
employee's primary retirement plan, Travelocity Holdings will match employee
contributions at the rate of 100% for the first 3% of compensation deferred to
the plan, and at the rate of 50% for the next 3% of compensation deferred to the
plan. All employer and employee contributions will be 100% vested and
nonforfeitable at all times. Employees who have elected the Sabre Legacy Pension
Plan as their primary retirement plan may make contributions to the Travelocity
Holdings Retirement Savings Plan, but will receive no matching funds or other
employer contributions. Employees of Travelocity Holdings who are former Preview
Travel employees may transfer funds in Preview Travel's retirement plan directly
to the plan. Distributions from the plan are generally in the form of a single
lump sum payment.
Legacy Pension Plan
Employees of Travelocity Holdings who previously participated in the Sabre
Legacy Pension Plan will continue to participate in the plan, which is a
tax-qualified defined benefit plan. The plan bases benefits on credited years of
service and the employee's base pay for the highest consecutive five years of
the ten years preceding retirement. For purposes of eligibility for the plan and
calculation of vesting and benefits, Sabre
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will credit all employees employed by Sabre prior to the merger for any service
previously credited under the plan. Employees who previously participated in the
Legacy Pension Plan but elected the Sabre Group Retirement Plan as their primary
retirement plan have had their benefits frozen under the Legacy Pension Plan.
Employees of Travelocity Holdings meeting specified criteria have elected
to remain in the tax-qualified defined benefit pension plan of American
Airlines, Inc. for service through December 31, 1996, and are in the Legacy
Pension Plan for service and increases in compensation levels after that date.
The obligation for benefits earned by these employees as of December 31, 1996
under the American Airlines plan remains with that plan. Mr. Jones elected to
remain in the American Airlines plan for service through December 31, 1996.
Sabre Supplemental Executive Retirement Plan
Messrs. Jones, Jackson and Steinberg will be eligible for additional
retirement benefits under Sabre's Supplemental Executive Retirement Plan. The
plan determines benefits calculated upon the basis of final average base salary,
incentive compensation payments and performance returns. The plan provides
pension benefits to which Messrs. Jones and Jackson would be entitled, but for
the limit of $130,000 on the maximum annual benefit payable and the $160,000
limit on the maximum amount of annual compensation which may be taken into
account under the Legacy Pension Plan and the American Airlines plan. The
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code
impose these salary limits.
The following table shows typical aggregate annual benefits payable under
the pension plan and the supplemental retirement plan, based upon retirement in
1999 at age 65, to persons in specified earnings and service classifications.
Annual retirement benefits set forth below are subject to reduction for Social
Security benefits and benefits received under other qualified and non-qualified
plans that Sabre, Travelocity Holdings or their affiliates provide.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
-----------------------------------------------
CREDITED YEARS OF SERVICE
-----------------------------------------------
FINAL AVERAGE EARNINGS 15 20 25 30 35
---------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 30,000 40,000 50,000 60,000 70,000
150,000 45,000 60,000 75,000 90,000 105,000
200,000 60,000 80,000 100,000 120,000 140,000
250,000 75,000 100,000 125,000 150,000 175,000
300,000 90,000 120,000 150,000 180,000 210,000
400,000 120,000 160,000 200,000 240,000 280,000
500,000 150,000 200,000 250,000 300,000 350,000
600,000 180,000 240,000 300,000 360,000 420,000
</TABLE>
As of December 31, 1999, Mr. Jones had 20.7 years of credited service, Mr.
Marsicano had 20.0 years of credited service, Mr. Jackson had 14.5 years of
credited service and Mr. Steinberg had 8.5 years of credited service. Benefits
are shown in the table using a straight-life annuity basis.
Sabre Deferred Compensation Plan
Sabre has adopted a deferred compensation plan, which is an unfunded
deferred compensation plan for a select group of management or highly
compensated employees. The plan is not qualified under the Internal Revenue
Code. Messrs. Jones and Steinberg currently participate in the plan.
Participants in the plan may elect to defer up to 100% of their annual
salary in excess of $160,000, 100% of their bonus, and 100% of their Sabre
performance shares to the plan.
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Travelocity Holdings, Inc. Employee Stock Purchase Plan
The board of directors of Travelocity Holdings anticipates adopting a
Travelocity Holdings 1999 Employee Stock Purchase Plan. The plan will not
qualify for special tax treatment under the Internal Revenue Code.
Only employees who work at least 20 hours per week would be eligible to
participate in the plan. Participation in the plan would end upon an
individual's termination of employment. Additionally, an employee making salary
deferrals under the plan could cease his or her participation in the plan at any
time during the offering period.
Under the plan, eligible employees could voluntarily defer up to 15% of
their compensation during each 6 month offering period, to be held for
investment in Travelocity.com Inc.'s common stock at the end of the offering
period. At the end of each offering period, Travelocity Holdings would use all
salary deferred during the period to purchase Travelocity.com Inc.'s common
stock, at a price equal to 85% of the lesser of
- the fair market value of the common stock on the last business day of the
offering period, or
- the fair market value of the common stock on the first business day of
the offering period.
Travelocity Holdings would pay the remainder of the purchase price. The
plan would limit an employee's deferral to $15,000 annually, and would limit an
employee's purchase of Travelocity.com Inc.'s common stock to an annual $25,000
in fair market value of the shares on the purchase date. Shares issued under the
plan would be either shares transferred to Travelocity Holdings by the
Travelocity.com Partnership or shares purchased on the open market. The
Travelocity Holdings board of directors, or a committee appointed by the board,
would administer the plan.
The Travelocity Holdings board of directors and the committee could amend
or terminate the plan at any time, provided that any amendment or termination
would not adversely affect any outstanding rights to purchase stock under the
plan. If not terminated earlier, the plan would have a ten year term.
OTHER BENEFIT PLANS OF THE TRAVELOCITY.COM PARTNERSHIP
Travelocity L.P. Retirement Savings Plan
The Travelocity.com Partnership anticipates adopting a 401(k) retirement
savings plan that is qualified for favorable tax treatment under section 401(a)
of the Code. Employees who have attained age 18 would immediately be eligible to
participate in the plan.
Employees eligible to participate in the plan could elect to defer up to
15% of their compensation to the plan on a pre-tax basis. The Travelocity.com
Partnership would match employee contributions at the rate of 100% for the first
3% of compensation deferred to the plan, and at the rate of 50% for the next
three percent of compensation deferred to the plan. All employer and employee
contributions would be 100% vested and nonforfeitable at all times. The
Travelocity.com Partnership would generally either distribute a participant's
account at termination of the participant's employment in the form of a cash
lump sum, or allow, at the participant's election, the participant to keep the
funds in the plan.
Employees of the Travelocity.com Partnership who are former Preview Travel
employees would be able to transfer funds in Preview Travel's 401(k) plan
directly to the Travelocity.com Partnership plan.
Travelocity.com L.P. Employee Stock Purchase Plan
The board of directors of the Travelocity.com Partnership anticipates
adopting a Travelocity.com L.P. 1999 Employee Stock Purchase Plan. The material
provisions of the plan would be similar to the provisions of the Travelocity
Holdings employee stock purchase plan.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1998, Preview Travel transferred substantially all of the
assets of its television business to NewsNet Central, Inc. In consideration of
the transfer of these assets to NewsNet Central, Preview Travel received a
$250,000 convertible promissory note which was converted to common stock in
March 1999, a $1 million subordinated promissory note which bears interest at
the rate of 6% per year, and a warrant to purchase up to 2,275,445 shares of
NewsNet Central's common stock at a price of $0.45 per share. As of December 31,
1999 and assuming the conversion of all outstanding NewsNet Central convertible
securities and exercise of all outstanding NewsNet Central stock options,
Preview Travel would own approximately 38% of NewsNet Central's common stock.
James J. Hornthal is a director of NewsNet Central and holds 800,000 shares of
NewsNet Central's common stock, which he purchased on November 15, 1998 at a
price of $0.015 per share. In addition, Mr. Hornthal has options to acquire
80,000 shares of NewsNet Central common stock.
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SABRE'S TRAVELOCITY DIVISION
OVERVIEW
The Travelocity Division is a leading provider of consumer-direct travel
content and travel reservation services on the Internet based on travel bookings
and the number of different visitors to its Web sites in a given month. Since
January 1, 1997, more than one million customers have made over $1 billion in
gross bookings of travel services through the Travelocity Division, including
bookings made through easySabre(R), a pioneer online travel product and the
precursor to the Travelocity Division. In the fourth quarter of 1999, gross
bookings of travel services through the Travelocity Division totaled $281
million, a 205% increase over $92 million in the fourth quarter of 1998 and a
24.2% increase over $226 million in the third quarter of 1999. In the full year
1999, gross bookings of travel services through the Travelocity Division totaled
$808 million, an increase of 184%, compared to $285 million in 1998.
On the Travelocity Division's online travel Web site, leisure and small
business travelers can compare prices, make travel reservations and obtain
destination information online. The Travelocity Division's Web site is
accessible to individual consumers free of charge through the Internet and
online services. It features booking and purchase capability for airlines, car
rental and hotel companies, cruises and vacation packages. The Travelocity
Division's Web site also offers access to a database of information regarding
specific destinations and other information of interest to travelers, articles
from travel correspondents and interactive maps. The Internet address for the
Travelocity Division's main Web site is www.travelocity.com.
In addition to our main Web site, the Travelocity Division operates Web
sites tailored to customers in the United Kingdom (www.travelocity.co.uk) and
Canada (www.travelocity.ca). We also operate as the provider of travel booking
services on Web sites operated by Yahoo!, Netscape and @Home, and on Web sites
operated by Infoseek under the brand GO Networks.
The Travelocity Division's proprietary technology and user-friendly
interface enable customers to quickly and easily access travel information 24
hours a day, seven days a week, and to make informed choices about their travel
purchases. The Travelocity Division complements its useful content and interface
with a high level of customer service.
To broaden its online presence and build brand recognition, the Travelocity
Division has entered into various strategic relationships. Since 1997, the
Travelocity Division has been the provider of air, car and hotel booking
services on the Yahoo! Web site. Recently, the Travelocity Division extended the
contract. In 1998, the Travelocity Division entered into three-year agreements
with each of Netscape and @Home, to be the travel booking provider on their
networks. In 1999, the Travelocity Division entered into a two year agreement
with Infoseek as a principal travel booking services provider on Web sites
operated under the brand GO Networks.
Sabre has offered consumer-direct online travel services since 1985. In
January 1995, Sabre established a separate division for this business. The
Travelocity Division Web site was launched in March 1996. As of December 1999,
approximately 10.3 million users had registered for free membership.
The Travelocity Division's principal corporate offices are located at 4200
Buckingham Boulevard, Fort Worth, Texas 76155. Its telephone number is (817)
963-2923.
THE TRAVELOCITY DIVISION'S STRATEGY
The Travelocity Division aims to enhance its position as a leading online
travel provider by increasing its brand awareness, enhancing its technology,
enhancing its supplier relationships, continuing its international expansion and
expanding its service offerings.
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WEB SITES
The Travelocity.com Web sites provide access to travel booking capability
and travel-related information and services.
Reservations
The reservations feature includes paths for purchasing airline tickets,
renting cars, reserving hotel rooms and booking cruises and vacation packages.
The Travelocity Division's Web site's reservation feature leads customers
through a purchase in a clear path, allowing them to use reliable price
comparisons, availability and itinerary details.
Flights
The Travelocity Division offers several ways to purchase airline tickets.
Through the main booking path customers enter their pertinent travel data and
can then select three ways to search for flights:
- The Best Fare Finder option is for travelers with flexible travel dates.
This option searches for the lowest fares offered and then shows the
dates those fares are available. This option is currently offered for
economy class travel within or between the United States, the U.S. Virgin
Islands, Canada and Puerto Rico.
- The 9 Best Itineraries option searches for the nine best-priced
itineraries for specific dates and the class of travel the customer
specifies, but assumes flexible travel times on those dates. This option
can also search all or specified airlines.
- The Search by Schedule option is for travelers who need to travel on
specific dates and times. It searches all flights so the customer can
build his or her own itinerary, then shows the total price for the class
of travel specified. This option will also find and display up to three
lower-cost alternatives, and can search all or specified airlines.
Additionally, the Web site also features an express booking path on the
home page that uses a registered customer's stored information profile to
provide a quicker path into the Best Fare Finder and 9 Best Itineraries options.
Hotels and Cars
The hotel booking path lets users search, compare and book stays at more
than 45,000 hotels. In addition to key information on destination, dates, number
of rooms and number of travelers, the hotel path also allows customers to select
a specific hotel company or a specific hotel by name. Users can also enter
frequent guest numbers, specify airport or downtown locations, select a type of
special rate for which they might qualify and a discount number.
Additional features by which users can select hotel properties include
preferences for amenities such as suites, extended stay, apartments, bed and
breakfast, resort, convention facility, business center, recreational facilities
and wheelchair accessibility.
Customers can also utilize an extensive database of hotel photographs and
reviews on selected hotels to help determine the best selection for their travel
plans. The Web site shows where hotels are located on a map while customers are
making their purchase decision.
Customers can also search for, select and reserve rental cars online. The
customer can select a specific car type, car company, and request up to three
special equipment options such as ski rack, child seat, mobile phone, luggage
rack, bicycle rack and navigational system.
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Vacations and Cruises
The Travelocity Division features thousands of vacation packages and
cruises from a number of suppliers. The variety of suppliers allows the customer
to select the provider that best meets their needs based on destination, package
and air carrier. Vacation and cruise bargains are featured on both the home page
and the vacations page.
Services
There are additional tools available that provide information to the
customer or allow the customer to provide more information to the Travelocity
Division. This information allows the customer to select the most appropriate
option, and allows the Travelocity Division to tailor travel planning to his or
her preferences. These tools include:
- Retrieve Existing Reservations, which reviews active reservations for
changes in schedule.
- Personal Profile, which stores travel preferences, payment information,
ticketing preferences and basic member information.
- Departures and Arrivals, which checks the current departure and arrival
information for specific flights.
- Fare Listing, which presents a complete list of current fares.
- Time Tables, which presents a complete list of flight times.
- Alternate Airports, which alerts customers if there is a lower fare at a
nearby airport.
- Fare Watcher E-mail, which tracks prices on up to five round-trip
itineraries selected by the customer and sends an e-mail to the customer
when there is a price change of $25 or more.
- Consolidator Fares, which links to low priced consolidator fares.
- Flight Paging, which sends flight information directly to a customer's
alphanumeric pager.
- Agency Locator, which locates a Sabre travel agent for a customer who
prefers to have a travel agent issue a ticket that has been reserved
through the Travelocity Division Web site. This allows the Travelocity
Division to make sales worldwide.
Content
Visitors use the extensive content information on the Travelocity Division
Web site at all stages of travel including the planning stage, after booking and
prior to departure. The Travelocity Division Web site features an extensive
selection of content from leading industry sources.
- The Destination Guide provides access to a large database of destination
content licensed from various industry experts in travel publishing,
featuring Frommers and Lonely Planet. The Travelocity Division Web site
includes content for over 300 countries and cities. Information includes
a general overview of each destination, basic facts, history, culture,
and activities.
- Maps provided by Mapquest allow the user to create maps showing the route
from one destination to another.
- High and low temperatures, forecasts and other weather information is
provided for a large number of destinations.
- News stories are published on a regular basis to highlight key news
stories, including fare sales. News headlines are featured on the home
page of the Web site.
- Traveler's Check is a free weekly newsletter which includes news
headlines and descriptions of promotions, new features and other
information. Traveler's Check is sent in both text and Web page versions
to registered members who choose to receive it.
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- The Road Warrior features editorial content for business travelers.
- Cruise Critic features cruise reviews on a wide range of cruise lines and
ships.
- The Travelocity Division's Been There features travel articles written by
the Travelocity Division employees.
International Web sites
Our localized Web sites in the United Kingdom and Canada offer
substantially all of the services described above, and content tailored to those
countries, such as train and ferry schedules, and prices in local currency.
STRATEGIC RELATIONSHIPS
The Travelocity Division pursues strategic relationships to increase its
access to online customers, to build brand recognition and to expand the
Travelocity Division's online presence. The Travelocity Division has established
alliances to distribute travel services and provide additional features, content
and services with partners that have among the strongest and most recognized
brands on the Internet. Immediately prior to the merger, Sabre, will assign to
the Travelocity.com Partnership all of the agreements that underlie the
Travelocity Division's strategic relationships. Consequently, the
Travelocity.com Business will benefit from the Travelocity Division's
established alliances. Several of these alliances include:
Yahoo!
The Travelocity Division has had an agreement with Yahoo! since June 1997
to serve as Yahoo!'s provider of air, car and hotel booking services, with
exceptions including Yahoo!'s right to maintain co-branded sites that provide
booking services for vacation packages. Recently, the Travelocity Division and
Yahoo! extended their relationship. Yahoo! is one of the most well known brands
associated with the Internet and is the leading portal in terms of traffic,
advertising and household and business user reach.
Netscape
In January 1998, the Travelocity Division entered into a three year
agreement with Netscape to operate and provide a co-branded travel service Web
site for Netscape Netcenter users. The Travelocity Division is the exclusive
travel booking provider on the Netcenter Web site.
Infoseek (GO Network)
The Travelocity Division and Infoseek recently agreed to provide a
co-branded travel service Web site for GO Network users and members. The
Travelocity Division is a provider of air, car and hotel booking services on the
GO Network through 2001. GO Network is one of the top five Web properties on the
Internet, according to Media Metrix.
@Home Network
In March 1998, the Travelocity Division entered into a three year agreement
with @Home Network to be the exclusive provider of air, car and hotel booking
services for @Home Network subscribers. Because @Home uses the broadband
attributes of cable, the Travelocity Division will be able to provide multimedia
services and content through this channel.
Visa
The Travelocity Division announced a marketing relationship with Visa
U.S.A. Inc. in October 1998. Visa is the preferred form of payment for all air,
hotel and car reservations for the Travelocity Division Web site. Visa receives
prominent branding and banner advertising throughout the Travelocity Division
Web site. In addition, the Travelocity Division and Visa collaborate on
promotions designed to encourage
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online consumers to shop the Travelocity Division and use their Visa cards for
online travel purchases. Visa will be the exclusive sponsor of the Travelocity
Division's Virtually There Personal Destination Guide, a new site feature that
gives online bookers a personalized overview of attractions, restaurants and
weather for their travel destination. Visa is the world's largest credit card
association, and works with banks around the world which issue Visa-branded
payment products.
First USA
The Travelocity Division has entered into an agreement effective through
June 2004 with First USA to issue a credit card under the Travelocity.com and
First USA brands. This credit card will primarily be marketed to the Travelocity
Division registered members and will provide a rewards program to cardholders.
Priceline.com
On December 9, 1999 the Travelocity Division, Preview Travel and
priceline.com announced their intention to create a mutual marketing and
customer referral arrangement, subject to agreement on definitive terms and
documentation. Any final arrangement between the parties may require each to pay
the other a fee for specified referred customers.
INTELLECTUAL PROPERTY AND PROPERTY RIGHTS
The Travelocity Division's intellectual property rights relate to
trademarks and domain names associated with the name "Travelocity" and
copyrights and other rights associated with the Travelocity Division's Web
sites, software and other aspects of its business and technology. The
Travelocity Division relies on trademark and trade secret protection law,
copyright law and confidentiality and license agreements with its employees,
customers, partners and others to protect its proprietary rights. The
Travelocity Division pursued the registration of its key trademarks and service
marks in the United States and internationally.
LICENSING OF PRODUCTS AND TECHNOLOGY
Currently, licensing of the Travelocity Division's products to third
parties is not a significant source of revenue. The Travelocity Division has
focused its resources on its consumer-direct online travel business. In the
future, the Travelocity Division may consider developing a licensing business.
Licensing selected components of its technology would allow it to participate
indirectly in online bookings placed through airline Web sites and corporate
travel agencies.
COMPETITION
The Travelocity Division currently faces the competition described with
respect to the Travelocity.com Business.
LEGAL PROCEEDINGS
The Travelocity Division is not currently subject to any material legal
proceedings. The Travelocity Division may from time to time become a party to
various legal proceedings arising in the ordinary course of our business.
EMPLOYEES
As of September 30, 1999, a total of 113 full-time Sabre employees work for
the Travelocity Division. Its employees are not presently represented by a labor
union. The Travelocity Division has not experienced any work stoppages and
considers its relations with its employees to be good. The Travelocity Division
also contracts for the services of 400 customer service representatives.
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PROPERTIES
The Travelocity Division is headquartered in Fort Worth, Texas in
approximately 11,527 square feet of space in a building owned by Sabre. This
space houses the Travelocity Division's principal administrative and sales and
marketing facilities. After the merger, the Travelocity Division will lease this
space through the facilities agreement with Sabre.
Additionally, the Travelocity Division leases approximately 37,790 square
feet of space in San Antonio, Texas from a third party. This space houses the
Travelocity Division's customer service and fulfillment operations.
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THE TRAVELOCITY DIVISION SELECTED HISTORICAL FINANCIAL DATA
The selected financial and operating data set forth on the following page
should be read in conjunction with the Travelocity Division's financial
statements and the related notes thereto starting on page F-1, and "The
Travelocity Division's Management Discussion and Analysis" starting on page 101.
The statement of operations data for the year ended December 31, 1995, and the
balance sheet data as of December 31, 1995, have been derived from unaudited
financial statements of the Travelocity Division. The balance sheet data as of
December 31, 1996 has been derived from financial statements of the Travelocity
Division, which have been audited by Ernst & Young LLP, independent auditors,
but which are not presented separately in this proxy statement/prospectus. The
statements of operations data for each of the three years in the period ended
December 31, 1998, and the balance sheet data as of December 31, 1997 and 1998,
have been derived from financial statements of the Travelocity Division, which
have been audited by Ernst & Young LLP, independent auditors, whose report
appears on page F-6. The selected financial data set forth below for the nine
months ended September 30, 1998 and 1999 is derived from unaudited interim
financial statements of the Travelocity Division. The unaudited financial
statements have been prepared on a basis consistent with the Travelocity
Division's audited financial statements and, in the opinion of management,
include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of such data. During these periods, the
Travelocity Division was an operating division of Sabre and was not conducted as
a separate business. These financial statements do not include the impact of the
contribution agreements and the intercompany agreements to be entered into
between the Travelocity.com Partnership and Sabre and do not indicate the
results of the Travelocity.com Business to be expected after the merger is
completed.
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THE TRAVELOCITY DIVISION SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------------
1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Revenues:
Transaction revenue........ $ 7,333 $ 10,949 $ 8,345 $ 18,370 $ 12,405 $ 35,361
Advertising revenue........ -- 94 577 2,821 1,586 5,785
Licensing and royalty
fees.................... 1,202 855 365 47 72 258
------- -------- -------- -------- -------- --------
Total revenues.......... 8,535 11,898 9,287 21,238 14,063 41,404
Cost of revenues............. 5,315 9,709 11,878 19,067 13,281 27,236
------- -------- -------- -------- -------- --------
Gross profit................. 3,220 2,189 (2,591) 2,171 782 14,168
Operating expenses:
Selling and marketing...... 2,153 5,556 6,887 10,608 7,574 18,574
Technology and
development............. 2,750 7,034 6,549 8,483 6,181 7,337
General and
administrative.......... 1,132 2,472 2,694 4,360 3,230 3,315
------- -------- -------- -------- -------- --------
Total operating
expenses.............. 6,035 15,062 16,130 23,451 16,985 29,226
------- -------- -------- -------- -------- --------
Operating loss............... (2,815) (12,873) (18,721) (21,280) (16,203) (15,058)
Other income (expense)....... 3 (88) 1 -- --
------- -------- -------- -------- -------- --------
Net loss........... $(2,812) $(12,961) $(18,720) $(21,280) $(16,203) $(15,058)
======= ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT THE
END OF THE PERIOD)
Working capital (deficit).... $ (222) $ (1,873) $ (1,205) $ (462) (429) $ (697)
Total assets................. 1,002 927 9,126 11,169 10,377 11,823
Total division deficit....... (75) (13,035) (31,755) (47,931) (42,856) (62,989)
SUPPLEMENTAL FINANCIAL DATA
Gross bookings(1)............ N/A(2) N/A(2) $121,000 $284,641 $192,609 $527,733
Segments booked(3)........... 1,781 1,999 1,148 2,704 1,759 5,035
</TABLE>
- ---------------
(1) Represents the total purchase price of all travel services booked through
the Travelocity.com Web site. This presentation of gross bookings does not
affect the Travelocity Division's operating results, and gross bookings are
not included in revenues. Management believes that gross bookings provide a
more consistent comparison of business activity between historical periods
than do transaction fees because of changing commission rates over the
periods. Gross bookings is not a financial measurement in accordance with
generally accepted accounting principles and should not be considered in
isolation or as a substitute for other information prepared in accordance
with GAAP, and period-to-period comparisons of gross bookings are not
necessarily meaningful as a measure of the Travelocity Division's revenues
due to, among other things, changes in commission rates, and, as with
operating results, should not be relied upon as an indication of future
performance. See "The Travelocity Division's Management Discussion and
Analysis."
(2) Gross bookings for these periods are not available.
(3) Represents the number of bookings processed through the Sabre(R) system for
the Travelocity Division.
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THE TRAVELOCITY DIVISION'S MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW
The information provided in this Management Discussion and Analysis
represents the historical results of the Travelocity Division as a division of
Sabre and does not include the impacts of the contribution agreements and the
intercompany agreements to be entered into between the Travelocity.com
Partnership and Sabre or other financial impacts of the merger. These historical
results are not indicative of the future financial position or results of
operations of Travelocity.com Inc. once the merger is complete.
The Travelocity Division receives transaction fees, including booking fees
collected by Sabre and transferred to the Travelocity Division and commissions
from travel suppliers for purchases of their travel products and services by
customers who make reservations through the Travelocity Division's Web site. The
Travelocity Division's online travel services have experienced substantial
growth since the launch of the Travelocity Division's Web site in March 1996.
Gross bookings of travel services online increased from approximately $32.5
million in the first quarter of 1997 to $226.1 million in the third quarter of
1999, which resulted in an increase in transaction revenues from approximately
$2.0 million to approximately $15.2 million for the corresponding periods.
The commission rates paid by travel suppliers are determined by individual
travel suppliers and are subject to change. Currently, the Travelocity Division
earns an average commission of approximately 4% on the sale of airline tickets.
Gross bookings represent the total purchase price of all travel services
booked through the Travelocity Division's Web site. Gross bookings do not affect
the Travelocity Division's operating results, and gross bookings are not
included in revenues. Management believes that gross bookings provide a more
consistent comparison of business activity between historical periods than do
transaction fees because of changing commission rates over the periods. Gross
bookings are not a financial measurement in accordance with GAAP and should not
be considered in isolation or as a substitute for other information prepared in
accordance with GAAP. Period-to-period comparisons of gross bookings are not
necessarily meaningful as a measure of the Travelocity Division's revenues due
to, among other things, changes in commission rates. As with operating results,
they should not be relied upon as an indication of future performance.
Advertising revenue is generated through an agreement with DoubleClick for
the placement of advertising on the Travelocity Division's Web site and through
the direct selling of advertisements on the site. Under the agreement,
DoubleClick obtains advertisers for the Travelocity Division's site, collects
the revenue paid by the advertisers, and pays the Travelocity Division an amount
that is net of fees due to DoubleClick for its service. The Travelocity Division
records advertising revenue generated through the agreement with DoubleClick on
a net of fee basis in the period the advertisements are delivered. Revenue from
advertisements placed on the Travelocity Division's site has grown from 6.2% of
total revenues for 1997 to 14.0% of total revenues for the nine months ended
September 30, 1999.
Cost of revenues for the Travelocity Division includes costs of operating
the customer service center, data processing charges and employee costs
associated with operating Internet infrastructure.
Gross Margins
The Travelocity Division's gross margin for the nine months ending
September 30, 1999 was 34.2%, and was 5.6% for the same period in 1998. A number
of different factors may impact gross margins, including the mix of online
commission revenues versus online advertising revenues, the mix of travel
services sold, the mix of revenues from distribution channels, the level of
commissions on travel products, and the amount of incentive commissions. We
expect higher gross margins on advertising revenues than commission revenues,
higher commissions on vacation packages than hotel rooms and car rentals, higher
commissions on hotel rooms and car rentals than airline tickets, and higher
gross margins on revenues from the Travelocity Division's own Web site than
through other distribution channels.
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Anticipated Losses
The Travelocity Division has incurred significant operating losses since
inception and, as of September 30, 1999, had an accumulated deficit of $70.8
million. The Travelocity Division's success will to a large part depend on its
ability to greatly increase sales volume to realize economies of scale, and
increased revenue from advertising and vacation packages. As the Travelocity
Division increases its spending for product development, advertising, customer
service, facilities, international expansion and general and administrative
expenses, we expect to continue to incur significant operating losses on a
quarterly and annual basis for the foreseeable future.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 and 1999
REVENUES
Transaction Revenues. Transaction revenues increased from $12.4 million to
$35.4 million for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1999, an increase of approximately $23.0 million,
185.1%. This increase was primarily attributable to increased sales on the site.
Gross bookings increased from $193 million for the nine months ended September
30, 1998 to $528 million for the nine months ended September 30, 1999.
Advertising Revenues. Advertising revenue increased from $1.6 million (net
of fees paid to DoubleClick of $460,000) to $5.8 million (net of fees of $1.5
million) for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1999, an increase of $4.2 million, 264.8%. This
increase was primarily due to an increase in net revenue from DoubleClick of
$2.3 million for advertisements placed on the Travelocity Division's site and an
increase in direct selling of advertising by the Travelocity Division of $1.9
million.
Licensing and Royalty Fees. Revenue from licensing and royalty fees
increased from $72,000 to $258,000 for the nine months ended September 30, 1998
compared to the nine months ended September 30, 1999, an increase of $186,000,
258.3% due to new royalty agreements.
COST OF REVENUES
Cost of revenues includes costs of operating the customer service center,
data processing charges and employee costs associated with operating the
Travelocity Division's Internet infrastructure. Cost of revenues increased from
$13.3 million to $27.2 million for the nine months ended September 30, 1998
compared to the nine months ended September 30, 1999, an increase of
approximately $14.0 million, 105.1%, primarily due to increases in data
processing charges, costs associated with the customer service center and
salaries and employee related costs. These increases are primarily due to the
increase in transactions on the Travelocity Division's Web site. Gross bookings
increased from $193 million for the nine months ended September 30, 1998 to $528
million for the nine months ended September 30, 1999. The increases are
partially offset by a $1.7 million payment made by an AMR affiliate to the
Travelocity Division in connection with the termination of the use of a customer
service center operated by the AMR affiliate. Cost of revenues declined as a
percentage of total revenue from 94.4% for the nine months ended September 30,
1998 to 65.8% for the nine months ended September 30, 1999 primarily due to
increased efficiencies in the customer service center and the increase in
advertising revenue in 1999.
OPERATING EXPENSES
Selling and Marketing. Selling and marketing expenses consist of
advertising costs to promote the Travelocity Division's Web site, costs relating
to the distribution of the Travelocity Division's Web site through other
services such as Yahoo! and Netscape, amortization of trademarks and salaries
and benefits. Selling and marketing expenses increased from $7.6 million to
$18.6 million for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1999, an increase of approximately $11.0 million,
145.2%. This increase was due to additional advertising of $6.2 million by the
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Travelocity Division to gain market share, and increased costs of $4.1 million
from distribution agreements including Yahoo!, Netscape and @Home. The remaining
increase of $0.7 million is due to an increase in salaries and other employee
related costs to support the additional direct selling efforts.
Technology and Development. Technology and development expense consists of
salaries and related costs and charges from Sabre for development of the
Travelocity Division's Web site, including any enhancements that have been made
to the site. Technology and development expenses increased from $6.2 million to
$7.3 million for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1999, an increase of approximately $1.2 million,
18.7%. This increase was primarily due to costs associated with enhancing the
Travelocity Division's Web site including the release of enhanced versions and
new products such as Best Fare Finder.
General and Administrative. General and administrative expense consists of
management fees from Sabre for the provision of various services, including
salaries and benefits for Sabre management devoted to the Travelocity Division,
corporate facility services, legal services, and accounting services. General
and administrative expense also includes salaries and benefits of the
Travelocity Division's management and administrative costs of the Travelocity
Division. General and administrative expenses remained relatively unchanged,
increasing from $3.2 million to $3.3 million, for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1999,
primarily due to an increase in salaries and employee related costs offset by a
decrease in the management fee from Sabre. Salaries and benefits increased
approximately $300,000 as a result of increased administrative requirements to
support the Travelocity Division's growth.
Comparison of Years Ended December 31, 1996, 1997 and 1998
REVENUES
Transaction Revenues. Transaction revenues decreased from $10.9 million to
$8.3 million for the year ended December 31, 1996 compared to the year ended
December 31, 1997, a decrease of approximately $2.6 million, 23.8%. The decrease
in transaction revenues was primarily due to the termination of the term of a
distribution agreement with AOL in 1996. This decrease was offset by revenues
from a new agreement with Yahoo! in June 1997 to be the provider of air, car and
hotel booking capabilities on the Yahoo! Web site as well as growth in usage of
the Travelocity Division's Web site. Transaction revenues increased from $8.3
million to $18.4 million for the year ended December 31, 1997 compared to the
year ended December 31, 1998, an increase of approximately $10.0 million,
120.1%, which was primarily attributable to increased sales on the Travelocity
Division's Web site. Gross bookings increased from $121 million in 1997 to $285
million in 1998. This increase was partially due to the agreement with Yahoo!
and an agreement with Netscape to be the primary travel reservation provider for
its network which was entered into in December 1997. Revenues from transaction
fees declined as a percentage of total revenues from 89.9% in 1997 to 86.5% in
1998 due to the increase in advertising revenue from the Travelocity Division's
Web site.
Advertising Revenues. The Travelocity Division began selling advertising on
the Travelocity Division's Web site in March 1996. Advertising revenue increased
from $94,000 to $577,000 for the year ended December 31, 1996 compared to the
year ended December 31, 1997, an increase of $483,000, 513.8%. This increase was
due to net revenue from DoubleClick for advertisements placed on the Travelocity
Division's Web site. Advertising revenue increased from $577,000 (net of fees
paid to DoubleClick of $190,000) to $2.8 million (net of fees of $820,000) for
the year ended December 31, 1997 compared to the year ended December 31, 1998,
an increase of $2.2 million, 388.9%. This increase was primarily due to an
increase in net revenue from DoubleClick of $1.3 million for advertisements
placed on the Travelocity Division's Web site and direct selling of advertising
by the Travelocity Division of $0.9 million.
Licensing and Royalty Fees. Revenue from licensing and royalty fees
decreased from $855,000 to $365,000 for the year ended December 31, 1996
compared to the year ended December 31, 1997, a decrease of $490,000, 57.3%.
This decrease in revenues was primarily due to the distribution contract with
AOL ending in December 1996. Revenue from licensing and royalty fees decreased
from $365,000 to
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$47,000 for the year ended December 31, 1997 compared to the year ended December
31, 1998, a decrease of $318,000, 87.1% due to the discontinuance of license
fees from certain agreements in 1998.
COST OF REVENUES
Cost of revenues increased from $9.7 million to $11.9 million for the year
ended December 31, 1996 compared to the year ended December 31, 1997, an
increase of $2.2 million, 22.3%, primarily due to an increase in data processing
charges. Cost of revenues increased from $11.9 million to $19.1 million for the
year ended December 31, 1997 compared to the year ended December 31, 1998, an
increase of approximately $7.2 million, 60.5%. This increase was primarily
attributable to increases in the cost of operating the customer service center,
data processing charges, salaries and benefits and communication expenses. These
increases are primarily due to the increase in transactions on the Travelocity
Division's sites. Gross bookings increased from $121 million in 1997 to $285
million in 1998. Cost of revenues declined as a percentage of total revenue from
127.9% in 1997 to 89.8% in 1998 primarily due to the increase in advertising
revenue in 1998.
OPERATING EXPENSES
Selling and Marketing. Selling and marketing expenses increased from $5.6
million to $6.9 million for the year ended December 31, 1996 compared to the
year ended December 31, 1997, an increase of approximately $1.3 million, 24.0%.
This increase was due to an increase of $1.2 million advertising on the
Travelocity Division's site to gain market share and amortization of $700,000 on
the Travelocity Division trademark, which the Travelocity Division acquired from
Worldview Systems Corporation in January 1997. The Travelocity Division
classifies the trademark as an intangible asset and amortizes it on a
straight-line basis over a period of seven years. These increases are offset by
decreases in distributor and other expenses of $600,000. Selling and marketing
expenses increased from $6.9 million to $10.6 million for the year ended
December 31, 1997 compared to the year ended December 31, 1998, an increase of
approximately $3.7 million, 54.0%. This increase was due to an increase of $1.8
million in costs to distribute and advertise the Travelocity Division's Web site
through the distribution agreements with Yahoo!, Netscape and @Home,
amortization of $1.3 million on a license fee paid in January 1998 to Netscape
for certain use of the Netscape trademark and additional advertising of $600,000
on the Travelocity Division's site to gain market share.
Technology and Development. Technology and development expenses decreased
from $7.0 million to $6.5 million for the year ended December 31, 1996 compared
to the year ended December 31, 1997, a decrease of approximately $485,000, 6.9%.
This decrease was primarily due to non-recurring costs associated with the
launch of the Travelocity Division's Web site in March 1996. Technology and
Development expenses increased from $6.5 million to $8.5 million for the year
ended December 31, 1997 compared to the year ended December 31, 1998, an
increase of approximately $1.9 million, 29.5%. This increase was primarily due
to costs associated with enhancing the Travelocity Division's Web site.
General and Administrative. General and administrative expenses increased
from $2.5 million to $2.7 million for the year ended December 31, 1996 compared
to the year ended December 31, 1997, an increase of $222,000, 8.9%, primarily
due to an increase in the management fee paid to Sabre. General and
administrative expenses increased from $2.7 million to $4.4 million for the year
ended December 31, 1997 compared to the year ended December 31, 1998, an
increase of $1.7 million, 61.8%, primarily due to an increase in the management
fee paid to Sabre of $1.3 million for legal costs and increased management focus
on the Travelocity Division. Additionally, salaries and benefits increased $0.4
million as a result of increased administrative requirements to support the
Travelocity Division's growth.
Other Income (Expense). Other expense in 1996 represents interest paid to
American Airlines, Inc. on the Travelocity Division's borrowings from American
to fund its operations. Effective with the establishment of Sabre as a separate
legal entity in July 1996, amounts due to American were paid by Sabre and no
further interest charges have been incurred.
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VARIABILITY OF RESULTS
The Travelocity Division expects that it will experience seasonality in its
business, reflecting seasonal fluctuations in the travel industry, Internet and
commercial online service usage and advertising expenditures. The Travelocity
Division anticipates that travel bookings will typically increase during the
first and second quarter in anticipation of summer travel and will typically
decline during the fourth quarter. Due to the significant growth of the
business, this effect has not been evident but may become so in the future.
Internet and commercial online service usage and the rate of growth of such
usage are expected to decline during the summer. Depending on the extent to
which the Internet and commercial online services are accepted as an advertising
medium, seasonality in the level of advertising expenditures could become more
pronounced for Internet-based advertising. Seasonality in the travel industry,
Internet and commercial online service usage and advertising expenditures is
likely to cause fluctuations in the Travelocity Division's operating results and
could have a material adverse effect on its business, operating results and
financial condition.
Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Travelocity Division believes that
period-to-period comparisons of its operating results will not necessarily be
meaningful and should not be relied upon as an indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used for operating activities in 1998 were $19.4 million which
was primarily attributed to the net loss before noncash charges and an increase
in accounts receivable, partially offset by increases in accrued expenses, other
liabilities and payable to AMR affiliates. Cash flows used for operating
activities in 1997 were $18.5 million, which was primarily attributed to the net
loss before noncash charges and a decrease in payable to AMR affiliates. Cash
flows used for operating activities in 1996 were $11.5 million, which was
primarily attributed to the net loss before noncash charges offset by an
increase in payable to AMR affiliates.
Investing activities for 1998 and 1997 were $2.3 million and $9.1 million,
respectively. For 1998, investing activities include capital expenditures for
leasehold improvements, furniture and fixtures and computer equipment for a new
facility for the customer service center. For 1997, investing activities include
a payment of $5 million to Worldview Systems Corporation to obtain exclusive
rights to the "Travelocity" trademark as well as other rights and interests and
a payment of $4 million to Netscape to license the use of the Netscape trademark
in specified circumstances.
The Travelocity Division does not maintain cash or cash equivalents. Sabre
maintains all cash balances, charging or crediting the Travelocity Division
through intercompany accounts upon the recording of certain transactions,
including the collection of accounts receivable and purchase of goods and
services. The Travelocity Division has incurred losses since its inception,
which have been funded by Sabre, as the Travelocity Division is a division of
Sabre. Cash advances for 1996, 1997 and 1998 were $11.4 million, $27.6 million
and, $16.6 million, respectively. Additionally, in 1998 Sabre contributed $5.1
million to the Travelocity Division, which was used to reduce payables to
affiliates. The Travelocity Division depends upon Sabre for the funding of its
cash requirements and will do so until operations become profitable or the
merger occurs.
The Travelocity Division expects that the principal use of funds in the
foreseeable future will be for continuing to enhance brand awareness, enhance
supplier relationships, product development and working capital.
INFLATION
We believe that inflation has not had a material effect on our results of
operations.
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NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which, as
amended, would be effective for fiscal years beginning after June 15, 2000.
Because the Travelocity Division does not currently use derivatives, management
does not anticipate that the adoption of Statement 133 will have a significant
effect on the earnings or the financial position of the Travelocity Division.
Effective January 1, 1999, the Travelocity Division adopted the provisions
of SOP 98-1, Accounting for Computer Software Developed or Obtained for Internal
Use. SOP 98-1 requires the capitalization of certain costs incurred during an
internal-use software development project, including costs related to upgrades
and enhancements which result in the availability of additional functions on the
Travelocity Division's Web sites. Capitalizable costs consist of certain
external direct costs of materials and services incurred in developing or
obtaining internal-use computer software, payroll and payroll-related costs for
employees who are directly associated with and who devote time to the project
and interest costs incurred. Costs that are considered to be related to research
and development activities, data conversion activities, and training,
maintenance and general and administrative or overhead costs will continue to be
expensed as incurred. Costs that cannot be separated between maintenance of, and
relatively minor upgrades and enhancements to, the Travelocity Division's Web
sites are also expensed as incurred.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Because Sabre maintains all cash balances, the Travelocity Division's
exposure to market risk for interest rates is indirect and subject to Sabre's
investment policies. Sabre does not currently use financial derivative
instruments to manage interest rate risk. Sabre's investment portfolio consists
primarily of high quality credit certificates of deposit, banker's acceptances,
commercial paper, and corporate and government notes.
The Travelocity Division does not currently transact any significant
portion of its business in functional currencies other than the United States
dollar. To the extent that it continues to transact its business using the
United States dollar as its functional currency, the Travelocity Division does
not believe that fluctuations in foreign currency exchange rates will have a
material adverse effect on its results of operations.
TRAVELOCITY.COM EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid to Travelocity.com Inc.'s and Travelocity.com Partnership's Chief Executive
Officer and the other individuals who are currently expected to be
Travelocity.com Inc.'s and the Travelocity.com Partnership's most highly
compensated executive officers, and whose total cash compensation is expected to
exceed $100,000. We refer to these individuals as the "Named Executive
Officers." The following information reflects compensation paid to such
individuals for the fiscal years ended December 31, 1999 and 1998. While this
compensation table indicates the compensation paid by Sabre to the Named
Executive Officers in 1999 and 1998, it does not necessarily indicate the
compensation that Travelocity Holdings, Travelocity.com Inc., or the
Travelocity.com Partnership will pay to them after the merger. The Named
Executive Officers will be employed and paid by Travelocity Holdings pursuant to
the management services agreement between Travelocity Holdings and the
Travelocity.com Partnership. In addition, under the management
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services agreement Travelocity Holdings will designate the executive officers of
the Travelocity.com Partnership, subject to the approval of the Travelocity.com
Partnership board of directors.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS AWARDS($) OPTIONS(#) PAYOUTS(1) COMPENSATION(2)
- --------------------------- ------ --------- -------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Terrell B. Jones, 1999 $308,750 $160,000 317,600(3) --(4) $ 6,078
Chief Executive Officer 1998 293,708 140,000 17,600 326,398 10,011
James D. Marsicano, 1999 152,063 --(4) 79,400(3) --(4) --
Executive Vice President 1998 129,558 53,030 4,400 27,681 --
of Sales and Service
Andrew B. Steinberg, 1999 218,333 115,000 90,000 --(4) 22,271
Executive Vice President 1998 197,708 95,000 21,000 313,242 18,785
Administration, General
Counsel and Corporate
Secretary
</TABLE>
- ---------------
(1) The amount shown represents payments made in 1998 under the Sabre 1996-1998
performance share program for Sabre performance shares that were granted in
1996. Performance shares for Messrs. Jones, Marsicano and Steinberg will not
convert to Travelocity.com Inc.'s shares.
(2) The information shown for Mr. Jones includes: in 1998, $3,933, representing
the above-market portion of interest, defined as a rate of interest
exceeding 120% of the applicable federal long-term rate, with compounding,
on deferred compensation that was credited but not paid in 1998; and $6,078
in each of 1999 and 1998, representing the full amount of premiums paid
under a split-dollar life insurance arrangement which provides for Sabre to
recover part of the premiums paid. The above market portion of interest on
deferred compensation for Mr. Jones that was credited but not paid in 1999
has not yet been determined. The information shown for Mr. Steinberg
includes: employer contributions to a plan under Section 401(k) of the
Internal Revenue Code that is sponsored by Sabre of $9,200 in each of 1999
and 1998; employer contributions to a supplemental executive retirement plan
that provides pension benefits to officers who earned in excess of qualified
plan limits (currently $160,000) of $8,817 in 1999 and $5,381 in 1998; and
$4,524 in each of 1999 and 1998, representing the full amount of premiums
paid under a split dollar life insurance arrangement which provides for
Sabre to recover part of the premium's paid.
(3) The amounts shown represent for Mr. Jones options to purchase 300,000 shares
of Travelocity.com Inc. common stock and options to purchase 17,600 shares
of Sabre Class A Common Stock, and for Mr. Marsicano options to purchase
75,000 shares of Travelocity.com Inc. common stock and options to purchase
4,400 shares of Sabre Class A Common Stock.
(4) Mr. Marsicano's bonus for 1999 and the 1999 LTIP payouts for all of the
Named Executive Officers have not yet been determined by Sabre.
Prior to the merger, Mr. Jones served as Executive Vice President,
Travelocity Division of Sabre Holdings Corporation and, since September 30,
1999, as President and Chief Executive Officer, Travelocity.com. Mr. Marsicano
previously served as Senior Vice President and General Manager of Sabre's
Travelocity Division. Mr. Steinberg serves as the Executive Vice President,
General Counsel and Corporate Secretary of Sabre.
The "Salary" column includes amounts contributed on behalf of each Named
Executive Officer to a 401(k) plan of his former employer at the officer's
election.
The "Securities Underlying Options" column reflects all options granted to
each Named Executive Officer by his employer. Sabre granted options to purchase
shares of its Class A Common Stock to the Named Executive Officers, and
Travelocity Holdings granted options to purchase shares of Travelocity.com Inc.
common stock to Messrs. Jones and Marsicano. We expect that in connection with
the merger, Messrs. Jones, Marsicano and Steinberg will elect to convert all of
their unvested Sabre options into
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options to purchase shares of Travelocity.com Inc.'s common stock. The vesting
schedule for converted Sabre options will remain unchanged, as described in the
discussion accompanying the "Options Granted" table.
OPTION GRANTS DURING FISCAL 1999
The following table sets forth information concerning stock options granted
during 1999 by Sabre and Travelocity.com Inc. to the listed individuals. Except
as noted below, the grants relate to options to purchase shares of Sabre's Class
A Common Stock. Neither Sabre nor Travelocity.com Inc. granted any stock
appreciation rights to any of these individuals during fiscal 1999.
OPTIONS GRANTED
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terrell B. Jones.......... 17,600(1) .72 $60.3125 04/26/09 $ 667,577 $1,691,713
300,000(2) 40.41 $23.00 10/01/09 4,339,410 10,996,530
James D. Marsicano........ 4,400 .18 $40.5625 03/22/09 733,554 1,858,904
75,000(2) 10.10 $23.00 10/01/09 3,156,292 7,998,382
Andrew B. Steinberg....... 15,000(3) .61 $46.6563 01/25/09 112,243 284,436
75,000(4) 3.05 $50.1875 12/13/09 1,084,853 2,749,133
</TABLE>
- ---------------
(1) We expect that in connection with the merger, Messrs. Jones, Marsicano and
Steinberg will elect to convert all of their unvested options to purchase
shares of Sabre Class A Common Stock to options to purchase shares of
Travelocity.com Inc.'s common stock. The converted options will keep their
original vesting schedule, which provides for vesting in annual 20%
increments over the original five year period. The converted options will
have their original ten year term. The number of shares subject to the
converted options and exercise price of the converted options will each be
adjusted by the ratio of the market price of Sabre common stock to the
market price of the Preview Travel common stock at completion of the merger.
(2) Represents options to purchase shares of Travelocity.com Inc. common stock.
Twenty five percent of the options will vest on the first anniversary of the
date of grant, and the remainder will vest in equal increments over the
following 36 months until fully vested on the fourth anniversary of grant.
The options will have a ten year term.
(3) Represents normal 1999 grant of options to purchase Sabre Class A Common
Stock.
(4) Represents options to purchase Sabre Class A Common Stock consisting of the
normal 2000 grant, recognition of contribution to strategic transactions and
retention as a key executive.
The SEC mandates the 5% and 10% assumed annual rates of compounded stock
price appreciation. We do not assure any executive officer or any other
stockholder that the stock price will appreciate at the 5% and 10% levels, or at
any other defined level. If the market price of the stock does not appreciate
over the option term, the Named Executive Officers will not realize any value
from these option grants.
OPTION EXERCISES DURING FISCAL 1999
The following table sets forth information concerning options exercised by
Named Executive Officers in 1999. The table sets forth exercises of options to
purchase Sabre Class A Common Stock. The table also sets forth the number and
value of unexercised in-the-money options for Sabre Class A Common Stock and
Travelocity.com Inc. common stock held by these individuals at December 31,
1999.
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AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/ SARS AT FY-END OPTIONS/ SARS AT FY-END
ACQUIRED VALUE --------------------------- ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- ---- ----------- -------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Terrell B. Jones......... 15,210 $587,976 78,800 382,240(2) $1,956,111 $9,993,716(2)
James D. Marsicano....... 4,490 119,053 2,980 88,420(3) 57,978 2,271,238(3)
Andrew B. Steinberg...... 14,150 522,443 32,310 126,850 815,313 1,122,368
</TABLE>
- ---------------
(1) Based on an average market price of $51.8125 for Sabre's Class A Common
Stock on the NYSE on December 31, 1999, minus the exercise price, multiplied
by the number of shares underlying the option, and a fair market value of
$51.375 for Travelocity.com Inc.'s common stock minus the exercise price,
multiplied by the number of shares underlying the option.
(2) Includes options to purchase 300,000 shares of Travelocity.com Inc. common
stock with a fiscal year-end value of $8,512,500.
(3) Includes options to purchase 75,000 shares of Travelocity.com Inc. common
stock with a fiscal year-end value of $2,128,125.
The "Value Realized" column represents the difference between the fair
market value of the underlying securities on the date of exercise and the
exercise price of the option. The value of the unexercised in-the-money options
to purchase shares of Travelocity.com common stock was based on the closing
price of Preview Travel common stock on December 31, 1999.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Under Sabre's 1996 Long-Term Incentive Plan, Sabre awarded deferred shares
of Sabre's Class A Common Stock to the Named Executive Officers. Under Sabre's
1998-2000 Performance Share Program, Sabre may grant performance shares to the
Named Executive Officers, consisting of deferred shares of Sabre's Class A
Common Stock issued under the 1996 plan. Sabre granted these shares contingent
on the increase in the share price of Sabre Class A Common Stock plus dividends
over the measurement period expressed as a percentage of the beginning share
price performance relative to same performance standard for the S&P 500
companies over a three year performance period. The Named Executive Officers
will continue to be eligible to receive deferred shares of Sabre's Class A
Common Stock in performance cycles for which Sabre has already granted them
performance shares. Messrs. Jones, Marsicano and Steinberg will not participate
in future award cycles.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OR OTHER PERIOD NON-STOCK PRICE BASED PLANS
OTHER UNTIL MATURATION -------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ---------------- ---------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
Terrell B. Jones.................... 6,960 12/31/01 0 6,960 13,920
James D. Marsicano.................. 730 12/31/01 0 730 1,460
Andrew B. Steinberg................. 2,300 12/31/01 0 2,300 4,600
</TABLE>
- ---------------
(1) All awards were grants of Sabre performance shares.
EMPLOYMENT AGREEMENTS
Currently, Mr. Jones is a party to employment and termination benefits
agreements with Sabre. In addition, Travelocity Holdings and Mr. Jones expect to
enter into an employment agreement that will become effective upon the closing
of the merger.
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Mr. Jones and Sabre are parties to an employment agreement effective
October 1, 1997, and a termination benefits agreement with Sabre effective
September 27, 1999. Under Mr. Jones' employment agreement, Sabre agreed to
employ Mr. Jones through April 18, 2000. We anticipate that both of these
agreements will terminate on the closing of the merger when he joins the
Travelocity.com Business. Mr. Jones will not be entitled to any termination
benefits under either agreement upon the closing of the merger.
Under the new employment agreement, Travelocity Holdings would pay Mr.
Jones termination benefits if Travelocity Holdings involuntarily terminated him
without cause.
If Mr. Jones' employment with Travelocity Holdings were to terminate for
any reason other than an involuntary termination without cause, Travelocity
Holdings would not have to provide termination benefits.
Under the new employment agreement, if Travelocity Holdings must provide
Mr. Jones termination benefits, then Travelocity Holdings must provide Mr. Jones
the following benefits:
- a lump sum payment equal to one year's salary and target bonus in effect
at the time of termination;
- acceleration of any vesting periods for Mr. Jones' options to purchase
Travelocity.com Inc. common stock by one year; and
- a period of 90 days from the date of termination to exercise his vested
options to purchase Travelocity.com Inc. common stock.
In addition, if Travelocity Holdings involuntarily terminates Mr. Jones
without cause within two years of a change in control, all of Mr. Jones' stock
options would vest immediately. A change in control under Mr. Jones' new
employment agreement occurs when a change in control occurs under the
Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan.
Mr. Steinberg and Sabre are parties to a termination benefits agreement
effective September 27, 1999. Under the termination benefits agreement, Sabre
must pay Mr. Steinberg termination benefits if:
- within two years following a change in control of Sabre, if Sabre
terminates Mr. Steinberg, or if he terminates his employment for "good
reason;"
- within a 30-day period immediately following the first anniversary of a
change in control of Sabre, if he terminates his employment for any or no
reason; or
- Sabre terminates him within six months prior to a change in control of
Sabre.
If Sabre terminates Mr. Steinberg for cause or as a result of his death,
disability or retirement, Sabre does not have to pay termination benefits.
Under the termination benefits agreement with Mr. Steinberg, a change in
control of Sabre occurs:
- if a person other than Sabre or a subsidiary acquires 15% or more of the
combined voting power of Sabre's then outstanding securities;
- if the individuals who constitute the Sabre board of directors cease for
any reason to constitute at least a majority of the board of directors,
unless those individuals becoming new directors are approved by a vote of
at least a majority of the incumbent board of directors;
- when Sabre completes a reorganization, merger or sale of all or
substantially all of its assets or acquires the assets of another
corporation, if the same persons who owned Sabre prior to the transaction
do not own at least 60% of the entity created by the transaction, or a
majority of Sabre's board of directors does not serve on the board of the
new entity; or
- when Sabre's stockholders approve a complete liquidation or dissolution
of Sabre.
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A change in control would not occur if AMR Corporation distributes its
stock in Sabre to its stockholders or sells such stock to the public in an
underwritten public offering.
Under the termination benefits agreement, if Sabre terminates Mr. Steinberg
or Mr. Steinberg quits for good reason, and Sabre must pay Mr. Steinberg
termination benefits, then Sabre must pay Mr. Steinberg a lump sum as follows:
- three times the greater of:
- his annual base salary at the termination date, or
- his annual base salary immediately prior to the change in control;
plus
- three times the greater of:
- the greatest annual bonus awarded to Mr. Steinberg under the Sabre
Variable Compensation Plan or any other bonus plan for the prior 3
years, or
- the highest target bonus rate applicable to him for any period during
the prior three-year period, multiplied by the annual applicable base
salary determined under the first part above, and other miscellaneous
benefits.
In addition, upon a change in control, Mr. Steinberg's stock awards would
vest immediately. Finally, Sabre would generally have to reimburse Mr. Steinberg
for any excise taxes paid in accordance with the Internal Revenue Code and for
federal income tax paid on the excise tax reimbursement. A portion of these
payments may not be deductible under Section 280G of the Internal Revenue Code.
Mr. Steinberg's employment with Travelocity Holdings does not result in a
change of control under his termination benefits agreement.
