<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 2000
REGISTRATION NO. 333-95757
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
TRAVELOCITY.COM INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4700 75-2855109
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification
incorporation or organization) Classification Code Number) No.)
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TRAVELOCITY.COM INC.
4200 BUCKINGHAM BOULEVARD
MD 1400
FORT WORTH, TEXAS 76155
TEL. (817) 963-2923
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
TERRELL B. JONES
CHIEF EXECUTIVE OFFICER
TRAVELOCITY.COM INC.
4200 BUCKINGHAM BOULEVARD
MD 1310
FORT WORTH, TEXAS 76155
TEL. (817) 963-2923
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
---------------------
Copies to:
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JAMES E. MURPHY CHARLES M. NATHAN LEONARD R. STEIN GARY I. HOROWITZ
SENIOR VICE PRESIDENT, FRIED, FRANK, HARRIS, SHRIVER EXECUTIVE VICE PRESIDENT, MICHAEL J. NOONEY
CORPORATE DEVELOPMENT AND & JACOBSON BUSINESS AFFAIRS AND SIMPSON THACHER & BARTLETT
TREASURER ONE NEW YORK PLAZA GENERAL COUNSEL 425 LEXINGTON AVENUE
SABRE INC. NEW YORK, NEW YORK 10004 PREVIEW TRAVEL, INC. NEW YORK, NEW YORK 10017
4255 AMON CARTER BOULEVARD (212) 859-8000 747 FRONT STREET (212) 455-2000
MD 4224 SAN FRANCISCO, CALIFORNIA
FORT WORTH, TEXAS 76155 94111
(817) 963-6400 (415) 439-1200
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---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the satisfaction or waiver of all other conditions to the merger
described in the enclosed proxy statement/prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE> 2
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> 3
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED FEBRUARY 3, 2000
[PREVIEW TRAVEL LOGO TO COME]
February [ ], 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,
James J. Hornthal
Founder and Chairman of the Board
Christopher E. Clouser
President and Chief Executive Officer
<PAGE> 4
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH , 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 , 2000, at 2:00 p.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
Executive Vice President, Business
Affairs and General Counsel,
Corporate Secretary
San Francisco, California
February [ ], 2000
<PAGE> 5
TABLE OF CONTENTS
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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
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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................. 122
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
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LIST OF ANNEXES
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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
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iii
<PAGE> 8
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 , 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> 9
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> 10
- 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> 11
- 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> 12
- - 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> 13
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> 14
This structure is illustrated in the following diagram:
[TRAVELOCITY CHART]
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
6
<PAGE> 15
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:
Preview Travel, Inc.
747 Front Street
San Francisco, California 94111
Attention: Casey Cotter
E-mail: [email protected]
Telephone Number: (415) 439-1200
or
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Telephone Number: (212) 929-5500
or
(800) 322-2885
7
<PAGE> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
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.
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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.
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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 2:00
p.m., local time, on March , 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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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> 39
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> 40
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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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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- 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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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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- 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
45
<PAGE> 54
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
46
<PAGE> 55
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> 56
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> 57
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> 58
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
======= ========= ========
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> 59
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> 60
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> 61
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> 62
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.
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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.
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)
</TABLE>
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<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>
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.
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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.
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.
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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.
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;
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- 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.
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.
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PREVIEW TRAVEL TRAVELOCITY.COM INC.
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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.
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PREVIEW TRAVEL TRAVELOCITY.COM INC.
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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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PREVIEW TRAVEL TRAVELOCITY.COM INC.
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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.
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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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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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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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- 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:
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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
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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.
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PREVIEW TRAVEL'S SEC FILINGS (FILE NO. 000-23177)
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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
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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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IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FEBRUARY , 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
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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.
Ernst & Young LLP
October 29, 1999
Dallas, Texas
F-2
<PAGE> 144
TRAVELOCITY.COM INC.
BALANCE SHEET
ASSETS
<TABLE>
<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> 145
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> 146
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> 147
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.
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> 148
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> 149
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> 150
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> 151
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> 152
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> 153
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> 154
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> 155
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's 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 come 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> 156
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> 157
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> 158
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> 159
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> 160
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> 161
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> 162
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> 163
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> 164
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> 165
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> 166
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> 167
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.
A-1
<PAGE> 168
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>
A-2
<PAGE> 169
<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
<PAGE> 170
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>
A-4
<PAGE> 171
<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>
A-5
<PAGE> 172
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
A-6
<PAGE> 173
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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<PAGE> 174
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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<PAGE> 175
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.
B-2
<PAGE> 216
(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-3
<PAGE> 217
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-4
<PAGE> 218
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-5
<PAGE> 219
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
B-2-1
<PAGE> 220
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> 221
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> 222
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> 223
(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> 224
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
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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
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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> 230
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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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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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> 233
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> 234
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
D-2
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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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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;
Registered and Private Offerings..................... 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
Exhibit 2.1
Form of Certificate of Limited Partnership of Travelocity LP
Schedule 6.2
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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<PAGE> 300
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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<PAGE> 301
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.
<PAGE> 302
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
for, among other things:
a. permissive indemnification for expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by designated
persons, including directors and officers of a corporation, in the event
such persons are parties to litigation other than stockholder derivative
actions if certain conditions are met;
b. permissive indemnification for expenses actually and reasonably
incurred by designated persons, including directors and officers of a
corporation, in the event such persons are parties to stockholder
derivative actions if certain conditions are met;
c. mandatory indemnification for expenses actually and reasonably
incurred by designated persons, including directors and officers of a
corporation, in the event such persons are successful on the merits or
otherwise in litigation covered by a. and b. above; and
d. that the indemnification provided for by Section 145 shall not be
deemed exclusive of any other rights which may be provided under any bylaw,
agreement, stockholder or disinterested director vote, or otherwise.
Travelocity.com Inc.'s restated certificate of incorporation provides that
a director shall not be personally liable to Travelocity.com Inc. or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of loyalty to
Travelocity.com Inc. or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit.
The restated bylaws also provide that each person who was or is made a
party to, or is involved in, any action, suit or proceeding by reason of the
fact that he or she is or was a director, officer of Travelocity.com Inc. (or
was serving at the request of Travelocity.com Inc. as a director, officer,
employee or agent for another entity) shall be, and employees and agents may be,
indemnified and held harmless by Travelocity.com Inc., to the fullest extent
authorized by the DGCL , as in effect (or, to the extent indemnification is
broadened, as it may be amended) against all expense, liability or loss
reasonably incurred by such person in connection therewith. The restated bylaws
further provide that such rights to indemnification are contract rights and
shall include the right to be paid by Travelocity.com Inc. the expenses incurred
in defending the proceedings specified above, in advance of their final
disposition, provided that, if the DGCL so requires, such payment shall only be
made upon delivery to Travelocity.com Inc. by the indemnified party of an
undertaking to repay all amounts so advanced if it shall ultimately be
determined that the person receiving such payment is not entitled to be
indemnified. Travelocity.com Inc. must advance the expenses incurred by the
director or officer in defending any proceeding, within 60 days of receipt of
the request for indemnification. Such expenses, including attorneys' fees, may
be paid with respect to indemnified employees and agents, as the Board of
Directors deems appropriate. The restated bylaws provide that the right to
indemnification and to the advance payment of expenses shall not be exclusive of
any other right which any person may have or acquire under any statute,
provision of Travelocity.com Inc.'s restated bylaws, restated certificate of
incorporation, or otherwise. The restated bylaws also provide that, subject to
the approval of a majority of the Board of Directors regarding the terms of
availability of the insurance, Travelocity.com Inc. must maintain insurance, at
its expense, to protect any of its directors and officers against any liability
arising out of his or her status as a director or officer, whether or not
Travelocity.com Inc. would have the power to indemnify the director or officer
against such liability under the restated bylaw's indemnification provision.
II-1
<PAGE> 303
ITEM 21. EXHIBITS.
(a) Exhibits.
<TABLE>
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of October 3,
1999, by and among Sabre Inc., Travelocity Holdings,
Inc., Travelocity.com, Inc., and Preview Travel, Inc.
(included in the Proxy Statement/Prospectus as Annex A)
2.2 -- Amendment to Agreement and Plan of Merger, dated as of
October 3, 1999, by and among Sabre Inc., Travelocity
Holdings, Inc., Travelocity.com, Inc., and Preview
Travel, Inc.(1)
3.1 -- Certificate of Incorporation of Registrant(1)
3.2 -- Form of Restated Certificate of Incorporation of
Registrant to become effective upon the closing of the
merger (included in Proxy Statement/Prospectus as Annex
D)
3.3 -- Bylaws of the Registrant(1)
3.4 -- Form of Restated Bylaws of Registrant to become effective
upon the closing of the merger (included in Proxy
Statement/Prospectus in Annex E)
4.1 -- Form of Registrant's Common Stock Certificate(1)
4.2 -- Form of Registrant's Series A Preferred Stock
Certificate(1)
4.3 -- Form of Registrant's Class B Common Stock Certificate(1)
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding legality of the shares being issued in the
merger
8.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to
certain federal income tax consequences described in the
proxy statement/prospectus
8.2 -- Opinion of Simpson Thacher & Bartlett as to certain
federal income tax consequences described in the proxy
statement/prospectus
10.1 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and James J. Hornthal (included in the
Proxy Statement/Prospectus as Annex B-1)
10.2 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and MediaOne Interactive Services,
Inc. (included in the Proxy Statement/Prospectus as Annex
B-2)
10.3 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and America Online, Inc. (included in
the Proxy Statement/Prospectus as Annex B-3)
10.4 -- Form of Amended and Restated Agreement of Limited
Partnership of Travelocity.com LP (included in the Proxy
Statement/Prospectus as Annex F)
10.5 -- Form of Management Services Agreement between
Travelocity.com LP and Travelocity Holdings, Inc.(1)
10.6 -- Form of Contribution Agreement between Travelocity.com LP
and Sabre Inc.(1)
10.7 -- Form of Contribution Agreement between Travelocity.com LP
and TSGL Holdings, Inc.(1)
10.8 -- Form of Contribution Agreement between Travelocity.com LP
and Travelocity.com Inc.(1)
10.9 -- Form of Option Agreement between Sabre Inc. and
Travelocity.com Inc.(1)
10.10 -- Form of Registration Rights Agreement between Sabre Inc.
and Travelocity.com Inc.(1)
10.11 -- Interactive Services and Exclusive Channel Agreement by
and between Travelocity Holdings, Inc. and America
Online, Inc., effective as of October 3, 1999+
</TABLE>
II-2
<PAGE> 304
<TABLE>
<S> <C>
10.12 -- Content Partner/Distribution Agreement by and between Infoseek Corporation and The
Sabre Group, Inc. effective as of July 22, 1999+
10.13 -- Content Partner Agreement, by and between The Sabre Group, Inc. and At Home
Corporation, effective as of March 13, 1999+
10.14 -- Travel Services Advertising and Promotion Agreement by and between Sabre Interactive a
division of Sabre, Inc. and Yahoo! Inc., effective as of June 29, 1997+
10.15 -- First Amendment to Travel Services Advertising and Promotion Agreement by and between
Sabre Interactive a division of Sabre Inc. and Yahoo! Inc., effective as of November
23, 1998+
10.16 -- Second Amendment to Travel Services Advertising and Promotion Agreement by and between
Sabre Interactive a division of Sabre Inc. and Yahoo! Inc., effective as of October 1,
1999+
10.17 -- Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan(1)
10.18 -- Travelocity.com LP 1999 Long-Term Incentive Plan(1)
10.19 -- The Sabre Group Deferred Compensation Plan(1)
10.20 -- The Sabre Group Holdings, Inc. Supplemental Executive Retirement Plan(1)
10.21 -- Executive Termination Benefits Agreement for Andrew B. Steinberg(1)
21.1 -- Subsidiary of Registrant(1)
23.1 -- Consent of Ernst & Young LLP, Independent Auditors
23.2 -- Consent of PricewaterhouseCoopers LLP, Independent Auditors
23.3 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibits 5.1 and 8.1)
24.1 -- Power of Attorney(1)
99.1 -- Opinion of Hambrecht & Quist LLC (included in Proxy Statement/Prospectus as Annex C)
99.2 -- Consent of Hambrecht & Quist LLC
99.3 -- Form of proxy card for Preview Travel, Inc.'s special meeting
99.4 -- Consent of Person About to Become a Director for Terrell B. Jones(1)
99.5 -- Consent of Person About to Become a Director for William J. Hannigan(1)
99.6 -- Consent of Person About to Become a Director for Jeffery M. Jackson(1)
99.7 -- Consent of Person About to Become a Director for Paul C. Ely, Jr.(1)
99.8 -- Consent of Person About to Become a Director for Bradford J. Boston(1)
99.9 -- Consent of Person About to Become a Director for Glenn W. Marschel, Jr.(1)
99.10 -- Consent of Person About to Become a Director for James J. Hornthal(1)
99.11 -- Consent of Person About to Become a Director for Michael A. Buckman(1)
99.12 -- Consent of Person About to Become a Director for James D. Marsicano(1)
99.13 -- Consent of Person About to Become a Director for F. William Conner
</TABLE>
- ---------------
(1) Previously filed on Registrant's Registration Statement on Form S-4 on
January 31, 2000.
+ Portions of this exhibit have been redacted and are subject to a request for
confidential treatment that has been filed with the Securities and Exchange
Commission.
All supporting schedules have been omitted because they are not required or
the information required to be set forth therein is included in the consolidated
financial statements or in the notes thereto.
II-3
<PAGE> 305
ITEM 22. UNDERTAKINGS.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act,
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this Registration
Statement; provided, however, that the undertakings set forth in
paragraphs (1)(i) and (ii) above do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(C) The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be
II-4
<PAGE> 306
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(D) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(E) The undersigned Registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of
responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-5
<PAGE> 307
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fort Worth,
State of Texas, on February 3, 2000.
TRAVELOCITY.COM INC.
By: /s/ TERRELL B. JONES
------------------------------------
Terrell B. Jones
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TERRELL B. JONES President and Chief Executive February 3, 2000
- ----------------------------------------------------- Officer (principal executive
Terrell B. Jones officer)
* Senior Vice President, Chief February 3, 2000
- ----------------------------------------------------- Financial Officer (principal
Jeffery M. Jackson financial officer and principal
accounting officer), and
Director
* Treasurer and Director February 3, 2000
- -----------------------------------------------------
James E. Murphy
* Senior Vice President, General February 3, 2000
- ----------------------------------------------------- Counsel, Corporate Secretary,
Andrew B. Steinberg and Director
*By: /s/ TERRELL B. JONES Attorney-in-fact February 3, 2000
------------------------------------------------
Terrell B. Jones
</TABLE>
II-6
<PAGE> 308
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of October 3,
1999, by and among Sabre Inc., Travelocity Holdings,
Inc., Travelocity.com, Inc., and Preview Travel, Inc.
(included in the Proxy Statement/Prospectus as Annex A)
2.2 -- Amendment to Agreement and Plan of Merger, dated as of
October 3, 1999, by and among Sabre Inc., Travelocity
Holdings, Inc., Travelocity.com, Inc., and Preview
Travel, Inc.(1)
3.1 -- Certificate of Incorporation of Registrant(1)
3.2 -- Form of Restated Certificate of Incorporation of
Registrant to become effective upon the closing of the
merger (included in Proxy Statement/Prospectus as Annex
D)
3.3 -- Bylaws of the Registrant(1)
3.4 -- Form of Restated Bylaws of Registrant to become effective
upon the closing of the merger (included in Proxy
Statement/Prospectus in Annex E)
4.1 -- Form of Registrant's Common Stock Certificate(1)
4.2 -- Form of Registrant's Series A Preferred Stock
Certificate(1)
4.3 -- Form of Registrant's Class B Common Stock Certificate(1)
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding legality of the shares being issued in the
merger
8.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to
certain federal income tax consequences described in the
proxy statement/prospectus
8.2 -- Opinion of Simpson Thacher & Bartlett as to certain
federal income tax consequences described in the proxy
statement/prospectus
10.1 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and James J. Hornthal (included in the
Proxy Statement/Prospectus as Annex B-1)
10.2 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and MediaOne Interactive Services,
Inc. (included in the Proxy Statement/Prospectus as Annex
B-2)
10.3 -- Voting Agreement, dated as of October 3, 1999, by and
between Sabre Inc. and America Online, Inc. (included in
the Proxy Statement/Prospectus as Annex B-3)
10.4 -- Form of Amended and Restated Agreement of Limited
Partnership of Travelocity.com LP (included in the Proxy
Statement/Prospectus as Annex F)
10.5 -- Form of Management Services Agreement between
Travelocity.com LP and Travelocity Holdings, Inc.(1)
10.6 -- Form of Contribution Agreement between Travelocity.com LP
and Sabre Inc.(1)
10.7 -- Form of Contribution Agreement between Travelocity.com LP
and TSGL Holdings, Inc.(1)
10.8 -- Form of Contribution Agreement between Travelocity.com LP
and Travelocity.com Inc.(1)
10.9 -- Form of Option Agreement between Sabre Inc. and
Travelocity.com Inc.(1)
10.10 -- Form of Registration Rights Agreement between Sabre Inc.
and Travelocity.com Inc.(1)
10.11 -- Interactive Services and Exclusive Channel Agreement by
and between Travelocity Holdings, Inc. and America
Online, Inc., effective as of October 3, 1999+
</TABLE>
<PAGE> 309
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.12 -- Content Partner/Distribution Agreement by and between
Infoseek Corporation and The Sabre Group, Inc. effective
as of July 22, 1999+
10.13 -- Content Partner Agreement, by and between The Sabre
Group, Inc. and At Home Corporation, effective as of
March 13, 1999+
10.14 -- Travel Services Advertising and Promotion Agreement by
and between Sabre Interactive a division of Sabre, Inc.
and Yahoo! Inc., effective as of June 29, 1997+
10.15 -- First Amendment to Travel Services Advertising and
Promotion Agreement by and between Sabre Interactive a
division of Sabre Inc. and Yahoo! Inc., effective as of
November 23, 1998+
10.16 -- Second Amendment to Travel Services Advertising and
Promotion Agreement by and between Sabre Interactive a
division of Sabre Inc. and Yahoo! Inc., effective as of
October 1, 1999+
10.17 -- Travelocity Holdings, Inc. 1999 Long-Term Incentive
Plan(1)
10.18 -- Travelocity.com LP 1999 Long-Term Incentive Plan(1)
10.19 -- The Sabre Group Deferred Compensation Plan(1)
10.20 -- The Sabre Group Holdings, Inc. Supplemental Executive
Retirement Plan(1)
10.21 -- Executive Termination Benefits Agreement for Andrew B.
Steinberg(1)
21.1 -- Subsidiary of Registrant(1)
23.1 -- Consent of Ernst & Young LLP, Independent Auditors
23.2 -- Consent of PricewaterhouseCoopers LLP, Independent
Auditors
22.3 -- Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibits 5.1 and 8.1)
24.1 -- Power of Attorney(1)
99.1 -- Opinion of Hambrecht & Quist LLC (included in Proxy
Statement/Prospectus as Annex C)
99.2 -- Consent of Hambrecht & Quist LLC
99.3 -- Form of proxy card for Preview Travel, Inc.'s special
meeting
99.4 -- Consent of Person About to Become a Director for Terrell
B. Jones(1)
99.5 -- Consent of Person About to Become a Director for William
J. Hannigan(1)
99.6 -- Consent of Person About to Become a Director for Jeffery
M. Jackson(1)
99.7 -- Consent of Person About to Become a Director for Paul C.
Ely, Jr.(1)
99.8 -- Consent of Person About to Become a Director for Bradford
J. Boston(1)
99.9 -- Consent of Person About to Become a Director for Glenn W.
Marschel, Jr.(1)
99.10 -- Consent of Person About to Become a Director for James J.
Hornthal(1)
99.11 -- Consent of Person About to Become a Director for Michael
A. Buckman(1)
99.12 -- Consent of Person About to Become a Director for James D.
Marsicano(1)
99.13 -- Consent of Person About to Become a Director for F.
William Conner
</TABLE>
- ---------------
(1) Previously filed with Registrant's Registration Statement on Form S-4 on
January 31, 2000.
+ Portions of this exhibit have been redacted and are subject to a request for
confidential treatment that has been filed with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 5.1
February 3, 2000
Board of Directors
Travelocity.com Inc.
4255 Amon Carter Boulevard
Fort Worth, Texas 76155
Gentlemen:
We have acted as special counsel for Travelocity.com, Inc., a Delaware
corporation (the "Company"), in connection with the merger of Preview Travel,
Inc., a Delaware corporation ("Preview Travel") into the Company pursuant to the
Agreement and Plan of Merger, dated as of October 3, 1999 (the "Merger
Agreement"), by and among the Company, Sabre, Inc., Travelocity Holdings, Inc.,
and Preview Travel. Under the terms of the Merger Agreement, the Company expects
to issue up to 15,945,952 shares of its common stock, par value $.001 per share
(the "Merger Shares") to holders of common stock of Preview Travel. In addition,
in the future, the Company may issue up to 7,000,000 shares of its common stock,
par value $.001, ("Common Stock") upon exercise of options that have been or may
be granted under the Travelocity Holdings, Inc. 1999 Long-Term Incentive Plan
("Holdings LTIP"), or the Travelocity.com LP Long-Term Incentive Plan
("Partnership LTIP").
With your permission, all assumptions and statements of reliance herein
have been made without any independent investigation or verification on our part
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such agreements, instruments, documents and records of
the Company, such certificates of public officials and such other documents, and
(iii) received such information from officers and representatives of the Company
as we have deemed necessary or appropriate for the purposes of this opinion. In
all examinations, we have assumed the legal capacity of all natural persons
executing documents, the genuineness of all signatures, authenticity of original
and certified documents and the conformity to original or certified copies of
all copies submitted to us as conformed or reproduction copies. As to various
questions of fact relevant to the opinions expressed herein, we have relied
upon, and assume the accuracy of, representations and warranties contained in
the documents and certificates and oral or written statements and other
information of or from representatives of the Company and others and assume
compliance on the part of all parties to the documents with their covenants and
agreements contained therein.
<PAGE> 2
Fried, Frank, Harris, Shriver & Jacobson
Page 2
Based upon the foregoing and subject to the limitations, qualifications
and assumptions set forth herein, we are of the opinion that
1. The Merger Shares registered under the Company's registration
statement filed on Form S-4 (File No. 333-95757), as amended,
("Registration Statement"), when issued, delivered, and paid for
in accordance with the terms of the Merger Agreement, will be
validly issued, fully paid and non-assessable.
2. The shares of Common Stock to be issued under each of the Holdings
LTIP and Partnership LTIP, when issued, delivered, and paid for
(with consideration received by the Company being not less than
the par value thereof) in accordance with the Holdings LTIP and
Partnership LTIP and any agreement applicable to such shares, will
be validly issued, fully paid, and non-assessable.
The opinions expressed herein are limited to the General Corporation
Law of the State of Delaware, the Delaware Constitution and reported judicial
decisions interpreting those laws, each as currently in effect. The opinions
expressed are given as of the date hereof, and we undertake no obligation to
supplement this letter if any applicable laws change after the effective date of
the Registration Statement or if we become aware of any facts that might change
the opinions expressed herein after such date or for any other reason.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not hereby admit that we are in the category of such
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Vasiliki B. Tsaganos
-------------------------------------
Vasiliki B. Tsaganos
<PAGE> 1
EXHIBIT 8.1
February 3, 2000
Travelocity.com Inc.
4200 Buckingham Boulevard
MD 1400
Ft. Worth, TX 76155
Ladies and Gentlemen:
We are acting as your counsel in connection with the proposed
acquisition by Travelocity.com Inc. ("Travelocity.com") of Preview Travel, Inc.
("Preview") pursuant to the proposed merger (the "Merger") of Preview into
Travelocity.com, whereupon Travelocity.com will be the surviving corporation
and the separate existence of Preview will cease. The Merger will be
consummated pursuant to the Agreement and Plan of Merger dated as of October 3,
1999 by and among Sabre Inc., Travelocity Holdings, Inc.,
Travelocity.com and Preview (the "Merger Agreement").
Travelocity.com has filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "1933 Act"), a registration
statement on Form S-4 (the "Registration Statement"), with respect to the
shares of Travelocity.com common stock to be issued to holders of shares of
common stock of Preview in connection with the Merger. In addition,
Travelocity.com has prepared, and we have reviewed, a Joint Proxy
Statement/Prospectus (the "Joint Proxy Statement") which is contained in and
made a part of the Registration Statement, and the Appendices thereto,
including the Merger Agreement. In rendering the opinion set forth below, we
have relied upon the facts and representations stated in the Joint Proxy
Statement and upon such other documents as we have deemed appropriate.
We have assumed that all parties to the Merger Agreement have acted,
and will act, in accordance with the terms of such Merger Agreement and that
the Merger Agreement will be consummated at the effective time pursuant to the
terms and conditions set forth in the Merger Agreement without the waiver or
modification of any such terms and conditions.
<PAGE> 2
Travelocity.com Inc.
February 3, 2000
Page 2
Based upon and subject to the foregoing, and to the qualifications,
limitations, representations and assumptions contained in the portion of the
Joint Proxy Statement captioned "Material Federal Income Tax Consequences," the
portion of the Joint Proxy Statement captioned "Material Federal Income Tax
Consequences" represents our opinion as to the material U.S. federal income tax
consequences of the Merger under applicable law. No opinion is expressed on any
matters other than those specifically referred to herein.
This opinion is furnished to you for your use in connection with the
Registration Statement and may not be used for any other purpose without our
prior express written consent. We hereby consent to the filing of this opinion
as an annex to the Registration Statement and to the references to us contained
in the Registration Statement. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section
7 of the 1933 Act.
Very truly yours,
------------------------
FRIED, FRANK, HARRIS,
SHRIVER & JACOBSON
<PAGE> 1
EXHIBIT 8.2
February 3, 2000
Preview Travel, Inc.
747 Front Street
San Francisco, CA 94111
Ladies and Gentlemen:
We are acting as your counsel in connection with the proposed
acquisition by Travelocity.com Inc. ("Travelocity.com") of Preview Travel, Inc.
("Preview") pursuant to the proposed merger (the "Merger") of Preview into
Travelocity.com, whereupon Travelocity.com will be the surviving corporation and
the separate existence of Preview will cease. The Merger will be consummated
pursuant to the Agreement and Plan of Merger dated as of October 3, 1999 by and
among Sabre Inc., Travelocity Holdings, Inc., Travelocity.com and Preview (the
"Agreement").
At your request, in connection with the filing of the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission, as
amended through the date hereof, in connection with the Merger (the
"Registration Statement"), we are rendering our opinion with regard to certain
United States federal income tax consequences of the Merger.
<PAGE> 2
Preview Travel, Inc. -2- February 3, 2000
All capitalized items used but not defined herein shall have the same meanings
as in the Agreement.
In arriving at the opinion expressed below, we have examined and relied
upon the accuracy and completeness of the facts, information, covenants and
representations contained in originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement, the Registration Statement and
the Proxy Statement-Prospectus included therein (together, the "Proxy
Statement").
Without limiting the generality of the foregoing, in arriving at the
opinions expressed below, we have also examined and relied, without independent
verification of the statements contained therein, on letters from Preview and
from Sabre Inc., Travelocity Holdings, Inc. and Travelocity.com regarding
certain tax matters, and we have assumed the accuracy of the representations and
statements made in each of the foregoing.
In arriving at the opinion expressed below, we also have assumed,
without making any independent investigation, that all such documents as
furnished to us are complete and authentic, that the signatures on all documents
are genuine, and that all such documents have been, or in the case of drafts,
will be, duly authorized, executed and delivered. We have further assumed that
the transactions will be consummated and the parties will act in accordance with
these documents.
Based on and subject to the foregoing and subject to the
qualifications, limitations, representations and assumptions contained in the
portion of the Proxy Statement captioned "THE MERGER -- Material Federal Income
Tax Consequences," the discussion contained in the Proxy Statement under the
caption "THE MERGER -- Material Federal
<PAGE> 3
Preview Travel, Inc. -3- February 3, 2000
Income Tax Consequences," insofar as such discussion purports to constitute a
summary of matters of United States federal income tax law and regulations or
legal conclusions with respect thereto, represents our opinion as to the
material U.S. federal income tax consequences of the Merger under applicable
law.
We hereby consent to the use of our name and the making of statements
with respect to us under the caption "THE MERGER -- Material Federal Income Tax
Consequences" in the Proxy Statement and the filing of this opinion as an annex
to the Proxy Statement. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
SIMPSON THACHER & BARTLETT
/s/ Simpson Thacher & Bartlett
<PAGE> 1
EXHIBIT 10.11
NOTE: REDACTED PORTIONS HAVE BEEN MARKED WITH (***). THE REDACTED PORTIONS ARE
SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT THAT HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
INTERACTIVE SERVICES AND EXCLUSIVE CHANNEL AGREEMENT
This Interactive Services and Exclusive Channel Agreement (this
"Agreement"), dated as of October 2, 1999, is made and entered into by and
between America Online, Inc. ("AOL"), a Delaware corporation, with its principal
offices at 22000 AOL Way, Dulles, Virginia 20166, Travelocity Holdings, Inc., a
Delaware corporation with its principal offices at 4200 Buckingham, MD 1310,
Fort Worth, Texas 76155 ("Travelocity" or the "Interactive Content Provider" or
"ICP") and Sabre Inc., a Delaware corporation with its principal offices at 4255
Amon Carter Boulevard, MD 4204, Fort Worth, Texas 76155. AOL and ICP are each
referred to herein as a "Party" and collectively as the "Parties".
INTRODUCTION
AOL and ICP each desires that AOL provide access to the ICP Internet
Site and ICP Programming (including the Res System) through the AOL Network,
subject to the terms and conditions set forth in this Agreement. Defined terms
used but not otherwise defined in this Agreement shall be as defined on Exhibit
B attached hereto.
TERMS
1. CARRIAGE
1.1 CARRIAGE AND PROMOTION. Subject to Section 2.5, beginning on the
later to occur of the Launch Date and completion of Site and
Content Preparation (as defined in Section 8.3), and continuing
during the Initial Term of this Agreement, AOL shall provide ICP
with the following, all as set forth on Exhibit A-1: (i) permanent
positioning within the Service, (ii) promotions and navigational
links to the Service from within the AOL Network, and (iii) banner
advertising and search program(s) for the Service within the AOL
Network. The matters described in the preceding sentence and on
Exhibit A-1 and any other promotions provided by AOL to ICP shall
be referred to as the "Promotions." Subject to ICP's reasonable
approval, AOL will have the right to fulfill its promotional
commitments with respect to any of the foregoing by providing ICP
comparable promotional placements in appropriate alternative areas
of the AOL Network. In addition, if AOL is unable to deliver any
particular Promotion, AOL will work with ICP to provide ICP a
comparable promotional placement. Except to the extent expressly
described herein, the exact form, placement and nature of the
Promotions shall be determined by AOL in its reasonable editorial
discretion. In this regard, ICP may reasonably object to AOL's
material changes, in which case the parties shall use good faith
efforts to modify the specific form, placement, and/or nature of
the specific Promotion in order to attempt to address and resolve
such objection. ICP shall comply with the customization and
co-branding requirements set forth in Section 6 and provide the
Content set forth in the Programming Plan (as defined below).
AOL's provision of Promotions in connection with any particular
AOL Property shall be conditioned upon ICP's substantial
compliance with the customization and co-branding requirements set
forth in Section 6 and provision of the Content set forth in the
Programming Plan for such AOL Property.
1.2 LICENSE. During the Term, ICP hereby grants AOL a non-exclusive
license to use, market, store, distribute, reproduce, display,
communicate, perform, translate, adapt, transmit and promote the
ICP Internet Site, the ICP Programming and the Licensed Content
(or any portion of any of the foregoing) through the AOL Network
as AOL may determine in its commercially reasonable discretion,
including without limitation, the right to integrate Licensed
Content on the AOL Network by creating links thereto, provided
that any such link to any such Licensed Content shall present or
contain an ICP Presence. If and to the extent ICP, in its
reasonable, good faith commercial judgment [***] to the Content
within any ICP Presence for any [***] then AOL shall, upon receipt
of notice from ICP regarding such [***] such ICP Presence within
[***] after receipt of such notice from ICP. During
<PAGE> 2
the Term, ICP also grants AOL a non-exclusive license to use,
license and sublicense any software (and all modifications and
enhancements thereto) necessary for use of the ICP Internet Site
and/or ICP Programming by AOL and/or AOL Members (the "ICP
Software"). ICP acknowledges and agrees that AOL Members worldwide
will have access to the ICP Internet Site, the ICP Programming,
the Licensed Content, and the ICP Software under the licenses
granted in this Section 1.2. During the Term, AOL Members shall
have the right to access and use the ICP Internet Site and ICP
Programming free of charge, other than standard fees and
commissions associated with the travel reservations. Subject to
such licenses, ICP retains all right, title to and interest in the
Licensed Content and the ICP Software. Notwithstanding anything to
the contrary in this Section 1.2 or elsewhere in this Agreement,
AOL shall not focus its marketing and promotional efforts in
respect of the ICP Internet Site, ICP Programming or Licensed
Content in any geographic region outside the United States and
Canada, and shall not specifically target any AOL Members or other
persons or entities as customers or users of, or visitors to, the
ICP Internet Site, ICP Programming or Licensed Content who reside
outside the United States or Canada to receive Promotions that are
designed for or targeted at geographic regions outside the United
States or Canada.
1.3 IMPRESSIONS TARGET. AOL shall provide ICP with at least [***]
Impressions during the Initial Term from ICP Presences on the AOL
Network, as set forth on Exhibit A-1 attached hereto (the
"Impressions Target"), provided that (i) only screens that contain
a link to any portion of the Service will count against the
Impressions Target and (ii) to the extent technically feasible
using AOL's then-current ad serving and measurement systems, only
[***] shall be [***] the [***]. In the event that the Impressions
Target is not met (or will not, in [***] reasonable judgment, be
met) during the Term, then AOL shall not be deemed in breach of
this Agreement, provided, that, in [***] either (a) the Initial
Term shall be extended for up to six months without additional
carriage fees (as contemplated in Section 4.1) payable by ICP
until the Impressions Target is met, and/or (b) AOL shall, within
the following six months, provide ICP with the remaining
Impressions in the form of advertising space within the AOL
Network of comparable value to the undelivered Impressions (as
reasonably determined by the parties) or (c) some combination
thereof; provided, however, that if [***] elected to proceed under
clause (a) above and the Impressions Target is not satisfied at
the end of the six month period referred to in such clause (a),
AOL's obligations under such clause (a) shall cease and AOL shall
be required to provide the remaining Impressions under clause (b)
within the following six month period, and provided, further, that
ICP may, at its option, elect to forego such additional
Impressions, in which case AOL's obligations under this Section
1.3 shall be deemed satisfied. AOL shall have the right to provide
such additional Impressions toward the Impressions Target from
time to time during the Initial Term in the form of advertising
space within the AOL Network of comparable value to the
undelivered Impressions (as reasonably determined and agreed by
the Parties).
2. PROGRAMMING; MANAGEMENT; CROSS-PROMOTION
2.1 CONTENT. The ICP Internet Site and ICP Programming shall consist
of the Content described on the programming plan attached as
Exhibit A-2 (the "Programming Plan") and shall not contain any
pointers or links to any other area on or outside the AOL Network
(including any other ICP Interactive Site), other than as
expressly described on Exhibit A-2, without AOL's prior written
consent. ICP will maintain the Core Systems and the Res System
accessible through the ICP Internet Site and ICP Programming and
will be responsible for arranging for the connection of the Res
System to the Travel Systems (through the Core Systems). Upon
AOL's reasonable request, to the extent technically and
commercially feasible, ICP shall integrate into the ICP Internet
Site and/or the ICP Programming (i) additional Content or services
provided by AOL or a third party (including Travel Suppliers, as
defined herein) including, without limitation, by integrating
additional tools, functionality, features and/or applications into
the Res System, and/or (ii) additional revenue generating
inventory or
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<PAGE> 3
services, provided that ICP does not already offer commerce
inventory at such time on the ICP Internet Site or ICP Programming
that is comparable in all material respects to such additional
commerce inventory. In connection with such integration, ICP
shall, without limitation, (a) provide AOL and the applicable
third party Content or service provider, to the extent technically
and commercially feasible, with the appropriate booking modules
and other necessary technology or assistance to integrate the Res
System with the above-referenced Content, services or commerce
inventory, as applicable and (b) display, in a mutually agreed
upon format, branding and attribution for the third party provider
of any integrated Content (including Travel Suppliers). Pages
containing third party Content (including Travel Suppliers')
hosted by such third party shall display such third party's
branding as reasonably determined by AOL. ICP shall inform AOL of
relevant search terms and terminology associated with popular
areas and functionality within the ICP Internet Site and ICP
Programming for AOL's promotional and Content integration
purposes. The inclusion of any additional Content for distribution
through the AOL Network (including, without limitation, any
features, functionality or technology) not expressly described on
Exhibit A-2 shall be subject to AOL's reasonable prior written
approval.
2.2 MANAGEMENT.
(a) Management. ICP shall design, create, edit, manage, review,
update, host and maintain the ICP Internet Site, ICP
Programming and the Licensed Content in a timely and
professional manner and in accordance with the terms of
this Agreement and shall keep the Licensed Content current,
accurate and well-organized at all times. ICP shall
provide, maintain and support the ICP Software and any
hardware necessary to operate, maintain and support the ICP
Software, the ICP Internet Site and ICP Programming. Except
as specifically provided for herein, AOL shall have no
obligations of any kind with respect to the ICP Internet
Site or ICP Programming. ICP shall be responsible for
hosting, and any hosting or communication costs associated
with, the pages of the Service as described in Exhibit A-2
(including without limitation the ICP Internet Site)
including, without limitation, the costs associated with
any agreed-upon direct connections between the AOL Network
and the ICP Internet Site or ICP Programming. ICP shall
ensure that the Licensed Content within the ICP Internet
Site and ICP Programming is substantially similar in all
material respects to the Content distributed by ICP through
any other ICP Interactive Site, including, without
limitation, quality, breadth, depth, timeliness,
functionality, features, prices of products and services
and terms and conditions, except as otherwise expressly
stated on Exhibit A, and subject to any limitations imposed
by any ICP supplier (it being agreed that (i) any such
limitation may not be imposed at ICP's direction and (ii)
if an ICP supplier imposes any such limitation, ICP shall
be required to make [***] such supplier that ICP be allowed
to satisfy its obligations under this sentence (the matters
referred to in clauses (i) and (ii) of this parenthetical
being hereinafter referred to as the "ICP Supplier
Limitation Standard")); provided that any specific changes
in Content required hereby shall be subject to AOL's review
and reasonable approval and the terms of this Agreement. In
connection with the foregoing sentence, and to the extent
commercially and technically feasible, ICP shall provide
AOL with the opportunity to add any new Content developed
by ICP into the Service as soon as such Content becomes
generally available. To the extent such performance is
within ICP's direct control (e.g., including pursuant to a
relationship with an independent contractor), ICP shall use
commercially reasonable best efforts to ensure that, on
average, the ICP Internet Site and ICP Programming perform
with respect to page size, loading speed and download time,
at least equal to the performance of the remainder of the
Service. ICP's management of the ICP Internet Site and ICP
Programming (including the Res System) shall also be
subject to the obligations set forth in subsection (b)
below and Exhibits E and F, subject to limitations imposed
by ICP's suppliers and to the extent such performance is
within ICP's direct control (it being agreed that the ICP
Supplier Limitation Standard shall be satisfied).
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<PAGE> 4
(b) Performance Standards. Except as provided in this Agreement
or otherwise mutually agreed, ICP shall use its
commercially reasonable best efforts to comply with the
performance standards (the "Performance Standards") set
forth in Exhibit E, including, without limitation, with
respect to the ICP Programming and ICP Internet Site, as
well as complying with AOL's then current reasonable
applicable commercial specifications and guidelines. To the
extent Performance Standards are not established for any
portion of the Licensed Content or services provided by ICP
hereunder, ICP will use its commercially reasonable best
efforts to provide such Licensed Content or perform such
services at a level of accuracy, quality, completeness, and
responsiveness which meets or exceeds prevailing industry
standards. Upon any discovery by ICP, or receipt by ICP of
written notice by AOL, of failure by ICP to meet a
Performance Standard, (a) ICP shall promptly investigate
the failure and inform AOL in writing of such failure and
the "root causes" thereof (to the extent they can be
determined) no later than five (5) business days after ICP
discovers the failure or receives such written notice by
AOL, (b) ICP shall develop an action plan for remedying the
failure within five (5) business days thereafter with
consultation from AOL, and (c) within thirty (30) days of
development of such action plan, ICP shall fully institute
such plan and reach compliance with the applicable
Performance Standard. In the event ICP has not complied
with the Performance Standard at the end of such 30-day
period, then upon written notice to ICP, AOL may (in
addition to any other available remedies) decrease or cease
the promotion, exclusivity and/or other commitments AOL
provides to ICP hereunder, in which event AOL will be
relieved of the proportionate amount of any promotional
commitment made to ICP by AOL hereunder corresponding to
such decrease in promotion and all revenue threshold(s) set
forth in Section 4 will each be adjusted proportionately to
correspond to any decrease in promotion and other
obligations. AOL may, in its sole but reasonable
discretion, enter into agreements with third parties to
provide products or services sufficient to cure ICP's
failure to comply with the Performance Standards, provided
that AOL shall [***]: (i) so that any such substitute or
replacement products or services are [***] to cure ICP's
failure to comply with such Performance Standard and (ii)
to ensure that the term of any such agreement shall be as
[***] to the [***] that ICP and AOL shall mutually agree in
good faith will be [***] remedy ICP's failure to comply
with the Performance Standards; and provided, further, that
where ICP's failure to comply with such Performance
Standard materially and negatively impacts the AOL Member
experience, then AOL may take any such action with respect
to cessation or reduction of the promotion or distribution
of the ICP Internet Site and/or ICP Programming referred to
in the preceding sentence at any time prior to or after the
expiration of such 30-day period until such noncompliance
is corrected. In addition, if ICP fails to comply with any
material term of this Agreement other than a Performance
Standard, including without limitation ICP's promotional
obligations under Section 2.4, then upon written notice to
ICP, AOL will have the right (in addition to any other
available remedies) to decrease or cease the promotion or
any other contractual obligations of AOL hereunder until
such time as ICP corrects its non-compliance, in which
event during such period of non-compliance AOL will be
relieved of the proportionate amount of any promotional
commitment made to ICP by AOL hereunder directly
corresponding to such decrease in promotion and the
relevant revenue threshold(s) set forth in Section 4 will,
as appropriate, be adjusted proportionately to correspond
to any decrease in promotion and other obligations during
such period of non-compliance. Notwithstanding the
foregoing, if Performance Standards or other ICP
obligations are not met by ICP because of (a) breaches by
AOL of its obligations under this Agreement; (b) conditions
in the AOL Network for which ICP is not responsible and has
expended commercially reasonable efforts to address; or (c)
a Force Majeure Event, then such non-compliance shall not
be deemed a Dispute and ICP shall be excused from the
Performance Standards or such other ICP obligations for as
long as such condition exists
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<PAGE> 5
(provided, however, that in the case of a Force Majeure
Event, AOL will have its rights set forth in the two
preceding sentences).
(c) Management Team. The Parties shall designate a management
team comprised of representatives from ICP and AOL to
implement the ICP Internet Site and ICP Programming on the
AOL Network, develop annual design and implementation
plans, and determine annual budgets therefor. In addition,
the management team will work to maximize revenue
(including Advertising Revenue and Commissions) by
coordinating advertising sales programs. Each of ICP and
AOL will specifically evaluate its respective
representatives on the management team and compare their
performance to the performance of the Parties objectives
(i.e., maximizing Advertising Revenues and Commissions). In
addition, a steering committee made up of one executive of
ICP and one executive of AOL will oversee the management
team and will approve annual designs and budgets, and will
be responsible for addressing issues arising out of the
management team.
2.3 LOWEST PRICE COMMITMENT; SPECIAL OFFERS. ICP shall ensure that the
prices for Products offered to AOL Members through the ICP
Internet Site and ICP Programming do not exceed prices for
substantially similar Products offered by or on behalf of ICP
through any other ICP Interactive Site, and all products and
services offered on any ICP Interactive Site shall be made
available to AOL Members as Products hereunder, where technically
feasible; provided, however, that the foregoing commitments are
subject to the limitations imposed by ICP's suppliers (it being
agreed that the ICP Supplier Limitation Standard shall be
satisfied). In addition, ICP shall, at all times, promote through
the ICP Internet Site and ICP Programming at least one exclusive
special offer to AOL Members (the "Special Offers"). The Special
Offers made available by ICP to AOL Members shall provide a
meaningful member benefit to AOL Members, such as discounted
fares, free upgrades or other price discounts, product
enhancements, unique service benefits or other special features.
ICP shall provide AOL with reasonable prior notice of Special
Offers so that AOL can market the availability of such Special
Offers in the manner AOL deems appropriate in its editorial
discretion. ICP and AOL will regularly work together to create
other effective and mutually agreeable promotions for AOL Members.
AOL may negotiate special and promotional offers to be made to AOL
Members by third parties (other than ICP Competitors) and ICP
shall use commercially reasonable best efforts to implement and
integrate into the ICP Internet Site and ICP Programming any
special or promotional offers made by such third parties to AOL
Members, including by using commercially reasonable best efforts
to permit such third party offers to be booked through the Res
System, to the extent applicable and provided that ICP receives a
commission for such services at its standard percentage rates
based on the actual price charged for such offer. At AOL's
reasonable request, the reservations main pages within the ICP
Internet Site and ICP Programming shall incorporate a "bargains"
or "specials" link that links to an area promoting all special and
promotional offers within the Service by ICP, AOL and/or such
third parties.
2.4. CROSS-PROMOTION.
2.4.1. COOPERATION. Each Party shall cooperate with and reasonably
assist the other Party in supplying material for marketing
and promotional activities in connection with this
Agreement.
2.4.2. INTERACTIVE SITE. (a) [***] promotional buttons on the
www.travelocity.com or any successor site, ICP shall
include an AOL promotional button (the "AOL Promos")
appearing on such site no less prominently than the button
of any other Interactive Service, to promote such AOL
products or services as AOL may designate (for example, the
America Online brand service, the CompuServe brand service,
the AOL.com site, the Digital City services or the AOL
Instant Messenger service). AOL will provide the creative
Content to be used in the AOL Promos. ICP shall post (or
update, as the case
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<PAGE> 6
may be) the creative Content supplied by AOL within the
spaces for the AOL Promos within five days of its receipt
of such Content from AOL. Without limiting any other
reporting obligations of the Parties contained herein, ICP
shall provide AOL with monthly written reports specifying
the number of impressions to the pages containing the AOL
Promos during the prior month. In the event that AOL elects
to serve the AOL Promos on the www.travelocity.com or any
successor site from an ad server controlled by AOL or its
agent, ICP shall take all reasonable operational steps
necessary to facilitate such ad serving arrangement,
including, without limitation, inserting HTML code
designated by AOL on the pages of the www.travelocity.com
or any successor site on which the AOL Promos will appear
and sizing the AOL Promo to the correct size for AOL's
server (90x30 pixels or 70x70 pixels).
(b) To the extent that ICP chooses to provide additional
tools and technology for www.travelocity.com or any
successor site, ICP shall provide AOL with the opportunity
to provide such tools and technology for
www.travelocity.com or any such successor site and the
parties will negotiate in good faith to reach an agreement
within ten (10) business days on the material terms
thereof, provided, however, that neither party shall be
under any obligation to reach agreement with respect to the
provision of such additional tools or technology.
2.4.3. OTHER MEDIA. In ICP's television, radio, print and "out of
home" (e.g., buses and billboards, point of purchase and
other "place-based" promotions) advertisements and in any
publications, programs, features or other forms of media
over which ICP exercises [***] editorial control, ICP will,
commencing upon the later of (x) the Launch Date and (y)
the date of completion of Site and Content Preparation (as
defined in Section 8.3), in conjunction with its domestic
U.S. advertising, use Promotional Efforts (as defined
below) to include specific references or mentions (orally
where possible) of the availability of the ICP Internet
Site through the AOL Properties. Except when prevented by
the circumstances set forth under clauses (a) - (d) of the
definition of Promotional Efforts below, ICP will include
with the listing, mention, reference or display of or
navigation to the "URL" for any ICP Interactive Site a
reasonably equivalent listing of the "keyword" term on AOL
for the ICP Internet Site, which listing shall conform to
the keyword guidelines attached hereto as Exhibit G, and
which shall be displayed in a manner no less prominent than
any other similar promotion. All such references or
mentions of AOL, and the use of AOL's trademarks, trade
names and service marks in connection therewith, shall be
in accordance with Section II of Exhibit C. For purposes of
this Section 2.4.3, "Promotional Efforts" shall mean that
ICP shall include such listings, mentions or references in
all of its advertising but may exclude such listings,
mentions or references (a) in trade shows and trade
advertising, (b) where it is commercially or technically
infeasible or infeasible due to material time and space
limitations (provided, that this exception shall not permit
ICP to exclude such listings, mentions or references solely
for creative reasons), (c) where ICP is advertising solely
Content that is not available (and is not required
hereunder to be made available) through the ICP Internet
Site and/or ICP Programming, and (d) where ICP is not
permitted to include them as a result of an arrangement,
including any co-op arrangement, with a third party entered
into in good faith in which ICP does not have primary
control over the content of the advertisement (e.g., a
joint promotion with American Airlines in which American
Airlines refuses to permit any such listing, mention or
reference).
2.4.4. PREFERRED ACCESS PROVIDER. ICP shall not promote any
Interactive Service as the preferred access provider
through which a user can access ICP's travel services (and
ICP
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<PAGE> 7
shall not implement or authorize any other promotions on
behalf of any third parties which are inconsistent with the
foregoing); provided, however that nothing herein shall
limit ICP's right to promote any other Interactive Service
as a means through which a user can access ICP's travel
services; provided, further, that nothing herein shall
prevent ICP from promoting AOL as its preferred access
provider if ICP shall elect, in its sole discretion, to do
so.
2.5 OEM ALTERNATIVE. If (i) ICP exercises its right under Section 4.3
to convert to the OEM alternative (the "OEM Alternative") or (ii)
AOL elects to extend this Agreement in accordance with Section 8.1
by converting to the OEM Alternative (and during any subsequent
extension thereof), the following provisions shall apply:
2.5.1 CONTINUATION OF SERVICE. Except as expressly provided
otherwise in this Section 2.5, following the date of
effectiveness of the OEM Alternative (the "OEM Effective
Date"), ICP shall (i) continue to provide, maintain and
operate the Res System and (ii) provide, maintain and
operate (x) the ICP Internet Site (but, with respect to
Licensed Content thereon, only OEM Licensed Content (as
hereinafter defined)), (y) the ICP Programming (but, with
respect to Licensed Content therein, only OEM Licensed
Content) and (z) all Licensed Content except such Licensed
Content that AOL elects in its discretion not to license
("OEM Licensed Content") to, for and through the AOL
Network in accordance with the terms of this Agreement (the
matters referred to in clauses (i) and (ii) above being
hereinafter collectively referred to as the "OEM Full
Package").
2.5.2 AOL CARRIAGE AND PROMOTIONAL OBLIGATIONS. Following the OEM
Effective Date and throughout the Term, AOL shall continue
to (i) promote the Service as an integral part of its
programming offerings throughout the AOL Properties and
(ii) provide ICP with permanent positioning within the
Service which positioning is readily accessible to AOL
Members. AOL shall be relieved of all other obligations
contained in this Agreement in respect of carriage,
promotions and Impressions.
2.5.3 EXCLUSIVITY FOLLOWING OEM EFFECTIVE DATE. Upon the OEM
Effective Date, the exclusivity provisions of Sections 3.1
and the right of first offer provisions of Section 3.2
shall terminate except that AOL shall not permit any
Advertising or any Content of any ICP Competitor to appear
or be presented upon any pages hosted by ICP within the
Service, except to the extent AOL is permitted pursuant to
Sections 3.1(a)(3), 3.1(b), 3.1(e) or 3.2 to do so prior to
the OEM Effective Date; provided, however, that AOL may, in
its sole discretion, elect, pursuant to Section 8.1, to
continue to be bound by all of the exclusivity provisions
of Sections 3.1 and 3.2 after the OEM Effective Date.
2.5.4 REVISED ADVERTISING AND COMMISSION REVENUE ALLOCATION. Upon
the OEM Effective Date, (i) ICP's obligations under
Sections 4.1 and 4.2.2 and (ii) AOL's obligations under
Section 4.2 shall cease, provided that neither party shall
be relieved of its obligations to the other party in
respect of periods ending on or prior to the OEM Effective
Date. In addition, each party shall be relieved of its
obligations under Sections 4.4, 4.9 and 4.11. Following the
OEM Effective Date: (i) ICP shall be entitled to (x) [***]%
of the Commissions and (y) [***]% of all Advertising
Revenue derived from pages containing only OEM Licensed
Content; and (ii) AOL shall be entitled to all other
Advertising Revenue.
2.5.5 TERMINATION OF PROMOTIONAL AND RELATED OBLIGATIONS. Upon
the OEM Effective Date, ICP shall be relieved of its
obligations under Section 2.4, provided that ICP thereafter
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during the Term shall continue to have the right in its
sole discretion, but not the obligation, to continue to use
the "keyword" term on AOL for the ICP Internet Site, ICP
Programming and OEM Licensed Content in accordance with the
keyword guidelines attached hereto as Exhibit G.
2.5.6 TERMINATION OF CERTAIN CONTENT AND PERFORMANCE RIGHTS AND
OBLIGATIONS. If, following the OEM Effective Date AOL shall
request, pursuant to Section 2.1, that ICP undertake (or
cause to be undertaken by any ICP affiliate or independent
contractor) any work in order to integrate any additional
Content or services into the ICP Internet Site and/or the
ICP Programming, AOL shall at its option, either (i)
promptly reimburse ICP for ICP's actual, all in, cost of
performing (or causing to be performed) such work
(including allocable costs of hardware, software, labor,
overhead and depreciation as determined in accordance with
then current audit principles) with the exception of minor
or incidental changes, plus a margin of [***]% of such
actual, all in cost, provided, however, that ICP shall, as
promptly as practicable after such a request by AOL,
provide AOL with a good faith estimate of such actual, all
in cost, or (ii) pay to ICP, in accordance with Section
4.5, [***]% of all Advertising Revenue from Advertising
appearing on pages containing any such additional Content.
Upon the OEM Effective Date, ICP shall only be required to
use commercially reasonable best efforts to satisfy its
obligations under Section 2.2.
2.5.7 REVISIONS TO OEM LICENSED CONTENT. Upon any request by AOL
on or after the OEM Effective Date, (i) ICP shall remove
any ICP or other branding and attribution from within the
OEM Licensed Content and (ii) AOL may request alterations
to the user interface of the ICP Internet Site, ICP
Programming, the Res System and OEM Licensed Content and
ICP shall perform such work if it is commercially and
technically feasible to do so. AOL shall promptly reimburse
ICP for ICP's actual, all in, cost of performing (or
causing to be performed) such work (including allocable
costs of hardware, software, labor, overhead and
depreciation as determined in accordance with then current
audit principles) with the exception of minor or incidental
changes, plus a margin of [***]% of such actual, all in,
cost; provided, however, that ICP shall, as promptly as
practicable after such a request by AOL, provide AOL with a
good faith estimate of such actual, all in cost.
2.5.8 TERM. If ICP exercises its rights under Section 4.3 to
convert to the OEM Alternative, AOL shall have the right to
terminate this Agreement (i) upon thirty (30) days prior
written notice to ICP pursuant to Section 4.3, or (ii)
thereafter by written notice to ICP not less than thirty
(30) days prior to the expiration of any Contract Year
during the Initial Term. This Agreement and the OEM
Alternative shall terminate upon the expiration of the
Initial Term, provided that if AOL elects, upon the
expiration or termination of the Initial Term, to extend
this Agreement in accordance with Section 8.1 or 8.2 by
converting to the OEM Alternative, this Agreement shall be
extended in accordance with Section 8.1, and subject to
further extension, in accordance with Section 8.1. In
either event, both ICP and AOL shall retain their rights to
terminate this Agreement in accordance with Section 8.2.
2.5.9 CONTINUED EFFECTIVENESS OF AGREEMENT. Except to the extent
expressly provided in this Section 2.5, following the OEM
Effective Date, this Agreement shall remain in full force
and effect.
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3. PREMIER STATUS
3.1 EXCLUSIVITY. AOL agrees that beginning on (i) the later of the
Launch Date and completion of Site and Content Preparation, ICP
shall be prominently positioned on the AOL Properties and the
Service as set forth in the Programming Plan, (ii) the Merger
Date, the Res System shall, subject to paragraphs (a) through (e)
and Section 3.2 below and the continuing availability on the AOL
Properties of the Preview Reservations Engine pursuant to the
Preview Agreement, be the exclusive Reservations Engine for all
travel-related services, including, but not limited to, air, car,
hotel, Vacation Packages and Cruises within the AOL Properties and
the Service and (iii) the Merger Date, AOL shall not, subject to
paragraphs (a) through (e) and Section 3.2 below, promote or
market the travel-related products or services of any ICP
Competitor within the AOL Properties and the Service. AOL will use
its commercially reasonable best efforts to ensure that all of its
agreements or arrangements with [***] for promotion, marketing,
distribution or carriage on the AOL Properties entered into
beginning on the date of execution of this Agreement [***] a
provision [***] promoting an ICP Competitor on any of the AOL
Properties [***] AOL is [***] promoting an ICP Competitor under
this Section 3. In addition, notwithstanding the foregoing
exclusivity, no provision of this Agreement shall limit AOL's
ability (on or off the AOL Properties except as provided in
paragraph (c) below) to:
(a) promote, market or distribute:
(1) [***];
(2) [***], AND
(3) [***]; or
(4) [***].