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COMPARISON OF STOCKHOLDER RIGHTS
At the merger, the holders of Preview Travel common stock will receive
Travelocity.com Inc.'s common stock and become stockholders in Travelocity.com
Inc. The following summary highlights the material differences between the
rights of holders of Preview Travel common stock and the rights of holders of
Travelocity.com Inc.'s common stock, and the material differences between the
certificate of incorporation and bylaws of Preview Travel and Travelocity.com
Inc.'s restated certificate of incorporation and bylaws that will be in effect
following the merger. This summary is qualified by reference to Travelocity.com
Inc.'s restated certificate of incorporation and restated bylaws, which are
attached as Annexes D and E to this proxy statement/prospectus.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF PREVIEW TRAVEL
STOCKHOLDERS AND RIGHTS THOSE STOCKHOLDERS WILL HAVE FOLLOWING THE MERGER
<TABLE>
<CAPTION>
PREVIEW TRAVEL TRAVELOCITY.COM INC.
-------------- --------------------
<S> <C>
CORPORATE GOVERNANCE
The rights of Preview Travel stockholders are The rights of Travelocity.com Inc.'s
currently governed by Delaware law, the stockholders will be governed by Delaware law
certificate of incorporation, and bylaws of and the Travelocity.com Inc. restated
Preview Travel. certificate of incorporation and restated
bylaws.
AUTHORIZED CAPITAL STOCK
50,000,000 shares of common stock, par value 135,000,000 shares of common stock, par value
$.001 per share. 5,000,000 shares of $.001 per share.
preferred stock, par value $.001 per share.
100,000 shares of this preferred stock is 75,000,000 shares of Class B Common Stock,
designated Series A Participating Preferred par value $.001 per share.
Stock.
40,000,000 shares of preferred stock, par
value $.001 per share.
33,000,000 shares of this preferred stock is
designated as Series A Preferred Stock.
VOTING RIGHTS
Each share of Preview Travel common stock is Each share of Travelocity.com Inc.'s common
entitled to one vote for each share. stock will be entitled to one vote. Each
share of Series A Preferred Stock will be
entitled to one vote for each share. The
holders of common stock and Series A
Preferred Stock will vote together as a
single class on all matters on which a
stockholder vote is taken.
NUMBER OF DIRECTORS
Preview Travel currently has seven directors, Travelocity.com Inc.'s restated bylaws will
with up to nine total directors permitted provide that, subject to the rights of
under its current bylaws. holders of any series of preferred stock, the
number of directors shall be fixed by the
board but may not be more than fifteen nor
less than three. Travelocity.com Inc. will
have nine directors immediately following the
merger. The issuance of Class B Common Stock
will require the number of directors to be
fixed at fifteen members. Upon conversion of
the Class B Common Stock to common stock, the
size of the board may be reduced.
</TABLE>
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<TABLE>
<CAPTION>
PREVIEW TRAVEL TRAVELOCITY.COM INC.
-------------- --------------------
<S> <C>
INDEPENDENT DIRECTORS
Preview Travel's certificate of incorporation At least two directors on Travelocity.com
does not require any independent directors. Inc.'s board must not be directors of,
employed by, or engaged in a material
business relationship with, Sabre or its
affiliates.
NOMINATION AND ELECTION OF DIRECTORS
Directors may be nominated at an annual Directors may be nominated at an annual
meeting or special meeting with proper notice meeting or special meeting with proper notice
by the board of directors or any stockholder by the board of directors or any stockholder
who is entitled to vote in the election. No who is entitled to vote in the election. No
stockholder is permitted to cumulate votes at stockholder will be permitted to cumulate
any election of directors. Preview Travel's votes at any election of directors.
bylaws permit stockholders to vote at a Travelocity.com Inc.'s restated bylaws will
meeting of stockholders in person or by permit stockholders to vote at a meeting of
proxy. stockholders in person or by proxy. If the
Class B Common Stock has been issued, the
Class B Common Stock will be entitled to
elect 80% of the board of directors with the
remaining directors to be elected by the
holders of common stock and Class B Common
Stock voting together as a single class.
TERMS AND CLASSIFICATION OF THE BOARD OF DIRECTORS
The Preview Travel board of directors is not Travelocity.com Inc.'s board of directors
classified. All of the directors are elected will be classified into three equal classes.
at each annual meeting of stockholders and The initial class of directors for each of
hold office until the next annual meeting. the three classes will be elected for terms
expiring at each annual stockholders meeting
in the years 2001, 2002, and 2003. At the
annual stockholders meeting starting with the
2001 annual meeting, the successor of the
class of directors whose terms expire at that
meeting will be elected to hold office for a
term of three years.
REMOVAL OF DIRECTORS
Preview Travel directors may be removed from Travelocity.com Inc.'s directors may be
office, with or without cause, by a majority removed from office at any time, with or
vote of stockholders. without cause, by the majority vote of
stockholders entitled to vote at an election
of directors, voting together as a single
class. After Sabre no longer beneficially
owns a majority of the voting power of
Travelocity.com Inc., directors may be
removed only for cause by at least 80% of the
voting power in Travelocity.com Inc. If the
Class B Common Stock has been issued,
directors elected by the holders of Class B
Common Stock may be removed from office with
or without cause, at any time, by at least
80% of the voting power in outstanding Class
B Common Stock.
</TABLE>
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<TABLE>
<CAPTION>
PREVIEW TRAVEL TRAVELOCITY.COM INC.
-------------- --------------------
<S> <C>
FILLING DIRECTOR VACANCIES
Preview Travel's bylaws provide that a Travelocity.com Inc.'s restated bylaws will
vacancy created by a removal of a director require that, unless the board of directors
may be filled only by a majority vote of the determines otherwise, vacancies on the board
stockholders represented and voting at a duly of directors, resulting from death,
held meeting in which a quorum is present. If resignation, retirement, disqualification,
a director has resigned, or a vacancy has removal from office, or other cause, and
been created by an increase in the authorized newly created directorships resulting from
number of directors, the vacancy may be any increase in the authorized number of
filled by a majority of directors then in directors, are to be filled by a majority of
office or by a sole remaining director. the remaining directors. If Class B Common
Stock has been issued, vacancies of Class B
directors can only be filled by the remaining
Class B directors.
SPECIAL MEETINGS OF STOCKHOLDERS
A special meeting of the Preview Travel A special meeting may be called by the board
stockholders may be called by Preview or at the request of the holders of a
Travel's board of directors, the chairman of majority of the voting power in
the board, the president, or by stockholders Travelocity.com Inc. After Sabre no longer
holding more than 10% of the votes at such beneficially owns a majority of the voting
meeting. power in Travelocity.com Inc., only the board
will be able to call a special meeting.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Preview Travel stockholders cannot take Travelocity.com Inc.'s stockholders may take
action by written consent. action by written consent in lieu of
meetings. After Sabre no longer beneficially
owns a majority of the voting power in
Travelocity.com Inc., stockholders will be
prohibited from taking action by written
consent.
ADVANCE NOTICE PROVISIONS
For a stockholder to nominate a person for For a stockholder to nominate a person for
election as a director, the stockholder must election as a director and bring other
deliver written notice to Preview Travel business properly before an annual meeting or
regarding the nomination not less than 60 to nominate a person for election as a
days nor more than 90 days prior to the director at a special meeting of
annual meeting of stockholders. stockholders, the stockholder a must provide
written notice to Travelocity.com Inc. not
less than 90 days nor more than 120 days
prior to the first anniversary of the
preceding year's annual meeting or the date
of such special meeting or the tenth day
following the date on which public
announcement of the date of such annual or
special meeting is made.
DIRECTORS' AND OFFICERS' INDEMNIFICATION
Preview Travel's bylaws require Travelocity.com Inc.'s bylaws will require
indemnification of its present and former indemnification of its present and former
officers and directors and permits officers and directors and permits
indemnification of its employees and agents indemnification of its employees and agents
to the fullest extent and in the manner to the fullest extent and in the manner
permitted by the Delaware law. Preview Travel permitted by Delaware law. Travelocity.com
must advance expenses incurred by a director Inc. must advance the expenses incurred by a
or officer in defending any proceeding. director or officer in defending any
proceeding within 60 days of receipt of the
request for indemnification.
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<TABLE>
<CAPTION>
PREVIEW TRAVEL TRAVELOCITY.COM INC.
-------------- --------------------
<S> <C>
DIRECTORS' AND OFFICERS' INSURANCE
Preview Travel may maintain insurance for Travelocity.com Inc. will be required to
present or former directors, officers, provide and maintain insurance on behalf of
employees or agents against any liability, any director or officer of Travelocity.com
whether or not Preview Travel would have the Inc., whether or not Travelocity.com Inc.
power to indemnify such person against such would have the power to indemnify such person
liability under the Delaware law. against such liability under Delaware law.
STOCKHOLDER RIGHTS AGREEMENT
Preview Travel has entered into a stockholder Travelocity.com Inc. will not have a
rights plan. The rights plan applies if any stockholder rights plan at the time of the
person or group acquires 20% or more of merger.
Preview Travel's common stock or Preview
Travel announces a tender or exchange offer,
the consummation of which would result in
ownership by a group or person of 20% or more
of Preview Travel's common stock. Then shares
of Series A Participating Preferred Stock
shall be exchanged for an amount per share
equal to 1000 times the aggregate amount of
stock, securities, cash, or other property
into which each share of Preview Travel's
common stock was exchanged. Preview Travel
has amended the plan to permit the
transactions contemplated by the merger
agreement.
BYLAW AMENDMENTS
The Preview Travel bylaws may be amended by Travelocity.com Inc.'s bylaws may be amended
the stockholders or the board of directors as by the stockholders or the board of directors
permitted by the bylaws. The bylaws further as long as notice of the proposed change to
provide that conferring power upon the board the bylaws is given in advance of the board
of directors to amend the bylaws shall not meeting. The bylaws further provide that they
divest or limit the Preview Travel may be amended or repealed by the directors
stockholders of their power to amend the or stockholders. After Sabre no longer
bylaws. beneficially owns a majority of the voting
power in Travelocity.com Inc., amendments to
the bylaws by stockholders will require a
vote of at least 80% of the voting power in
Travelocity.com Inc.
CERTIFICATE OF INCORPORATION AMENDMENTS
Preview Travel's certificate of incorporation Travelocity.com Inc.'s restated certificate
may be amended by a vote of the majority of of incorporation may be amended by a vote of
Preview Travel stockholders. the majority of Travelocity.com Inc.'s
stockholders. After Sabre no longer
beneficially owns a majority of the voting
power in Travelocity.com Inc., amendments to
the restated certificate of incorporation
will require a vote of at least 80% of
Travelocity.com Inc.'s voting power.
</TABLE>
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<PAGE> 135
DESCRIPTION OF TRAVELOCITY.COM INC.'S CAPITAL STOCK
The following summarizes the terms of Travelocity.com Inc.'s capital stock
that will be in effect after completion of the merger. This summary is qualified
by reference to Travelocity.com Inc.'s restated certificate of incorporation and
restated bylaws. Copies of Travelocity.com Inc.'s restated certificate of
incorporation and restated bylaws are attached as Annexes D and E to this proxy
statement/prospectus.
GENERAL
Travelocity.com Inc.'s authorized capital stock after the merger will
consist of 135 million shares of common stock, par value $.001 per share, 75
million shares of Class B Common Stock, par value $.001 per share, 40 million
shares of preferred stock, par value $.001, 33 million shares of which will be
designated as Series A Preferred Stock, par value $.001 per share.
COMMON STOCK
Holders of shares of Travelocity.com Inc.'s common stock:
- will be entitled to receive dividends when and as declared by
Travelocity.com Inc.'s board from legally available funds for that
purpose, if any;
- will not be able to cumulate voting rights;
- will be entitled to one vote per share on all matters on which
stockholders generally are entitled to vote, including the election of
directors;
- will be entitled, upon any liquidation, dissolution or winding up of
Travelocity.com Inc., to a pro rata distribution of the assets and funds
available for distribution to stockholders; and
- will not have preemptive or preferential rights to subscribe for or
purchase any new or additional issue of stock or securities convertible
into Travelocity.com Inc.'s stock, nor will stockholders be entitled to
the benefits of any redemption or sinking fund provisions.
The shares of Travelocity.com Inc.'s common stock that will be issued in
the merger will be duly authorized, validly issued, fully paid, and
nonassessable.
EquiServ will be the transfer agent and registrar for Travelocity.com
Inc.'s common stock. After the merger, the common stock of Travelocity.com Inc.
held by the former Preview Travel stockholders is expected to be listed on the
Nasdaq National Market and registered under the Securities Act, and the Preview
Travel common stock will no longer be so listed or registered. Shares of
Travelocity.com Inc.'s common stock may be traded on the Nasdaq National Market
under the symbol "TVLY."
DIVIDEND LIMITATIONS
Travelocity.com Inc. has never declared or paid any cash dividends on the
common stock and does not anticipate declaring or paying dividends on the common
stock in the foreseeable future. There are no limitations on dividends in
Travelocity.com Inc.'s organizational documents.
ADDITIONAL SERIES OF PREFERRED STOCK
Travelocity.com Inc.'s restated certificate of incorporation will authorize
the board of directors to create and issue one or more series of preferred stock
and determine the rights and preferences of each series within the limits set
forth in the restated certificate of incorporation and applicable law. When, and
if, any such new series of Travelocity.com Inc.'s preferred stock is issued, it
could affect the dividend, voting, and liquidation rights of Travelocity.com
Inc.'s common stock.
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<PAGE> 136
SERIES A PREFERRED STOCK
At the time of the merger, 33 million shares of Series A Preferred Stock,
par value $.001 per share, will be authorized. In the merger, Travelocity.com
Inc. will issue all of the Series A Preferred Stock to Travelocity Holdings.
Transfers of the Series A Preferred Stock will only be permitted to Travelocity
Holdings' affiliates, or in connection with any merger, acquisition or other
business combination involving Travelocity.com Inc. and Travelocity Holdings or
any affiliate of Travelocity Holdings. All of the Series A Preferred Stock will
be convertible as a series in the aggregate into 3 million shares of
Travelocity.com Inc.'s common stock at any time by the majority of the holders
of the Series A Preferred Stock. Each share of Series A Preferred Stock will be
entitled to one vote per share and will vote together as single class with the
holders of common stock.
Ranking
The Series A Preferred Stock will rank as follows:
- junior as to any class or series of stock that is entitled by its terms
to the receipt of dividends or other amounts distributable upon
liquidation, dissolution, or winding up, in preference or priority to the
Series A Preferred Stock;
- on parity with any class or series of stock without preference or
priority over Series A Preferred Stock with respect to the payment of
dividends or other amounts, or as to distribution of assets upon
liquidation, dissolution, or winding up, whether or not the dividend
rates, dividend payment rates, dividend payment dates or redemption or
liquidation prices per share of the class or series of stock are
different from those of Series A Preferred Stock; and
- senior as to any class or series of stock as to the payment of dividends
or other amounts distributable upon liquidation, dissolution, or winding
up, if the Series A Preferred Stock by its terms is entitled to such
dividend payments or other distributable amounts in preference or
priority to the holders of the other class or series of stock.
Additional series of preferred stock may be created that are junior,
senior, or on parity with the Series A Preferred Stock.
Dividends
The restated certificate of incorporation will provide that if dividends or
other distributions are payable on shares of common stock, the board of
directors must simultaneously declare a dividend or distribution on shares of
the Series A Preferred Stock so that the holders of Series A Preferred Stock
receive the dividend or distribution that would be payable to them assuming the
Series A Preferred Stock has been fully converted into 3 million shares of
common stock. If the dividend or distribution is payable in the form of
Travelocity.com Inc.'s voting securities or rights in respect of such voting
securities, and such dividend or distribution would result in a reduction of the
relative voting power of the Series A Preferred Stock stockholders, the restated
certificate of incorporation requires the board of directors to declare a
dividend or distribution payable in Series A Preferred Stock, or in rights in
respect of Series A Preferred Stock, or to make any other adjustment necessary
to maintain the relative voting power of the holders of Series A Preferred Stock
and common stock in effect immediately prior to the record date for the dividend
or distribution.
Liquidation, Dissolution, or Winding Up
After a voluntary or involuntary liquidation, dissolution, or winding up of
Travelocity.com Inc., and after the payment of Travelocity.com Inc.'s debts and
other liabilities and payment of any preferential amounts to holders of any
class or series of stock senior to Series A Preferred Stock, Series A Preferred
Stock will be entitled to share ratably in the remaining net assets of
Travelocity.com Inc. with the holders
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<PAGE> 137
of common and Class B Common Stock, if any, as if the Series A Preferred Stock
had been fully converted into 3 million shares of common stock.
CLASS B COMMON STOCK
The restated certificate of incorporation will authorize 75 million shares
of Class B Common Stock, par value $.001 per share. Travelocity.com Inc. may
issue Class B Common Stock only to Travelocity Holdings or any affiliate of
Travelocity Holdings and only in connection with a tax-free distribution of
Sabre's ownership in the Travelocity.com Partnership to Sabre's stockholders in
a transaction known as a "spin-off." Under the terms of the partnership
agreement, the Class B Common Stock will be issued in exchange for an amount of
cash determined at that time, and all of the Travelocity.com Partnership units,
shares of common stock and shares of Series A Preferred Stock held by the Sabre
Partners. The Class B Common Stock has powers, preferences, rights,
qualifications, limitations, and restrictions identical to the common stock,
except with respect to voting rights and removal of directors.
Voting Rights and Removal of Directors
Holders of Class B Common Stock will be entitled to vote separately as a
class to elect such number of directors as needed to constitute 80% of
Travelocity.com Inc.'s board of directors. After the Class B Common Stock is
issued, Travelocity.com Inc.'s board of directors will be fixed at fifteen and
divided into three classes, with the Class B Common Stock electing four of the
five directors in each class. The remaining directors will be elected by holders
of common stock and Class B Common Stock voting together as a single class. Once
elected, Class B directors may be removed from office, with or without cause, at
any time, by 80% of the voting power of the outstanding Class B Common Stock.
Vacancies among Class B directors can only be filled by a majority of the
remaining Class B directors. After the Class B Common Stock is fully converted
into common stock, the board of directors may reduce the size of the board, but
the board will remain classified into three classes.
Conversion
The Class B Common Stock will automatically convert into common stock on
the fifth anniversary of the date on which shares of Class B Common Stock are
first transferred to the holders of Sabre's Class A or Class B Common Stock in
the tax-free spin-off of its ownership interest in the Travelocity.com
Partnership. The automatic conversion to common stock may not occur on the fifth
anniversary if, prior to the fifth anniversary, Travelocity.com Inc. receives an
opinion from Sabre's tax counsel that the elimination of the Class B Common
Stock will cause the spin-off to become taxable. In this case, the conversion
will not occur until Travelocity.com Inc. receives an opinion from Sabre's tax
counsel that a stockholder vote or the conversion will not cause the spin-off to
become a taxable event and the conversion is approved by the holders of common
stock and Class B Common Stock voting together as a single class, with each
share of Class B Common Stock and each share of common stock having one vote.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF TRAVELOCITY.COM INC.'S RESTATED
CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS
Travelocity.com Inc.'s restated certificate of incorporation and restated
bylaws will provide that:
- the board of directors is divided into three classes as nearly equal in
number as is possible, with the term of one class expiring at the annual
meeting in each year;
- once Sabre no longer beneficially owns a majority of Travelocity.com
Inc.'s voting power, stockholders will be prohibited from requesting a
special meeting of stockholders, other than meetings of holders of Class
B Common Stock for the election of Class B directors;
- stockholders cannot cumulate their votes;
- stockholders must give advance notice to Travelocity.com Inc. for a
stockholder to nominate directors for election at a stockholders'
meeting;
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<PAGE> 138
- Travelocity.com Inc. must indemnify present and former officers and
directors, and may indemnify employees and agents;
- personal liability of directors to Travelocity.com Inc. or its
stockholders for breach of fiduciary duty is limited to the fullest
extent permitted under Delaware law; and
- once Sabre no longer beneficially owns a majority of the voting power in
Travelocity.com Inc., Travelocity.com Inc.'s stockholders will be
prohibited from taking action by written consent and the following
actions will require approval of at least 80% of Travelocity.com Inc.'s
voting power:
- the removal for cause of directors other than at the expiration of their
terms, and
- the amendment of Travelocity.com Inc.'s restated certificate of
incorporation or the restated bylaws.
After the merger, there will be 7 million authorized and unissued shares of
preferred stock. Travelocity.com Inc.'s restated certificate of incorporation
will authorize the board of directors to issue one or more series of preferred
stock and to establish the designations, powers, preferences, and rights of each
series of preferred stock. This preferred stock could have terms that could
delay, deter or prevent a tender offer or takeover attempt of Travelocity.com
Inc.
Moreover, under Delaware law, an acquirer of 15% or more of Travelocity.com
Inc.'s shares must wait three years before a business combination with
Travelocity.com Inc. unless one of the following exceptions is available:
- approval by Travelocity.com Inc.'s board of directors prior to the time
the acquirer became a 15% stockholder of Travelocity.com Inc.;
- achieving an ownership level of at least 85% of Travelocity.com Inc.'s
shares in the transaction in which the acquirer became a 15% stockholder
of Travelocity.com Inc.; or
- approval of the business combination by Travelocity.com Inc.'s board of
directors and at least two-thirds of Travelocity.com Inc.'s disinterested
stockholders.
Any of these provisions could delay, deter, or prevent a tender offer or
takeover attempt with respect to Travelocity.com Inc.
WHERE YOU CAN FIND MORE INFORMATION
Travelocity.com Inc. has filed a registration statement on Form S-4 to
register with the SEC Travelocity.com Inc. common stock to be issued to Preview
Travel stockholders in the merger. This proxy statement/prospectus is a part of
that registration statement and constitutes a prospectus of Travelocity.com Inc.
in addition to being a proxy statement of Preview Travel for the meeting. As
allowed by SEC rules, this proxy statement/prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
In addition, Preview Travel files reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934, as amended,
and Travelocity.com Inc. will begin to file such reports upon completion of the
merger. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. You may read and copy this information at the following
locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
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You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet World Wide
Web site that contains reports, proxy statements and other information about
issuers, including Travelocity.com Inc. and Preview Travel, who file
electronically with the SEC. The address of that Web site is www.sec.gov. You
can also inspect reports, proxy statements and other information about Preview
Travel at the office of the National Association of Securities Dealers, 1735 K
Street, N.W., Washington, D.C. 20036.
The SEC allows us to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that
Preview Travel has previously filed with the SEC. They contain important
information about Preview Travel and its financial condition. Some of these
filings have been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
PREVIEW TRAVEL'S SEC FILINGS (FILE NO. 000-23177)
- -------------------------------------------------
<S> <C>
Annual Report Form 10-K Year ended December 31, 1998
Amendment to Current Report on Form 8-K, dated Provides further information regarding a
January 12, 1999 transaction with NewsNet Central, Inc.
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Quarterly Report on Form 10-Q Quarter ended September 30, 1999
Amendment to Quarterly Report on Form 10-Q, filed Amendment to report on the quarter ended
December 30, 1999 September 30, 1999
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to the
1999 annual meeting of Preview Travel
stockholders on June 15, 1999
Revised Definitive Proxy Statement on Schedule Revised definitive proxy statement relating
14A to the 1999 annual meeting of Preview Travel
stockholders on June 15, 1999
Current Report on Form 8-K, dated October 6, 1999 Discloses the entering into of the merger
agreement and related matters
Amendment to Registration Statement on Form 8-A, Reflects amendment of Preview Travel's rights
dated October 12, 1999 plan in connection with the merger
</TABLE>
We incorporate by reference additional documents that Preview Travel may
file with the SEC between the date of this document and the date of the special
stockholder meeting. These documents include periodic reports, including Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from Preview Travel or from the SEC through the SEC's Web site at the
address provided above. Documents incorporated by reference are available from
Preview Travel without charge, excluding any exhibits to those documents unless
the exhibit is specifically incorporated by reference as an exhibit in this
proxy statement/prospectus. You can obtain documents incorporated by reference
in this proxy statement/prospectus by requesting them in writing or by telephone
from Preview Travel at the following address:
Preview Travel
747 Front Street
San Francisco, California 94111
Attention: Casey Cotter
Telephone No.: (415) 439-1200
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<PAGE> 140
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FEBRUARY 29, 2000
TO RECEIVE THEM BEFORE THE SPECIAL STOCKHOLDERS MEETING. If you request any
incorporated documents from us, Preview Travel will mail them to you by first
class mail, or another equally prompt means, within one business day after
Preview Travel receives your request.
FUTURE STOCKHOLDER PROPOSALS
Preview Travel will hold an annual meeting in the year 2000 only if the
merger has not already been completed. If the annual meeting is held,
stockholders' proposals will be eligible for consideration for inclusion in the
proxy statement for the 2000 annual meeting only if the proposals are received
by the Secretary of Preview Travel, Leonard R. Stein, Preview Travel, Inc., 747
Front Street, San Francisco, California 94111, no later than January 15, 2000.
EXPERTS
The balance sheet of Travelocity.com Inc. at September 30, 1999 and the
financial statements of the Travelocity Division at December 31, 1998 and 1997,
and for each of the three years in the period ended December 31, 1998, appearing
in this proxy statement/prospectus, which is made a part of Travelocity.com
Inc.'s Form S-4 registration statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports appearing elsewhere herein,
and are included in reliance upon such reports, given on the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements of Preview Travel at December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, incorporated by reference in this proxy statement/prospectus, which is
made a part of Travelocity.com Inc.'s Form S-4 registration statement, have been
audited by PricewaterhouseCoopers LLP, independent auditors, as set forth in
their report included in Preview Travel's annual report on Form 10-K, which is
incorporated by reference in this proxy statement/prospectus, and are included
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
Legal matters relating to the validity of the shares of Travelocity.com
Inc.'s common stock offered by this proxy statement prospectus and federal
income tax matters relating to the merger will be passed upon for
Travelocity.com Inc. by Fried, Frank, Harris, Shriver & Jacobson, a partnership
including professional corporations, New York, New York. Federal income tax
matters relating to the merger will be passed upon for Preview Travel by Simpson
Thacher & Bartlett, New York, New York.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of PricewaterhouseCoopers will be present at the special
stockholders meeting. These representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
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INDEX TO FINANCIAL STATEMENTS
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TRAVELOCITY.COM INC.
Report of Ernst & Young LLP................................. F-2
Balance Sheet............................................... F-3
Notes to Financial Statement................................ F-4
TRAVELOCITY DIVISION
Report of Ernst & Young LLP................................. F-6
Balance Sheets.............................................. F-7
Statements of Operations.................................... F-8
Statements of Cash Flows.................................... F-9
Statements of Division Equity (Deficit)..................... F-10
Notes to Financial Statements............................... F-11
</TABLE>
F-1
<PAGE> 142
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Travelocity.com Inc.
We have audited the accompanying balance sheet of Travelocity.com Inc. as
of September 30, 1999. This balance sheet is the responsibility of the
management of Travelocity.com Inc. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Travelocity.com Inc. at September
30, 1999, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
October 29, 1999
Dallas, Texas
F-2
<PAGE> 143
TRAVELOCITY.COM INC.
BALANCE SHEET
ASSETS
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<CAPTION>
SEPTEMBER 30, 1999
----------------------
(IN THOUSANDS, EXCEPT
PER SHARE INFORMATION)
<S> <C>
Assets...................................................... $ --
------
Total assets...................................... $ --
======
Stockholder's equity
Class A Common Stock: $.001 par value; 3,000 shares
authorized, issued and outstanding..................... $ 3
Class B Common Stock: $.001 par value; 1,500 shares
authorized; no shares issued........................... --
Stock subscription receivable from affiliate.............. (3)
------
Total stockholder's equity........................ $ --
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 144
TRAVELOCITY.COM INC.
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 30, 1999
1. GENERAL
Travelocity.com Inc. (the "corporation") was incorporated on September 30,
1999 as a wholly owned subsidiary of Sabre Holdings Corporation ("Sabre").
Travelocity.com Inc. currently has no operating activities, but was established
to consummate the proposed merger discussed in Note 2.
The authorized capital of the Company is 3 million shares of Class A Common
Stock and 1.5 million shares of Class B Common Stock. At September 30, 1999, 3
million shares of Class A Stock have been issued to a Sabre affiliate in
exchange for a stock subscription.
2. SUBSEQUENT EVENT
Proposed Merger with Preview Travel, Inc. On October 3, 1999 Sabre
announced the terms of an agreement to combine Travelocity.com Inc., its
Travelocity business unit (the "Travelocity Division") and Preview Travel Inc.
("Preview Travel") in a holding company/partnership structure. When the
transactions are completed, Travelocity.com Inc. will be a holding company whose
sole asset will be units of Travelocity.com LP (the "partnership"). Sabre will
also own units of the Travelocity.com Partnership. The Travelocity.com
Partnership will ultimately own all of the assets and have all of the
liabilities of the Travelocity Division and Preview Travel.
Currently, the Travelocity Division is an operating division of Sabre
engaged in consumer direct Internet travel distribution. Immediately prior to
the merger, Sabre and TSGL Holding, Inc., a wholly owned subsidiary of Sabre,
will contribute the Travelocity Division and $50 million in cash to the
Travelocity.com Partnership and receive partnership units in exchange. Then
Sabre will contribute partnership units to Travelocity Holdings, Inc.
("Travelocity Holdings"), a wholly owned subsidiary of Sabre, as additional
paid-in-capital, and Travelocity Holdings will contribute a portion of those
partnership units to Travelocity.com Inc. as additional paid-in-capital, so that
those entities become partners in the Travelocity.com Partnership.
As a result, immediately prior to the merger, the Travelocity.com
Partnership will own the Travelocity Division and $50 million in cash. Sabre
will own the Travelocity.com Partnership through a combination of its direct
interest, its interest held through Travelocity Holdings and TSGL Holding, and
its interest held through Travelocity.com Inc.
In the merger, Preview Travel, which is also engaged in consumer direct
Internet travel distribution, will be merged with and into Travelocity.com Inc.
Travelocity.com Inc. will be the surviving corporation. Each share of Preview
Travel common stock will be converted into one share of Travelocity.com Inc.'s
common stock. Approximately 14 million shares of Travelocity.com Inc.'s common
stock will be issued to former Preview Travel stockholders in the merger. The
shares of Travelocity.com Inc.'s common stock beneficially held by Sabre will be
converted in the merger into 33 million shares of Series A Preferred Stock.
The preferred stock is convertible into 3 million shares of Travelocity.com
Inc.'s common stock, and the preferred stock receives dividends and
distributions on a basis as if it were converted into common stock.
Economically, therefore, Travelocity.com Inc. will have approximately 17 million
common stock equivalent shares outstanding after the merger. The shares of
common stock issued to former Preview Travel stockholders will represent an
approximate 82% (14 million out of 17 million) equity interest in
Travelocity.com Inc., and the shares of preferred stock issued to Sabre will
represent an approximate 18% (3 million out of 17 million) equity interest in
Travelocity.com Inc.
Immediately after the merger, Travelocity.com Inc. will contribute all of
the Preview Travel assets and liabilities to the Travelocity.com Partnership. In
exchange, Travelocity.com Inc. will receive additional
F-4
<PAGE> 145
TRAVELOCITY.COM INC.
NOTES TO FINANCIAL STATEMENT -- (CONTINUED)
units of the Travelocity.com Partnership representing in total an approximate
36% equity interest in the Travelocity.com Partnership.
As a result, the current Preview Travel stockholders will become
Travelocity.com Inc.'s public stockholders and will receive shares of common
stock in the merger that equates to approximately a 30% equity interest in the
Travelocity.com Partnership -- that is, 82% (their equity interest in
Travelocity.com Inc.) of the 36% equity interest in the Travelocity.com
Partnership held by Travelocity.com Inc.
Sabre will beneficially hold an approximate 70% equity interest in the
Travelocity.com Partnership -- that is:
- a 64% equity interest held directly or through its affiliates, plus
- a 6% equity interest held through Travelocity.com Inc. -- that is, 18%
(its equity interest in Travelocity.com Inc.) of 36% (Travelocity.com
Inc.'s equity interest in the Travelocity.com Partnership).
In connection with the closing of the merger, Travelocity.com Inc., the
Travelocity.com Partnership, Sabre and certain Sabre affiliates will enter into
certain agreements governing the operations of the Travelocity.com Partnership,
the management of the Travelocity.com Partnership by Travelocity Holdings, the
contributions of the assets and liabilities of the Travelocity Division and
Preview Travel to the Travelocity.com Partnership and other agreements related
to the separation of the Travelocity Division from Sabre.
F-5
<PAGE> 146
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Sabre Holdings Corporation
We have audited the accompanying balance sheets of the Travelocity
Division, an operating division of Sabre Holdings Corporation, as of December
31, 1998 and 1997, and the related statements of income, division equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Travelocity Division's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Travelocity Division at
December 31, 1998 and 1997, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
July 30, 1999, except as to Note 10 as
to which the date is October 29, 1999.
Dallas, Texas
F-6
<PAGE> 147
TRAVELOCITY DIVISION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets
Accounts receivable...................................... $ 612 $ 2,721 $ 5,084
Prepaid expenses and other current assets................ -- -- 26
-------- -------- --------
Total current assets.................................. 612 2,721 5,110
Property and equipment
Leasehold improvements................................... -- 688 726
Furniture, fixtures and equipment........................ -- 897 995
Computer equipment....................................... 438 1,147 1,237
-------- -------- --------
438 2,732 2,958
Less accumulated depreciation............................ (212) (524) (947)
-------- -------- --------
Total property and equipment.......................... 226 2,208 2,011
Intangible assets, net..................................... 8,286 6,238 4,702
Other assets............................................... 2 2 --
-------- -------- --------
Total assets..................................... $ 9,126 $ 11,169 $ 11,823
======== ======== ========
LIABILITIES AND DIVISION EQUITY (DEFICIT)
Current liabilities
Accounts payable......................................... $ 902 $ 662 $ 4,353
Accrued compensation and related benefits................ 148 405 914
Other accrued liabilities................................ 317 693 520
Payable to affiliates.................................... 450 1,423 20
-------- -------- --------
Total current liabilities........................ 1,817 3,183 5,807
Payable to affiliates...................................... 38,976 55,594 68,553
Other liabilities.......................................... 88 323 452
Commitments and contingencies
Division equity (deficit)
Contributions from affiliates............................ 2,737 7,841 7,841
Accumulated deficit...................................... (34,492) (55,772) (70,830)
-------- -------- --------
Total division deficit........................... (31,755) (47,931) (62,989)
-------- -------- --------
Total liabilities and division equity
(deficit)...................................... $ 9,126 $ 11,169 $ 11,823
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 148
TRAVELOCITY DIVISION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
Transaction revenue................... $ 10,949 $ 8,345 $ 18,370 $ 12,405 $ 35,361
Advertising........................... 94 577 2,821 1,586 5,785
Licensing and royalty fees............ 855 365 47 72 258
-------- -------- -------- -------- --------
Total revenues................ 11,898 9,287 21,238 14,063 41,404
Cost of revenues........................ 9,709 11,878 19,067 13,281 27,236
-------- -------- -------- -------- --------
Gross profit (loss)..................... 2,189 (2,591) 2,171 782 14,168
Operating expenses
Selling and marketing................. 5,556 6,887 10,608 7,574 18,574
Technology and development............ 7,034 6,549 8,483 6,181 7,337
General and administrative............ 2,472 2,694 4,360 3,230 3,315
-------- -------- -------- -------- --------
Total operating expenses...... 15,062 16,130 23,451 16,985 29,226
-------- -------- -------- -------- --------
Operating loss.......................... (12,873) (18,721) (21,280) (16,203) (15,058)
Other income (expense).................. (88) 1 -- -- --
-------- -------- -------- -------- --------
Net loss...................... $(12,961) $(18,720) $(21,280) $(16,203) $(15,058)
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 149
TRAVELOCITY DIVISION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss.............................. $(12,961) $(18,720) $(21,280) $(16,203) $(15,058)
Adjustments to reconcile net loss to
cash used in operating activities
Depreciation and amortization...... 102 836 2,412 1,719 2,119
Changes in operating assets and
liabilities
Accounts receivable and other
assets........................ (110) 20 (2,109) (1,506) (2,387)
Accounts payable, accrued
expenses and other
liabilities................... 221 158 628 451 4,155
Payable to affiliates............ 1,254 (804) 973 430 (1,403)
-------- -------- -------- -------- --------
Cash used in operating
activities....................... (11,494) (18,510) (19,376) (15,109) (12,574)
Investing activities
Additions to property and equipment... (211) (100) (2,346) (1,463) (385)
Purchase of Travelocity trademark..... -- (5,000) -- -- --
License of Netscape trademark......... -- (4,000) -- -- --
-------- -------- -------- -------- --------
Cash used in investing
activities....................... (211) (9,100) (2,346) (1,463) (385)
Financing activities
Advances from affiliates.............. 11,399 27,610 16,618 11,468 12,959
Contributions from affiliates......... -- -- 5,104 5,104 --
-------- -------- -------- -------- --------
Cash provided by financing
activities....................... 11,399 27,610 21,722 16,572 12,959
-------- -------- -------- -------- --------
Decrease in cash and cash
equivalents........................ (306) -- -- -- --
Cash and cash equivalents at beginning
of the period...................... 306 -- -- -- --
-------- -------- -------- -------- --------
Cash and cash equivalents at end of the
period................................ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 150
TRAVELOCITY DIVISION
STATEMENTS OF DIVISION EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONTRIBUTIONS ACCUMULATED TOTAL DIVISION
FROM AFFILIATES DEFICIT EQUITY (DEFICIT)
--------------- ----------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1, 1996............................ $2,737 $ (2,811) $ (74)
Net loss............................................ -- (12,961) (12,961)
------ -------- --------
Balance at December 31, 1996.......................... 2,737 (15,772) (13,035)
Net loss............................................ -- (18,720) (18,720)
------ -------- --------
Balance at December 31, 1997.......................... 2,737 (34,492) (31,755)
Net loss............................................ -- (21,280) (21,280)
Contribution from Sabre............................. 5,104 -- 5,104
------ -------- --------
Balance at December 31, 1998.......................... 7,841 (55,772) (47,931)
Net loss (Unaudited)................................ -- (15,058) (15,058)
------ -------- --------
Balance at September 30, 1999 (Unaudited)............. $7,841 $(70,830) $(62,989)
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 151
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1999 IS
UNAUDITED)
1. GENERAL INFORMATION
The Travelocity Division is an operating division of Sabre Inc. ("Sabre"),
which is engaged in electronic travel distribution services using the Sabre(R)
system. The Travelocity Division represents substantially all of the
consumer-direct Internet travel distribution business of Sabre. In January 1995,
Sabre established a separate operating division for this business. Sabre,
pursuant to the Reorganization (as defined below), is the successor to the
businesses of The Sabre Group which were previously operated as subsidiaries or
divisions of American Airlines, Inc. ("American") or AMR Corporation ("AMR").
The Sabre Group was formed by AMR to capitalize on synergies of combining AMR's
information technology businesses under common management. Sabre Inc. is a
wholly owned subsidiary of Sabre Holdings Corporation. Unless otherwise
indicated, references herein to "Sabre" include Sabre Holdings Corporation and
its consolidated subsidiaries and, for periods prior to the Reorganization, the
business of American and AMR constituting The Sabre Group, an operating unit of
AMR. See Note 10.
On July 2, 1996, AMR reorganized the businesses of The Sabre Group (the
"Reorganization"). As part of the Reorganization, Sabre was incorporated as a
direct wholly owned subsidiary of American, the businesses of The Sabre Group
formerly operated as divisions and subsidiaries of American or AMR, including
the Travelocity Division, were combined under Sabre and Sabre and its
subsidiaries were dividended by American to AMR. Sabre completed an initial
public offering of its common stock (the "Offering") in October 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The financial statements for periods prior to the
Reorganization have been prepared using AMR's historical basis in the assets and
liabilities of the Travelocity Division, and Sabre's historical basis for
periods subsequent to the Reorganization. The financial statements reflect the
results of operations, financial condition and cash flows of the Travelocity
Division as a component of Sabre, and, for periods prior to the Reorganization,
of AMR, and may not be indicative of actual results of operations and financial
position of the Travelocity Division under other ownership. Management believes
the income statements include a reasonable allocation of administrative costs,
which are described in Note 4, incurred by Sabre and/or AMR on behalf of the
Travelocity Division.
Cash and Cash Equivalents. Prior to the Reorganization, the Travelocity
Division's cash and cash equivalents were held for the Travelocity Division by
American. Cash and cash equivalents were immediately charged or credited to the
Travelocity Division upon recording certain transactions, including transactions
with American for airline booking fees and purchases of goods and services. Cash
equivalents were carried at cost plus accrued interest, which approximates fair
value. Effective with the Reorganization, Sabre began maintaining its own cash
management system with separate cash and investment accounts from American.
Subsequent to the Reorganization, the Travelocity Division has not maintained
cash or cash equivalents. Sabre maintains all cash balances, charging or
crediting the Travelocity Division through intercompany accounts upon the
recording of certain transactions, including the collection of accounts
receivable and the purchases of goods and services.
F-11
<PAGE> 152
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation and Amortization. The Travelocity Division's depreciation and
amortization policies are as follows:
<TABLE>
<S> <C>
Property and Equipment
Computer equipment................................. 3 to 5 years
Furniture and fixtures............................. 5 to 15 years
Leasehold improvements............................. Lesser of lease term or useful life
Other Assets
Intangible assets, principally trademarks.......... 3 to 7 years
</TABLE>
Property and equipment are stated at cost less accumulated depreciation and
amortization, which is calculated on the straight-line basis. Depreciation of
property and equipment totaled approximately $102,000, $121,000 and $365,000 in
1996, 1997 and 1998, respectively, and $182,000 and $583,000 for the nine months
ended September 30, 1998 and 1999, respectively. Intangible assets are amortized
on the straight-line basis, over the lesser of estimated useful life or
contractual right of use. Amortization of intangible assets approximated
$714,000 in 1997 and $2,048,000 in 1998 (none in 1996). Accumulated amortization
of intangible assets approximated $714,000 and $2,762,000 at December 31, 1997
and 1998, respectively. See Note 3.
Revenue Recognition. The Travelocity Division provides online travel
services through Travelocity.com, its proprietary online travel site (the
"Travelocity.com site"), and the easySabre(R) reservations site (the
"easySabre(R) site"), as well as certain co-branded sites operated in
conjunction with other internet sites. The easySabre(R) site was retired in July
1999. Reservations made through these sites are booked through the Sabre(R)
system. As compensation for processing bookings, transaction fees are collected
from air, car rental and hotel vendors and other providers of travel related
products and services ("associates") by Sabre and transferred to the Travelocity
Division. The fee per booking charged to associates is dependent upon the level
of functionality within the Sabre(R) system at which the associate participates.
Transaction revenue for airline travel reservations is recognized at the time of
the booking of the reservation, net of estimated future cancellations. At
December 31, 1997 and 1998, the Travelocity Division had recorded booking fee
cancellation reserves of approximately $46,000 and $141,000, respectively.
Transaction revenue for car rental and hotel bookings and other travel providers
is recognized at the time the reservation is used by the customer.
Transaction revenue also includes commissions from travel suppliers for air
travel, hotel rooms, car rentals, vacation packages and cruises. Commissions
from air travel providers are recognized upon confirmation of pending payment of
the commission. Commissions from other travel providers are recognized upon
receipt.
Advertising revenues are derived primarily from the delivery of advertising
impressions on the Travelocity Division's Web sites. Advertising revenues are
recognized in the period that advertising impressions are delivered. Licensing
and royalty fees are derived from operating certain airline reservation sites
and are recognized in the period earned.
Advertising Costs. The Travelocity Division recognizes advertising expense
in accordance with Statement of Position 93-7 Reporting on Advertising Costs.
Internet advertising expenses are recognized based on the terms of the
individual agreements, but generally over the greater of the ratio of the number
of impressions delivered over the total number of contracted impressions, or on
a straight-line basis over the term of the contract. Advertising expenses,
including certain amounts paid to American for marketing support of the
Travelocity.com site and easySabre(R) site (See Note 4), totaled approximately
$2,202,000, $3,275,000 and $4,072,000 during 1996, 1997 and 1998, respectively,
and $2,807,000 and $8,947,000 for the nine months ended September 30, 1998 and
1999, respectively.
F-12
<PAGE> 153
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Software Development Costs. Through December 31, 1998, the Travelocity
Division accounted for the costs of developing and testing new or significantly
enhanced products and Web site features in accordance with the provisions of
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed (FAS 86). Pursuant to
FAS 86, costs are capitalized when technological feasibility of the product is
established, which is achieved upon completion of a detailed program design or a
working model. Costs incurred prior to the establishment of technological
feasibility are expensed as incurred as research and development costs. Research
and development costs included in technology and development approximated
$542,000, $92,000 and $137,000 for 1996, 1997 and 1998, respectively. No amounts
have been capitalized pursuant to FAS 86.
Effective January 1, 1999, the Travelocity Division adopted the provisions
of SOP 98-1, Accounting for Computer Software Developed or Obtained for Internal
Use. SOP 98-1 requires the capitalization of certain costs incurred during an
internal-use software development project, including costs related to upgrades
and enhancements which result in the availability of additional functions on the
Travelocity Division's Web sites. Capitalizable costs consist of (a) certain
external direct costs of materials and services incurred in developing or
obtaining internal-use computer software, (b) payroll and payroll-related costs
for employees who are directly associated with and who devote time to the
project and (c) interest costs incurred. Costs that are considered to be related
to research and development activities, data conversion activities, and
training, maintenance and general and administrative or overhead costs will
continue to be expensed as incurred. Costs that cannot be separated between
maintenance of, and relatively minor upgrades and enhancements to, the
Travelocity Division's Web sites are also expensed as incurred.
Income Taxes. As a division of Sabre, the Travelocity Division is included
in the consolidated federal income tax return of AMR. Prior to July 1, 1996,
under the terms of a tax sharing agreement, Sabre paid AMR an amount equal to
the income tax payments calculated as if Sabre had filed separate income tax
returns.
Sabre and AMR entered into a tax sharing agreement effective July 1, 1996
(the "Tax Sharing Agreement"), which provides for the allocation of tax
liabilities during the tax periods Sabre, and its operating divisions and
subsidiaries, is included in the consolidated federal, state and local income
tax returns filed by AMR. The Tax Sharing Agreement generally requires Sabre to
pay to AMR the amount of federal, state and local income taxes that Sabre would
have paid had it ceased to be a member of the AMR consolidated tax group for
periods after the Reorganization. Sabre, and its operating divisions and
subsidiaries, is jointly and severally liable for the federal income tax of AMR
and the other companies included in the consolidated return for all periods in
which Sabre is included in the AMR consolidated group. AMR has agreed, however,
to indemnify Sabre, and its operating divisions and subsidiaries, for any
liability for taxes reported or required to be reported on a consolidated return
arising from operations of subsidiaries of AMR other than Sabre.
Except for certain items specified in the Tax Sharing Agreement, AMR
generally retains any potential tax benefit carryforwards, and remains obligated
to pay all taxes attributable to periods before the Reorganization. The Tax
Sharing Agreement also grants Sabre certain limited participation rights in any
disputes with tax authorities.
The Travelocity Division has computed its provision for deferred income
taxes using the liability method as if it were a separate taxpayer. Under the
liability method, deferred income tax assets and liabilities are determined
based on differences between financial reporting and income tax bases of assets
and liabilities and are measured using the enacted tax rates and laws. A
valuation allowance has been recorded to reflect management's judgment about the
realization of the net deferred tax assets in future years.
F-13
<PAGE> 154
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Business Risk and Concentrations of Credit Risk. The Travelocity Division
operates in the online travel services industry, which is new, rapidly evolving
and intensely competitive. The Travelocity Division competes with traditional
travel agency reservation methods and online travel reservation services. In the
online travel services market, the Travelocity Division competes with other
entities that maintain similar commercial Web sites. Transaction revenue from
air commissions represented 41.3%, 42.0% and 36.2% of total revenues for 1996,
1997 and 1998, respectively. The Travelocity Division relies on unrelated
service entities to accumulate, process and remit these revenues. Discontinuance
of these services could result in disruption to the Travelocity Division's
business and accordingly have a material adverse effect on the results of
operations, financial position and cash flow.
The Travelocity Division has incurred losses since its inception, which
have been funded by Sabre, as the Travelocity Division is a division of Sabre.
The Travelocity Division will remain dependent on Sabre for the funding of its
cash requirements until operations become profitable.
The Travelocity Division is subject to risks and uncertainties common to
growing technology based companies, including rapid technological change, growth
and commercial acceptance of the Internet, dependence on third-party and Sabre
technology, new service introductions, activities of competitors, dependence on
key personnel, international expansion, and limited operating history.
A substantial portion of the Travelocity Division's revenues comes from
commissions paid by travel suppliers for bookings made through its online sites.
These travel suppliers are not obligated to pay any specified commission rates
for bookings. The reduction, or elimination, of commissions could have a
material adverse effect on the financial condition and result of operations of
the Travelocity Division.
The Travelocity Division's customers are primarily located in the United
States and are concentrated in the travel industry. Revenue from AMR, Delta Air
Lines, US Airways, Inc. and United Airlines during 1996 were approximately $2.0
million, $2.0 million, $1.2 million and $1.2 million, respectively, which
represented 16.7%, 16.4%, 10.4% and 10.3% of the Travelocity Division's
revenues, respectively. During 1997, revenues from Delta Air Lines and AMR were
approximately $1.4 million and $1.0 million respectively, which represented
14.6% and 10.3% of the Travelocity Division's revenues, respectively. During
1998, revenues from Delta Air Lines, US Airways, Inc. and AMR were approximately
$2.7 million, $2.6 million and $2.2 million, respectively, which represented
12.3%, 11.6% and 10.0%, respectively, of the Travelocity Division's revenues.
The Travelocity Division's receivables are generally unsecured and,
historically, bad debts have not been significant.
Use of Estimates. The preparation of these financial statements in
conformity with generally accepted accounting principles requires that certain
amounts be recorded based on estimates and assumptions made by management.
Actual results could differ from these estimates and assumptions.
Stock Awards and Options. Stock awards and stock options granted to
employees of the Travelocity Division, including awards of Sabre stock and stock
options and awards of AMR stock and stock options granted prior to the
Reorganization, have been accounted for in the Travelocity Division's financial
statements in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. No compensation expense is recognized
for stock option grants if the exercise price is at or above the fair market
value of the underlying stock on the date of grant. Compensation expense
relating to other stock awards is recognized over the period during which the
employee renders service to the Travelocity Division necessary to earn the
award.
Financial Instruments. The carrying value of the Travelocity Division's
financial instruments, primarily accounts receivable, approximate their
respective fair values at December 31, 1996, 1997 and 1998.
F-14
<PAGE> 155
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which, as amended, would be effective for fiscal years
beginning after June 15, 2000. Because the Travelocity Division does not
currently use derivatives, management does not anticipate that the adoption of
Statement 133 will have a significant effect on the earnings or the financial
position of the Travelocity Division.
3. SIGNIFICANT TRANSACTIONS AND RELATIONSHIPS
In January 1997, the Travelocity Division entered into an agreement to
obtain exclusive rights to the trademark "Travelocity" as well as other
associated rights and interests from Worldview Systems Corporation for $5
million. The trademark is classified as an intangible asset and is being
amortized on a straight-line basis over a period of seven years. Amortization
expense of approximately $714,000 was recorded in both 1997 and 1998.
In December 1997, the Travelocity Division entered into an agreement with
Netscape Communication Corporation ("Netscape") to license the use of the
Netscape trademark in specified circumstances for $4 million. The license fee is
classified as an intangible asset and is being amortized over its estimated
useful life of 3 years. Amortization expense recorded in 1998 was approximately
$1,333,000.
The Travelocity Division has entered into agreements with Yahoo! Inc.
("Yahoo!"), Netscape and At Home Corporation ("@Home") establishing the
Travelocity.com site as the provider of air, car and hotel booking capabilities
on the Yahoo! Web site and as the primary travel reservations provider for
Netscape and @Home. Under these agreements, as amended, Yahoo!, Netscape and
@Home are obligated to promote the Travelocity.com site and to deliver minimum
numbers of annual page views, or impressions, featuring the Travelocity
Division's travel services on their respective Web sites. During the terms of
these agreements, as amended, the Travelocity Division is obligated to make
certain minimum payments as well as pay Yahoo!, Netscape and @Home a percentage
of commissions revenue earned by the Travelocity Division in excess of certain
thresholds. In connection with these agreements, the Travelocity Division is
committed to make aggregate future minimum payments as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999.............................................. $ 4,950
2000.............................................. 7,400
-------
$12,350
=======
</TABLE>
4. CERTAIN RELATED PARTY TRANSACTIONS
Contributions from Affiliates. During 1998, Sabre made a capital
contribution of approximately $5,100,000 to the Travelocity Division. Proceeds
from the contribution were used to reduce payables to affiliates.
Management Services Agreement. The Travelocity Division, as a division of
Sabre, and American are parties to a Management Services Agreement dated July 1,
1996 (the "American Management Services Agreement"), pursuant to which American
performs various management services for Sabre and the Travelocity Division that
American has historically provided. Transactions with American are settled
through monthly billings, with payment due in 30 days. The American Management
Services Agreement will expire on June 30, 2000, unless terminated earlier if
American and Sabre, including the Travelocity Division, are no longer under
common control or if Sabre's Technology Services Agreement with American is
terminated early. Amounts charged to the Travelocity Division under this
agreement approximate American's cost of providing the services plus a margin.
The parties agreed to apply the financial terms of the American Management
Services Agreement as of January 1, 1996.
F-15
<PAGE> 156
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Marketing Cooperation Agreement. The Travelocity Division, as a division of
Sabre, and American are parties to the Marketing Cooperation Agreement dated
July 1, 1996 (the "Marketing Cooperation Agreement"), pursuant to which American
will provide marketing support for five years for the Travelocity.com site and
the easySabre(R) site. The Marketing Cooperation Agreement may be terminated by
either party prior to June 30, 2001 only if the other party fails to perform its
obligations thereunder. As payment for American's support of the Travelocity
Division's promotion of the Travelocity.com site and the easySabre(R) site , the
Travelocity Division pays American a marketing fee based upon booking volume.
Approximately $50,000 in 1996 and $100,000 in both 1997 and 1998 was paid to
American under the terms of the agreement.
Non-Competition Agreement. The Travelocity Division, as a division of
Sabre, AMR and American are parties to a Non-Competition Agreement dated July 1,
1996 (the "Non-Competition Agreement") and expiring December 31, 2001, pursuant
to which AMR and American, on behalf of themselves and certain of their
subsidiaries, have agreed to limit their competition with Sabre's business,
including consumer-direct internet travel distribution in certain circumstances.
Travel Agreements. The Travelocity Division, as a division of Sabre, and
American are parties to a Travel Privileges Agreement dated July 1, 1996 (the
"Travel Privileges Agreement"), pursuant to which the Travelocity Division is
entitled to purchase personal travel for all its employees and retirees at
reduced fares, while it is a wholly owned division or subsidiary of Sabre. As
long as the Travelocity Division remains an affiliate of Sabre, the Travelocity
Division is entitled to purchase personal travel for a portion of its employees
and retirees at reduced fares based on the percent of ownership by Sabre.
However, at the time of a change in the ownership percentage, all existing
employees and retirees are allowed to maintain their existing travel privileges.
The cost for employee travel is charged to the Travelocity Division based upon
the Travelocity Division's employees travel activities and the cost for retirees
travel is allocated to the Travelocity Division based on the Travelocity
Division's headcount relative to Sabre's headcount.
The Travelocity Division, as a division of Sabre, and American are also
parties to a Corporate Travel Agreement dated July 1, 1996 and ending June 30,
1998 (the "Corporate Travel Agreement"), pursuant to which the Travelocity
Division received discounts for certain flights purchased on American. In
exchange, Sabre, including the Travelocity Division, must have flown a certain
percentage of its travel on American as compared to all other air carriers
combined. If Sabre, including the Travelocity Division, failed to meet the
applicable percentage on an average basis over any calendar quarter, American
may have terminated the agreement upon 60 days' notice. The parties agreed to
apply the financial terms of the Travel Privileges Agreement and the Corporate
Travel Agreement as of January 1, 1996. In 1998, Sabre and American entered into
a new corporate travel agreement (the "Revised Corporate Travel Agreement")
commencing July 1, 1998 and ending June 30, 2001. The terms and conditions of
the Revised Corporate Travel Agreement are substantially the same as the
Corporate Travel Agreement.
Indemnification Agreement. In connection with the Reorganization, the
Travelocity Division, as a division of Sabre, and American are parties to an
intercompany agreement (the "Indemnification Agreement") pursuant to which each
party indemnified the other for certain obligations relating to the
Reorganization. Pursuant to the Indemnification Agreement, Sabre indemnified
American for liabilities assumed in the Reorganization, against third party
claims asserted against American as a result of American's prior ownership of
assets or operation of businesses contributed to Sabre and for losses arising
from or in connection with Sabre's lease of property from American. In exchange,
American indemnified Sabre for specified liabilities retained by it in the
Reorganization, against third party claims against Sabre relating to American's
businesses and asserted against Sabre as a result of the ownership or possession
by American prior to the Reorganization of any asset contributed to Sabre in the
Reorganization and for losses arising from or in connection with American's
lease of property from Sabre.
F-16
<PAGE> 157
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenues from Affiliates. Revenues from American and other subsidiaries of
AMR were approximately $1,689,000, $1,326,000 and $2,239,000 in 1996, 1997 and
1998, respectively, and $1,588,000 and $3,221,000 for the nine months ended
September 30, 1998 and 1999, respectively.
Cost of Revenues and Operating Expenses. Operating expenses are charged to
the Travelocity Division by Sabre, American and other subsidiaries of AMR to
cover certain data processing, communication, labor, ticket fulfillment,
employee benefits, facilities rental, marketing services, management services,
legal fees and certain other administrative costs based on employee headcount or
actual usage of facilities and services. Amounts charged to the Travelocity
Division by Sabre approximate the cost to Sabre for providing such services. The
Travelocity Division believes amounts charged to the Travelocity Division by
American for these expenses approximate the cost of such services provided by
third parties. Travel service costs for travel by the Travelocity Division's
employees for personal and business travel are charged to the Travelocity
Division based on rates negotiated with American. If the Travelocity Division
were not affiliated with American, the personal travel flight privilege would
most likely not be available to employees. The rates negotiated with American
for 1996, 1997 and 1998 under the Corporate Travel Agreement approximate
corporate travel rates offered by American to similar companies.
Expenses charged to the Travelocity Division by affiliates are as follows
(in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Data processing, communication and labor
costs...................................... $12,005 $13,002 $15,225 $11,042 $24,583
Ticket fulfillment costs..................... 3,275 3,830 8,718 5,498 1,116
Management services.......................... 1,111 1,461 2,744 2,086 2,122
Employee benefits............................ 421 374 407 306 404
Travel services.............................. 377 410 327 250 340
Facilities rental............................ 228 351 287 205 267
Marketing cooperation........................ 50 100 100 75 75
Other administrative costs................... 9 4 4 3 2
------- ------- ------- ------- -------
Total expenses..................... $17,476 $19,532 $27,812 $19,465 $28,909
======= ======= ======= ======= =======
</TABLE>
During the nine months ended September 30, 1999, the Travelocity Division
received a $1.7 million payment from an AMR affiliate in connection with the
termination of the use of a customer service center operated by the AMR
affiliate, which has been credited to cost of revenues.
F-17
<PAGE> 158
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Payable to Affiliates -- Amounts due to American and other subsidiaries of
AMR are due within 30 days of month end and are therefore considered to be
current liabilities. Amounts due to Sabre are considered non-current liabilities
as Sabre funds the Travelocity Division's losses. Interest expense is not
recorded by the Travelocity Division on amounts due to Sabre. A summary of
balances outstanding and the weighted average balances outstanding for the
periods indicated are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period................ $ -- $11,411 $38,976 $38,976 $55,594
Advances from affiliates...................... 11,411 27,565 21,722 16,572 12,959
Contributions by affiliates to division
equity...................................... -- -- (5,104) (5,104) --
------- ------- ------- ------- -------
Balance at end of period...................... $11,411 $38,976 $55,594 $50,444 $68,553
======= ======= ======= ======= =======
Weighted average balance of advances
outstanding................................. $ 6,003 $26,183 $44,683 $41,612 $63,008
======= ======= ======= ======= =======
</TABLE>
5. EMPLOYEE BENEFIT PLANS
Substantially all of the employees of the Travelocity Division, as a
division of Sabre, participate in The Sabre Group Retirement Plan (the "SGRP"),
a defined contribution plan qualified under Section 401(k) of the Internal
Revenue Code of 1986, and The Sabre Group Legacy Pension Plan (the "LPP"), a
tax-qualified defined benefit plan. Each of these plans was established on
January 1, 1997. Prior to 1997, substantially all of the Travelocity Division's
employees participated in a tax qualified defined benefit plan sponsored by
American.
Costs for participation in these plans have been allocated to the
Travelocity Division based on the number of employees participating in the plans
and are included in employee benefits in the table included in Note 4. Costs
allocated totaled approximately $118,000, $165,000 and $191,000 in 1996, 1997
and 1998, respectively.
Substantially all employees of the Travelocity Division may become eligible
for certain health care and life insurance benefits provided by American to
retired employees of the Travelocity Division. The amount of health care
benefits is limited to lifetime maximums as outlined in the plan. Certain
employee groups make contributions towards funding a portion of their retiree
health care benefits during their working lives and the Travelocity Division
matches the employee prefunding. Benefits provided to retired employees are
funded as incurred. The Travelocity Division recorded expenses related to health
care benefits of approximately $153,000, $155,000 and $170,000 in 1996, 1997 and
1998, respectively, which were allocated to the Travelocity Division based on
the number of Company employees participating in the plans and are included in
employee benefits in the table in Note 4.
F-18
<PAGE> 159
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
The provision (benefit) for income taxes differed from amounts computed at
the statutory federal income tax rate as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Statutory income tax benefit............................ $(4,537) $(6,552) $(7,448)
State income taxes, net of federal tax benefit.......... (421) (608) (692)
Losses for which no benefit has been recognized......... 4,956 7,155 8,135
Other................................................... 2 5 5
------- ------- -------
Total provision for income taxes.............. $ -- $ -- $ --
======= ======= =======
</TABLE>
The components of the Travelocity Division's deferred tax assets and
liabilities as of December 31, 1997 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
----- -----
<S> <C> <C>
Depreciation and amortization............................... $ 144 $ 690
Accrued expenses............................................ 90 294
----- -----
234 984
Less valuation allowance.................................... (234) (984)
----- -----
Total provision for income taxes.................. $ -- $ --
===== =====
</TABLE>
The losses attributable to the Travelocity Division's operations for the
years ended December 31, 1996, 1997 and 1998 have been included in the
consolidated income tax return of AMR. As the Travelocity Division has computed
its provision for income taxes as if it was a separate taxpayer, no tax benefit
for the losses has been recognized in the accompanying financial statements. The
Travelocity Division intends to enter into a tax sharing agreement with Sabre
and certain Sabre affiliates. The proposed agreement would not allow the
Travelocity Division to utilize net operating losses it has generated as an
operating division of Sabre. Accordingly, no deferred tax asset has been
recorded related to these operating losses.
7. COMMITMENTS AND CONTINGENCIES
In September 1998, the Travelocity Division entered into an operating lease
agreement with a third party for the lease of certain facilities in San Antonio.
At December 31, 1998, the future minimum lease payments required under this
operating lease agreement were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999................................................ $580
2000................................................ 587
2001................................................ 391
</TABLE>
Rental expense, excluding facilities rented from affiliates, was
approximately $200,000 for the year ended December 31, 1998. All rental expense
in 1996 and 1997 was with affiliated companies. See Note 4.
The Travelocity Division is involved in certain disputes arising in the
normal course of business. Although the ultimate resolution of these matters
cannot be reasonably estimated at this time, management does not believe that
they will have a material adverse effect on the financial condition or results
of operations of the Travelocity Division.
F-19
<PAGE> 160
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCK AWARDS AND OPTIONS
Prior to the Offering, officers and key employees of the Travelocity
Division were eligible, under AMR's 1988 Long-Term Incentive Plan (the "AMR
LTIP"), to be granted deferred stock, restricted stock, stock options, stock
appreciation rights, stock purchase rights and/or other stock based awards in
common stock of AMR ("AMR Common Stock").
In conjunction with the AMR LTIP, certain officers and key employees of the
Travelocity Division were awarded 3,800 shares of deferred AMR Common Stock
("AMR Career Equity Shares") at no cost to the officers and employees, to be
issued upon the individuals' retirement from AMR. In connection with the
Offering by Sabre, the AMR Career Equity Shares awarded to certain officers and
key employees of the Travelocity Division were exchanged for 8,600 restricted
shares of Sabre Class A Common Stock, with a weighted-average grant date fair
value of $27.00, and options to purchase 8,600 shares of Sabre Class A Common
Stock. Restricted shares generally vest over three years following the date of
grant. All of the restricted shares issued in connection with the Offering to
employees of the Travelocity Division were outstanding at December 31, 1996,
1997 and 1998.
Effective with the Offering, Sabre also established the 1996 Long-Term
Incentive Plan (the "1996 Plan") in which the employees of the Travelocity
Division participate. The 1996 LTIP was amended in May 1999. Under the 1996
Plan, officers and other key employees of the Travelocity Division may be
granted restricted stock, deferred stock, stock options, stock appreciation
rights, stock purchase rights, other stock based awards and/or performance
related awards.
The total charge for stock compensation expense related to grants of AMR or
Sabre stock made to employees of the Travelocity Division included in wages,
salaries and benefits expense was approximately $46,000, $87,000 and $316,000
for 1996, 1997 and 1998, respectively. No compensation expense has been
recognized for stock option grants under the AMR LTIP or the 1996 Plan because
the exercise price of stock options granted was equal to the fair market value
of the underlying stock on the date of grant.
In conjunction with the AMR LTIP, certain officers and key employees of the
Travelocity Division were also awarded, at no cost to the officers and
employees, deferred AMR Common Stock performance shares ("AMR Performance
Shares"). The AMR Performance Shares vest over a three-year performance period
based on performance metrics of AMR and the Travelocity Division, as defined in
the plan. In connection with the Offering, certain AMR Performance Shares
awarded to officers and key employees of the Travelocity Division were converted
into 1,590 deferred Sabre Class A Common Stock performance shares ("Sabre
Performance Shares") based on the initial public offering price of shares of
Sabre Class A Common Stock and the previous day's closing price of the AMR
Common Stock on the date of the Offering.
Sabre Performance Shares are also awarded at no cost to officers and key
employees of the Travelocity Division based on performance metrics of the
Travelocity Division and Sabre as defined in the 1996 Plan. The Sabre
Performance Shares vest over a three-year performance period and are settled in
cash. The Travelocity Division's Performance Share activity was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997 1998
------ ------- ------
<S> <C> <C> <C>
Outstanding at January 1.................................... -- 3,060 2,890
Issued upon conversion of AMR Performance Shares............ 1,590 -- --
Granted................................................... 1,470 1,660 1,990
Transfers................................................. -- 340 430
Canceled.................................................. -- (2,170) (940)
------ ------- ------
Outstanding at December 31................................ 3,060 2,890 4,370
====== ======= ======
</TABLE>
F-20
<PAGE> 161
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The weighted-average grant date fair values of Sabre Performance Shares
granted during 1996, 1997 and 1998 were $27.00, $26.25 and $35.75, respectively.
The grant date fair values are based on the price of Sabre's common stock price
on the date of grant.
In conjunction with the AMR LTIP, options to purchase shares of AMR Common
Stock ("AMR Options") were granted to officers and key employees of the
Travelocity Division. Options granted were exercisable at the market value upon
grant, generally becoming exercisable over one to five years following the date
of grant and expiring ten years from the date of grant. In connection with the
Offering, the AMR Options were exchanged for options to purchase 5,050 shares of
Sabre Class A Common Stock by employees of the Travelocity Division. The
exercise prices of the options to purchase Sabre Class A Common Stock were
computed by multiplying the initial public offering price of Sabre Class A
Common Stock by the ratio of the exercise prices of the AMR Options to the
previous day's closing price of AMR Common Stock at the date of the Offering.
The number of options was increased to maintain the aggregate intrinsic value of
each holder's options. These options will continue to vest in equal annual
installments over the original vesting period.
Options granted under the 1996 Plan to employees of the Travelocity
Division are granted at the market value of Sabre Class A Common Stock on the
date of grant, except as otherwise determined by a committee appointed by the
board of directors, generally vest over five years and are not exercisable more
than ten years after the date of grant. Stock option activity follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1997 1998
------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1............. -- -- 18,650 $25.11 20,650 $25.13
Issued upon exchange of AMR
Options............................ 5,050 $20.04 -- -- -- --
Issued upon exchange of AMR Career
Equity Shares...................... 8,600 27.00 -- -- -- --
Granted.............................. 5,000 27.00 5,500 26.26 10,650 35.75
Transfers............................ -- -- 850 27.00 1,100 35.75
Exercised............................ -- -- -- -- (5,120) 23.04
Canceled............................. -- -- (4,350) 26.85 (5,790) 32.58
------ ------ ------
Outstanding at December 31........... 18,650 25.11 20,650 25.13 21,490 29.44
====== ====== ======
Exercisable options outstanding at
December 31........................ 1,790 $20.03 5,130 $23.01 4,020 $24.91
====== ====== ======
</TABLE>
The weighted-average grant date fair values of stock options granted during
1996, 1997 and 1998 were $9.24, $9.45 and $12.86, respectively. The grant date
fair values were estimated at the date of grant using the Black-Scholes
option-pricing model.
F-21
<PAGE> 162
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE WEIGHTED- NUMBER OF WEIGHTED-
RANGE OF OPTIONS REMAINING LIFE AVERAGE OPTIONS AVERAGE
EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$16.52-$19.49...................... 640 5.82 $16.52 320 $16.52
$19.50-$24.49...................... 1,470 6.14 21.57 830 21.38
$24.50-$35.49...................... 11,480 7.88 26.83 2,870 26.87
$35.50-$43.60...................... 7,900 9.23 35.75 -- --
------ -----
Total.................... 21,490 8.20 $29.44 4,020 $24.91
====== =====
</TABLE>
For other stock-based awards, a committee established by the Sabre board of
directors determines the eligible persons to whom awards will be made, the times
at which the awards will be made, the number of shares to be awarded, the price,
if any, to be paid by the recipient and all other terms and conditions of the
award under the terms of the 1996 Plan at the time of grant.
Stock appreciation rights may be granted in conjunction with all or part of
any stock option granted under the 1996 Plan. All appreciation rights will
terminate upon termination or exercise of the related option and will be
exercisable only during the time that the related option is exercisable. If an
appreciation right is exercised, the related stock option will be deemed to have
been exercised. To date, no stock appreciation rights have been granted to
employees of the Travelocity Division.
Effective January 1, 1997, Sabre established The Sabre Group Holdings, Inc.
Employee Stock Purchase Plan (the "ESPP") in which the employees of the
Travelocity Division participate. The ESPP allows eligible employees the right
to purchase Sabre Class A Common Stock on a monthly basis at the lower of 85% of
the market price at the beginning or the end of each monthly offering period.
The ESPP allows each employee to acquire Sabre Class A Common Stock with an
aggregate maximum purchase price equal to either 1% or 2% of that employee's
annual base pay, subject to limitations under the Internal Revenue Code of 1986.
Shares of 1,001 and 1,574 were issued to the Travelocity Division's employees
during 1997 and 1998, respectively.
As required by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, pro forma information regarding net
income and earnings per share have been determined as if the Travelocity
Division had accounted for Sabre employee stock options issued to its employees
and stock-based awards under the fair value method set forth in Statement No.
123. The fair value for the stock options granted by Sabre to officers and key
employees of the Travelocity Division after January 1, 1995 was estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rate of 6.07% for 1996, 6.20%
to 6.70% for 1997 and 5.45% to 5.67% for 1998; a dividend yield of 0%; a
volatility factor of the expected market price of Sabre's Class A Common Stock
of .28 for 1996, .29 for 1997 and .32 for 1998; and a weighted-average expected
life of the options granted of 4.5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Sabre's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of Sabre employee stock options issued to its
employees.
F-22
<PAGE> 163
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For purposes of the pro forma disclosures, the estimated fair value of the
options and stock-based awards is amortized to expense over the vesting period.
The Travelocity Division's pro forma information is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported........................................ $(12,961) $(18,720) $(21,280)
======== ======== ========
Pro forma.......................................... $(12,965) $(18,737) $(21,305)
======== ======== ========
</TABLE>
9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1997 and 1998 (in thousands):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
Revenues....................................... $ 1,971 $ 2,135 $ 2,494 $ 2,687
Operating loss................................. (4,388) (4,333) (4,886) (5,114)
Net loss....................................... (4,388) (4,333) (4,885) (5,114)
1998
Revenues....................................... $ 3,861 $ 4,525 $ 5,677 $ 7,175
Operating loss................................. (5,909) (5,150) (5,144) (5,077)
Net loss....................................... (5,909) (5,150) (5,144) (5,077)
</TABLE>
10. SUBSEQUENT EVENTS
Proposed Merger with Preview Travel, Inc. On October 3, 1999 Sabre
announced the terms of an agreement to combine Travelocity.com Inc., a newly
formed wholly-owned subsidiary of Sabre Holdings Corporation and Preview Travel
in a holding company/partnership structure. When the transactions are completed,
Travelocity.com Inc. will be a holding company whose sole asset will be units of
Travelocity.com LP (the "Travelocity.com Partnership"). Sabre will also own
units of the Travelocity.com Partnership. The Travelocity.com Partnership will
ultimately own all of the assets and have all of the liabilities of the
Travelocity Division and Preview Travel.
Currently, the Travelocity Division is an operating division of Sabre
engaged in consumer direct Internet travel distribution. Immediately prior to
the merger, Sabre and TSGL Holding, Inc., a wholly owned subsidiary of Sabre,
will contribute the Travelocity Division and $50 million in cash to the
Travelocity.com Partnership and receive partnership units in exchange. Then
Sabre will contribute partnership units to Travelocity Holdings, Inc.
("Travelocity Holdings"), a wholly owned subsidiary of Sabre, as additional
paid-in-capital, and Travelocity Holdings will contribute a portion of those
partnership units to Travelocity.com Inc. as additional paid-in-capital, so that
those entities become partners in the Travelocity.com Partnership.
As a result, immediately prior to the merger, the Travelocity.com
Partnership will own the Travelocity Division and $50 million in cash. Sabre
will own the Travelocity.com Partnership through a combination of its direct
interest, its interest held through Travelocity Holdings and TSGL Holding, and
its interest held through Travelocity.com Inc.
In the merger, Preview Travel, which is also engaged in consumer direct
Internet travel distribution, will be merged with and into Travelocity.com Inc.
Travelocity.com Inc. will be the surviving corporation.
F-23
<PAGE> 164
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Each share of Preview Travel common stock will be converted into one share of
Travelocity.com Inc.'s common stock. Approximately 14 million shares of
Travelocity.com Inc.'s common stock will be issued to former Preview Travel
stockholders in the merger. The shares of Travelocity.com Inc.'s common stock
beneficially held by Sabre will be converted in the merger into 33 million
shares of Series A Preferred Stock.
The preferred stock is convertible into 3 million shares of Travelocity.com
Inc.'s common stock, and the preferred stock receives dividends and
distributions on a basis as if it were converted into common stock.
Economically, therefore, Travelocity.com Inc. will have approximately 17 million
common stock equivalent shares outstanding after the merger. The shares of
common stock issued to former Preview Travel stockholders will represent an
approximate 82% (14 million out of 17 million) equity interest in
Travelocity.com Inc., and the shares of preferred stock issued to Sabre will
represent an approximate 18% (3 million out of 17 million) equity interest in
Travelocity.com Inc.
Immediately after the merger, Travelocity.com Inc. will contribute all of
the Preview Travel assets and liabilities to the Travelocity.com Partnership. In
exchange, Travelocity.com Inc. will receive additional units of the
Travelocity.com Partnership representing in total an approximate 36% equity
interest in the Travelocity.com Partnership.
As a result, the current Preview Travel stockholders will become
Travelocity.com Inc.'s public stockholders and will receive shares of common
stock in the merger that equates to approximately a 30% equity interest in the
Travelocity.com Partnership -- that is, 82% (their equity interest in
Travelocity.com Inc.) of the 36% equity interest in the Travelocity.com
Partnership held by Travelocity.com Inc.
Sabre will beneficially hold an approximate 70% equity interest in the
Travelocity.com Partnership -- that is:
- a 64% equity interest held directly or through its affiliates, plus
- a 6% equity interest held through Travelocity.com Inc. -- that is, 18%
(its equity interest in Travelocity.com Inc.) of 36% (Travelocity.com
Inc.'s equity interest in the Travelocity.com Partnership).
In connection with the closing of the merger, Travelocity.com Inc., the
Travelocity.com Partnership, Sabre and certain Sabre's affiliates will enter
into certain agreements governing the operations of the Travelocity.com
Partnership, the management of the Travelocity.com Partnership by Travelocity
Holdings, the contributions of the assets and liabilities of the Travelocity
Division and Preview Travel to the Travelocity.com Partnership and other
agreements related to the separation of the Travelocity Division from Sabre.
Significant Relationships. The agreement with Yahoo! was amended in October
1999 to extend the term of the agreement and modify certain other terms of the
agreement, including the payment commitment for 2000. In August 1999, the
Travelocity Division entered into an agreement with Infoseek/ Go Network
establishing it as the preferred provider of air, car and hotel booking and
reservation services
F-24
<PAGE> 165
TRAVELOCITY DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
on the Go Network through 2001. In connection with these agreements and those
described in Note 3, the Travelocity Division is committed to make aggregate
future minimum payments as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999............................................... $ 5,783
2000............................................... 15,883
2001............................................... 8,492
2002............................................... 8,000
-------
$38,158
=======
</TABLE>
On October 2, 1999, Travelocity Holdings entered into an Interactive
Services and Exclusive Channel Agreement (the "AOL Agreement") with America
Online, Inc. ("AOL"). The AOL Agreement provides, among other things, that (a)
the Travelocity.com site will be the exclusive reservations engine for AOL's
internet properties; (b) required payments of up to $200 million will be made to
AOL and advertising revenue and commissions will be shared; and (c) the term of
the agreement is five years and may be extended under certain conditions. The
AOL Agreement may be terminated by either party in the event that the proposed
merger as described above is not completed.
Stock Options and Awards. On October 1, 1999, Travelocity Holdings and the
Travelocity.com Partnership each adopted a long-term incentive plan and granted
to employees of the Travelocity Division 456,400 and 286,000, respectively,
options to purchase shares of Travelocity.com Inc.'s stock. The options vest 25%
on the first anniversary of the date of grant and monthly thereafter until fully
vested on the fourth anniversary of the grant. The options granted have an
exercise price of $23 per share, the estimated fair market value of
Travelocity.com Inc.'s stock on the date of grant.
Employees of the Travelocity Division and other Sabre employees who will
become employees of the Travelocity.com Partnership or Travelocity Holdings will
be given the option to convert unvested Sabre options to options to acquire
Travelocity.com Inc.'s stock. It is currently estimated that approximately
113,000 unvested options will be converted into 282,000 options to acquire
Travelocity.com Inc.'s stock, based upon a Sabre common stock price of $50.00
per share and a price of Travelocity.com Inc.'s common stock $20.00 per share.
The actual number of options will be determined so that the employees maintain
the aggregate value between the exercise price of the option and the previous
day's closing price of Sabre common stock. The conversion of the Sabre options
to options to acquire Travelocity.com Inc.'s stock will result in a new
measurement date for the options. Under the above pricing scenario, compensation
expense of approximately $1.7 million will be amortized over the remaining
vesting period of an average of 20 months.
F-25
<PAGE> 166
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
OCTOBER 3, 1999,
AS AMENDED JANUARY 24, 2000
BY AND AMONG
SABRE INC.,
TRAVELOCITY HOLDINGS, INC.,
TRAVELOCITY.COM INC.
AND
PREVIEW TRAVEL, INC.
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<PAGE> 167
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE TRANSACTIONS.................................. A-6
ARTICLE II THE MERGER....................................... A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PREVIEW....... A-11
Section 3.1 Organization, Standing and Power............. A-11
Section 3.2 Capital Structure............................ A-11
Section 3.3 Authority; No Conflicts...................... A-12
Section 3.4 Reports and Financial Statements............. A-13
Section 3.5 Information Supplied......................... A-13
Section 3.6 Vote Required; DGCL.......................... A-14
Section 3.7 Rights Agreement............................. A-14
Section 3.8 Brokers or Finders........................... A-14
Section 3.9 Opinion of Financial Advisor................. A-14
Section 3.10 Absence of Certain Changes................... A-14
Section 3.11 Litigation and Liabilities................... A-15
Section 3.12 No Violation of Law; Permits................. A-15
Section 3.13 Employee Matters; ERISA...................... A-16
Section 3.14 Labor Matters................................ A-17
Section 3.15 Tax Matters.................................. A-17
Section 3.16 Contracts.................................... A-18
Section 3.17 Intellectual Property........................ A-20
Section 3.18 Year 2000 Compliance......................... A-21
Section 3.19 No Termination of Business Relationship...... A-21
Section 3.20 Insurance.................................... A-21
Section 3.21 Disclosure................................... A-21
Section 3.22 AOL Agreements............................... A-22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SABRE,
TRAVELOCITY HOLDINGS AND TRAVELOCITY.COM.................. A-22
Section 4.1 Organization, Standing and Power............. A-22
Section 4.2 Authority; No Conflicts...................... A-22
Section 4.3 Financial Statements......................... A-23
Section 4.4 Information Supplied......................... A-23
Section 4.5 Vote Required; DGCL.......................... A-23
Section 4.6 Brokers or Finders........................... A-24
Section 4.7 No Business Activities....................... A-24
Section 4.8 Absence of Certain Changes................... A-24
Section 4.9 Litigation and Liabilities................... A-24
Section 4.10 No Violation of Law; Permits................. A-25
Section 4.11 Employee Matters/ ERISA...................... A-25
Section 4.12 Labor Matters................................ A-26
Section 4.13 Contracts.................................... A-27
Section 4.14 Intellectual Property........................ A-28
Section 4.15 Year 2000 Compliance......................... A-28
Section 4.16 No Termination of Business Relationship...... A-29
Section 4.17 Insurance.................................... A-29
Section 4.18 Sufficiency of Assets........................ A-29
Section 4.19 Disclosure................................... A-29
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE V COVENANTS......................................... A-29
Section 5.1 Covenants of Preview......................... A-29
Section 5.2 Covenants of Sabre........................... A-32
Section 5.3 Advice of Changes; Regular Reporting;
Governmental Filings................................... A-33
Section 5.4 Transition Planning.......................... A-34
ARTICLE VI ADDITIONAL AGREEMENTS............................ A-34
Section 6.1 Preparation of Form S-4 and Proxy Statement;
Preview Stockholders Meeting........................... A-34
Section 6.2 Access to Information........................ A-35
Section 6.3 Reasonable Best Efforts...................... A-35
Section 6.4 No Solicitation.............................. A-36
Section 6.5 Employee Matters............................. A-38
Section 6.6 Fees and Expenses............................ A-38
Section 6.7 Director and Officer Liability............... A-38
Section 6.8 Public Announcements......................... A-39
Section 6.9 Accountants' Letters......................... A-39
Section 6.10 Listing of Shares of Travelocity.com Common
Stock.................................................. A-39
Section 6.11 Officers and Senior Management............... A-39
Section 6.12 Year 2000 Compliance......................... A-39
ARTICLE VII CONDITIONS PRECEDENT............................ A-39
Section 7.1 Conditions to Each Party's Obligation to
Effect the Merger...................................... A-39
Section 7.2 Additional Conditions to Obligations of Sabre,
Travelocity Holdings and Travelocity.com...... A-40
Section 7.3 Additional Conditions to Obligations of
Preview................................................ A-40
ARTICLE VIII TERMINATION AND AMENDMENT...................... A-41
Section 8.1 Termination.................................. A-41
Section 8.2 Effect of Termination........................ A-42
Section 8.3 Termination Fee.............................. A-42
ARTICLE IX GENERAL PROVISIONS............................... A-43
Section 9.1 Non-Survival of Representations and
Warranties............................................. A-43
Section 9.2 Notices...................................... A-43
Section 9.3 Interpretation............................... A-44
Section 9.4 Counterparts................................. A-44
Section 9.5 Entire Agreement............................. A-44
Section 9.6 Governing Law................................ A-44
Section 9.7 Severability................................. A-44
Section 9.8 Successors and Assigns....................... A-45
Section 9.9 Jurisdiction................................. A-45
Section 9.10 Waiver of Jury Trial......................... A-45
Section 9.11 Amendments; No Waivers....................... A-45
Section 9.12 Definitions.................................. A-45
Section 9.13 Other Agreements............................. A-46
</TABLE>
A-3
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------
<S> <C>
Acquisition Proposal........................................ 6.4
Agreement................................................... Preamble
Ancillary Agreements........................................ 1.2(d)
Blue Sky Laws............................................... 3.3(c)
Board of Directors.......................................... 9.12(a)
Business Day................................................ 9.12(b)
Certificate................................................. 2.1(b)
Certificate of Merger....................................... 1.3(b)
Closing..................................................... 1.3(a)
Closing Date................................................ 1.3(a)
Code........................................................ Recitals
Confidentiality Agreement................................... 6.2(c)
Contracts................................................... 3.16(a)
DGCL........................................................ Recitals
Effective Time.............................................. 1.3(b)
ESPP........................................................ 3.2(a)
Exchange Act................................................ 3.3(c)
Exchange Agent.............................................. 2.2(a)
Exchange Fund............................................... 2.2(a)
Expenses.................................................... 6.6
Financial Advisor........................................... 3.8
Form S-4.................................................... 6.1(a)
Governmental Entity......................................... 3.3(c)
HSR Act..................................................... 3.3(c)
Indemnitees................................................. 6.7.(a)
Knowledge................................................... 9.12(c)
Limited Partnership Agreement............................... 1.2(c)
Management Services Agreement............................... 1.2(c)
Material Adverse Effect..................................... 9.12(d)
Parties..................................................... Preamble
Party....................................................... Preamble
Pension Plan................................................ 3.13(c)
Person...................................................... 9.12(e)
Preview..................................................... Preamble
Preview Assignments......................................... 1.2(b)
Preview Benefit Plan........................................ 3.13(a)
Preview Common Stock........................................ Recitals
Preview Contribution Agreement.............................. 1.2(b)
Preview Disclosure Schedule................................. 3
Preview Employee............................................ 3.13(b)
Preview Employees........................................... 3.13(b)
Preview ERISA Affiliate..................................... 3.13(d)
Preview Fairness Opinion.................................... 3.9
Preview Multiemployer Plan.................................. 3.13(a)
Preview Pension Plan........................................ 3.13(c)
Preview SEC Reports......................................... 3.4
Preview Stock Option........................................ 2.3(a)
Preview Stock Option Plan................................... 3.2(a)
Preview Stockholders Meeting................................ 6.1(b)
Preview Voting Debt......................................... 3.2(b)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------
<S> <C>
Proxy Statement/Prospectus.................................. 6.1(a)
Required Preview Vote....................................... 3.6(a)
Required Travelocity.com Vote............................... 4.5(a)
Rights...................................................... 3.2(a)
Rights Agreement............................................ 3.2(a)
Sabre....................................................... Preamble
Sabre Assignments........................................... 1.2(a)
Sabre Benefit Plan.......................................... 4.11(a)
Sabre Contribution Agreements............................... 1.2(a)
Sabre Disclosure Schedule................................... 4
Sabre ERISA Affiliate....................................... 4.11(d)
Sabre Multiemployer Plan.................................... 4.11(a)
Sabre Pension Plan.......................................... 4.11(c)
Sabre SEC Reports........................................... 4.8
Sabre Stock Option.......................................... 2.3(b)
SEC......................................................... 3.4
Securities Act.............................................. 2.3(e)
Subsidiary.................................................. 9.12(f)
Superior Proposal........................................... 6.4
Surviving Corporation....................................... 1.1
Systems..................................................... 3.18
Tax Return.................................................. 3.15
Tax, Taxes and Taxable...................................... 3.15
Termination Date............................................ 8.1(b)
Travelocity Business........................................ Recitals
Travelocity Business Employee............................... 4.11(b)
Travelocity Business Employees.............................. 4.11(b)
Travelocity Holdings........................................ Preamble
Travelocity.com............................................. Preamble
Travelocity.com Certificate................................. 1.4(a)
Travelocity.com Class A Common Stock........................ 2.1(a)
Travelocity.com Class B Common Stock........................ 2.1(a)
Travelocity.com Common Stock................................ 2.1(a)
Travelocity.com LP.......................................... Recitals
Travelocity.com Series A Preferred Stock.................... 2.1(a)
Violation................................................... 3.3(b)
Year 2000 Compliant......................................... 3.18
Year 2000 Plan.............................................. 3.18
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 3, 1999 (this
"Agreement"), by and among Sabre Inc., a Delaware corporation ("Sabre"),
Travelocity Holdings, Inc., a Delaware corporation ("Travelocity Holdings") and
a wholly owned subsidiary of Sabre, Travelocity.com Inc., a Delaware corporation
and a wholly owned subsidiary of Travelocity Holdings ("Travelocity.com"), and
Preview Travel, Inc., a Delaware corporation ("Preview"). Sabre, Travelocity
Holdings, Travelocity.com and Preview are sometimes referred to herein
individually as a "Party," and collectively as the "Parties."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Sabre and Preview have
determined to combine Sabre's business of providing consumer-direct travel
content and travel reservation services through an internet web site or web
sites, online, wireless, cable or other consumer-direct services as existing on
the date hereof and reflected in the Sabre Contribution Agreements (the
"Travelocity Business") and Preview's business pursuant to a series of
transactions outlined in this Agreement into a new entity, Travelocity.com LP, a
Delaware limited partnership ("Travelocity.com LP");
WHEREAS, in connection with the foregoing combination, the Parties intend
that Preview shall merge with and into Travelocity.com;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as an inducement to the willingness of Sabre, Travelocity Holdings and
Travelocity.com to enter into this Agreement, certain holders of shares of
common stock, par value $.001, of Preview ("Preview Common Stock") have each
entered into Voting Agreements dated as of the date hereof pursuant to which
such holders have agreed to vote their shares of Preview Common Stock in the
manner set forth therein;
WHEREAS, the Boards of Directors of Preview and Travelocity.com have each
approved this Agreement and deem it advisable and in the best interests of their
respective stockholders to consummate the Merger on the terms and conditions set
forth in this Agreement in accordance with the Delaware General Corporation Law,
as amended (the "DGCL"); and
WHEREAS, it is intended that, for federal income tax purposes, the Merger
will qualify as a reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the rules and regulations promulgated
thereunder.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE I
THE TRANSACTIONS
Section 1.1 The Merger. At the Effective Time and subject to and upon the
terms and conditions of this Agreement and in accordance with the DGCL, Preview
shall be merged with and into Travelocity.com and the separate corporate
existence of Preview shall cease. Travelocity.com shall continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") in the Merger, and shall continue to be governed by the laws of
the State of Delaware. The Merger shall have the effects specified in the DGCL.
Section 1.2 Assignments to New Travelocity and
Travelocity.com. (a) Immediately prior to the Effective Time, each of Sabre and
Travelocity Holdings shall take such action or actions as is necessary to cause,
effect and consummate the transfers, contributions, assignments, conveyances and
other transactions that may be required to be accomplished, effected or
consummated by Sabre and Travelocity Holdings or any of their respective
Subsidiaries or affiliates in order to separate and divide the existing business
of Sabre so that the Travelocity Business is owned directly by Travelocity.com
LP (the "Sabre Assignments"), including, without limitation, pursuant to the
Bill of Contribution, Assignment and
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Assumption Agreement by and between Sabre and Travelocity.com LP, substantially
in the form of Exhibit 1.2(a)(i), and pursuant to the Bill of Contribution,
Assignment and Assumption Agreement by and between TSGL Holding, Inc., an
affiliate of Sabre, and Travelocity.com LP, substantially in the form of Exhibit
1.2(a)(ii) (collectively, the "Sabre Contribution Agreements"). The Parties
agree that any one or more of the Sabre Assignments may be modified,
supplemented or eliminated; provided that such modification, supplement or
elimination is necessary or appropriate to divide the existing business of Sabre
so that the Travelocity Business shall be owned directly by Travelocity.com LP
and does not individually and in the aggregate affect the business of
Travelocity.com LP (other than to a de minimis extent).
(b) Immediately after the Effective Time, the Surviving Corporation
shall take such action or actions as is necessary to cause, effect and
consummate the transfers, contributions, assignments, conveyances and other
transactions that may be required to be accomplished, effected or
consummated by the Surviving Corporation or its Subsidiaries or affiliates
so that Preview's business is owned directly by Travelocity.com LP (the
"Preview Assignments"), including without limitation, pursuant to the Bill
of Contribution, Assignment and Assumption Agreement by and between
Travelocity.com and Travelocity.com LP substantially in the form of Exhibit
1.2(b) (the "Preview Contribution Agreement").
(c) Immediately after the Effective Time, Travelocity Holdings, Sabre,
Travelocity.com and certain of their affiliates shall enter into the
Amended and Restated Agreement of Limited Partnership of Travelocity.com
LP, substantially in the form of Exhibit 1.2(c)(i) (the "Limited
Partnership Agreement") and Travelocity Holdings and Travelocity.com LP
shall enter into the Management Services Agreement, substantially in the
form of Exhibit 1.2(c)(ii) (the "Management Services Agreement").
(d) Immediately prior to the Effective Time, Sabre shall enter into
the following intercompany agreements with Travelocity.com LP or
Travelocity.com, as the case may be: (i) an Access Agreement, substantially
in accordance with the terms set forth on Exhibit 1.2(d)(i), (ii) a
Technology Services Agreement, substantially in accordance with the terms
set forth on Exhibit 1.2(d)(ii), (iii) an Intellectual Property Agreement,
substantially in accordance with the terms set forth on Exhibit
1.2(d)(iii), (iv) an Administrative Services Agreement, substantially in
accordance with the terms set forth in Exhibit 1.2(d)(iv), (v) a
Facility/Leasing Agreement, substantially in accordance with the terms set
forth in Exhibit 1.2(d)(v), (vi) a Cash and Short-Term Investments
Agreement, substantially in accordance with the terms set forth in Exhibit
1.2(d)(vi), (vii) a Non-Competition Agreement, substantially in accordance
with the terms set forth on Exhibit 1.2(d)(vii), (viii) an Option Agreement
substantially in the form of Exhibit 1.2(d)(viii), and (ix) a Registration
Rights Agreement substantially in the form of Exhibit 1.2(d)(ix)
(collectively, and together with the Sabre Contribution Agreements, the
Preview Contribution Agreement, the Management Services Agreement and the
Limited Partnership Agreement, the "Ancillary Agreements").
Section 1.3 The Closing; Effective Time. (a) The closing of the Merger
(the "Closing") shall take place (i) at the offices of Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York, 10004, at 10:00 A.M.
local time, on the second Business Day following the date on which the last to
be satisfied or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or, where permitted, waiver of those conditions)
shall be satisfied or waived in accordance with this Agreement or (ii) at such
other place, time and/or date as Sabre and Preview shall agree (the date of the
Closing, the "Closing Date").
(b) On the Closing Date, Travelocity.com and Preview shall cause a
certificate of merger (the "Certificate of Merger") in respect of the
Merger to be properly executed and filed with the Secretary of State of the
State of Delaware. The Merger shall become effective at the time at which
the Certificate of Merger shall have been duly filed with the Secretary of
State of the State of Delaware or at such later time reflected in the
Certificate of Merger as shall have been agreed by Sabre and
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Preview in accordance with the DGCL (the time that the Merger becomes
effective, the "Effective Time").
Section 1.4 Certificate of Incorporation; Bylaws; Listing Symbol. Unless
otherwise agreed by Sabre and Preview prior to the Closing, at the Effective
Time:
(a) The certificate of incorporation of Travelocity.com shall be
amended to read in its entirety as set forth in Exhibit 1.4(a) and, as so
amended, shall be the certificate of incorporation of the Surviving
Corporation, until duly amended in accordance with applicable law (the
"Travelocity.com Certificate").
(b) The bylaws of Travelocity.com shall be substantially in the form
set forth in Exhibit 1.4(b) and shall be the Bylaws of the Surviving
Corporation, until duly amended in accordance with applicable law.
(c) Travelocity.com shall use its reasonable best efforts to obtain
TVLY as its listing symbol on the Nasdaq.
ARTICLE II
THE MERGER
Section 2.1 Conversion of Common Stock of Preview and Exchange of
Certificates. (a) At the Effective Time, by virtue of the Merger and without any
action on the part of any Person:
(i) each share of Preview Common Stock issued and held in Preview's
treasury at the Effective Time shall cease to be outstanding and shall
be canceled and retired without payment of any consideration therefore;
(ii) each share of Preview Common Stock issued and outstanding
immediately prior to the Effective Time, and all rights in respect
thereof, shall be converted into one share of Common Stock, $.001 par
value, of Travelocity.com (the "Travelocity.com Common Stock");
(iii) each share of Class A Common Stock, $.001 par value, of
Travelocity.com ("Travelocity.com Class A Common Stock") issued and
outstanding immediately prior to the Effective Time, and all rights in
respect thereof, shall be converted into the number of shares of Series
A Preferred Stock, $.001 par value, of Travelocity.com (the
"Travelocity.com Series A Preferred Stock") equal to (x) 33,000,000,
divided by (y) the number of shares of Travelocity.com Class A Common
Stock issued and outstanding immediately prior to the Effective Time;
and
(iv) each share of Class B Common Stock, $.001 par value, of
Travelocity.com ("Travelocity.com Class B Common Stock") issued and
outstanding immediately prior to the Effective Time, and all rights in
respect thereof, shall be converted into one share of Travelocity.com
Common Stock.
(b) As a result of the Merger and without any action on the part of
the holder thereof, all shares of Preview Common Stock shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate (a "Certificate") representing any shares of
Preview Common Stock shall thereafter cease to have any rights with respect
thereto, except the right to receive, without interest, Travelocity.com
Common Stock in accordance with Section 2.2(a) upon the surrender of such
certificates.
Section 2.2 Exchange of Certificates Representing Preview Common
Stock. (a) As of the Effective Time, Travelocity.com shall deposit, or shall
cause to be deposited, with an exchange agent mutually acceptable to Preview and
Sabre (the "Exchange Agent"), for the benefit of the holders of shares of
Preview Common Stock, for exchange in accordance with this Article II,
certificates representing the
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shares of Travelocity.com Common Stock (such certificates for shares of
Travelocity.com Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 2.2 in exchange for outstanding shares of Preview
Common Stock.
(b) Promptly after the Effective Time, Travelocity.com shall cause the
Exchange Agent to mail to each Preview holder of record of a Certificate or
Certificates (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Travelocity.com may
reasonably specify and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of
Travelocity.com Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing the number of
shares of Travelocity.com Common Stock equal to the number of shares of
Preview Common Stock represented by such Certificate and (y) a check
representing the amount of unpaid dividends and distributions, if any,
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article II and the
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the unpaid dividends and distributions, if any, payable
to holders of Certificates. In the event of a transfer of ownership of
Preview Common Stock which is not registered in the transfer records of
Preview, a certificate representing the proper number of shares of
Travelocity.com Common Stock may be issued to such a transferee if the
Certificate representing such Preview Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. Until delivered and exchanged for Travelocity.com
Common Stock as contemplated by this Section 2.2, each Certificate
representing Preview Common Stock shall be deemed at any time after the
Effective Time to represent only the right to receive upon such delivery
the Certificate representing shares of Travelocity.com Common Stock as
contemplated by Section 2.2.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on Travelocity.com Common Stock shall be
paid with respect to any shares of Preview Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Travelocity.com Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such Travelocity.com
Common Stock and not paid, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such Travelocity.com Common Stock.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Preview of the shares of Preview Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing Preview Common Stock are
presented to Travelocity.com, they shall be canceled and exchanged for
certificates for shares of Travelocity.com Common Stock pursuant to this
Agreement in accordance with the procedures set forth in this Article II.
(e) Any portion of the Exchange Fund that remains unclaimed by the
former stockholders of Preview one year after the Effective Time shall be
delivered to Travelocity.com. Any former stockholders of Preview who have
not theretofore complied with this Article II shall thereafter look only to
Travelocity.com for payment of their shares of Travelocity.com Common
Stock, and unpaid dividends and distributions on the Travelocity.com Common
Stock deliverable in respect of each
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share of Preview Common Stock such stockholder holds as determined pursuant
to this Agreement, in each case, without any interest thereon.
(f) None of Travelocity.com, Preview, the Exchange Agent or any other
person shall be liable to any former holder of shares of Preview Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by Travelocity.com, the posting by such person of a bond in such reasonable
amount as Travelocity.com may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
shares of Travelocity.com Common Stock and unpaid dividends and
distributions on shares of Travelocity.com Common Stock deliverable in
respect thereof pursuant to this Agreement.
Section 2.3 Stock Options and Equity Awards. (a) At the Effective Time,
each outstanding employee, director or consultant option to purchase shares of
Preview Common Stock (a "Preview Stock Option") granted under Preview's Stock
Option Plans or otherwise, whether vested or not vested, shall be assumed by
Travelocity.com. As of and after the Effective Time (i) each Preview Stock
Option then outstanding shall be converted into a stock option to acquire the
number of shares of Travelocity.com Common Stock equal to the number of shares
of Preview Common Stock subject to such Preview Stock Option immediately prior
to the Effective Time, and (ii) the exercise price per share of Travelocity.com
Common Stock subject to any such converted Preview Stock Option shall be an
amount equal to the exercise price per share of Preview Common Stock subject to
the underlying Preview Stock Option immediately prior to the Effective Time.
Other than as provided above, as of and after the Effective Time, each
Travelocity.com stock option that had been a Preview Stock Option immediately
prior to the Effective Time shall be subject to the same terms and conditions as
in effect immediately prior to the Effective Time, including the timing of the
vesting of such options.
(b) At the Effective Time, each outstanding employee, director or
consultant option to purchase shares of Sabre Class A Common Stock $.01 par
value, (a "Sabre Stock Option") granted under Sabre's Stock Option Plans or
otherwise but not exceeding the amount set forth on Schedule 2.3(b),
whether vested or not vested, may be assumed by Travelocity.com as provided
in this Section 2.3(b). As of and after the Effective Time (i) each Sabre
Stock Option then outstanding, with respect to which both Sabre and the
holder thereof have consented to such conversion, shall be converted into a
stock option to acquire the number (rounded down to the nearest whole
number) of shares of Travelocity.com Common Stock determined by multiplying
(x) the number of shares of Sabre Class A Common Stock subject to such
Sabre Stock Option immediately prior to the Effective Time by (y) the
Option Exchange Ratio, and (ii) the exercise price per share of
Travelocity.com Common Stock subject to any such converted Sabre Stock
Option shall be an amount (rounded down to the nearest one-hundredth of a
cent) equal to (x) the exercise price per share of Sabre Class A Common
Stock subject to the underlying Sabre Stock Option immediately prior to the
Effective Time, divided by (y) the Option Exchange Ratio. Other than as
provided above, as of and after the Effective Time, each Travelocity.com
stock option that had been a Sabre Stock Option immediately prior to the
Effective Time shall be subject to the same terms and conditions as in
effect immediately prior to the Effective Time. For purposes of this
Section 2.3(b), the "Option Exchange Ratio" shall equal (x) the average
closing price per share of the Sabre Class A Common Stock for the ten (10)
trading days ending on the trading day immediately prior to the Closing
Date, divided by (y) the average closing price per share of the Preview
Common Stock for the ten (10) trading days ending on the trading day
immediately prior to the Closing Date; provided, however, that if Sabre
Holdings Corporation, in connection with the payment of a cash dividend
with an ex-dividend date that occurs within such period of ten (10) trading
days, adjusts the number of Sabre Stock Options held by any person whose
Sabre Stock Options are assumed by Travelocity.com pursuant to this Section
2.3(b), then for purposes of the calculation of the Option Exchange Ratio
with respect to such person, the closing
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price per share of the Sabre Class A Common Stock on each trading day prior
to such ex-dividend date shall be reduced by the per share amount of such
cash dividend.
(c) At the Effective Time, each outstanding option to purchase shares
of Travelocity.com Class B Common Stock shall be converted into an option
to acquire an equal number of shares of Travelocity.com Common Stock,
subject to the same terms and conditions as in effect immediately prior to
the Effective Time.
(d) Travelocity.com shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Travelocity.com
Common Stock for delivery upon exercise of Preview Stock Options and Sabre
Stock Options and settlement of other stock-based awards of Preview at and
after the Effective Time.
(e) On or as soon as practicable after the Effective Time,
Travelocity.com shall file with the SEC a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Travelocity.com Common Stock subject
to Preview Stock Options and Sabre Stock Options and other stock-based
awards of Preview, and shall use its reasonable best efforts to maintain
the current status of the prospectus contained therein, as well as comply
with any applicable Blue Sky Laws, for so long as such options or other
stock-based awards remain outstanding.
Section 2.4 Adjustments. If at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of Preview shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any similar transaction, or any stock dividend thereon with a record
date during such period, the number of shares of Travelocity.com Series A
Preferred Stock or Travelocity.com Common Stock (or options to acquire such
shares) issuable pursuant to this Agreement shall be appropriately adjusted to
provide the holders of shares of Preview Common Stock the same economic effect
as contemplated by this Agreement prior to such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PREVIEW
Except as set forth in the Preview Disclosure Schedule delivered by Preview
to Sabre prior to the execution of this Agreement (the "Preview Disclosure
Schedule"), Preview represents and warrants to Sabre, Travelocity Holdings and
Travelocity.com as follows:
Section 3.1 Organization, Standing and Power. Preview and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify would
not, either individually or in the aggregate, have a Material Adverse Effect on
Preview. The copies of the certificate of incorporation and by-laws of Preview
which were previously furnished to Sabre are true, complete and correct copies
of such documents as in effect on the date of this Agreement.
Section 3.2 Capital Structure. (a) As of October 3, 1999, the authorized
capital stock of Preview consisted of (A) 50,000,000 shares of Common Stock, of
which 13,935,243 shares were outstanding and (B) 5,000,000 shares of preferred
stock, of which 100,000 shares of Series A Participating Preferred Stock have
been designated and reserved for issuance upon exercise of the rights (the
"Rights") distributed to the holders of Preview Common Stock pursuant to the
Preferred Shares Rights Agreement dated as of October 29, 1998 between Preview
and U.S. Stock Transfer Corporation, as rights agent, as amended (the "Rights
Agreement"). Since October 3, 1999 to the date of this Agreement, there have
been no issuances of shares of the capital stock of Preview or any other
securities of Preview other than issuances of shares
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(and accompanying Rights) pursuant to options or rights outstanding as of
October 3, 1999 under the Preview Benefit Plans. All issued and outstanding
shares of the capital stock of Preview are duly authorized, validly issued,
fully paid and nonassessable, and no class of capital stock is entitled to
preemptive rights. There were outstanding as of October 3, 1999 no options,
warrants or other rights to acquire capital stock from Preview other than (w)
the Rights, (x) options representing in the aggregate the right to purchase
3,089,295 shares of Preview Common Stock at a weighted average exercise price of
$17.27 per share under Preview's 1988 Stock Option Plan, Preview's 1997 Stock
Option Plan and Preview's 1997 Directors' Stock Option Plan (collectively, the
"Preview Stock Option Plans"), and (y) rights to purchase shares of Preview
Common Stock under the Preview 1997 Employee Stock Purchase Plan (the "ESPP").
No options or warrants or other rights to acquire capital stock from Preview
have been issued or granted since October 3, 1999, other than (i) the associated
Rights issued with the shares issued as described above, (ii) options to
purchase no more than 100,000 shares of Preview Common Stock granted in the
ordinary course of business to non-executive employees and having an exercise
price not less than the current market price of Preview Common Stock on the date
of grant and (iii) options to purchase up to that number of shares of Preview
Common Stock equal to the number of shares subject to outstanding options that
expire unexercised after the date hereof, provided that such options are granted
with the consent of Sabre and have an exercise price not less than the current
market price of Preview Common Stock on the date of grant.
(b) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of Preview having the right to vote on any matters on
which stockholders may vote ("Preview Voting Debt") are issued or
outstanding.
(c) All of the outstanding shares of capital stock and other equity
securities of Preview's Subsidiaries have been duly authorized, validly
issued and are fully paid and nonassessable and are owned, directly or
indirectly, by Preview, free and clear of all pledges and security
interests.
(d) Except as otherwise set forth in this Section 3.2, as of the date
of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which Preview or any of its Subsidiaries is a party or by which any of
them is bound obligating Preview or any of its Subsidiaries to issue,
deliver, register or sell, or cause to be issued, delivered, registered or
sold, additional shares of capital stock or other voting securities of
Preview or any of its Subsidiaries or obligating Preview or any of its
Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of Preview or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Preview or any of its
Subsidiaries. There are no voting trusts, proxies or other agreements or
understandings to which Preview is a party with respect to the voting of
capital stock of Preview.
Section 3.3 Authority; No Conflicts. (a) Preview has all requisite
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which Preview will be a party and to consummate the transactions
contemplated hereby and thereby, subject in the case of the consummation of the
Merger to the approval of this Agreement and the Merger by the Required Preview
Vote. The execution and delivery of this Agreement and the Ancillary Agreements
to which Preview will be a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Preview, subject in the case of the consummation
of the Merger to the approval of this Agreement and the Merger by the Required
Preview Vote. This Agreement has been, and the Ancillary Agreements to which
Preview will be a party will be, duly executed and delivered by Preview and
constitute a valid and binding agreement of Preview, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally or by general equity principles.
(b) The execution and delivery of this Agreement does not and the
execution and delivery of the Ancillary Agreements to which Preview will be
a party will not, and the consummation of the Merger
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and the other transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to a right
of termination, amendment, cancellation or acceleration of any obligation
or the loss of a material benefit under, or the creation of a lien, pledge,
security interest, charge or other encumbrance on any assets (any such
conflict, violation, default, right of termination, amendment, cancellation
or acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the certificate of incorporation or by-laws of Preview or any
Subsidiary of Preview, or (B) except as would not have a Material Adverse
Effect on Preview and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (c) below, any loan, credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Preview or any Subsidiary of Preview or their respective properties or
assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal
or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority, (a
"Governmental Entity"), is required by or with respect to Preview or any
Subsidiary of Preview in connection with the execution and delivery of this
Agreement and the Ancillary Agreements to which Preview will be a party by
Preview or the consummation of the Merger and the other transactions
contemplated hereby or thereby, except for those required under or in
relation to (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) state securities or "blue sky" laws (the
"Blue Sky Laws"), (iii) the Securities Act, (iv) the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (v) the DGCL with respect to
the filing of the Delaware Certificate of Merger, (vi) rules and
regulations of Nasdaq, and (vii) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain would not have a Material Adverse Effect on
Preview.
Section 3.4 Reports and Financial Statements. Preview has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") since
November 19, 1997 (collectively, including all exhibits thereto, the "Preview
SEC Reports"). No Subsidiary of Preview is required to file any form, report or
other document with the SEC. None of the Preview SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to the date of
this Agreement or the Closing Date, then on the date of such filing), contained
or will contain any untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements of Preview and its Subsidiaries
(including the related notes) included in the Preview SEC Reports present
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of Preview and its
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with U.S. GAAP consistently applied during the
periods involved except as otherwise noted therein, and subject, in the case of
the unaudited interim financial statements, to normal and recurring year-end
adjustments and the absence of notes. All of such Preview SEC Reports, as of
their respective dates (and as of the date of any amendment to the respective
Preview SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder.
Section 3.5 Information Supplied. (a) None of the information supplied or
to be supplied by Preview for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the Proxy Statement/Prospectus will, on the date
it is first mailed to Preview stockholders or at the time of
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the Preview Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of the financial statements of
Preview and its Subsidiaries (including the related notes) included in the Proxy
Statement/Prospectus will present fairly, in all material respects, the
consolidated financial position and consolidated results of operations and cash
flows of Preview and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with U.S. GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial statements,
to normal and recurring year-end adjustments and the absence of notes. The Form
S-4 will comply as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder.
(b) Notwithstanding the foregoing provisions of this Section 3.5, no
representation or warranty is made by Preview with respect to statements
made or incorporated by reference in the Proxy Statement/Prospectus based
on information supplied by Sabre, Travelocity Holdings or Travelocity.com
for inclusion or incorporation by reference therein.
Section 3.6 Vote Required; DGCL. (a) The affirmative vote of the holders
of a majority of the outstanding shares of Preview Common Stock (the "Required
Preview Vote"), is the only vote of the holders of any class or series of
Preview capital stock necessary to adopt this Agreement and approve the
transactions contemplated hereby.
(b) Neither the restrictions on business combinations set forth in
Section 203 of the DGCL nor similar restrictions imposed by any other state
takeover or similar statute or regulation apply to the Merger, this
Agreement, any Ancillary Agreement to which Preview will be a party or any
of the transactions contemplated hereby and thereby.
Section 3.7 Rights Agreement. The Board of Directors of Preview has
resolved to, and Preview promptly after the execution of this Agreement will,
take all action necessary to render the rights issued pursuant to the Rights
Agreement inapplicable to the Merger Agreement and the Ancillary Agreements to
which Preview will be a party and the other transactions contemplated hereby and
thereby and for the rights to expire as of the Effective Time.
Section 3.8 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except Hambrecht & Quist LLC
(the "Financial Advisor"), whose fees and expenses will be paid by Preview in
accordance with Preview's agreement with such firm, based upon arrangements made
by or on behalf of Preview and previously disclosed to Sabre.
Section 3.9 Opinion of Financial Advisor. Preview has received the opinion
of the Financial Advisor, dated the date of this Agreement, to the effect that,
as of such date, the transactions contemplated by this Agreement are fair, from
a financial point of view, to the holders of Preview Common Stock (the "Preview
Fairness Opinion"), a copy of which opinion has been made available to Sabre.