(b) subject to Section 4.2, sell Advertising, including
standard placements in any shopping area or channel, to
any Travel Suppliers (IT BEING AGREED THAT THE TWO CLICK
REQUIREMENT SHALL NOT APPLY TO A TRAVEL SUPPLIER'S OWN
RESERVATIONS ENGINE OR A RESERVATIONS ENGINE PROVIDED TO
A TRAVEL SUPPLIER BY A THIRD PARTY CONTRACTOR);
(c) enter into an agreement with any third party for the
primary purpose of acquiring new AOL Members pursuant to
which such third party is allowed to promote or market
products or services off the AOL Properties in a
co-branded or "private label" environment solely to AOL
Members that are acquired as a result of such agreement;
(d) create editorial commentary or contextual links, such as
news stories, editorial features, stock quotes or search
results, relating to any travel-related company,
including ICP Competitors, Travel Suppliers and Ancillary
Service Providers, provided that AOL shall not [***] any
[***] in any [***] any such [***] creating or presenting
any such editorial commentary or contextual links; or
(e) undertake activities or perform duties pursuant to: (i)
existing agreements between: (x) AOL and any
travel-related interactive content or service provider
(whether an ICP Competitor or not) other than Travel
Suppliers, pursuant to which such travel-related
interactive content or service provider makes a
Reservations Engine available on any AOL Property or the
Service or (y) between AOL and any ICP Competitor
pursuant to which such ICP Competitor promotes
travel-related Content on any AOL Property or the
Service, provided that all such material existing
agreements, described in clauses (x) and (y) above, of
which [***] are
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<PAGE> 10
[***] this Agreement, which [***] each such [***] and the
[***] and [***] of each such [***]; or (ii) any
agreements to which AOL becomes a party subsequent to the
Merger Date as a result of a merger, acquisition or other
similar transaction; provided, that (x) nothing in this
paragraph (e)(ii) shall relieve AOL of its obligation to
comply with the exclusivity provisions set forth in the
first paragraph of this Section 3.1, and (y) after the
Merger Date AOL may not extend or consent to the
extension of the term of any such arrangements without
the prior written consent of ICP. "Knowledge" means, for
purposes of this Section 3.1(e), the knowledge of any of
the officers or employees of AOL, after due inquiry.
Subject to Section 3.1(a) above, ICP acknowledges that AOL
does not and cannot guarantee that AOL Members will not be
able to access alternative Reservations Engines through the
AOL Properties (e.g., using an Internet browser).
3.2 ANCILLARY SERVICE PROVIDERS. ICP's exclusivity (INCLUDING ANY "TWO
CLICK REQUIREMENT") does not apply to Ancillary Services (as
defined below); provided, however, that AOL shall not enter into
any agreement or arrangement with any person or entity other than
a Travel Supplier for the provision by such person or entity
primarily of Ancillary Services (an "Ancillary Service Provider")
unless AOL first provides ICP with the opportunity to provide such
Ancillary Service and the Parties, after good faith negotiations,
fail to reach agreement within ten (10) business days on the
material terms pursuant to which ICP shall provide such Ancillary
Service; provided, however, that neither party shall be under any
obligation to reach agreement with respect to ICP providing such
Ancillary Services. Any arrangement or agreement between AOL and
any Ancillary Service Provider shall be non-exclusive (i.e., shall
permit AOL to enter into agreements and arrangements with other
parties (including ICP) to provide the same or a similar Ancillary
Service). Any Ancillary Service provided by any Ancillary Service
Provider (other than ICP) shall be integrated in the Service as a
clear secondary alternative to the Res System. "Ancillary Service"
shall mean a service for which AOL provides contextually
integrated commerce placements (i.e., permanent promotional
placements for purposes of securing bookings for or through the
Ancillary Services) within the Service that relates to primarily
travel auction services, primarily travel-related consolidation
services or primarily travel-related time share services, in each
case through which travel can be booked, or to primarily
travel-related classifieds. All of AOL's agreements with Ancillary
Service Providers in respect of an Ancillary Service which require
AOL to provide such Ancillary Service Provider with contextually
integrated commerce placements within the Service [***].
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4. PAYMENT; REPORTING
4.1 PAYMENTS. ICP shall pay AOL Two Hundred Million Dollars
($200,000,000), subject to and in accordance with the following
provisions:
4.1.1. Technology License. ICP shall pay AOL a non-refundable
guaranteed payment of Ten Million Dollars ($10,000,000) on
the Merger Date for the technology license being granted by
AOL to ICP for certain AOL Tools pursuant to this
Agreement.
4.1.2. Trademark License. ICP shall pay AOL a payment of [***] for
the trademark license being granted by AOL to ICP pursuant
to this Agreement, which amount shall be paid as follows:
(a) a non-refundable guaranteed payment of $2,500,000 on
the Merger Date and (b) [***] on or before thirty (30) days
prior to each of the dates that are twelve (12) months,
eighteen (18) months, twenty-four (24) months, thirty (30)
months, thirty-six (36) months and forty-two (42) months,
respectively, from the Launch Date, all of which payments
shall be non-refundable except such payments totaling
[***].
4.1.3. Carriage Payments. ICP shall pay AOL in respect of the
carriage, exclusivity, premier status, and other rights and
benefits afforded ICP hereunder, the following amounts:
Contract Year 1: a non-refundable guaranteed payment
of Twenty-Seven Million Five Hundred Thousand
Dollars ($27,500,000) on the Merger Date.
Contract Year 2: a non-refundable payment of [***]),
which amount shall be paid in two equal
installments on or before thirty (30) days
prior to each of the dates that are twelve
(12) months and eighteen (18) months,
respectively, from the Launch Date.
Contract Year 3: a non-refundable payment of [***],
which amount shall be paid in two equal
installments on or before thirty (30) days
prior to each of the dates that are
twenty-four (24) months and thirty (30)
months, respectively, from the Launch Date.
Contract Year 4: a non-refundable payment of [***],
which amount shall be paid in two equal
installments on or before thirty (30) days
prior to each of the dates that are
thirty-six (36) months and forty-two (42)
months, respectively, from the Launch Date.
Contract Year 5: a payment of [***], which amount
shall be paid as follows:
(a) a [***] (in accordance with Section 4.3)
payment of [***] to be prepaid as
follows: (1) [***] on or before thirty
(30) days prior to each of the dates
that are twelve (12) months and eighteen
(18) months, respectively, from the
Launch Date (collectively, the "First
Prepayment"); (2) [***] on or before
thirty (30) days prior to each of the
dates that are twenty-four (24) months
and thirty (30) months, respectively,
from the Launch Date (collectively, the
"Second Prepayment"); and (3) [***] on
or before thirty (30) days prior to each
of the dates that are thirty-six (36)
months and forty-two (42) months,
respectively, from the Launch Date
(collectively, the "Third Prepayment").
Each of the First Prepayment, Second
Prepayment and Third Prepayment are
designated as [***] against
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<PAGE> 12
[***] payments and are specifically
[***] in accordance with Section [***]
if this Agreement is converted to the
OEM Alternative (i.e., if ICP elects to
convert to the OEM Alternative and such
election is not properly nullified in
accordance with Section 4.3) pursuant to
Section 4.3 or if AOL terminates this
Agreement pursuant to Section 4.3 after
ICP elects to convert this Agreement to
the OEM Alternative.
(b) a non-refundable payment of [***], to be
paid in two equal installments on or
before thirty (30) days prior to each of
the dates that are forty-eight (48)
months and fifty-four (54) months,
respectively, from the Launch Date.
4.2 ICP ADVERTISING REVENUE AND COMMISSIONS SHARE.
4.2.1 Within thirty (30) days after the end of each quarter
during each Contract Year, AOL shall pay ICP [***]%) of all
Advertising Revenues collected by AOL during such quarter
from sales of:
(i) Advertising placed on pages within the Service;
(ii) Advertising placed on pages within the AOL Properties
on which the Res System or the ICP Programming or any
portion thereof is integrated (as opposed to linked to
from or promoted on);
(iii) Advertising to Qualified Travel Suppliers placed on
pages outside of the Service but within the AOL
Properties; and
(iv) Advertising to Ancillary Service Providers placed on
pages outside of the Service but within the AOL
Properties.
Notwithstanding the foregoing, if Advertising Revenues for
such Contract Year plus any Elected Payments, in the
aggregate, exceed the Advertising Revenues Hurdle
applicable to such Contract Year, AOL shall pay ICP with
respect to Advertising Revenues attributed to the remainder
of such Contract Year in excess of such Advertising Revenue
Hurdle:
(i) [***] percent ([***]%) of Advertising Revenues
collected by AOL from sales of Advertising placed on
pages within the Service;
(ii) [***] percent ([***]%) of Advertising Revenues
collected by AOL from sales of Advertising placed on
pages within the AOL Properties on which the Res
System and/or ICP Programming is integrated (as
opposed to in linked to from or promoted on);
(iii) [***] percent ([***]%) of Advertising Revenues
collected by AOL from the sale to Qualified Travel
Suppliers of Advertising outside of the Service but
within the AOL Properties; and
(iv) [***] percent ([***]%) of Advertising Revenues
collected by AOL from sales of Advertising to
Ancillary Service Providers placed on pages outside of
the Service but within the AOL Properties.
AOL shall have the right, at any time, from time to time,
and in its sole discretion (except as provided in the
following provision), to pay ICP Elected Payments;
provided, however, that AOL may not make an Elected Payment
with respect to the Advertising Revenue Hurdle applicable
to the fourth Contract Year without ICP's prior written
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consent (which ICP may grant or withhold in its sole
discretion) if and to the extent that Advertising Revenues
for the fourth Contract Year are less than [***]% of the
Advertising Revenue Hurdle set forth below for the fourth
Contract Year. "Elected Payments" shall mean those amounts
that AOL pays to ICP for the purpose of satisfying an
Advertising Revenue Hurdle and/or the Cumulative OEM Hurdle
Amount in excess of Advertising Revenues.
"Advertising Revenue Hurdle" shall mean, for each
corresponding Contract Year, the amount set forth below
opposite such Contract Year:
First Contract Year: $[***]
Second Contract Year: $[***]
Third Contract Year: $[***]
Fourth Contract Year: $[***]
Fifth Contract Year: $[***]
4.2.2 Subject to Section 2.5.4, during each Contract Year, ICP
shall pay AOL [***] percent ([***]%) of Commissions for
such Contract Year.
4.3 OEM HURDLES. On or before each of the dates (each, a "Review
Date") which are sixty (60) days prior to the last day of the
second, third and fourth Contract Years, respectively, if the
total Advertising Revenues during the Term plus the aggregate
amount of all Elected Payments made during the Term plus AOL's
good faith projection of the Advertising Revenues for the fourth
quarter of such Contract Year (collectively, the "Projected Ad
Revenues and Elected Payments") do not equal or exceed the
Cumulative OEM Hurdle Amount (as defined below) required to be
achieved by the last day of such Contract Year, then ICP shall
have the right, by giving AOL written notice within thirty (30)
days after such Review Date, to convert this Agreement into the
OEM Alternative as described in Section 2.5. Notwithstanding the
foregoing, any such election by ICP shall be nullified, and this
Agreement shall not convert to the OEM Alternative, if, prior to
the expiration of such Contract Year, either (a) the actual
Advertising Revenues during the Term plus Elected Payments made
during the Term equal or exceed the Cumulative OEM Hurdle Amount
required to be achieved by the last day of such Contract Year; or
(b) AOL pays ICP the shortfall between Advertising Revenues during
the Term plus Elected Payments paid to ICP during the Term and the
Cumulative OEM Hurdle Amount for such Contract Year; provided,
however, that AOL may not make an Elected Payment with respect to
the Cumulative OEM Hurdle Amount for the fourth Contract Year
without ICP's prior written consent (which ICP may grant or
withhold in its sole discretion) if and to the extent that
Advertising Revenues during the Term plus Elected Payments paid to
ICP prior to the last day of the fourth Contract Year are less
than [***]% of the Cumulative OEM Hurdle Amount required to be
achieved by the last day of such Contract Year. If ICP elects to
convert this Agreement into the OEM Alternative, and such election
is not nullified pursuant to the preceding sentence, then AOL
shall have the right, at its option, to terminate this Agreement
by giving ICP written notice by the later of (i) thirty (30) days
following such election by ICP or (ii) the last day of the
applicable Contract Year.
"Cumulative OEM Hurdle Amount" shall mean, as of the last day
of each corresponding Contract Year, the amount set forth
below opposite such Contract Year:
Second Contract Year: $[***]
Third Contract Year: $[***]
Fourth Contract Year: $[***]
In the event this Agreement is converted to the OEM Alternative
pursuant to this Section 4.3 or if AOL terminates this Agreement
pursuant to this Section 4.3, AOL shall [***] to ICP (I) [***]
plus
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<PAGE> 14
the [***] if such conversion to the OEM Alternative occurred with
respect to the first Review Date, (II) [***] plus the [***] and
[***] if such conversion to the OEM Alternative occurred with
respect to the second Review Date, or (III) [***] plus the [***]
if such conversion to the OEM Alternative occurred with respect to
the third Review Date. Such refunds shall be paid by AOL within
thirty (30) days after the conversion to the OEM Alternative or
the date of termination.
4.4 ADDITIONAL REVENUE STREAMS. In the event ICP receives or desires
to receive, directly or indirectly, any compensation in connection
with the Service (other than Advertising Revenues and Commissions)
or otherwise restructures the nature of its transactions with AOL
Users (e.g., establishment of club memberships or conducting
auctions) (collectively, "Additional Revenues"), ICP shall
promptly inform AOL in writing and the Parties shall negotiate in
good faith regarding the equitable portion of such Additional
Revenues that shall be shared with AOL. Any portion shared with
AOL shall, at a minimum, satisfy the Parties' joint goal that AOL
receive its equitable share of revenues generated by ICP
(including any new or incremental revenues) in connection with the
Service. If the Parties cannot, after negotiating in good faith
with each other, reach an agreement regarding Additional Revenues
for a period of thirty (30) days after ICP's request to negotiate,
ICP shall not be permitted to collect such Additional Revenues or
restructure the nature of its transactions with AOL Users.
4.5 PAYMENT SCHEDULE. Except as otherwise specified herein, each Party
agrees to pay the other Party all amounts received and owed to
such other Party as described herein on a quarterly basis within
[***] days following the end of the quarter in which such amounts
were collected by such Party. The first quarter for which payment
is to be made shall begin on the Launch Date.
4.6 WIRED PAYMENTS. All payments by ICP hereunder shall be paid in
immediately available, non-refundable U.S. funds wired to the
"America Online" account, Account Number [***] at the [***], 1
[***], New York, New York 10081 ([***]), or such other account of
which AOL shall give ICP written notice. All payments by AOL
hereunder shall be paid in immediately available, non-refundable
U.S. funds wired to the "Sabre Inc." account, Account Number [***]
at Citibank NA, 399 Park Avenue, New York, New York 10081 (ABA:
[***]), or such other account of which ICP shall give AOL written
notice.
4.7 SALES REPORTS. ICP shall provide AOL in an automated manner with a
monthly report accompanying the payments to be made pursuant to
this Section 4 (as applicable) in a mutually agreeable format
consistent with the reports provided to AOL by its other
interactive content providers, detailing the following activity in
such period (and any other information mutually agreed upon by the
Parties or reasonably necessary for measuring revenue activity by
ICP through the ICP Internet Site and ICP Programming):
Commissions, Additional Revenues, Overrides, number of profiles
created, transactions by type (air, hotel, car) and by source
(Travel Channel, AOL.com, other channels), chargebacks and credits
for returned or cancelled goods or services (and, where possible,
an explanation of the type of reason therefor, e.g., bad credit
card information, poor customer service, etc.), and credit card
processing fees charged and/or collected by the credit card
issuer. AOL will be entitled to use the Sales Reports in its
business operations, subject to the terms of this Agreement, and
AOL acknowledges that such reports may contain Confidential
Information as defined herein.
4.8 FRAUDULENT TRANSACTIONS. To the extent permitted by applicable
laws, ICP shall provide AOL with a prompt report of any fraudulent
order, including the date, screenname and amount associated with
such order, following ICP obtaining knowledge that the order is,
in fact, fraudulent.
4.9 AOL USAGE REPORTING. AOL shall make available to ICP a monthly
report specifying for the prior month aggregate usage and
Impressions with respect to ICP's presence on the AOL Network,
which are similar in substance and form to the reports provided by
AOL to other content partners similar to ICP.
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4.10 ICP INTERNET SITE REPORTING. If and to the extent ICP otherwise
collects and processes the following data regarding impressions by
AOL Members, ICP will supply AOL with monthly reports which
reflect total impressions by AOL Members to the ICP Internet Site
during the prior month, the number of and dollar value associated
with the transactions involving AOL Users and any registration
information obtained from AOL Members at the ICP Internet Site
during the period in question. ICP represents that all URLs
related to the ICP Internet Site are listed on Exhibit A-2 and ICP
shall provide AOL with an update of such list promptly upon any
change thereto.
4.11 PROMOTIONAL COMMITMENTS. ICP shall provide to AOL a monthly report
documenting its compliance with any promotional commitments it has
undertaken pursuant to this Agreement in the form attached as
Exhibit D hereto, and ICP shall provide AOL with "click-through"
data with respect to the promotions specified in Section 2.4.
4.12 MONTHLY REPORTS. AOL shall provide to ICP a monthly written report
of all Advertising Revenues as of the end of the preceding month,
which report shall specify, among other information, the total
amount of Advertising Revenues for such preceding month, and the
year-to-date total amount of Advertising Revenues. ICP will be
entitled to use such reports in its business operations, subject
to the terms of this Agreement, and ICP acknowledges that such
reports may contain Confidential Information as defined herein.
5. ADVERTISING AND MERCHANDISING
5.1 ADVERTISING SALES. AOL owns all right, title and interest in and
to the advertising and promotional spaces within the AOL Network
(including, without limitation, advertising and promotional spaces
on any AOL forms or pages preceding or framing the ICP Internet
Site or ICP Programming and any AOL pages on which ICP Programming
resides). The specific advertising inventory within any such AOL
forms or pages shall be as reasonably determined by AOL. AOL shall
have the exclusive right to license or sell Advertisements in and
through the Service (including the ICP Internet Site and ICP
Programming) subject to payments due to ICP from AOL in accordance
with Section 4.2 of this Agreement. ICP shall not incorporate or
link to any promotional, advertising or sponsorship elements on
the ICP Internet Site or ICP Programming without AOL's prior
written consent. AOL shall have the right to elect to serve
Advertisements on the ICP Internet Site and ICP Programming,
either directly on its own server or by contracting with a third
party server, and ICP shall take all reasonable steps necessary to
facilitate AOL's serving of the Advertisements, including without
limitation, maintaining the computer code on the ICP Internet Site
and ICP Programming in order to display the Advertisements.
5.2 INTERACTIVE COMMERCE. Any merchandising permitted hereunder
through the ICP Internet Site and/or ICP Programming shall be
subject to (i) the then-current requirements of AOL's merchant
certification program, (ii) AOL's standard terms and conditions
applicable to its interactive marketing partners, and (iii) prior
approval by AOL of all products, goods and services to be offered
through the ICP Internet Site or the ICP Programming (such AOL
approval shall not be unreasonably withheld). ICP will take
reasonable steps, taking into account commercial and technical
feasibility, to conform its promotion and sale of Products through
the ICP Internet Site and ICP Programming to the then-existing
technologies identified by AOL which are optimized for the AOL
Properties including, without limitation, any "quick checkout"
tool which AOL may implement to facilitate purchase of Products by
AOL Users through the ICP Internet Site.
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6. CUSTOMIZED ICP PROGRAMMING AND ICP INTERNET SITE
6.1 CUSTOMIZATION. ICP shall customize all ICP Programming and the ICP
Internet Site for AOL Users as follows:
(a) ICP shall customize and co-brand the ICP Internet Site and
ICP Programming for distribution over the AOL Properties
using AOL's design guideline templates and co-branding
requirements, including any requirements set forth on
Exhibit A. ICP shall make any changes to the customization
and/or co-branding of the ICP Internet Site and ICP
Programming to conform to the standard requirements of any
AOL Property or otherwise reasonably requested by AOL
during the Term. In addition, the user interface of the
ICP Internet Site and ICP Programming and all design
aspects of the screens outside of the Res System shall be
subject to AOL's approval.
(b) ICP shall host all pages of the Service to be hosted by
ICP under a co-branded domain name (i.e., icp.aol.com,
icp.netscape.com, icp.compuserve.com, etc.) and traffic to
pages hosted on such domain name shall be deemed to be AOL
traffic. ICP agrees that for the purpose of third party
industry measurement metrics (such as Media Metrix and
Relevant Knowledge), the traffic (i.e., page views) within
such pages and sites shall be exclusively attributable to
AOL; provided that AOL will work with ICP to enable third
party industry measurement services to attribute credit
for such traffic to ICP through a syndication report, or
such other report developed by Media Metrix or other third
party measurement service, in accordance with such
measurement service's policies provided that AOL continues
to receive primary credit for such traffic, including as
necessary for ranking purposes.
(c) ICP shall not take any action the result of which is to
provide AOL Members accessing the ICP Programming or
linking to the ICP Internet Site with access to
advertisements or promotions of, or links to, AOL Direct
Competitors. ICP shall [***] not to take any action as a
result of which AOL Members accessing the ICP Programming
or linking to the ICP Internet Site receive or have access
to advertisements or promotions of, or links to, (i) other
parties that ICP should reasonably know are competitive
with AOL in AOL's core businesses (including any
Interactive Service), (ii) product categories in which AOL
or the applicable AOL Property has an exclusive or other
preferential relationship of which they have informed ICP
in writing or (iii) which are otherwise in violation of
the applicable AOL Property's then-current standard
advertising policies as provided to ICP in writing. ICP
shall have a period of [***] days from its receipt of
written notice from AOL that it is in breach or alleged
breach of any provision of this Section 6.1(c) to cure
such breach, provided that ICP acknowledges that AOL shall
have the right to prevent AOL Members from receiving or
accessing such advertisements, promotions and links prior
to the expiration of such [***] day period.
(d) ICP shall provide continuous navigational ability for AOL
Members to return to an AOL-designated point on the
applicable AOL Property from the ICP Internet Site or ICP
Programming (which, at AOL's option, may be satisfied
through the use of a hybrid browser format), which shall
include links to AOL-designated areas from each tool and
functionality within the ICP Internet Site and ICP
Programming. ICP shall use its commercially reasonable
best efforts to ensure that navigation back to the AOL
Network from the ICP Internet Site, whether through a
particular pointer or link, the "back" button on an
Internet browser, the closing of an active window, or any
other return mechanism, shall not be interrupted by ICP
through the use of any intermediate screen or other device
not specifically requested by the user, including without
limitation through the use of any html pop-up
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window or any other similar device. Rather, such AOL
traffic shall be pointed directly back to the AOL Network
as designated by AOL.
(e) Within the ICP Programming and the ICP Internet Site, ICP
shall, [***], use AOL's "quick checkout" and "suitcase"
tools and technology. To the extent ICP wishes to include
any other tools and technology within the ICP Programming
and the ICP Internet Site, including without limitation,
real time instant messaging, calendaring, local content,
and photograph services similar to AOL's You've Got
Pictures service, chat and message boards, ICP shall,
[***], use AOL's tools and technology for all such
products. The tools and technology described in this
subsection are referred to herein as "AOL Tools." If it is
not [***] to use AOL Tools within the ICP Programming or
ICP Internet Site, ICP shall not be able to use any tools
or technology competitive with the core functionality of
the relevant AOL Tool within the ICP Internet Site or ICP
Programming without AOL's prior written consent. In the
event ICP uses any AOL Tools, AOL and ICP shall enter into
a license agreement, to be mutually agreeable to both
parties, pursuant to which AOL will license to ICP, on a
[***], mutually agreed upon AOL Tools to be integrated
into the ICP Internet Site. AOL will be responsible for
and will provide to ICP all updates and fixes for the AOL
Tools [***] to ICP, as such bug fixes and updates are made
commercially available.
(f) AOL Members shall not be required to go through a
registration process (or any similar process) in order to
access and use the ICP Internet Site, ICP Programming or
the Licensed Content, except as set forth on Exhibit A or
approved in writing by AOL, subject to AOL's privacy
policies. On the AOL Service and the CompuServe Service,
AOL will use commercially reasonable efforts to [***] ICP
with [***] needed by ICP to establish a [***] of the
Service. On AOL.com, CompuServe.com, Digital City and
Netscape Netcenter, AOL and ICP will work together to
create a seamless registration process incorporating
existing registration information (i.e., "Universal
Registration"). Where such registration information is not
available, ICP will not require registration until such
user books travel arrangements. During the Term and for
the two (2) year period after the expiration or
termination thereof, ICP shall allow AOL Members to access
and use any ICP Interactive Site on terms and conditions
no less favorable than the terms and conditions available
to other general users of such ICP Interactive Site.
6.2 LINKS ON ICP INTERNET SITE. The Parties will work together on
mutually acceptable links (including links back to AOL) within the
ICP Internet Site in order to create a robust and engaging AOL
Member experience and ICP shall modify links, from time to time at
AOL's reasonable request, to direct AOL Members to other areas
within the AOL Network. ICP shall take reasonable efforts to
ensure that AOL traffic is generally either kept within the ICP
Internet Site or ICP Programming or channeled back into the AOL
Network. To the extent that AOL notifies ICP in writing that, in
AOL's reasonable judgment, links from the ICP Internet Site or ICP
Programming cause an excessive amount of AOL traffic to be
diverted outside of such site and the AOL Network in a manner that
has a detrimental effect on the traffic flow of the AOL audience,
then ICP shall immediately reduce the number of links out of such
site(s). In the event that ICP cannot or does not so limit
diverted traffic from such site, AOL reserves the right to
terminate such links from the AOL Network to such site.
6.3 LINKS FROM ICP INTERNET SITE. All links to ICP, Preview and
Travelocity (including, e.g. banners, links, favorite places,
keywords, and www.preview.com) from the AOL Properties shall go to
the ICP Internet Site or ICP Programming, except for links to
www.travelocity.com when AOL Members enter the URL:
"www.travelocity.com" or links to any other ICP Interactive Site
created by ICP in the future not contemplated by this Agreement
when AOL Members enter the URL for such ICP Interactive Site.
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6.4 REVIEW. ICP shall allow appropriate AOL personnel to have access
to all ICP Programming and the ICP Internet Site for the purpose
of reviewing such sites to determine compliance with the
provisions of this Agreement.
7. SOLICITATION; USER INFORMATION
7.1 RELATIONSHIP WITH AOL MEMBERS.
7.1.1 SOLICITATION OF SUBSCRIBERS. (a) During the Term and for
the two-year period following the expiration or termination
of this Agreement, neither ICP nor its affiliates will use
the AOL Network (including, without limitation, the e-mail
network contained therein) to solicit AOL Members (as
hereinafter defined) from whom ICP has received Member
Information on behalf of or for the benefit of another
Interactive Service or any product or service competitive
with products or services offered through AOL or the AOL
Network. Notwithstanding the foregoing, ICP shall have the
right to send [***] during the [***] day period immediately
prior to the expiration of this Agreement to each [***]
from whom ICP has [***] informing such [***] that ICP will
no longer be providing services through the AOL Network,
provided that such [***] shall be subject to the other
terms of this Section 7 and the contents thereof shall be
subject to AOL's prior written approval, not to be
unreasonably withheld or denied. More generally, ICP will
not send unsolicited, commercial e-mail (i.e., "spam") or
other online communications through or into AOL's products
or services, absent a Prior Business Relationship. For
purposes of this Agreement, a "Prior Business Relationship"
will mean that the AOL Member to whom commercial e-mail or
other online communication is being sent has voluntarily
either (i) engaged in a transaction with ICP or (ii)
provided information to ICP through a contest,
registration, or other communication, which included clear
notice to the AOL Member that the information provided
could result in commercial e-mail or other online
communications being sent to that AOL Member by ICP or its
agents. Any commercial e-mail or other online
communications to AOL Members which are otherwise permitted
hereunder will (a) include a prominent and easy means to
"opt-out" of receiving any future commercial communications
from ICP and (b) shall also be subject to AOL's
then-standard restrictions on distribution of bulk e-mail
(e.g., related to the time and manner in which such e-mail
can be distributed through or into the AOL product or
service in question).
(b) ICP shall ensure that its collection, use and
disclosure of information obtained from AOL Members
under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii)
AOL's standard privacy policies, available on the AOL
Service at the keyword term "Privacy". ICP will not (x)
disclose Member Information collected hereunder to any
third party in a manner that identifies AOL Members as
end users of an AOL product or service, (y) rent, sell
or barter Member Information, or (z) use Member
Information collected under this Agreement to market
another Interactive Service. Nothing herein shall
prevent ICP from using Member Information to compile,
for ICP's internal use, statistical or demographic
information or for other legal purposes
("Compilations"); such Compilations may only be used
for ICP's internal purposes and shall be deemed to be
AOL Confidential Information, provided that, ICP shall
be able to use such aggregate numbers included in the
Compilations for general information purposes.
7.1.2 E-MAIL NEWSLETTERS. Any e-mail newsletters sent to AOL
Members by ICP or its agents shall (i) be subject to AOL's
policies on use of the e-mail functionality, including but
not limited to AOL's policy on unsolicited bulk e-mail,
(ii) be sent only to AOL Members
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requesting to receive such newsletters, (iii) not contain
Content which violates AOL's Terms of Service, and (iv)
contain only advertisements, links, marketing or promotion
that are approved by AOL and shall in no event contain any
advertisements, links, marketing or promotion for any other
Interactive Service or for any ICP Interactive Site other
than the ICP Internet Site and ICP Programming.
7.1.3 AOL MEMBER COMMUNICATIONS. To the extent ICP is permitted
by this Agreement to send communications to AOL Members (in
accordance with the other requirements contained herein):
in any such communications to AOL Members (including,
without limitation, e-mail messages), ICP will limit the
subject matter of such communications to those categories
of products, services and/or content that are specifically
contemplated by this Agreement and shall not include any
advertising, promotional, sponsorship or other commercial
messages without AOL's prior written approval. In addition,
ICP will not, in any such communication, encourage AOL
Members to take any action inconsistent with the scope and
purpose of this Agreement, including without limitation,
the following actions: (i) using an interactive site other
than the ICP Internet Site for the purchase of Products,
(ii) using Content other than the Licensed Content; (iii)
bookmarking of interactive sites; or (iv) changing the
default home page on the AOL browser. Additionally, with
respect to such AOL Member communications, in the event
that ICP encourages an AOL Member to purchase products
through such communications, ICP shall ensure that (a) the
AOL Network is expressly promoted as the primary means
through which the AOL Member can access the ICP Internet
Site (including without limitation by stating the
applicable Keyword Search Term and including direct links
to specific offers within the ICP Internet Site) and (b)
any link to the ICP Internet Site will link to a page which
indicates to the AOL Member that such user is in a site
which is affiliated with the AOL Network. All
communications with AOL Members and service and marketing
materials, whether online or offline (including, without
limitation, e-mails, customer service calls, mailings,
ticket jackets, etc.) shall be co-branded with AOL and ICP
and subject to AOL's approval on a case by case basis with
respect to such co-branding, such approval not to be
unreasonably withheld or delayed.
7.2 CUSTOMER DATA; AOL DATA. Any personal customer data generated
directly from Core Systems operations through the Res System,
otherwise derived from the ICP Internet Site or ICP Programming,
or produced by ICP in performing its obligations hereunder,
including, without limitation, customer names, addresses and
travel frequency but excluding credit card information and AOL
screennames (the "Customer Data"), shall be and remain during the
Term the joint property of the Parties. Upon the expiration or
termination of this Agreement, ownership of the Customer Data
shall revert to AOL and ICP shall have no further rights or
interest in the Customer Data and shall promptly provide all
Customer Data to AOL in the form in which such data is maintained
by ICP or, if AOL so elects, destroy the Customer Data. AOL agrees
that during the Term, ICP may use the Customer Data subject to the
terms of this Agreement and AOL's then-applicable privacy
policies; provided that ICP (a) shall comply with the foregoing
Section 7.1, (b) shall provide users the right to have their
Customer Data deleted form any database created by or on behalf of
ICP, and (c) shall not have the right to use the Customer Data to
market or promote any consumer direct airline travel information
and reservations systems reasonably construed to be in competition
with the Res System. Any data provided by AOL to ICP (e.g., usage
reports) (the "AOL Data") shall be and remain the property of AOL,
and the AOL Data will be promptly returned to AOL by ICP in the
form in which such data is maintained by ICP or, if AOL so elects,
will be destroyed, upon (i) AOL's request, (ii) expiration or
termination of this Agreement for any reason, or (iii) with
respect to any particular AOL Data, on such earlier date that the
same is no longer required by ICP in order to provide the services
required hereunder. ICP will not use the AOL Data for any purpose
other than that of providing such services, nor will the AOL Data,
or any part thereof, be disclosed, sold, assigned, leased, or
otherwise disposed of to third parties by
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ICP or commercially exploited by or on behalf of ICP, its
employees or agents. ICP will not possess or assert any lien or
other right against or to the AOL Data.
8. TERM, TERMINATION, SITE AND CONTENT PREPARATION, PRESS RELEASES
8.1 TERM. Unless earlier terminated as set forth herein, the initial
term of this Agreement (the "Initial Term") shall commence on the
Merger Date and expire five (5) years from the Launch Date,
provided that not less than one hundred eighty (180) days prior to
the expiration of the Initial Term, the Parties shall inform one
another of their intention, if any, to extend this Agreement and
if both Parties wish to seek to extend the Agreement, the Parties
shall negotiate in good faith to reach agreement on the terms of
any such extension. Notwithstanding the foregoing, AOL must inform
ICP at least [***] days prior to the expiration of the Term as to
whether AOL will exercise its rights to convert to the OEM
Alternative, as described in Section 2.5, or allow the Agreement
to expire. If AOL elects to convert to the OEM Alternative in
accordance with Section 2.5, then AOL must provide ICP written
notice, at least [***] days prior to the expiration of the Initial
Term, as to the following: (1) whether the OEM Alternative will be
(x) exclusive (i.e., AOL will remain subject to and bound by the
exclusivity provisions of Sections 3.1 and 3.2) or (y)
non-exclusive (i.e., AOL will be bound by the exclusivity
provisions of Sections 3.1 and 3.2 only to the extent that those
provisions do not terminate in accordance with Section 2.5.3) and
(2) whether the OEM Alternative will include, and entitle AOL to
(x) the OEM Full Package or (y) just the Res System (the
information in clauses (1) and (2), collectively, the "OEM
Information"), and upon the expiration of the Initial Term this
Agreement shall be extended for one (1) year under the OEM
Alternative. AOL may extend the OEM Alternative for three (3)
additional one-year terms by giving ICP at least [***] prior
written notice thereof prior to the expiration of the then-current
term (which notice shall include the OEM Information to apply to
such extension term), provided further, however, that nothing in
the preceding proviso or elsewhere in this Agreement shall
obligate ICP to remain or continue in the business of providing
online travel reservations services and/or the type of services
otherwise provided under this Agreement.
8.2 TERMINATION. Either Party may terminate this Agreement at any time
in the event of a material breach by the other Party which remains
uncured after thirty (30) days written notice thereof unless such
breach arises from circumstances constituting a Force Majeure
Event. If and when a Party (the "Prevented Party") is prevented
from performing any material obligation hereunder as a result of a
Force Majeure Event, such Party shall (i) give prompt written
notice to the other Party (the "Non-Prevented Party") of its
inability to perform such material obligation and (ii) promptly
take commercially reasonable steps to remove the effects of such
Force Majeure Event preventing its performance. A Prevented Party
shall not be deemed to be in breach of (and shall not be liable
for breach of contract in respect of) any contractual obligation
that it is prevented from performing as a result of such Force
Majeure Event. If, despite such commercially reasonable steps,
such Force Majeure Event prevents the performance of such material
obligation by the Prevented Party, the Non-Prevented Party may
take all commercially reasonable steps to mitigate its damages
resulting from the Prevented Party's inability to perform such
material obligation. If such Force Majeure Event continues to
prevent the Prevented Party from performing a material obligation
hereunder for a continuous period of [***], the Non-Prevented
Party may terminate this Agreement without any liability to either
Party as a result of such inability to perform such material
obligation. If such Force Majeure Event continues to prevent the
Prevented Party from performing a material obligation and, as a
result thereof, the Prevented Party cannot obtain the substantial
benefits afforded the Prevented Party under this Agreement for a
continuous period of [***], the Prevented Party may terminate this
Agreement without any liability to either Party as a result of
such inability to perform such material obligation. In addition,
either Party may terminate this Agreement immediately following
written notice to the other Party if the other Party ceases to do
business, becomes or is declared insolvent or bankrupt, is the
subject of any proceeding related to its liquidation or insolvency
which is not
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dismissed within ninety (90) days or makes an assignment for the
benefit of creditors. In addition, in the event of a Change of
Control of ICP by or with an AOL Direct Competitor or any
affiliate thereof, AOL shall have the right to terminate this
Agreement upon thirty (30) days written notice to ICP; provided,
however, that, if, in connection with any such potential Change of
Control, ICP provides written notice to AOL of such potential
Change of Control, then AOL will notify ICP, in writing within
thirty (30) days whether it intends to: (i) terminate this
Agreement pursuant to this Section; (ii) convert the Agreement to
the OEM Alternative; or (iii) continue this Agreement with no
change; provided, further that if AOL fails to provide such
written notice AOL shall be deemed to have elected to terminate
this Agreement. Any such written notification from AOL shall be
binding for only 30 days, provided that a definitive agreement is
signed within such 30-day period and such transaction is
consummated within six (6) months from the date of signing of any
such definitive agreement. In addition, in the event that AOL is
eligible to exercise any of its termination rights pursuant to
this Agreement, AOL may elect to convert this Agreement to the OEM
Alternative as of the date such termination would have taken
effect, in which event AOL shall retain its rights to renew the
OEM Alternative as described in Section 8.1. If (x) the Merger
Agreement is terminated for any reason whatsoever prior to the
"Closing" (as defined in the Merger Agreement) and/or (y) the
Merger fails to close on or before the "Termination Date" (as
defined in the Merger Agreement), as such date may be extended by
the parties to the Merger Agreement, for any reason whatsoever,
then ICP and AOL shall each have the right to terminate this
Agreement with no liability whatsoever, whether fixed, contingent
or otherwise, except as provided in the next sentence. If the
Merger fails to close on or before February 1, 2000, for any
reason whatsoever, then ICP may, in its sole discretion, pay AOL
Two Million Dollars ($2,000,000) as a prepayment to be applied to
the amount due from ICP to AOL on the Merger Date pursuant to
Section 4.1.3; provided, however, that AOL may terminate this
Agreement if ICP shall fail to make such Two Million Dollar
($2,000,000) payment on or before February 1, 2000; provided,
further, that if the Merger fails to close on or before March 31,
2000, for any reason whatsoever, (x) AOL shall have the right to
terminate this Agreement with no liability whatsoever, whether
fixed, contingent or otherwise, and (y) AOL shall retain such Two
Million Dollar ($2,000,000) payment, provided, that if AOL does
not exercise its right to terminate this Agreement in accordance
with clause (x), such Two Million Dollar ($2,000,000) payment
shall continue to be applied as a prepayment of the amount due by
ICP to AOL on the Merger Date pursuant to Section 4.1.3. The
delivery by any party of a notice to terminate this Agreement
pursuant to this Section 8.2 shall automatically give rise to a
Dispute to be resolved pursuant to Section VI of Exhibit C other
than for a termination for a Change of Control of ICP by or with
an AOL Direct Competitor which is not disputed by ICP.
8.3 SITE AND CONTENT PREPARATION. If the Res System is not integrated
into the Service by the Launch Date or the Preview Reservations
Engine does not remain integrated into the Service on the Launch
Date in an manner similar to its integration on the date of
execution of this Agreement, then for each day following the
Launch Date that the Res System (or the Preview Reservations
Engine) is not so integrated, the following changes will be made
to the Term: (i) when the reason for such failure is due to AOL
(including, without limitation, a failure by AOL to satisfy its
obligations under the Preview Agreement with respect to the
integration of the Preview Reservations Engine within the Service)
then the Term of the Agreement will be extended by one (1) day for
each day by which AOL delayed such launch (and any period by which
the term is extended shall be added to the last Contract Year of
the Initial Term) and (ii) when the reason for such failure is due
to ICP, then the Impressions Target, the Advertising Revenue
Hurdles, the Commissions Hurdles, and the Cumulative OEM Hurdle
Amounts will be proportionally adjusted based on the length of
such delay. "Site and Content Preparation" shall mean in
connection with the respective obligations of each Party
hereunder, that the Party having such obligation shall have:
completed all necessary production work (including completion of
all necessary training for AOL's proprietary "Rainman" publishing
tool) for the ICP Internet Site, and all ICP Programming
(including programming all Licensed Content thereon); customized
and configured the ICP Internet Site and all ICP Programming in
accordance with this
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Agreement; and completed all other necessary work (including,
without limitation, all AOL site testing set forth on Exhibit E)
to prepare the ICP Internet Site all ICP Programming to launch on
the AOL Properties as contemplated hereunder. In the event that
Site and Content Preparation has not been achieved by September 1,
2000 as a result of a Party's non-performance in respect of the
elements of Site and Content Preparation to be performed by such
Party, then in addition to any other remedies available, the other
Party shall have the right to terminate this Agreement if such
non-performance or delayed performance has not been cured within
thirty (30) days following written notice to the non-performing
party. Nothing in this Section 8.3 shall prejudice any rights that
either AOL or ICP may have under this Agreement or at common law.
8.4 PRESS RELEASES. Each Party will submit to the other Party, for its
prior written approval, which will not be unreasonably withheld or
delayed, any press release or any other authorized public
statement ("Press Release") regarding the transactions
contemplated hereunder. Notwithstanding the foregoing, either
Party may issue Press Releases and other disclosures as required
by law without the consent of the other Party and in such event,
the disclosing Party will provide at least five (5) business days
prior written notice of such disclosure. The failure to obtain the
prior written approval of the other Party shall be deemed a
material breach of this Agreement, whereby the non-breaching Party
may terminate this Agreement immediately following written notice
to the other Party, and the cure provision of Section 6.2 of this
Agreement shall not apply. Because it would be difficult to
precisely ascertain the extent of the injury caused to the
non-breaching party, in the event of such material breach, the
non-breaching party may elect to either (a) terminate this
Agreement immediately upon notice to the other Party, or (b) as
liquidated damages, elect to modify the Impression commitment
hereunder by [***] (either an increase in Impressions if AOL has
materially breached the Agreement or a decrease in Impressions if
ICP has materially breached the Agreement). The Parties agree that
the liquidated damages set forth are a reasonable approximation of
the injury that would be suffered by the non-breaching Party.
8.5 AOL PLUS. Notwithstanding anything to the contrary in this Section
8.5 or elsewhere in this Agreement, AOL Plus shall only be an AOL
Property for a period of one (1) year from the later of the Launch
Date and the launch date of AOL Plus and all of the Parties'
rights and obligations with respect to AOL Plus (including,
without limitation, carriage and exclusivity) shall terminate
after such date. To the extent that AOL seeks to [***] Content
and/or a Reservations Engine [***], AOL shall provide [***] to
provide [***] Content and/or Reservations Engine for [***] and the
[***] will [***] in [***] to reach an [***] within ten (10)
business days on the material [***] thereof; provided, however,
that neither party shall be under any obligation to [***] with
respect to the [***] of [***] Content or Reservations Engine for
[***].
9. PRIOR AGREEMENTS.
9.1 EFFECT OF MERGER. Notwithstanding anything to the contrary herein,
the Travelocity Agreement shall remain in full force and effect
after the date of execution of this Agreement until such agreement
expires or terminates pursuant to its terms as amended herein. The
execution of this Agreement by AOL and ICP shall not prejudice the
rights of either party under the Travelocity Agreement, provided
that Sabre and AOL hereby waive any rights they may have arising
from any actual or potential breach of the Travelocity Agreement
as a result of execution of this Agreement or performance
hereunder. The Travelocity Agreement is hereby amended (i) to the
extent necessary to permit the parties hereto to commence the
integration work contemplated by this Agreement, including without
limitation integrating the ICP Programming within the AOL
Properties, (ii) to terminate on the later to occur of (I) the
Launch Date and (II) the earlier to occur of (x) the launch of the
ICP Internet Site on the CompuServe Service and Netscape Netcenter
and (y) expiration or termination of the Travelocity Agreement
pursuant to the terms thereof (the dates of the events described
in clauses (I) and (II) are collectively defined as the
"Travelocity Agreement Termination Date"); and (iii) such that
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between the Launch Date and the Travelocity Agreement Termination
Date, each Party's obligations with respect to payments,
promotions, and impressions (and in each case the reporting
obligations associated therewith) and exclusivity shall terminate
under the Travelocity Agreement and shall be superceded as of the
Launch Date by the corresponding terms set forth in this
Agreement. The DCI Agreement (as defined below) shall terminate on
the earlier to occur of (x) the launch of the ICP Internet Site on
Digital City pursuant to this Agreement and (y) the expiration or
termination of the DCI Agreement pursuant to its terms. In
addition, upon or immediately following the Merger, ICP shall
assign this Agreement and the Travelocity Agreement to the
Combined Entity and cause the Combined Entity to assume all
obligations under such agreements. "Combined Entity" shall mean
the operating entity created in connection with transactions
contemplated by the Merger of Travelocity and Preview.
9.2 GUARANTEE. Sabre hereby guarantees the performance by ICP of all
of ICP's obligations and duties under this Agreement from the date
of this Agreement through the Merger Date, including all payments
to be made on the Merger Date by ICP, which payments total the sum
of (x)[***] and (y) any amount which ICP may elect to pay pursuant
to Section 8.2; provided that such guarantee shall, in all events,
terminate upon the later of (i) the Merger Date and (ii) the
payment of the [***] and any amounts ICP elects to pay pursuant to
Section 8.2; provided, further, that notwithstanding anything to
the contrary in this Section 9.2, such guarantee shall in all
events terminate upon the termination of the Merger Agreement
prior to the closing of the Merger.
9.3 ESCROW. Upon a Change of Control of ICP (other than a Change of
Control involving Sabre or its affiliates), AOL may, within thirty
(30) days following such Change of Control, elect, upon giving
written notice to ICP, to require ICP to implement an escrow
arrangement with respect to ICP's payments to AOL under Section
4.1 (the "Escrow Arrangement"). If AOL makes such an election, ICP
and AOL will mutually agree on a third party that will act as
escrow agent, which agreement shall not be unreasonably withheld
or delayed. Under the Escrow Arrangement, beginning on the first
day of each six-month payment period, ICP will transfer to the
escrow agent an amount equal to the sum of the amount that would
be owed to AOL at the end of such six-month period assuming AOL's
performance of its obligations under the Agreement (each such
six-month advance payment a "Pre-Funded Amount"). The escrow agent
will make payment to AOL of any Pre-Funded Amount on the date upon
which such amounts would have been paid to AOL by ICP if the
Escrow Arrangements had not been implemented. AOL's right to
receive the Pre-Funded Amount from the escrow agent will be
identical to AOL's right to receive payment from ICP under this
Agreement.
9.4 PREVIEW AGREEMENT BREACHES.
(a) AOL hereby agrees not to terminate the Preview Agreement
for any breach or alleged breach thereof which arose prior
to the date of execution of this Agreement of which AOL
has Knowledge on the date hereof.
(b) To the extent that, as of the date of this Agreement, AOL
has Knowledge of any pending or threatened third party
claim against AOL in respect of which AOL has or may have
a right of indemnification or other claim against Preview
(a "Third Party Claim"), AOL shall specify the nature and
amount of such pending or threatened Third Party Claim in
Schedule 9 to this Agreement.
(c) If AOL determines in good faith during the Relevant Period
(as defined in (g) below) that Preview is in breach or
alleged breach of the Preview Agreement, AOL shall provide
reasonably prompt written notice thereof to ICP, which
notice shall specify the nature of such breach or alleged
breach. Except as provided in Section 9.4(d) below, ICP
shall have the right, but not the obligation, for a period
of 30 days following the date of such notice, to cure such
breach or alleged breach on behalf of Preview. If, at the
end of such 30-day
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period, such breach or alleged breach has not been cured
by ICP or otherwise, AOL shall, subject to Section 9.4(e)
below, have the right to take any and all actions it
would otherwise be entitled to take under the Preview
Agreement. In addition, during the Relevant Period, AOL
shall provide reasonably prompt written notice to ICP of
any Third Party Claim not described in Schedule 9 hereto
of which AOL obtains Knowledge, which notice shall
provide substantially the same information provided in
such Schedule with respect to the Third Party Claims
described therein.
(d) If AOL provides notice to ICP of any breach by Preview of
the Preview Agreement relating to a payment owed by
Preview to AOL after the date of this Agreement and
payable pursuant to Section 4.1 of the Preview Agreement
taking into account all defenses, rights and remedies of
the Parties under the Preview Agreement (a "Preview
Payment Breach"), ICP shall pay to AOL the amount owed
but not paid by Preview to AOL, which amount in no event
shall exceed the total amount owed by Preview to AOL
under Section 4.1 of the Preview Agreement during the
Relevant Period.
(e) Notwithstanding anything to the contrary in this Section
9.4 or elsewhere in this Agreement or in the Preview
Agreement, commencing on the date of execution of this
Agreement and continuing through the end of the Relevant
Period, [***] thereof or [***] thereunder by Preview (or
any successor to Preview), even if such [***] and is not
[***] by Preview, ICP or otherwise; provided, however,
that nothing in this Section 9.4 or elsewhere in this
Agreement shall [***] (if permitted to do so in
accordance with [***]) upon the occurrence of one or more
of the following events or actions (each, a "Catastrophic
Event"): (i) the Preview Reservations Engine is
unoperational or inaccessible to AOL Members for a period
of more than forty-eight (48) hours in any one hundred
twenty (120) hour period (the "Minimum Downtime Period")
due to a cause or reason not attributable to AOL; (ii) a
substantial majority of the Content licensed or provided
by Preview to AOL pursuant to the Preview Agreement is
inaccessible or unavailable to AOL Members for the
Minimum Downtime Period due to a cause or reason not
attributable to AOL; (iii) Preview commits fraud or
malicious conduct; or (iv) intentional, repeated breaches
of material provisions of the Preview Agreement by
Preview that substantially deprives AOL of its rights and
benefits under the Preview Agreement or which causes AOL
substantial commercial or reputational harm and which
Preview has failed to cure despite notice thereof from
AOL and a reasonable opportunity to do so.
(f) If Preview commits any breach of or default under the
Preview Agreement which breach or default (1) gives Sabre
the right to either not close the Merger or to terminate
the Merger Agreement and (2) would otherwise give AOL the
right to terminate the Preview Agreement in accordance
with the terms thereof, then Sabre shall, within thirty
(30) days following the date of receipt of notice from
AOL of such default pursuant to Section 9.4(c), notify
AOL in writing whether it (a) elects to either not close
the Merger or to terminate the Merger Agreement based on
such breach or default (a "Merger Termination Election")
or (b) waives such breach or default as a basis for not
closing the Merger or terminating the Merger Agreement (a
"Waiver Election"). If Sabre makes a Merger Termination
Election in accordance with the preceding sentence,
nothing in this Section 9.4 or elsewhere in this
Agreement shall prevent AOL from terminating the Preview
Agreement in accordance with the terms thereof. If Sabre
makes a Waiver Election in accordance with the second
preceding sentence and such breach or default is not a
Catastrophic Event, then AOL shall have no right to
terminate the Preview Agreement for such breach or
default during the Relevant Period.
-24-
<PAGE> 25
(g) ICP covenants to AOL that it will not fail to close the
Merger based on a Preview Payment Breach or a breach or
default in respect of which Sabre has made a Waiver
Election.
(h) For purposes of this Section 9.4: (i) the "Relevant
Period" means the period commencing on the date of
execution of this Agreement and ending on the earlier of
(x) the completion of the Site and Content Preparation
and (y) September 1, 2000; and (ii) "Knowledge" means
actual knowledge of the officers or employees of AOL
responsible for supervising or managing AOL's overall
relationship with Preview, including the Preview
Agreement.
(i) The Parties acknowledge and agree that if the Merger
fails to close for any reason whatsoever, Preview shall
have no rights under this Agreement, including, without
limitation, Section 9.4, as a third party beneficiary or
otherwise.
9.5 EFFECTIVENESS. Upon due execution of this Agreement by all the
Parties hereto, this Agreement shall become effective as of the
date first written above, notwithstanding that the Term may not
have commenced.
9.6 REFUND FROM EXISTING TRAVELOCITY AGREEMENT. The Parties agree
that, on the Launch Date, each Party shall pay the other Party
(provided the other Party has performed its obligations
thereunder) any amounts owed by such Party to the other Party
under the Travelocity Agreement, including the pro rata share of
any advance payments made pursuant to the Travelocity Agreement.
10. TERMS AND CONDITIONS. The terms and conditions set forth on the
Exhibits attached hereto are hereby made a part of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-25-
<PAGE> 26
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.
AMERICA ONLINE, INC., A DELAWARE CORPORATION
By: /s/ David M. Colburn
Print Name: David M. Colburn
Title: President, Business Affairs
Date: October 3, 1999
TRAVELOCITY HOLDINGS, INC., A DELAWARE CORPORATION
By: /s/ Terrell B. Jones
Print Name: Terrell B. Jones
Title: President and CEO
Date: October 3, 1999
SABRE INC., A DELAWARE CORPORATION, SOLELY AS TO SECTIONS 9.1, 9.2 AND 9.4(F)
By: /s/ Terrell B. Jones
Print Name: Terrell B. Jones
Title: President, Travelocity.com
Date: October 3, 1999
-26-
<PAGE> 27
[EXHIBIT A-1 CARRIAGE PLAN ]
<TABLE>
<CAPTION>
YEAR ONE
SELLABLE
IMPRESSIONS YEAR TWO YEAR THREE YEAR FOUR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRAVEL PRODUCT (ALL BRANDS)
------------------------------------------------------------------
AOL ([***]% GROWTH) 156,000,000 195,000,000 243,750,000 304,687,500
AOL.COM ([***]% GROWTH) 39,866,667 49,833,333 62,291,667 77,864,583
COMPUSERVE ([***]% GROWTH) 7,222,222 9,027,778 11,284,722 14,105,903
NETSCAPE 65,000,000 81,250,000 101,562,500 126,953,125
DCI 51,037,037 63,796,296 79,745,370 99,681,713
BROADBAND
- -----------------------------------------------------------------------------------------------------------------------------------
SHOPPING - TRAVEL ANCHOR (AOL, AOL.COM, 4,350,202 5,220,242 6,264,291 7,517,149
COMPUSERVE, NETSCAPE)
------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CALENDAR (AOL, AOL.COM, DCI, NETSCAPE,
COMPUSERVE)
- -----------------------------------------------------------------------------------------------------------------------------------
CALENDAR - TRADESHOWS (DIRECTORY INTEGRATION ./ 2,000,000 2,500,000 3,125,000 3,906,250
PROMOTION)
CALENDAR - TRADESHOW BANNERS 5,000,000 6,250,000 7,812,500 9,765,625
CALENDAR - CONCERTS / LOCAL EVENTS (DIRECTORY 7,000,000 8,750,000 10,937,500 13,671,875
INTEGRATION ./ PROMOTION)
EVENT WATCH - REMINDER UPDATES > IN DEVELOPMENT N/A
CLICK TO ADD AGENDA (REQUIRES FORMATTING OF DATA N/A
BY PARTNER)
TRAVEL COUNTDOWN CALENDARS N/A
- -----------------------------------------------------------------------------------------------------------------------------------
DCI
------------------------------------------------------------------
TRAVEL X HOT DEALS PROMOTION 6,400,000 12,700,000 17,800,000 23,100,000
DCI MAIN - TOP 24 TICKER 22,100,000 41,700,000 58,300,000 75,800,000
OTHER PROMOTIONS (NON-TRAVEL) 13,400,000 26,800,000 37,500,000 48,800,000
</TABLE>
<TABLE>
<CAPTION>
YEAR FIVE TOTAL IMPRESSIONS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
TRAVEL PRODUCT (ALL BRANDS) 2,619,076,447
-----------------------------------------
AOL ([***]% GROWTH) 380,859,375 1,280,296,875
AOL.COM ([***]% GROWTH) 97,330,729 327,186,979
COMPUSERVE ([***]% GROWTH) 17,632,378 59,273,003
NETSCAPE 158,691,406 533,457,031
DCI 124,602,141 418,862,558
BROADBAND
- -------------------------------------------------------------------------------------------------
SHOPPING - TRAVEL ANCHOR (AOL, AOL.COM, 9,020,579 32,372,463
COMPUSERVE, NETSCAPE)
-----------------------------------------
- -------------------------------------------------------------------------------------------------
CALENDAR (AOL, AOL.COM, DCI, NETSCAPE, 234,898,438
COMPUSERVE)
- -------------------------------------------------------------------------------------------------
CALENDAR - TRADESHOWS (DIRECTORY INTEGRATION ./ 4,882,813 16,414,063
PROMOTION)
CALENDAR - TRADESHOW BANNERS 12,207,031 41,035,156
CALENDAR - CONCERTS / LOCAL EVENTS (DIRECTORY 17,089,844 57,449,219
INTEGRATION ./ PROMOTION)
EVENT WATCH - REMINDER UPDATES > IN DEVELOPMENT 50,000,000
CLICK TO ADD AGENDA (REQUIRES FORMATTING OF DATA 20,000,000
BY PARTNER)
TRAVEL COUNTDOWN CALENDARS 50,000,000
- -------------------------------------------------------------------------------------------------
DCI 561,700,000
-----------------------------------------
TRAVEL X HOT DEALS PROMOTION 27,700,000 87,700,000
DCI MAIN - TOP 24 TICKER 91,000,000 288,900,000
OTHER PROMOTIONS (NON-TRAVEL) 58,600,000 185,100,000
</TABLE>
-27-
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------
NETSCAPE
------------------------------------------------------------------------
HOMEPAGE 36,000,000 45,000,000 56,250,000 70,312,500
ADS IN SPORTS, ENTERTAINMENT AND WEATHER 24,000,000 30,000,000 37,500,000 46,875,000
TARGETED CO-BROWSING BOOKMARK (NO BUSINESS
MODEL TO DATE)
------------------------------------------------------------------------
AOL.COM
------------------------------------------------------------------------
AOL.COM HOMEPAGE 12,000,000 15,000,000 18,750,000 23,437,500
ADS IN SPORTS, ENTERTAINMENT AND WEATHER 24,000,000 30,000,000 37,500,000 46,875,000
HOMETOWN TRAVEL, RECREATION 10,200,000 12,750,000 15,937,500 19,921,875
TIMESAVERS - TRAVEL 4,200,000 5,250,000 6,562,500 8,203,125
SEARCH - TRAVEL RELATED TRY THESE FIRST 24,000,000 30,000,000 37,500,000 46,875,000
------------------------------------------------------------------------
AOL
------------------------------------------------------------------------
WELCOME SCREEN 100,000,000 125,000,000 156,250,000 195,312,500
EXIT SCREEN 49,000,000 61,250,000 76,562,500 95,703,125
SPECIAL EVENTS, INCLUDING: 7,125,000 562,500 10,559,125 2,195,907
SUMMER OLYMPICS INTEGRATION (2000)
WINTER OLYMPICS INTEGRATION (2002)
WOMEN'S WORLD CUP INTEGRATION (2003)
WORLD CUP INTEGRATION (2002)
WORLD SERIES GOLD
SUPERBOWL GOLD
BANNERS IN SPORTS, PERSONAL FINANCE,
NEWS, WEATHER, INTERNATIONAL AND CAREERS
AOL MAPS 12,000,000 15,000,000 18,750,000 23,437,500
AOL LIVE EVENTS (6 ANNUALLY. IMPRESSIONS ARE 3,000,000 3,750,000 4,687,500 5,859,375
PROMOTIONAL TO EVENT)
TRAVEL & INTERNATIONAL CHAT AND MESSAGE BOARDS 56,000,000 70,000,000 87,500,000 109,375,000
------------------------------------------------------------------------
COMPUSERVE
------------------------------------------------------------------------
BUSINESS TRAVEL 24,000,000 30,000,000 37,500,000 46,875,000
ARTS & ENTERTAINMENT 18,000,000 22,500,000 28,125,000 35,156,250
BUSINESS & PROFESSIONAL 90,000,000 112,500,000 140,625,000 175,781,250
HOME & FAMILY 9,000,000 11,250,000 14,062,500 17,578,125
RUN OF COMPUSERVE 102,000,000 127,500,000 159,375,000 199,218,750
</TABLE>
<TABLE>
<S> <C> <C>
-----------------------------------------
NETSCAPE 692,421,875
-----------------------------------------
HOMEPAGE 87,890,625 295,453,125
ADS IN SPORTS, ENTERTAINMENT AND WEATHER 58,593,750 196,968,750
TARGETED CO-BROWSING BOOKMARK (NO BUSINESS 200,000,000
MODEL TO DATE)
-----------------------------------------
AOL.COM 610,603,125
-----------------------------------------
AOL.COM HOMEPAGE 29,296,875 98,484,375
ADS IN SPORTS, ENTERTAINMENT AND WEATHER 58,593,750 196,968,750
HOMETOWN TRAVEL, RECREATION 24,902,344 83,711,719
TIMESAVERS - TRAVEL 10,253,906 34,469,531
SEARCH - TRAVEL RELATED TRY THESE FIRST 58,593,750 196,968,750
-----------------------------------------
AOL 2,032,263,821
-----------------------------------------
WELCOME SCREEN 244,140,625 820,703,125
EXIT SCREEN 119,628,906 402,144,531
SPECIAL EVENTS, INCLUDING: 1,098,633 21,541,165
SUMMER OLYMPICS INTEGRATION (2000) -
WINTER OLYMPICS INTEGRATION (2002) -
WOMEN'S WORLD CUP INTEGRATION (2003) -
WORLD CUP INTEGRATION (2002) -
WORLD SERIES GOLD -
SUPERBOWL GOLD -
BANNERS IN SPORTS, PERSONAL FINANCE,
NEWS, WEATHER, INTERNATIONAL AND CAREERS 61,035,156 205,175,781
AOL MAPS 29,296,875 98,484,375
AOL LIVE EVENTS (6 ANNUALLY. IMPRESSIONS ARE 7,324,219 24,621,094
PROMOTIONAL TO EVENT)
TRAVEL & INTERNATIONAL CHAT AND MESSAGE BOARDS 136,718,750 459,593,750
-----------------------------------------
COMPUSERVE 1,994,308,594
-----------------------------------------
BUSINESS TRAVEL 58,593,750 196,968,750
ARTS & ENTERTAINMENT 43,945,313 147,726,563
BUSINESS & PROFESSIONAL 219,726,563 738,632,813
HOME & FAMILY 21,972,656 73,863,281
RUN OF COMPUSERVE 249,023,438 837,117,188
</TABLE>
-28-
<PAGE> 29
- -------------------------------------------------------------------------------
GUARANTEED IMPRESSIONS 8,777,644,762
- -------------------------------------------------------------------------------
IN THE EVENT AOL PROVIDES AN EXCESS OF ANY ANNUAL IMPRESSIONS TARGET IN ANY
YEAR, THE IMPRESSIONS TARGET FOR THE SUBSEQUENT YEAR SHALL BE REDUCED BY THE
AMOUNT OF SUCH EXCESS.