Section 3.10 Absence of Certain Changes. Except as disclosed in the
Preview SEC Reports filed prior to this date, (a) since the end of Preview's
fiscal year last ended, Preview and each of its Subsidiaries has conducted its
business in all material respects in the ordinary and usual course of its
business consistent with past practice and there has not been any change,
development or combination of developments that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on Preview and (b) since the end of Preview's fiscal year last ended
there has not been (i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Preview; (ii) any
change by Preview to its accounting policies, practices or methods; (iii) other
than in the ordinary course of business consistent with past practice, any
material tax election
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made or changed, any material tax audit settled or any amended material Tax
Returns filed; (iv) any amendment or change to the terms of any of its
indebtedness material to Preview and its Subsidiaries taken as a whole; (v) any
incurrence of any material indebtedness; (vi) any transfer, lease, license,
sale, mortgage, pledge, encumbrance or other disposition of assets or properties
material to Preview and its Subsidiaries taken as a whole; (vii) any material
damage, destruction or other casualty loss with respect to any asset or property
owned, leased or otherwise used by Preview or its Subsidiaries material to
Preview and its Subsidiaries taken as a whole, whether or not covered by
insurance; (viii) except (1) in the ordinary course of business consistent with
past practice for employees other than executive officers or directors, (2) as
required by applicable law, (3) for the issuance of options to purchase not more
than 100,000 shares of Preview Common Stock granted in the ordinary course of
business to non-executive employees and having an exercise price not less than
the current market price of Preview Common Stock on the date of grant, (4)
options to purchase up to that number of shares of Preview Common Stock equal to
the number of shares subject to outstanding options that expire unexercised
after the date hereof, provided that such options are granted with the consent
of Sabre, and have an exercise price not less than the current market price of
Preview Common Stock on the date of grant, (5) for options to purchase 2,205,996
shares issued after the end of Preview's fiscal year last ended and prior to the
date hereof, or (6) for the acceleration of stock options in connection with a
change of control in the amounts and on the terms and conditions as described in
the Preview Disclosure Schedule (A) any execution, adoption or amendment of any
agreement or arrangement relating to severance or any employment or consulting
agreement with any officer, director or other key employee, or any amendment to
any Preview Benefit Plan or adoption or execution of any new employee benefit
plan for the benefit of any officer, director or other key employee (including,
without limitation, the Preview Benefit Plans referred to in Section 3.13) or
(B) any grant of any stock options or other equity related award; or (ix) any
agreement or commitment entered into with respect to any of the foregoing.
Section 3.11 Litigation and Liabilities. (a) Except as disclosed in the
Preview SEC Reports filed prior to this date, there are no civil, criminal or
administrative actions, suits or claims, proceedings (including condemnation
proceedings) or hearings or, to the knowledge of Preview, investigations,
pending or, to the knowledge of Preview, threatened against Preview or any of
its Subsidiaries or any of their respective properties and assets, except for
any of the foregoing which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Preview.
(b) Neither Preview nor any of its Subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) the existence of which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Preview except (i) liabilities described in the Preview
SEC Reports filed with the SEC prior to the date hereof or reflected on
Preview's consolidated balance sheet (and related notes thereto) as of the
end of its most recently completed fiscal year filed in the Preview SEC
Reports or (ii) liabilities of the type permitted to be incurred pursuant
to Section 5.1.
Section 3.12 No Violation of Law; Permits. The business of Preview and
each of its Subsidiaries is being conducted in accordance with all, and not in
violation of any, applicable statutes, rules, ordinances, regulations,
judgments, orders or decrees of all Governmental Entities, and all permits,
franchises, licenses, authorizations or consents granted by each Governmental
Entity, and Preview and each of its Subsidiaries has obtained all permits,
franchises, licenses, authorizations or consents necessary for the conduct of
its business, except, in each case, as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Preview.
Neither Preview nor any of its Subsidiaries is subject to any cease and desist
or other order, judgment, injunction or decree issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, is a
party to any commitment letter or similar undertaking to, is subject to any
order or directive by, or has adopted any board resolutions at the request of,
any Governmental Entity that materially restricts the conduct of its business
(whether the type of business, the location or otherwise) and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Preview, nor has Preview been advised in writing that
any Governmental Entity has proposed issuing or requesting any of the foregoing.
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Section 3.13 Employee Matters; ERISA. (a) Set forth in the Preview
Disclosure Schedule is a complete list of each Preview Benefit Plan and each
Preview Multiemployer Plan. The term "Preview Benefit Plan" shall mean (i) each
plan, program, policy, contract or agreement providing for compensation,
deferred compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
including, without limitation, any "employee benefit plan," within the meaning
of Section 3(3) of ERISA but excluding any "multiemployer plan" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA, and (ii) each employment,
severance, "change of control," consulting, non-compete, confidentiality, or
similar agreement or contract, in each case, with respect to which Preview or
any Subsidiary of Preview has or may have any liability (accrued, contingent or
otherwise). The term "Preview Multiemployer Plan" shall mean any "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA in respect of which
Preview or any Subsidiary of Preview has or may have any liability (accrued,
contingent or otherwise).
(b) Preview has provided or made available to Sabre (i) current,
accurate and complete copies of all documents embodying each Preview
Benefit Plan, including all amendments, written interpretations (which
interpretation could be regarded as increasing the liabilities of Preview
and its Subsidiaries taken as a whole under the relevant Preview Benefit
Plan) and all trust or funding arrangements and insurance contracts with
respect thereto; (ii) the most recent annual actuarial valuation, if any,
prepared for each Preview Benefit Plan; (iii) the most recent annual report
(Series 5500 and all schedules), if any, required under ERISA in connection
with each Preview Benefit Plan or related trust; (iv) the most recent
determination letter received from the Internal Revenue Service, if any,
for each Preview Benefit Plan and related trust which is intended to
satisfy the requirements of Section 401(a) of the Code; (v) if any Preview
Benefit Plan is funded, the most recent annual and periodic accounting of
such Preview Benefit Plan's assets; (vi) the most recent summary plan
description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Preview
Benefit Plan; and (vii) all material communications to any one or more
current, former or retired employee, officer, consultant, independent
contractor, agent or director of Preview or any Subsidiary of Preview
(each, a "Preview Employee" and collectively, the "Preview Employees")
relating to each Preview Benefit Plan (which communication could be
regarded as increasing the liabilities of Preview and its Subsidiaries
taken as a whole under the relevant Preview Benefit Plan).
(c) All Preview Benefit Plans have been administered in all respects
in accordance with the terms thereof and all applicable laws except for
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Preview. Each Preview Benefit
Plan which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code (each, a "Preview Pension
Plan"), has received a favorable determination letter from the Internal
Revenue Service, and Preview is not aware of any circumstances that would
reasonably be expected to result in the revocation or denial of this
qualified status. Except as otherwise set forth in the Preview Disclosure
Schedule or in the Preview SEC Reports filed prior to this date, as of the
date hereof there is no pending or, to Preview's knowledge, threatened,
material claim, litigation, proceeding, audit, examination or investigation
relating to any Preview Benefit Plans or any Preview Employees that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Preview.
(d) No material liability under Title IV of ERISA exists or is
reasonably expected to be incurred by Preview or any Subsidiary of Preview
or any entity which is considered a single employer with Preview or any
Subsidiary of Preview under Section 4001(a)(15) of ERISA or Section 414 of
the Code (a "Preview ERISA Affiliate"). No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Preview Pension Plan within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the
aggregate) required to be made as of the date of this Agreement under
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the terms of any Preview Benefit Plan have been made. No Preview Pension
Plan has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. Neither
Preview nor any Subsidiary of Preview nor any Preview ERISA Affiliate has
provided, or is required to provide, security to any Preview Pension Plan
pursuant to Section 401(a)(29) of the Code.
(f) As of the date of this Agreement, none of Preview, any Subsidiary
of Preview or any Preview ERISA Affiliate have incurred any withdrawal
liability (within the meaning of Section 4201 of ERISA) to any Preview
Multiemployer Plan, which liability has not previously been fully
satisfied. None of Preview, any Subsidiary of Preview or any Preview ERISA
Affiliate has knowledge that any Preview Multiemployer Plan fails to
qualify under Section 401(a) of the Code, is insolvent or is in
reorganization within the meaning of Part 3 of Subtitle E of Title IV of
ERISA or of any condition that would reasonably be expected to result in a
Preview Multiemployer Plan becoming insolvent or going into reorganization.
(g) Except as set forth in the Preview Disclosure Schedule, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) (i) constitute an event under any Preview Benefit
Plan that will or would reasonably be expected to result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Preview Employee, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of
Preview, any Subsidiary of Preview or New Travelocity to amend or terminate
any Preview Benefit Plan. Except as set forth in the Preview Disclosure
Schedule, no payment or benefit which will or may be made by Preview, or
any Subsidiary of Preview, New Travelocity or any of their respective
affiliates with respect to any Preview Employee will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 3.14 Labor Matters. (a) Except as set forth in the Preview SEC
Reports filed prior to this date, no work stoppage, slowdown, lockout or labor
strike against Preview or any Subsidiary of Preview by Preview Employees is
pending or, to the knowledge of Preview, threatened in writing.
(b) Except as set forth in the Preview SEC Reports filed prior to this
date, as of the date of this Agreement, neither Preview nor any Subsidiary
of Preview is involved in or, to the knowledge of Preview, threatened with,
any material labor dispute, grievance or arbitration or any union
organizing activity (by it or any of its employees) involving any Preview
Employees.
Section 3.15 Tax Matters. (a) All material Tax Returns required to be
filed by Preview or its Subsidiaries either on a separate or combined or
consolidated basis on or prior to the Effective Time have been or will be
prepared in good faith and timely filed with the appropriate Governmental Entity
on or prior to the Effective Time or by the due date thereof including
extensions. All such Tax Returns are (or, as to Tax Returns not filed on the
date hereof, will be) complete and accurate in all material respects.
(b) All material Taxes (as herein defined) shown as due on the Tax
Returns referred to in Section 3.15(a) either (i) have been fully paid
(except with respect to matters contested in good faith as set forth in the
Preview Disclosure Schedule) or (ii) are adequately reflected as a
liability on Preview's or its Subsidiaries' books and records. All material
Taxes required to be collected or withheld have been collected or withheld.
(c) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, Preview and its
Subsidiaries have made due and sufficient accruals for such Taxes, to the
extent they are material, in their respective books and records and
financial statements.
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(d) Preview and each of its Subsidiaries have not waived any statute
of limitations, or agreed to any extension of time, with respect to federal
income or material state Taxes or a material Tax assessment or deficiency.
(e) As of this date, (i) there are not pending or, to the knowledge of
Preview, threatened in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters and (ii) there are not
any unresolved questions or claims concerning Preview's or any of its
Subsidiaries' Tax liability that were raised by any taxing authority in a
written communication to Preview or any Subsidiary.
(f) Preview has made available to Sabre correct and complete copies of
the United States federal income, all material state income or franchise,
and all material sales, use and excise Tax Returns filed by Preview and its
Subsidiaries since January 1, 1996.
(g) Preview has not distributed the stock of a "controlled
corporation" (within the meaning of that term as used in section 355(a) of
the Code) in a transaction subject to Section 355 of the Code within the
past two years.
(h) No written claim, and to the knowledge of Preview, no claim, has
ever been made by an authority in a jurisdiction where any of Preview and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(i) Preview has previously delivered to Sabre true and correct copies
of all federal, state, local and foreign income Tax Returns and all other
material Tax Returns filed with respect to any of Preview and its
Subsidiaries for taxable periods ending on or after January 1, 1996. None
of such Tax Returns has been audited or currently is the subject of an
audit.
(j) None of Preview and its Subsidiaries is a party to any Tax
allocation or sharing agreement.
(k) As of December 31, 1998, the net operating loss carryforward of
Preview and its Subsidiaries for federal income Tax purposes was at least
$58,705,492, and for the six months ended June 30, 1999 Preview and its
Subsidiaries had negative taxable income of approximately $11,000,000, and
except as set forth in the Preview Disclosure Schedule, Preview and its
Subsidiaries are not subject to any limitations, e.g., Sections 382 and 384
of the Code and restrictions under the consolidated return regulations
pursuant to Section 1502 of the Code or provisions of state laws affecting
such net operating loss carryforwards for state income tax or state
franchise tax purposes, on their ability to use the net operating loss
carryforward other than those that may arise as a result of the
transactions contemplated by this Agreement.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes" and "Taxable") includes all federal, state, local and
foreign income, profits, franchise, gross receipts, license, premium,
environmental (including taxes under Section 59A of the Code), capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
transfer, property, withholding, excise, production, occupation, windfall
profits, customs duties, social security (or similar), registration, value
added, alternative or add-on minimum, estimated, occupancy and other taxes,
duties or governmental assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (ii) the term "Tax
Return" includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns and any amendment
thereto) required to be supplied to a Tax authority relating to Taxes.
Section 3.16 Contracts. (a) Set forth in the Preview Disclosure Schedule
is a true and complete list of contracts or agreements, of any nature
whatsoever, whether written or oral, including all amendments thereof and
supplements thereto ("Contracts") of the following types to which Preview or
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any Subsidiary is a party or by or to which Preview or any Subsidiary or any of
their properties may be bound or subject as of the date hereof:
(i) Contracts for the sale of any real or personal (tangible or
intangible) properties other than in the ordinary course of business, or
for the grant of any option or preferential rights to purchase any such
properties;
(ii) Contracts for the construction, modification or repair of any
building, structure or facility or for the incurrence of any capital
expenditures or for the acquisition of fixed assets, providing for
payments in excess of $100,000 in the aggregate;
(iii) Contracts relating to the acquisition by Preview or any
Subsidiary of any operating business or the capital stock of any other
Person that has not been consummated or that has been consummated but
contains representations, covenants, guaranties, indemnities or other
obligations that remain in effect;
(iv) Contracts relating to any litigation;
(v) Contracts relating to the lending or borrowing of money or
other indebtedness for borrowed money in excess of $75,000 or pursuant
to which Preview or any of its Subsidiaries' assets are or may become
subject to a lien, charge, mortgage or other encumbrance;
(vi) Contracts under which Preview or any Subsidiary agrees to
indemnify any Person;
(vii) Contracts containing non-competition, exclusivity or other
similar provisions that would limit, impair or restrict the ability of
Preview or any of its Subsidiaries to do business in any line of
business or in any geographical area or with any Person;
(viii) Contracts pursuant to which Preview or any Subsidiary
leases, subleases or otherwise has the right to use any real or personal
property, except those contracts terminable (other than in the case of
default by a party thereto) on 90 days' or less notice without any
penalty and those involving receipt or payment of less than $75,000 in
any year;
(ix) Contracts in respect of licenses or other Contracts relating
to Intellectual Property and Contracts relating to advertising
arrangements, except those contracts terminable (other than in the case
of default by a party thereto) on 90 days' or less notice without any
penalty and those involving receipt or payment of less than $75,000 in
any year;
(x) Contracts relating to portal or other distribution
arrangements;
(xi) Contracts in respect of any joint venture, partnership or
other similar arrangement (including, without limitation, any joint
development agreement);
(xii) Contracts with any Governmental Entity;
(xiii) Contracts with any Preview Employee or consultant relating
to (A) non-disclosure, confidentiality, assignment of inventions,
proprietary rights or non-competition agreements and (B) severance,
bonus or similar arrangements that become operative in connection with
or as a result of the Merger; and
(xiv) Contracts (other than those specified in any of clauses (i)
through (xiii) of this clause (a)) which relate to or affect the
business, operations or any of the assets or properties of Preview or
any Subsidiary in a material way, except those (x) which are
specifically not required to be scheduled pursuant to the provisions of
any of clauses (i) through (xiii) of this paragraph (a), and (y) which
are terminable (other than in the case of default by a party thereto) on
90 days' or less notice without any penalty and those involving payments
of less than $50,000 in any year; and, in the case of each of clauses
(x) and (y) above, are not material.
(b) Unless precluded by an applicable confidentiality agreement, true
and complete copies of all Contracts listed on Preview Disclosure Schedule
have been made available to Sabre, Travelocity
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Holdings or Travelocity.com. All of the Contracts referred to in the
preceding paragraph (a) clauses (i) through (xiv) are valid, binding, in
full force and effect and enforceable in accordance with their terms
against Preview, or the applicable Subsidiary (as the case may be), and, to
the knowledge of Preview, against the respective counterparties to such
Contracts. None of Preview or any of its Subsidiaries or, to the knowledge
of Preview as of the date hereof, any other party, is in breach, violation
or default under any Contract listed or required to be listed on the
Preview Disclosure Schedule. No event exists to the knowledge of Preview as
of the date hereof which, with notice or lapse of time or both, would
constitute a breach, violation or default, or give rise to any lien, charge
or encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under any
Contract listed or required to be listed on the Preview Disclosure
Schedule. None of Preview, any Subsidiary or, to the knowledge of Preview,
any other party to any of the Contracts listed on the Preview Disclosure
Schedule is in material arrears in respect of the performance or
satisfaction of the terms and conditions on its part to be performed or
satisfied under any of such Contracts and no waiver or indulgence has been
granted by any of the parties thereto.
Section 3.17 Intellectual Property. Each material item of Preview
Intellectual Property which is a patent, patent application, trademark,
trademark application, service mark, service mark application, domain name,
copyright registration, copyright application, or license, sublicense,
agreement, or permission concerning any of the foregoing, is set forth on the
Preview Disclosure Schedule. Except as set forth on the Preview Disclosure
Schedule:
(a) Preview possesses all right, title and interest in and to, and is
the sole and exclusive owner of or has a valid license to use, all the
Preview Intellectual Property, free and clear of any encumbrance, and has
the right to require the applicant of any Preview Intellectual Property
which is an application, including but not limited to patent applications
or copyright applications, to transfer ownership to Preview of the
application and of the registration once it issues, and, to Preview's
knowledge, all registered patents, trademarks, service marks and copyrights
listed on the Preview Disclosure Schedule are valid and subsisting and in
full force and effect;
(b) The Preview Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of Preview's
properties and assets and Preview has the right to use all of the Preview
Intellectual Property in all jurisdictions in which Preview conducts or
proposes to conduct its business, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights;
(c) To Preview's knowledge, Preview has not, and the continued
operation of its business as presently conducted and as presently proposed
to be conducted will not, interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property rights of
third parties, and Preview has not received written notice of any charge,
complaint, claim, demand or notice so alleging (including any claim that
Preview must license or refrain from using any Intellectual Property rights
of any third party);
(d) To Preview's knowledge, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Preview Intellectual Property; and
(e) To Preview's knowledge, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand has been made, is
pending, or, to the knowledge of Preview, is threatened which challenges
the legality, validity, enforceability, use or ownership of any Preview
Intellectual Property.
"Preview Intellectual Property" means all Intellectual Property used by
Preview in the operation of its business.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereon,
and all patents, patent applications and patent
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disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, domain names, and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, know-how, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(e) all computer software (including data and related documentation), (f) all
other proprietary rights, (g) all copies and tangible embodiments of the
foregoing categories of intellectual property listed in subsections (a) through
(f) herein (in whatever form or medium), and (h) all licenses, sublicenses,
agreements, or permissions related to the foregoing categories of intellectual
property listed in subsections (a) through (f) herein.
Section 3.18 Year 2000 Compliance. Preview has provided to Sabre the plans
(the "Year 2000 Plan") that detail the steps Preview plans to take to provide
that all material computer software and hardware, and any other systems affected
by computer technology, used by Preview or any Subsidiary in the conduct of its
businesses as presently conducted (the "Systems") will have date fields,
processing logic, outputs and interfaces that (i) will recognize the advent of
the year 2000, (ii) will correctly process information relating to the dates
before, on and after January 1, 2000, and (iii) will function accurately and
without interruption before, during and after January 1, 2000 without any change
in operations associated with the advent of the new century (collectively, "Year
2000 Compliant"). Preview has used all means reasonably available to determine
that (a) the Year 2000 Plan will be effective to cause the Systems to be Year
2000 Compliant by November 15, 1999; (b) the Year 2000 Plan has been carried out
to date in a diligent manner and there is no fact or circumstance of which
Preview is aware that will cause the Year 2000 Plan not to result in the Systems
being Year 2000 Compliant; and (c) the Year 2000 Plan includes the steps
necessary to ascertain whether third party vendors upon whom Preview relies for
goods and services of a material nature utilize systems that are Year 2000
Compliant, and if they are not, to replace such vendors with vendors who have
systems that are Year 2000 Compliant.
Section 3.19 No Termination of Business Relationship. Since January 1,
1999 through the date hereof, none of the Persons with which Preview or any
Subsidiary has a material business relationship has given notice in writing or
other indication in writing of any intention to cancel or otherwise terminate,
prior to the end of the applicable contract term, a material business
relationship with Preview or any Subsidiary and, to the knowledge of Preview as
of the date hereof, no event has occurred or failed to occur which (i) would, to
the knowledge of Preview as of the date hereof, precipitate the cancellation or
termination of such a business relationship or (ii) would entitle any such
entity or customer to terminate such a business relationship.
Section 3.20 Insurance. Preview and each Subsidiary maintain in full force
and effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms, with such deductibles, and covering
such risks (including fire, casualty, and liability), as is consistent with
industry practice. There is no default with respect to any provision contained
in any insurance policy, nor has Preview or any Subsidiary failed to give any
notice or present any claim under any such policy in due and timely fashion. All
premiums due and payable with respect to the insurance policies have been paid.
All such policies are in full force and effect. Neither Preview nor any
Subsidiary has failed to give any notice or present any claim under any such
insurance policy in due and timely fashion or as required by any of such
insurance policies or has otherwise, through any act, omission or
non-disclosure, jeopardized or impaired full recovery of any claim under such
policies, and there are no claims by Preview or any Subsidiary under any of such
policies to which any insurance company is denying liability or defending under
a reservation of rights or similar clause. No notice of cancellation or
non-renewal of any such policy has been received by Preview or any Subsidiary.
Section 3.21 Disclosure. The information described on Schedule 3.21 (i) to
the extent constituting historical facts, does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained therein not
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misleading, and (ii) to the extent constituting forward-looking statements,
represents Preview's best estimates prepared in good faith and based upon
reasonable assumptions (excluding the impact of the transactions contemplated by
this Agreement).
Section 3.22 AOL Agreements. As of the date hereof, each of the
Interactive Services Agreement between America Online Inc. ("AOL") and Preview
dated September 1, 1997, the Database Agreement between AOL and Preview dated
September 25, 1997, (collectively, the "AOL Agreements"), are valid, binding, in
full force and effect and enforceable in accordance with their terms against
Preview and to Preview's knowledge, against AOL. As of the date hereof, there is
no breach, violation or default of or under the AOL Agreements by Preview or, to
Preview's knowledge, by AOL. To Preview's knowledge, as of the date hereof, no
event exists which, with notice or lapse of time or both, would constitute a
breach, violation or default, or give rise to any right of termination,
modification, cancellation, suspension, limitation, revocation or acceleration
under the AOL Agreements by either Preview or AOL. Preview has no reason to
believe that AOL will not be able to fulfill all of its obligations under the
AOL Agreements and, as of the date hereof, Preview has not been notified that
AOL intends to cancel, terminate or modify the AOL Agreements and, as of the
date hereof, Preview does not have knowledge of any event which would
precipitate any such cancellation, termination or modification or entitle AOL to
cancel, terminate or modify the AOL Agreements. Preview and, to Preview's
knowledge, AOL are in compliance in all material respects with the AOL
Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SABRE, TRAVELOCITY HOLDINGS AND TRAVELOCITY.COM
Except as set forth in the Sabre Disclosure Schedule delivered by Sabre to
Preview prior to the execution of this Agreement (the "Sabre Disclosure
Schedule"), each of Sabre, Travelocity Holdings and Travelocity.com (as
applicable), jointly and severally, represents and warrants to Preview as
follows:
Section 4.1 Organization, Standing and Power. Each of Sabre, Travelocity
Holdings and Travelocity.com is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so to
qualify would not, either individually or in the aggregate, have a Material
Adverse Effect on each of Sabre, Travelocity Holdings or Travelocity.com, as
applicable.
Section 4.2 Authority; No Conflicts. (a) Each of Sabre, Travelocity
Holdings and Travelocity.com has all requisite corporate power and authority to
enter into this Agreement and the Ancillary Agreements to which it will be a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Ancillary Agreements to which
it will be a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of each of Sabre, Travelocity Holdings and Travelocity.com. This Agreement
has been, and the Ancillary Agreements to which Sabre, Travelocity Holdings and
Travelocity.com will be a party will be, duly executed and delivered by each of
Sabre, Travelocity Holdings and Travelocity.com and constitute a valid and
binding agreement of each of Sabre, Travelocity Holdings and Travelocity.com,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally or by
general equity principles.
(b) The execution and delivery of this Agreement does not and the
execution and delivery of the Ancillary Agreements to which Sabre,
Travelocity Holdings and Travelocity.com will be a party will not and the
consummation of the Merger and the other transactions contemplated hereby
or thereby will not, conflict with, or result in any Violation pursuant to:
(A) any provision of the respective
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certificate of incorporation or by-laws of Sabre, Travelocity Holdings or
Travelocity.com, or (B) except as would not have a Material Adverse Effect
on any of Sabre, Travelocity Holdings or Travelocity.com and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (c) below,
any loan, credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to any of Sabre, Travelocity Holdings or
Travelocity.com or their respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to any of Sabre, Travelocity Holdings or Travelocity.com in
connection with the execution and delivery of this Agreement or any
Ancillary Agreement by each of Sabre, Travelocity Holdings or
Travelocity.com or the consummation of the Merger and the other
transactions contemplated hereby or thereby, except for those required
under or in relation to (i) the HSR Act, (ii) the Blue Sky Laws, (iii) the
Securities Act, (iv) the Exchange Act, (v) the DGCL with respect to the
filing of the Delaware Certificate of Merger, (vi) rules and regulations of
Nasdaq, and (vii) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain would not have a Material Adverse Effect on any of Sabre,
Travelocity Holdings, Travelocity.com or Travelocity LP.
Section 4.3 Financial Statements. Sabre has provided to Preview the
audited balance sheets of the Travelocity Business as at December 31, 1998, 1997
and 1996, and the related statements of income, changes in stockholders' equity
and cash flows for the fiscal year then ended (collectively, the "Travelocity
Financial Statements"). Each of the financial statements of the Travelocity
Business (including the related notes) presents fairly in all material respects,
the financial position of the Travelocity Business and results of operations and
cash flows of the Travelocity Business as of the respective dates or for the
respective periods set forth therein, all in conformity with U.S. GAAP
consistently applied during the period involved except as otherwise noted
therein.
Section 4.4 Information Supplied. (a) None of the information supplied or
to be supplied by Sabre, Travelocity Holdings or Travelocity.com for inclusion
or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement/Prospectus will, on the date it is first mailed to Preview
stockholders or at the time of the Preview Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) of the Travelocity
Business included in the Proxy Statement/Prospectus will present fairly, in all
material respects, the consolidated financial position and consolidated results
of operations and cash flows of the Travelocity Business as of the respective
dates or for the respective periods set forth therein, all in conformity with
U.S. GAAP consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments and the absence of
notes. The Form S-4 will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(b) Notwithstanding the foregoing provisions of this Section 4.4, no
representation or warranty is made by Sabre, Travelocity Holdings or
Travelocity.com with respect to statements made or incorporated by
reference in the Proxy Statement/Prospectus based on information supplied
by Preview for inclusion or incorporation by reference therein.
Section 4.5 Vote Required; DGCL. (a) The affirmative vote of the holders
of a majority of the outstanding shares of Travelocity.com Common Stock (the
"Required Travelocity.com Vote"), has been
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obtained and is the only vote of the holders of any class or series of
Travelocity.com capital stock necessary to adopt this Agreement and approve the
transactions contemplated hereby.
(b) Neither the restrictions on business combinations set forth in
Section 203 of the DGCL nor similar restrictions imposed by any other state
takeover or similar statute or regulation apply to the Merger, this
Agreement, or any of the transactions contemplated hereby.
Section 4.6 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except Goldman, Sachs & Co.
whose fees and expenses will be paid by Sabre in accordance with Sabre's
agreement with such firm, based upon arrangements made by or on behalf of Sabre
and previously disclosed to Preview.
Section 4.7 No Business Activities. Travelocity.com has not conducted any
activities other than in connection with the organization of Travelocity.com,
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Travelocity.com has no Subsidiaries.
Section 4.8 Absence of Certain Changes. Except as disclosed in any
required report, schedule, form, statement or other document required to be
filed by Sabre Holdings, Inc. with the SEC (collectively, including all exhibits
thereto, the "Sabre SEC Reports") filed prior to this date or the Sabre
Disclosure Schedule, (A) since the end of Sabre's fiscal year last ended, Sabre
has conducted the Travelocity Business in all material respects in the ordinary
and usual course of such business consistent with past practice and there has
not been any change, development or combination of developments that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Travelocity Business and (B) since the end
of Sabre's fiscal year last ended until this date there has not been (i) any
change by the Travelocity Business to its accounting policies, practices or
methods; (ii) any amendment or change to the terms of any indebtedness material
to the Travelocity Business taken as a whole; (iii) any incurrence of any
material indebtedness by the Travelocity Business; (iv) any transfer, lease,
license, sale, mortgage, pledge, encumbrance or other disposition of assets or
properties material to the Travelocity Business taken as a whole; (v) any
material damage, destruction or other casualty loss with respect to any asset or
property owned, leased or otherwise used by the Travelocity Business material to
the Travelocity Business taken as a whole, whether or not covered by insurance;
(vi) except in the ordinary course of business consistent with past practice for
employees other than executive officers or directors, or except as required by
applicable law or contemplated by this Agreement, (A) any execution, adoption or
amendment of any agreement or arrangement relating to severance or any
employment or consulting agreement with any officer, director or other key
employee of the Travelocity Business, or any amendment to any Sabre Benefit Plan
or adoption or execution of any new employee benefit plan for the benefit of any
officer, director or other key employee of the Travelocity Business (including,
without limitation, the Sabre Benefit Plans referred to in Section 4.11), or (B)
any grant of any stock options or other equity related award to any officer,
director or employee of the Travelocity Business; or (vii) any agreement or
commitment entered into with respect to any of the foregoing.
Section 4.9 Litigation and Liabilities. (a) Except as disclosed in the
Sabre SEC Reports filed prior to this date or the Sabre Disclosure Schedule,
there are no civil, criminal or administrative actions, suits or claims,
proceedings (including condemnation proceedings) or hearings or, to the
knowledge of Sabre, investigations, pending or, to the knowledge of Sabre,
threatened against the Travelocity Business or any of the properties and assets
used in the Travelocity Business, except for any of the foregoing which would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Travelocity Business.
(b) The Travelocity Business has no liabilities (absolute, accrued,
contingent or otherwise) the existence of which would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
the Travelocity Business except (i) liabilities described in the Sabre SEC
Reports filed with the SEC prior to the date hereof or on the Sabre
Disclosure Schedule or reflected on Sabre's consolidated balance sheet (and
related notes thereto) as of the end of its most recently
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completed fiscal year filed in the Sabre SEC Reports or (ii) liabilities of
the type permitted to be incurred pursuant to Section 5.1.
Section 4.10 No Violation of Law; Permits. The Travelocity Business is
being conducted in accordance with all, and not in violation of any, applicable
statutes, rules, ordinances, regulations, judgments, orders or decrees of all
Governmental Entities, and all permits, franchises, licenses, authorizations or
consents granted by each Governmental Entity, and all permits, franchises,
licenses, authorizations or consents necessary for the conduct of the
Travelocity Business, except, in each case, as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Travelocity Business. The Travelocity Business is not subject to any cease and
desist or other order, judgment, injunction or decree issued by, or is not
subject to any written agreement, consent agreement or memorandum of
understanding with, is not subject to any commitment letter or similar
undertaking to, is not subject to any order or directive by, or is not subject
to any board resolutions at the request of, any Governmental Entity that
materially restricts the conduct of its business (whether the type of business,
the location or otherwise) and which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Travelocity
Business, nor has Sabre been advised in writing that any Governmental Entity has
proposed issuing or requesting any of the foregoing.
Section 4.11 Employee Matters/ERISA. (a) Set forth in the Sabre Disclosure
Schedule is a complete list of each Sabre Benefit Plan and each Sabre
Multiemployer Plan. The term "Sabre Benefit Plan" shall mean (i) each plan,
program, policy, contract or agreement providing for compensation, deferred
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
including, without limitation, any "employee benefit plan," within the meaning
of Section 3(3) of ERISA but excluding any "multiemployer plan" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA, and (ii) each employment,
severance, "change of control," consulting, non-compete, confidentiality, or
similar agreement or contract, in each case, in which Travelocity Business
Employees (as defined in Section 4.11(b) below) participate and with respect to
which Sabre or any Subsidiary of Sabre has or may have any liability (accrued,
contingent or otherwise). The term "Sabre Multiemployer Plan" shall mean any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA in which
employees of the Travelocity Business participate and with respect to which
Sabre or any Subsidiary of Sabre has or may have any liability (accrued,
contingent or otherwise).
(b) Sabre has provided or made available to Preview (i) current,
accurate and complete copies of all documents embodying each Sabre Benefit
Plan, including all amendments, written interpretations (which
interpretation could be regarded as increasing the liabilities of Sabre and
its Subsidiaries taken as a whole under the relevant Sabre Benefit Plan)
and all trust or funding arrangements and insurance contracts with respect
thereto; (ii) the most recent annual actuarial valuation, if any, prepared
for each Sabre Benefit Plan; (iii) the most recent annual report (Series
5500 and all schedules), if any, required under ERISA in connection with
each Sabre Benefit Plan or related trust; (iv) the most recent
determination letter received from the Internal Revenue Service, if any,
for each Sabre Benefit Plan and related trust which is intended to satisfy
the requirements of Section 401(a) of the Code; (v) if any Sabre Benefit
Plan is funded, the most recent annual and periodic accounting of such
Sabre Benefit Plan's assets; (vi) the most recent summary plan description
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Sabre Benefit Plan; and (vii) all
material communications to any one or more current, former or retired
employee, officer, consultant, independent contractor, agent or director of
the Travelocity Business (each, a "Travelocity Business Employee" and
collectively, the "Travelocity Business Employees") relating to each Sabre
Benefit Plan (which communication could be regarded as increasing the
liabilities of Sabre and its Subsidiaries taken as a whole under the
relevant Sabre Benefit Plan).
(c) All Sabre Benefit Plans have been administered in all respects in
accordance with the terms thereof and all applicable laws except for
violations which, individually or in the aggregate, would not
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reasonably be expected to have a Material Adverse Effect on the Travelocity
Business. Each Sabre Benefit Plan which is a Pension Plan, which is
intended to be qualified under Section 401(a) of the Code and in which
Travelocity Business Employees participate (each, a "Sabre Pension Plan"),
has received a favorable determination letter from the Internal Revenue
Service, and Sabre is not aware of any circumstances that would reasonably
be expected to result in the revocation or denial of this qualified status.
Except as otherwise set forth in the Sabre Disclosure Schedule or in the
Sabre SEC Reports filed prior to this date, there is no pending or, to
Sabre's knowledge, threatened, material claim, litigation, proceeding,
audit, examination or investigation relating to any Sabre Benefit Plans or
any Travelocity Business Employees that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the
Travelocity Business.
(d) No material liability under Title IV of ERISA exists or is
reasonably expected to be incurred by Sabre or any Subsidiary of Sabre or
any entity which is considered a single employer with Sabre or any
Subsidiary of Sabre under Section 4001(a)(15) of ERISA or Section 414 of
the Code (a "Sabre ERISA Affiliate"). No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Sabre Pension Plan within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the
aggregate) required to be made under the terms of any Sabre Benefit Plan
have been made. No Sabre Pension Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither Sabre nor any Subsidiary of Sabre
nor any Sabre ERISA Affiliate has provided, or is required to provide,
security to any Sabre Pension Plan pursuant to Section 401(a)(29) of the
Code.
(f) As of the Closing Date, none of Sabre, any Subsidiary of Sabre or
any Sabre ERISA Affiliate will have incurred any withdrawal liability
(within the meaning of Section 4201 of ERISA) to any Sabre Multiemployer
Plan, which liability has not previously been fully satisfied. None of
Sabre, any Subsidiary of Sabre or any Sabre ERISA Affiliate has knowledge
that any Sabre Multiemployer Plan fails to qualify under Section 401(a) of
the Code, is insolvent or is in reorganization within the meaning of Part 3
of Subtitle E of Title IV of ERISA or of any condition that would
reasonably be expected to result in a Sabre Multiemployer Plan becoming
insolvent or going into reorganization.
(g) Except as set forth in the Sabre Disclosure Schedule, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) (i) constitute an event under any Sabre Benefit Plan,
trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Travelocity Business Employee, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of
Sabre or any Subsidiary of Sabre to amend or terminate any Sabre Benefit
Plan. Except as set forth in the Sabre Disclosure Schedule, no payment or
benefit which will or may be made by Sabre, or any Subsidiary of Sabre, or
any of their respective affiliates with respect to any Travelocity Business
Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
Section 4.12 Labor Matters. (a) Except as set forth in the Sabre SEC
Reports filed prior to this date or the Sabre Disclosure Schedule, no work
stoppage, slowdown, lockout or labor strike by employees of the Travelocity
Business is pending or, to the knowledge of Sabre, threatened in writing.
(b) Except as set forth in the Sabre SEC Reports filed prior to this
date or the Sabre Disclosure Schedule, as of the date of this Agreement,
neither Sabre nor any Subsidiary of Sabre is involved in or, to the
knowledge of Sabre, threatened with, any material labor dispute, grievance
or arbitration or any union organizing activity (by it or any of its
employees) involving any employees of the Travelocity Business.
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Section 4.13 Contracts. (a) Set forth in the Sabre Disclosure Schedule is
a true and complete list of Contracts of the following types to which Sabre or
any Subsidiary is a party relating to the Travelocity Business or by or to which
the Travelocity Business or any of its properties may be bound or subject as of
the date hereof:
(i) Contracts for the sale of any real or personal (tangible or
intangible) properties other than in the ordinary course of business, or
for the grant of any option or preferential rights to purchase any such
properties;
(ii) Contracts for the construction, modification or repair of any
building, structure or facility or for the incurrence of any capital
expenditures or for the acquisition of fixed assets, providing for
payments in excess of $100,000 in the aggregate;
(iii) Contracts relating to the acquisition by Sabre or any
Subsidiary of any operating business or the capital stock of any other
Person that has not been consummated or that has been consummated but
contains representations, covenants, guaranties, indemnities or other
obligations that remain in effect;
(iv) Contracts relating to any litigation;
(v) Contracts relating to the lending or borrowing of money or
other indebtedness for borrowed money in excess of $75,000 or pursuant
to which any assets of the Travelocity Business are or may become
subject to a lien, charge, mortgage or other encumbrance;
(vi) Contracts under which Sabre or any Subsidiary agrees to
indemnify any Person;
(vii) Contracts containing non-competition, exclusivity or other
similar provisions that would limit, impair or restrict the ability of
the Travelocity Business to do business in any line of business or in
any geographical area or with any Person;
(viii) Contracts pursuant to which Sabre or any Subsidiary leases,
subleases or otherwise has the right to use any real or personal
property, except those contracts terminable (other than in the case of
default by a party thereto) on 90 days' or less notice without any
penalty and those involving receipt or payment of less than $75,000 in
any year;
(ix) Contracts in respect of licenses or other Contracts relating
to Intellectual Property and Contracts relating to advertising
arrangements, except those contracts terminable (other than in the case
of default by a party thereto) on 90 days' or less notice without any
penalty and those involving receipt or payment of less than $75,000 in
any year;
(x) Contracts relating to portal or other distribution
arrangements;
(xi) Contracts in respect of any joint venture, partnership or
other similar arrangement (including, without limitation, any joint
development agreement);
(xii) Contracts with any Governmental Entity;
(xiii) Contracts with any employee or consultant of the Travelocity
Business relating to (A) non-disclosure, confidentiality, assignment of
inventions, proprietary rights or non-competition agreements and (B)
severance, bonus or similar arrangements that become operative in
connection with or as a result of the Merger; and
(xiv) Contracts (other than those specified in any of clauses (i)
through (xiii) of this clause (a)) which relate to or affect the
business, operations or any of the assets or properties of the
Travelocity Business in a material way, except those (x) which are
specifically not required to be scheduled pursuant to the provisions of
any of clauses (i) through (xiii) of this paragraph (a), and (y) which
are terminable (other than in the case of default by a party thereto) on
90 days' or less notice without any penalty and those involving payments
of less than $50,000 in any year; and, in the case of each of clauses
(x) and (y) above, are not material.
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(b) Unless precluded by an applicable confidentiality agreement, true
and complete copies of all Contracts listed on the Sabre Disclosure
Schedule have been made available to Preview. All of the Contracts referred
to in the preceding paragraph (a) clauses (i) through (xiv) are valid,
binding, in full force and effect and enforceable in accordance with their
terms against Sabre, or the applicable Subsidiary (as the case may be),
and, to the knowledge of Sabre, against the respective counterparties to
such Contracts. None of Sabre or any of its Subsidiaries or, to the
knowledge of Sabre, any other party is in breach, violation or default, and
no event which, with notice or lapse of time or both, would constitute a
breach, violation or default, or give rise to any lien, charge or
encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under any
Contract listed or required to be listed on the Sabre Disclosure Schedule.
None of Sabre, any Subsidiary or, to the knowledge of Sabre, any other
party to any of the Contracts listed on the Sabre Disclosure Schedule is in
material arrears in respect of the performance or satisfaction of the terms
and conditions on its part to be performed or satisfied under any of such
Contracts and no waiver or indulgence has been granted by any of the
parties thereto.
Section 4.14 Intellectual Property. Each material item of Sabre
Intellectual Property that is a patent, patent application, trademark, trademark
application, service mark, service mark application, domain name, copyright
registration, copyright application, or license, sublicense, agreement, or
permission concerning any of the foregoing, and that is used primarily in the
Travelocity Business is set forth on the Sabre Disclosure Schedule. Except as
set forth on the Sabre Disclosure Schedule:
(a) Sabre possesses all right, title and interest in and to, and is
the sole and exclusive owner of, or has a valid license to use, all the
Sabre Intellectual Property, free and clear of any encumbrance, and has the
right to require the applicant of any Sabre Intellectual Property which is
an application, including but not limited to patent applications or
copyright applications, to transfer ownership to Sabre of the application
and of the registration once it issues, and, to Sabre's knowledge, all
registered patents, trademarks, service marks and copyrights listed on the
Sabre Disclosure Schedule are valid and subsisting and in full force and
effect;
(b) The Sabre Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of the
Travelocity Business and Sabre has the right to use all of the Sabre
Intellectual Property in all jurisdictions in which Sabre conducts or
proposes to conduct the Travelocity Business, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights;
(c) To Sabre's knowledge, Sabre has not, and the continued operation
of the Travelocity Business as presently conducted and as presently
proposed to be conducted will not, interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of third parties, and Sabre has not received written notice
of any charge, complaint, claim, demand or notice so alleging (including
any claim that Sabre must license or refrain from using any Intellectual
Property rights of any third party);
(d) To Sabre's knowledge, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Sabre Intellectual Property; and
(e) To Sabre's knowledge, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand has been made, is
pending, or, to the knowledge of Sabre, is threatened which challenges the
legality, validity, enforceability, use or ownership of any Sabre
Intellectual Property.
"Sabre Intellectual Property" means all Intellectual Property used by Sabre
in the operation of the Travelocity Business.
Section 4.15 Year 2000 Compliance. All material software and leased
computer hardware used in the conduct by Sabre or any Subsidiary of the
Travelocity Business as presently conducted will be Year 2000 Compliant. All
licensed software and leased computer hardware systems used in the conduct of
the Travelocity Business are, to Sabre's knowledge, Year 2000 Compliant.
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Section 4.16 No Termination of Business Relationship. Since January 1,
1999 through the date hereof, none of the Persons with which the Travelocity
Business has a material business relationship has given notice in writing or
other indication in writing of any intention to cancel or otherwise terminate,
prior to the end of the applicable contract term, a material business
relationship with the Travelocity Business and, to the knowledge of Sabre, no
event has occurred or failed to occur which would (i) precipitate the
cancellation or termination of, or (ii) entitle any such entity or customer to
terminate, such a business relationship.
Section 4.17 Insurance. Sabre maintains with respect to the Travelocity
Business in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms, with such
deductibles, and covering such risks (including fire, casualty, and liability),
as is consistent with industry practice. There is no default with respect to any
provision contained in any insurance policy, nor has Sabre failed to give any
notice or present any claim under any such policy in due and timely fashion. All
premiums due and payable with respect to the insurance policies have been paid.
All such policies are in full force and effect. Neither Sabre nor any Subsidiary
has failed to give any notice or present any claim under any such insurance
policy in due and timely fashion or as required by any of such insurance
policies or has otherwise, through any act, omission or non-disclosure,
jeopardized or impaired full recovery of any claim under such policies, and
there are no claims by Sabre or any Subsidiary under any of such policies to
which any insurance company is denying liability or defending under a
reservation of rights or similar clause. No notice of cancellation or
non-renewal of any such policy has been received by Sabre.
Section 4.18 Sufficiency of Assets. The assets to be conveyed pursuant to
the Sabre Assignments include all of the assets and properties required to
operate the Travelocity Business substantially in the manner as it is now being
conducted and operated.
Section 4.19 Disclosure. The information described on Schedule 4.19 (i) to
the extent constituting historical facts, does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained therein not
misleading, and (ii) to the extent constituting forward-looking statements,
represents Sabre's best estimates prepared in good faith and based upon
reasonable assumptions (excluding the impact of the transactions contemplated
hereby).
ARTICLE V
COVENANTS
Section 5.1 Covenants of Preview. During the period from the date of this
Agreement and continuing until the Effective Time, Preview agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the Preview Disclosure Schedule or to the
extent that Sabre, Travelocity Holdings or Travelocity.com shall otherwise
consent in writing):
(a) Ordinary Course. (i) Preview and each of its Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary
course in all material respects, in substantially the same manner as
heretofore conducted, shall use all reasonable best efforts to keep
available the services of its officers and employees as a group (subject to
changes in the ordinary course) and shall use all reasonable efforts to
preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with customers, suppliers,
regulators, distributors, creditors, lessors and others having business
dealings with them to the end that their ongoing businesses shall not be
impaired in any material respect at the Effective Time; provided, however,
that no action by Preview or its Subsidiaries with respect to matters
specifically addressed by any other provision of this
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Section 5.1 shall be deemed a breach of this Section 5.1(a)(i) unless such
action would constitute a breach of one or more of such other provisions.
(ii) Preview shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new line of business, (B) incur or
commit to any capital expenditures other than capital expenditures
incurred or committed to in the ordinary course of business consistent
with past practice and which are not in excess of $250,000 in the
aggregate or $50,000 individually or (C) incur or commit to any
advertising expenditures before March 31, 2000 not provided for in the
advertising budget set forth in the Preview Disclosure Schedule or incur
or commit to any advertising expenditures after March 31, 2000 not
provided for in an advertising budget as is mutually agreed by Preview
and Sabre.
(iii) Preview shall perform and comply with the AOL Agreements in
the usual, regular and ordinary course and shall not willfully breach,
violate or default on the AOL Agreements or take any action that would
precipitate AOL or entitle AOL to cancel, terminate or modify the AOL
Agreements.
(b) Dividends; Changes in Share Capital. Preview shall not and shall
not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine
or reclassify any of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. Preview shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock of any
class, any Preview Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Preview Voting Debt, or enter into any agreement with respect to
any of the foregoing, other than (i) the issuance of Preview Common Stock
(and the associated Rights) upon the exercise of stock options or in
connection with other stock-based benefits plans outstanding on the date
hereof in accordance with their present terms, (ii) issuances by a wholly
owned Subsidiary of Preview of capital stock to such Subsidiary's parent,
(iii) issuances in accordance with the Rights Agreement, (iv) issuances of
shares and options to purchase no more than 100,000 shares of Preview
Common Stock granted to non-executive employees in the ordinary course of
business and having an exercise price equal to the current market price of
Preview Common Stock on the date of grant, or (v) issuances of options to
purchase up to that number of shares of Preview Common Stock equal to the
number of shares subject to outstanding options that expire unexercised
after the date hereof, provided that such options are granted with the
consent of Sabre and have an exercise price not less than the current
market price of Preview Common Stock on the date of grant as contemplated
by this Agreement.
(d) Governing Documents. Except to the extent required by law or
required by the rules and regulations of Nasdaq, Preview and its
Subsidiaries shall not amend or propose to amend their respective
certificates of incorporation, by-laws or other governing documents.
(e) No Acquisitions or Joint Ventures. Preview shall not, and shall
not permit any of its Subsidiaries to, acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (other than the acquisition of assets used in the
operations of the business of Preview and its Subsidiaries in the ordinary
course). Preview shall not, and shall not permit any of its Subsidiaries
to, enter into, or agree to enter into, (i) any joint venture or
partnership, or any discussions with respect to any joint venture or
partnership, or (ii) any material marketing or technology alliance (other
than supplier relationships and site sponsorships entered into in the
ordinary course of business) or any discussions with respect to such
alliance unless such alliance would not extend beyond the Closing Date and
Preview has given Sabre reasonable notice to Sabre prior to entering into
such alliance.
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(f) No Reorganizations or Dispositions. Preview shall not, and shall
not permit any Subsidiary to, adopt a plan or agreement of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Preview or any of its
Subsidiaries or sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries), except for the disposal of obsolete or
worn-out assets or properties in the ordinary course of business,
consistent with past practices, or as contemplated by this Agreement.
(g) Indebtedness. Preview shall not, and shall not permit any of its
Subsidiaries to, (i) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by Preview or a Subsidiary
of Preview to or in Preview or any Subsidiary of Preview or (ii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than
indebtedness, loans, advances, payments, discharges or satisfactions
incurred or committed to in the ordinary course of business consistent with
past practice.
(h) Tax-Free Qualification. Preview shall not, and shall not permit
any of its Subsidiaries to, take any action that would prevent or impede
the Merger from qualifying as a reorganization under Section 368 of the
Code.
(i) Other Actions. Preview shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in, except as otherwise permitted by Section 6.4, any
of the conditions to the Merger set forth in Article VII not being
satisfied.
(j) Accounting Methods; Income Tax Elections; Tax Returns. Except as
disclosed in Preview SEC Reports filed prior to the date of this Agreement,
Preview shall not change its methods of accounting in effect at December
31, 1998, except as required by changes in U.S. GAAP as concurred in by
Preview's independent auditors. Preview shall not (i) change its fiscal
year or (ii) make any material Tax election, other than in the ordinary
course of business consistent with past practice, without consultation with
Sabre. Preview shall prepare and file all Tax Returns required to be filed
and pay all required Taxes due in accordance with applicable law.
(k) Preview Rights Agreement. Except as contemplated by this
Agreement, Preview shall not amend, modify or waive any provision of the
Rights Agreement, and shall not take any action to redeem the Rights or
render the Rights inapplicable to any transaction, other than to permit a
Person to make a Superior Proposal if the Board of Directors of Preview
determines in its good faith judgment, after receiving the advice of
outside legal counsel, that, in light of the Superior Proposal, the Board
of Directors of Preview would be in violation of its fiduciary duties under
applicable law if it failed to amend, modify or waive such provision of the
Preview Rights Agreement.
(l) Preview Benefit Plans. Preview shall not, and shall not permit its
Subsidiaries, to (i) enter into, adopt or amend any agreement or
arrangement relating to severance or termination pay of any director or
officer or employee of Preview or any Subsidiary except, in the case of
employees, in the ordinary course of business, (ii) enter into, adopt or
amend any Preview Benefit Plan or Preview Multiemployer Plan, (iii) grant
any increase in base compensation or other payment or benefit to any
directors, officers or employees, except for increases occurring in the
ordinary course of business, and except in the case of clauses (i), (ii)
and (iii), as required under existing contracts and as required by law.
(m) Standstills. Preview shall not amend or waive any provisions of,
or grant any approval under, any standstill agreement; provided that the
Board of Directors of Preview may grant a waiver of provisions of, or
approval under, a standstill agreement with any Person solely to permit
such Person to make a Superior Proposal if the Board of Directors of
Preview determines in its good faith judgment, after receiving the advice
of outside legal counsel, that, in light of the Superior Proposal, the
Board of Directors of Preview would be in violation of its fiduciary duties
under applicable law if it failed to grant such waiver.
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(n) Commitments. Preview shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments, contracts or agreements to do
any of the foregoing.
Section 5.2 Covenants of Sabre. During the period from the date of this
Agreement and continuing until the Effective Time, Sabre agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the Sabre Disclosure Schedule or to the
extent that Preview shall otherwise consent in writing):
(a) Ordinary Course. (i) Sabre shall carry on the Travelocity Business
in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use all
reasonable best efforts to keep available the services of the employees as
a group of the Travelocity Business (subject to changes in the ordinary
course) and use all reasonable efforts to preserve intact the Travelocity
Business, maintain its rights and franchises and preserve its relationships
with customers, suppliers, regulators, distributors, creditors, lessors and
others having business dealings with Sabre with respect to the Travelocity
Business to the end that the Travelocity Business shall not be impaired in
any material respect at the Effective Time; provided, however, that no
action by Sabre with respect to matters specifically addressed by any other
provisions of this Section 5.2 shall be deemed a breach of this Section
5.2(a)(i) unless such action would constitute a breach of one or more of
such other provisions.
(b) Issuance of Securities. Sabre shall not permit Travelocity.com to
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock of any class or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any
of the foregoing, other than issuances of Triton.com Class A Common Stock
to Sabre or its Affiliates or as described in the Sabre Disclosure
Schedule. Sabre shall not permit Travelocity.com to declare any cash
dividends or effect any share repurchases.
(c) No Acquisitions or Joint Ventures. Except as contemplated by this
Agreement, Sabre shall not permit Travelocity.com to acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets (other than the acquisition of assets used in
the operations of the Travelocity Business in the ordinary course and the
assets of the Travelocity Business to be assigned to Travelocity.com
pursuant to the Preview Assignments and Sabre Assignments).
(d) No Reorganizations or Dispositions. Sabre shall not, and shall not
permit any Subsidiary to, adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization affecting the Travelocity Business
or sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of the assets of the Travelocity
Business (including capital stock of Subsidiaries), except for the disposal
of obsolete or worn-out assets or properties in the ordinary course of
business, consistent with past practices, or as contemplated by this
Agreement.
(e) Indebtedness. Sabre shall not permit the Travelocity Business to
(i) make any loans, advances or capital contributions to, or investments
in, any other Person, or (ii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than indebtedness, loans, advances,
payments, discharges or satisfactions incurred or committed to in the
ordinary course of the Travelocity Business consistent with past practice.
(f) Tax-Free Qualification. Sabre shall not, and shall not permit any
of its Subsidiaries to, take any action that would prevent or impede the
Merger from qualifying as a reorganization under Section 368 of the Code.
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(g) Other Actions. Sabre shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the conditions to the Merger set forth in
Article VII not being satisfied.
(h) Accounting Methods. Except as disclosed in Sabre SEC Reports filed
prior to the date of this Agreement, Sabre shall not change its methods of
accounting in respect of the Travelocity Business in effect at December 31,
1998, except as required by changes in U.S. GAAP as concurred in by Sabre's
independent auditors.
(i) Commitments. Sabre shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments, contracts or agreements to do
any of the foregoing.
Section 5.3 Advice of Changes; Regular Reporting; Governmental
Filings. (a) Each Party shall confer on a regular and frequent basis with the
other and report (to the extent permitted by law or regulation or any applicable
confidentiality agreement) on operational matters including, without limitation,
the provision of regular reports by Preview (with respect to it and its
Subsidiaries) and Sabre (with respect to the Travelocity Business) in the form
attached at Exhibit 5.3. During the period from the date hereof to the Closing,
each Party shall give prompt written notice to the other Parties of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
cause or could reasonably be expected to cause any representation or warranty of
the Party giving notice contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Closing, or (ii)
any failure of the Party giving notice to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such Party hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.3
shall not limit or otherwise affect the remedies available hereunder to the
Parties receiving notice, or modify in any way any disclosure made in or in
connection with this Agreement as of the date hereof.
(b) As soon as practicable after the end of each month during the
period from the date of this Agreement until the Closing Date, Preview will
prepare and promptly deliver to Sabre copies of an unaudited balance sheet
as of the end of such month and an unaudited income statement for the month
then ended for Preview and Sabre will prepare and promptly deliver to
Preview copies of an unaudited balance sheet as of the end of such month
and an unaudited income statement for the month then ended for the
Travelocity Business. All financial statements delivered hereunder by
Preview shall (a) be prepared in accordance with U.S. GAAP applied on a
basis consistent with past practice (except that such financial statements
need not contain all of the footnotes required under U.S. GAAP and may be
subject to year-end accrual adjustments) and (b) fairly present the
consolidated financial position of Preview and its Subsidiaries as at the
dates thereof and the consolidated results of its operations for the
periods then ended. All financial statements delivered hereunder by Sabre
shall (a) be prepared in accordance with U.S. GAAP applied on a basis
consistent with past practice (except that such financial statements need
not contain all of the footnotes required under U.S. GAAP and may be
subject to year-end accrual adjustments) and (b) fairly present the results
of operations of the Travelocity Business for the periods then ended.
(c) Preview and Sabre shall file all reports required to be filed by
each of them with the SEC (and all other Governmental Entities) between the
date of this Agreement and the Effective Time and shall (to the extent
permitted by law or regulation or any applicable confidentiality agreement)
deliver to the other party copies of all such reports, announcements and
publications promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of Preview and Sabre shall
have the right to review in advance, and will consult with the other with
respect to, all the information relating to the other party and each of
their respective Subsidiaries, which appears in any filings, announcements
or publications made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of
the parties hereto agrees to act reasonably and as promptly as practicable.
Each party agrees that, to the extent practicable and as timely as
practicable, it will consult with, and provide all appropriate and
necessary assistance to, the other
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party with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party apprised of the status of matters
relating to completion of the transactions contemplated hereby.
(d) As soon as practicable after the end of each month during the
period from the date of this Agreement until the Closing Date, if requested
by Sabre, Preview will prepare and promptly deliver to Sabre reports
regarding the AOL Agreements addressing such matters as Sabre shall
request, including traffic, development obligations, or other information
and Preview shall promptly notify Sabre of any actual or potential
breaches, violation or defaults by it or AOL under the AOL Agreements or
any event which would precipitate any cancellation, termination or
modification of the AOL Agreements by AOL. In addition, if requested by
Sabre, Preview shall promptly provide Sabre with copies of all reports
supplied to AOL and of all reports supplied by AOL under the AOL
Agreements.