ANY SHORTFALL IN IMPRESSIONS AT THE END OF A YEAR WILL NOT BE DEEMED A BREACH OF
THIS AGREEMENT BY AOL; INSTEAD SUCH SHORTFALL WILL BE ADDED TO THE IMPRESSIONS
TARGET FOR THE NEXT YEAR.
ANY SHORTFALL IN IMPRESSIONS FROM A PARTICULAR AOL PROPERTY OR AREA WITHIN AN
AOL PROPERTY MAY BE MADE UP BY OVER-DELIVERY OF IMPRESSIONS IN ANOTHER AOL
PROPERTY OR AREA.
-29-
<PAGE> 30
[EXHIBIT A-2 PROGRAMMING REQUIREMENTS DOCUMENT]
ICP will cooperate in the redesign of the Service, emphasizing integrated
content and functionality designed to increase online bookings, user experience,
and transaction revenues. To that end, ICP will abide by the following
programming requirements:
GENERAL PROGRAMMING PRINCIPLES
Design and UI
Subject to technological and commercial feasibility, ICP will customize its
products and content to meet the design specifications developed by AOL and its
designated design firm, from time to time, including but not limited to UI,
design templates, branding, and navigation architecture. The inventory,
performance, functionality, and look-and-feel of ICP's customized site are all
subject to AOL's reasonable approval. ICP will assist AOL in connection with all
issues in connection with navigation architecture and UI within the booking
engine and transaction centers.
Customization
In addition to the customization requirements set forth in Section 6.1, ICP will
customize its product(s) for carriage on the AOL Properties. Customization will
consist of the following:
o ICP will create a version of the ICP Internet Site customized for distribution
through each of the AOL Properties by (x) developing the ICP Internet Site so as
to contain no links outside of the ICP Internet Site other than to AOL or third
party Content determined by AOL, or advertisements pursuant to this Agreement,
(y) displaying on each page of the ICP Internet Site framing (e.g., C-frame,
side navigation/menu bars, headers and footers) of size and type determined by
AOL, with consultation with ICP, and which contain branding for the applicable
AOL Property and ICP as determined by AOL, links to the applicable AOL Property,
a search box and promotional spaces to be programmed by AOL, and (z) matching
the look and feel of the applicable AOL Property on the ICP Internet Site.
Content used on the Service may include attribution by using the providing
party's name or logo.
o Contextual integration of ancillary services into ICP's products that may
differ from platform to platform, including, without limitation, book sales
(e.g., Amazon and B&N), luggage & merchandise, weather, mapping, currency
converter, message boards, and other community features.
o All pages of the Service hosted by ICP will be hosted under a co-branded
domain name (i.e., icp.aol.com, icp.netscape.com, icp.compuserve.com, etc.) and
traffic to pages hosted on such domain name shall be deemed to be AOL traffic.
IN ADDITION TO THE FOREGOING, ICP WILL PERFORM SUCH OTHER CUSTOMIZATION OF ITS
PRODUCT(S) AS REQUESTED BY AOL AND MUTUALLY AGREED BY THE PARTIES.
HOSTING
ICP will host all pages within the ICP Internet Site on an AOL domain name
(e.g., aol.com, compuserve.com, netscape.com, dci.com), and will assume all
costs associated with their maintenance and updating. Exceptions to the previous
sentence are outlined below:
Reservation System. ICP will host all pages within the Res System and assumes
all costs associated with their maintenance and updating. Notwithstanding the
previous sentence, AOL reserves the right to host the initial input screen for
the Res System (air, car, hotel, cruises, and vacation packages), including but
not limited to the following fields: Destination, origin city, number of
passengers, date of departure, date of return, preferred airline, preferred
rental agency, preferred hotel chain, sort priorities, user id, password,
pick-up location, drop-off location.
Fodor's Database. As warranted by technical and performance issues and
contractual limitations, AOL may, upon reasonable notice to ICP, elect to host
the Fodor's database on its own servers and to pour the data into templates of
its design in order to integrate into integrated search or personalization
functionality. In such an event, ICP will work with AOL to facilitate the
transition from its own servers and to establish a scheduled maintenance and
updating procedure based on Fodor's updating schedule, provided that the Parties
obtain necessary sublicenses. The Parties will use commercially reasonable best
efforts to obtain necessary sublicenses, provided that ICP shall not bear
additional fees from Fodor's with such sublicenses.
-30-
<PAGE> 31
INTEGRATION
AOL may, in its editorial discretion, integrate third party Content within the
Service, including, without limitation, Content of Travel Suppliers, Ancillary
Services and Content related to rewards and/or mileage programs. ICP shall
integrate such Content into the Service in accordance with the terms of this
Agreement, including by making such Content available through a unified search
or other UI, provided such integration is technologically and commercially
feasible. Any specific references herein to ICP's integration obligations shall
in no way limit the generality of this paragraph.
SPECIFIC CONTENT & FUNCTIONALITY REQUIREMENTS
1) Reservation Engine
ICP will provide AOL with online booking capabilities via the Sabre CRS for
airline tickets, car rentals, hotels and other lodging, Cruises and Vacation
Packages. Specific booking requirements appear under categories devoted to Air,
Car, Hotel, Vacations, and Preferences & Profiles, below. General booking
requirements are as follows:
a) Calendar integration. ICP will integrate CRS-driven information into users'
AOL calendar application, including but not limited to reminders,
reservations, saved itineraries, reservations on 24-hour hold, and
specials, as determined by AOL.
b) Trip Suitcase/My Travel Integration. ICP will integrate information about
bookings, reservations, and planned itineraries into AOL's Trip Suitcase/My
Travel functionality, as determined by AOL. This information may be
displayed automatically on the main screen of a user's My Travel area.
c) ICP will create and maintain user Profiles and Preferences, which can be
automatically applied to streamline and narrow a user's search and booking
requests. See Profiles & Preferences, below.
d) ICP will co-brand the entire booking process, including all screens
appearing within the booking stream, email reservation confirmations and
customer-service notices, and any regular mail correspondence including but
not limited to paper-based tickets, confirmation notices, one-to-one
marketing, etc, each of which shall be subject to AOL's approval, not to be
unreasonably withheld or delayed.
e) ICP will implement changes to the booking engine (functional, design, and
UI) reasonably requested by AOL and recommended by user testing.
f) ICP will work with AOL to identify ways to either eliminate the
registration process, pre-register AOL users, or give non-registered users
a trial period that requires no registration.
Airline Reservation Engine
ICP will provide AOL with airline booking functionality that is comparable or
superior in scope, flexibility, ease-of-use, and value pricing to the booking
products offered on any ICP Interactive Site. As part of its airline booking
functionality, ICP will at minimum provide the following in a UI mutually agreed
upon by AOL and ICP:
a) Express Air Booking, giving users the ability to find and book a round-trip
ticket on user-specified dates and airlines within four screens (currently,
such screens are the request screen, selection screen, review screen and
confirmation screen).
b) Long-form booking, giving users the maximum number of options for selecting
the airline, number of trip legs, date and time of departure.
c) Best Fare Finder, giving users the ability to do lowest fare look-ups for
500 city pairs when the user's travel dates are flexible. For each
low-price flight option, ICP will provide a calendar indicating possible
days of departure and return. Users will be required to register with
ICP/AOL only at the point when the user wishes to access the CRS to check
availability and to book. In addition, ICP will merge Best Fare Finder with
its regular booking engine to create a unified UI and product offering,
using similar concepts to those currently employed by ICP on Yahoo Travel.
ICP agrees to work with AOL to customize the way in which such results are
displayed.
d) Seating charts, giving users the ability to select their preferred seat
from a seating-availability chart. ICP agrees to support the additional
customer-service volumes surrounding such functionality.
e) 24-hour-hold capability on all reservations, contingent upon the
cooperation and/or acceptance of this functionality by domestic and/or
international airlines.
f) Fare Alert emails. Users must be able to specify up to 5 routes (including
fare notification start and stop dates) for which they are pricing tickets
and receive an e-mail update as soon as the price drops below the
user-specified threshold. Upon request and as commercially feasible, ICP
will work with AOL to extend this functionality to pager and cell-phone
notifications, and also agrees to provide AOL a data feed of Fare Alert
updates that can be used to populate My Travel main screens, customized for
each registered user.
-31-
<PAGE> 32
Placement
ICP's airline booking engine will receive the following placements:
a) Contingent upon AOL design decisions made during the Travel Channel
redesign, the input fields for Origin City and Destination City may appear
on the main screen of Travel, as well as tabbed selections for one-way,
round-trip, and multi-leg travel. Such placement will not feature the ICP
brand.
b) Contingent upon AOL design decisions made during the Travel Channel
redesign, the ICP Res Engine may appear on two versions of the Air Center
screen:
o A customized Air Center screen displaying the following:
o The Best Fare Finder results based on user input from the Travel
Channel main screen, displayed in a customized UI to be determined by
AOL and ICP.
o The Express round-trip booking module with pre-populated user ID,
origin and destination fields.
o Access to the long-form version of the booking engine.
o Access to the Preferences & Profiles component of My Travel.
o A non-customized Air Center screen, displaying the following:
o Prominent positioning for the input fields for the Express booking
module, with the origin city pre-populated with the user's local
airport (pending localization).
o Access to Best Fare Finder
o Access to the long-form booking engine.
o Access to the Preferences and Profiles component of My Travel.
c) Contextual integration within the Fodor's Destination Guides and within all
other destination-content providers, contingent upon the cooperation of
such third-party providers. For all such contextual placements, ICP agrees
to provide a pre-populated Express booking module.
d) Contextual integration within the Travel Bargains area, contingent upon the
cooperation of the third-party manager of the area. ICP agrees to provide
the following:
o Airfare bargains, specials, and AOL member specials for inclusion within
the relevant areas of Travel Bargains. ICP agrees to work with the
third-party manager of this area to incorporate its air bargains into the
overall bargains database, including adhering to any fielding and attribute
requirements.
o Pre-populated Express booking modules tied to all qualified air bargains
managed by the third-party manager of the area. ICP agrees to work with
this third-party manager to facilitate implementation.
e) The Express Trip and Airline areas of the Business Travel Center, as long
as this area shall exist. See below.
f) ICP will work with AOL to integrate the Res System within all areas where
AOL may, in its editorial discretion, request contextual integration of an
airline-reservation product. Such areas might include: Personalogic
Decision Guides, customized My Travel areas, seasonal feature packages,
Travel Interest areas, event-based programming, and local and weekend
travel.
Hotel & Lodging Reservation Engine
ICP will provide AOL with hotel- and lodging-booking functionality that is
comparable or superior in scope, flexibility, ease-of-use, and value pricing to
the booking products offered on any ICP Interactive Site. As part of its
lodging-booking functionality, ICP will at minimum provide the following in a UI
mutually agreed upon by AOL and ICP:
a) The ability to book hotel rooms at any of more than 40,000 hotels
worldwide, including major hotel chains accessed through the Sabre CRS.
Smaller inns, hotels, B&Bs, vacation rentals and timeshares accessed via
World Res will be implemented by ICP, using ICP's commercially reasonable
best efforts, within 90 days of such functionality becoming available to
Sabre, the scope of such offerings to equal or exceed that of
Vacationspot.com, Rent.net, and RCI. ICP further agrees to work with AOL to
create a unified search that allows a user to obtain from a single
lodging-search query complete information (possibly in a tabbed set-up)
about each available lodging type including "Major Hotel Chains", "Small
Inns and Hotels", "Bed-and-Breakfasts," "Vacation Rentals," and
"Timeshares."
b) ICP will geo-code and implement proximity searches for all lodging
properties appearing within the databases of ICP and its partners.
c) The ability to store member preferences and profiles about hotels that can
be used to streamline and narrow hotel searches. These preferences include
but are not limited to: preferred hotel chains, guest-reward memberships,
all-suite, apartment, bed and breakfast, convention facility, extended
stay, first class, historical, luxury, motel, ranch and resort. Up to three
preferences may be selected. Additionally, one of the following special
amenities may also be searched: business center, meeting facility, pets
allowed, casino, recreational facilities, wheelchair accessible, children's
program, golf, tennis, fitness center, pool and restaurants.
d) Hotel specials, discounts, and AOL-only member specials for integration
into the Hotel Center and Hotel Bargains areas.
-32-
<PAGE> 33
Placement
ICP's hotel-booking engine will receive the following placements:
a) Contingent upon AOL design decisions made during the Travel Channel
redesign, the input fields for Destination City (and possibly date range)
may appear on the main screen of Travel. Such placement will not feature
the ICP brand.
b) Contingent upon AOL design decisions made during the Travel Channel
redesign, the Res System will appear on two versions of the Hotel & Lodging
Center screen:
o A customized Hotel Center screen displaying the following:
o The input fields for the Hotel booking module, including but not
limited to pre-populated user ID and destination fields, as well as input
fields for date of arrival and departure, preferred hotel chain, and
number of rooms required.
o A contextual link to the Fodor's-reviewed hotels in that destination.
o Promotion of any ICP-negotiated hotel or lodging specials in that
destination.
o A contextual link to Bed & Breakfasts in that destination.
o Access to the Preferences & Profiles component of My Travel.
o A non-customized Hotel Center screen, displaying the following:
o Prominent positioning for the input fields for the hotel booking
module.
o Access to the Preferences and Profiles component of My Travel.
o A link to the Fodor's Hotel Finder.
o A link to the BedandBreakfasts.com site.
c) Contextual integration with all qualified hotels and lodging within the
Fodor's Destination Guides and within all other destination-content
providers, contingent upon the cooperation of such third-party providers.
For all such contextual placements, ICP agrees to provide a pre-populated
booking module.
d) Contextual integration within the Travel Bargains area, contingent upon the
cooperation of the third-party manager of the area. ICP agrees to provide
the following:
o Hotel bargains, specials, and AOL-only member specials for inclusion
within the relevant areas of Travel Bargains. ICP agrees to work with the
third-party manager of this area to incorporate its lodging bargains into
the overall bargains database, including adhering to any fielding and
attribute requirements.
o Pre-populated booking modules tied to all qualified lodging bargains
offered by the third-party manager of the area. ICP agrees to work with
this third-party manager to facilitate implementation.
e) The Express Trip and Hotel areas of the Business Travel Center, as long as
this area shall exist. See Business Travel Center, below.
f) ICP will integrate the Res System within all areas where AOL may, in its
editorial discretion, request contextual integration of a
lodging-reservation product. Such areas might include: Personalogic
Decision Guides, customized My Travel areas, seasonal feature packages,
Travel Interest areas, event-based programming, and local and weekend
travel.
Car-Rental Reservation Engine
ICP will provide AOL with car-rental reservations functionality that is
comparable or superior in scope, flexibility, ease-of-use, and value pricing to
the booking products offered on any ICP Interactive Site. As part of its
rental-reservations functionality, ICP will at minimum provide the following in
a UI mutually agreed upon by AOL and ICP:
a) The ability for users to reserve and book rental cars in destinations
worldwide from a minimum of 20 rental agencies, including but not limited
to Hertz, Avis, Budget, Dollar, National, Enterprise, Alamo, and Payless.
Users must be able to specify pick-up and drop-off locations and dates,
preferred rental agencies, and car type and/or make.
b) The ability to search for low-cost rental cars.
c) The ability to store member preferences and profiles about rental cars that
can be used to streamline and narrow searches. These preferences include
but are not limited to: preferred rental agencies, frequent-rental reward
memberships, preferred car size and make.
d) Car-rental specials, discounts, and AOL-only member specials for
integration into the Car-Rental Center and Car-Rental Bargains areas.
Placement
ICP's car-rental booking engine will receive the following placements:
a) Contingent upon AOL design decisions made during the Travel Channel
redesign, the input fields for the car-rental pick-up location may appear
on the main screen of Travel. Such placement will not feature the ICP
brand.
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b) Contingent upon AOL design decisions made during the Travel Channel
redesign, the ICP car-rental booking engine may appear on two versions of
the Car-Rental Center screen:
o A customized Car-Rental Center screen displaying the following:
o Low-cost rental car search results based on user input from the
Travel Channel main screen, displayed in a customized UI to be
determined by AOL and ICP.
o The rental-car booking module with pre-populated user ID and
destination fields.
o Access to the Preferences & Profiles component of My Travel.
o A non-customized Car-Rental Center screen, displaying the following:
o Prominent positioning for the input fields for the car-rental booking
module.
o Ability to search for low-cost rental cars
o Access to the Preferences and Profiles component of My Travel.
c) Contextual integration within the Fodor's Destination Guides and within all
other destination-content providers, contingent upon the cooperation of
such third-party providers. For all such contextual placements, ICP agrees
to provide a pre-populated booking module.
d) Contextual integration within the Travel Bargains area, contingent upon the
cooperation of the third-party manager of the area. ICP agrees to provide
the following:
o Car-rental bargains, specials, and AOL member specials for inclusion
within the relevant areas of Travel Bargains. ICP agrees to work with the
third-party manager of this area to incorporate its car-rental bargains
into the overall bargains database, including adhering to any fielding and
attribute requirements.
o Pre-populated car-rental booking modules tied to all qualified rental
bargains offered by the third-party manager of the area. ICP agrees to work
with this third-party manager to facilitate implementation.
e) The Express Trip and Car areas of the Business Travel Center, as long as
this area shall exist. See below.
f) ICP will integrate the Res System within all areas where AOL may, in its
editorial discretion, request contextual integration of a car-rental
reservation product. Such areas might include: Personalogic Decision
Guides, customized My Travel areas, seasonal feature packages, Travel
Interest areas, event-based programming, and local and weekend travel.
Vacations
o ICP will offer customized versions of its Vacation Package and Cruise products
on AOL that match or surpass its other Web-based offerings in terms of quantity
and quality of Cruise and Vacation Packages, and value pricing. Unless otherwise
approved by AOL, ICP will provide AOL members with a selection of no fewer than
2,000 Vacation Packages, although ICP agrees to increase this number as
necessary to remain competitive within the industry. Substantially all of these
packages shall be bookable online.
o ICP will provide the same or a superior level of detail about each trip as is
currently found on the www.travelocity.com site. This includes but is not
limited to thumbnail sketches of each trip (photo, link to Cruise or trip
details, link to Cruise line or resort details, price/price range, and vacation
length); itinerary maps; itinerary and activity details; ship profiles with
photos; photos of resort rooms; facility/accommodation description; sailing
dates; prices; and a booking module or toll-free reservation number.
o ICP will customize its Vacation Packages and Vacation Package search results
according to a design spec, UI, and information architecture determined by AOL,
and to brand the vacation-finder product as the AOL Vacation Finder. Contingent
upon decisions to be made by AOL during the travel-service redesign, AOL will
create the following Vacation Package sub-categories:
o Romance o Family
o Theme Park
o Hotel & Resort
o Golf
o Skiing
o Sports
o Adventure & Active
o Learning & Culture
o Cruise
o Casino Resorts
o Bargains
o ICP will make its Vacation Packages fully searchable through a unified search.
As such, ICP will create a database of all its Vacation Packages with the
following search attributes at minimum:
o Destination
o Price Range
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o Amenities (pool, child care, etc.)
o Activities (Swimming, Sailing, Hiking, etc.)
o All inclusive/ Land Only
o Months Available
o Cruise Line or Package Supplier
o In the event that AOL partners with a third-party content provider (e.g.,
Discovery Channel) that offers its own branded packages, ICP will incorporate
them into its own Vacation Package offering and/or integrate such third party
provider into AOL's unified search, as technologically and commercially
feasible.
o ICP will offer a Vacation Bargains area, consisting of significantly
discounted Vacation Packages across all major vacation and Cruise categories.
ICP will work with its vacation suppliers to guarantee that all vacation
bargains promoted within the Bargains area represent at least a 10% discount off
the published package price and that suppliers will not artificially inflate
base prices for their packages in order to meet the discount threshold. If
technically and commercially feasible, ICP will provide suppliers with a
back-end tool to manage their inventory, including the ability to automatically
discount packages and enter them into the Bargains area.
o Upon request, ICP agrees to contextually integrate into the Vacation Center
links to other AOL services and content including, but not limited, to
destination guides, travel interests, and feature articles (dynamically generate
from a database).
o ICP will update all of its content in timely fashion, with a frequency that is
equal or superior to that of any other Web-based Cruise suppliers. AOL reserves
the right to remove the ICP Vacation Packages or categories that are out of date
from the Vacation Center and partner with a third-party provider of its choice.
o [***]
o
In addition to the requirements set forth in paragraph 13 below, ICP will
operate dedicated, co-branded, toll-free telephone numbers for customer support,
travel reservation, booking and availability services with respect to travel
vacations for AOL Members, seven days a week. The co-branded toll-free number
for travel vacations will be operated from 7:00 am pst to 8:00 pm pst, Monday
through Friday, and 8:00 am pst to 7:00 pm pst, Saturday and Sunday. If these
hours are not sufficient to meet AOL Members purchasing needs, sales, and
customer feedback, these hours will be extended and/or staffing will be
increased as mutually agreed by the Parties. . AOL members shall receive the
same level of service which ICP provides to its other users, which shall be of a
quality that meets or exceeds industry standards. The ICP toll-free number must
be prominently displayed throughout the vacation area.
Preferences & Profiles
a) ICP will provide registered AOL users of the Res System with the same or a
superior level of personalization, in the form of preferences and profiles, as
it currently provides on any ICP Interactive Site. This includes, but is not
limited to, the following:
o The ability to store and apply member preferences and profile information
regarding airlines, frequent-flier mileage programs, age, airline
seating, airline meals, hotel chains, guest-reward programs,
smoking/non-smoking rooms, car-rental agencies, car size and make, and
car-rental reward programs.
o The ability for users to edit, delete, or augment their personal
information at any time.
o The ability for users to apply or disregard their preferences during each
booking session.
o The ability to save itineraries prior to booking, and to access them at
any time.
o The ability to save frequently traveled trips for quick re-booking.
o The ability for users to see their travel history (e.g., past trips
booked through ICP, etc.) for a time period agreed to by AOL and ICP.
o The ability to include multiple passengers with multiple profiles on a
single account.
b) In addition, ICP will ensure that Preview's members are seamlessly
transitioned to the ICP back-end with minimum disturbance and churn.
c) AOL reserves the right to host the profiles/preferences of all AOL Members
and all users who register with the ICP through an AOL platform. ICP will
maintain a mirror database of information required by and/or furnished to
ICP by registered users. ICP agrees to work with AOL to develop a
bi-directional updating procedure to ensure that AOL Member profiles remain
current on both sites.
c) ICP will provide incentive opportunities for non-registrants to sign up for
the Service. These include but are not limited to first-time discounts,
mileage awards, companion fares, and free gifts.
d) ICP will make any back-end technical modifications necessary to allow AOL
to implement progressive personalization, meaning the ability to build up a
profile of a member over a long period of time (with their permission),
without requiring them to fill out an exhaustive personalization profile.
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e) ICP will implement the "trip suitcase" concept, allowing users to "pack"
information including, but not limited to, reservations, Vacation Package
descriptions, destination content, mini-guides, and Personalogic decision
guide results, to assist them in the trip-planning process.
2) Destination Guides
ICP will provide the database of Fodor's-based destination content that is
currently maintained and developed by Preview. Upon the expiration of the
existing contract with Fodor's, ICP shall use its commercially reasonable best
efforts to continue such relationship. This product will consist of the
following:
a) Fodor's destination database, currently consisting of over 200 cities,
resorts, and islands worldwide, with contextual integration of reservation
modules, currency converter, mapping, broadband video, photo galleries,
local events, message boards, and book collections.
b) Fodor's Hotel Finder, consisting of an index, search function, and reviews
for all hotels appearing in the Fodor's destination database.
c) Fodor's Restaurant Finder, consisting of an index, search function, and
reviews for all restaurants appearing in the Fodor's destination database.
d) Fodor's Mini-guides, allowing users to create printable, customized
mini-guides of any major destination appearing within the Fodor's database.
e) Where relevant, all pages in the Destination Guides shall have links to the
ICP booking engine.
Placement
The Preview-maintained Fodor's database will be carried in the Destination
Guides area of the Travel Channel along with other content providers of AOL's
choice. At AOL's sole discretion, the destinations content may be contextually
integrated or linked into any other area of the service including, but not
limited to, the Vacations area; the Hotel, Car, and Air reservation centers; the
Bargains and Member Specials area; the Cruise area and other Travel Interests;
message boards; and AOL's mapping product. Where relevant, the Destination
Guides shall have links to the ICP booking engine.
Branding
AOL reserves the right to sublimate the ICP brand in favor of the Fodor's brand
within the destination guides and all related promotions. This includes but is
not limited to any tabs, links, advertising, promotions, and pull-down menus
related to the Destination Guides product.
Requirements
o Unified Search. ICP will cooperate with AOL in the creation of a unified
destination search capable of returning results from multiple content providers
including, but not limited to, Fodor's, Rough Guides, Lonely Planet, Travefile,
and Mobil Guides.
o Design and UI. AOL and ICP will work together to create a mutually agreed-upon
UI, design, and navigation architecture for the Fodor's destination database,
although any such design must meet the then-prevailing design specs of the
Service and the other Destination Guides product(s).
o Trip Suitcase. ICP will allow users to select and store content selections
from the Fodor's destination database in trip "suitcases" or virtual folders as
part of the trip-planning process. ICP will cooperate with AOL in the creation
of the trip suitcase concept, including making any necessary changes within the
database structure or tagging. Under no circumstances will ICP allow members to
use Fodor's content within professionally printed customized guidebooks without
written permission from Fodor's Travel Publications.
o Hosting. Subject to paragraph entitled "Hosting" above, The Fodor's database
will be hosted and maintained by ICP on its own servers.
o Maintenance & Updating. ICP will update the destination content within the
database on an annual basis.
o Expansion of Coverage. ICP will extend the breadth and depth of its Fodor's
coverage in a mutually agreed-upon timeframe. Extension of coverage includes but
is not limited to the introduction of country-based navigation and content (as
opposed to city based), including complete coverage of all European countries
and all 50 of the United States.
o ICP will cooperate with AOL in the creation of a browse/fantasize component of
the Fodor's destination guides involving the creation of introductory text
nuggets for use with pop-up balloons and image-mapped country and state/province
maps intended to help users select a destination.
o ICP will work with AOL to integrate additional third-party content and
services into the destination guides, including but not limited to dynamically
rendered feature articles, lowest fares localized to users' airports, additional
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broadband offerings, local events, HTML-based message boards, Hometown site
collections, You've Got Pictures albums, merchandizing, special travel values,
bargains, and AOL-only member specials.
o In the event that AOL licenses additional destination content from other
providers, ICP will integrate any relevant services controlled by ICP, including
but not limited to booking modules, lowest fares, currency conversion, and local
events; provided that the foregoing integration is technologically and
commercially feasible.
3) Tools & Utilities
Upon request and as commercially and technically feasible, ICP will provide AOL
with co-branded versions of the following utilities with UI approved by AOL:
o Flight Paging
o Best Fare Finder
o Currency Converter
o Seat Maps
o Fare Watcher Email
In the event that AOL already offers a utility (e.g., currency converter) also
provided by ICP, AOL will use its own version in the Service. The parties will
mutually agree on which, if any, utilities will be replaced by ICP utilities.
Utilities falling under this clause include: Currency Converter, Miles Manager,
Flight Tracker, Flight-Arrival Notification, Fare Aware, International Holiday
Calendar, and World Clock. Not included in this clause are utilities that have
cross-service carriage, including Maps & Directions and Weather. The Parties
will integrate links to the Res System from appropriate tools and utilities
(e.g., Best Fare Finder, Seat Maps).
4) Newsletters and Emails
Subject to the terms of this Agreement, including Section 7, ICP may send
e-mails directly to AOL users under the following circumstances: reservation
confirmations or changes; fare alerts; billing queries; pre-trip reminders
and/or services (e.g., weather forecasts, events, etc.); post-trip
customer-service queries and survey solicitation (see Survey, below), provided
such e-mails are clearly co-branded and do not incorporate or link to any other
Web site, including any promotional, sponsorship or advertising links to a
third-party or any ICP Interactive Site. Information pertaining to any special
offers, discounts, new products, services, and content not directly related to a
specific reservation or member query may be sent out only as part of the Travel
Channel's umbrella newsletter. Although AOL reserves the right to edit for
length and clarity any submissions to the newsletter, AOL will use good-faith
attempts to include all qualifying ICP messages in the AOL Travel Newsletter,
provided such messages promote features, specials, or content appearing on the
Service.
5) Surveys
ICP will cooperate with AOL and a third-party publisher in the creation of an
annual travel survey of AOL members for promotion within the AOL service and
offline. Given AOL's goal to survey only qualified respondents, ICP will send
destination-specific surveys to AOL members returning from trips booked through
ICP (e.g., a member returning from a trip to Paris would receive a Paris
survey), and to forward completed surveys to AOL for tabulation. ICP will be
credited for its role in the annual survey but the survey itself will be
co-branded by AOL and the third-party publisher.
6) Bargains
ICP will use commercially reasonable best efforts to make discounts, specials,
and promotions that are negotiated with travel suppliers available through AOL's
Travel Bargains area, managed by Independent Traveler. This includes, but is not
limited to, adhering to standardized protocols for tagging bargains and
populating a bargains database. ICP will work with Independent Traveler to
develop and maintain a mutually agreed-upon method for delivering and updating
bargain information. In addition, ICP will work with Independent Traveler to
integrate pre-populated booking modules into all Independent Traveler bargains
that can be booked through the Res System.
7) AOL Member Specials
ICP will use commercially reasonable best efforts to secure a regular supply of
AOL member-only specials from travel suppliers that are bookable through the Res
System. Such specials include but are not limited to significant price
discounts, mileage incentives, free gifts, and perks.
Placement
AOL Member Specials will receive the following placements, contingent upon
navigation-architecture decisions made during the Travel Channel redesign:
a) On the main screen of registered users' My Travel areas, where relevant and
contingent upon promotional space availability.
b) Within the AOL Member Specials area of Travel Bargains (see above)
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c) On Air, Car, and Hotel Center screens, where relevant and contingent upon
programming-space availability.
d) Within the Travel Channel newsletter, contingent upon programming-space
availability.
8) Broadband including AOL Plus
ICP will make available to AOL all broadband assets under its control (or to
which it has rights) for integration into AOL Plus. These include but are not
limited to the video, photographic, and slideshow assets of News Net. In
addition, ICP will integrate into its AOL-only services any broadband assets
that AOL may provide by itself or through designated third-party suppliers
including, but not limited to, IPIX and Discovery Channel. Where relevant, these
broadband assets shall be used to funnel reservations to the Res System. ICP
will provide ongoing supply of travel videos, some of which may include Veon
and/or IPIX enhancements.
9) Localization
ICP will cooperate with AOL in the delivery of localized content to its members,
either using the billing addresses of AOL and CompuServe members or via a user
opt-in process on other platforms. To that end, ICP will make any necessary
back-end technical modifications to permit a localized data feed in the
following products, if available:
a) Fare Finder or Best Fare Finder
b) Air-inclusive Vacation Packages or specials.
c) Lodging specials and discounts, including bed and breakfasts, small inns,
vacation rentals, timeshares, and chain hotels.
d) Internet specials (air, car, and hotel), including weekend E-fares.
e) Travel bargains or special offers, including air, car, hotel, and Cruise.
f) Local events and attractions (e.g., festivals, ski passes, etc.)
10) Community
ICP will use commercially reasonable best efforts to integrate, with the goal of
integrating with 90 days after such request of AOL, AOL's community products
into the Service, ICP Internet Site or ICP Programming, as designated by AOL.
These products include but are not limited to message boards; chats; Hometown
and selected Hometown sites; You've Got Pictures and selected member photo
albums; and member reviews and ratings for hotels, restaurants, Vacation
Packages, and attractions. In the meantime, ICP will provide its existing member
ratings and review product for hotels, Vacation Packages, and restaurants.
11) Content Partners
a) ICP will cooperate with existing partners within the Service as long as
their AOL contracts endure for the purpose of integrating content and
utilities to develop a better product and travel buying experience for
AOL's Members, provided the foregoing is technologically and commercially
feasible. These partners include, but are not limited to, Independent
Traveler, Family Travel Network, Vicinity or its equivalent,
Bedandbreakfast.com, Travelon, Trip.com (Res Engine excluded), Max Miles,
Cendant, Travelfile, and Planet Out.
b) ICP understands AOL's intention to integrate into its travel service
additional content and utility providers, including but not limited to
Rough Guides, Mobil Guides, Lonely Planet, and GORP. In the event that AOL
partners with any third-party provider, ICP will use commercially
reasonable best efforts to integrate its booking modules and products into
the content and services of the new partner.
c) In the event that AOL and ICP hold contracts with the same third-party
supplier (e.g., bedandbreakfast.com), AOL will continue to maintain its
relationship with the third party. The Parties will mutually agree upon
which contracts provide the greatest value for the Parties, including
superior products and maximizing revenue.
12) Business Travel Center
ICP will provide booking modules for the Air, Car, Hotel and Express Trip areas
of the existing AOL Business Travel Center
13) Co-Branded Toll Free Number
o ICP will establish, obtain and operate dedicated, co-branded, toll-free
telephone numbers for customer support, travel reservation, booking and
availability services for AOL Members, seven days a week. The Parties shall
mutually agree upon the co-branding attribution and branding. AOL members shall
receive the same level of service which ICP provides to its other users, which
shall be of a quality that meets or exceeds industry standards. The ICP
toll-free number shall be displayed in areas of the AOL Properties as the
Parties shall agree.
14) Travel Interests
In the event that ICP creates content and utilities around specific travel
interests such as skiing or family travel, AOL agrees to review ICP's product
for possible integration into the Service. Under no circumstances shall AOL pay
ICP for such products.
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EXHIBIT B -- DEFINITIONS
DEFINITIONS. The following definitions shall apply to this Agreement:
ADVERTISING. Advertisements or promotions, banners, buttons, pointers,
integration, links, sponsorships and similar services and rights.
ADVERTISING REVENUE. The aggregate amount of all cash paid or payable to AOL for
Advertising that has been sold for placement on the pages described in Section
4.2.1 (other than local advertising on Digital City) and all carriage,
performance and other Advertising-related fees or revenues, at such time as such
cash is recognized as revenue by AOL in accordance with applicable generally
accepted account principles, less (i) actual third party commissions, (ii) AOL
sales expenses not to exceed [***] of such aggregate amount, (iii) all other
amounts, fees and revenues received by AOL that are not related to Advertising,
including without limitation, license fees, web design fees and revenues from
software sales, in each case, only if derived from an agreement entered into on
a good faith, bona fide basis without the intention of minimizing Advertising
revenues and (iv) any amounts not collected by AOL and more than ninety (90)
days past due.
AFFILIATE. Any agent, distributor, or franchisee of AOL, or an entity in which
AOL or ICP holds at least a nineteen percent (19%) equity interest.
AOL DIRECT COMPETITOR. (a) an entity who offers either: (i) online or Internet
connectivity services (e.g., an Internet service provider); or (ii) an
interactive portal site or portal service featuring a broad selection of
aggregated third party interactive content (or navigation thereto) (e.g., an
online service or search and directory service); and (b) [***]. AOL shall have
the right to substitute other entities which are online shopping channels for
entities already on the foregoing list every six months, provided that the total
number of entities on the list shall not include more than eight (8) entities.
AOL PLUS. The specific Content and functionality which is available through the
U.S. version of the America Online brand service and which is accessible solely
through a high speed (generally over 100 kbps) broadband distribution platform,
specifically excluding (a) the components of the AOL Service accessible through
narrowband distribution platforms, (b) AOL.com, any AOL Interactive Site and the
international versions of an America Online service (e.g., AOL Japan) and any
broadband component available through such AOL Properties and versions (c) the
CompuServe brand service and any other CompuServe products or services whether
broadband or narrowband, (d) Netscape Netcenter and any other Netscape products
or services whether broadband or narrowband, (e) "ICQ" "AOL NetFind," "AOL
Instant Messenger," "Digital City" "NetMail," "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown" or any similar independent product,
service or property which may be offered by, through or with the U.S. version of
the America Online brand service or the broadband component thereof, (f) any
programming or content area offered by or through the U.S. version of the
America Online brand service over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), whether broadband or
narrowband, (g) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through the U.S. version
of the America Online brand service whether broadband or narrowband, (h) any
property, feature, product or service which AOL or its affiliates may acquire
subsequent to the date of this Agreement and (i) any other version of an America
Online service and (and broadband Content associated therewith) which is
materially different from the narrow-band U.S. version of the America Online
brand service, by virtue of its branding, distribution, functionality, Content
or services, including, without limitation, any co-branded version of the
service and any version distributed through any platform or device other than a
desktop personal computer.
AOL SERVICE. The narrow-band U.S. version of the America Online(R) brand
service, specifically excluding (a) AOL.com and any other AOL interactive site,
(b) the international versions of an America Online service (e.g., AOL Japan),
(c) the CompuServe(R) brand service and any other CompuServe products or
services, (d) Netscape Netcenter(TM) and any other Netscape(R) products or
services, (e) "ICQ(TM)," "AOL NetFind(TM)," "AOL
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Instant Messenger(TM)," "Digital City(TM)," "NetMail(TM)," "Love@AOL",
"Entertainment Asylum," "AOL Hometown" or any similar independent product,
service or property which may be offered by, through or with the U.S. version of
the America Online(R) brand service, (f) any programming or content area offered
by or through the U.S. version of the America Online(R) brand service over which
AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (g) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through the U.S. version
of the America Online(R) brand service, (h) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the date of this
Agreement and (i) any other version of an America Online service which is
materially different from the narrow-band U.S. version of the America Online
brand service, by virtue of its branding, distribution, functionality, Content
or services, including, without limitation, any co-branded version of the
service and any version distributed through any broadband distribution platform
or through any platform or device other than a desktop personal computer.
AOL.COM. AOL's primary Internet-based interactive site marketed under the
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) any
international versions of such site, (c) CompuServe.com, Netscape Netcenter, any
other CompuServe or Netscape products or services or interactive sites, (d)
"ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)" or any
similar independent product or service offered by or through such site or any
other AOL Interactive Site, (e) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any programming or Content area offered by or
through the U.S. version of the America Online(R) brand service which was
operated, maintained or controlled by the former AOL Studios division, (g) any
yellow pages, white pages, classifieds or other search, directory or review
services or Content offered by or through such site or any other AOL Interactive
Site, (h) any property, feature, product or service which AOL or its affiliates
may acquire subsequent to the date of this Agreement and (i) any other version
of an America Online Interactive Site which is materially different from AOL's
primary Internet-based Interactive Site marketed under the "AOL.COM(TM)" brand,
by virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer.
AOL LOOK AND FEEL. The distinctive and particular elements of graphics, design,
organization, presentation, layout, user interface, navigation, trade dress and
stylistic convention (including the digital implementations thereof) within the
AOL Network and the total appearance and impression substantially formed by the
combination, coordination and interaction of these elements.
AOL MEMBER(S). Subscribers to the AOL Service or CompuServe Service (including
any sub-accounts under an authorized master account) and authorized users of any
portion of the AOL Network.
AOL NETWORK. (i) The AOL Service, as well as AOL.com, Compuserve Service,
Netscape Netcenter, Digital City and AOL Plus, and (ii) any other product or
service owned, operated, distributed or authorized to be distributed by or
through AOL or its Affiliates worldwide through which such party elects to offer
the ICP Internet Site, ICP Programming and/or Licensed Content (which may
include, without limitation, AOL-related Internet sites, "offline" information
browsing products, international versions of the AOL brand service, or
Compuserve).
AOL PROPERTIES. The AOL Service, AOL.com, the Compuserve Service, Netscape
Netcenter, Digital City and AOL Plus.
AOL USER. Those AOL Members who purchase products through the ICP Internet Site
or the ICP Programming.
CHANGE OF CONTROL. (a) The consummation of a reorganization, merger or
consolidation or sale or other disposition of substantially all of the assets of
a party or (b) the acquisition by any individual, entity or group (within the
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meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1933,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of such party; or (ii) the combined voting power of the
then outstanding voting securities of such party entitled to vote generally in
the election of directors.
COMPUSERVE SERVICE. The standard HTML version of the narrow-band U.S. version of
the CompuServe brand service, specifically excluding (a) any international
versions of such service (e.g., NiftyServe), (b) any web-based service including
"CompuServe.com", "cserve.com" and "cs.com", or any similar product or service
offered by or through the U.S. version of the CompuServe brand service, (c)
Content areas owned, maintained or controlled by CompuServe affiliates or any
similar "sub-service," (d) any programming or Content area offered by or through
the U.S. version of the CompuServe brand service over which CompuServe does not
exercise complete or substantially complete operational control (e.g.,
third-party Content areas), (e) any yellow pages, white pages, classifieds or
other search, directory or review services or Content (f) any co-branded or
private label branded version of the U.S. version of the CompuServe brand
service, (g) any version of the U.S. version of the CompuServe brand service
which offers Content, distribution, services or functionality materially
different from the Content, distribution, services or functionality associated
with the standard, narrow-band U.S. version of the CompuServe brand service,
including, without limitation, any version of such service distributed through
any platform or device other than a desktop personal computer, (h) any property,
feature, product or service which CompuServe or its affiliates may acquire
subsequent to the date of this Agreement, (i) the America Online brand service
and any independent product or service which may be offered by, through or with
the U.S. version of the America Online brand service and (j) the HMI versions of
the CompuServe brand service.
COMPUSERVE.COM. CompuServe's primary Internet-based Interactive Site marketed
under the "CompuServe.com(TM)" brand, specifically excluding (a) the CompuServe
Service and AOL Service, (b) any international versions of such site, (c)
AOL.com, Netscape Netcenter, any other AOL or Netscape products or services or
interactive sites, (d) "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant
Messenger(TM)," "NetMail(TM)" or any similar independent product or service
offered by or through such site or any other AOL or CompuServe Interactive Site,
(e) any programming or Content area offered by or through such site over which
AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (f) any programming or Content area offered by or through the U.S.
versions of the America Online(R) brand service or CompuServe brand service
which was operated, maintained or controlled by the former AOL Studios division,
(g) any yellow pages, white pages, classifieds or other search, directory or
review services or Content offered by or through such site or any other AOL or
CompuServe Interactive Site, (h) any property, feature, product or service which
AOL or its affiliates may acquire subsequent to the date of this Agreement and
(i) any other version of an AOL or CompuServe Interactive Site which is
materially different from CompuServe's primary Internet-based Interactive Site
marketed under the "CompuServe.com(TM)" brand, by virtue of its branding,
distribution, functionality, Content or services, including, without limitation,
any co-branded versions and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer.
COMMISSIONS. The aggregate amount of standard gross commissions (based on
commission schedules published in the GDS and available for review by all
approved ARC agencies) paid to or received by ICP or its agents which are
generated from AOL Members using the ICP Internet Site or ICP Programming
through the AOL Properties and/or from the co-branded toll-free telephone
number(s), in each case less all third party refunds, rebates, exchanges, and/or
taxes. Commissions shall include Overrides.
CONFIDENTIAL INFORMATION. Any information relating to or disclosed in the course
of this Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information (a)
already lawfully known to or independently developed by the receiving Party, (b)
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disclosed in published materials, (c) generally known to the public, or (d)
lawfully obtained from any third party.
CONTENT. Text, images, video, audio (including, without limitation, music used
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, links, pointers, technology and software.
CONTRACT YEAR. Any twelve (12) month period commencing on the Launch Date or any
anniversary thereof.
CORE SYSTEMS. The systems between the RMG and the Travel Systems, that serve as
the back-end systems for the Res System.
CRUISE. Any offer solely relating to travel by ocean liner which is offered
directly by a travel agent and reserved through a CRS.
DCI AGREEMENT. The enhanced insertion order between Travelocity and Digital
City, if any, entered into by such parties prior to the Merger Date of the
Agreement and after the date of execution of the Agreement.
DIGITAL CITY. The standard, narrow-band U.S. version of Digital City's local
content offerings marketed under the Digital City(R) brand name, specifically
excluding (a) the AOL Service, AOL.com or any other AOL Interactive Site, (b)
any international versions of such local content offerings, (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Love@AOL", "Entertainment Asylum," "AOL Hometown," "My
News" or any similar independent product, service or property which may be
offered by, through or with the standard narrow band version of Digital City's
local content offerings, (e) any programming or Content area offered by or
through such local content offerings over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), (f) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through such local content offerings, (g) any property, feature,
product or service which AOL or its affiliates may acquire subsequent to the
date of this Agreement, (h) any other version of a Digital City local content
offering which is materially different from the narrow-band U.S. version of
Digital City's local content offerings marketed under the Digital City(R) brand
name, by virtue of its branding, distribution, functionality, Content or
services, including, without limitation, any co-branded version of the offerings
and any version distributed through any broadband distribution platform or
through any platform or device other than a desktop personal computer, and (i)
Digital City- branded offerings in any local area where such offerings are not
owned or operationally controlled by AOL, Inc. or DCI (e.g., Chicago, Orlando,
South Florida, and Hampton Roads).
FORCE MAJEURE EVENT. Acts of God, war, warlike conditions, strikes or other
labor disputes, work stoppage, fire, flood, communications failures of third
party suppliers, valid or invalid acts of government or any other cause, whether
similar or dissimilar, beyond the reasonable control of a Party.
ICP COMPETITOR means: [***]
(b) [***]
(ii) each Competitive Person, if any, added to the list of ICP Competitors at
any time during each of the five (5) consecutive twelve (12) month periods
following the date of execution of this Agreement, provided that, subject to
ICP's rights under clause (iii) below, only one (1) Competitive Person may be
added to the list of ICP Competitors during each such twelve (12) month period;
and
(iii) so long as this Agreement has not been converted to the OEM Alternative,
any other person or entity which ICP has elected, in its sole discretion, to
substitute for an existing Competitive Person and, provided that any Competitive
Person removed from the list of Competitive Persons pursuant to this clause
(iii) may at any time (prior to the conversion of this Agreement to the OEM
Alternative) be re-included on such list if another Competitive Person is
removed therefrom and provided, further, that ICP may substitute a Competitive
Person to the list of Competitive Persons no more than one (1) time in each of
the five (5) consecutive 12 month periods referred to above.
[***
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Notwithstanding anything to the contrary, each time that ICP desires to either
substitute a new Competitive Person for a Competitive Person already on the list
of Competitive Persons pursuant to clause (iii) or add a new Competitive Person
to the list of Competitive Persons pursuant to clause (ii), ICP shall provide
written notice thereof to AOL. If AOL executes a definitive agreement with such
Competitive Person within 30 days of ICP's notice to AOL, pursuant to which such
Competitive Person provides services that would otherwise be prohibited by
Section 3.1, such agreement must have a term of less than one year from the time
such services launch on the AOL Properties and shall be non-renewable and may
not be extended for so long as such Competitive Person remains on the list of
Competitive Persons. If AOL does not execute a definitive agreement with such
Competitive Person within such 30-day period, then AOL shall be precluded from
entering into an agreement with such person or entity for so long as such
persons or entity remains on the list of Competitive Persons set forth above.
ICP INTERACTIVE SITE. Any interactive site or area (other than ICP Programming),
including any mirrored site or area, which is managed, maintained or owned by
ICP or its agents or to which ICP provides and/or licenses information, content
or other materials, including, by way of example and without limitation, (i) an
ICP site on the World Wide Web portion of the Internet or (ii) a channel or area
delivered through a "push" product such as the Pointcast Network or interactive
environment such as Microsoft's proposed Active Desktop or interactive
television service such as WebTV.
ICP INTERNET SITE. Each of the versions of the www.travelocity.com Internet site
which are customized for distribution through the AOL Network in accordance with
this Agreement. The www.travelocity.com Internet site shall mean the site,
currently located at www.travelocity.com and any successor thereto, and any
Content offered on or through such site. It shall not include the generally
available version of the www.travelocity.com site or any other version of such
site other than the version customized for distribution through this Agreement.
ICP PRESENCE. Any (a) ICP trademark or logo, (b) headline or picture from ICP
Content, (c) teaser, icon, or link to the ICP Internet Site or ICP Programming
or the Service and/or (d) other Content which originates from, describes or
promotes ICP or ICP's Content or the Service.
ICP PROGRAMMING. Any (a) area within the AOL Network which is developed,
programmed, and/or managed by ICP, in whole or in part, pursuant to this
Agreement and all Content thereon (including, without limitation, message
boards, chat and other AOL Member-supplied content areas contained therein) and
(b) Content provided to AOL by or on behalf of ICP pursuant to this Agreement
for distribution on or through the AOL Network other than on the ICP Internet
Site. ICP Programming shall include without limitation, the Res System.
IMPRESSION. User exposure to an ICP Presence, as such exposure may be reasonably
determined and measured by AOL in accordance with its standard methodologies and
protocols.
INDUSTRY AIRLINE SYSTEMS. The computer reservation systems operated under the
brand names or trade names ABACUS, AMADEUS, APOLLO, GALILEO, GEMINI, GETS,
SYSTEM ONE, SABRE and WORLDSPAN, and any successors thereto.
INTERACTIVE SERVICE. An entity who offers either: (i) online or Internet
connectivity services (e.g., an Internet service provider); or (ii) an
interactive portal site or portal service featuring a broad selection of
aggregated third party interactive content (or navigation thereto) (e.g., an
online service or search and directory service) and/or marketing a broad
selection of products and/or services across numerous interactive commerce
categories (e.g., an online mall or other leading online commerce site); (iii) a
persistent desktop client; or (iv) communications software capable of serving as
the principal means through which a user creates, sends or receives electronic
mail or real time or "instant" online messages (whether by telephone, computer
or other means), including without limitation, greeting cards.
KEYWORD SEARCH TERMS. (a) The Keyword(TM) online search terms made available on
the AOL Service, combining AOL's Keyword(TM) online search modifier with a term
or phrase specifically related to ICP (and determined in accordance with the
terms of this Agreement), and (b) the Go Word online search terms made available
on CompuServe, combining CompuServe's Go Word online search modifier with
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a term or phrase specifically related to ICP and determined in accordance with
the terms of this Agreement).
LAUNCH DATE. April 1, 2000.
LICENSED CONTENT. All Content provided by or on behalf ICP or its agents on or
through the ICP Internet Site and/or the AOL Network in connection with the
subject matter of this Agreement, including without limitation all ICP
Programming.
MERGER. The merger contemplated by the Merger Agreement.
MERGER AGREEMENT. That certain Agreement and Plan of Merger dated as of October
3, 1999 between Sabre, ICP, Travelocity.com Inc. and Preview.
MERGER DATE. The date of closing of the Merger.
NETSCAPE NETCENTER. Netscape Communications Corporation's primary Internet-based
interactive site marketed under the "Netscape Netcenter(TM)" brand, specifically
excluding (a) the AOL Service and the CompuServe Service, (b) AOL.com and
CompuServe.com, (c) any international versions of such site, (d) "ICQ," "AOL
Netfind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My
News," "Digital City(TM)," or any similar independent product or service offered
by or through such site or any other AOL Interactive Site, (e) any programming
or Content area offered by or through such site over which AOL does not exercise
complete operational control (including, without limitation, Content areas
controlled by other parties and member-created Content areas), (f) any
programming or Content area offered by or through the U.S. version of the
America Online(R) brand service which was operated, maintained or controlled by
the former AOL Studios division (e.g., Electra), (g) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through such site or any other AOL Interactive Site, (h) any
property, feature, product or service which AOL or its affiliates may acquire
subsequent to the date of this Agreement and (i) any other version of an AOL or
Netscape Communications Corporation Interactive Site which is materially
different from Netscape Communications Corporation's primary Internet-based
Interactive Site marketed under the "Netscape Netcenter(TM)" brand, by virtue of
its branding, distribution, functionality, Content or services, including,
without limitation, any co-branded versions and any version distributed through
any broadband distribution platform or through any platform or device other than
a desktop personal computer (e.g. Custom NetCenters built specifically for third
parties).
OVERRIDES. The aggregate amounts received from airlines by ICP or its agents for
performance over and above standard sales targets set by such airlines,
including without limitation, any amounts based on percentage of target volume,
flat fee arrangements, or other non-cash incentives.
PREVIEW. Preview Travel, Inc., a Delaware corporation.
PREVIEW AGREEMENT. The Interactive Services Agreement, dated as of September 1,
1997, between AOL and Preview and the Database Agreement, dated as of September
25, 1997, between AOL and Preview.
PRODUCT. Any product, good or service which ICP (or others acting on its behalf
or as distributors) offers, sells, provides, distributes or licenses to AOL
Users directly or indirectly through (i) the ICP Internet Site or ICP
Programming (including through any Interactive Site linked thereto), (ii) any
other electronic means directed at AOL Users (e.g., e-mail offers), or (iii) an
"offline" means (e.g., toll-free number) for receiving orders related to
specific offers within the ICP Internet Site or ICP Programming requiring
purchasers to reference a specific promotional identifier or tracking code,
including, without limitation, products sold through surcharged downloads (to
the extent expressly permitted hereunder).
QUALIFIED TRAVEL SUPPLIER. Any national or international Travel Supplier
offering a Reservations Engine and booking and availability functionality for
air, rental car, hotels, Cruises, and/or Vacation Packages under its own brand
and paying AOL annual Advertising Revenues in excess of [***] for Advertising on
the AOL Properties or receiving permanent promotional placements on any main
channel screen of an AOL Property.
RES SYSTEM. The ICP brand computerized reservations system, which includes a
screen interface and programming behind the screen that is connected to
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the Core Systems that is connected to the Travel Systems, together with the Core
Systems and the RMG.
RESERVATION ENGINE. A computerized reservations system that provides consumers
with flight and fare information and the ability to make reservations and
purchase tickets on all airlines whose information is general available through
Industry Airline Systems and also provides hotel and car rental reservation
information (and the ability to make those reservations).
RMG. The remote managed gateway connecting the AOL Network to the Core Systems
and the Travel Systems. ICP will be responsible for maintenance of the part of
the RMG connecting the Core Systems up to the RMG Focal Point.
RMG FOCAL POINT. The focal point within the RMG in which ICP's and AOL's
equipment and software directly interface (i.e., connect).
SERVICE. The Travel Channels of the AOL Properties, including the ICP
Programming contained therein, and the ICP Internet Site.
SABRE. Sabre Inc., a Delaware Corporation.
TERM. The period beginning on the Merger Date and ending upon the expiration or
earlier termination of this Agreement, including all extensions or continuations
of this Agreement including, without limitation, any extension related to the
OEM Alternative.
TRAVEL CHANNEL. The following travel channels in the AOL Properties specified,
as well as any and all successors: AOL Service travel channel, AOL.com travel
webcenter, Netscape travel channel, AOL Plus travel channel or department,
Compuserve travel channel and the Digital City travel department.
TRAVEL INFORMATION/RESERVATIONS. Travel information, pricing and reservations
for, among other things, airlines, hotels, and car rentals, all as generally
available through the major Airline Systems.
TRAVEL SUPPLIER. Any supplier of travel services, such as, without limitation,
airlines, hotels, rental car companies, cruise lines, and vacation packages and
other third party travel-related services selling under their own brands.
TRAVEL SYSTEMS. Any computerized reservations systems that provide booking and
availability information (and the ability to make reservations) on (i) all
airlines whose information is generally available through Industry Airline
Systems and (ii) with respect to hotels, car rentals, cruise supplies, and other
travel service information.