Section 5.4 Transition Planning. Terry Jones, as President of
Travelocity.com (and on behalf of Travelocity Holdings and Sabre), and Chris
Clouser, as President of Preview, jointly shall be responsible for coordinating
all aspects of transition planning and implementation relating to the Sabre
Assignments, the Preview Assignments, the Merger and the other transactions
contemplated hereby. If either such person ceases to be President of his company
for any reason, such person's successor shall assume his predecessor's
responsibilities under this Section 5.4. During the period between the date of
this Agreement and the Effective Time, Terry Jones and Chris Clouser jointly
shall examine various alternatives regarding the manner in which to best
organize and manage the businesses of Travelocity.com LP after the Effective
Time to the extent permitted by law or regulation or any applicable
confidentiality agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of Form S-4 and Proxy Statement; Preview
Stockholders Meeting. (a) The parties shall cooperate and promptly prepare, and
Sabre shall file with the SEC as soon as practicable, a Registration Statement
on Form S-4 with respect to the issuance of Travelocity.com Common Stock in the
Merger (the "Form S-4"), a portion of which Registration Statement shall also
serve as the proxy statement/prospectus with respect to the meeting of Preview's
stockholders in connection with the Merger (the "Proxy Statement/Prospectus").
Sabre shall use its reasonable best efforts to, and Preview will cooperate with
Sabre to, have the Form S-4 declared effective by the SEC as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Merger. Sabre shall use its reasonable best efforts to obtain,
prior to the effective date of the Form S-4, all necessary permits or approvals
required under Blue Sky Laws to carry out the Merger.
(b) Preview shall, as promptly as practicable following the execution
of this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Preview Stockholders Meeting") for the purpose of
obtaining the Required Preview Vote with respect to the transactions
contemplated by this Agreement. In connection with the Preview Stockholders
Meeting, Preview will mail to its stockholders as promptly as practicable,
the Proxy Statement/Prospectus and all other proxy materials for the
Preview Stockholders Meeting, (i) will use its reasonable best efforts,
subject to paragraph (c) of this Section 6.1, to obtain the Required
Preview Vote and (ii) will otherwise comply with all legal requirements
applicable to the Preview Stockholders Meeting.
(c) Except as provided in the next sentence, the Board of Directors of
Preview shall recommend approval and adoption of this Agreement and the
Merger by Preview's stockholders. The Board of Directors of Preview shall
be permitted (i) not to recommend to Preview's stockholders that they give
the Required Preview Vote or (ii) to withdraw or modify in a manner adverse
to Sabre its recommendation to Preview's stockholders that they give the
Required Preview Vote, only (w) if after receiving an Acquisition Proposal
that constitutes a Superior Proposal, the Board of Directors of
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Preview determines in its good faith judgment, after receiving the advice
of outside legal counsel, that, in light of this Superior Proposal, the
Board of Directors would be in violation of its fiduciary duties under
applicable law if it failed not to take such action, (x) if three Business
Days have elapsed following delivery by Preview to Sabre of written notice
advising Sabre that the Board of Directors of Preview intends to resolve to
take such action absent modification to the terms and conditions of this
Agreement, (y) if, assuming this Agreement were amended to reflect all
adjustments to the terms and conditions hereof proposed by Sabre during
such three Business Day period, such Acquisition Proposal would nonetheless
constitute a Superior Proposal (it being understood that Sabre shall be
permitted to propose adjustments to the terms and conditions hereof,
notwithstanding anything contained in the Confidentiality Agreement), and
(z) if Preview has complied, in all material respects, with its obligations
set forth in Section 6.4; provided, however, that nothing in this paragraph
(c) shall be interpreted to excuse Preview from complying with its
obligations under paragraphs (a) and (b) of this Section 6.1.
(d) Sabre shall, and shall cause its respective Subsidiaries to,
approve and adopt this Agreement and the Merger.
Section 6.2 Access to Information. (a) Upon reasonable notice, Preview
shall (and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of Sabre
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, Preview shall (and shall cause its Subsidiaries to)
furnish promptly to Sabre (i) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or state securities
laws, as applicable (other than reports or documents which such party is not
permitted to disclose under applicable law), and (ii) consistent with its legal
obligations, all other information concerning its business, properties and
personnel as such other party may reasonably request; provided, however, that
Preview may restrict the foregoing access to the extent that any law, treaty,
rule or regulation of any Governmental Entity or any confidentiality agreement
applicable to Preview requires Preview or its Subsidiaries to restrict access to
any properties or information.
(b) Upon reasonable notice, Sabre shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Preview reasonable access
during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records
relating to the Travelocity Business and, during such period, Sabre shall
(and shall cause its Subsidiaries to) furnish promptly to Preview (i) a
copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant
to the requirements of Federal or state securities laws, as applicable
(other than reports or documents which such party is not permitted to
disclose under applicable law), and (ii) consistent with its legal
obligations, all other information concerning the Travelocity Business, as
such other party may reasonably request; provided, however, that Sabre may
restrict the foregoing access to the extent that any law, treaty, rule or
regulation of any Governmental Entity or any confidentiality agreement
applicable to Sabre requires Sabre or its Subsidiaries to restrict access
to any properties or information.
(c) The parties will hold any such information which is non-public in
confidence to the extent required by, and in accordance with, the
provisions of the letter dated January 18, 1999 between Preview and Sabre
(the "Confidentiality Agreement".) Any investigation by Preview or Sabre
shall not affect the representations and warranties of Sabre, Travelocity
Holdings, Travelocity.com or Preview, as the case may be.
Section 6.3 Reasonable Best Efforts. (a) Subject to Section 6.3(b), Sabre
and Preview shall each cooperate with the other and use (and shall cause their
respective Subsidiaries to use) their respective reasonable best efforts to
promptly (i) take or cause to be taken all necessary actions, and do or cause to
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be done all things, necessary, proper or advisable under this Agreement and
applicable laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including,
without limitation, preparing and filing promptly and fully all documentation to
effect all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other
confirmations required to be obtained from any third party necessary, proper or
advisable to consummate the Merger and the other transactions contemplated by
this Agreement. Subject to applicable laws relating to the exchange of
information, Sabre and Preview shall have the right to review in advance, and to
the extent practicable each will consult the other on, all the information
relating to Preview and its Subsidiaries or Sabre and its Subsidiaries, as the
case may be, that appears in any filing made with, or written materials
submitted to, any third party and/or any governmental authority in connection
with the Merger and the other transactions contemplated by this Agreement.
(b) Without limiting Section 6.3(a), Preview and Sabre shall each use
its reasonable best efforts to avoid the entry of, or to have vacated or
terminated, any decree, order, or judgment that would restrain, prevent or
delay the Closing, on or before the Termination Date, including without
limitation defending through litigation on the merits any claim asserted in
any court by any Person.
(c) Each of Sabre, Travelocity Holdings, Travelocity.com and Preview
shall use its reasonable best efforts to cause the Merger to qualify, and
will not (both before and after consummation of the Merger) take any
actions which to its knowledge could reasonably be expected to prevent the
Merger from qualifying, as a reorganization under the provisions of Section
368 of the Code.
Section 6.4 No Solicitation. (a) Each of Preview and its Subsidiaries will
not, and will use its reasonable best efforts to cause its respective officers,
directors, employees, investment bankers, consultants, attorneys, accountants,
agents and other representatives not to, directly or indirectly, take any action
to solicit, initiate, knowingly encourage or knowingly facilitate the making of
any Acquisition Proposal (including without limitation, by amending, or granting
any waiver under, the Rights Agreement) or any inquiry with respect thereto or
engage in discussions or negotiations with any Person with respect thereto, or
in connection with any Acquisition Proposal or potential Acquisition Proposal,
disclose any nonpublic information relating to it or its Subsidiaries or afford
access to the properties, books or records of it or its Subsidiaries to, any
Person that has made, or to such party's knowledge, is considering making, any
Acquisition Proposal; provided, however, that, in the event that prior to
receipt by Preview of the Required Preview Vote, (i) Preview shall receive a
Superior Proposal that was not solicited by it and did not otherwise result from
a breach of this Section 6.4, (ii) the Board of Directors of Preview, determines
in its good faith judgment, after receiving the advice of outside counsel that,
in light of this Superior Proposal, if Preview fails to participate in such
discussions or negotiations with, or to provide such information or access to,
the party making the Superior Proposal, it would be in violation of its
fiduciary duties under applicable law, and (iii) after giving Sabre 24 hours'
notice of its intention to do so, Preview may (x) furnish information or access
with respect to it and its Subsidiaries to the Person making such Superior
Proposal pursuant to a customary confidentiality agreement containing terms
generally no less restrictive than the terms contained in the Confidentiality
Agreement, provided that a copy of all such written information is
simultaneously, or has been previously, provided to Sabre and (y) participate in
discussions and negotiations regarding such Superior Proposal; and provided,
further, that after receipt of an unsolicited, written, bona fide Acquisition
Proposal that the Board of Directors of Preview reasonably concludes may
constitute a Superior Proposal, Preview may on one occasion submit to the party
making such Acquisition Proposal a written list of questions, the sole purpose
of which is to elicit clarifications as to the material terms of the Acquisition
Proposal so as to enable the Board of Directors of Preview to make a
determination whether such Acquisition Proposal is in fact a Superior Proposal
(it being agreed that any correspondence with such party shall be limited to
questions and such questions shall be limited
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to the purpose of clarifying the material terms of such Acquisition Proposal and
shall not solicit or encourage any new Acquisition Proposal or any change to the
Acquisition Proposal).
(b) Nothing contained in this Agreement shall prevent the Board of
Directors of Preview from complying with Rule 14d-9 or Rule 14e-2 under the
Exchange Act with regard to an Acquisition Proposal; provided that the
Board of Directors of Preview shall not recommend that the stockholders of
Preview tender their shares in connection with a tender offer except to the
extent, after receiving a Superior Proposal, the Board of Directors of
Preview determines in its good faith judgment, after receiving the advice
of outside legal counsel, that, in light of the Superior Proposal, the
Board of Directors would be in violation of its fiduciary duties under
applicable law if it fails to make such a recommendation.
(c) If Preview or any Subsidiary of Preview receives an Acquisition
Proposal, Preview will (A) promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal) notify (which notice shall be
provided orally and in writing and shall identify the Person making the
Acquisition Proposal and set forth the material terms thereof) Sabre of the
receipt of the Acquisition Proposal, or any request for non-public
information relating to Preview or any Subsidiary of Preview or for access
to the properties, books or records of Preview or any Subsidiary of Preview
by any Person that has made, or to Preview or any Subsidiary's knowledge
may be considering making, an Acquisition Proposal, and (B) will keep Sabre
reasonably informed of any changes to the material terms of any such
Acquisition Proposal or request. Preview shall, and shall cause its
Subsidiaries to, immediately cease and cause to be terminated, and use
reasonable best efforts to cause its officers, directors, employees,
investment bankers, consultants, attorneys, accountants, agents and other
representatives to, immediately cease and cause to be terminated, all
discussions and negotiations, if any, that have taken place prior to the
date hereof with any Persons with respect to any actual or potential
Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal for, or any indication of interest in, any (i) direct or
indirect acquisition or purchase of a business or asset of Preview or any
of its Subsidiaries that constitutes 20% or more of the net revenues or
assets of Preview and its Subsidiaries, taken as a whole; (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of Preview or any of its Subsidiaries whose business constitutes
20% or more of the net revenues or assets of Preview and its Subsidiaries,
taken as a whole; (iii) tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning 20% or more of
any class of equity securities of Preview or any of its Subsidiaries whose
business constitutes 20% or more of the net revenues or assets of Preview
and its Subsidiaries, taken as a whole; or (iv) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Preview or any of its Subsidiaries whose business
constitutes 20% or more of the net revenue or assets of Preview and its
Subsidiaries, taken as a whole, other than the transactions contemplated by
this Agreement. For purposes of this Agreement, "Superior Proposal" means
any bona fide written Acquisition Proposal for or in respect of more than
50 percent of the outstanding shares of Preview Common Stock on terms that
the Board of Directors of Preview determines in its good faith judgment
(after consultation with a financial advisor of nationally recognized
reputation and taking into account all the terms and conditions of the
Acquisition Proposal deemed relevant by Preview's Board of Directors,
including any break-up fees, expense reimbursement provisions, conditions
to consummation, and the ability of the party making such proposal to
obtain financing for such Acquisition Proposal) are more favorable from a
financial point of view to its stockholders than the Merger.
(d) Nothing contained in this Agreement shall prohibit a deferral of
the distribution of rights issued pursuant to the Preview Rights Agreement
following the commencement of a tender offer or an exchange offer for
Preview Common Stock.
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(e) Each of Preview and its Subsidiaries agrees that it will take the
necessary steps promptly to inform its officers, directors, investment
bankers, consultants, attorneys, accountants, agents and other
representatives, as appropriate, of the obligations undertaken in this
Section 6.4.
Section 6.5 Employee Matters. Preview and Sabre agree that the individuals
who immediately prior to the Effective Time are employees of Preview and its
Subsidiaries (the "Continuing Employees") shall, following the Effective Time,
be provided with employee benefits that are no less advantageous in the
aggregate to (in Sabre's discretion) either (i) the employee benefits provided
to the Continuing Employees immediately prior to the Effective Time or (ii) the
employee benefits provided to those individuals who following the Effective Time
are employees of Travelocity.com LP, other than the Continuing Employees (but
excluding in any event awards under stock option and other equity-based plans
and flight benefit privileges); and provided, that nothing herein shall limit
the right of any entity to make such changes to any employee benefit plan or
arrangement as may be necessary to conform a plan or arrangement with applicable
law or to terminate the employment of any person following the Effective Time.
The Surviving Corporation shall grant or cause Travelocity.com LP to grant all
Continuing Employees credit for all service with Preview and its Subsidiaries
and their respective predecessors prior to the Effective Time for all purposes
for which such service is recognized under employee benefit plans provided to
such Continuing Employees following the Effective Time. To the extent that
Continuing Employees receive medical, dental or health insurance benefits after
the Effective Time, Sabre shall waive or cause Travelocity.com LP to waive any
pre-existing condition exclusions and actively-at-work requirements for
Continuing Employees and their covered dependents and provide that any expenses
incurred during the portion of the calendar year preceding the Effective Time by
a Continuing Employee or a Continuing Employee's covered dependents shall be
taken into account under any such medical, dental or health plans provided to
such Continuing Employees for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions.
Section 6.6 Fees and Expenses. Whether or not the Merger is consummated,
(i) all Expenses incurred in connection with the Preview Assignments, the Sabre
Assignments, this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such Expenses, and (ii) all Expenses incurred in
connection with the printing, filing and mailing of the Form S-4 and the Proxy
Statement/ Prospectus shall be shared equally by Sabre and Preview, except in
each case as provided in Section 8.3. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, printing, filing and mailing of the Proxy
Statement/Prospectus and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby.
Section 6.7 Director and Officer Liability. (a) Travelocity.com shall
indemnify and hold harmless, to the fullest extent permitted under applicable
law, the individuals who on or prior to the Effective Time were officers,
directors and employees of Preview or its Subsidiaries (collectively, the
"Indemnitees") with respect to all acts or omissions by them in their capacities
as such or taken at the request of Preview or any of its Subsidiaries at any
time on or prior to the Effective Time. Following the Effective Time,
Travelocity.com shall honor all indemnification obligations presently provided
under Preview's certificate of incorporation and by-laws in effect on the date
hereof. Travelocity.com shall honor all indemnification agreements with
Indemnitees in effect as of the date of this Agreement in accordance with the
terms thereof.
(b) For six years after the Effective Time, Travelocity.com shall
procure the provision of officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering
each such Person currently covered by Preview's officers' and directors'
liability insurance policy on terms with respect to coverage and in amounts
no less favorable than those of such policy in effect on the date hereof;
provided, that if the aggregate annual premiums for such insurance at any
time during such period shall exceed 200% of the per annum rate of premium
paid by Preview and its
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Subsidiaries as of the date hereof for such insurance, then Travelocity.com
shall provide only such coverage as shall then be available at an annual
premium equal to 200% of such rate.
(c) The obligations of Travelocity.com under this Section 6.7 shall
not be terminated or modified in such a manner as to adversely affect any
Indemnitee to whom this Section 6.7 applies without the consent of the
affected Indemnitee (it being expressly agreed that the Indemnitees to whom
this Section 6.7 applies shall be third party beneficiaries of this Section
6.7).
Section 6.8 Public Announcements. Sabre and Preview shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
Section 6.9 Accountants' Letters. Upon reasonable notice from the other,
Sabre and Preview shall use their respective reasonable best efforts to cause
their respective independent public accountants to deliver to Preview or Sabre,
as the case may be, a letter, dated within two Business Days of the Effective
Time of the Form S-4 covering such matters as are reasonably requested by
Preview or Sabre, as the case may be, and as are customarily addressed in
accountant's "comfort" letters.
Section 6.10 Listing of Shares of Travelocity.com Common
Stock. Travelocity.com shall use its reasonable best efforts to cause the shares
of Travelocity.com Common Stock to be approved for quotation, upon official
notice of issuance, on Nasdaq.
Section 6.11 Officers and Senior Management. Prior to the Closing Date,
Sabre shall identify the officers and senior managers of the Surviving
Corporation.
Section 6.12 Year 2000 Compliance. Preview shall use its reasonable best
efforts to cause all computer software and hardware used by it or any Subsidiary
in the conduct of its business, and Sabre shall use its reasonable best efforts
to cause all computer software and hardware used by it or any Subsidiary in the
conduct of the Travelocity Business, to be Year 2000 Compliant by November 15,
1999.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligations of Preview, Sabre, Travelocity Holdings and
Travelocity.com to effect the Merger are subject to the satisfaction or waiver
on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. Preview shall have obtained the Required
Preview Vote in connection with the adoption of this Agreement and approval
of the Merger by the stockholders of Preview in accordance with the DGCL.
(b) No Injunctions or Restraints, Illegality. No statute, rule,
ordinance or regulation shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other
order issued by a court or other Governmental Entity of competent
jurisdiction shall be in effect, having the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger, the formation of Travelocity.com LP or the other
transactions contemplated hereby under the HSR Act shall have been
terminated or shall have expired.
(d) Nasdaq Listing. Nasdaq shall have approved the shares of
Travelocity.com Common Stock upon official notice of issuance for quotation
on Nasdaq.
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(e) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
Section 7.2 Additional Conditions to Obligations of Sabre, Travelocity
Holdings and Travelocity.com. The obligations of Sabre, Travelocity Holdings and
Travelocity.com to effect the Merger are subject to the satisfaction of, or
waiver by Sabre on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Preview set forth in this Agreement that is qualified as to
"materiality" or "Material Adverse Effect" shall be true and correct on the
Closing Date as if made on the Closing Date (except to the extent that any
such representation or warranty is made as of a specified date, in which
case such representation or warranty shall be true and correct as of such
specified date), and each of the representations and warranties of Preview
that is not so qualified shall be true and correct in all material respects
on the Closing Date as if made on the Closing Date (except to the extent
that any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall be true and correct in all
material respects as of such specified date), and Travelocity Holdings
shall have received a certificate of an executive officer of Preview to
such effect.
(b) Performance of Obligations of Preview. Preview shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality and shall have performed or complied in all
material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are not so qualified as to materiality, and Travelocity Holdings shall have
received a certificate of an executive officer of Preview to such effect.
(c) Tax Opinion. Travelocity.com shall have received from Fried,
Frank, Harris, Shriver & Jacobson, counsel to Travelocity.com, on the
Closing Date, a written opinion dated as of such date substantially in the
form of Exhibit 7.2(c)(1). In rendering such opinion, counsel to
Travelocity.com shall be entitled to rely upon representations of officers
of Travelocity.com and Preview substantially in the form of Exhibits
7.2(c)(2) and 7.2(c)(3).
(d) Consents. The consents set forth on Exhibit 7.2(d) shall have been
obtained on terms reasonably acceptable to Sabre.
(e) Comfort Letter. The letter contemplated by Section 6.9 to be
delivered to Sabre shall have been delivered as contemplated thereby.
Section 7.3 Additional Conditions to Obligations of Preview. The
obligations of Preview to effect the Merger are subject to the satisfaction of,
or waiver by Preview, on or prior to the Closing Date of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of each of Sabre, Travelocity Holdings and Travelocity.com set
forth in this Agreement that is qualified as to materiality or "Material
Adverse Effect" shall be true and correct on the Closing Date as if made on
the Closing Date (except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation
or warranty shall be true and correct as of such specified date), and each
of the representations and warranties of each of Sabre, Travelocity
Holdings and Travelocity.com that is not so qualified shall be true and
correct in all material respects on the Closing Date as if made on the
Closing Date (except to the extent that any such representation or warranty
is made as of a specified date, in which case such representation or
warranty shall be true and correct in all material respects as of such
specified date), and Preview shall have received a certificate of an
executive officer of Sabre to such effect.
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(b) Performance of Obligations of Sabre. Each of Sabre, Travelocity
Holdings and Travelocity.com shall have performed or complied with all
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects
with all agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and Preview shall have received a certificate of the an
executive officer of Sabre to such effect.
(c) Tax Opinion. Preview shall have received from Simpson Thacher &
Bartlett, counsel to Preview, on the Closing Date, a written opinion dated
as of such date substantially in the form of Exhibit 7.3(c)(2). In
rendering such opinion, counsel to Preview shall be entitled to rely upon
representations of officers of Sabre and Preview substantially in the form
of Exhibits 7.3(c)(2) and 7.3(c)(3).
(d) Consents. The consents set forth on Exhibit 7.3(d) shall have been
obtained on terms reasonably acceptable to Preview.
(e) Travelocity LP. Travelocity LP shall have been formed as a
Delaware limited partnership and Travelocity Holdings, Sabre,
Travelocity.com and their affiliates shall have entered into the Limited
Partnership Agreement.
(f) Assignments to New Travelocity. The Sabre Assignments shall have
been consummated.
(g) Ancillary Agreements. Sabre, Travelocity Holdings and
Travelocity.com LP shall have entered into the Ancillary Agreements to
which they are parties.
(h) Comfort Letter. The letter contemplated by Section 6.9 to be
delivered to Preview shall have been delivered as contemplated thereby.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, by action taken or
authorized by the Board of Directors of the terminating party or parties
(notwithstanding any approval of this Agreement by the stockholders of Preview):
(a) By mutual written consent of Sabre and Preview;
(b) By either Sabre or Preview if the Effective Time shall not have
occurred on or before March 31, 2000 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement (including without limitation Section 6.3)
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) By either Sabre or Preview if there shall be any law or regulation
that makes consummation of the Merger or the assignment of assets to New
Travelocity, LP illegal or otherwise prohibited or if any Governmental
Entity shall have issued an order, decree or ruling or taken any other
action (which the parties shall have used their reasonable best efforts to
resist, resolve or lift, as applicable, in accordance with Section 6.3)
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section
8.1(c) shall not be available to any party whose failure to comply with
Section 6.3 has to any extent been the cause of such action;
(d) By either Sabre or Preview if the approval by the stockholders of
Preview required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the
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Required Preview Vote at a duly held meeting of stockholders of Preview or
at any adjournment thereof;
(e) By Sabre if the Board of Directors of Preview (i) shall withdraw
or modify or change in any manner adverse to Sabre its approval or
recommendation of this Agreement or the Merger whether or not permitted by
the terms hereof, (ii) shall fail to call the Preview Stockholders' Meeting
in accordance with Section 6.1(b), (iii) shall recommend a Superior
Proposal or (iv) shall resolve to take any of the actions specified in
clauses (i), (ii) or (iii) above;
(f) By Sabre (i) if there has been a breach by Preview of any
representation or warranty contained in this Agreement that would cause the
condition in Section 7.2(a) not to be satisfied, or (ii) if there has been
a breach of any of the covenants or agreements set forth in this Agreement
on the part of Preview that would cause the condition in Section 7.2(b) not
to be satisfied, and, in the case of (i) or (ii), the breach is not curable
or, if curable, is not cured within twenty (20) Business Days after written
notice of such breach is given by Sabre to Preview;
(g) By Preview (i) if there has been a breach by Sabre, Travelocity
Holdings or Travelocity.com of any representation or warranty contained in
this Agreement that would cause the condition set forth in Section 7.3(a)
not to be satisfied, or (ii) if there has been a breach of any of the
covenants or agreements set forth in this Agreement on the part of Sabre,
Travelocity Holdings or Travelocity.com that would cause the condition in
Section 7.3(b) not to be satisfied, and, in the case of (i) or (ii), the
breach is not curable or, if curable, is not cured within twenty (20)
Business Days after written notice of such breach is given by Preview to
Sabre, Travelocity Holdings or Travelocity.com; or
(h) By Preview if (i) the board of directors of Preview authorizes
Preview to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and Preview notifies Sabre in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice (which version shall be updated on
a current basis) and (ii) Sabre does not make, within three Business Days
(or, in the case of any update of such version with respect to a given
third party, other than the initial notification, one Business Day) of
receipt of Preview's written notification of its intention to enter into a
binding agreement for a Superior Proposal, a non-revocable binding offer
that the board of directors of Preview determines, in good faith, is at
least as favorable to the stockholders of Preview as the Superior Proposal;
Section 8.2 Effect of Termination. In the event of termination of this
Agreement by either Sabre or Preview as provided in Section 8.1, this Agreement
shall forthwith become void and of no effect and there shall be no liability or
obligation on the part of Sabre, Travelocity Holdings, Travelocity.com or
Preview or their respective officers or directors except with respect to Section
6.6, this Section 8.2 and Section 8.3 and the Confidentiality Agreement, and
except that no such termination shall relieve any party hereto from any
liability or damages resulting from any willful breach of this Agreement.
Section 8.3 Termination Fee. (a) If:
(i) Sabre shall terminate this Agreement pursuant to Section
8.1(e), unless at the time of such failure to recommend, withdrawal or
adverse modification or change, failure to call the Preview Stockholders
Meeting or recommendation of a Superior Proposal, any of the conditions
set forth in Section 7.3(a) or (b) would not have been satisfied as of
such date and would not be reasonably capable of being satisfied; or
(ii) either Preview or Sabre shall terminate this Agreement
pursuant to Section 8.1(d) and prior to the Preview Stockholders Meeting
any Person shall have publicly announced an Acquisition Proposal and
within six months after such termination Preview enters into a
definitive agreement with respect to, or consummates, any Acquisition
Proposal; or
(iii) Sabre shall terminate this Agreement pursuant to Section
8.1(f) and prior to such termination any Person shall have publicly
announced an Acquisition Proposal and within six
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months after such termination Preview enters into a definitive agreement
with respect to, or consummates, any Acquisition Proposal; or
(iv) Preview shall terminate this Agreement pursuant to Section
8.1(h).
then, (x) in the case of clauses (i) and (iv), Preview shall pay to Sabre, not
later than the date of termination of this Agreement, an amount equal to
$10,000,000, and (y) in the case of clauses (ii) and (iii), Preview shall pay to
Sabre, not later than the date a definitive agreement is entered into with
respect to any Acquisition Proposal or any Acquisition Proposal is consummated,
an amount equal to $10,000,000 less any amounts previously paid pursuant to
Section 8.3(b). Receipt by Sabre of the final payment to which Sabre is entitled
in connection with the events described in clauses (i), (ii) and (iii) (other
than in the case of the events described in clause (iii), if the breach involved
constitutes a willful breach) and (iv), as applicable, referred to in the
foregoing sentence shall constitute conclusive evidence that this Agreement has
been validly terminated and upon acceptance of payment of such amount, Preview
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement.
(b) If no fee is payable pursuant to Section 8.3(a) and Sabre shall
terminate this Agreement pursuant to Section 8.1(f), then, in any such
case, Preview shall, upon request of Sabre, reimburse Sabre for all of its
Expenses (documented in reasonable detail) incurred in connection with this
Agreement and the transactions contemplated hereby up to an aggregate of
$4,000,000.
(c) If Preview shall terminate this Agreement pursuant to Section
8.1(g), then Sabre shall, upon request of Preview, reimburse Preview for
all of its Expenses (documented in reasonable detail) incurred in
connection with this Agreement and the transactions contemplated hereby up
to an aggregate of $3,000,000.
(d) If this Agreement is terminated for any reason, then in addition
to any other payments required under this Section 8.3, Preview shall
reimburse Sabre for all payments made by Sabre to AOL to discharge
Preview's obligations under Section 4.1 of the AOL Agreements.
(e) All payments and reimbursements made under this Section 8.3 shall
be made by wire transfer of immediately available funds to an account
specified by Sabre or Preview, as applicable.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time.
Section 9.2 Notices. All notices and other communications hereunder shall
be in writing (including facsimile or similar writing) and shall be given,
if to Sabre, Travelocity Holdings or Travelocity.com, to
Sabre Inc.
4255 Amon Carter Boulevard
Fort Worth, Texas 76155
Attention: Executive Vice President and
Chief Financial Officer
Facsimile No.: (817) 931-5582
with a copy to
Sabre Inc.
4255 Amon Carter Boulevard
Fort Worth, Texas 76155
Attention: General Counsel
Facsimile No.: (817) 931-7502
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and a copy to
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Charles M. Nathan
Facsimile No.: (212) 859-4000
if to Preview to
Preview Travel, Inc.
747 Front Street
San Francisco, CA 94111
Attention:
Facsimile No.: (415) 421-4992
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Gary I. Horowitz
Michael Nooney
Facsimile No.: (212) 455-2502
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties. Each such notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
Section 9.3 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
Section 9.4 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
Section 9.5 Entire Agreement. This Agreement (including the Exhibits and
Schedules), and the Confidentiality Agreement constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
Except as provided in Section 6.7(c), no provision of this Agreement or any
other agreement contemplated hereby is intended to confer on any Person other
than the parties hereto any rights or remedies.
Section 9.6 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware without regard to principles of conflicts
of law.
Section 9.7 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the
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original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
Section 9.8 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Travelocity.com may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights under this Agreement, but any such transfer or assignment
will not relieve Travelocity.com of its obligations hereunder.
Section 9.9 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement, the Option Agreement or the transactions contemplated
hereby or thereby may be brought in any federal or state court located in the
State of Delaware, and each of the parties hereby consents to the jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 9.2 shall be
deemed effective service of process on such party.
Section 9.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.11 Amendments; No Waivers. (a) Any provision of this Agreement
(including the Exhibits and Schedules hereto) may be amended or waived prior to
the Effective Time at any time prior to or after the receipt of the Required
Preview Vote, if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Sabre, Preview and Travelocity.com, or
in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the receipt of the Required Preview Vote, if any
such amendment or waiver shall by law or in accordance with the rules and
regulations of any relevant securities exchange requires further approval of
stockholders, the effectiveness of such amendment or waiver shall be subject to
obtaining the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 9.12 Definitions. As used in this Agreement:
(a) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(b) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(c) "Knowledge" means the knowledge of any of the officers or
employees of Preview or Sabre, as applicable, listed in Schedule 9.12(c) of
the Preview Disclosure Schedule or the Sabre Disclosure Schedule, as
applicable, after due inquiry.
(d) "Material Adverse Effect" means, with respect to any entity, any
adverse effect that, individually or in the aggregate with all other
adverse effects, is or could reasonably be expected to be materially
adverse to the business, financial condition, operations or results of
operations of such entity
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and its Subsidiaries taken as a whole other than adverse effects caused by
(i) changes in the economy generally or (ii) changes in the consumer direct
Internet travel business.
(e) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(f) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority
of the voting interests in such partnership) or (ii) at least a majority of
the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
Section 9.13 Other Agreements. The parties hereto acknowledge and agree
that, except as otherwise expressly set forth in this Agreement, the rights and
obligations of Preview and Sabre, Travelocity Holdings or Travelocity.com or any
of their respective Subsidiaries or affiliates under any other agreement between
such parties shall not be affected by any provision of this Agreement.
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IN WITNESS WHEREOF, Sabre, Travelocity Holdings, Preview and
Travelocity.com have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of October 3, 1999.
SABRE INC.
By: /s/ JEFFERY M. JACKSON
----------------------------------
Name: Jeffery M. Jackson
Title: Senior Vice President
and
Chief Financial Officer
TRAVELOCITY HOLDINGS, INC.
By: /s/ TERRELL B. JONES
----------------------------------
Name: Terrell B. Jones
Title: President
TRAVELOCITY.COM INC.
By: /s/ TERRELL B. JONES
----------------------------------
Name: Terrell B. Jones
Title: President
PREVIEW TRAVEL, INC.
By: /s/ CHRISTOPHER E. CLOUSER
----------------------------------
Name: Christopher E. Clouser
Title: President
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ANNEX B-1
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of October 3, 1999 (the "Agreement"), is
made by and between Sabre Inc., a Delaware corporation ("Sabre"), and James J.
Hornthal (the "Stockholder"). Capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Merger Agreement (as defined
below).
WHEREAS, simultaneously herewith, Sabre, Travelocity Holdings, Inc., a
Delaware corporation and a wholly-owned subsidiary of Sabre ("Travelocity
Holdings"), Travelocity.com, a Delaware corporation and a wholly-owned
subsidiary of Travelocity Holdings ("Travelocity.com"), and Preview Travel,
Inc., a Delaware corporation ("Preview"), have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant
to which Preview has agreed, subject to certain terms and conditions, to merge
with and into Travelocity.com (the "Merger");
WHEREAS, the Stockholder is a stockholder of Preview and has voting power
with respect to the number of shares (the "Shares") of common stock of Preview
(the "Preview Common Stock") set forth below the Stockholder's signature hereto;
and
WHEREAS, in order to induce Sabre, Travelocity Holdings and Travelocity.com
to enter into the Merger Agreement and to provide reasonable assurances that the
transactions contemplated by the Merger Agreement will be consummated, the
Stockholder is making certain agreements regarding the Shares upon the terms and
subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder agrees to vote all of its Shares of Preview Common
Stock, Shares of Preview Common Stock of any person controlled by the
Stockholder and any Shares of Preview Common Stock hereafter acquired by
the Stockholder or by any person controlled by the Stockholder
(collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Preview stockholders called to vote upon the
Merger or the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought (the "Preview
Stockholders' Meeting"), the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares in favor of the Merger, the
execution and delivery by Preview of the Merger Agreement and the
approval of the terms thereof, and each of the other transactions
contemplated by the Merger Agreement.
(ii) At any meeting of Preview stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares against (A) the approval of any
Acquisition Proposal or (B) any amendment of Preview's Certificate of
Incorporation or Bylaws or other proposal or transaction involving
Preview or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints, Sabre
and Donald J. Carty, Acting Chief Executive Officer of Sabre, and Jeffrey
M. Jackson, Chief Financial Officer of Sabre, in their respective
capacities as officers of Sabre, and any individual who shall hereafter
succeed to any such office of Sabre, and each of them individually, its
proxy and attorney-in-fact, with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote upon and act with
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respect to all of the Stockholder's Shares as set forth in subsections
(a)(i) and (a)(ii) of this Section 1. The Stockholder represents that any
proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 1(b) is
given in connection with the execution of the Merger Agreement, and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212 of the
Delaware General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of Preview take action to approve the Merger and the
Merger Agreement by written consent in lieu of a meeting of stockholders,
the Stockholder will execute such consent and provide a copy to Sabre.
2. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of any
or all of the Stockholder's Shares shall pass, whether by operation of law or
otherwise, including without limitation, the Stockholder's successors or
assigns. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of
Preview affecting the Preview capital stock, or the acquisition of additional
shares of Preview capital stock or other voting securities of Preview by the
Stockholder, the number of the Stockholder's Shares subject to the terms of this
Agreement shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Preview capital stock or
other voting securities of Preview issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder hereby
represents and warrants to Sabre that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or to
which the Stockholder's Shares are subject. If the Stockholder is married
and the Stockholder's Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Stockholder's spouse, enforceable
against such person in accordance with its terms. Consummation by the
Stockholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times will be, held by the
Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, security interest, proxies,
voting trusts or voting agreements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder.
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(e) No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(f) The Stockholder understands and acknowledges that Sabre, and
Travelocity.com are entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement. The Stockholder
acknowledges that the irrevocable proxy set forth in Section 1(b) is
granted in consideration for the execution and delivery of the Merger
Agreement by Sabre and Travelocity.com.
(g) The Stockholder represents to Sabre, Travelocity Holdings and
Travelocity.com that it has no plan or intention to sell, exchange or
otherwise transfer ownership (including by derivative transactions such as
an equity swap which would have the economic effect of a transfer of
ownership) to Travelocity Holdings, Travelocity.com, Preview or any related
person (within the meaning of Treas. Reg. sec. 1.368-1(e)(3)) with respect
to any of them or any agent of the foregoing, directly or indirectly
(including through partnerships or through third parties in connection with
a plan to so transfer ownership), of any shares of Travelocity.com Common
Stock.
4. Covenants. (a) The Stockholder agrees with, and covenants to, Sabre that
it shall not (i) transfer (which term shall include, without limitation, for the
purpose of this Agreement, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Stockholder's Shares or any
interest therein, except pursuant to the Merger; (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of the Stockholder's Shares or any interest therein; (iii) grant any
proxy, power of attorney or other authorization in or with respect to such
shares, except for this Agreement; (iv) deposit such shares into a voting trust
or enter into a voting agreement or arrangement with respect to such shares; or
(v) take any action prohibited by Section 6.4 of the Merger Agreement.
(b) The Stockholder shall use its reasonable best efforts to take, or
cause to be taken, all necessary actions, and to do, or cause to be done
all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed and
delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Sabre may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of Sabre. Sabre represents and warrants
that this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Sabre, enforceable against Sabre
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application respecting creditors' rights and by general
equitable principles.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon each
party hereto and such party's successors and assigns. This Agreement shall
not be assignable by the Stockholder, but may be assigned by Sabre in whole
or in part to any direct or indirect wholly-owned subsidiary of Sabre,
provided that Sabre shall remain liable for any obligations so assigned.
(b) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby or
thereby may be brought in any federal or state court located in the State
of Delaware, and each of the parties hereby consents to the
B-1-3
<PAGE> 216
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting foregoing, each party agrees that service
of process on such party as provided in Section 6(h) shall be deemed
effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Sabre would be
irreparably damaged if for any reason the Stockholder failed, in breach of
its obligations hereunder, to perform any of its obligations under this
Agreement, and that Sabre would not have an adequate remedy at law for
money damages in such event. Accordingly, Sabre shall be entitled to
specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by the Stockholder; and, if Sabre should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense that
Sabre has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such
equitable relief. This provision is without prejudice to any other rights
that Sabre may have against the Stockholder for any failure to perform its
respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of
a written agreement executed by the parties hereto. This Agreement contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
(i) if to Sabre Inc.
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
Attention: Chief Financial Officer
General Counsel
Facsimile: (817) 931-7502
with a copy (which shall not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Charles M. Nathan
Facsimile: (212) 859-8587
(ii) if to Stockholder, to its address shown below its signature on
the last page hereof.
B-1-4
<PAGE> 217
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 6(h) and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest
to occur of (a) the termination of the Merger Agreement in accordance
with its terms or (b) the Effective Time.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of Preview makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of
Shares. The provisions of this Agreement shall not apply to actions
taken or omitted to be taken by any such person in his or her capacity
as a director or officer of Preview.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the date first above written.
SABRE INC.
By: /s/ JEFFERY M. JACKSON
----------------------------------
Name: Jeffery M. Jackson
Title: Senior Vice President
and
Chief Financial Officer
STOCKHOLDER:
/s/ JAMES J. HORNTHAL
------------------------------------
James J. Hornthal
Address: 2234 Beach Street
San Francisco, CA 94123
Number of Shares
Beneficially Owned: 781,660
B-1-5
<PAGE> 218
ANNEX B-2
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of October 3, 1999 (the "Agreement"), is
made by and between Sabre Inc., a Delaware corporation ("Sabre"), and MediaOne
Interactive Services, Inc. (the "Stockholder"). Capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement (as defined below).
WHEREAS, simultaneously herewith, Sabre, Travelocity Holdings, Inc., a
Delaware corporation and a wholly-owned subsidiary of Sabre ("Travelocity
Holdings"), Travelocity.com, a Delaware corporation and a wholly-owned
subsidiary of Travelocity Holdings ("Travelocity.com"), and Preview Travel,
Inc., a Delaware corporation ("Preview"), have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant
to which Preview has agreed, subject to certain terms and conditions, to merge
with and into Travelocity.com (the "Merger");
WHEREAS, the Stockholder is a stockholder of Preview and has voting power
with respect to the number of shares (the "Shares") of common stock of Preview
(the "Preview Common Stock") set forth below the Stockholder's signature hereto;
and
WHEREAS, in order to induce Sabre, Travelocity Holdings and Travelocity.com
to enter into the Merger Agreement and to provide reasonable assurances that the
transactions contemplated by the Merger Agreement will be consummated, the
Stockholder is making certain agreements regarding the Shares upon the terms and
subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder agrees to vote all of its Shares of Preview Common
Stock, Shares of Preview Common Stock of any person the voting of which is
controlled by the Stockholder and any Shares of Preview Common Stock
hereafter acquired by the Stockholder or by any person controlled by the
Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Preview stockholders called to vote upon the
Merger or the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought (the "Preview
Stockholders' Meeting"), the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares in favor of the Merger, the
execution and delivery by Preview of the Merger Agreement and the
approval of the terms thereof, and each of the other transactions
contemplated by the Merger Agreement.
(ii) At any meeting of Preview stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares against (A) the approval of any
Acquisition Proposal or (B) any amendment of Preview's Certificate of
Incorporation or Bylaws or other proposal or transaction involving
Preview or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints, Sabre
and Donald J. Carty, Acting Chief Executive Officer of Sabre, and Jeffrey
M. Jackson, Chief Financial Officer of Sabre, in their respective
capacities as officers of Sabre, and any individual who shall hereafter
succeed to any such office of Sabre, and each of them individually, its
proxy and attorney-in-fact, with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote upon and act with
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<PAGE> 219
respect to all of the Stockholder's Shares as set forth in subsections
(a)(i) and (a)(ii) of this Section 1. The Stockholder represents that any
proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 1(b) is
given in connection with the execution of the Merger Agreement, and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may not
be revoked, except as provided in this Agreement. The Stockholder hereby
ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212
of the Delaware General Corporation Law. This proxy shall survive the
bankruptcy, merger, dissolution or liquidation of the Stockholder. In the
event that the stockholders of Preview take action to approve the Merger
and the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a copy
to Sabre.
2. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and be binding
upon any transferee of such shares but solely to the extent such shares are
transferred to MediaOne Group Inc. or any of its subsidiaries. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of Preview affecting the Preview capital
stock, or the acquisition of additional shares of Preview capital stock or other
voting securities of Preview by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional
shares of Preview capital stock or other voting securities of Preview issued to
or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder hereby
represents and warrants to Sabre that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or to
which the Stockholder's Shares are subject, other than a violation, default
or conflict which does not materially impair the ability of the Stockholder
to perform its obligations under this Agreement. If the Stockholder is
married and the Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder's spouse,
enforceable against such person in accordance with its terms. Consummation
by the Stockholder of the transactions contemplated hereby will not
violate, or require any consent, approval, or notice under, any provision
of any judgment, order, decree, statute, law, rule or regulation applicable
to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such
B-2-2
<PAGE> 220
encumbrances or proxies arising hereunder and (ii) any arrangements that do
not materially impair the ability of the Stockholder to perform its
obligations hereunder.
(e) The Stockholder understands and acknowledges that Sabre, and
Travelocity.com are entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement. The Stockholder
acknowledges that the irrevocable proxy set forth in Section 1(b) is
granted in consideration for the execution and delivery of the Merger
Agreement by Sabre and Travelocity.com.
(f) The Stockholder represents to Sabre, Travelocity Holdings and
Travelocity.com that it has no plan or intention to sell, exchange or
otherwise transfer ownership (including by derivative transactions such as
an equity swap which would have the economic effect of a transfer of
ownership) to Travelocity Holdings, Travelocity.com, Preview or any related
person (within the meaning of Treas. Reg. sec. 1.368-1(e)(3)) with respect
to any of them or any agent of the foregoing, directly or indirectly
(including through partnerships or through third parties in connection with
a plan to so transfer ownership), of any shares of Travelocity.com Common
Stock.
4. Covenants. (a) The Stockholder agrees with, and covenants to, Sabre that
it shall not (i) grant any proxy, power of attorney or other authorization in or
with respect to such shares, except for this Agreement; (ii) deposit such shares
into a voting trust or enter into a voting agreement or arrangement with respect
to such shares; or (iii) take any action prohibited by Section 6.4 of the Merger
Agreement, except for any arrangements which do not materially impair the
ability of the Stockholder to perform its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to take,
or cause to be taken, all necessary actions, and to do, or cause to be done
all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed and
delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Sabre may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of Sabre. Sabre represents and warrants
that this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Sabre, enforceable against Sabre
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application respecting creditors' rights and by general
equitable principles, and that Sabre is simultaneously entering into similar
voting agreements with James Hornthal and America Online, Inc.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon each
party hereto and such party's successors and assigns. This Agreement shall
not be assignable by the Stockholder, but may be assigned by Sabre in whole
or in part to any direct or indirect wholly-owned subsidiary of Sabre,
provided that Sabre shall remain liable for any obligations so assigned.
(b) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby or
thereby may be brought in any federal or state court located in the State
of Delaware, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it
B-2-3
<PAGE> 221
may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting foregoing, each party
agrees that service of process on such party as provided in Section 6(h)
shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Sabre would be
irreparably damaged if for any reason the Stockholder failed, in breach of
its obligations hereunder, to perform any of its obligations under this
Agreement, and that Sabre would not have an adequate remedy at law for
money damages in such event. Accordingly, Sabre shall be entitled to
specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by the Stockholder; and, if Sabre should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense that
Sabre has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such
equitable relief. This provision is without prejudice to any other rights
that Sabre may have against the Stockholder for any failure to perform its
respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of
a written agreement executed by the parties hereto. This Agreement contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
(i) if to Sabre Inc.
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
Attention: Chief Financial Officer
General Counsel
Facsimile: (817) 931-7502
with a copy (which shall not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Charles M. Nathan
Facsimile: (212) 859-8587
B-2-4
<PAGE> 222
(ii) if to Stockholder, to its address shown below its signature on
the last page hereof.
with a copy (which shall not constitute notice) to:
MediaOne Group Inc.
188 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel
Facsimile: (303) 858-5834
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 6(h) and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
(j) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with its
terms, (b) the material amendment of the Merger Agreement without the
Stockholder's approval, or (c) approval of the Merger Agreement by the
stockholders of Preview.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of Preview makes any agreement in this Agreement in his
or her capacity as such director or officer. The Stockholder signs solely
in its capacity as a record holder and beneficial owner of Shares. The
provisions of this Agreement shall not apply to actions taken or omitted to
be taken by any such person in his or her capacity as a director or officer
of Preview.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the date first above written.
SABRE INC.
By: /s/ JEFFERY M. JACKSON
----------------------------------
Name: Jeffery M. Jackson
Title:Senior Vice President and
Chief Financial Officer
STOCKHOLDER:
AMERICA ONLINE, INC.
By: /s/ ERIC L. KELLER
----------------------------------
Name: Eric L. Keller
Title: Vice President, Business
Affairs
Address: 22000 AOL Way
Dulles, Virginia 20166
Number of Shares
Beneficially Owned: 932,540
B-2-5
<PAGE> 223
ANNEX B-3
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of October 3, 1999 (the "Agreement"), is
made by and between Sabre Inc., a Delaware corporation ("Sabre"), and America
Online, Inc. (the "Stockholder"). Capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Merger Agreement (as defined
below).
WHEREAS, simultaneously herewith, Sabre, Travelocity Holdings, Inc., a
Delaware corporation and a wholly-owned subsidiary of Sabre ("Travelocity
Holdings"), Travelocity.com, a Delaware corporation and a wholly-owned
subsidiary of Travelocity Holdings ("Travelocity.com"), and Preview Travel,
Inc., a Delaware corporation ("Preview"), have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant
to which Preview has agreed, subject to certain terms and conditions, to merge
with and into Travelocity.com (the "Merger");
WHEREAS, the Stockholder is a stockholder of Preview and has voting power
with respect to the number of shares (the "Shares") of common stock of Preview
(the "Preview Common Stock") set forth below the Stockholder's signature hereto;
and
WHEREAS, in order to induce Sabre, Travelocity Holdings and Travelocity.com
to enter into the Merger Agreement and to provide reasonable assurances that the
transactions contemplated by the Merger Agreement will be consummated, the
Stockholder is making certain agreements regarding the Shares upon the terms and
subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder agrees to vote all of its Shares of Preview Common
Stock, Shares of Preview Common Stock of any entity controlled by the
Stockholder and any Shares of Preview Common Stock hereafter acquired by
the Stockholder or by any person controlled by the Stockholder
(collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Preview stockholders called to vote upon the
Merger or the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought (the "Preview
Stockholders' Meeting"), the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares in favor of the Merger, the
execution and delivery by Preview of the Merger Agreement and the
approval of the terms thereof, and each of the other transactions
contemplated by the Merger Agreement.
(ii) At any meeting of Preview stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, the Stockholder shall vote (or cause to be
voted) all of the Stockholder's Shares against (A) the approval of any
Acquisition Proposal or (B) any amendment of Preview's Certificate of
Incorporation or Bylaws or other proposal or transaction involving
Preview or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints, Sabre
and Donald J. Carty, Acting Chief Executive Officer of Sabre, and Jeffrey
M. Jackson, Chief Financial Officer of Sabre, in their respective
capacities as officers of Sabre, and any individual who shall hereafter
succeed to any such office of Sabre, and each of them individually, its
proxy and attorney-in-fact, with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote upon and act with
B-3-1
<PAGE> 224
respect to all of the Stockholder's Shares as set forth in subsections
(a)(i) and (a)(ii) of this Section 1. The Stockholder represents that any
proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 1(b) is
given in connection with the execution of the Merger Agreement, and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212 of the
Delaware General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of Preview take action to approve the Merger and the
Merger Agreement by written consent in lieu of a meeting of stockholders,
the Stockholder will execute such consent and provide a copy to Sabre.
2. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of any
or all of the Stockholder's Shares shall pass, whether by operation of law or
otherwise, including without limitation, the Stockholder's successors or
assigns. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of
Preview affecting the Preview capital stock, or the acquisition of additional
shares of Preview capital stock or other voting securities of Preview by the
Stockholder, the number of the Stockholder's Shares subject to the terms of this
Agreement shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Preview capital stock or
other voting securities of Preview issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder hereby
represents and warrants to Sabre that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or to
which the Stockholder's Shares are subject. If the Stockholder is married
and the Stockholder's Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Stockholder's spouse, enforceable
against such person in accordance with its terms. Consummation by the
Stockholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times will be, held by the
Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, security interest, proxies,
voting trusts or voting agreements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder.
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(e) No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(f) The Stockholder understands and acknowledges that Sabre, and
Travelocity.com are entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement. The Stockholder
acknowledges that the irrevocable proxy set forth in Section 1(b) is
granted in consideration for the execution and delivery of the Merger
Agreement by Sabre and Travelocity.com.
(g) The Stockholder represents to Sabre, Travelocity Holdings and
Travelocity.com that it has no plan or intention to sell, exchange or
otherwise transfer ownership (including by derivative transactions such as
an equity swap which would have the economic effect of a transfer of
ownership) to Travelocity Holdings, Travelocity.com, Preview or any related
person (within the meaning of Treas. Reg. sec. 1.368-1(e)(3)) with respect
to any of them or any agent of the foregoing, directly or indirectly
(including through partnerships or through third parties in connection with
a plan to so transfer ownership), of any shares of Travelocity.com Common
Stock.
4. Covenants. (a) The Stockholder agrees with, and covenants to, Sabre that
it shall not (i) transfer (which term shall include, without limitation, for the
purpose of this Agreement, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Stockholder's Shares or any
interest therein, except pursuant to the Merger; (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of the Stockholder's Shares or any interest therein; (iii) grant any
proxy, power of attorney or other authorization in or with respect to such
shares, except for this Agreement; (iv) deposit such shares into a voting trust
or enter into a voting agreement or arrangement with respect to such shares; or
(v) take any action prohibited by Section 6.4 of the Merger Agreement.
(b) The Stockholder shall use its reasonable best efforts to take, or
cause to be taken, all necessary actions, and to do, or cause to be done
all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed and
delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Sabre may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of Sabre. Sabre represents and warrants
that this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Sabre, enforceable against Sabre
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application respecting creditors' rights and by general
equitable principles.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon each
party hereto and such party's successors and assigns. This Agreement shall
not be assignable by the Stockholder, but may be assigned by Sabre in whole
or in part to any direct or indirect wholly-owned subsidiary of Sabre,
provided that Sabre shall remain liable for any obligations so assigned.
(b) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby or
thereby may be brought in any
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federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Sabre would be
irreparably damaged if for any reason the Stockholder failed, in breach of
its obligations hereunder, to perform any of its obligations under this
Agreement, and that Sabre would not have an adequate remedy at law for
money damages in such event. Accordingly, Sabre shall be entitled to
specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by the Stockholder; and, if Sabre should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense that
Sabre has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such
equitable relief. This provision is without prejudice to any other rights
that Sabre may have against the Stockholder for any failure to perform its
respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of
a written agreement executed by the parties hereto. This Agreement contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
(i) if to Sabre Inc.
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
Attention: Chief Financial Officer
General Counsel
Facsimile: (817) 931-7502
with a copy (which shall not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Charles M. Nathan
Facsimile: (212) 859-8587
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(ii) if to Stockholder, to its address shown below its signature on
the last page hereof.
with a copy (which shall not constitute notice) to:
Arnold & Porter
555 Twelfth Street, NW
Washington, DC 20004
Attention: Robert Ott
Facsimile: (202) 942-5999
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 6(h) and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest
to occur of (a) the termination of the Merger Agreement in accordance
with its terms or (b) the Effective Time.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of Preview makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of
Shares. The provisions of this Agreement shall not apply to actions
taken or omitted to be taken by any such person in his or her capacity
as a director or officer of Preview.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the date first above written.
SABRE INC.
By: /s/ JEFFERY M. JACKSON
---------------------------------
Name: Jeffery M. Jackson
Title:Senior Vice President and
Chief Financial Officer
STOCKHOLDER:
AMERICA ONLINE, INC.
By: /s/ ERIC L. KELLER
---------------------------------
Name: Eric L. Keller
Title: Vice President, Business
Affairs
Address: 22000 AOL Way
Dulles, Virginia 20166
Number of Shares
Beneficially Owned: 851,312
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<PAGE> 229
ANNEX C
HAMBRECHT & QUIST LLC
ONE BUSH STREET
SAN FRANCISCO, CA 94104
(415) 490-3000
October 3, 1999
Confidential
The Board of Directors
Preview Travel, Inc.
747 Front Street
San Francisco, CA 94111
Gentlemen:
You have requested our opinion to the effect that the Proposed Transactions
(as described below) are fair, from a financial point of view, to the
stockholders of Preview Travel, Inc. ("Preview Travel" or the "Company").
Pursuant to the Agreement and Plan of Merger, the Agreement of Limited
Partnership, the Contribution Agreements, and other related agreements
(collectively, the "Agreements") (i) Preview Travel will merge with and into
Travelocity.com, Inc. ("Travelocity.com"), a wholly owned subsidiary of
Travelocity Holdings, Inc., a wholly owned subsidiary of Sabre, Inc. ("Sabre");
(ii) Travelocity.com will contribute the assets of Preview Travel to a limited
partnership ("Travelocity L.P."); and (iii) Sabre will contribute its online
travel agency to Travelocity L.P. (together, the "Proposed Transactions").
We understand that the terms of the Agreements provide, among other things,
that each issued and outstanding share of common stock of Preview Travel shall
be converted into the right to receive one share of common stock of
Travelocity.com, as more fully set forth in the Agreements. For purposes of this
opinion, we have assumed that the Proposed Transactions will qualify as a
tax-free reorganization under the United States Internal Revenue Code for the
stockholders of the Company and that the Proposed Transactions will be accounted
for as a purchase.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Preview Travel in connection with the Proposed Transactions, and we
will receive a fee for our services, which include the rendering of this
opinion.
In the past, we have provided investment banking and other financial
advisory services to Preview Travel and have received fees for rendering these
services. Specifically, Hambrecht & Quist served as lead-manager for the
Company's initial public offering in November 1997, as lead-manager for the
Company's follow-on offering in April 1998, and as financial advisor with
respect to the Company's adoption of a Stockholder Rights Plan in October 1998.
In the ordinary course of business, Hambrecht & Quist acts as a market maker and
broker in the publicly traded securities of Preview Travel and receives
customary compensation in connection therewith, and also provides research
coverage for Preview Travel. In the ordinary course of business, Hambrecht &
Quist actively trades in the equity and derivative securities of Preview Travel
and Sabre for its own account and for the accounts of its customers and,
accordingly, may
SAN FRANCISCO -- NEW YORK -- BOSTON -- NEWPORT BEACH -- SAN
DIEGO -- LONDON
MEMBERS NEW YORK STOCK EXCHANGE -- AMERICAN STOCK EXCHANGE -- PACIFIC STOCK
EXCHANGE
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<PAGE> 230
at any time hold a long or short position in such securities. Hambrecht & Quist
may in the future provide additional investment banking or other financial
advisory services to Preview Travel, Travelocity.com, or Sabre.
In connection with our review of the Proposed Transactions, and in arriving
at our opinion, we have, among other things:
(i) reviewed the financial statements of Travelocity.com for recent
years and interim periods to date and certain other relevant financial and
operating data of Travelocity.com made available to us from the internal
records of Travelocity.com;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to Travelocity.com prepared by the
management of Travelocity.com;
(iii) discussed the business, financial condition and prospects of
Travelocity.com with certain members of senior management;
(iv) reviewed the publicly available consolidated financial statements
of Preview Travel for recent years and interim periods to date and certain
other relevant financial and operating data of Preview Travel made
available to us from published sources and from the internal records of
Preview Travel;
(v) reviewed certain internal financial and operating information,
including certain projections, relating to Preview Travel prepared by the
management of Preview Travel;
(vi) discussed the business, financial condition and prospects of
Preview Travel with certain members of senior management;
(vii) reviewed the recent reported prices and trading activity for the
common stock of Preview Travel and compared such information and certain
financial information for Preview Travel with similar information for
certain other companies engaged in businesses with characteristics we
considered comparable;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions;
(ix) reviewed the Agreements; and
(x) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Travelocity.com and Preview
Travel considered in connection with our review of the Proposed Transactions,
and we have not assumed any responsibility for independent verification of such
information. We have not prepared any independent valuation or appraisal of any
of the assets or liabilities of Travelocity.com or Preview Travel, nor have we
conducted a physical inspection of the properties and facilities of either
company. With respect to the financial forecasts and projections made available
to us and used in our analysis, we have assumed that they reflect the best
currently available estimates and judgments of the expected future financial
performance of Travelocity.com and Preview Travel. For purposes of this opinion,
we have assumed that neither Travelocity.com nor Preview Travel is a party to
any pending transactions, including external financings, recapitalizations or
material merger discussions, other than the Proposed Transactions and those
activities undertaken in the ordinary course of conducting their respective
businesses. Our opinion is necessarily based upon market, economic, financial
and other conditions as they exist and can be evaluated as of the date of this
letter and any change in such conditions would require a reevaluation of this
opinion. We express no opinion as to the price at which Travelocity.com common
stock will trade subsequent to the rendering of this opinion. In rendering this
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<PAGE> 231
opinion, we have assumed that the Proposed Transactions will be consummated
substantially on the terms discussed in the Agreements, without any waiver of
any material terms or conditions by any party thereto.
It is understood that this letter is for the information of the Board of
Directors in connection with their evaluation of the Proposed Transactions and
may not be used for any other purpose without our prior written consent;
provided, however, that this letter may be reproduced in full in the Proxy
Statement/ Prospectus to be filed in connection with the Proposed Transactions.
This letter does not constitute a recommendation to any stockholder as to how
such stockholder should vote on the Proposed Transactions.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the Proposed Transactions are fair, from a financial point of view, to the
stockholders of Preview Travel.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ PAUL B. CLEVELAND
-----------------------------------
Paul B. Cleveland
Managing Director
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<PAGE> 232
ANNEX D
RESTATED
CERTIFICATE OF INCORPORATION
OF
TRAVELOCITY.COM INC.
Travelocity.com Inc., a Delaware corporation, the original certificate of
incorporation of which was filed with the Secretary of State of the State of
Delaware on September 30, 1999 under the name Travelocity.com Inc., hereby
certifies that this Restated Certificate of Incorporation, restating,
integrating and amending its Certificate of Incorporation, was duly adopted by
its Board of Directors and its stockholders in accordance with Sections 228, 242
and 245 of the Delaware General Corporation Law (the "DGCL"). The Certificate of
Incorporation of Travelocity.com Inc., is hereby amended and restated in its
entirety to read as follows:
ARTICLE ONE
NAME
The name of the corporation is Travelocity.com Inc. (the "Corporation").
ARTICLE TWO
REGISTERED AGENT
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THREE
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the DGCL.
ARTICLE FOUR
CAPITAL STOCK
The total number of shares of all classes of capital stock which the
Corporation shall have the authority to issue is 250,000,000 shares divided into
three classes of which 40,000,000 shares, of par value $.001 per share shall be
designated preferred stock ("Preferred Stock"), 135,000,000 shares of par value
$.001 per share shall be designated Common Stock ("Common Stock"), and
75,000,000 shares of par value $.001 per share shall be designated Class B
Common Stock (the "Class B Common Stock").
A. Preferred Stock
1. Issuance. The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
one or more series, to establish the number of shares to be included in each
such series, and to fix the designations, powers, preferences, and rights of the
shares of each such series, and any qualifications, limitations, or restrictions
thereof.
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<PAGE> 233
B. Series A Preferred Stock
1. Designation; Ranking. (a) There is hereby established a series of the
authorized Preferred Stock, such shares of such series shall be designated as
"Series A Preferred Stock" and the number of shares constituting such series
shall be 33,000,000.
(b) Any class or series of stock of the Corporation shall be deemed to
rank:
(i) prior to the Series A Preferred Stock, either as to the payment
of dividends or other amounts and/or as to distribution of assets upon
liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled by the terms thereof to the receipt of
dividends or other amounts and/or of amounts distributable upon
liquidation, dissolution or winding up, in preference or priority to the
holders of Series A Preferred Stock ("Senior Securities");
(ii) on a parity with the Series A Preferred Stock, either as to
the payment of dividends or other amounts and/or as to distribution of
assets upon liquidation, dissolution or winding up, whether or not the
dividend rates, dividend payment dates or redemption or liquidation
prices per share thereof are different from those of the Series A
Preferred Stock, if the holders of the Series A Preferred Stock and of
such class of stock or series shall be entitled by the terms thereof to
the receipt of dividends or other amounts and/or of amounts
distributable upon liquidation, dissolution or winding up, in proportion
to their respective amounts of accrued and unpaid dividends per share
and/or liquidation preferences, without preference or priority one over
the other and such class of stock or series is not a class of Senior
Securities ("Parity Securities"); and
(iii) junior to the Series A Preferred Stock, either as to the
payment of dividends or other amounts and/or as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of
the Series A Preferred Stock shall be entitled by the terms thereof to
receipt of dividends or other amounts, and/or of amounts distributable
upon liquidation, dissolution or winding up, in preference or priority
to the holders of shares of such stock or series ("Junior Securities").
(c) The respective definitions of Senior Securities, Junior Securities
and Parity Securities shall also include any rights or options exercisable
or exchangeable for or convertible into any of the Senior Securities,
Junior Securities and Parity Securities, as the case may be.
(d) The Series A Preferred Stock shall be subject to the creation of
Senior Securities, Junior Securities and Parity Securities and such
creation shall not be deemed to affect adversely the powers, preferences or
special rights of the shares of Series A Preferred Stock.
2. Dividends. If dividends or other distributions are payable on shares of
Common Stock, the Board of Directors shall simultaneously declare a dividend or
distribution on the shares of Series A Preferred Stock so that the shares of
Series A Preferred Stock shall receive the dividend or distribution that would
be payable to them assuming all outstanding shares of Series A Preferred Stock
had been converted into shares of Common Stock pursuant to Paragraph B(5) of
this Article Four immediately prior to the record date for such dividend or
distribution; provided that if the dividend or distribution is payable in the
form of voting securities of the Corporation (or rights in respect of voting
securities of the Corporation) and such dividend or distribution would result in
a reduction of the relative voting power of the holders of the shares of Series
A Preferred Stock, the Board of Directors shall declare at that time a dividend
or distribution payable in shares of Series A Preferred Stock, or in rights in
respect of Series A Preferred Stock, or make such other adjustment, as may be
necessary, to maintain the relative voting power of the holders of the shares of
Series A Preferred Stock and Common Stock, respectively, in effect immediately
prior to the record date of the dividend or distribution payable on shares of
Common Stock; provided further that the intent of this Paragraph B(2) is to
ensure that (i) if the dividend or distribution payable on shares of Common
Stock confers an economic benefit on the holders of shares of Common Stock,
pursuant to this Paragraph B(2), the holders of shares of Series A Preferred
Stock shall receive their proportionate share
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<PAGE> 234
of that benefit assuming all outstanding shares of Series A Preferred Stock had
been converted into shares of Common Stock pursuant to Paragraph B(5) of this
Article Four immediately prior to the record date for such dividend or
distribution and (ii) following such dividend or distribution, the holders of
shares of Series A Preferred Stock shall maintain the same relative voting power
as in effect immediately prior to the record date of the dividend or
distribution payable on shares of Common Stock. Other than as provided in this
Paragraph B(2) of this Article Four, holders of shares of Series A Preferred
Stock shall not be entitled to receive any dividends or other distributions
payable in cash, stock or other property.
3. Voting Rights. At every annual or special meeting of stockholders of the
Corporation, every holder of Series A Preferred Stock shall be entitled to one
vote for each share of Series A Preferred Stock standing in his name on the
books of the Corporation and shall vote together as a single class with the
holders of Common Stock and Class B Common Stock on all matters on which a vote
of stockholders is to be taken, except as otherwise required by law or by
Paragraph C(4) or Paragraph C(6)(a) of this Article Four.
4. Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation (a "Liquidation"), after payment or provision for payment of the
debts and other liabilities of the Corporation and of any preferential amounts
to which the holders of any shares of any Senior Securities shall be entitled,
the holders of all outstanding shares of Series A Preferred Stock shall be
entitled to share ratably in the remaining net assets of the Corporation with
the holders of shares of Common Stock and Class B Common Stock, assuming all
outstanding shares of the Series A Preferred Stock had been converted into
shares of Common Stock pursuant to Paragraph B(5) of this Article Four
immediately prior to such Liquidation.
5. Conversion. (a) All outstanding shares of Series A Preferred Stock in
the aggregate as a series shall be convertible, at any time, at the option of
the holders of a majority of the shares of Series A Preferred Stock, into
3,000,000 shares of Common Stock (the fraction of 3,000,000 divided by the
number of outstanding shares of Series A Preferred Stock is referred to as the
"Conversion Ratio"); provided that in the event of any reclassification,
subdivision, combination, dividend or distribution, the Board of Directors of
the Corporation shall make such adjustment, as may be necessary, to the
Conversion Ratio in effect immediately prior to the effective date in the case
of a reclassification, subdivision or combination, or the record date in the
case of a dividend or distribution to maintain the relative aggregate ownership
interest of the Common Stock held by the holders of all outstanding shares of
Series A Preferred Stock (assuming all outstanding shares of the Series A
Preferred Stock had been converted into shares of Common Stock pursuant to this
paragraph immediately prior to the effective date in the case of a
reclassification, subdivision, combination, or the record date in the case of a
dividend or distribution) and by the other holders of the Common Stock,
respectively, in effect immediately prior to the effective date in the case of a
reclassification, subdivision, combination, or the record date in the case of a
dividend or distribution. Such adjustment shall be made successively whenever
any reclassification, subdivision, combination, dividend or distribution is
made.
(b) The conversion of all outstanding shares of Series A Preferred
Stock into shares of Common Stock shall be effected by written notice to
the Secretary of the Corporation by the holders of a majority of the
outstanding shares of Series A Preferred Stock stating that such holders
desire to convert all outstanding shares of Series A Preferred Stock, as a
series, into shares of Common Stock (the "Conversion"). The Conversion
shall be deemed to have been effected as of the close of business on the
date on which such notice has been received. The Corporation will provide
notice of the Conversion to all holders of record of Series A Preferred
Stock as soon as practicable following the Conversion. Such notice shall be
provided by mailing notice of such conversion first class postage prepaid,
to each holder of record of the Series A Preferred Stock at such holder's
address as it appears on the books of the Corporation; provided, further,
that no failure to give such notice nor any defect therein shall affect the
validity of the Conversion. Each such notice shall state, as appropriate,
the following: (i) the date of the Conversion; (ii) that all outstanding
shares of Series A Preferred Stock are automatically converted; (iii) the
place or places where certificates for such shares are to be
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<PAGE> 235
surrendered for conversion; and (iv) that no dividends will be declared on
the shares of Series A Preferred Stock converted after such conversion
date.
(c) Immediately upon the Conversion, the rights of the holders of
shares of Series A Preferred Stock as such shall cease and such holders
shall be treated for all purposes as having become the record owners of the
shares of Common Stock issuable upon the Conversion; provided, however,
that such Persons shall be entitled to receive when paid dividends, if any,
declared on the Series A Preferred Stock as of a record date preceding the
time of the Conversion and unpaid as of the time of the Conversion, subject
to paragraph (e) below.
(d) Promptly after the Conversion, the Corporation shall deliver to
the holders of issued and outstanding shares of Series A Preferred Stock,
which surrender for cancellation a certificate or certificates representing
outstanding shares of Series A Preferred Stock, a certificate or
certificates representing the number of shares of Common Stock issuable
upon the Conversion in the name of such holders. Until surrendered as
provided herein, from and after the Conversion, certificates representing
outstanding shares of Series A Preferred Stock prior to the Conversion
shall thereupon be deemed for all corporate purposes to evidence ownership
of the number of shares of Common Stock into which the Series A Preferred
Stock shall have been converted by reason of the Conversion.
(e) Upon the Conversion, any dividend, for which the record date or
payment date shall be subsequent to the Conversion, which may have been
declared on the shares of Series A Preferred Stock so converted shall be
deemed to have been declared, and shall be payable, with respect to the
shares of Common Stock into which such shares of Series A Preferred Stock
shall have been so converted.
(f) The Corporation shall at all times reserve and keep available for
issuance upon the Conversion free from any preemptive rights, such number
of its authorized but unissued shares of Common Stock as shall from time to
time be necessary to permit the Conversion, and shall take all action
required to increase the authorized number of shares of Common Stock if
necessary to permit the Conversion. The Corporation covenants that any
shares of Common Stock issued upon the Conversion shall be validly issued,
fully paid and non-assessable.
(g) The issuance of certificates for shares of Common Stock upon the
Conversion shall be made without charge to the holders of such shares for
any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with the Conversion and the related issuance of
the shares of Common Stock.
(h) When any shares of Series A Preferred Stock are acquired by the
Corporation, including without limitation, upon the Conversion, such shares
may not be reissued as Series A Preferred Stock and shall be retired and
cancelled and the Corporation shall take all such actions as are necessary
to restore such shares to the status of authorized but unissued shares of
Preferred Stock, without designation as to series.
6. Transferability. The shares of Series A Preferred Stock shall not be
transferable to any holder other than to an Affiliate of Travelocity Holdings,
Inc. ("Travelocity Holdings"); provided that transfers of shares of Series A
Preferred Stock to the Corporation or in connection with any merger, acquisition
or other business combination involving the Corporation and Travelocity Holdings
or any Affiliate of Travelocity Holdings shall be permitted.
7. Adjustments. If any event occurs as to which, in the opinion of the
Board of Directors, the provisions of Paragraph B(2) and B(5) of this Article
Four are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holders of the shares of Series A Preferred Stock in
accordance with the essential intent and principles of such provisions, the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights of the holders of the shares of Series A Preferred Stock.
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C. Common Stock and Class B Common Stock
1. Powers and Preferences. The powers, preferences and rights and the
qualifications, limitations and restrictions with respect to the Common Stock
and the Class B Common Stock shall be identical in all respects, except as
provided in Paragraphs C(2) and C(4) of this Article Four, Paragraph D of
Article Five or as otherwise required by law.
2. Limitations on Ownership. The Class B Common Stock shall only be
issuable to Travelocity Holdings or any Affiliate of Travelocity Holdings and
only in connection with a Tax-Free Spin-Off.
3. Dividends. Subject to the preferential rights, if any, of any
outstanding shares of any Senior Securities, the holders of shares of Common
Stock and Class B Common Stock shall be entitled to receive, when and if
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends or distributions payable either in
cash, in property, or in stock. If any dividend or other distribution in cash or
other property is paid with respect to Common Stock or with respect to Class B
Common Stock (other than dividends or other distributions payable in shares of
Common Stock or Class B Common Stock), a like dividend or other distribution in
cash or other property shall also be paid with respect to shares of the other
class of Common Stock, in an amount equal per share. In the case of dividends or
other distributions payable in Common Stock or Class B Common Stock, including
without limitation distributions pursuant to stock splits or divisions of Common
Stock or Class B Common Stock of the Corporation, only shares of Common Stock
shall be paid or distributed with respect to Common Stock, and only shares of
Class B Common Stock shall be paid or distributed with respect to Class B Common
Stock. The number of shares of Common Stock and Class B Common Stock so
distributed shall be equal in number on a per share basis.
4. Voting Rights. (a) At every annual or special meeting of stockholders of
the Corporation, every holder of shares of Common Stock and Class B Common Stock
shall be entitled to one vote for each share of Common Stock or Class B Common
Stock standing in his name on the books of the Corporation, and shall vote
together as a single class with the holders of the shares of Series A Preferred
Stock on all matters on which a vote of stockholders is to be taken, except as
otherwise required by law or by Paragraph C(4)(b) of this Article Four or by
Paragraph C(6)(a) of this Article Four.
(b) (i) Upon the issuance of shares of Class B Common Stock, the
holders of shares of Class B Common Stock shall have the right, voting
separately as a class, to elect such number of directors as shall
constitute eighty percent of the whole Board of Directors (and if eighty
percent of such number of directors is not a whole number, then the holders
of shares of Class B Common Stock, voting separately as a class, shall be
entitled to elect the next higher whole number of directors) and the
remaining directors of the Corporation shall be elected by the holders of
shares of Common Stock and Class B Common Stock voting together as a single
class.
(ii) At the stockholders meeting held as provided in Paragraph C(2)
of Article Five, each holder of Class B Common Stock, present at the
meeting in person or by proxy, shall be entitled to cast that number of
votes on the removal of the directors then in office so that the holders
of all the shares of Class B Common Stock present at such meeting in
person or by proxy shall be entitled to cast a majority of the total
votes entitled to be cast on the removal of directors by the holders of
the outstanding shares of capital stock of the Corporation entitled to
vote thereon.
5. Liquidation, Dissolution, or Winding Up. In the event of any
Liquidation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to which
the holders of any Senior Securities shall be entitled, the holders of all
outstanding shares of Common Stock and Class B Common Stock with the holders of
all outstanding shares of Series A Preferred Stock (assuming all outstanding
shares of the Series A Preferred Stock had been converted into shares of Common
Stock pursuant to Paragraph B(5) of this Article Four immediately prior to such
Liquidation) shall be entitled to share ratably in the remaining net assets of
the Corporation.
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6. Conversion of Class B Common Stock.
(a) In the event of a Tax-Free Spin-Off, each share of Class B Common
Stock shall automatically convert into one share of Common Stock on the
fifth anniversary of the date on which shares of Class B Common Stock are
first transferred to holders of Class A or B common stock of Sabre Holdings
Corporation, a Delaware corporation ("Sabre Parent"), in a Tax-Free
Spin-Off unless, prior to such Tax-Free Spin-Off, Sabre Parent delivers to
the Corporation an opinion of counsel, reasonably satisfactory to the
Corporation, to the effect that such conversion could adversely affect the
ability of Sabre Parent to obtain a favorable ruling from the Internal
Revenue Service (the "IRS") that the distribution would be a tax-free
spin-off under Section 355 of the Code. If such an opinion is received,
approval of such conversion shall be submitted to a vote of the holders of
only the Common Stock and Class B Common Stock as soon as practicable after
the fifth anniversary of the Tax-Free Spin-Off provided that Sabre Parent
delivers to the Corporation an opinion of counsel, reasonably satisfactory
to the Corporation, to the effect that such vote would not adversely affect
the status of the Tax-Free Spin-Off (including without limitation the
ability to obtain a favorable ruling from the IRS); if such opinion is not
so delivered at such time, such vote shall not be held until such time as
such opinion is delivered. At the meeting of stockholders called for such
purpose, each holder of Common Stock and Class B Common Stock shall be
entitled to one vote, in person or by proxy, for each share of Common Stock
or Class B Common Stock of the Corporation standing in his name on the
books of the Corporation. Approval of such conversion shall require the
approval of a majority of the votes, on the per share voting basis provided
in the preceding sentence, entitled to be cast by the holders of the Common
Stock and the Class B Common Stock present and voting, voting together as a
single class, and the holders of the Class B Common Stock shall not be
entitled to a separate class vote. Such conversion shall be effective on
the date on which such approval is given at a meeting of stockholders
called for such purpose.
(b) The Corporation will provide notice of any automatic conversion of
all outstanding shares of Class B Common Stock to all holders of record of
the Common Stock and Class B Common Stock as soon as practicable following
such conversion; provided, however, that the Corporation may satisfy such
notice requirement by providing such notice prior to such conversion. Such
notice shall be provided by mailing notice of such conversion first class
postage prepaid, to each holder of record of the Common Stock and Class B
Common Stock at such holder's address as it appears on the books of the
Corporation; provided, further, that no failure to give such notice nor any
defect therein shall affect the validity of the automatic conversion of any
shares of Class B Common Stock. Each such notice shall state, as
appropriate, the following: (i) the automatic conversion date; (ii) that
all outstanding shares of Class B Common Stock are automatically converted;
(iii) the place or places where certificates for such shares are to be
surrendered for conversion; and (iv) that no dividends will be declared on
the shares of Class B Common Stock converted after such conversion date.
(c) Immediately upon such conversion, the rights of the holders of
shares of Class B Common Stock as such shall cease and such holders shall
be treated for all purposes as having become the record owners of the
shares of Common Stock issuable upon such conversion; provided, however,
that such Persons shall be entitled to receive when paid dividends, if any,
declared on the Class B Common Stock as of a record date preceding the time
of such conversion and unpaid as of the time of such conversion, subject to
paragraph (e) below.
(d) Holders of shares of Class B Common Stock may at any and all times
transfer to any Person the shares of Common Stock issuable upon conversion
of such shares of Class B Common Stock.
(e) Upon any conversion of shares of Class B Common Stock into shares
of Common Stock, any dividend for which the record date or payment date
shall be subsequent to such conversion, which may have been declared on the
shares of Class B Common Stock so converted, shall be deemed to have been
declared, and shall be payable, with respect to the shares of Common Stock
into which such shares of Class B Common Stock shall have been so
converted.
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(f) When any shares of Class B Common Stock are acquired by the
Corporation, including without limitation, upon conversion into shares of
Common Stock, such shares may not be reissued and shall be retired and
cancelled and the Corporation shall take all such actions as are necessary
to cause the authorized number of Class B Common Stock to be accordingly
reduced.
(g) The Corporation shall at all time reserve and keep available, for
issuance upon the conversion of the shares of Class B Common Stock free
from any preemptive rights, such number of its authorized but unissued
shares of Common Stock as shall from time to time be necessary to permit
the conversion of all outstanding shares of Class B Common Stock into
shares of Common Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if necessary to permit the
conversion of all outstanding shares of Class B Common Stock. The
Corporation covenants that any shares of Common Stock issuable upon
conversion of the shares of Class B Common Stock shall be validly issued,
fully paid and non-assessable.
(h) Promptly after the conversion, the Corporation shall deliver to
the holders of issued and outstanding shares of Class B Common Stock, which
surrender for cancellation, a certificate or certificates representing
outstanding shares of Class B Common Stock, a certificate or certificates
representing the number of shares of Common Stock issuable upon the
conversion of the Class B Common Stock into Common Stock in the name of
such holders. Until surrendered as provided herein, from and after the
conversion of Class B Common Stock into Common Stock, certificates
representing outstanding shares of Class B Common Stock prior to the
conversion into Common Stock shall thereupon be deemed for all corporate
purposes to evidence ownership of the number of shares of Common Stock into
which the Class B Common Stock shall have been converted.
(i) The issuance of certificates for shares of Common Stock upon the
conversion of shares of Class B Common Stock into Common Stock shall be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection
with such conversion and the related issuance of the shares of Common
Stock.
D. No Preemptive Rights
No stockholder of the Corporation shall have any preemptive or preferential
right, nor be entitled as such as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock of the Corporation of
any class or series whether now or hereafter authorized, and whether issued for
money or for consideration other than money, or of any issue of securities
convertible into stock of the Corporation.
E. Subdivision or Combination
If the Corporation shall in any manner subdivide or combine the outstanding
shares of Series A Preferred Stock, Common Stock or Class B Common Stock, all
outstanding shares of Series A Preferred Stock, Common Stock and Class B Common
Stock shall be proportionally subdivided or combined in the same manner and on
the same basis, and holders of shares of Series A Preferred Stock shall receive
only shares of Series A Preferred Stock, holders of shares of Common Stock shall
receive only shares of Common Stock and holders of shares of Class B Common
Stock shall receive only shares of Class B Common Stock in respect thereof.
F. Additional Shares
Any increase in the authorized number of shares of any class or classes of
stock of the Corporation or creation, authorization or issuance of any
securities convertible into, or warrants, options or similar rights to purchase,
acquire or receive, shares of any such class or classes of stock shall be deemed
not to affect adversely the powers, preferences or special rights of the shares
of Series A Preferred Stock, Common Stock or Class B Common Stock.
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G. Record Holders
The Corporation shall be entitled to treat the Person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other Person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
H. Cumulative Voting
No stockholder shall be entitled to the right of cumulative voting.
ARTICLE FIVE
BOARD OF DIRECTORS
A. Number of Directors and Composition.
1. Number. Subject to the rights of the holders of any outstanding shares
of any series of Preferred Stock, the number of directors of the Corporation
shall be fixed by the By-laws of the Corporation and may be increased or
decreased from time to time in such a manner as may be prescribed by the
By-laws; provided that during such time as shares of Class B Common Stock are
outstanding, the Board of Directors shall consist of 15 members.
2. Independent Directors. Except for temporary periods resulting from the
death, resignation, retirement or removal from office of any Independent
Director, at least two directors of the Corporation shall be Persons who do not
have a material business relationship with Sabre or any of its Affiliates and
who are not employees, officers or directors of Sabre or any of its Affiliates
or any Person having a material business relationship with Sabre (for purposes
of this paragraph Travelocity.com LP and its Subsidiaries, or any Subsidiaries
of the Corporation, shall not be deemed an Affiliate of Sabre) (the "Independent
Directors").
B. Written Ballot Not Required
Elections of directors need not be by written ballot unless the By-laws of
the Corporation shall otherwise provide.
C. Classes
1. Initial Classes. The directors, other than those who may be elected by
the holders of any outstanding shares of any series of Preferred Stock, shall be
divided into three classes, as nearly equal in number as possible. One class of
directors shall be initially elected for a term expiring at the annual meeting
of stockholders to be held in 2001, another class shall be initially elected for
a term expiring at the annual meeting of stockholders to be held in 2002, and
another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 2003. Members of each class shall hold
office until their successors are elected and qualified. At each annual meeting
of the stockholders of the Corporation, commencing with the 2001 annual meeting,
the successors of the class of directors whose term expires at that meeting
shall be elected by a plurality vote of all votes cast at such meeting to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
2. Classes After Issuance of Class B Common Stock. After the issuance of
Class B Common Stock, the Secretary of the Corporation shall call a special
meeting of the stockholders for the removal of the incumbent directors and the
election of directors. The Corporation shall use its reasonable best efforts to
hold such meeting within sixty days after the issuance of the Class B Common
Stock and at such place and upon such notice as is provided by law and in the
Bylaws of the Corporation; provided, however, that the Secretary shall not be
required to call any such special meeting in the event the Class B Common
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Stock is issued less than ninety days before the date fixed for the next ensuing
annual meeting of stockholders and provided further that no such special meeting
nor any adjournment thereof shall be held on a date less than thirty days before
any meeting of the stockholders called for the election of directors. At such
meeting or adjournment thereof, a vote on the removal of the directors then in
office shall be taken and an election for fifteen directors to the Board of
Directors of the Corporation in accordance with Paragraph C(4)(b) of Article
Four hereof shall be held. The directors shall be divided into three classes
with each class consisting of five directors. The holders of shares of Class B
Common Stock shall have the right to elect four (the "Class B Directors") of the
five directors in each class. One class of directors shall be initially elected
for a term expiring at the first annual meeting of stockholders to be held after
such special meeting, another class shall be initially elected for a term
expiring at the second annual meeting of stockholders to be held after such
special meeting, and another class shall be initially elected for a term
expiring at the third annual meeting of stockholders to be held after such
special meeting of stockholders. Members of each class shall hold office until
their successors are elected and qualified. The Class B Directors shall be
elected by a plurality vote of the votes cast by holders of Class B Common Stock
at such meeting and the remaining directors shall be elected by a plurality vote
of all votes cast at such meeting. At each annual meeting of the stockholders
commencing with the first annual meeting of stockholders to be held after such
special meeting, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election. After the shares of Class B Common Stock are no longer outstanding,
the Board of Directors may decrease the number of directors; provided that the
Board of Directors shall continue to be divided into three classes, as nearly
equal in number as possible and shall be elected by a plurality vote of all
votes cast at each annual meeting of stockholders.
D. Removal
Subject to the rights of the holders of any outstanding shares of any
series of Preferred Stock, any director may be removed from office, at any time,
with or without cause, by the affirmative vote of the holders of at least a
majority of the voting power of the then outstanding Voting Stock, voting
together as a single class; provided, however, that after the Trigger Date, any
director may be removed from office, but only for cause, and only by the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class; provided,
further, that the Class B Directors may be removed from office, with or without
cause, at any time only by the holders of at least 80 percent of the voting
power of the then outstanding shares of Class B Common Stock.
E. By-laws
1. Amendments. The Board of Directors is expressly authorized to adopt,
amend or repeal the By-laws of the Corporation. Any By-laws made by the
directors under the powers conferred hereby may be amended or repealed by the
directors or by the stockholders having voting power with respect thereto;
provided, that in the case of amendments by stockholders, effective as of the
Trigger Date, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal any provision of the By-laws
or adopt any provision of the By-laws inconsistent with any other provision of
the By-laws.
2. Powers. The Corporation may in its By-laws confer powers upon the Board
of Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
3. Inspection. The Board of Directors is expressly authorized and empowered
from time to time to determine whether and to what extent, and at what times and
places, and under what conditions and regulations, the accounts and books of the
Corporation, or any of them, shall be open to inspection of stockholders; and,
except as so determined, or as expressly provided in this Restated Certificate
of Incorporation, and subject to the rights of the holders of any outstanding
shares of any series of Preferred
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Stock, no stockholder shall have any right to inspect any account, book or
document of the Corporation other than such rights as may be conferred by
applicable law.
ARTICLE SIX
CORPORATE OPPORTUNITIES
A. For purposes of this Article Six, (i) "Sabre" shall mean Sabre Parent,
all successors to Sabre Parent by way of merger, consolidation or sale of all or
substantially all its assets, and all corporations, partnerships, joint
ventures, associations and other entities (each a "Subsidiary Entity") in which
Sabre Parent Beneficially Owns, directly or indirectly, 50 percent or more of
the outstanding voting stock, voting power or similar voting interests ("Voting
Interest"), but shall not mean Travelocity Holdings, any Subsidiary of
Travelocity Holdings, or the Corporation; and (ii) "Corporation" shall mean the
Corporation and all corporations, partnerships, joint ventures, associations and
other entities in which the Corporation owns, directly or indirectly, securities
or other interests having by their terms the voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation, partnership, joint venture, association or other entity, and
shall also include Travelocity Holdings and any Subsidiary of Travelocity
Holdings.
B. In anticipation that: (i) Sabre will remain, for some period of time, a
Beneficial Owner of a substantial amount of Voting Stock of the Corporation;
(ii) the Corporation and Sabre may engage in the same or similar activities or
lines of business and may have an interest in the same or similar areas of
corporate opportunities; (iii) there will be benefits to be derived by the
Corporation through its continued contractual, corporate and business relations
with Sabre (including, without limitation, service of directors, officers and
employees of Sabre as directors, officers and employees of the Corporation); and
(iv) there will be benefits in providing guidelines for directors, officers and
employees of Sabre and of the Corporation with respect to the allocation of
corporate opportunities and other matters; the provisions of this Article Six
are set forth to regulate, define and guide the conduct of certain affairs of
the Corporation as they may involve the respective rights, duties and
liabilities of Sabre and its directors, officers, employees and stockholders, on
the one hand, and the respective rights, duties and liabilities of the
Corporation and its directors, officers, employees and stockholders (other than
Sabre), on the other hand, in connection therewith.
C. Except as Sabre may otherwise agree in writing, Sabre shall have the
right to, and shall have no duty not to, (i) engage in the same or similar
business activities or lines of business as the Corporation, (ii) do business
with any potential or actual customer or supplier of the Corporation, or (iii)
employ or otherwise engage any director, officer or employee of the Corporation.
In the event Sabre or any director, officer or employee of Sabre engages in any
of the activities described in the preceding sentence, Sabre and such director,
officer and employee (i) shall have fully satisfied and fulfilled any fiduciary
duty it may have to the Corporation and its stockholders with respect to such
activity, (ii) shall not be liable to the Corporation or its stockholders for
breach of any fiduciary duty it may have by reason of any activities of Sabre
described in the preceding sentence or of the participation in such activities
of any director, officer or employee of Sabre (except as provided in paragraph
(D) of this Article Six), (iii) shall be deemed to have acted in good faith and
in a manner it reasonably believes to be in and not opposed to the best
interests of the Corporation, (iv) shall be deemed not to have breached any duty
of loyalty to the Corporation or its stockholders that it may have and not to
have derived an improper benefit therefrom, and (v) shall be deemed to have
acted in a manner entirely fair to the Corporation and its stockholders.
D. In the event that a director, officer or employee of the Corporation who
is also a director, officer or employee of Sabre acquires knowledge of a
potential transaction or matter that may be a corporate opportunity for both the
Corporation and Sabre, such director, officer or employee of the Corporation (i)
shall have fully satisfied and fulfilled any fiduciary duty it may have to the
Corporation and its stockholders with respect to such corporate opportunity,
(ii) shall not be liable to the Corporation or its stockholders for breach of
any fiduciary duty it may have by reason of the fact that Sabre pursues or
acquires such corporate opportunity for itself or directs such corporate
opportunity to another Person or
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does not communicate information regarding such corporate opportunity to the
Corporation, (iii) shall be deemed to have acted in good faith and in a manner
it reasonably believes to be in and not opposed to the best interests of the
Corporation, (iv) shall be deemed not to have breached any duty of loyalty to
the Corporation or its stockholders that it may have and not to have derived an
improper benefit therefrom, and (v) shall be deemed to have acted in a manner
entirely fair to the Corporation and its stockholders, if such director, officer
or employee acts in a manner consistent with the following policy:
(x) when a corporate opportunity is offered to an officer or employee
and/or director of the Corporation who is also an officer or employee
and/or director of Sabre, solely in his or her designated capacity with one
of the two companies, such corporate opportunity shall belong to whichever
company was so designated; otherwise, a corporate opportunity first offered
(1) to any Person who is an officer or employee or officer or employee and
director of the Corporation, and who is also a director of Sabre shall
belong to the Corporation, (2) to a Person who is a director of the
Corporation and who is also an officer or employee and/or director of Sabre
shall belong to Sabre, (3) to any Person who is an officer or employee, but
not a director, of both the Corporation and Sabre shall belong to the
company to which such Person has devoted a majority of his or her time over
the prior six-month period, (4) to any Person who is an officer or employee
and director of both the Corporation and Sabre shall belong to Sabre, (5)
to any Person who is an officer or employee of the Corporation and who is
also an officer or employee and director of Sabre shall belong to Sabre,
and (6) to any Person who is an officer or employee and director of the
Corporation and who is also an officer or employee of Sabre shall belong to
the Corporation, unless such Person serves as a director of Travelocity
Holdings but not of the Corporation (for purposes of this clause (6), the
Corporation shall be deemed to exclude Travelocity Holdings and "Sabre"
shall be deemed to include Travelocity Holdings), such corporate
opportunity shall belong to Sabre; and
(y) in the case of any business opportunity not specifically allocated
by the foregoing (whether because of the means by which it arose or was
published, or otherwise), any such business opportunity may be pursued by
either the Corporation or Sabre.
However, a corporate opportunity not allocated and pursued in accordance
with the foregoing policy shall not solely by reason of the lack of allocation
and pursuit of the corporate opportunity in accordance with such policy be
deemed a breach of any fiduciary duty, but shall be governed by the other
provisions of this Article Six, this Restated Certificate of Incorporation, the
By-laws, the DGCL and other applicable law.
E. Any corporate opportunity that belongs to Sabre or to the Corporation
pursuant to the foregoing policy shall not be pursued by the other, or directed
by the other to another Person, unless and until Sabre or the Corporation, as
the case may be, determines not to pursue the opportunity and advises in writing
the chief executive officer of the other party that it has determined not to
pursue such corporate opportunity. Notwithstanding the preceding sentence, if
the party to whom the corporate opportunity belongs does not within a reasonable
period of time begin to pursue, or thereafter continue to pursue, such
opportunity diligently and in good faith, the other party may then pursue such
opportunity or direct it to another Person. Any business opportunity that
belongs to the Corporation pursuant to the foregoing policy shall be deemed to
belong to Travelocity.com Inc. and not to Travelocity Holdings or any Subsidiary
of Travelocity Holdings (other than Travelocity.com Inc. and its Subsidiaries).
F. For purposes of this Article Six, "corporate opportunities" shall
consist only of business opportunities which (i) the Corporation is financially
able to undertake, or with respect to which the Corporation would reasonably be
able to obtain debt or equity financing, and (ii) are, from their nature, in the
line or lines of the Corporation's business or reasonable expansion thereof. In
addition, "corporate opportunities" shall not include any contract, agreement,
arrangement, transaction, undertaking or business (a "Transaction") in which the
Corporation or Sabre is permitted to participate pursuant to (a) any agreement
between the Corporation and Sabre that is in effect as of the time any equity
security of the Corporation is held of record by any Person other than Sabre, as
such agreement may be amended thereafter with the approval of a majority of
disinterested directors or (b) any subsequent agreement
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between the Corporation and Sabre approved in accordance with the procedures set
forth in Article Seven hereof; it being acknowledged that the rights of the
Corporation under any such agreement shall be deemed to be contractual rights
and shall not be corporate opportunities of the Corporation for any purpose;
provided, however, that no presumption or implication as to corporate
opportunities relating to any Transaction not explicitly covered by such an
agreement shall arise from the existence or absence of any such agreement.
G. Any Person purchasing or otherwise acquiring any interest in any shares
of stock of the Corporation shall be deemed to have notice of and consented to
the provisions of this Article Six.
H. If any Transaction between the Corporation and Sabre involves a
corporate opportunity and is approved in accordance with the procedures set
forth in Article Seven hereof, Sabre and its directors, officers and employees
shall also, for the purposes of this Article Six and the other provisions of
this Restated Certificate of Incorporation, be deemed to have fully satisfied
and fulfilled any fiduciary duties they may have to the Corporation and its
stockholders. Any such Transaction involving a corporate opportunity not so
approved shall not solely by reason of the lack of such approval be deemed a
breach of any fiduciary duty, but shall be governed by the other provisions of
this Article Six, this Restated Certificate of Incorporation, the By-laws, the
DGCL and other applicable law.
ARTICLE SEVEN
RELATED TRANSACTIONS
A. For purposes of this Article Seven, (i) "Sabre" shall mean Sabre Parent,
all successors to Sabre Parent by way of merger, consolidation or sale of all or
substantially all its assets, and all Subsidiary Entities in which Sabre Parent
Beneficially Owns, directly or indirectly, 50 percent or more of the Voting
Interest, but shall not mean the Corporation; and (ii) "Corporation" shall mean
the Corporation, Travelocity.com L.P. and all corporations, partnerships, joint
ventures, associations and other entities in which the Corporation owns,
directly or indirectly, securities or other interests having by their terms the
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation, partnership, joint venture,
association or other entity.
B. In anticipation that: (i) Sabre Parent will remain, for some period of
time, a Beneficial Owner of a substantial amount of Voting Stock of the
Corporation and have continued contractual, corporate and business relations
with the Corporation; (ii) the Corporation and Sabre or Sabre's customers or
suppliers may enter into contracts or otherwise transact business with each
other and the Corporation may derive benefits therefrom; and (iii) the
Corporation may from time to time enter into contractual, corporate or business
relations with one or more of its directors, or one or more corporations,
partnerships, associations or other organizations in which one or more of its
directors have a financial interest (collectively, "Related Entities"), the
provisions of this Article Seven are set forth to regulate and guide certain
contractual relations and other business relations of the Corporation as they
may involve the respective rights, duties and liabilities of Sabre or its
customers or suppliers, Related Entities and their respective directors,
officers, employees, and stockholders, on the one hand, and the respective
rights, duties and liabilities of the Corporation and its directors, officers,
employees and stockholders, on the other hand, in connection therewith.
C. The provisions of this Article Seven are in addition to the provisions
of the DGCL and the other provisions of this Restated Certificate of
Incorporation. Any contract or business relation which does not comply with
procedures set forth in this Article Seven shall not by reason thereof be deemed
void or voidable or result in any breach of any fiduciary duty to, or duty of
loyalty to, or failure to act in good faith or in the best interests of, the
Corporation, or the derivation of any improper personal benefit, but shall be
governed by the remaining provisions of this Restated Certificate of
Incorporation, the By-laws, the DGCL and other applicable law.
D. No Transaction between the Corporation and Sabre or any customer or
supplier of Sabre or any Related Entity or between the Corporation and one or
more of the directors, officers or employees of the
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Corporation, Sabre or any Related Entity, or any amendment, modification or
termination thereof, or any waiver of any right thereunder shall be void or
voidable solely because Sabre or such customer or supplier, any Related Entity
or any one or more of the directors, officers and employees of the Corporation,
Sabre or any Related Entity are parties thereto, or solely because any such
directors, officers or employees are present at or participate in the meeting of
the Board of Directors or committee thereof which authorize such Transaction or
amendment, modification, termination or waiver (each of which for purposes of
this Article Seven and Article Eight hereof shall also be deemed a
"Transaction") or solely because his or their votes are counted for such
purpose, and Sabre, any Related Entity and such directors, officers and
employees (i) shall have fully satisfied and fulfilled any fiduciary duty they
may have to the Corporation and its stockholders with respect thereto, (ii)
shall not be liable to the Corporation or its stockholders for any breach of any
fiduciary duty they may have by reason of the entering into, performance or
consummation of any such Transaction, (iii) shall be deemed to have acted in
good faith and in a manner reasonably believed to be in and not opposed to the
best interests of the Corporation, to the extent such standard is applicable to
such Persons' conduct, (iv) shall be deemed not to have breached any duty of
loyalty to the Corporation or its stockholders they may have and not to have
derived an improper personal benefit therefrom, and (v) shall be deemed to have
acted in a manner entirely fair to the Corporation and its stockholders, if any
of the following requirements are met:
(w) the material facts as to the relationship or interest and as to
the Transaction are disclosed or are known to the Board of Directors or the
committee thereof that authorizes the Transaction and the Board of
Directors or such committee in good faith authorizes or approves the
Transaction by the affirmative vote of a majority of the disinterested
directors on the Board of Directors or such committee even if the
disinterested directors are less than a quorum;
(x) the material facts as to the relationship or interest and as to
the Transaction are disclosed or are known to the holders of Voting Stock
entitled to vote thereon, and the Transaction is specifically approved by
vote of the holders of a majority of the then outstanding Voting Stock not
Beneficially Owned by Sabre or such Related Entity, voting together as a
single class, as the case may be;
(y) such Transaction is effected pursuant to, and consistent with,
terms and conditions specified in any arrangements, standards, protocols or
guidelines (collectively, the "Guidelines") which are in good faith
authorized or approved, after disclosure or knowledge of the material facts
as to the relationship or interest and as to the Transaction, by the
affirmative vote of a majority of the disinterested directors on the Board
of Directors or the applicable committee thereof (even though the
disinterested directors be less than a quorum) or by vote of the holders of
a majority of the then outstanding Voting Stock not Beneficially Owned by
Sabre or such Related Entity, voting together as a single class, as the
case may be (such authorization or approval of such Guidelines constituting
or being deemed to constitute authorization or approval of such
Transaction); or
(z) such Transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified by the Board of Directors, a committee
thereof or the stockholders of the Corporation.
E. Directors of the Corporation who are also directors, officers or
employees of Sabre or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
that authorizes or approves any such Transaction or any such Guidelines. Voting
Stock Beneficially Owned by Sabre and any Related Entities may be counted in
determining the presence of a quorum at a meeting of stockholders that
authorizes or approves any such Transaction or any such Guidelines.
F. No vote cast or other action taken by any Person who is a director,
officer or employee or other representative of Sabre, which vote is cast or
action is taken by such Person in his capacity as a director of the Corporation,
shall constitute an action of, or the exercise of a right by, or a consent of,
Sabre for the purpose of any such Transaction.
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G. Any Person purchasing or otherwise acquiring any interest in any shares
of stock of the Corporation shall be deemed to have notice of and to have
consented to the provisions of this Article Seven.
H. For purposes of this Article Seven, any Transaction with any
corporation, partnership, joint venture, association or other entity in which
the Corporation Beneficially Owns, directly or indirectly, 50 percent or more of
the outstanding voting stock, voting power or similar voting interests, or with
any officer or director thereof, shall be deemed to be a Transaction with the
Corporation.
ARTICLE EIGHT
APPROVAL BY INDEPENDENT DIRECTOR
Notwithstanding anything to the contrary in Article Seven, until [insert
the date that is the second anniversary of the Effective Time], the Corporation
shall not enter into any Transaction with Sabre or any material customer or
supplier of Sabre, or any amendment, modification or termination thereof, or any
waiver of any right thereunder unless (i) such Transaction has been approved by
at least one Independent Director or (ii) such Transaction is effected pursuant
to, and consistent with, terms and conditions specified in any Guidelines
authorized or approved by a majority of the Independent Directors.
ARTICLE NINE
WRITTEN CONSENT; SPECIAL MEETINGS
Effective as of the Trigger Date, and subject to the rights of the holders
of any series of Preferred Stock, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing in lieu of a meeting of such stockholders. Except as
otherwise required by law or Articles Four or Five of this Restated Certificate
of Incorporation and subject to the rights of the holders of any series of
Preferred Stock, special meetings of the stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies or by the Chairman of the Board; provided, that, prior
to the Trigger Date, special meetings of the stockholders of the Corporation may
also be called at the request of the holders of a majority of the voting power
of the then outstanding Voting Stock. Except as expressly provided in the
immediately preceding sentence, any power of stockholders to call a special
meeting is specifically denied. Only such business as shall have been brought
before the special meeting of stockholders pursuant to the Corporation's notice
of meeting shall be conducted at such meeting.
ARTICLE TEN
LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is hereafter
amended to permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the DGCL as so amended.
Any repeal or modification of this Article Nine by the stockholders of the
Corporation or otherwise shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
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ARTICLE ELEVEN
DEFINITIONS
For purposes of this Certificate of Incorporation:
"Affiliate" shall mean with respect to a specified Person, any Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the specified Person.
"Beneficial Owner," "Beneficially Own," "Beneficially Owned," "Beneficial
Ownership," and words of similar import shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations of the Securities
Exchange Act of 1934 as in effect on the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Person" shall mean any individual, firm, partnership, corporate or other
entity.
"Subsidiary" shall mean any corporation of which a majority of any series
or class of equity security is owned, directly or indirectly, by a different
corporation.
"Tax-Free Spin-Off" shall mean a distribution of Common Stock or Class B
Common Stock as a spin-off, split-up or split-off to holders of Class A or Class
B common stock of Sabre Parent intended to qualify as a tax-free distribution
under Section 355(a) of the Code.
"Trigger Date" shall mean the first time at which Sabre shall cease to be
the Beneficial Owner of an aggregate of at least a majority of the voting power
of the Voting Stock then outstanding.
"Voting Stock" shall mean the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
ARTICLE TWELVE
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding
anything contained in this Restated Certificate of Incorporation or the By-Laws
of the Corporation to the contrary, effective as of the Trigger Date, the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class, shall be
required to amend, alter, change or repeal any provision contained in this
Restated Certificate of Incorporation. Neither the alteration, amendment or
repeal of Articles Six or Seven hereof, nor the adoption of any provision of
this Restated Certificate of Incorporation inconsistent with Articles Six or
Seven hereof, shall eliminate or reduce the effect of Articles Six or Seven
hereof in respect of any matter occurring, or any cause of action, suit or claim
that, but for Article Six or Seven hereof, would accrue or arise, prior to such
alteration, amendment, repeal or adoption.
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IN WITNESS WHEREOF, this Restated Certificate of Incorporation which
restates, integrates and amends the provisions of the Certificate of
Incorporation of the Corporation, and which has been duly adopted in accordance
with the provisions of Sections 228, 242 and 245 of the DGCL, has been executed
by the undersigned on this day of , 2000.
TRAVELOCITY.COM INC.
By:
----------------------------------
Name:
Title:
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ANNEX E
RESTATED BYLAWS
OF
TRAVELOCITY.COM INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
Section 1.1. Delaware Office. The registered office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware.
Section 1.2. Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
Section 1.3. Books and Records. The books and records of the Corporation
may be kept at the Corporation's principal office or at such other locations
outside the State of Delaware as may from time to time be designated by the
Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on the third Thursday in May of each year, if not a
legal holiday, and if a legal holiday then on the next succeeding business day,
at 10:00 a.m., local time, at the principal executive offices of the Corporation
or at such other date, place and/or time as may be fixed from time to time by
resolution of the Board of Directors. The first annual meeting of the
stockholders of the Corporation shall be held in 2001.
Section 2.2. Special Meeting. Except as otherwise required by applicable
law, subject to the rights of the holders of any series of preferred stock, par
value $0.001 per share (the "Preferred Stock"), to elect additional directors
under specified circumstances, and subject to Articles Four and Five of the
Restated Certificate of Incorporation and Section 3.2 hereof, special meetings
of the stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no vacancies (the
"Whole Board") or by the Chairman of the Board; provided, that prior to the
Trigger Date (as such term is defined in the Restated Certificate of
Incorporation), special meetings of the stockholders of the Corporation shall
also be called at the request of the holders of a majority of the voting power
of the then outstanding Voting Stock (as defined in Section 2.5 hereof). Except
as expressly provided in the immediately preceding sentence, any power of
stockholders of the Corporation to call a special meeting is specifically
denied.
Section 2.3. Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
Section 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally, or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law.
Meetings may be held without
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notice if all stockholders entitled to vote are present, or if notice is waived
by those not present. Any previously scheduled meeting of the stockholders may
be postponed by resolution of the Board of Directors upon public notice given
prior to the time previously scheduled for such meeting of stockholders.
Section 2.5. Quorum and Adjournment. Except as otherwise provided by law or
by the Restated Certificate of Incorporation, the holders of at least one-third
of the voting power of the outstanding shares of the Corporation entitled to
vote generally in the election of directors (the "Voting Stock"), represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders,
except that when specified business is to be voted on by a class or series
voting as a class, the holders of at least one-third of the shares of such class
or series shall constitute a quorum for the transaction of such business. The
chairman of the meeting or a majority of the voting power of the shares of
Voting Stock so represented may adjourn the meeting from time to time, whether
or not there is such a quorum (or in the case of specified business to be voted
on by a class or series, the chairman of the meeting or a majority of the shares
of such class or series so represented may adjourn the meeting with respect to
such specified business). No notice of the time and place of adjourned meetings
need be given if the time and place thereof are announced at the meeting at
which the adjournment is taken, unless the adjournment is for more than thirty
days or a new record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 2.6. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or as otherwise permitted
by law, or by his duly authorized attorney-in-fact. Such proxy must be filed
with the Secretary of the Corporation or his representative at or before the
time of the meeting.
Section 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the Corporation's notice of meeting
delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the
direction of the Board of Directors or the Chairman of the Board, (c) by
any stockholder of the Corporation who is entitled to vote at the meeting,
who complied with the notice procedures set forth in clauses (2) and (3) of
this paragraph (A) and this Bylaw and who was a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation or
(d) prior to the Trigger Date, by Travelocity Holdings Inc.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder, pursuant to clause (c) of paragraph
(A) (1) of this Bylaw, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than ninety days
nor more than one hundred and twenty-days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such anniversary
date, notice by the stockholder to be timely must be so delivered not
earlier than the one hundred and twentieth day prior to such annual
meeting and not later than the close of business on the later of the
ninetieth day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is
first made. For purposes of determining whether a stockholder's notice
shall have been delivered in a timely manner for the annual meeting of
stockholders in 2001, the "first anniversary of the preceding year's
annual meeting" shall be deemed to be the third Thursday in May, 2001.
In no event shall the adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director all
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information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11
thereunder, including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to
be brought before the meeting, the reasons for conducting such business
at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal
is made (i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner and (ii) the class
and number of shares of the Corporation which are owned beneficially and
of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees
for director or specifying the size of the increased Board of Directors
made by the Corporation at least one hundred days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Bylaw shall also be considered timely, but only
with respect to nominees for any new positions created by such increase,
if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the
tenth day following the day on which such public announcement is first
made by the Corporation.
(B) Special Meetings of Stockholders. Only such business as shall have
been brought before the special meeting of stockholders pursuant to the
Corporation's notice of meeting pursuant to Section 2.4 of these Bylaws
shall be conducted at such meeting. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at
which directors are to be elected pursuant to the Corporation's notice of
meeting (1) by or at the direction of the Board of Directors or (2) by any
stockholder of the Corporation who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this Bylaw and who is a
stockholder of record at the time such notice is delivered to the Secretary
of the Corporation. Nominations by stockholders of persons for election to
the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by paragraph (A)(2) of
this Bylaw shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the one hundred twentieth day
prior to such special meeting and not later than the close of business on
the later of the ninetieth day prior to such special meeting or the tenth
day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the adjournment
of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(C) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this Bylaw. Except as otherwise provided by law,
the Restated Certificate of Incorporation or these Bylaws, the chairman of
the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare
that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news
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service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Bylaw. Nothing in this Bylaw shall be
deemed to affect any rights (i) of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act, or (ii) of the holders of any outstanding series
or class of Voting Stock to elect directors if so entitled.
Section 2.8. Voting Procedures. Election of directors at all meetings of
the stockholders at which directors are to be elected shall be by written
ballot. Except as otherwise set forth in the Restated Certificate of
Incorporation with respect to the right of the holders of any series of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, directors shall be elected by a
plurality of the votes cast by the holders of Common Stock, present in person or
by proxy. Except as otherwise provided by law, the Restated Certificate of
Incorporation or these Bylaws, all matters other than the election of directors
properly submitted to the stockholders at any meeting shall be decided by the
affirmative vote of a majority of the voting power of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
matter. The vote upon any matter other than the election of directors shall be
by ballot only if so ordered by the chairman of the meeting.
Section 2.9. Inspectors of Elections; Opening and Closing the Polls.
(A) The Board of Directors by resolution shall appoint, or shall
authorize an officer of the Corporation to appoint, one or more inspectors,
which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives of the Corporation, to act
at the meeting and make a written report thereof. One or more persons may
be designated as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate has been appointed to act, or if all
inspectors or alternates who have been appointed are unable to act, at a
meeting of stockholders, the chairman of the meeting shall appoint one or
more inspectors to act at the meeting. Each inspector, before discharging
his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of
his or her ability. The inspectors shall have the duties prescribed by the
General Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
Section 2.10. No Stockholder Action by Written Consent. Effective as of the
Trigger Date, and subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing by such
stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law or by the Restated
Certificate of Incorporation or by these Bylaws required to be exercised or done
by the stockholders.
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Section 3.2. Number, Tenure and Qualifications. Subject to the rights of
the holders of any series of Preferred Stock to elect directors under specified
circumstances, and subject to the Restated Certificate of Incorporation, the
number of directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the Whole Board, but shall consist of not
more than fifteen nor less than three directors; provided that during such time
as shares of Class B Common Stock are outstanding, the Board of Directors shall
consist of 15 directors. The directors, other than those who may be elected by
the holders of any series of Preferred Stock, shall be divided into three
classes, as nearly equal in number as possible. One class of directors shall be
initially elected for a term expiring at the annual meeting of stockholders to
be held in 2001; another class shall be initially elected for a term expiring at
the annual meeting of stockholders to be held in 2002; and another class shall
be initially elected for a term expiring at the annual meeting of stockholders
to be held in 2003. Members of each class shall hold office until their
successors are elected and qualified. At each annual meeting of the stockholders
of the Corporation, commencing with the 2001 annual meeting, the successors of
the class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.
Section 3.3. Regular Meetings. A regular annual meeting of the Board of
Directors shall be held without other notice than this Bylaw on the same date,
and at the same place, as each annual meeting of stockholders or on such other
day, at such other place and at such time as the Board of Directors may
determine. The Board of Directors may from time to time, by resolution, provide
the time and place for the holding of additional regular meetings without other
notice than such resolution.
Section 3.4. Special Meetings. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Whole Board. The person or persons authorized to call special
meetings of the Board of Directors may fix the place and time of the meetings.
Section 3.5. Notice. Notice of any special meeting shall be given to each
director at his or her business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least three days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least twenty-four hours before such meeting. If by
facsimile transmission or electronic mail, such notice shall be transmitted at
least twenty-four hours before such meeting. If by telephone, the notice shall
be given at least twelve hours prior to the time set for the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice of such
meeting, except for amendments to these Bylaws as provided under Section 8.1 of
Article VIII hereof. A meeting may be held at any time without notice if all the
directors are present or if those not present waive notice of the meeting in
writing, either before or after such meeting. Any director present in person at
a meeting of the Board of Directors shall be deemed to have waived notice of the
time and place of meeting.
Section 3.6. Action by Consent of Board of Directors. Any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 3.7. Conference Telephone Meetings. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Section 3.8. Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at
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which a quorum is present shall be the act of the Board of Directors. The
directors present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of enough directors to leave
less than a quorum.