TRAVELOCITY AGREEMENT. Trademark License Agreement, dated December 24, 1997,
between Netscape Communications Corporation and The Sabre Group, Inc.; and
Netscape Communications Corporation Marketplace Services Agreement, dated
December 23, 1997, between Netscape Communications Corporation and The Sabre
Group, Inc.
VACATION PACKAGES. Any leisure travel offer involving two or more of the
following travel features: air, hotel (or other lodging), car (or other land
transportation), Cruises, adventure, which is offered directly by a travel agent
and reserved through a CRS.
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EXHIBIT C -- STANDARD LEGAL TERMS AND CONDITIONS
I. AOL NETWORK
CONTENT. ICP represents and warrants that all Content contained within the ICP
Internet Site and ICP Programming and all Licensed Content (i) does and will
conform to AOL's applicable Terms of Service, the terms of this Agreement and
any other standard, written policy of AOL and any applicable AOL Property, (ii)
does not and will not infringe on or violate any copyright, trademark, U.S.
patent, rights of publicity, moral rights or any other third party right,
including without limitation, any music performance or other music related
rights, and (iii) does not and will not contain any Content which violates any
applicable law or regulation ((i), (ii) and (iii) collectively, the "Rules"). In
the event that AOL notifies ICP in writing that any such Content, as reasonably
determined by AOL, does not comply or adhere to the Rules, then ICP shall use
its best efforts to block access by AOL Members to such Content. In the event
that ICP cannot, through its best efforts, block access by AOL Members to such
Content in question, then ICP shall provide AOL prompt written notice of such
fact. AOL may then, at its option, either (i) restrict access from the AOL
Network to the Content in question using technology available to AOL or (ii) in
the event access cannot be restricted, direct ICP to remove any such Content.
ICP will cooperate with AOL's reasonable requests to the extent AOL elects to
implement any such access restrictions.
AOL NETWORK DISTRIBUTION. ICP shall not authorize or permit any third party to
distribute any Content of ICP through the AOL Network absent AOL's prior written
approval. The distribution, placements and/or promotions described in this
Agreement or otherwise provided to ICP by AOL shall be used by ICP solely for
its own benefit, will link to and promote solely the Licensed Content within the
ICP Internet Site or ICP Programming expressly described on Exhibit A and will
not be resold, traded, exchanged, bartered, brokered or otherwise offered or
transferred to any third party or contain any branding other than ICP's
branding. Further, the Content of all such distribution, placements and
promotions shall be subject to AOL's policies relating to advertising and
promotion, including those relating to AOL's exclusivity commitments and other
contractual preferences to third parties.
CHANGES TO AOL PROPERTIES. AOL reserves the right to redesign or modify the
organization, structure, "look and feel," navigation and other elements of the
AOL Service, AOL.com, the CompuServe Service, Netscape Netcenter or any other
AOL Property, including without limitation, by adding or deleting channels,
subchannels and/or screens. If AOL eliminates or modifies an area on an AOL
Property in a manner that substantially modifies the nature of the distribution
required under this Agreement in a material adverse fashion, AOL will work with
ICP in good faith to provide ICP, as its sole remedy, with comparable
distribution reasonably satisfactory to ICP.
CONTESTS. ICP shall ensure that any contest, sweepstakes or similar promotion
conducted or promoted through the ICP Internet Site and/or ICP Programming (a
"Contest") complies with all applicable laws and regulations. ICP shall provide
AOL with (i) at least thirty (30) days prior written notice of any Contest and
(ii) upon AOL's request, an opinion from ICP's counsel confirming that the
Contest complies with all applicable federal, state and local laws and
regulations.
DISCLAIMERS. Upon AOL's request, ICP agrees to include within the ICP Internet
and/or ICP Programming a disclaimer indicating that all Licensed Content
(including any products and services) is provided solely by ICP and not AOL, and
any transactions are solely between ICP and AOL Users using or purchasing such
Licensed Content and AOL is not responsible for any loss, expense or damage
arising out of the Licensed Content or services provided through the ICP
Internet Site or ICP Programming (e.g., "In no event shall AOL nor any of its
agents, employees, representatives or affiliates be in any respect legally
liable to you or any third party in connection with any information or services
contained herein and AOL makes no warranty or guaranty as to the accuracy,
completeness, correctness, timeliness, or usefulness of any of the information
contained herein"). ICP shall not in any manner state or imply that AOL
recommends or endorses ICP or its Content.
REWARDS PROGRAMS. ICP shall not offer, provide, implement or otherwise make
available on the ICP Internet Site or ICP Programming any promotional programs
or plans that are intended to provide customers with rewards or benefits in
exchange for, or on account of, their past or continued loyalty to, or patronage
or
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purchase of, the products or services of ICP or any third party (e.g., a
promotional program similar to a "frequent flier" program), unless such
promotional program or plan is provided exclusively through AOL's "AOL Rewards"
program, accessible on the AOL Service at Keyword: "AOL Rewards."
AOL LOOK AND FEEL. ICP acknowledges and agrees that AOL shall own all right,
title and interest in and to the AOL Look and Feel. In addition, AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the ICP Internet Site or ICP Programming (the "AOL Frames"). AOL may, at
its discretion, incorporate navigational icons, links and pointers or other
Content into such AOL Frames.
OPERATIONS. AOL shall be entitled to require reasonable changes to the ICP
Internet Site and ICP Programming to the extent such site will, in AOL's good
faith judgment, adversely affect operations of the AOL Network.
CLASSIFIEDS. ICP shall not implement or promote any classifieds listing features
through ICP Programming without AOL's prior written approval. Such approval may
be conditioned upon, among other things, ICP's conformance with any
then-applicable service-wide technical or other standards related to online
classifieds.
MESSAGE BOARDS; CHAT ROOMS AND COMPARABLE VEHICLES. Any Content submitted by ICP
or its agents within AOL message boards, AOL chat rooms or any comparable AOL
vehicles will be subject to the license grant relating to submissions to "public
areas" set forth in the AOL Terms of Service. ICP acknowledges that it has no
rights or interest in AOL Member submissions to message boards, chat rooms or
any other vehicles through which AOL Members may make submissions within the AOL
Network. ICP will refrain from editing, deleting or altering, without AOL's
prior approval, any opinion expressed or submission made by an AOL Member within
ICP Programming except in cases where ICP has a good faith belief that the
Content in question violates an applicable law, regulation, third party right or
the applicable AOL Property's Terms of Service.
DUTY TO INFORM. Each party shall promptly inform the other party of any
information related to the ICP Internet Site, ICP Programming or the Licensed
Content which could reasonably lead to a claim, demand or liability of or
against the other party and/or its affiliates by any third party.
RESPONSE TO QUESTIONS/COMMENTS. Each party shall respond promptly and
professionally to questions, comments, complaints and other reasonable requests
regarding the ICP Internet Site, ICP Programming or the Licensed Content, and
shall cooperate and assist the other party in promptly answering the same.
STATEMENTS THROUGH AOL NETWORK. Neither party shall make, publish, or otherwise
communicate any deleterious remarks concerning the other party or its
affiliates, directors, officers, employees, or agents (including, without
limitation, the other party, AOL's business projects, business capabilities,
performance of duties and services, or financial position) which remarks are
based on the relationship established by this Agreement or information exchanged
hereunder. This section is not intended to limit good faith editorial statements
made by a party based upon publicly available information, or information
developed by ICP independent of its relationship with AOL and its employees and
agents.
PRODUCTION WORK. In the event that ICP requests any AOL production assistance,
ICP shall work with AOL to develop detailed production plans for the requested
production assistance (the "Production Plan"). Following receipt of the final
Production Plan, AOL shall notify ICP of (i) AOL's availability to perform the
requested production work, (ii) the proposed fee or fee structure for the
requested production work and (iii) the estimated development schedule for such
work. To the extent the Parties reach agreement regarding implementation of
agreed-upon Production Plan, such agreement shall be reflected in a separate
work order signed by the Parties. All fees to be paid to AOL for any such
production work shall be paid in advance. To the extent ICP elects to retain a
third party provider to perform any such production work, work produced by such
third party provider must generally conform to AOL's production standards
available at Keyword "Styleguide." The specific production resources which AOL
allocates to any production work to be performed on behalf of ICP shall be as
determined by AOL in its sole discretion. With respect to any routine
production, maintenance or related services which AOL reasonably determines are
necessary for AOL to perform in order to support the proper functioning and
integration of the Anchor Tenant Button and the ICP Internet Site ("Routine
Services"), ICP will pay the then-standard fees charged by AOL for such Routine
Services.
PRODUCTION TOOLS. AOL shall determine in its sole discretion, which of its
proprietary publishing tools (each a "Tool") shall be made available to ICP in
order to develop and implement the Licensed Content during the Term. ICP shall
be granted a nonexclusive license to use any such Tool, which license shall be
subject to: (i)
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ICP's compliance with all rules and regulations relating to use of the Tools, as
published from time to time by AOL, (ii) AOL's right to withdraw or modify such
license at any time, and (iii) ICP's express recognition that AOL provides all
Tools on an "as is" basis, without warranties of any kind.
TRAINING AND SUPPORT. AOL shall make available to ICP standard AOL training and
support programs necessary to produce any AOL areas hereunder. ICP can select
its training and support program from the options then offered by AOL. ICP shall
be responsible to pay the fees associated with its chosen training and support
package. In addition, ICP will pay travel and lodging costs associated with its
participation in any AOL training programs (including AOL's travel and lodging
costs when training is conducted at ICP's offices).
EXPIRATION DATE. If the expiration date of this Agreement changes pursuant to
Section 8.3, the Parties shall record such expiration date in a written
instrument signed by both Parties promptly following the determination of such
expiration date pursuant to Section 8.3; provided that, in the absence of such a
written instrument, the expiration date shall be as reasonably determined by AOL
and ICP based on the information available to AOL.
KEYWORDS. Any Keyword Search Terms to be directed to the ICP Internet Site shall
be (i) subject to availability for use by ICP and (ii) limited to the
combination of the Keyword(TM) search modifier combined with a registered
trademark of ICP. AOL reserves the right to revoke at any time ICP's use of any
Keyword Search Terms which do not incorporate registered trademarks of ICP. ICP
acknowledges that its utilization of a Keyword Search Term will not create in
it, nor will it represent it has, any right, title or interest in or to such
Keyword Search Term, other than the right, title and interest ICP holds in ICP's
registered trademark independent of the Keyword Search Term. Without limiting
the generality of the foregoing, ICP will not: (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term;
or (b) use the Keyword Search Term, except for the purposes expressly required
or permitted under this Agreement. This Section shall survive the completion,
expiration, termination or cancellation of this Agreement.
ACCOUNTS. To the extent AOL has granted ICP any accounts on the AOL Service, ICP
will be responsible for the actions taken under or through its accounts, which
actions are subject to AOL's applicable Terms of Service and for any surcharges,
including, without limitation, all premium charges, transaction charges, and any
applicable communication surcharges incurred by any account issued to ICP, but
ICP will not be liable for charges incurred by any account relating to AOL's
standard monthly usage fees and standard hourly charges, which charges AOL will
bear. Upon the termination of this Agreement, all accounts, related screen names
and any associated usage credits or similar rights, will automatically
terminate. AOL will have no liability for loss of any data or content related to
the proper termination of any such account.
CUSTOMER SERVICE. It is the sole responsibility of ICP to provide customer
service to persons or entities purchasing Products through the AOL Network
("Customers"). ICP will bear full responsibility for all customer service,
including without limitation, order processing, billing, fulfillment, shipment,
collection and other customer service associated with any Products offered, sold
or licensed through the ICP Internet Site or ICP Programming, and AOL will have
no obligations whatsoever with respect thereto. ICP will receive all e-mails
from Customers via a computer available to ICP's customer service staff and
generally respond to such e-mails within one business day of receipt. ICP will
receive all orders electronically and generally process all orders within one
business day of receipt, provided Products ordered are not advance order items.
ICP will ensure that all orders of Products are received, processed, fulfilled
and delivered on a timely and professional basis. ICP will bear all
responsibility for compliance with federal, state and local laws in the event
that Products are out of stock or are no longer available at the time an order
is received. ICP will also comply with the requirements of any federal, state or
local consumer protection or disclosure law. Payment for Products will be
collected by ICP directly from customers. ICP's order fulfillment operation will
be subject to AOL's reasonable review.
MERCHANT CERTIFICATION PROGRAM. ICP will participate in any generally applicable
"Certified Merchant" program operated by AOL or its authorized agents or
contractors. Such program may require merchant participants on an ongoing basis
to meet certain reasonable, generally applicable standards relating to provision
of electronic commerce through the AOL Network (including, as a minimum, use of
40-bit SSL encryption and if requested by AOL, 128-bit encryption) and may also
require the payment of certain reasonable certification fees to the applicable
entity operating the program. Each Certified Merchant in good standing will be
entitled to place on its affiliated Interactive Site an AOL designed and
approved button promoting the merchant's status as an AOL Certified Merchant.
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II. TRADEMARKS
TRADEMARK LICENSE. In designing and implementing any marketing, advertising, or
other promotional materials (expressly excluding Press Releases) related to this
Agreement and/or referencing the other Party and/or its trade names, trademarks
and service marks (the "Promotional Materials") and subject to the other
provisions contained herein, ICP shall be entitled to use the following trade
names, trademarks and service marks of AOL: the "America Online(R)" brand
service, "AOL(TM)" service/software and AOL's triangle logo and, in connection
therewith, ICP shall comply with the AOL styleguide available at keyword: "style
guide"; and AOL and its Affiliates shall be entitled to use the trade names,
trademarks and service marks of ICP (collectively, together with the AOL marks
listed above, the "Marks"), provided that each Party: (i) does not create a
unitary composite mark involving a Mark of the other Party without the prior
written approval of such other Party and (ii) displays symbols and notices
clearly and sufficiently indicating the trademark status and ownership of the
other Party's Marks in accordance with applicable trademark law and practice.
This Section shall survive the completion, expiration, termination or
cancellation of this Agreement with respect to Promotional Materials created or
generated during the Term.
RIGHTS. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
QUALITY STANDARDS. Each Party agrees that the nature and quality of its products
and services supplied in connection with the other Party's Marks shall conform
to quality standards communicated in writing by the other Party for use of its
trademarks. Each Party agrees to supply the other Party, upon request, with a
reasonable number of samples of any Promotional Materials publicly disseminated
by such Party which utilize the other Party's Marks. Each Party shall comply
with all applicable laws, regulations and customs and obtain any required
government approvals pertaining to use of the other Party's Marks.
PROMOTIONAL MATERIALS. Each Party will submit to the other Party, for its prior
written approval, which shall not be unreasonably withheld or delayed, any
Promotional Materials; provided, however, that after initial public announcement
of the business relationship between the Parties in accordance with the approval
and other requirements contained herein, either Party's subsequent factual
reference in Promotional Materials to the existence of a business relationship
between AOL and ICP, including, without limitation, the availability of the
Licensed Content through the AOL Network, or use of screen shots relating to the
distribution under this Agreement (so long as the AOL Network is clearly
identified as the source of such screen shots) for promotional purposes shall
not require the approval of the other Party. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the distribution of the Licensed Content through the AOL Network and reused for
such purpose until such approval is withdrawn with reasonable prior notice. In
the event such approval is withdrawn, existing inventories of Promotional
Materials may be depleted.
INFRINGEMENT PROCEEDINGS. Each Party agrees to promptly notify the other Party
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
SEARCH TERMS. To the extent this Agreement sets forth any mechanism by which the
ICP Internet Site or ICP Programming will be promoted in connection with
specified search terms within any AOL product or service, ICP hereby represents
and warrants that ICP has all consents, authorizations, approvals, licenses,
permits or other rights necessary for ICP to use such specified search terms.
Notwithstanding the foregoing, AOL shall have the right to suspend the use of
any search term if AOL has reason to believe continued use may subject AOL to
liability or other adverse consequences.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
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will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; (iv) such Party's
Promotional Materials will neither infringe on any copyright, U.S. patent or any
other third party right nor violate any applicable law or regulation and (v)
such Party acknowledges that the other Party makes no representations,
warranties or agreements related to the subject matter hereof which are not
expressly provided for in this Agreement.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or to its other agents who must have access
to such Confidential Information for such Party to perform its obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure containing
Confidential Information without the consent of the other Party, to the extent
such disclosure is required by law, rule, regulation or government or court
order. In such event, the disclosing Party will provide at least five (5)
business days prior written notice of such proposed disclosure to the other
Party. Further, in the event such disclosure is required of either Party under
the laws, rules or regulations of the Securities and Exchange Commission or any
other applicable governing body, such Party will (i) redact mutually agreed-upon
portions of this Agreement to the fullest extent permitted under applicable
laws, rules and regulations and (ii) submit a request to such governing body
that such portions and other provisions of this Agreement receive confidential
treatment under the laws, rules and regulations of the Securities and Exchange
Commission or otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other applicable
governing body.
V. TREATMENT OF CLAIMS
Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM BREACH OF THIS AGREEMENT, THE USE OF OR INABILITY TO USE THE AOL
NETWORK OR ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO,
LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS (COLLECTIVELY,
"DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE TO THE OTHER
PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE
SUBJECT TO INDEMNIFICATION BELOW. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY"
SECTION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN $[***];
PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE FOR THE AGGREGATE AMOUNT OF ANY
PAYMENT OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE PROVISIONS OF THIS
AGREEMENT.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK, OR
ANY AOL PUBLISHING TOOLS, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY
OF AOL NETWORK OR THE ICP INTERNET SITE.
INDEMNITY. Each Party will defend, indemnify, save and hold harmless the other
Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach of any
duty, representation, or warranty of this Agreement. In addition, ICP will
defend, indemnify, save and hold harmless AOL and AOL's officers, directors,
agents, affiliates, distributors, franchisees and employees from any and all
Liabilities arising out of or in any way related to the Licensed Content.
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<PAGE> 51
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification is
being asserted and (ii) be accompanied by copies of all relevant pleadings,
demands, and other papers related to the Action and in the possession of the
Indemnified Party. The Indemnifying Party shall have a period of ten (10) days
after delivery of such notice to respond. If the Indemnifying Party elects to
defend the Action or does not respond within the requisite ten (10) day period,
the Indemnifying Party shall be obligated to defend the Action, at its own
expense, and by counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall cooperate, at the expense of the Indemnifying Party,
with the Indemnifying Party and its counsel in the defense and the Indemnified
Party shall have the right to participate fully, at its own expense, in the
defense of such Action. If the Indemnifying Party responds within the required
ten (10) day period and elects not to defend such Action, the Indemnified Party
shall be free, without prejudice to any of the Indemnified Party's rights
hereunder, to compromise or defend (and control the defense of) such Action. In
such case, the Indemnifying Party shall cooperate, at its own expense, with the
Indemnified Party and its counsel in the defense against such Action and the
Indemnifying Party shall have the right to participate fully, at its own
expense, in the defense of such Action and the Indemnifying Party shall pay all
the legal fees of the Indemnified Party. Any compromise or settlement of an
Action shall require the prior written consent of both Parties hereunder, such
consent not to be unreasonably withheld or delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VI. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim, controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute, the Dispute
shall be submitted to the Management Committee for resolution. For ten (10) days
after the Dispute was submitted to the Management Committee, the Management
Committee shall have the exclusive right to resolve such Dispute; provided
further that the Management Committee shall have the final and exclusive right
to resolve Disputes arising from any provision of this Agreement which expressly
or implicitly provides for the Parties to reach mutual agreement as to certain
terms. If the Management Committee is unable to amicably resolve the Dispute
during the ten (10) day period, then the Management Committee will consider in
good faith the possibility of retaining a third party mediator to facilitate
resolution of the Dispute. In the event the Management Committee elects not to
retain a mediator, the Dispute will be subject to the resolution mechanisms
described below. "Management Committee" shall mean a committee made up of a
senior executive from each of the Parties for the purpose of resolving Disputes
under this Section and generally overseeing the relationship between the Parties
contemplated by this Agreement. Neither Party shall seek, nor shall be entitled
to seek, binding outside resolution of the Dispute unless and until the Parties
have been unable to amicably resolve the dispute as set forth in this paragraph
(a) and then, only in compliance with the procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) intellectual property and
confidentiality, and (ii) any provision of this Agreement which expressly or
implicitly provides for the Parties to reach mutual agreement as to certain
terms (which shall be resolved by the Parties solely and exclusively through
amicable resolution as set forth in paragraph (a), any Dispute not resolved by
amicable resolution as set forth in paragraph (a) shall be governed exclusively
and finally by arbitration; provided, however, that the Parties shall not be
prevented from seeking injunctive relief and such other equitable relief as may
be permitted under applicable law from a court of competent jurisdiction. Such
arbitration shall be
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conducted by the American Arbitration Association ("AAA") in Washington, D.C.
and shall be initiated and conducted in accordance with the Commercial
Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which in a judicial setting would be considered a conflict of
interest. The third arbitrator, selected by the first two, shall be a neutral
participant, with no prior working relationship with either Party. If the two
arbitrators are unable to select a third arbitrator within ten (10) days, a
third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may not continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
toto. The arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory damages as
well as declaratory relief. Any damages award by the arbitrators shall be
accompanied by a written opinion setting forth the findings of fact and
conclusions of law relied upon in reaching the decision. The award rendered by
the arbitrators shall be final, binding and non-appealable, and judgment upon
such award may be entered by any court of competent jurisdiction. The Parties
agree that the existence, conduct and content of any arbitration shall be kept
confidential and no Party shall disclose to any person any information about
such arbitration, except as may be required by law or by any governmental
authority or for financial reporting purposes in each Party's financial
statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of witnesses
and all other expenses and costs in connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding the foregoing, the
arbitrators may modify the allocation of Arbitration Costs and award Attorneys'
Fees in those cases where fairness dictates a different allocation of
Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively,
"Non-Arbitration Claims") shall be brought in a court of competent jurisdiction
in the State of New York. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the State of New York and the federal courts
situated in the State of New York, over any and all Non-Arbitration Claims and
any and all actions to enforce such claims or to recover damages or other relief
in connection with such claims or to enforce a judgment rendered in an
arbitration proceeding.
VII. MISCELLANEOUS
AUDITING RIGHTS. Each Party shall maintain complete, clear and accurate records
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, each party shall have the right, at its expense,
to direct an independent certified public accounting firm subject to strict
confidentiality restrictions to conduct a reasonable and necessary copying and
inspection of portions of the Records of the other party that are directly
related to amounts payable to such party pursuant to this Agreement. Any such
audit may be conducted after
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twenty (20) business days prior written notice, subject to the following. Such
audits shall not be made more frequently than once every twelve months. No such
audit of AOL shall occur during the period beginning on June 1 and ending
October 1. In lieu of providing access to its Records as described above, either
party shall be entitled to provide the other party with a report from an
independent certified public accounting firm confirming the information to be
derived from such Records.
INDEPENDENT CONTRACTORS. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
NOTICE. Any notice, approval, request, authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname "AOLNotice" in
the case of AOL) or by confirmed facsimile; (ii) on the delivery date if
delivered personally to the Party to whom the same is directed; (iii) one
business day after deposit with a commercial overnight carrier, with written
verification of receipt; or (iv) five business days after the mailing date,
whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no.
703-265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of ICP, except as otherwise specified herein, the notice address shall be the
address for ICP set forth in the first paragraph of this Agreement, with the
other relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
NO WAIVER. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
RETURN OF INFORMATION. Upon the expiration or termination of this Agreement,
each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all confidential information,
documents, manuals and other materials specified by the other Party.
SURVIVAL. Section 7 of this Agreement and Sections IV, V, VI, and VII of this
Exhibit C, shall survive the completion, expiration, termination or cancellation
of this Agreement. In addition, all payment terms of this Agreement and any
provision which expressly survives or, by its nature, must survive the
completion, expiration, termination or cancellation of this Agreement, shall
survive the completion, expiration, termination or cancellation of this
Agreement.
ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and supersedes
any and all prior agreements of the Parties with respect to the transactions set
forth herein. Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is different from or in
addition to the provisions of this Agreement (whether or not it would materially
alter this Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be bound thereby
specifically agrees to such provision in writing.
AMENDMENT. No change, amendment or modification of any provision of this
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
FURTHER ASSURANCES. Each Party shall take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other Party for the implementation or continuing
performance of this Agreement.
ASSIGNMENT. Neither Party shall assign this Agreement or any right, interest or
benefit under this Agreement without the prior written consent of the other
party; provided, however, that either Party may, without the consent of the
other Party, assign this Agreement to a party that controls, is controlled by or
is under common control with such Party or in connection with a merger,
consolidation or acquisition of all or substantially all of such Party's assets;
provided, further, that no such
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assignment shall be deemed to release the assigning Party from its obligations
or liability hereunder. Subject to the foregoing, this Agreement shall be fully
binding upon, inure to the benefit of and be enforceable by the Parties hereto
and their respective successors and assigns.
SUBCONTRACTORS. To the extent ICP utilizes consultants or subcontractors to
perform a material portion of its obligations under this Agreement, such
consultants and/or subcontractors shall be subject to AOL's prior written
approval and ICP shall provide AOL with direct contact information for the
employees of such consultants and/or subcontractors who are responsible for
performing such obligations, which employees shall be available during business
hours for consultation with AOL. AOL hereby approves Sabre.
CONSTRUCTION; SEVERABILITY. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
REMEDIES. Except where otherwise specified and notwithstanding the limitation on
damages described below, the rights and remedies granted to a Party under this
Agreement are cumulative and in addition to, and not in lieu of, any other
rights or remedies which the Party may possess at law or in equity, including
the right to specific performance.
APPLICABLE LAW; JURISDICTION. This Agreement shall be interpreted, construed and
enforced in all respects in accordance with the laws of the State of New York
except for its conflicts of laws principles.
EXPORT CONTROLS. Both parties shall adhere to all applicable laws, regulations
and rules relating to the export of technical data and shall not export or
re-export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
HEADINGS. The captions and headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
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EXHIBIT D
PROMOTIONS
Pursuant to the Interactive Services and Exclusive Channel Agreement between
Travelocity Holdings, Inc. ("ICP") and America Online, Inc. ("AOL"), dated as of
_________________, 1999 (the "Agreement"), the following report is delivered to
AOL for the period beginning _____________ and ending __________ (the "Period"):
PROMOTIONAL COMMITMENTS
ICP has completed the following promotions during the Period:
<TABLE>
<CAPTION>
TYPE OF PROMOTION DATE(S) OF DURATION/CIRCULATION OF RELEVANT CONTRACT
PROMOTION PROMOTION SECTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.
- ------------------------------------------------------------------------------------------------------------
2.
- ------------------------------------------------------------------------------------------------------------
3.
</TABLE>
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EXHIBIT E
PERFORMANCE STANDARDS
1. General. The Res System will, in the aggregate, provide travel-related
services, including, but not limited to, air, car, hotel, vacation package
and cruise booking and availability functionality and travel related
Content that will have performance and quality features equivalent to such
functionality, offered by the leading online travel reservations providers,
including, without limitation, the following standards: (i) pricing of
Products made available through AOL, (ii) scope and selection of Products,
(iii) quality of Products, (iv) customer service and fulfillment associated
with the marketing and sale of Products; and (v) ease of use of the ICP
Internet Site and ICP Programming.
2. ICP Internet Site Infrastructure. ICP will be responsible for all
communications, hosting and connectivity costs and expenses associated with
the ICP Internet Site. ICP will provide all hardware, software,
telecommunications lines and other infrastructure necessary to meet traffic
demands on the ICP Internet Site from the AOL Network. ICP will design and
implement the network between the AOL Service and ICP Internet Site such
that (i) no single component failure will have a materially adverse impact
on AOL Members seeking to reach the ICP Internet Site from the AOL Network
and (ii) no single [***] under ICP's reasonable control will run at more
than [***] average utilization for a [***] in a daily period. In this
regard, ICP will provide AOL, upon request, with a detailed network diagram
regarding the architecture and network infrastructure supporting the ICP
Internet Site. In the event that ICP elects to create a custom version of
the ICP Internet Site in order to comply with the terms of this Agreement,
ICP will bear responsibility for all aspects of the implementation,
management and cost of such customized site.
3. Optimization; Speed. ICP will ensure that: (a) the functionality and
features within the ICP Internet Site are optimized for the client software
then in use by AOL Members; (b) the ICP Internet Site is designed and
populated in a manner that minimizes delays when AOL Users attempt to
access such site and (c) performs with respect to page size, loading speed
and download time at least equal to the performance of the AOL client
software then in use. At a minimum, ICP will ensure that the ICP Internet
Site's data transfers initiate within fewer than [***] on average. Prior to
commercial launch of any material promotions described herein, ICP will
permit AOL to conduct performance and load testing of the ICP Internet Site
(in person or through remote communications), with such commercial launch
not to commence until such time as AOL is reasonably satisfied with the
results of any such testing.
4. User Interface. ICP shall use its commercially reasonable best efforts to
maintain a graphical user interface within the ICP Internet Site that is
competitive in all material respects with interfaces of other similar sites
based on similar form technology. AOL reserves the right to review and
approve the user interface and site design prior to launch of the
Promotions and to conduct focus group testing to assess ICP's
competitiveness in this regard.
5. Technical Problems. ICP agrees to use commercially reasonable efforts to
address material technical problems (over which ICP exercises control)
affecting use by AOL Members of the ICP Internet Site (an "ICP Technical
Problem") promptly following notice thereof. In the event that ICP is
unable to promptly resolve an ICP Technical Problem following notice
thereof from AOL (including, without limitation, infrastructure
deficiencies producing user delays), AOL will have the right to regulate
the promotions it provides to ICP hereunder until such time as ICP corrects
the ICP Technical Problem at issue.