Section 3.9. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances
and prior to the election of directors by the holders of the Class B Common
Stock (the "Class B Directors") as set forth in the Corporation's Restated
Certificate of Incorporation, and unless the Board of Directors otherwise
determines, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
shall be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. After the election of the Class B Directors, any vacancy among
such directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled only by the affirmative vote
of a majority of the remaining Class B Directors, although less than a quorum,
and each director so chosen shall hold for a term expiring at the annual meeting
of stockholders at which the office of the class to which such director has been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.
Section 3.10. Removal. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances
and prior to the election of directors by the holders of the Class B Common
Stock (the "Class B Directors") as set forth in the Corporation's Restated
Certificate of Incorporation, any director or the entire Board of Directors may
be removed from office at any time with or without cause by the affirmative vote
of the holders of at least a majority of the voting power of the then
outstanding Voting Stock, voting together as a single class; provided, however,
that after the Trigger Date any director or directors may be removed from
office, but only for cause, and only by the affirmative vote of the holders of
at least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class; provided further, that the Class B Directors
may be removed from office, with or without cause, at any time only by the
holders of at least 80 percent of the voting power of the then outstanding
shares of Class B Common Stock.
Section 3.11. Fees and Expenses. Directors shall receive such fees and
expenses as the Board of Directors shall from time to time prescribe.
ARTICLE IV
COMMITTEES
Section 4.1. Executive Committee. (A) The Board of Directors may, by
resolution passed by a majority of the Whole Board, designate an Executive
Committee, to consist of four or more members, including the Chairman of the
Board and the Chief Executive Officer, if he/she is a director. The Chairman of
the Board, the Chief Executive Officer, and one other member of the Executive
Committee shall constitute a quorum.
(B) The Executive Committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business
and affairs of the Corporation, with the exception of such powers and
authority as may be specifically reserved to the Board of Directors by law
or by resolution adopted by the Board of Directors.
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Section 4.2. Audit Committee. (A) The Board of Directors may, by resolution
passed by a majority of the Whole Board, designate an Audit Committee, to
consist of two or more members.
(B) The Audit Committee shall from time to time review and make
recommendations to the Board of Directors with respect to the selection of
independent auditors, the fees to be paid such auditors, the adequacy of
the audit and accounting procedures of the Corporation, and such other
matters as may be specifically delegated to the Committee by the Board of
Directors. In this connection the Audit Committee shall, at its request,
meet with representatives of the independent auditors and with the
financial officers of the Corporation separately or jointly.
Section 4.3. Compensation/Nominating Committee. (A) The Board of Directors
may by resolution passed by a majority of the Whole Board, designate a
Compensation/Nominating Committee, to consist of three or more members, none of
the members of which shall be employees or officers of the Corporation. A
majority of the members of the Compensation/Nominating Committee shall
constitute a quorum.
(B) The Compensation/Nominating Committee shall from time to time
review and make recommendations to the Board of Directors with respect to
the management remuneration policies of the Corporation including salary
rates and fringe benefits of elected officers, other remuneration plans
such as incentive compensation, deferred compensation and stock option
plans, directors' compensation and benefits and such other matters as may
be specifically delegated to the Committee by the Board of Directors.
(C) In addition, the Compensation/Nominating Committee shall make
recommendations to the Board of Directors (1) concerning suitable
candidates for election to the Board, (2) with respect to assignments to
Board Committees, and (3) with respect to promotions, changes and
succession among the senior management of the Corporation, and shall
perform such other duties as may be specifically delegated to the Committee
by the Board of Directors.
Section 4.4. Committee Procedure, Seal. (A) The Executive,
Compensation/Nominating, and Audit Committees shall keep regular minutes of
their meetings, which shall be reported to the Board of Directors, and shall fix
their own rules of procedures.
(B) The Executive, Compensation/Nominating, and Audit Committees may
each authorize the seal of the Corporation to be affixed to all papers
which may require it.
(C) In the absence or disqualification of a member of any Committee,
the members of that Committee present at any meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of such absent or disqualified member.
Section 4.5. Other Committees. The Board of Directors, or any Committee
thereof so authorized by the Board of Directors, may, from time to time, by
resolution passed by a majority of the Whole Board or such Committee, designate
one or more other Committees of the Board. Each such Committee shall have such
duties and may exercise such powers as are granted to it in the resolution
designating the members thereof. Each Committee shall fix its own rules of
procedure.
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ARTICLE V
OFFICERS
Section 5.1. Elected Officers. The elected officers of the Corporation
shall be (A) a Chairman of the Board, unless the Board of Directors specifies
that the Chairman of the Board shall not be an officer of the Corporation, (B) a
President, (C) one or more vice Presidents (including Executive Vice Presidents
and Senior Vice Presidents), (D) a Secretary, (E) a Treasurer, and (F) such
other officers as the Board of Directors from time to time may deem proper. The
Chairman of the Board (whether or not an officer of the Corporation) shall be
chosen from the directors. The other officers of the Corporation may or may not
be directors. All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article V. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 5.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
5.9 of these Bylaws, the officers shall hold their respective offices at the
pleasure of the Board of Directors and any officer may be removed at any time,
with or without cause, by a vote of the majority of the directors; each officer
shall hold office until his or her successor shall have been duly elected and
shall have qualified or until his death or removal or until he shall resign.
Section 5.3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the stockholders and of the Board of Directors. He or she
shall make reports to the Board of Directors and the stockholders, and shall
have such other powers and perform such other duties as are required of him or
her from time to time by the Board of Directors. The Board of Directors may
specify in a resolution or resolutions that the Chairman of the Board shall not
be an officer of the Corporation. The offices of Chairman of the Board and
President may be filled by the same individual.
Section 5.4. President. Unless otherwise specified by the Board of
Directors, the President shall be the Chief Executive Officer of the
Corporation, shall be responsible for the general management of the affairs of
the Corporation and shall perform all duties incidental to his or her office
which may be required by law, and shall have such other powers and perform such
other duties as are required of him or her from time to time by the Board of
Directors. The President shall, in the absence of or because of the inability to
act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors. He or she shall see that all orders and
resolutions of the Board of Directors and of any committee thereof are carried
into effect.
Section 5.5. Vice Presidents. Each Vice President (including any Executive
Vice Presidents and Senior Vice Presidents) shall perform such duties as shall
be assigned by the Board of Directors, the Chairman of the Board or the
President.
Section 5.6. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and Directors and all other notices
required by law or by these Bylaws and in case of his or her absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the Chairman of the Board or the President, or by the Board of
Directors, upon whose request the meeting is called as provided in these Bylaws.
He or she shall record all the proceedings of the meetings of the Board of
Directors, any committees thereof and the stockholders of the Corporation in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him or her by the Board of Directors, the Chairman of the Board or
the President. He or she shall have the custody of the seal of the corporation
and shall affix the same to all instruments requiring it, when authorized by the
Board of
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Directors, the Chairman of the Board or the President, and attest to the same.
Any or all of the duties of the Secretary may be delegated to one or more
Assistant Secretaries.
Section 5.7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursement in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
the Treasurer shall give the Corporation a bond for the faithful discharge of
his or her duties in such amount and with such surety as the Board of Directors
shall prescribe. Any or all of the duties of the Treasurer may be delegated to
one or more Assistant Treasurers.
Section 5.8. Compensation. The compensation of the officers of the
Corporation shall be fixed, from time to time, by the Board of Directors.
Section 5.9. Vacancies. In case any office becomes vacant by death,
resignation, retirement, disqualification, removal from office, or any other
cause, the Board of Directors may abolish the office (except that of President,
Secretary and Treasurer) or elect an officer to fill such vacancy.
ARTICLE VI
STOCK CERTIFICATES AND TRANSFERS
Section 6.1. Stock Certificates and Transfers. (A) The interest of each
stockholder of the Corporation shall be evidenced by certificates for shares of
stock in such form as the appropriate officers of the Corporation may from time
to time prescribe; provided, however, the Board of Directors may provide by
resolution that some or all of any or all classes or series of the Corporation's
stock shall be uncertificated shares. The shares of the stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof in
person or by his attorney, upon surrender for cancellation of certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon
a certificate has ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January and end on the thirty-first day of December of each
year.
Section 7.2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Restated
Certificate of Incorporation.
Section 7.3. Seal. The corporate seal may bear in the center the emblem of
some object, and shall have inscribed thereunder the words "Corporate Seal" and
around the margin thereof the words "Travelocity.Com, Inc. -- Delaware 199 ".
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Section 7.4. Waiver of Notice. Whenever any notice is required to be given
to any stockholder or director of the Corporation under the provisions of the
General Corporation Law of the State of Delaware, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of any annual
or special meeting of the stockholders of the Board of Directors need be
specified in any waiver of notice of such meeting.
Section 7.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
Section 7.6. Resignations. Any director or any officer, whether elected or
appointed, may resign at any time by serving written notice of such resignation
on the Chairman of the Board, the President or the Secretary, and such
resignation shall be deemed to be effective as of the close of business on the
date said notice is received by the Chairman of the Board, the President, or the
Secretary, or at such later date as is stated therein. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective.
Section 7.7. Indemnification and Insurance.
(A) Generally. (1) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or
was or has agreed to serve as a director or officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity.
(2) The Corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that be or she as
or was or has agreed to serve at the request of the Corporation as an
employee or agent of the Corporation, or is or was serving or has agreed
to serve at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity.
(3) The indemnification provided by this Subsection (A) shall be
from and against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
indemnitee or on his or her behalf in connection with such action, suit
or proceeding and any appeal therefrom, but shall only be provided if
the indemnitee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action, suit or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
(4) Notwithstanding the foregoing provisions of this Subsection
(A), in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (a) the indemnification
provided by this subsection (A) shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the
defense or settlement of such action or suit, and (b) no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless,
and only to the extent that, the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
(5) The Board of Directors (by resolution passed by a majority of
the Board of Directors), the Chairman of the Board, the President or the
Secretary shall have the authority to determine
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whether a person is or was serving or has agreed to serve at the request
of the Corporation (a) as a director or officer of the Corporation or
another corporation, partnership, joint venture, trust or other
enterprise, or (b) as an employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise. If
the Board of Directors (by resolution passed by a majority of the Board
of Directors), the Chairman of the Board, the President or the Secretary
determines that a person is not or was not serving or has not agreed to
serve at the request of the Corporation in any capacity described in
clause (a) or (b) of the preceding sentence, then such person shall not
(unless otherwise ordered by a court) be entitled to indemnification
under this Section 7.7.
(6) The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
(B) Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
Subsection (A) hereof or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
(C) Determination That Indemnification Is Proper. Any indemnification
of a person entitled to indemnity under Subsection (A)(1) hereof shall
(unless otherwise ordered by a court) be made by the Corporation unless a
determination is made that indemnification of such person is not proper in
the circumstances because he or she has not met the applicable standard of
conduct set forth in Subsection (A)(3) hereof. Any indemnification of a
person entitled to indemnity under Subsection (A)(2) hereof may (unless
otherwise ordered by a court) be made by the Corporation upon a
determination that indemnification of such person is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in Subsection (A)(3) hereof. Any such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even if less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in
a written opinion, or (3) by the stockholders.
(D) Advance Payment of Expenses. Expenses (including attorneys' fees)
incurred by a director or officer in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director
or officer to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Corporation as
authorized in this Section. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board
of Directors may authorize the Corporation's counsel to represent a
director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or
proceeding.
(E) Procedure for Indemnification of Required Indemnitees. Any
indemnification of a person the Corporation is required to indemnify under
Subsection (A) hereof, or advance of costs, charges and expenses of a
person the Corporation is required to pay under Subsection (D) hereof,
shall be made promptly, and in any event within 60 days, upon the written
request of such person. If the Corporation fails to respond within 60 days
then the request for indemnification shall be deemed to be approved. The
right to indemnification or advances as granted by this Section shall be
enforceable by the person the Corporation is required to indemnify under
Subsection (A) hereof in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part. Such person's costs
and expenses incurred in connection with successfully establishing his or
her right to indemnification,
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in whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of costs, charges and expenses
under Subsection (D) hereof where the required undertaking, if any, has
been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Subsection (A) hereof, but the burden of
proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in Subsection (A) hereof, nor the fact that there has
been an actual determination by the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
(F) Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in
such capacity at any time while these provisions as well as the relevant
provisions of the General Corporation Law of the State of Delaware are in
effect and any repeal or modification thereof shall not affect any right or
obligation then existing with respect to any state of facts then or
previously existing or any action, suit, or proceeding previously or
thereafter brought or threatened based in whole or in part upon any such
state of facts. Such a "contract right" may not be modified retroactively
without the consent of such director, officer, employee or agent.
The indemnification provided by this Section 7.7 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
(G) Insurance. The Corporation shall purchase and maintain insurance
on behalf of any person who is or was or has agreed to serve at the request
of the Corporation as a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against, and incurred by, him or her or on
his or her behalf in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify
him or her against such liability under the provisions of this Section 7.7;
provided, however, that such insurance is available on acceptable terms,
which determination shall be made by a vote of a majority of the entire
Board of Directors.
(H) Savings Clause. If this Section 7.7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges
and expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or
in the right of the Corporation, to the full extent permitted by any
applicable portion of this Section 7.7 that shall not have been invalidated
and to the full extent permitted by applicable law.
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ARTICLE VIII
AMENDMENTS
Section 8.1. Amendments. These Bylaws may be amended, added to, rescinded
or repealed at any meeting of the Board of Directors or of the stockholders, so
long as notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given no
less than twenty-four hours prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these Bylaws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of stock required by law, the Restated Certificate of
Incorporation or these Bylaws, effective as of the Trigger Date, the affirmative
vote of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal any provision of these Bylaws.
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ANNEX F
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TRAVELOCITY.COM LP
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF , 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I -- Certain Definitions............................ F-4
1.1 Definitions.......................................... F-4
1.2 Accounting Terms and Determinations.................. F-9
1.3 Directly or Indirectly; Without Limitation........... F-9
1.4 References........................................... F-9
ARTICLE II -- Organization.................................. F-9
2.1 Organization......................................... F-9
2.2 Name................................................. F-9
2.3 Registered Office; Registered Agent; Principal Office
in the United States; Other Offices.................... F-9
2.4 Term................................................. F-9
ARTICLE III -- Purpose and Powers........................... F-10
3.1 Purpose.............................................. F-10
3.2 Powers............................................... F-10
3.3 Other Authority...................................... F-10
ARTICLE IV -- Capital Contributions and Issuances of
Partnership Units......................................... F-10
4.1 Capital Contributions................................ F-10
4.2 Additional Capital Contributions..................... F-11
4.3 Return of Contributions.............................. F-11
4.4 Advances by Partners................................. F-11
4.5 No Preemptive Rights................................. F-11
4.6 Other Contribution Provisions........................ F-11
4.7 Additional Contributions by Travelocity.com;
Relationship of Travelocity.com Shares to Partnership
Units................................................ F-11
4.8 Incentive Plans; Management Services Agreement....... F-12
4.9 Additional Contributions by Travelocity Holdings..... F-12
4.10 Splits and Reclassifications......................... F-13
ARTICLE V -- Capital Accounts, Allocations and
Distributions............................................. F-13
5.1 Capital Accounts..................................... F-13
5.2 Allocation of Net Profit or Net Loss................. F-14
5.3 Additional Allocations............................... F-15
5.4 Allocations for Tax Purposes......................... F-15
5.5 Distributions........................................ F-15
5.6 Tax Distributions.................................... F-16
5.7 Withholding.......................................... F-16
ARTICLE VI -- Management.................................... F-17
6.1 Management by Board of Directors..................... F-17
6.2 Composition of Board of Directors.................... F-17
6.3 Board of Directors -- Manner of Acting............... F-18
6.4 Compensation of Directors............................ F-19
6.5 Officers............................................. F-19
6.6 Business Opportunities............................... F-19
6.7 Related Transactions................................. F-22
6.8 Approval by Independent Director..................... F-24
6.9 Certificate of Limited Partnership................... F-24
6.10 Title to Partnership Assets.......................... F-24
6.11 Reimbursement of Travelocity.com Partner............. F-24
6.12 Liability of the General Partners.................... F-24
6.13 Other Matters Concerning the General Partners........ F-25
6.14 Rights and Obligations of Limited Partners........... F-25
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII -- Transfer Restrictions; Exchange Right........ F-25
7.1 Transfer Restrictions................................ F-25
7.2 Permitted Transfers.................................. F-25
7.3 Exchange Right....................................... F-26
ARTICLE VIII -- Limited Liability; Indemnification.......... F-27
8.1 Limited Liability.................................... F-27
8.2 Indemnification...................................... F-27
8.3 Contribution......................................... F-28
8.4 Tax/ERISA Indemnity.................................. F-29
ARTICLE IX -- Taxes......................................... F-29
9.1 Tax Matters Partner; Tax Returns..................... F-29
9.2 Partnership Status................................... F-29
9.3 Fiscal Year.......................................... F-29
ARTICLE X -- Books, Records and Bank Accounts............... F-30
10.1 Maintenance of Books................................ F-30
10.2 Accounting Principles............................... F-30
10.3 Bank Accounts....................................... F-30
10.4 Tax Information..................................... F-30
10.5 Public Filings...................................... F-30
ARTICLE XI -- Admission of Partners; Withdrawal............. F-30
11.1 Substitution of Partners............................ F-30
11.2 Admission of Additional Partners.................... F-30
11.3 Withdrawal.......................................... F-31
ARTICLE XII -- Dissolution, Liquidation and Termination..... F-31
12.1 Dissolution......................................... F-31
12.2 Liquidation and Termination......................... F-31
12.3 Distribution in Kind................................ F-32
12.4 Deficit Capital Accounts............................ F-32
12.5 Cancellation of Filings............................. F-32
ARTICLE XIII -- GENERAL PROVISIONS.......................... F-32
13.1 Representations and Warranties of Partners.......... F-32
13.2 Offset.............................................. F-33
13.3 Notices............................................. F-33
13.4 Entire Agreement; Waivers and Modifications......... F-33
13.5 No Third-Party Beneficiaries........................ F-34
13.6 Governing Law....................................... F-34
13.7 Further Assurances.................................. F-34
13.8 Waiver of Certain Rights............................ F-34
13.9 Severability........................................ F-34
13.10 Successors and Assigns.............................. F-34
13.11 Specific Performance................................ F-34
13.12 Interpretation of Agreement......................... F-34
13.13 Multiple Counterparts............................... F-34
Exhibit A -- Partnership Interests.......................... F-36
Exhibit 2.1................................................. F-37
Form of Certificate of Limited Partnership of Travelocity LP
Schedule 6.2................................................ F-39
Board of Directors
</TABLE>
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF TRAVELOCITY.COM LP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
Travelocity.com LP (the "Agreement") is made and entered into, effective as of
, 2000, by and among Travelocity.com Inc., a Delaware
corporation ("Travelocity.com"), Travelocity.com LP Sub Inc., a Delaware
corporation ("Travelocity.com LP Sub"), Travelocity Holdings, Inc., a Delaware
corporation ("Travelocity Holdings"), TSGL Holding, Inc., a Delaware corporation
("TSGL Holding"), and Sabre, Inc., a Delaware corporation ("Sabre").
WHEREAS, on , 1999, certain of the Partners entered into an
Agreement of Limited Partnership of Travelocity.com LP (the "Original
Partnership Agreement") and formed the Partnership as a limited partnership
under the Act by filing a certificate of limited partnership with the Secretary
of State of the State of Delaware;
WHEREAS, on , 1999, Sabre, Travelocity Holdings,
Travelocity.com, and Preview Travel, Inc., a Delaware corporation ("Preview"),
entered into an Agreement and Plan of Merger, which provided for, among other
things, (i) the merger of Preview with and into Travelocity.com (the "Merger"),
(ii) the transfer of the Travelocity Business to the Partnership to be effected
by Sabre or its subsidiaries or affiliates immediately prior to the Effective
Time of the Merger, and (iii) the transfer of the Preview business to the
Partnership to be effected by the surviving corporation immediately after the
Effective Time of the Merger, in each case on conditions set forth or referred
to in the Merger Agreement;
WHEREAS, on , 2000, immediately prior to the Effective Time of
the Merger, (i) Sabre and the Partnership entered into the Sabre Contribution
Agreement, (ii) TSGL Holding and the Partnership entered into the TSGL
Contribution Agreement, and (iii) the Original Partnership Agreement was amended
to reflect the capital contributions made pursuant to the Sabre Contribution
Agreement and the TSGL Contribution Agreement and the issuance of Partnership
Units in respect of those contributions;
WHEREAS, on , 2000, the Merger became effective;
WHEREAS, on , 2000, immediately after the Effective Time of the
Merger, Travelocity.com and the Partnership entered into the Travelocity.com
Contribution Agreement; and
WHEREAS, in order to reflect the capital contribution made pursuant to the
Travelocity.com Contribution Agreement and the issuance of additional
Partnership Units to Travelocity.com in respect of that contribution and to set
forth the terms and conditions which will govern the relative rights and
obligations of the Partners, the parties hereto desire to amend and restate the
Partnership Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt and the
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
that the Original Partnership Agreement, as previously amended, is hereby
amended and restated:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C.
sec.17-101, et seq. as amended from time to time, and any successor statute.
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"Adjusted Capital Account" of a Partner means such Partner's Capital
Account increased by such Partner's share of partner nonrecourse debt minimum
gain and partnership minimum gain as defined in Treas. Reg. sec. 1.704-2.
"Affiliate" means with respect to a specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Ancillary Agreements" has the meaning set forth in the Merger Agreement.
"Aries" means Aries Corp., a Delaware corporation.
"Available Cash" means, at any specified time, (x) the sum of all cash
receipts of the Partnership prior to such time from any and all sources, less
(y) all cash disbursements (including all distributions made to Partners, cash
payments made by the Partnership and its Subsidiaries pursuant to the Management
Services Agreement, payment of fees and expenses of Travelocity.com, loan
repayments, capital improvements and replacements) prior to such time and the
amount of Reserves at such time.
"Board of Directors" has the meaning set forth in Section 6.1(a).
"Business" means the business of (a) providing consumer-direct travel
content and travel reservation services and other related goods and services
through an internet web site or web sites, online, wireless, cable or other
consumer-direct services and (b) entering into any lawful transaction and
engaging in any lawful activities in furtherance of the foregoing purposes and
as may be necessary, incidental or convenient to carry out the business of the
Partnership as contemplated by this Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a holiday
on which national banking associations in New York or Texas are required or
permitted by law to be closed.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.1, including all additions and subtractions thereto
pursuant to this Agreement.
"Capital Contribution" means, with respect to any Partner, the amount of
any money and the fair market value of any property (net of any liability
secured by such property that the Partnership is considered to assume or take
subject to under sec. 752 of the Code) contributed by such Partner to the
Partnership.
"Carrying Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) the Carrying Value of any asset contributed or deemed contributed
by a Partner to the Partnership shall be the gross fair market value of
such asset at the time of contribution as reasonably determined by
agreement of the Partners or by the Board of Directors;
(ii) the Carrying Value of any asset distributed or deemed distributed
by the Partnership to any Partner shall be adjusted immediately prior to
such distribution to equal its gross fair market value at such time as
reasonably determined by the Board of Directors;
(iii) the Carrying Value of all Partnership assets may be adjusted to
equal their respective gross fair market values, as reasonably determined
by the Tax Matters Partner as of:
(1) the date of the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for a
contribution to the capital of the Partnership; or
(2) upon the liquidation of the Partnership, or the distribution by
the Partnership to a retiring or continuing Partner of money or other
Partnership property in reduction of such Partner's interest in the
Partnership;
(iv) any adjustments to the adjusted basis of any asset of the
Partnership pursuant to sec.sec. 734 or 743 of the Code shall be taken into
account in determining such asset's Carrying Value in a manner consistent
with Treas. Reg. sec. 1.704-1(b)(2)(iv)(m); and
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(v) if the Carrying Value of an asset has been determined pursuant to
clauses (i) through (iv) above, such Carrying Value shall thereafter be
adjusted in the same manner as would the asset's adjusted tax basis for
federal income tax purposes, except that depreciation and amortization
deductions shall be computed based on the asset's Carrying Value as so
determined, and not on the asset's adjusted tax basis; provided, that if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the Tax Matters Partner may adopt.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Secretary of State, as amended or
restated from time to time in accordance with the terms of the Act.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Control, controls or controlling" means the possession, directly or
indirectly, through one or more intermediaries, of the power or authority,
through ownership of voting securities, as manager, general partner, trustee or
executor, by contract or otherwise, to direct the management, activities or
policies of a Person.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) obligations of such Person
incurred in connection with a lease which, in accordance with generally accepted
accounting principles, should be capitalized.
"Directors" has the meaning set forth in Section 6.2(a).
"Dispose, Disposing or Disposition" means a sale, lease, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest or other
disposition or encumbrance (including by operation of law) or the acts thereof.
"Effective Time" has the meaning set forth in the Merger Agreement.
"Equity Award" means any compensatory stock option, stock appreciation
right, stock award, restricted stock award or other or similar right to receive
Travelocity.com Shares.
"Existing Tax Benefit" means the actual tax benefit realized by
Travelocity.com, individually or on a consolidated basis, from net operating
loss deductions to which Travelocity.com succeeded by operation of law pursuant
to the Merger.
"Financial Statements" means the annual financial statements of the
Partnership.
"Fiscal Year" means each of the taxable years of the Partnership, as
described in Section 9.3.
"Future Tax Benefit" means the actual tax benefit realized by
Travelocity.com, individually or on a consolidated basis, from having negative
taxable income after the date hereof (excluding for these purposes net operating
loss deductions to which Travelocity.com succeeded by operation of law pursuant
to the Merger).
"GAAP" means generally accepted accounting principles consistently applied.
"General Partners" means Travelocity.com, Travelocity Holdings, and any
other Person admitted to the Partnership as a general partner of the Partnership
pursuant to this Agreement (so long as each of the foregoing owns any
Partnership Units); reference to a "General Partner" shall refer to any one of
the General Partners.
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"General Partner Interest" means a Partnership Interest of a General
Partner that is held in its capacity as a General Partner.
"Incentive Plan" means any incentive compensation plan adopted by the
Partnership or Travelocity.com and approved by the Board of Directors.
"Limited Partner" means Travelocity.com LP Sub, TSGL Holding, Sabre, any
Person whose interest in the Partnership is converted from a General Partner
Interest to a Limited Partner Interest in accordance with this Agreement, and
any other Person admitted to the Partnership as a limited partner of the
Partnership pursuant to this Agreement (so long as each of the foregoing owns
any Partnership Units); reference to a "Limited Partner" shall refer to any one
of the Limited Partners.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner that is held in its capacity as a Limited Partner.
"Liquidator" means Travelocity Holdings or one or more persons appointed by
Travelocity Holdings to wind up the affairs of the Partnership and make final
distributions to Partners upon the dissolution of the Partnership as provided in
Section 12.2.
"Management Services Agreement" means the Management Services Agreement,
dated the date hereof, between the Partnership and Travelocity Holdings, as the
same may be modified, amended or supplemented from time to time.
"Merger" has the meaning set forth in the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
October , 1999, by and among Sabre, Travelocity Holdings, Travelocity.com and
Preview.
"Net Profit" and "Net Loss" mean, respectively, for any period, the taxable
income and taxable loss of the Partnership for the period as determined for
federal income tax purposes, provided that for purpose of determining Net Profit
and Net Loss and each item thereof (and not for income tax purposes) (i) there
shall be taken into account any tax exempt income of the Partnership; (ii) any
expenditures of the Partnership which are described in sec. 705(a)(2)(B) of the
Code or which are deemed to be described in sec. 705(a)(2)(B) of the Code
pursuant to Treasury Regulations under sec. 704(b) of the Code shall be treated
as deductible expenses; (iii) if any Partnership asset has a Carrying Value
which differs from its adjusted tax basis as determined for federal income tax
purposes, income, gain, loss and deduction with respect to such asset shall be
computed based upon the asset's Carrying Value rather than its adjusted tax
basis; (iv) items of gross income or deduction allocated pursuant to Section 5.3
shall be excluded from the computation of Net Profit and Net Loss; (v) there
shall be taken into account any separately stated items under sec. 702(a) of the
Code; and (vi) if the Carrying Value of any Partnership asset is adjusted
pursuant to the definition thereof, the amount of such adjustment shall be taken
into account in the taxable year of adjustment as gain or loss from the
disposition of such asset for purposes of computing Net Profits and Net Losses.
"Partners" means the General Partners and the Limited Partners; reference
to a "Partner" shall refer to any one of the Partners. As the context may
require, in connection with the allocation of any item of income, gain, loss,
deduction, profit or distribution, but not otherwise, the term "Partner" shall
include unadmitted transferees of Partners who are treated as partners of the
Partnership for federal income tax purposes.
"Partnership" means Travelocity.com LP, a Delaware limited partnership.
"Partnership Interest" means an interest of a Limited Partner or a General
Partner in the Partnership and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Unit" means the equal units into which the Partnership
Interests of all Partners issued pursuant to Article IV are divided and includes
any class or series of Partnership Units established after
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the date hereof. The ownership of Partnership Units shall be evidenced by such
form of certificate for Partnership Units as the Board of Directors may adopt
from time to time unless the Board of Directors determines that the Partnership
Units shall be uncertificated securities. The number of Partnership Units
outstanding and the Percentage Interests in the Partnership represented by such
Partnership Units are set forth in Exhibit A, as such Exhibit may be amended
from time to time.
"Percentage Interest" means the quotient, expressed as a percentage,
determined from time to time by dividing the number of Partnership Units held by
such Partner at that time by the aggregate number of Partnership Units then
outstanding.
"Person" means any natural person, corporation, limited liability company,
partnership, limited partnership, venture, trust, estate, association,
governmental entity or other individual or entity.
"Reserves" means funds set aside by the Board of Directors in consultation
with Travelocity Holdings (acting as manager under the Management Services
Agreement) and based on the operating budget prepared by Travelocity Holdings
(acting as manager under the Management Services Agreement) for working capital
and the payment of taxes, insurance, debt service, repairs, replacements,
renewals, or other costs or expenses incident to the business of the
Partnership.
"Sabre Holdings" means Sabre Holdings Corporation.
"Sabre Contribution Agreement" means the Bill of Contribution, Assignment
and Assumption Agreement, dated the date hereof, between Sabre and the
Partnership.
"Secretary of State" means the Secretary of State of the State of Delaware.
"Subsidiary" or "Subsidiaries" when used with respect to any party means
any corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partner interests of which held by
such party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
"Supermajority Vote" means the affirmative vote or consent of a majority of
the members of the Board of Directors, including at least one Travelocity.com
Director and at least one Travelocity Holdings Director.
"Tax Benefit" means the Existing Tax Benefit and the Future Tax Benefit,
collectively.
"Tax Matters Partner" has the meaning set forth in Section 9.1(a).
"Taxable Period" means each period which starts on the first day of a
Partnership fiscal year and ends on the last day of a Partnership fiscal year
except where the Partnership has dissolved pursuant to the terms set forth in
Article XII of this Agreement.
"Travelocity Holdings Directors" has the meaning set forth in Section
6.2(a).
"Travelocity Holdings Partners" means Travelocity Holdings, TSGL Holding,
and Sabre; reference to a Travelocity Holdings Partner shall refer to any one of
the Travelocity Holdings Partners.
"Travelocity.com Class B Shares" means shares of Class B Common Stock, par
value $.01 per share, of Travelocity.com.
"Travelocity.com Contribution Agreement" means the Bill of Contribution,
Assignment and Assumption Agreement, dated the date hereof, between
Travelocity.com and the Partnership.
"Travelocity.com Directors" has the meaning set forth in Section 6.2(a).
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"Travelocity.com Partners" means Travelocity.com and Travelocity.com LP
Sub; reference to a Travelocity.com Partner shall refer to any one of the
Travelocity.com Partners.
"Travelocity.com Preferred Shares" means shares of preferred stock, par
value $.01 per share, of Travelocity.com.
"Travelocity.com Shares" means shares of common stock, par value $.01 per
share, of Travelocity.com.
"TSGL Contribution Agreement" means the Bill of Contribution, Assignment
and Assumption Agreement, dated the date hereof, between TSGL Holding and the
Partnership.
1.2 Accounting Terms and Determinations. All accounting terms used herein
and not otherwise defined shall have the meanings accorded to them in accordance
with GAAP, and, except as expressly provided herein, all accounting
determinations shall be made in accordance with GAAP, consistently applied.
1.3 Directly or Indirectly; Without Limitation. Where any provision in
this Agreement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person, including actions taken
by or on behalf of any Affiliate of such Person. Throughout this Agreement, the
term "including" and words to the same or similar effect shall be interpreted
and construed to mean "including without limitation."
1.4 References. All references herein to one gender shall include the
other and the singular shall include the plural and vice versa as appropriate.
Unless otherwise expressly provided, all references to "Articles" or "Sections"
are to Articles or Sections of this Agreement and all references to "Exhibits"
or "Schedules" are to the exhibits and schedules attached hereto, each of which
is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.1 Organization. Upon the execution of this Agreement, the parties shall
cause the Partnership to be continued as a Delaware limited partnership by the
filing of the Certificate, substantially in the form of Exhibit 2.1, in the
office of the Secretary of State under and pursuant to the Act.
2.2 Name. The name of the Partnership is "Travelocity.com LP" and all
Partnership business shall be conducted under that name or such other name or
names as the Board of Directors may determine from time to time.
2.3 Registered Office; Registered Agent; Principal Office in the United
States; Other Offices. The registered office of the Partnership in the State of
Delaware shall be the initial registered office designated in the Certificate or
such other office (which need not be a place of business of the Partnership) as
the Board of Directors may designate from time to time in the manner provided by
law. The registered agent of the Partnership in the State of Delaware shall be
the initial registered agent designated in the Certificate or such other Person
or Persons as the Board of Directors may designate from time to time in the
manner provided by law. The principal office of the Partnership in the United
States of America shall be in such place (which need not be within the State of
Delaware) as the Board of Directors may designate from time to time. The
Partnership shall have such other offices (which need not be within the State of
Delaware) as the Board of Directors may determine to be appropriate.
2.4 Term. The Partnership shall commence on the date the Certificate is
filed with the Secretary of State and shall continue in existence until December
31, 2099, unless earlier dissolved pursuant to Section 12.1 or as otherwise
provided by law.
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ARTICLE III
PURPOSE AND POWERS
3.1 Purpose. The nature of the business or purposes to be conducted or
promoted by the Partnership is to engage in any lawful act or activity for which
limited partnerships may be formed under the Act.
3.2 Powers. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property.
3.3 Other Authority. Notwithstanding anything to the contrary contained in
this Agreement, the Partnership shall have the authority to enter into, deliver
and perform the Ancillary Agreements and any amendments to the Ancillary
Agreements.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP UNITS
4.1 Capital Contributions.
(a) Immediately prior to the Effective Time of the Merger, TSGL
Holding contributed to the capital of the Partnership its entire right,
title and interest in the assets, properties and rights listed in Section 2
of the TSGL Contribution Agreement in exchange for [ ] Partnership
Units. The Partners agree that for purposes of Section 5.1, the net fair
market value of the assets, properties and rights contributed by TSGL
Holding shall be $ .
(b) Immediately prior to the Effective Time of the Merger, Sabre
contributed to the capital of the Partnership its entire right, title and
interest in the assets, properties and rights listed in Section 2 of the
Sabre Contribution Agreement in exchange for [ ] Partnership Units
to be issued to Sabre, [ ] Partnership Units to be issued at
Sabre's direction to Travelocity Holdings, and [ ] Partnership
Units to be issued at Sabre's direction to Travelocity.com. The Partners
agree that for purposes of Section 5.1, the net fair market value of the
assets, properties and rights contributed by Sabre shall be $ .
(c) Immediately after the Effective Time of the Merger, (i)
Travelocity.com for itself and on behalf of Travelocity.com LP Sub shall
contribute, grant, convey, transfer, assign, set over and deliver to the
capital of the Partnership its entire right, title and interest in the
assets, properties and rights listed in Section 2 of the Travelocity.com
Contribution Agreement and (ii) Travelocity.com and Travelocity.com LP Sub
agree to make additional capital contributions equal to the Tax Benefit (to
be paid from time to time as and to the extent the Tax Benefit is actually
realized by Travelocity.com), and Travelocity.com agrees to cause
Travelocity.com LP Sub to agree to the same, in exchange for [ ]
Partnership Units to be issued to Travelocity.com and [ ]
Partnership Units to be issued to Travelocity.com LP Sub. The Partners
agree that for purposes of Section 5.1, the net fair market value of the
assets contributed or to be contributed by Travelocity.com for itself and
on behalf of Travelocity.com LP Sub (including the present value of the
expected Existing Tax Benefit but excluding the Future Tax Benefit) shall
be $ and $ , respectively, and that the Capital Accounts of
Travelocity.com and Travelocity.com LP Sub, respectively, shall not be
further increased as a result of the actual payment of the Existing Tax
Benefit amount; but, shall be further increased as a result of the actual
payment of the Future Tax Benefit. In connection with any cash contribution
by Travelocity.com or Travelocity.com LP Sub, respectively, pursuant to
Section 4.1(c)(ii) in so far as it relates to the Existing Tax Benefit, the
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Carrying Value of the other non-cash assets previously contributed by
Travelocity.com by itself or on behalf of Travelocity.com LP Sub, shall be
reduced by the amount of such cash contribution so that the Adjusted
Capital Account of Travelocity.com or Travelocity.com LP Sub, respectively,
is unchanged as a result of such contribution.
4.2 Additional Capital Contributions.
(a) Persons hereafter admitted as Partners shall make such
contributions of cash (or promissory obligations), property or services to
the Partnership as shall be determined by the Board of Directors, at the
time of such admission.
(b) Except as may be required by law or as specifically provided
herein, no Partner shall have any obligation to make any further Capital
Contribution to the Partnership.
4.3 Return of Contributions. A Partner is not entitled (except as
otherwise expressly provided by other provisions of this Agreement) to the
return of any part of its Capital Contributions or to be paid interest in
respect of either its Capital Account or its Capital Contributions. An unrepaid
Capital Contribution is not a liability of the Partnership or of the other
Partners. A Partner is not required to contribute or to lend any cash or
property to the Partnership to enable the Partnership to return any other
Partners' Capital Contributions.
4.4 Advances by Partners. Except as approved by a Supermajority Vote, or
otherwise provided for specifically herein, no Partner may advance any money or
other property to, or contribute any money or property to, the Partnership.
4.5 No Preemptive Rights. Except as provided in this Article IV, no Person
shall have any preemptive, preferential or other similar right with respect to
(i) additional Capital Contributions or loans to the Partnership; or (ii) the
issuance or sale of any Partnership Units or other Partnership Interests.
4.6 Other Contribution Provisions. If any Partner is admitted to the
Partnership and is given a Capital Account in exchange for services rendered to
the Partnership or to the General Partner on behalf of the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
4.7 Additional Contributions by Travelocity.com; Relationship of
Travelocity.com Shares to Partnership Units.
(a) Issuances of Travelocity.com Shares. Travelocity.com shall not
issue any additional Travelocity.com Shares (other than Travelocity.com
Shares issued pursuant to Section 7.3 hereof, pursuant to an Incentive
Plan, or pursuant to a combination or subdivision of shares as described in
Section 4.10), or other equity securities unless:
(i) Travelocity.com transfers to the Partnership, as an additional
Capital Contribution, the proceeds from the grant, award, or issuance of
such additional Travelocity.com Shares or other equity securities, as
the case may be, or from the exercise of rights contained in such
additional Travelocity.com Shares or other equity securities, as the
case may be; and
(ii) the Partnership issues to Travelocity.com Partnership Units or
rights, options, warrants or convertible or exchangeable securities of
the Partnership having designations, preferences and other rights, all
such that the economic interests are substantially the same as those of
such additional Travelocity.com Shares or other equity securities, as
the case may be.
(b) Acquisition of Travelocity.com Shares by Travelocity.com. If
Travelocity.com acquires Travelocity.com Shares for any reason and in any
manner, then (i) the Travelocity.com Shares so acquired shall be cancelled,
(ii) the Partnership shall pay to Travelocity.com an amount equal to the
amount, if any, paid by Travelocity.com to acquire the shares, and (iii)
Travelocity.com shall
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surrender to the Partnership for cancellation that number of Partnership
Units held by Travelocity.com equal to the number of Travelocity.com Shares
so acquired.
(c) Acquisition of Travelocity.com Shares by the Partnership. Except
as provided in Section 4.8, if the Partnership acquires Travelocity.com
Shares for any reason and in any manner, then (i) the Partnership shall
transfer such shares to Travelocity.com for cancellation and, (ii) in
exchange Travelocity.com shall surrender an equal number of Partnership
Units to the Partnership for cancellation.
4.8 Incentive Plans; Management Services Agreement.
(a) Subject to Section 4.8(b), at any time Travelocity.com issues
Travelocity.com Shares pursuant to an Incentive Plan (whether pursuant to
an Equity Award or otherwise) to Partnership employees, the following shall
occur:
(i) Travelocity.com shall be deemed to contribute to the capital of
the Partnership an amount of cash equal to the current market price of
such Travelocity.com Shares on the date such shares are issued (or if
earlier, the date the related option is exercised (if the Equity Award
is a stock option));
(ii) the Partnership shall be deemed to purchase such
Travelocity.com Shares from Travelocity.com for an amount of cash equal
to the amount of cash deemed contributed by Travelocity.com to the
Partnership in clause (i) above (and such share is deemed delivered to
its owner under the Incentive Plan);
(iii) the net proceeds actually received by Travelocity.com with
respect to such share (including any amounts paid in respect of
applicable withholding taxes), if any, shall be concurrently transferred
to the Partnership (and such net proceeds so transferred shall not
constitute a Capital Contribution); and
(iv) the Partnership shall issue to Travelocity.com that number of
Partnership Units equal to the number of Travelocity.com Shares so
issued.
(b) At any time the Partnership becomes obligated to transfer
Travelocity.com Shares (whether pursuant to an Equity Award or otherwise)
to Travelocity Holdings pursuant to the Management Services Agreement, the
following shall occur:
(i) Travelocity.com shall be deemed to contribute to the capital of
the Partnership an amount of cash equal to the current market price of
such Travelocity.com Shares on the date such shares are issued (or if
earlier, the date the related option is exercised (if the Equity Award
is a stock option));
(ii) the Partnership shall be deemed to purchase such
Travelocity.com Shares from Travelocity.com for an amount of cash equal
to the amount of cash deemed contributed by Travelocity.com to the
Partnership in clause (i) above; and
(iii) the Partnership shall issue to Travelocity.com that number of
Partnership Units equal to the number of Travelocity.com Shares so
transferred.
4.9 Additional Contributions by Travelocity Holdings. If the Partnership
issues additional Partnership Units to Travelocity.com for any reason other than
pursuant to Section 4.8:
(a) Travelocity Holdings shall have the right, but not the obligation,
to contribute other property, if acceptable to the Board of Directors and
subject to Section 6.7 hereof, or cash to the Partnership in an amount
equal to the product obtained by multiplying:
(i) the amount of cash or other property contributed by
Travelocity.com to the Partnership in exchange for such Partnership
Units, times
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(ii) a fraction, the numerator of which shall be the aggregate
Percentage Interest held by the Travelocity Holdings Partners and the
denominator of which shall be the aggregate Percentage Interest held by
the Travelocity.com Partners (in each case, determined immediately prior
to the deemed contribution referred to in clause (i) above).
(b) In exchange for any such contribution by Travelocity Holdings
pursuant to Section 4.9(a), Travelocity Holdings shall receive that number
of Partnership Units equal to the product obtained by multiplying:
(i) the number of Partnership Units issued to Travelocity.com,
times
(ii) a fraction, the numerator of which shall be the aggregate
Percentage Interest held by the Travelocity Holdings Partners and the
denominator of which shall be the aggregate Percentage Interest held by
the Travelocity.com Partners (in each case, determined immediately prior
to the issuance of Partnership Units referred to in clause (i) above).
(c) In connection with any additional capital contribution made in the
form of property under this Section 4.9, such property shall be valued at
its fair value as determined by a nationally recognized independent
appraiser (including, without limitation, an investment banker, public
accounting firm or other expert) selected by Travelocity Holdings and
reasonably satisfactory to the Board of Directors.
4.10 Splits and Reclassifications. The Partnership shall not in any manner
subdivide (by any unit split, unit distribution, reclassification,
recapitalization or otherwise) or combine (by reverse unit split,
reclassification, recapitalization or otherwise) the outstanding Partnership
Units unless Travelocity.com is subdividing or combining the Travelocity.com
Shares, in which event the Partnership Units shall be combined or subdivided
concurrently with, to the same extent as, and in the same manner as, the
Travelocity.com Shares.
ARTICLE V
CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Accounts.
(a) The Partnership shall maintain for each Partner owning a
Partnership Interest a single, separate Capital Account with respect to
such Partnership Interest in accordance with the rules of Treas. Reg.
sec. 1.704-1(b)(2)(iv). The initial Capital Account balance of each of the
Partners shall be as set forth on Exhibit A.
(b) Subject to rules of Treas. Reg. sec. 1.704-1(b)(2)(iv), the
Capital Account of each Partner shall be increased by (i) except as
otherwise provided in this Agreement, the amount of any money and the fair
market value of any property (net of any liability secured by such property
that the Partnership is considered to assume or take subject to under
sec. 752 of the Code) contributed by such Partner to the Partnership, (ii)
the Net Profit allocated to such Partner pursuant to Section 5.2, and (iii)
the gross income allocated to such Partner pursuant to Section 5.3 of this
Agreement.
(c) The Capital Account of each Partner shall be reduced by (i) the
amount of any distribution of cash or the fair market value of any property
(net of any liability secured by such property that the Partner is
considered to assume or take subject to sec. 752 of the Code) distributed
to such Partner when such distribution is made, (ii) the Net Loss allocated
to such Partner pursuant to Section 5.2, and (iii) any "partner
non-recourse deductions" (as defined in Treas. Reg. sec. 1.704-2(i)) and
any "non-recourse deductions" (as defined in Treas. Reg. sec. 1.704-2(b))
allocated to such Partner pursuant to Section 5.3 of this Agreement.
(d) Except as otherwise provided in this Agreement, whenever it is
necessary to determine the Capital Account of any Partner, the Capital
Account of such Partner shall be determined after giving
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effect to the allocations of Net Profit, Net Loss and other items realized
prior or concurrently to such time (including, without limitation, any Net
Profits and Net Losses attributable to adjustments to Carrying Values with
respect to any concurrent distribution), and all contributions and
distributions made prior or concurrently to the time as of which such
determination is to be made.
(e) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(f) Consistent with the provisions of Treas. Reg.
sec. 1.704-1(b)(2)(iv)(f):
(i) On an issuance of additional Partnership Units for cash or
other property, the Capital Accounts of all Partners and the Carrying
Value of all Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any unrealized
appreciation or depreciation attributable to such Partnership property,
as if such unrealized appreciation or depreciation had been recognized
on an actual sale of such property immediately prior to such issuance
and had been allocated to the Partners at such time pursuant to Section
5.2. In determining such unrealized appreciation or depreciation , the
aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be
determined by the Board of Directors using such reasonable method of
valuation as it may adopt; provided, that the Board of Directors, in
arriving at such valuation, must take fully into account the fair market
value of the Partnership Interests of all Partners at such time. The
Board of Directors shall allocate such aggregate value among the assets
of the Partnership (in such manner as it determines in its sole
discretion to be reasonable) to arrive at a fair market value for
individual properties.
(ii) Immediately prior to any actual or deemed distribution to a
Partner of any Partnership property (other than a distribution of cash
that is not in redemption or retirement of any portion of a Partnership
Interest), the Capital Accounts of all Partners and the Carrying Value
of such Partnership property shall be adjusted upward or downward to
reflect any unrealized appreciation or depreciation attributable to such
Partnership property, as if such unrealized appreciation or depreciation
had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 5.2. In
determining such unrealized appreciation or depreciation, the aggregate
cash amount and fair market value of all Partnership assets (including,
without limitation, cash or cash equivalents) immediately prior to the
actual or deemed distribution shall be determined by the Board of
Directors using such reasonable method of valuation as it may adopt;
provided, that the Board of Directors, in arriving at such valuation,
must take fully into account the fair market value of the Partnership
Interests of all Partners at such time.
(g) Capital Accounts shall be adjusted, in a manner consistent with
this Article V, to reflect any adjustments in items of the Partnership's
income, gain, loss or deduction that result from amended returns filed by
the Partnership or pursuant to an agreement by the Partnership with the
Internal Revenue Service or a final court decision.
5.2 Allocation of Net Profit or Net Loss.
(a) Net Profit for any Fiscal Year shall be allocated to the Partners
as follows:
(i) First, to each Partner to reverse any allocation of Net Loss to
the Partner pursuant to the provisions in Section 5.2(b) (in reverse
order to the order in which such Net Loss was allocated to the
Partners), to the extent not previously reversed under this clause (i);
and
(ii) Second, pro-rata among the Partners in accordance with their
Percentage Interests.
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(b) Net Loss for any Fiscal Year shall be allocated to the Partners as
follows:
(i) First, among the Partners in proportion to their respective
Percentage Interests, but only to the extent such amount when so
allocated would not result in, or cause an increase in, a deficit
balance in any Partner's Adjusted Capital Account;
(ii) Second, to the Partners that (after the application of Section
5.2(b)(i)) do not have an Adjusted Capital Account with a deficit
balance in accordance with their respective Percentage Interests; but
only to the extent such amount when so allocated would not result in, or
cause an increase in, a deficit balance in any Partner's Adjusted
Capital Account. This Section 5.2(b)(ii) shall be applied, mutatis
mutandis, until the allocation of Net Losses would cause each of the
Partners to have an Adjusted Capital Account balance of zero;
(iii) Third, once the Adjusted Capital Accounts of all Partners
have been reduced to zero, to the Partners in such manner as they would
bear the economic risk of loss with respect to such Net Losses within
the meaning of Treas. Reg. sec. 1.752-2(b).
5.3 Additional Allocations.
(a) Notwithstanding any other provision of this Agreement, (i)
"partner nonrecourse deductions" (as defined in Treas. Reg.
sec. 1.704-2(i)), if any, of the Partnership shall be allocated to the
Partner that bears the economic risk of loss within the meaning of Treas.
Reg. sec. 1.704-2(i), and (ii) "nonrecourse deductions" (as defined in
Treas. Reg. sec. 1.704-2(b)), if any, of the Partnership with respect to
each period shall be allocated in the same proportion as Net Profits and
Net Losses for such period.
(b) This Agreement shall be deemed to include "qualified income
offset," "minimum gain chargeback" and "partner non-recourse debt minimum
gain chargeback" provisions within the meaning of Treas. Reg. under
sec. 704(b) of the Code. Accordingly, notwithstanding any other provision
of this Agreement, items of gross income shall be allocated to the Partners
on a priority basis to the extent and in the manner required by such
provisions.
(c) Any special allocation of items pursuant to Sections 5.3(a) and
(b) shall be taken into account in computing subsequent allocations
pursuant to Section 5.2 so that the cumulative net amount of all items
allocated to each Partner shall, to the extent possible, be equal to the
amount that would have been allocated to such Partner if there had never
been any special allocation pursuant to Sections 5.3(a) and (b).
5.4 Allocations for Tax Purposes. For income tax purposes only, (i) all
items of income, gain, loss, deduction, and expense shall be allocated to the
Partners in the same manner as the correlative items of "book" income, gain,
loss, deduction, and expense are allocated pursuant to Sections 5.2 and 5.3 and
(ii) each tax credit shall be allocated to Partners in the same manner as the
receipt or expenditure giving rise to such credit is allocated pursuant to
Sections 5.2 and 5.3; provided, however, that in accordance with sec. 704(c) of
the Code, the Treas. Reg. promulgated thereunder and Treas. Reg.
sec. 1.704-1(b)(4)(i), items of income, gain, loss, deduction, expense and
credit with respect to any property whose Carrying Value differs from its
adjusted basis for tax purposes shall, solely for income tax purposes, be
allocated among the Partners so as to take account of both the amount and
character of such variation, and the Tax Matters Partner may elect an
appropriate method under sec. 704(c) of the Code and the U.S. Treasury
Regulations promulgated thereunder; provided that the Tax Matters Partner shall
give Travelocity.com an opportunity to comment on such method before the return
is filed.
5.5 Distributions.
(a) Except as otherwise required by law or as provided in this
Agreement, no Partner shall have any right to withdraw any portion of its
Capital Account without the consent of all the other Partners.
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(b) The Partnership shall distribute Available Cash or other property
available to be distributed in-kind by the Partners to the Partners to each
Partner in proportion to such Partner's Percentage Interest, at such times
and in such amounts as the Board of Directors shall determine.
5.6 Tax Distributions.
(a) At least 10 days prior to any Estimated Tax Payment Date, the
Partnership shall make a distribution to each Partner equal to the
Estimated Tax Distribution for such date.
(b) Within one hundred eighty (180) days after the end of each year,
the Partnership shall provide to each Partner a report for the prior year
computing for each Partner the amount by which the sum of the Estimated Tax
Distributions for the prior year exceeds or falls short of the product of
(i) the taxable income allocated to such Partner for such prior year, and
(ii) the Applicable Tax Rate. An amount equal to any shortfall shall be
distributed to such Partner with the report. Any excess will be treated as
an "Excess Tax Distribution" and credited against future Estimated Tax
Distributions pursuant to Section 5.6(d)(iii).
(c) Notwithstanding anything to the contrary herein, distributions
under this Section 5.6 shall be made in proportion to the Partners'
Percentage Interests. This paragraph (c) shall operate to increase the
distribution to be otherwise made under Section 5.6 to any Partner to the
extent necessary so that distributions under this Section 5.6 are made in
proportion to the Partners' Percentage Interests.
(d) Definitions:
(i) "Applicable Tax Rate" means, for any year, the highest marginal
combined tax rate, as reasonably determined by the Tax Matters Partner,
under the U.S. federal, and applicable states' franchise or income tax
laws as in effect for such year to which a corporation doing business in
jurisdictions in which the Partnership is doing business would be
subject, taking into account the deductibility of state and local income
taxes for federal income tax purposes.
(ii) "Estimated Tax Payment Date" means, with respect to any
calendar year, any of April 15, June 15, September 15, and December 15
of such year.
(iii) "Estimated Tax Distribution" means, with respect to any
Partner and any Estimated Tax Payment Date, an amount equal to the
excess (if any) of (A) the product of (w) an estimate of the
Partnership's taxable income for the year, as estimated in good faith by
the Tax Matters Partner, (x) the Applicable Tax Rate, (y) the Partner's
Percentage Interest, and (z) the Proration Percentage over (B) the sum
of (u) the prior Estimated Tax Distributions distributed to such Partner
with respect to the same year and (v) Excess Tax Distributions with
respect to the prior year.
(iv) "Proration Percentage" means with respect to April 15, 25%;
June 15, 50%; September 15, 75%; and December 15, 100%.
5.7 Withholding. The Partnership shall comply with all income tax
withholding requirements under federal, state, local or foreign law. To the
extent that the Partnership is required to withhold and pay over to any taxing
authority any amount resulting from the allocation of income to any Partner, the
amount withheld shall be treated as a distribution to such Partner of cash in
the amount of such withholding for all purposes of this Agreement. Each party
shall use commercially reasonable efforts to minimize the amount that the
Partnership is required to withhold; provided, however, that the foregoing shall
not be deemed to prohibit the Partnership from making distributions.
Notwithstanding any provision to the contrary contained in this Agreement, the
Partnership, and the Board of Directors on behalf of the Partnership, shall not
be required to make a distribution to any Partner on account of its interest in
the Partnership if such distribution would violate Section 17-607 of the Act or
any other applicable law.
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ARTICLE VI
MANAGEMENT
6.1 Management by Board of Directors.
(a) The General Partners hereby delegate the management of the
business and affairs of the Partnership to the board of directors of the
Partnership (the "Board of Directors"); provided, that the General Partners
shall have such power and authority as is expressly specified in this
Agreement or as may be re-delegated by the Board of Directors. Subject to
the preceding proviso, the Board of Directors shall have by virtue of
delegation from the General Partners the power and authority to make all
decisions regarding the business, affairs and properties of the Partnership
and to perform any and all other lawful acts or activities necessary or
convenient to the conduct, promotion or attainment of the business,
purposes and activities of the Partnership, including the execution,
delivery and performance of the Ancillary Agreements on behalf of the
Partnership. Except as expressly provided in this Agreement or as approved
by the Board of Directors, no Partner shall have any authority to act for,
or undertake or assume any obligation or responsibility on behalf of, the
other Partners or the Partnership. The Board of Directors shall constitute
a committee of the Partnership. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall a Director be considered a
general partner of the Partnership by agreement, estoppel, as a result of
the performance of its duties, or otherwise. Notwithstanding the delegation
of rights and powers over the management of the Partnership to the Board of
Directors, the General Partners shall not cease to be general partners of
the Partnership.
(b) The Board of Directors shall have the right, in respect of any of
its powers or obligations hereunder, to act through duly appointed agents
(who may be designated as officers of the Partnership), attorneys-in-fact,
or other Persons and each such agent, attorney-in-fact or other Person
shall, to the extent delegated by the Board of Directors, have full power
and authority to do and perform all and every act and duty which is
permitted or required to be done by the Board of Directors hereunder.
Without limiting the generality of the preceding sentence, the Board of
Directors is expressly authorized to cause the Partnership to enter into
the Management Services Agreement and to delegate to Travelocity Holdings,
as the manager thereunder, the authority to supervise and manage the
day-to-day operations of the Partnership including to act for and in the
name of, and bind, the Partnership. Any approval or action taken by the
Board of Directors in accordance with this Agreement, or by Travelocity
Holdings pursuant to the Management Services Agreement, shall constitute
approval or action taken by the Partnership and shall be binding on the
Partners. Notwithstanding anything to the contrary contained in this
Agreement, in no event shall the manager, in its capacity as such, under
the Management Services Agreement be considered a general partner of the
Partnership by agreement, estoppel, as a result of the performance of its
duties, or otherwise.
6.2 Composition of Board of Directors.
(a) The Board of Directors shall initially consist of nine members
(collectively, the "Directors") appointed as follows:
(i) Travelocity.com shall appoint five (5) Directors (the
"Travelocity.com Directors") of whom at least two (2) shall be directors
of Travelocity.com who do not have a material business relationship with
Sabre or any of its Affiliates (other than Travelocity.com, the
Partnership or any of their Subsidiaries) and who are not officers,
directors or employees of Sabre, any Affiliate of Sabre or any Person
having a material business relationship with Sabre, (other than
Travelocity.com, the Partnership or any of their Subsidiaries)
("Independent Directors"); and
(ii) Travelocity Holdings shall appoint four (4) Directors (the
"Travelocity Holdings Directors").
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The initial Directors shall be the persons identified in Schedule 6.2. The
number of Directors may be increased or reduced by Supermajority Vote; provided,
however, that the number of Directors appointed by Travelocity.com shall
constitute a majority of the Board of Directors at all times. Directors need not
be residents of the State of Delaware.
(b) Each Director shall serve on the Board of Directors until death,
resignation or removal. Any Director may be removed, with or without cause,
only by the Partner which appointed such Director. In the event the
position of a Director becomes vacant (including as a result of an increase
in the number of Directors) a replacement shall be appointed (i) by the
Partner who appointed the Director whose position became vacant, or (ii) as
the Partners may otherwise agree.
6.3 Board of Directors -- Manner of Acting.
(a) Annual and Regular Meetings. The Board of Directors shall hold an
annual meeting, and may hold additional regular meetings, at such time and
place (which need not be in the State of Delaware) as the Board of
Directors determines by resolution.
(b) Special Meetings. Special meetings of the Board of Directors may
be called by the Chief Executive Officer (as defined in Section 6.5(a)) or
by any Director.
(c) Notice of Meetings; Participation. Notice of regular meetings
established by resolution of the Board of Directors shall not be required.
All other meetings of the Board of Directors may be called on at least five
(5) Business Days advance notice to each Director. Such notice shall state
the purpose or the business to be transacted at such meeting. Any notice of
a meeting required hereunder may be waived in writing before or after the
meeting. All Directors shall be entitled to receive required notices and
agendas of upcoming Board of Directors meetings, attend all Board of
Directors meetings, participate in all discussions and receive minutes from
previous Board of Directors meetings.
(d) Quorum; Vote Required. A majority of the total number of Directors
shall constitute a quorum for the transaction of any business. The vote of
a majority of the Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless a different vote
is required by this Agreement.
(e) Matters Requiring Supermajority Vote. Notwithstanding anything in
this Agreement to the contrary, so long as the aggregate Percentage
Interest of the Travelocity Holdings Partners equals or exceeds thirty
percent (30%), the Partnership shall not take any of the following actions
unless approved by a Supermajority Vote:
(i) consolidate with, or merge with or into, any other Person or
engage in any conversion, redomestication or other reorganization
transaction;
(ii) liquidate or dissolve, or Dispose of all or substantially all
of the assets of, the Partnership, or initiate a bankruptcy proceeding;
(iii) enter into any line of business or activity other than the
Business;
(iv) except as provided in this Agreement, issue any Partnership
Interests or any rights, options, warrants, convertible debt or equity
instruments that provide any right to subscribe for, purchase or
otherwise acquire Partnership Interests; or
(v) except as provided in this Agreement, declare or make any
distributions of cash or property with respect to the Partnership
Interests, or redeem, purchase, or otherwise acquire for consideration
all or any part of any Partnership Interest.
(f) Waiver of Notice. Attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting, at the beginning of
such meeting, to the transaction of any business on the ground that the
meeting is
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not lawfully called or convened. Minutes of all meetings of the Board of
Directors shall be kept and retained in the records of the Partnership.
(g) Action by Written Consent. Any action permitted or required by
applicable law or this Agreement to be taken at a meeting of the Board of
Directors may be taken without a meeting if a consent in writing, setting
forth the action to be taken, is signed by the Directors having not less
than the minimum number of votes that would be necessary to authorize or
take such action at a meeting. Any such consent may be executed and
delivered by telecopy in multiple counterparts. Action taken by written
consent shall have the same force and effect as a vote at a meeting and may
be stated as such in any document or instrument filed with the Secretary of
State, and the execution of such consent shall constitute attendance or
presence in person at a meeting of the Board of Directors.
(h) Telephonic Meetings. Subject to the requirements of this Agreement
for notices of special meetings, Directors may participate in and hold a
meeting of the Board of Directors, by means of a conference telephone or
similar communications equipment by means of which all Directors
participating in the meeting can hear and speak to each other, and
participation in such meeting shall constitute attendance and presence in
person at such meeting, except where a Director participates in the meeting
for the express purpose of objecting, at the beginning of such meeting, to
the transaction of any business on the ground that the meeting is not
lawfully called or convened.
(i) Committees. The Board of Directors may by resolution designate
one or more committees of the Board of Directors, each committee to
consist of one or more of the Directors. The Board of Directors may
designate one or more Directors as alternate members of any such
committee, who may replace any absent or disqualified member at any
meeting of the committee. Except to the extent restricted by the Act, or
this Agreement, each such committee, to the extent provided in the
resolution creating it, shall have and may exercise all the powers and
authority of the Board of Directors. Each such committee shall serve at
the pleasure of the Board of Directors and have such name as may be
determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors.
6.4 Compensation of Directors. No Director shall be entitled to any
compensation from the Partnership solely in such person's capacity as a
Director.
6.5 Officers.
(a) Appointment. The Board of Directors may appoint such officers of
the Partnership (including, but not limited to, a president and chief
executive officer (the "Chief Executive Officer"), one or more vice
presidents, a secretary, one or more assistant secretaries, a treasurer and
one or more assistant treasurers) upon such terms and conditions as the
Board of Directors deems necessary and appropriate. Such officers shall
have such rights, powers and duties as may be delegated by the Board of
Directors.
(b) Removal; Vacancies. Each officer shall serve until such time as he
or she resigns, retires, dies, becomes disabled or is removed. Each officer
may be removed with or without cause by the Board of Directors. Each
officer may resign at any time by giving written notice to the Board of
Directors. If an officer resigns, retires, dies or becomes disabled, or is
removed, his or her successor shall be appointed by the Board of Directors.
6.6 Business Opportunities.
(a) For purposes of this Section 6.6 (i) "Sabre" shall mean Sabre
Holdings Corporation, a Delaware corporation ("Sabre Parent"), all
successors to Sabre Parent by way of merger, consolidation or sale of all
or substantially all its assets, and all corporations, partnerships, joint
ventures, associations and other entities (each a "Subsidiary Entity") in
which Sabre Parent beneficially owns, directly or indirectly, fifty percent
(50%) or more of the outstanding voting stock,
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voting power or similar voting interests, but shall not mean Travelocity
Holdings, any Subsidiary of Travelocity Holdings, Travelocity.com, any
Subsidiary of Travelocity.com, or the Partnership; and (ii) "Partnership"
shall mean the Partnership and any Subsidiary of the Partnership and shall
also include Travelocity Holdings, any Subsidiary of Travelocity Holdings,
Travelocity.com, and any Subsidiary of Travelocity.com.
(b) In anticipation that: (i) Sabre will remain, for some period of
time, a beneficial owner of a substantial Percentage Interest of the
Partnership both directly and through its ownership of the other
Travelocity Holdings Partners; (ii) the Partnership and Sabre may engage in
the same or similar activities or lines of business and may have an
interest in the same or similar areas of business opportunities; (iii)
there will be benefits to be derived by the Partnership through its
continued contractual, partnership and business relations with Sabre
(including, without limitation, service of directors, officers and
employees of Sabre as directors, officers and employees of the
Partnership); and (iv) there will be benefits in providing guidelines for
directors, officers and employees of Sabre and of the Partnership with
respect to the allocation of business opportunities and other matters; the
provisions of this Section 6.6 are set forth to regulate, define and guide
the conduct of certain affairs of the Partnership as they may involve the
respective rights, duties and liabilities of Sabre and its directors,
officers, employees and stockholders, on the one hand, and the respective
rights, duties and liabilities of the Partnership and its directors,
officers, employees and partners (other than Sabre), on the other hand, in
connection therewith.
(c) Except as Sabre may otherwise agree in writing, Sabre shall have
the right to, and shall have no duty not to, (i) engage in the same or
similar business activities or lines of business as the Partnership, (ii)
do business with any potential or actual customer or supplier of the
Partnership, or (iii) employ or otherwise engage any director, officer or
employee of the Partnership. In the event Sabre or any director, officer or
employee of Sabre engages in any of the activities described in the
preceding sentence, Sabre and such director, officer and employee (i) shall
have fully satisfied and fulfilled any fiduciary duty it may have to the
Partnership and its Partners with respect to such activity, (ii) shall not
be liable to the Partnership or its Partners for breach of any fiduciary
duty it may have by reason of any activities of Sabre described in the
preceding sentence or of the participation in such activities of any
director, officer or employee of Sabre (except as provided in paragraph (d)
of this Section 6.6), (iii) shall be deemed to have acted in good faith and
in a manner it reasonably believes to be in and not opposed to the best
interests of the Partnership, (iv) shall be deemed not to have breached any
duty of loyalty to the Partnership or its Partners that it may have and not
to have derived an improper benefit therefrom, and (v) shall be deemed to
have acted in a manner entirely fair to the Partnership and its Partners.
(d) In the event that a director, officer or employee of the
Partnership who is also a director, officer or employee of Sabre acquires
knowledge of a potential transaction or matter that may be a business
opportunity for both the Partnership and Sabre, such director, officer or
employee of the Partnership (i) shall have fully satisfied and fulfilled
any fiduciary duty it may have to the Partnership and its Partners with
respect to such business opportunity, (ii) shall not be liable to the
Partnership or its Partners for breach of any fiduciary duty it may have by
reason of the fact that Sabre pursues or acquires such business opportunity
for itself or directs such business opportunity to another Person or does
not communicate information regarding such business opportunity to the
Partnership, (iii) shall be deemed to have acted in good faith and in a
manner it reasonably believes to be in and not opposed to the best
interests of the Partnership, (iv) shall be deemed not to have breached any
duty of loyalty to the Partnership or its Partners that it may have and not
to have derived an improper benefit therefrom, and (v) shall be deemed to
have acted in a manner entirely fair to the Partnership and its Partners,
if such director, officer or employee acts in a manner consistent with the
following policy:
(x) when a business opportunity is offered to an officer or
employee and/or director of the Partnership who is also an officer or
employee and/or director of Sabre, solely in his or her designated
capacity with one of the two entities, such business opportunity shall
belong to
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whichever entity was so designated; otherwise, a business opportunity
first offered (1) to any Person who is an officer or employee or officer
or employee and director of the Partnership, and who is also a director
of Sabre shall belong to the Partnership, (2) to a Person who is a
director of the Partnership and who is also an officer or employee
and/or director of Sabre shall belong to Sabre, (3) to any Person who is
an officer or employee, but not a director, of both the Partnership and
Sabre shall belong to the entity to which such Person has devoted a
majority of his or her time over the prior six month period, (4) to any
Person who is an officer or employee and director of both the
Partnership and Sabre shall belong to Sabre, (5) to any Person who is an
officer or employee of the Partnership and who is also an officer or
employee and director of Sabre shall belong to Sabre; and (6) to any
Person who is an officer or employee and director of the Partnership and
who is also an officer or employee of Sabre shall belong to the
Partnership, unless such Person serves as a director of Travelocity
Holdings but not of the Partnership (for purposes of this clause (6),
the "Partnership" shall be deemed to exclude Travelocity Holdings and
"Sabre" shall be deemed to include Travelocity Holdings), such business
opportunity shall belong to Sabre; and
(y) in the case of any business opportunity not specifically
allocated by the foregoing (whether because of the means by which it
arose or was published, or otherwise), any such business opportunity may
be pursued by either the Partnership or Sabre.
However, a business opportunity not allocated and pursued in accordance
with the foregoing policy shall not solely by reason of the lack of allocation
and pursuit of the business opportunity in accordance with such policy be deemed
a breach of any fiduciary duty, but shall be governed by the other provisions of
this Section 6.6, this Agreement, the Act and other applicable law.
(e) Any business opportunity that belongs to Sabre or the Partnership
pursuant to the foregoing policy shall not be pursued by the other, or
directed by the other to another Person, unless and until Sabre or the
Partnership, as the case may be, determines not to pursue the opportunity
and advises in writing the chief executive officer of the other party that
it has determined not to pursue such business opportunity. Notwithstanding
the preceding sentence, if the party to whom the business opportunity
belongs does not within a reasonable period of time begin to pursue, or
thereafter continue to pursue, such opportunity diligently and in good
faith, the other party may then pursue such opportunity or direct it to
another Person. Any business opportunity that belongs to the Partnership
pursuant to the foregoing policy shall be deemed to belong to Travelocity,
L.P. and not to Travelocity Holdings or any Subsidiary of Travelocity
Holdings (other than Travelocity, L.P.).
(f) For purposes of this Section 6.6, "business opportunities" shall
consist only of business opportunities which (i) the Partnership is
financially able to undertake, or with respect to which the Partnership
would reasonably be able to obtain debt or equity financing (including from
Travelocity.com) and (ii) are, from their nature, in the line or lines of
the Partnership's business or reasonable expansion thereof. In addition,
"business opportunities" shall not include any contract, agreement,
arrangement, transaction, undertaking or business (a "Transaction") in
which the Partnership or Sabre is permitted to participate pursuant to (a)
any agreement between the Partnership and Sabre that is in effect as of the
time any equity security of the Partnership is held of record by any Person
other than Sabre, as such agreement may be amended thereafter with the
approval of a majority of disinterested directors or (b) any subsequent
agreement between the Partnership and Sabre approved in accordance with the
procedures set forth in Section 6.7 hereof; it being acknowledged that the
rights of the Partnership under any such agreement shall be deemed to be
contractual rights and shall not be business opportunities of the
Partnership for any purpose; provided, however, that no presumption or
implication as to business opportunities relating to any Transaction not
explicitly covered by such an agreement shall arise from the existence or
absence of any such agreement.
(g) Any Person purchasing or otherwise acquiring any Partnership Units
shall be deemed to have notice of and consented to the provisions of this
Section 6.6.
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(h) If any Transaction between the Partnership and Sabre involves a
business opportunity and is approved in accordance with the procedures set
forth in Section 6.7 hereof, Sabre and its directors, officers and
employees shall also, for the purposes of this Section 6.6 and the other
provisions of this Agreement, be deemed to have fully satisfied and
fulfilled any fiduciary duties they may have to the Partnership and its
Partners. Any such Transaction involving a business opportunity not so
approved shall not solely by reason of the lack of such approval be deemed
a breach of any fiduciary duty, but shall be governed by the other
provisions of this Section 6.6, this Agreement, the Act and other
applicable law.
(i) Nothing contained in this Agreement shall be deemed to amend or
modify the term of the Non-Competition Agreement between Sabre and the
Partnership.
6.7 Related Transactions.
(a) For purposes of this Section 6.7 (i) "Sabre" shall mean Sabre
Parent, all successors to Sabre Parent by way of merger, consolidation or
sale of all or substantially all of its assets, and all Subsidiary Entities
in which Sabre Parent beneficially owns, directly or indirectly, fifty
percent (50%) or more of the outstanding voting stock, voting power or
similar voting interests but shall not mean Travelocity.com, any Subsidiary
of Travelocity.com or the Partnership; and (ii) "Partnership" shall mean
the Partnership and any Subsidiary of the Partnership, and shall include
Travelocity.com and any Subsidiary of Travelocity.com.
(b) In anticipation that: (i) Sabre Parent will remain, for some
period of time, a beneficial owner of a substantial Percentage Interest of
the Partnership both directly and through its ownership of the other
Travelocity Holdings Partners and Sabre Parent will have continued
contractual, partnership and business relations with the Partnership; (ii)
the Partnership and Sabre or Sabre's customers or suppliers may enter into
contracts or otherwise transact business with each other and the
Partnership may derive benefits therefrom; and (iii) the Partnership may
from time to time enter into contractual, partnership or business relations
with one or more of its directors, or one or more corporations,
partnerships, associations or other organizations in which one or more of
its directors have a financial interest (collectively, "Related Entities"),
the provisions of this Section 6.7 are set forth to regulate and guide
certain contractual relations and other business relations of the
Partnership as they may involve the respective rights, duties and
liabilities of Sabre or its customers or suppliers, Related Entities and
their respective directors, officers, employees, and stockholders, on the
one hand, and the respective rights, duties and liabilities of the
Partnership and its directors, officers, employees and partners (other than
Sabre) stockholders, on the other hand, in connection therewith.
(c) The provisions of this Section 6.7 are in addition to the
provisions of the Act and the other provisions of this Agreement. Any
contract or business relation which does not comply with procedures set
forth in this Section 6.7 shall not by reason thereof be deemed void or
voidable or result in any breach of any fiduciary duty to, or duty of
loyalty to, or failure to act in good faith or in the best interests of,
the Partnership, or the derivation of any improper personal benefit, but
shall be governed by the remaining provisions of this Agreement, the Act
and other applicable law.
(d) No Transaction between the Partnership and Sabre or any customer
or supplier of Sabre or any Related Entity or between the Partnership and
one or more of the directors, officers or employees of the Partnership,
Sabre or any Related Entity, or any amendment, modification or termination
thereof, or any waiver of any right thereunder shall be void or voidable
solely because Sabre or such customer or supplier, any Related Entity or
any one or more of the directors, officers and employees of the
Partnership, Sabre or any Related Entity are parties thereto, or solely
because any such directors, officers or employees are present at or
participate in the meeting of the Board of Directors or committee thereof
which authorize such Transaction or amendment, modification, termination or
waiver (each of which for purposes of this Section 6.7 shall also be deemed
a "Transaction") or solely because his or their votes are counted for such
purpose, and Sabre, any Related Entity and such directors, officers and
employees (i) shall have fully satisfied and fulfilled any fiduciary duty
they
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may have to the Partnership and its Partners with respect thereto, (ii)
shall not be liable to the Partnership or its Partners for any breach of
any fiduciary duty they may have by reason of the entering into,
performance or consummation of any such Transaction, (iii) shall be deemed
to have acted in good faith and in a manner reasonably believed to be in
and not opposed to the best interests of the Partnership, to the extent
such standard is applicable to such Persons' conduct, (iv) shall be deemed
not to have breached any duty of loyalty to the Partnership or its Partners
they may have and not to have derived an improper personal benefit
therefrom, and (v) shall be deemed to have acted in a manner entirely fair
to the Partnership and its Partners, if any of the following requirements
are met:
(w) the material facts as to the relationship or interest and as to
the Transaction are disclosed or are known to the Board of Directors or
the committee thereof that authorizes the Transaction and the Board of
Directors or such committee in good faith authorizes or approves the
Transaction by the affirmative vote of a majority of the disinterested
directors on the Board of Directors or such committee even if the
disinterested directors are less than a quorum;
(x) the material facts as to the relationship or interest and as to
the Transaction are disclosed or are known to the holders of Partnership
Units entitled to vote thereon, and the Transaction is specifically
approved by vote of the holders of a majority of the then outstanding
Partnership Units not beneficially owned by Sabre or such Related
Entity, voting together as a single class, as the case may be;
(y) such Transaction is effected pursuant to, and consistent with,
terms and conditions specified in any arrangements, standards, protocols
or guidelines (collectively, the "Guidelines") which are in good faith
authorized or approved, after disclosure or knowledge of the material
facts as to the relationship or interest and as to the Transaction, by
the affirmative vote of a majority of the disinterested directors on the
Board of Directors or the applicable committee thereof (even though the
disinterested directors be less than a quorum) or by vote of the holders
of a majority of the then outstanding Partnership Units not beneficially
owned by Sabre or such Related Entity, voting together as a single
class, as the case may be (such authorization or approval of such
Guidelines constituting or being deemed to constitute authorization or
approval of such Transaction); or
(z) such Transaction is fair as to the Partnership as of the time
it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the Partners of the Partnership.
(e) Directors of the Partnership who are also directors, officers or
employees of Sabre or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee that authorizes or approves any such Transaction or any such
Guidelines. Partnership Units beneficially owned by Sabre and any Related
Entities may be counted in determining the presence of a quorum at a
meeting of holders of Partnership Units that authorizes or approves any
such Transaction or any such Guidelines.
(f) No vote cast or other action taken by any Person who is a
director, officer or employee or other representative of Sabre, which vote
is cast or action is taken by such Person in his capacity as a director of
the Partnership, shall constitute an action of, or the exercise of a right
by, or a consent of, Sabre for the purpose of any such Transaction.
(g) Any Person purchasing or otherwise acquiring any Partnership Units
shall be deemed to have notice of and to have consent to the provisions of
this Section 6.7.
(h) For purposes of this Section 6.7, any Transaction with any
corporation, partnership, joint venture, association or other entity in
which the Partnership beneficially owns, directly or indirectly, fifty
percent (50%) or more of the outstanding voting stock, voting power or
similar voting interests, or with any officer or director thereof, shall be
deemed to be a Transaction with the Partnership.
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6.8 Approval by Independent Director. Notwithstanding anything to the
contrary in Section 6.7, until [insert the date that is the second anniversary
of the date of this Agreement], the Partnership shall not enter into any
Transaction with Sabre or any material customer or supplier of Sabre, or any
amendment, modification or termination thereof, or any waiver of any right
thereunder unless (i) such Transaction has been approved by at least one
Independent Director or (ii) such Transaction is effected pursuant to, and
consistent with, terms and conditions specified in any Guidelines authorized or
approved by a majority of the Independent Directors.
6.9 Certificate of Limited Partnership. The General Partners shall file
the Certificate with the Secretary of State concurrently with or promptly
following the execution of this Agreement. To the extent that such action is
determined by the Board of Directors to be reasonable and necessary or
appropriate, the General Partners, at the direction of the Board of Directors,
shall file or cause to be filed amendments to and restatements of the
Certificate and shall do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other state, the
District of Columbia or other jurisdiction in which the Partnership may elect to
do business or own property. The General Partners shall not be required, before
or after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partners, at the direction of the
Board of Directors, shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do business
or own property.
6.10 Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partners, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof.
6.11 Reimbursement of Travelocity.com.
(a) No Compensation. Except pursuant to the Management Services
Agreement and as provided in this Section 6.11 and elsewhere in this
Agreement (including the provisions of Articles V and XII regarding
distributions, payments and allocations to which it may be entitled), the
General Partners shall not be compensated for their services as general
partners of the Partnership.
(b) Travelocity.com Expenses. Travelocity.com shall be reimbursed on a
quarterly basis, or on a more frequent basis as the Board of Directors may
determine in its sole and absolute discretion, for all expenses it incurs
relating to the ownership and operation of, or for the benefit of, the
Partnership (including, without limitation, expenses related to the
operations of Travelocity.com, the status of Travelocity.com as a public
company, and the management and administration of any Subsidiaries of
Travelocity.com or the Partnership or Affiliates of the Partnership, such
as auditing expenses and filing fees) but excluding any portion of expenses
reasonably attributable to assets not owned by or for the benefit of, or to
operations not for the benefit of, the Partnership or Affiliates of the
Partnership.
(c) Reimbursement Treated as a Distribution. If and to the extent any
reimbursement made pursuant to Section 6.11(b) is determined for federal
income tax purposes not to constitute a payment of expenses of the
Partnership, the amount so determined shall be treated as a distribution to
the Partners in accordance with their Percentage Interests pursuant to
Section 5.5(b), and each Partner (other than Travelocity.com) shall be
deemed to have contributed its proportionate share of the deemed
distribution to Travelocity.com.
6.12 Liability of the General Partners.
(a) General. Notwithstanding anything to the contrary set forth in
this Agreement, no Director or General Partner, or any of their Affiliates,
and no officer, director, shareholder, member, partner, employee or agent
of any Director or General Partner, or their respective Affiliates (each a
"Covered
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Person"), shall be personally liable to the Partnership, or any Partner, or
any Person claiming by or through the Partnership or any Partner, for any
losses sustained, liabilities incurred or benefits not derived as a result
of errors in judgment or mistakes of fact or law or of any other act or
omission relating to the conduct of the business of the Partnership;
provided, however, that nothing contained herein shall protect any Covered
Person against any liability to the Partnership or any Partner to which
such Covered Person would otherwise be subject by reason of (i) any act or
omission of such Covered Person that involves actual fraud or willful
misconduct or (ii) any transaction from which such Covered Person derived
an improper personal benefit.
(b) Actions of Agents. Each General Partner and the Board of Directors
may exercise any of the powers granted to it by this Agreement and perform
any of the duties imposed upon it hereunder either directly or by or
through its agents. No General Partner or member of the Board of Directors
shall be responsible for any misconduct or negligence on the part of any
such agent appointed by such General Partner or the Board of Directors in
good faith.
(c) Effect of Amendment. Notwithstanding any other provision contained
herein, any amendment, modification or repeal of this Section 6.12 or any
provision hereof shall be prospective only and shall not in any way affect
the limitations on the liability of any Director or General Partner, any
officers, directors, shareholders, employees or agents of any General
Partner to the Partnership and the Partners under this Section 6.12 as in
effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
6.13 Other Matters Concerning the General Partners.
(a) Reliance on Documents. Each General Partner and Director may rely
and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties.
(b) Reliance on Advisors. Each General Partner and Director may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers, and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance upon
the opinion of such Persons as to matters which such General Partner or the
Board of Directors reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have
been done or omitted in good faith and in accordance with such opinion.
6.14 Rights and Obligations of Limited Partners. Except as otherwise
required by law, no Limited Partner shall be personally liable for any of the
debts or obligations of the Partnership. No Limited Partner shall participate in
the management, control or direction of the Partnership's operations, business
or affairs, transact any business for the Partnership, or have the right, power,
or authority to act for or on behalf of or to bind the Partnership, the same
being vested solely and exclusively in the Board of Directors as delegated by
the General Partners and, to the extent herein provided, the General Partners.
ARTICLE VII
TRANSFER RESTRICTIONS; EXCHANGE RIGHT
7.1 Transfer Restrictions. Except as otherwise provided in Section 7.2 or
Section 7.3, no Partner shall, directly or indirectly, transfer any right, title
or interest in any Partnership Units.
7.2 Permitted Transfers.
(a) The Travelocity Holdings Partners may transfer their Partnership
Units to (i) any Affiliate of Travelocity Holdings or (ii) the transferee
of substantially all of the assets of Travelocity Holdings.
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(b) The Travelocity.com Partners may transfer their Partnership Units
to (i) any wholly owned Subsidiary of Travelocity.com or (ii) the
transferee of substantially all of the assets of Travelocity.com.
7.3 Exchange Right.
(a) At any time or from time to time, each Travelocity Holdings
Partner shall have the right to transfer any number of Partnership Units to
Travelocity.com and surrender an equal number of Travelocity.com Preferred
Shares to be canceled, in exchange for the issuance by Travelocity.com to
such Partner of that number of Travelocity.com Shares equal to the number
of Partnership Units offered for exchange.
(b) Subject to Section 7.3(c), if at any time:
(i) Sabre Holdings proposes to effect a Tax-Free Spin-Off (as
defined in the certificate of incorporation of Travelocity.com) (the
"Distribution");
(ii) Sabre Holdings delivers to Travelocity.com an opinion of
counsel reasonably satisfactory to Travelocity.com to the effect that
the failure to effect the exchange described in this Section 7.3(b)
would adversely affect the ability to obtain a private letter ruling
from the Internal Revenue Service or an opinion of counsel reasonably
satisfactory to Travelocity.com to the effect that the Distribution will
qualify as a tax-free distribution for federal income tax purposes under
sec. 355(a) of the Code; and
(iii) in connection with or to facilitate a Tax-Free Spin-Off,
Travelocity.com shall merge or otherwise combine with a Travelocity
Holdings Partner (or an affiliate of a Travelocity Holdings Partner),
then, immediately prior to or in connection with such merger or
combination, the Travelocity Holdings Partners shall have the right to
transfer to Travelocity.com (by merger or otherwise) all of the
Partnership Units, Travelocity.com Shares and Travelocity.com Preferred
Shares owned by such Travelocity Holdings Partners and the Cash
Equivalent Amount, in exchange for the issuance by Travelocity.com to
the Travelocity Holdings Partners of the number of Travelocity.com Class
B Shares and the number of Travelocity.com Shares determined by the
following formulae:
Number of Travelocity.com Class B Shares = (1 - X) X (A + B)
Number of Travelocity.com Shares = X X (A + B)
where:
X = a fraction, the numerator of which shall be the number
of shares of common stock of Sabre Holdings not owned by Aries
immediately prior to the exchange and the denominator of which
shall be the total number of shares of common stock of Sabre
Holdings outstanding immediately prior to the exchange; provided,
however, that if Aries owns common stock of Sabre Holdings
representing less than eighty percent (80%) of the outstanding
voting power for directors of Sabre Holdings, X shall equal zero.
A = the number of Partnership Units held by the Travelocity
Holdings Partners immediately prior to the exchange; and
B = the number of Travelocity.com Shares (including
Travelocity.com Shares issuable upon conversion of the
Travelocity.com Preferred Shares) held by the Travelocity
Holdings Partners immediately prior to the exchange.
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The "Cash Equivalent Amount" shall mean the Future Tax Benefit multiplied
by a fraction, the numerator of which shall be the aggregate Percentage Interest
of the Travelocity Holdings Partners and the denominator of which shall be the
aggregate Percentage Interest of the Travelocity.com Partners.
(c) Notwithstanding any other provisions to the contrary, the exchange
right described in Section 7.3(b) may be exercised only if, immediately
after the contemplated exchange, the economic interest of the Travelocity
Holdings Partners in Travelocity.com would exceed thirty percent (30%).
(d) Travelocity.com shall at all times reserve and keep available for
issuance upon the exercise of the exchange rights described in this Section
7.3, free from any preemptive rights, such number of its authorized but
unissued Travelocity.com Shares and Travelocity.com Class B Shares as shall
from time to time be necessary to permit the exchange of all outstanding
Partnership Units held by the Travelocity Holdings Partners into
Travelocity.com Shares or Travelocity.com Class B Shares as provided
herein, and shall take all action required to increase the authorized
number of Travelocity.com Shares or Travelocity.com Class B Shares if
necessary to permit the exchange of all outstanding Partnership Units held
by the Travelocity Holdings Partners. Travelocity.com covenants that any
Travelocity.com Shares or Travelocity.com Class B Shares issued upon
exchange of Partnership Units pursuant to this Section 7.3 shall be validly
issued, fully paid and non-assessable.
(e) The exchange of Partnership Units for Travelocity.com Shares or
Travelocity.com Class B Shares shall be effected by written notice to the
secretary of Travelocity.com by a Travelocity Holdings Partner stating that
such Partner desires to exchange Partnership Units as described in this
Section 7.3. An exchange shall be deemed to have been effected as of the
close of business on the date on which such notice has been received, and
at such time the rights of the holders of the Partnership Units as such
holders shall cease and such holders shall be treated for all purposes as
having become the record owners of Travelocity.com Shares or
Travelocity.com Class B Shares issuable upon such exchange.
(f) Promptly after the receipt of such written notice, Travelocity.com
shall issue and deliver in accordance with the surrendering Travelocity
Holdings Partner's instructions the certificate or certificates for
Travelocity.com Shares or Travelocity.com Class B Shares issuable upon such
exchange.
(g) The issuance of certificates for Travelocity.com Shares or
Travelocity.com Class B Shares upon the exercise of the exchange rights
described in this Section 7.3 shall be made without charge to the holders
of such shares for any issuance tax in respect thereof or other cost
incurred by Travelocity.com in connection with such exercise and the
related issuance of such shares.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
8.1 Limited Liability. Except as otherwise provided under the Act, the
debts, obligations and liabilities of the Partnership, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Partnership and no Limited Partner shall be obligated or
liable for any such debt, obligation or liability of the Partnership. Except as
otherwise provided by the laws of the State of Delaware, the debts, obligations
and liabilities of any Partner, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liability of such Partner and neither
the Partnership nor any other Partner shall be obligated or liable for any such
debt, obligation or liability of such Partner.
8.2 Indemnification.
(a) The Partnership shall, to the fullest extent permitted by law,
indemnify, defend and hold harmless each Covered Person against any and all
losses, claims, damages, expenses and liabilities (including, but not
limited to, any investigation, legal and other reasonable expenses incurred
in connection with, and any amounts paid in settlement of, any action,
suit, proceeding or claim, whether civil, criminal or administrative) of
any kind or nature whatsoever that such Covered Person may at
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any time become subject to or liable for by reason of the formation,
operation or termination of the Partnership, or the Covered Person's acting
as a Director or General Partner (or on behalf of any such Person), or the
authorized actions of such Covered Person in connection with the conduct of
the affairs of the Partnership or any Person in which the Partnership has
an investment (including, without limitation, indemnification against
negligence, gross negligence or breach of duty); provided, however, that no
Covered Person shall be entitled to indemnification if and to the extent
that the liability otherwise to be indemnified for results from (i) any act
or omission of such Covered Person that involves actual fraud or willful
misconduct or (ii) any transaction from which such Covered Person derived
improper personal benefit.
(b) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Partnership in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any Covered Person to repay such amount if
it shall be ultimately determined by a court of competent jurisdiction from
which no further appeal may be taken or the time for appeal has lapsed that
such Person is not entitled to be indemnified by the Partnership pursuant
to the terms and conditions of this Section 8.2.
(c) The Partnership shall maintain insurance on behalf of any Person
who is or was a Covered Person or is or was serving at the request of the
Partnership as an officer, director, manager, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against and incurred by such Person in any such
capacity, or arising out of such Person's status as such, whether or not
the Partnership would have the power to indemnify such Person against such
liability under this Section 8.2.
(d) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 8.2 shall continue as to a Person who has
ceased to be a Covered Person, and shall inure to the benefit of the heirs,
executors, administrators and other legal successors of such Person.
(e) The indemnification provided by this Section 8.2 shall not be
deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement, determination
of Partners or otherwise.
(f) Any indemnification hereunder shall be satisfied only out of the
assets of the Partnership (including insurance and any agreements pursuant
to which the Partnership and indemnified Persons are entitled to
indemnification), and the Partners shall not, in such capacity, be subject
to personal liability by reason of these indemnification provisions.
(g) No Person shall be denied indemnification in whole or in part
under this Section 8.2 because such Person had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
8.3 Contribution. Each of the General Partners covenants for itself, its
successors and assigns that it will at any time, on demand, both during the time
it is a Partner and after its withdrawal from the Partnership (upon the sale of
its interests or otherwise), contribute its share (determined (i) with respect
to Travelocity.com, based upon the aggregate Percentage Interest of the
Travelocity.com Partners, and (ii) with respect to Travelocity Holdings, based
upon the aggregate Percentage Interest of the Travelocity Holdings Partners, in
each case as in effect at the time of such withdrawal or demand), of any
liability, judgment or cost of any kind (including the reasonable cost of the
defense of any suit or action and any sums which may be paid in settlement
thereof) which any other General Partner(s) may be required to pay or for which
such other General Partner(s) is liable in excess of its share (determined (i)
with respect to Travelocity.com, based upon the aggregate Percentage Interest of
the Travelocity.com Partners, and (ii) with respect to Travelocity Holdings,
based upon the aggregate Percentage Interest of the Travelocity Holdings
Partners, in each case as in effect at the time of such withdrawal or demand) on
account of any matter or transaction that occurred during the time that it was a
General Partner and for which such other General Partner is entitled to
indemnification under Section 8.2 hereof or for which the Partnership is liable,
except that no such contribution need be made to any General Partner who acted
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with gross negligence, willful misconduct or a knowing violation of law and the
same resulted in such liability, judgment or cost. Each of the General Partners
agrees to keep all former General Partners reasonably informed with respect to
any potential claim for contribution pursuant to this Section 8.3. The
provisions of this Section 8.3 are only for the purpose of contribution among
the General Partners in the event that any one General Partner is required to
pay a disproportionate share of any liability and may not be relied upon or
enforced by any third party, including, without limitation, creditors of the
Partnership or any General Partner.
8.4 Tax/ERISA Indemnity. The Travelocity Holdings Partners shall jointly
and severally indemnify and defend the Partnership, the Travelocity.com Partners
and their Subsidiaries and hold each of them harmless from and against (i) any
liability for the income taxes of any Affiliate of Travelocity Holdings other
than the Partnership or Travelocity.com or their Subsidiaries under Treas. Reg.
sec. 1.1502-6 (or any similar provision of state or local law); and (ii) any
liability arising under the Employee Retirement Income Security Act of 1974, as
amended, with respect to any employee benefit plan established, maintained or
controlled by any Affiliate of Travelocity Holdings (other than the Partnership
or Travelocity.com or any of their Subsidiaries).
ARTICLE IX
TAXES
9.1 Tax Matters Partner; Tax Returns.
(a) Travelocity Holdings shall, as long as it is a Partner, be the
"tax matters partner" of the Partnership pursuant to sec. 6231(a)(7) of the
Code (the "Tax Matters Partner"). Subject to the provisions of this Section
9.1, the Tax Matters Partner shall be entitled to take any action or
decline to take any action, all as required by applicable law. The Tax
Matters Partner shall take such action as may be necessary to cause the
other Partners to become "notice partners" within the meaning of
sec. 6231(a)(8) of the Code.
(b) The Tax Matters Partner shall cause to be prepared and filed all
necessary foreign, federal, state and local income tax returns for the
Partnership, including making elections on the Partnership's tax returns or
otherwise relating to tax matters. Each other Partner shall furnish to the
Tax Matters Partner all pertinent information in its possession relating to
Partnership operations that is necessary to enable the Partnership's income
tax returns to be prepared and filed.
(c) To the extent permitted by applicable law, the Tax Matters Partner
shall determine, in its reasonable discretion, whether or not to permit the
other Partners to participate in the defense of all pending tax proceedings
involving the Partnership, including, without limitation, participation in
any meeting with the Internal Revenue Service or other taxing authority.
(d) The Partnership shall reimburse the Tax Matters Partner for any
costs and expenses incurred in connection with such Person serving as the
Tax Matters Partner, including costs and expenses incurred in the
preparation or filing of any such income tax returns and the defense of any
such tax proceedings.
9.2 Partnership Status. It is the intent of the Partners that the
Partnership be treated as a partnership for federal income tax purposes and, to
the extent permitted by applicable law, for state, local and foreign franchise
and income tax purposes. Neither the Partnership nor any Partner may make an
election for the Partnership to be excluded from the application of the
provisions of subchapter K of Chapter 1 of Subtitle A of the Code or any similar
provisions of applicable state or local law, and no provision of this Agreement
shall be construed to sanction or approve such an election.
9.3 Fiscal Year. The fiscal year of the Partnership for financial,
accounting, federal, state and local income tax purposes shall initially be the
fiscal year commencing on January 1 and ending on
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December 31 or such other fiscal year that is the same as the taxable year that
is required by law for federal income tax purposes (the "Fiscal Year").
ARTICLE X
BOOKS, RECORDS AND BANK ACCOUNTS
10.1 Maintenance of Books. The books of account for the Partnership shall
be maintained on an accrual basis in accordance with the terms of this
Agreement. The fiscal year shall be the accounting year of the Partnership.
10.2 Accounting Principles. Except as otherwise expressly provided herein,
the books and records of the Partnership shall be maintained in accordance with
GAAP; provided that Capital Accounts shall be maintained in accordance with
Section 5.1.
10.3 Bank Accounts. The Board of Directors shall cause the Partnership to
establish, maintain and designate signatories on one or more separate bank and
investment accounts for Partnership funds in the Partnership name with such
financial institutions and firms as the Board of Directors may select and
designate signatories thereon. The Partnership's funds shall not be commingled
with the funds of any other Person.
10.4 Tax Information. Within one hundred eighty (180) days after the end
of each Fiscal Year, the Tax Matters Partner shall prepare and send, or cause to
be prepared and sent, to each Person who was a Partner at any time during such
Fiscal Year, copies of such information as may be required for federal, state,
local and foreign income tax reporting purposes, including copies of Schedule
K-1 or any successor schedule or form, for such Person and such other
information as a Partner may reasonably request for the purpose of complying
with applicable laws.
10.5 Public Filings. The Partnership shall prepare or cause to be prepared
all registration statements, periodic reports and other documents required to be
filed by Travelocity.com pursuant to Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and shall deliver such documents to Travelocity.com a
reasonable period of time in advance of the date such documents are required to
be filed.
ARTICLE XI
ADMISSION OF PARTNERS; WITHDRAWAL
11.1 Substitution of Partners. Any transferee of an interest in the
Partnership from a Partner, if such transfer complies with Article VII, shall be
admitted as a Partner, such admission to be effective immediately prior to such
transfer, only if such substitute Partner shall have agreed to be bound by the
terms and conditions of this Agreement by executing a counterpart hereof.
Whether or not such a counterpart is executed, such transferee shall be deemed,
by acquiring such interest in the Partnership, to have agreed to hold it subject
to the terms and conditions of this Agreement. Upon such admission, such
substitute Partner shall be a Partner for all purposes of this Agreement.
11.2 Admission of Additional Partners. Other than pursuant to Section 11.1
in connection with a transfer, the Partnership may admit additional Partners
only upon the satisfactory completion of the following:
(a) such admission of an additional Partner shall have been approved
by Supermajority Vote; and
(b) such additional Partner shall have agreed to be bound by the terms
and conditions of this Agreement by executing a counterpart hereof.
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11.3 Withdrawal. No Partner shall have any right to withdraw or resign
from the Partnership, except in connection with a transfer of such Partner's
entire interest in the Partnership permitted by Section 7.2 or Section 7.3 of
this Agreement, in which case such transferring Partner shall cease to be a
Partner of the Partnership.
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
12.1 Dissolution. The Partnership shall be dissolved and its affairs shall
be wound up upon the first to occur of any of the following:
(a) the expiration of the Partnership's term pursuant to Section 2.4;
(b) the written consent of Travelocity.com and Travelocity Holdings;
(c) the entry of a decree of judicial dissolution under the Act;
(d) the Disposition of all, or substantially all, the assets of the
Partnership (excluding a lease, mortgage, pledge, grant of security
interest or other encumbrance);
(e) an event of withdrawal of a General Partner has occurred under the
Act, provided, however, the Partnership shall not be dissolved or required
to be wound upon an event of withdrawal of a General Partner if (i) at the
time of such event of withdrawal, there is at least one (1) other General
Partner of the Partnership who carries on the business of the Partnership
(any remaining general partner being hereby authorized to and shall carry
on the business of the Partnership), or (ii) within ninety (90) days after
the occurrence of such event of withdrawal, all remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of the event of withdrawal, of one (1) or more
additional General Partners of the Partnership; or
(f) at any time there are no limited partners of the Partnership
unless the Partnership is continued in accordance with the Act.
12.2 Liquidation and Termination.
(a) On dissolution of the Partnership, Travelocity Holdings shall act
as Liquidator or may appoint one or more other Persons as Liquidator. The
Liquidator shall proceed diligently to wind up the affairs of the
Partnership and make final distributions as provided herein and in the Act
by the end of the taxable year of the Partnership in which its liquidation
(as such term is defined in Treas. Reg. sec. 1.704-1(b)(2)(ii)(g)) occurs
or, if later, within ninety (90) Business Days of the date of such
liquidation. The costs of liquidation shall be borne as a Partnership
expense. Until final distribution, the Liquidator shall continue to operate
the Partnership properties with all of the power and authority of the
Partners and the Board of Directors. The steps to be accomplished by the
Liquidator are as follows:
(i) as promptly as possible after dissolution and again after final
liquidation, the Liquidator shall cause a proper accounting to be made
by an accounting firm of the Partnership's assets, liabilities and
operations through the last day of the calendar month in which the
dissolution shall occur or the final liquidation shall be completed, as
applicable;
(ii) the Liquidator shall have full power and authority to sell,
assign and encumber any or all of the Partnership's assets and to wind
up and liquidate the affairs of the Partnership in an orderly and
business-like manner; and
(iii) all proceeds from liquidation shall be distributed in the
following order of priority:
(A) first, to the satisfaction of the debts and liabilities of
the Partnership both to Partners, to the extent otherwise permitted
by law, and to persons other than Partners (but, in the case of
nonrecourse debts and liabilities, only to the extent required under
the
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applicable credit and security agreement) and expenses of liquidation
(whether by payment or the making of reasonable provision for payment
thereof, including the setting up of such reserves as the Liquidator
may reasonably deem necessary for any liability of the Partnership);
(B) second, pro rata to the Partners in accordance with the
positive balances in their Capital Accounts (as determined after
taking into account the adjustments required under Treas. Reg.
sec. 1.704-1(b)(2)(ii)(b)(2)); and
(C) last, to the Partners in accordance with their respective
Percentage Interests.
(b) Notwithstanding the provisions of this Section 12.2 which require
the liquidation of the assets of the Partnership, but subject to the order
of priorities set forth above, if upon or following dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all
of the Partnership's assets would be impractical or would cause undue loss
to the Partners, the Liquidator may, in its reasonable discretion, defer
for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (other than those to Partners as
creditors).
12.3 Distribution in Kind. If the Liquidator shall determine that all or a
portion of the Partnership's assets should be distributed in kind to the
Partners, the Liquidator, on behalf of the Partnership, shall obtain an
independent appraisal of the fair market value of each such asset as of a date
reasonably close to the date of liquidation. Any unrealized appreciation or
depreciation with respect to such assets shall be allocated among the Partners'
Capital Accounts (in accordance with Article V, assuming that the assets of the
Partnership were sold for such appraised fair market value) and distribution of
any such assets in kind to a Partner shall be considered a distribution of an
amount equal to the assets' appraised fair market value for purposes of Section
12.2.
12.4 Deficit Capital Accounts. Notwithstanding any other provision hereof
to the contrary, to the extent that a deficit, if any, exists in the Capital
Account of any Partner, such deficit shall not be an asset of the Partnership
and such Partner shall not be obligated to contribute such amount to the
Partnership to bring the balance of such Partner's Capital Account to zero.
12.5 Cancellation of Filings. Upon completion of the distribution of
Partnership assets as provided herein, the Liquidator and, if the Liquidator so
directs, the General Partners, shall file a certificate of cancellation with the
Secretary of State, cancel any other filings made pursuant to Section 6.9 as may
be necessary and take such other actions as may be necessary to terminate the
Partnership.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Representations and Warranties of Partners. Each Partner hereby
represents and warrants to the Partnership and each other Partner that:
(a) such Partner is duly organized, validly existing and in good
standing under the law of the jurisdiction of its organization and is duly
qualified and in good standing in the jurisdiction of its principal place
of business (if not organized therein);
(b) such Partner has full corporate, or other applicable power and
authority to execute and agree to this Agreement and to perform its
obligations hereunder and all necessary actions by the board of directors,
shareholders, members, or other Persons necessary for the due
authorization, execution, delivery and performance of this Agreement by
that Partner have been duly taken;
(c) such Partner has duly executed and delivered this Agreement;
(d) such Partner's authorization, execution, delivery and performance
of this Agreement do not conflict with any other agreement or arrangement
to which that Partner is a party or by which it is bound or with any law or
regulation to which that Partner is subject;
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(e) such Partner has such knowledge and experience in business and
financial matters and is capable of evaluating the merits and risks of an
investment in the Partnership and making an informed investment decision
with respect thereto;
(f) such Partner is able to bear the economic and financial risk of an
investment in the Partnership for an indefinite period of time;
(g) such Partner is acquiring its Partnership Interest for its own
account, for investment only and not with a view to a sale or distribution
thereof in violation of any securities laws;
(h) and such Partner has received, or has had access to, all
information which it considers necessary or advisable to that Partner's
decision concerning its acquisition of the Partnership Interest; and
(i) this Agreement constitutes a valid and binding agreement of
such Partner, enforceable against such Partner in accordance with its
terms, subject to general equitable principles and except as the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application relating to creditors' rights.
13.2 Offset. Whenever the Partnership is to pay any sum to any Partner,
any amounts that a Partner owes the Partnership may be deducted from that sum
before payment.
13.3 Notices. All notices and other communications (collectively,
"Notices") provided for or permitted to be given under this Agreement shall be
in writing and shall be given by depositing the Notice in the United States
mail, addressed to the Person to be notified, postage paid and registered or
certified with return receipt requested, or by such Notice being delivered in
person or by facsimile communication to such party. Unless otherwise expressly
set forth herein, notices given or served pursuant hereto shall be effective
upon receipt by the Person to be notified. All Notices to be sent to a Partner
shall be sent to or made at, and all payments hereunder shall be made at the
address of such Partners set forth on Exhibit A hereto, or such other address as
that Partner or any additional Partner may specify by Notice to the Partnership.
Any Notice to the Partnership or the Board of Directors shall be given to all
Directors. The address of a Director shall, unless Notice to the contrary is
given by a Director to the Partnership and the Partners, be the same as the
address of the Partner that appointed such Director.
13.4 Entire Agreement; Waivers and Modifications.
(a) This Agreement constitutes the entire agreement of the Partners
relating to the Partnership and supersedes any and all prior contracts,
understandings, negotiations and agreements with respect to the Partnership
and the subject matter hereof, whether oral or written.
(b) This Agreement may be amended or modified from time to time only
by a written instrument executed by each of the Partners; provided,
however, that the Board of Directors may amend Exhibit A from time to time
to reflect the admission or withdrawal of Partners, the issuance,
redemption or transfer of Partnership Units, changes in Percentage
Interests, or changes in the names or addresses of Partners, in each case
pursuant to transactions otherwise permitted by the terms of this
Agreement; and provided, further, that the Board of Directors may amend
this Agreement from time to time to make ministerial changes that are not
materially adverse, in the good faith judgment of the Board of Directors,
to the interests of any Partner.
(c) Any waiver or consent, express, implied or deemed, in whatever
form, to or of any breach or default by any Person in the performance by
that Person of its obligations with respect to the Partnership or any
action inconsistent with this Agreement is not a waiver of or consent to
any other breach or default in the performance by that Person of the same
or any other obligations of that Person with respect to the Partnership or
any other such action. Failure on the part of a Person to complain of any
act of any Person or to declare any Person in default with respect to the
Partnership, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights
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with respect to that default until the applicable statute-of-limitations
period has run. All waivers and consents hereunder shall be in writing and
shall be delivered to the other Partners in the manner set forth in Section
13.3.
13.5 No Third-Party Beneficiaries. Nothing in this Agreement shall provide
any benefit to any third party or entitle any third party to any claim, cause of
action, remedy or right of any kind, it being the intent of the parties that
this Agreement shall not be construed as a third-party beneficiary contract.
13.6 Governing Law. This agreement is governed by and shall be construed in
accordance with the law of the State of Delaware, excluding any conflict-of-laws
rule or principle that might refer the governance or construction of this
agreement to the law of another jurisdiction.
13.7 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Partner shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
13.8 Waiver of Certain Rights. To the fullest extent permitted by law, each
Partner irrevocably waives any right (but not any power) it might have to
maintain any action for dissolution of the Partnership or for partition of the
property of the Partnership. If any Partner maintains any action for such
dissolution or partition, such Partner shall, to the fullest extent permitted by
law, be liable to the Partnership and the other Partners for all monetary
damages suffered by them as a result thereof (including, indirect, incidental
and consequential damages).
13.9 Severability. The provisions of this Agreement are severable. The
invalidity, in whole or in part, of any provision of this Agreement shall not
affect the validity or enforceability of any other of its provisions. If one or
more provisions hereof shall be so declared invalid or unenforceable, the
remaining provisions shall remain in full force and effect and shall be
construed in the broadest possible manner to effectuate the purposes hereof. The
Partners further agree to replace such void or unenforceable provisions with
provisions which will achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable provisions.
13.10 Successors and Assigns. Subject to the limitations and restrictions
set forth in this Agreement, this Agreement shall be binding on and inure to the
benefit of the successors and assigns of the Partnership Interests of the
parties hereto.
13.11 Specific Performance. Without intending to limit the remedies
available to any party, each party hereto acknowledges that a breach of any of
the covenants contained in this Agreement may result in irreparable injury to
the other party for which there is no adequate remedy at law, that it will not
be possible to measure damages for such injuries precisely and that, in the
event of such a breach or threat thereof, each party hereto shall be entitled to
obtain a temporary restraining order and a preliminary or permanent injunction
restraining or requiring actions prohibited or required by this Agreement or
such other relief as may be requested to enforce specifically any of the
covenants of this Agreement.
13.12 Interpretation of Agreement. The table of contents of and headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
13.13 Multiple Counterparts. This Agreement may be executed in multiple
counterparts with the same effect as if each of the signing parties had signed
the same document. All counterparts shall be construed together and constitute
the same instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
<TABLE>
<S> <C>
GENERAL PARTNERS: TRAVELOCITY.COM INC.
By:
-----------------------------------------------------
Name:
Title: President
TRAVELOCITY HOLDINGS, INC.
By:
-----------------------------------------------------
Name:
Title: President
LIMITED PARTNERS: TRAVELOCITY.COM LP SUB INC.
By:
-----------------------------------------------------
Name:
Title:
TSGL HOLDING, INC.
By:
-----------------------------------------------------
Name:
Title:
SABRE INC.
By:
-----------------------------------------------------
Name:
Title:
</TABLE>
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EXHIBIT A -- PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
INITIAL
NAME AND ADDRESS PARTNERSHIP CAPITAL PERCENTAGE
OF PARTNER UNITS* ACCOUNT** INTEREST
- ---------------- ----------- --------- ----------
<S> <C> <C> <C>
GENERAL PARTNERS:
Travelocity Holdings...................................... [$ ] [10%]
[address]
Travelocity.com........................................... [$ ] 1%
[address]
LIMITED PARTNERS:
TSGL Holding.............................................. [$ ] [10%]
[address]
Travelocity.com LP Sub.................................... [$ ] [35%]
[address]
Sabre..................................................... [$ ] [44%]
[address]
Total............................................. [$ ] 100%
</TABLE>
- ---------------
* The aggregate number of Partnership Units issued to the Travelocity.com
Partners will be equal to (x) the number of shares of Travelocity.com Common
Stock issued pursuant to the Merger, plus (y) the number of shares of
Travelocity.com Common Stock issuable upon conversion of the Travelocity.com
Series A Preferred Stock. The aggregate number of Partnership Units issued to
the Travelocity Holdings Partners will be equal to (x) 33,000,000, minus (y)
the number of shares of Travelocity.com Common Stock issuable upon conversion
of the Travelocity.com Series A Preferred Stock.
** Each Partner's initial Capital Account will be equal to (x) the number of
Partnership Units held by the Partner, multiplied by (y) the average closing
price per share of Preview Common Stock for the ten (10) trading days
immediately preceding the Effective Time.
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EXHIBIT 2.1
Form of Restated Certificate of Limited Partnership of Travelocity.com LP
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TRAVELOCITY.COM LP
The undersigned, for the purpose of forming a limited partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act, 6 Del. Ch. sec.17-101,
et seq. (the "Act"), DO HEREBY CERTIFY as follows:
(1) Name
The name of the limited partnership formed and continued hereby is
Travelocity, L.P. (hereinafter referred to as the "Partnership").
(2) Address of Registered Office and Name and Address of Registered Agent
The address of the registered office of the Partnership is Corporation
Trust Center, 1209 Orange Street in the City of Wilmington, County of New
Castle, Delaware 19801. The name of the Partnership's registered agent for
service of process at such address is The Corporation Trust Company.
(3) Names and Addresses of the General Partners
The names and business addresses of the general partners of the Partnership
are:
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
Travelocity.com Inc.
-----------------------------------------------------
-----------------------------------------------------
Travelocity Holdings
Inc.
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
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IN WITNESS WHEREOF, this Certificate has been duly executed as of the
day of , 1999 by the undersigned as general partners of
the Partnership and is being filed in accordance with Section 17-210 of the Act.
GENERAL PARTNERS:
TRAVELOCITY.COM INC.
By:
----------------------------------
Name:
Title:
TRAVELOCITY HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
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SCHEDULE 6.2
Board of Directors
Travelocity.com Directors
1.
----------------------------------------------------
2.
----------------------------------------------------
3.
----------------------------------------------------
4.
----------------------------------------------------
5.
----------------------------------------------------
Travelocity Holdings Directors
1.
----------------------------------------------------
2.
----------------------------------------------------
3.
----------------------------------------------------
4.
----------------------------------------------------
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Outside back cover
The background of the page includes a large airplane.
The page includes Web page from the Travelocity.com Inc.
To the left of the Web page the following text appears with lines pointing from
the text toward the Web page:
Easy access to all of the most popular features.
Express booking right from the home page.
Check flight status and gate information.
News about travel deals.
Featured vacation packages.
Featured destination information.
To the right of the Web page the following text appears with lines pointing
from the text toward the Web page: Prominent location of the tools customers
need. Travel tips to help customers.
At the bottom of the page there are two overlapping portions of Web pages with
color pictures and text. The words Destinations and Vacations appear to the
left of the Web pages with arrows connecting the words to the Web pages.