6. Monitoring. ICP will ensure that the performance and availability of the
ICP Internet Site is monitored on a continuous (24 X 7) basis and shall
provide AOL with a technical support plan for 24 x 7 technical support
acceptable to AOL. ICP will provide AOL with contact information (including
e-mail, phone, pager and fax information, as applicable, for both during
and after business hours) for ICP's principal business and technical
representatives, for use in cases when issues or problems arise with
respect to the ICP Internet Site.
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<PAGE> 57
7. Security. ICP will utilize Internet standard encryption technologies (e.g.,
Secure Socket Layer - SSL) to provide a secure environment for conducting
transactions and/or transferring private member information (e.g. credit
card numbers, banking/financial information, and member address
information) to and from the ICP Internet Site. ICP will facilitate
periodic reviews of the ICP Internet Site by AOL in order to evaluate the
security risks of such site. ICP will promptly remedy any security risks or
breaches of security as may be identified by AOL's Operations Security
team.
8. Telecommunications. Where applicable ICP will utilize encryption
methodology to secure data communications between the Parties' data center.
The network between the Parties will be configured such that no single
component failure will control runs at more than [***] average utilization
for a [***] minute peak in a daily period.
9. Technical Performance.
i. ICP will design the ICP Internet Site to support the AOL-Client embedded
versions of the Microsoft Internet Explorer 3.XX and 4.XX browsers (Windows
and Macintosh), the Netscape Browser 4.XX and make commercially reasonable
efforts to support all other AOL browsers listed at:
"http://webmaster.info.aol.com."
ii. To the extent ICP creates customized pages on the ICP Internet Site for
AOL Users, ICP develop and employ a methodology to detect AOL Members
(e.g., examine the HTTP User-Agent field in order to identify the "AOL
User-Agents" listed at: http://webmaster.info.aol.com and referenced under
the heading "Browser Detection."
iii. ICP will periodically review the technical information made available
by AOL at http://webmaster.info.aol.com.
iv. ICP will design its site to support HTTP 1.0 or later protocol as
defined in RFC 1945 and to adhere to AOL's parameters for refreshing or
preventing the caching of information in AOL's proxy system as outlined in
the document provided at the following URL: http://webmaster.info.aol.com.
ICP is responsible for the manipulation of these parameters in web based
objects so as allow them to be cached or not cached as outlined in RFC
1945.
v. Prior to releasing material, new functionality or features through the
ICP Internet Site ("New Functionality"), ICP will use commercially
reasonable efforts to either (i) test the New Functionality to confirm its
compatibility with AOL Service client software and (ii) provide AOL with
written notice of the New Functionality so that AOL can perform tests of
the New Functionality to confirm its compatibility with the AOL Service
client software. Should any new material, new functionality or features
through the ICP Internet Site be released without notification to AOL, AOL
will not be responsible for any adverse member experience until such time
that compatibility tests can be performed and the new material,
functionality or features qualified for the AOL Service.
10. AOL Internet Services Partner Support. AOL will provide ICP with access to
the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL
makes generally available to similarly situated web-based partners. AOL
support will not, in any case, be involved with content creation on behalf
of ICP or support for any technologies, databases, software or other
applications which are not supported by AOL or are related to any ICP area
other than the ICP Internet Site. Support to be provided by AOL is
contingent on ICP providing to AOL demo account information (where
applicable), a detailed description of the ICP Internet Site's software,
hardware and network architecture and access to the ICP Internet Site for
purposes of such performance and the coordination load testing as AOL
elects to conduct.
11. ICP Programming. The terms and conditions of this Exhibit applicable to the
ICP Internet Site shall apply equally to any ICP Programming that is (a)
programmed in HTML or (b) web-based.
12. Additional Standards. ICP shall diligently monitor the ICP Internet Site
and ICP Programming, including the Res System for fraud and abuse and shall
provide adequate staffing for maintenance of both the ICP Internet Site and
ICP Programming. In the event that fraudulent activity associated with use
of the ICP Internet Site and/or ICP Programming exceeds two times AOL's
average occurrence of fraud for a similar time frame across its credit
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<PAGE> 58
card transaction activities through the AOL Service (as measured by AOL)
(the "Average Fraud Level"), then the Parties shall make such modifications
to any and all applicable operations, systems, information flows related to
fraud prevention and billing as are necessary to reduce such fraudulent
activity to no greater than two times the Average Fraud Level. ICP shall
also work with AOL in developing policies (not otherwise addressed herein)
that are designed to combat any repeated customer service complaints and to
prevent deceptive selling practices.
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<PAGE> 59
EXHIBIT F
ICP SERVICES
1. INTRODUCTION
This Exhibit F describes certain services, functions and responsibilities
of ICP (the "Services"). ICP shall be fully responsible for all services
(including, without limitation, for equipment and software) from the
connection to the Airline Systems to the Core Systems to the RMG Focal
Point (such area shall be known as the "ICP Responsibility Area"). Included
in such responsibilities, ICP shall operate and maintain the Core Systems
and part of the RMG up to the RMG Focal Point, and arrange for the
connection of the Core Systems to the Airline Systems, and then manage and
operate the equipment, software and any other resources within the ICP
Responsibility Area. ICP shall also be fully responsible for providing
support and back-end services in connection with travel reservations
support and ticket processing, including, without limitation, call center
operation and management services and fulfillment services and other
general support functions.
ICP anticipates that the provision of Services will improve over the Term
based on ICP's knowledge of and access to state-of-the-art resources and
technology, implementation of improved methods and procedures for providing
the Services, and efficiencies arising from ICP's provision of the
Services.
2. MANAGEMENT AND OPERATION SERVICES
2.1 Management and Operation of the Equipment. ICP will assume full
management and operational responsibility for the equipment within the
ICP Responsibility Area. Such responsibilities include, at a minimum,
acquiring, installing, upgrading, managing, maintaining, repairing and
replacing all equipment in order to provide the Services.
o ICP shall assume full management and operational responsibility
for host processor(s) functions and services within the ICP
Responsibility Area. ICP's responsibilities during the term of
the Agreement will include, at a minimum: console monitoring and
operations; tape and storage management; and all technical system
support operations. ICP will maintain proper and adequate
facilities, equipment and supplies, and a properly trained and
adequately staffed operations center, including necessary
management and support staff. The hours of operation of the
operations center will be 24 hours per day, 7 days per week.
o ICP will assume full management and operational responsibility
for network functions and services within the ICP Responsibility
Area. ICP's responsibilities will include, at a minimum,
acquiring, installing, upgrading, managing, maintaining,
repairing and replacing all equipment, software, lines and
cabling, as required to perform the network services as the
network may change during the Term. ICP shall implement measures
necessary to ensure confidentiality and protect against
unauthorized access and fraudulent use.
2.2 Software Management and Maintenance. ICP will assume full management
and operational responsibility for the software within the ICP
Responsibility Area, i.e., the "Back-End Systems". Such
responsibilities include, at a minimum, acquiring, installing,
upgrading, managing, maintaining, repairing and replacing all software
in order to provide the Services. Software management and maintenance
will include, at a minimum, the following:
o Corrective maintenance, including correction of systems defects
in accordance with applicable specifications;
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<PAGE> 60
o Preventative maintenance, including prevention of systems
problems by, where appropriate, improving systems documentation,
source code restructuring to the extent the code is accessible,
database/index reorganization, system re-engineering, tool
construction and re-writing un-maintainable modules.
o Upgrading the Back-End Systems: (i) so that the Back-End Systems
are always kept current and competitive (including
cost-competitive) with the major airline reservations systems in
the industry, (ii) pursuant to ICP's normal maintenance
practices, (ii) in a manner that ensures continued eligibility
for support and maintenance by any third-party for such Software,
and (iii) so as to maintain connectivity with the Airline
Systems.
o Tuning of systems to improve operational performance and minimize
resource usage to the extent practicable;
o Development and maintenance of current documentation for the
Back-End Systems, including changes to reflect any modifications
to the Back-End Systems; and
o Implementation of any regulatory requirements.
2.3 Other Management and Operational Responsibilities. ICP shall be
responsible for other management and operation services related to the
ICP Responsibility Area, including, without limitation, the following:
o Disaster Recovery. ICP will assume management and operational
responsibility, as applicable, for the provision of disaster
recovery services in a manner at least consistent with industry
standards. Such services include the management and interface
with third party disaster recovery service providers, and the
development, management and, as applicable, operation of a
disaster recovery plan.
o Security Management. ICP will manage and monitor access to
computer system resources, including system level accounts,
groups, users and passwords and will maintain the security
software. AOL shall have the right to perform a and end-to-end
security audit of the ICP Responsibility Area at AOL's sole
option and expense.
3. SUPPORT AND BACK-END SERVICES
3.1 Call Center Services. ICP shall be responsible for the management of a
call center to answer inquiries from users of the Res System related
to information and reservations on all airlines that are generally
available on major airline reservations systems (the "Call Center").
ICP shall manage and operate the Call Center, providing the resources
necessary to respond promptly to inquiries and customer support
related to information and reservations on all airlines that are
generally available on major airline reservations systems. All
communications (including oral communications) with AOL Users through
the Call Center shall be co-branded with AOL in a manner approved by
AOL in advance. Without limiting the generality of the foregoing,
ICP's services shall include, without limitation:
o Supporting both toll free (800) voice service and online,
real-time assistance to users through instant messages and/or (as
commercially reasonable and necessary) chat/conference room(s).
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<PAGE> 61
o Providing hours of operation that will mirror periods of highest
user activity over all time zones, which, unless mutually agreed,
at a minimum will be between 6:00 am to 10:00 p.m. Pacific Time.
o Staffing the Call Center as necessary to meet or exceed customer
demand for customer support.
o Acknowledging customer complaints within 24 hours of receipt of
complaint and promptly resolving the same, but no later than
within five (5) business days after receipt. ICP shall log all
such complaints and will note the date/time of the complaint,
escalation (if any) and resolution. ICP shall maintain files on
all complaints and resolutions.
o Responding to AOL requests for information on Call Center
operations. ICP understands that from time to time AOL shall make
surprise test calls to the Call Center in order to determine
provision of Call Center services. In the event that AOL
discovers a problem with the services, AOL shall notify ICP, and
the Parties shall meet to discuss the problem. ICP shall take the
steps necessary to correct any problems.
3.2 Fulfillment Services. ICP shall be responsible for the management of
fulfillment services in which ICP shall receive ticket reservation
orders made by customers through the Res System and then print out the
tickets and distribute (i.e., mail) them to customers ("Fulfillment").
ICP shall manage and operate the Fulfillment services, providing the
resources necessary to receive ticket reservation orders made by
customers through the Res System and then printing out the tickets and
distributing them to customers. All communications (including oral
communications) with AOL Users in connection with Fulfillment shall be
co-branded with AOL in a manner approved by AOL in advance. Without
limiting the generality of the foregoing, ICP's services shall
include:
o Using commercially reasonable best efforts to ensure that all
travel documentation is delivered to customers on a timely basis.
ICP shall document all missed deliveries and will keep such
documentation on file for AOL review.
Acknowledging customer complaints within 24 hours of receipt of complaint
consistent with ICP's standard customer service practices. ICP shall log all
such complaints and will note the date/time of the complaint, escalation (if
any) and resolution. ICP shall maintain files on all complaints and resolutions.
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EXHIBIT G
KEYWORD GUIDELINES
PRINT/GRAPHIC
o Preferred listing: (AOL Logo appears) America Online Keyword: Travel
America Online Keyword: Travel
o If necessary, due to space constraints, listing may appear as follows:
AOL KEYWORD: TRAVEL
o Every effort should be made to have 'America Online' spelled out
o Capitalization - listing should appear in initial caps only
Note: When America Online is abbreviated to AOL - AOL must appear in
all caps. K of Keyword must always be capitalized
o Font, Font style and Size must all be consistent
o Listing size must be of equal prominence to that of any/all other URLs
featured
BROADCAST/RADIO
o America Online Keyword must announced entirely (even if an accompanying
graphic is set with AOL versus America Online)
Example voiceover would read:
"For more information, please visit America Online Keyword: Travel"
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<PAGE> 63
[SCHEDULE 1]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CONTRACT START
PARTNER RELATIONSHIP DATE CONTRACT END BRANDS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BMD TRAVEL SERVICES, INC. ADVERTISER 7/22/99 4/21/00 AOL
- --------------------------------------------------------------------------------------------------------------------------
CENDANT CORPORATION ADVERTISER 1/7/99 9/30/00 AOL, NETSCAPE
- --------------------------------------------------------------------------------------------------------------------------
CHEAP TICKETS ADVERTISER 9/11/99 12/31/99 AOL.COM
- --------------------------------------------------------------------------------------------------------------------------
HOTEL RESERVATIONS NETWORK ADVERTISER 4/22/99 6/9/00 AOL, AOL.COM
- --------------------------------------------------------------------------------------------------------------------------
HOTELSAVERS WORLDWIDE ADVERTISER 11/5/98 1/10/00 AOL
- --------------------------------------------------------------------------------------------------------------------------
LAS VEGAS RESERVATIONS SYSTEMS, INC. ADVERTISER 7/20/98 9/30/99 AOL
- --------------------------------------------------------------------------------------------------------------------------
TRAVELSCAPE ADVERTISER 7/20/98 9/30/99 AOL
- --------------------------------------------------------------------------------------------------------------------------
ONSALE, INC. ADVERTISER 9/12/98 7/21/00 SHOPPING, AOL, AOL.COM,
NETSCAPE, COMPUSERVE
- --------------------------------------------------------------------------------------------------------------------------
THE TRAVEL COMPANY ADVERTISER 1/1/99 3/31/00 AOL
- --------------------------------------------------------------------------------------------------------------------------
MANN COMPANY ADVERTISER 9/15/99 11/15/99 COMPUSERVE
- --------------------------------------------------------------------------------------------------------------------------
TRIP.COM ADVERTISER -- -- DCI
- --------------------------------------------------------------------------------------------------------------------------
CENDANT CORPORATION CONTENT PARTNER 7/1/97 9/30/01 AOL, AOL.COM
(TRAVELERS ADVANTAGE)
- --------------------------------------------------------------------------------------------------------------------------
TRIP.COM CONTENT PARTNER (TOOLS) 2/1/99 1/31/00 AOL, AOL.COM
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-63-
<PAGE> 64
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT CONTRACT
UPCOMING PARTNERS RELATIONSHIP START DATE END BRANDS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
WORLDRES ADVERTISER -- -- AOL, AOL.COM, NETSCAPE, COMPUSERVE
- --------------------------------------------------------------------------------------------------------------------------------
TRAVELSCAPE ADVERTISER -- -- AOL, AOL.COM
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-64-
<PAGE> 65
SCHEDULE 9
None
-65-
<PAGE> 1
EXHIBIT 10.12
NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
CONTENT PARTNER/DISTRIBUTION AGREEMENT
This Content Partner/Distribution Agreement ("Agreement") is entered into by and
between Infoseek Corporation, a corporation duly organized under the laws of
California, with its principal place of business at 1399 Moffett Park Drive,
Sunnyvale. California 94089-1134. hereinafter referred to as "Infoseek", and The
SABRE Group, Inc., a corporation organized under the laws of the State of
Delaware with its principal place of business at 4255 Amon Carter Blvd., Fort
Worth, Texas, 76155, hereinafter referred to as "Content Partner".
WITNESSETH:
WHEREAS, Infoseek hosts and maintains a U.S. version of the Internet service
known as GO Network.
WHEREAS, Content Partner operates an Internet site located at "travelocity.com"
which provides various online travel services (including flight, hotel and car
reservations) and related travel information.
NOW, THEREFORE, for good and valuable consideration, and in consideration of the
mutual covenants and conditions herein set forth, and with the intent to be
legally bound thereby, Infoseek and Content Partner hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 AFFILIATE means with respect to a party to this Agreement, any
entity that directly or indirectly controls, or is under
common control with, or is controlled by, such party;
"control" (including, with its correlative meanings,
"controlled by" and "under common control with") means
possession, directly or indirectly, of the power to direct or
cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership
interests, by contract or otherwise).
1.2 CENTER means a channel on GO Network devoted to a particular
subject (such as Money, Family, or Entertainment). The Travel
Center is the Center on GO Network devoted primarily to topics
relating to travel.
1.3 CONTENT PARTNER SERVICE or TRAVELOCITY.COM is the Internet
site operated by Content Partner and located at
www.travelocity.com.
1.4 GO NETWORK OR SERVICE is the US version of Infoseek's Internet
service located at www.infoseek.go.com, www.go.com and/or such
other successor, extension or replacement sites(s) as may be
designated by Infoseek, and will always include, without
limitation. the primary Internet service operated by Infoseek.
1.5 GO NETWORK-WRAPPED PAGES means Infoseek/Content Partner
co-branded pages with the GO Wrapper that display the Travel
Content, as further described herein and in the mock up pages
attached hereto as Appendix B.
1.6 GO WRAPPER means a page with the GO Network Trademarks and
includes the GO Network header, GO footer, GO tabs and GO
Network copyright notice as shown in Appendix B.
1.7 LINK means a so-called "hot link" in graphical and/or textual
format located on the applicable areas of the Service which
takes a User directly to another web site or area within the
site.
1.8 RESERVATIONS LAUNCH PAGES means the GO Network-Wrapped Pages
that will appear on the Travel Center (one level below the
Travel Center home page) and will guide
<PAGE> 2
Users through the start of the booking process for air, car or
hotel travel reservations through Content Partner.
1.9 TRADEMARKS means trade names, logos, and trademarks and
representations of the foregoing.
1.10 TRAVEL CONTENT means content and services, owned, controlled
or supplied by or through Content Partner relating to travel
and supplied to GO Network Users pursuant to this Agreement
and as further described in Appendix A. As used herein,
"Travel Content" includes all travel services supplied to
Users by Content Partner through the Service. including,
without limitation, reservation services. Fare Watcher, Best
Fare Finder City Pair Data, and Flight Paging.
1.11 USERS means individuals or entities that access GO Network.
ARTICLE 2. DISPLAY OF TRAVEL CONTENT ON GO NETWORK
2.1 Display of Travel Content. Pursuant to this Agreement, Content
Partner will be the preferred online travel reservation
service for providing air, car and hotel reservations on GO
Network. As used herein, "preferred" means that Infoseek will
provide (***) and (***) Links on the Travel Center, at such
locations as shall be determined (***) to the (***) and the
(***) and placement of such Links on the Travel Center will be
consistent with the (***) shown on the (***) attached hereto
(***). Infoseek may also include Links to the Travel Center
throughout the GO Network. Infoseek may also include Links
with attribution to Content Partner on GO Network to Content
Partner's Fare Watcher and Flight Paging services (which links
will be considered Travel Content), which services shall
appear on GO Network-Wrapped Pages. (Emails and pages
generated by such services shall also be co-branded by the
parties.)
2.2 GO Network Wrapped Pages. Except as provided herein, the
Travel Content will be displayed on GO Network-Wrapped Pages
as further described on the mock up pages attached hereto as
Appendix B. During the term of this Agreement, the relative
prominence and placement of the Travel Content in the Travel
Center shall be consistent with prominence and placement of
the Travel Content as shown on the mock up pages attached
hereto as Appendix B. Except as otherwise provided herein ,
Infoseek retains the right to adopt or otherwise alter the
design, look, and any other attributes of the Service and
Service pages, including all links thereon; provided, however,
that Content Partner shall not be required to make any
material changes to the Content Partner Service or Content
Partner's travel engine technology in order to implement such
changes. The design of the Reservations Launch Pages will
reasonably conform to the reasonable requirements specified by
Content Partner in order to properly interface with Content
Partner's Service. Subject only to Infoseek's right to control
the look and feel of GO Network and to remove content that it
reasonably deems objectionable, Content Partner shall refrain
from selling tangible products (other than air, car or hotel)
on Go Network Wrapped Pages that could place Infoseek in
violation of any of its agreements with third parties for
exclusive or preferred placement on GO Network (for example.
music, books. cars, or credit cards); Infoseek shall be
responsible for advising Content Partner in writing of any
such restrictions. Content Partner shall be solely responsible
for providing the Travel Content, including all related user
interfaces, reservation systems, customer support (as
described in Appendix A), engineering and editorial content.
The GO Network-Wrapped Pages will be hosted as follows:
(a) Infoseek will (i) create, host and serve the
Reservation Launch Pages on the Travel Center and
(ii) host and serve elements of the Content Partner's
hotel database as specified Appendix G as well as,
with appropriate attribution to Content Partner,
Content Partner's Best Fare Finder City Pair Data
selected by
2
<PAGE> 3
Infoseek. The Reservation Launch Pages will Link to
GO Network-Wrapped Pages hosted by Content Partner,
and the Content Partner Service will be the only
travel reservation booking engine on such GO
Network-Wrapped Pages. Subject to the restrictions
contained in this Agreement, Infoseek shall have the
exclusive authority to sell all advertising,
promotions and sponsorships on such pages hosted by
Infoseek, and Infoseek shall retain all revenues
derived from such sales.
(b) Content Partner will create, host and serve GO
Network-Wrapped Pages that will Link to and from the
Reservation Launch Pages and that will permit Users
to make travel reservations. Content Partner shall
have the exclusive authority to sell all advertising,
promotions and sponsorships on such pages, subject to
the restrictions contained in this Agreement and,
except as expressly provided in Appendix C, retain
all revenues derived from such sales. In no event
shall Content Partner permit any advertising or
promotion of any kind to be displayed on such pages
(i) concerning or relating to any GO Network
competitor set forth on Appendix E or (ii) in
violation of the Infoseek Ad Guidelines, which are
attached hereto as Appendix F. The transaction pages
hosted by Content Partner (e.g., those pages on which
Users actually complete their travel reservations)
will bear a modeled GO Wrapper. Appendix E may be
amended from time to time upon mutual written
agreement of the parties, which shall not be
unreasonably withheld or delayed.
(c) All travel confirmations shall be the responsibility
of Content Partner. Such travel confirmations will
have a Link back to GO Network from Content Partner's
Service.
(d) The parties shall cooperate with each other to create
GO Network-Wrapped Pages that meet Infoseek's
engineering and User experience requirements.
Infoseek shall provide one employee to assist Content
Partner in understanding and complying with these
requirements.
(e) The GO Network-Wrapped Pages shall be developed and
implemented in accordance with the implementation
schedule attached hereto as Appendix A. The parties
shall use commercially reasonable efforts to maintain
continuity of the implementation teams of each party
to assure a timely, effective launch of the Travel
Content.
(f) Infoseek may maintain Links on the Reservation Launch
Pages (when hosted by Infoseek) and such other GO
Network-Wrapped Pages, all as may be mutually agreed
upon to Content Partner's Services directed to
individuals located in the United Kingdom and Canada
("Content Partner International Services"). Content
Partner's International Services available from the
Reservations Launch Pages will not contain the Go
Wrapper, but upon the mutual agreement of the
parties, will contain co-branding as requested by
Infoseek.
2.3 Delivery of Content. Content Partner will deliver to Infoseek
the Travel Content to be hosted by Infoseek in a mutually
agreeable format, electronically via modem or Internet access
(e.g. Internet ftp or Internet e-mail). Content Partner agrees
to certify, when requested, that all deliveries hereunder were
made electronically. Content Partner will make updates to the
Travel Content available to Infoseek and Infoseek shall update
the Travel Content hosted by Infoseek on a regular mutually
agreed upon basis. Infoseek shall have the right, but not the
obligation, to remove from the content hosted by Infoseek, or
direct Content Partner to remove, any Travel Content that is
in violation of Infoseek's Content Guidelines attached hereto
as Appendix H. Content Partner shall cooperate and assist
Infoseek by promptly answering questions and complaints
3
<PAGE> 4
regarding the Travel Content. Each party shall promptly inform
the other party of any event or circumstance, and provide all
information pertaining to such event or circumstance, related
or arising from this Agreement that could reasonably lead to a
claim or demand against the other party by any third party.
2.4 Correction of Errors. Content Partner shall use commercially
reasonable efforts to promptly remedy and/or correct any
material errors in the Travel Content.
2.5 Linking. The GO Network-Wrapped Pages Shall not be linked to
any Infoseek competitor listed on Appendix E. Content Partner
agrees not to override browser back button functionality to
prevent Users who link to the Content Partner Service or GO
Network-Wrapped Pages from GO Network from returning to GO
Network.
2.6 Costs. Each party will be responsible for its respective
telecommunications charges with respect to the provisions of
respective portions of the Travel Content to GO Network and to
Users.
2.7 Preferred Reservation Services Partner.
(a) Except for any online travel services provided by
Infoseek or any of its Affiliates (including, without
limitation, The Walt Disney Company), which shall not
be restricted by this Agreement, Travelocity will be
the only co-branded comprehensive, online travel
booking engine, offering air, hotel and car services,
directly accessible from the Travel Center home page
of GO Network (other than travel services available
through advertisements not restricted by this
Agreement). The Travel Center home page shall have
one attribution to Travelocity, in a format to be
mutually agreed to between the parties.
Notwithstanding the foregoing, Infoseek and its
Affiliates may (i) offer online travel services
(which may be co-branded) for air, hotel or car
services from the Travel Center home page (for
example, an airline or hotel link) and (ii) provide
links on the Travel Center home page to specialized
travel areas (for example, Deals or Vacation
Packages) featuring multiple providers of air, car
and/or hotel products. In addition, the Walt Disney
Company may, in connection with its online travel
services offered on GO Network, partner with third
party vendors, including air, hotel and/or car
providers to provide online travel services.
(i) Infoseek shall not sell banner advertisements for
display within the Travel Center to (***) (herein
"Travelocity Competitors"); provided, however the
foregoing shall not prohibit the display of run of
site ads for such Travelocity Competitors within GO
Network nor shall the foregoing prohibit the sale of
advertisements to the Travelocity Competitors within
GO Network's Directory, Search or Community pages, or
any pages outside of the Travel Center. The parties
may mutually agree to amend the list of Travelocity
Competitors; provided, however, that such list may
only be amended to include entities whose (***) and
(***) business is the provision of online travel
services in competition with Content Partner. In the
event any competitor is added to the list, one entity
must be deleted so that the list shall never consist
of more than three (3) competitors. Any such
amendments shall be subject to and shall not impact
Infoseek's pre-existing agreements with third parties
(including, without limitation, any such competitors)
(ii) Content Partner shall be entitled to purchase
from Infoseek (***) of the available inventory of
each of the keywords listed on Appendix D. As used
herein "keywords" means words that result in the
display of Content Partner's content or advertising
on GO Network in response to a User entering such
keyword in a search query.
4
<PAGE> 5
(b) The restrictions of Section 2.7 (a) and (i) shall not
apply to authentic news or editorial content or to
content displayed on GO Network (including, without
limitation, content provided by or concerning any
Travelocity Competitor or any keywords purchased by
Content Partner) in response to User queries or
searches or content displayed on Infoseek's Search or
Web directories. In addition, the restrictions of
Section 2.7(a) (and its subsections) shall not apply
to any preexisting contracts that Infoseek may have
as of the execution date of this Agreement with any
Travelocity Competitors; provided, however, that
Infoseek agrees that any such contacts shall expire
by no later than (***), and shah not be renewed by
Infoseek. In addition, the restrictions of Section
2.7(a) and its subsections shall not restrict in any
way the ability of Infoseek to package and/or private
label its own travel services (independently or
together with third parties, other than Travelocity
Competitors) or to enter into agreements with other
providers of travel related service (other than the
Travelocity Competitors), such as, but without
limitation. airlines, cruises, car rentals. hotels,
bed and breakfast reservations, vacation planners,
cruises, discount agencies, and other similar
distributors of travel related services and
information. Finally, the provisions of Section
2.7(a) and its subsections shall apply only to the
Travel Center operated by Infoseek and shall not
apply to any of Infoseek's Affiliates or their sites,
including without limitation, The Walt Disney
Company, espn.com or abcnews.com.
(c) Content Partner will exercise commercially reasonable
efforts to comply with and participate in GO Network
commerce initiatives such as, but not limited to, the
GO Network credit card program, GO Wallet
initiatives, and shopping incentives ("points")
programs.
2.8 Home Page Display. As long as the GO Network Centers continue
to be featured on the GO Network home page, during the term of
this Agreement, there will always be a Link on the GO Network
home page to the Travel Center.
2.9 Changes to Go Network-Wrapped Pages. From time to time, and
after the initial GO Network-Wrapped Pages have been created,
Infoseek may request that Content Partner make modifications,
enhancements, or other changes to the GO Network-Wrapped Pages
hosted by Content Pages (each such requested modification,
enhancement or change being a "GO Network Enhancement"). Upon
each such request, the parties will negotiate for the purpose
of determining mutually acceptable terms and conditions
regarding (i) the nature and scope of the GO Network
Enhancement, (ii) the allocation of resources necessary by
both parties to create the GO Network Enhancement, (iii) the
schedule for creating and implementing the GO Network
Enhancement, (iv) the allocation of expenses, and (v)
ownership of the GO Network Enhancement. Although the parties
have no obligation to reach any agreement, upon reaching an
agreement the parties will develop the GO Network Enhancement
in accordance with the terms thereof.
2.10 GO-Network Representative. Infoseek shall designate one (1)
individual to serve as the primary point of contact for any
issues arising from or related to the development, promotion
and other operations contemplated by this Agreement (the
"Infoseek Contact"). Infoseek may replace the Infoseek Contact
at any time and for any reason upon written notice to Content
Partner. The Infoseek Contact shall assist Content Partner in
maximizing the effectiveness of the advertising acquired by
Content Partner under this Agreement.
ARTICLE 3. LICENSE
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3.1 Grant of License by content Partner. Subject to the terms and
conditions of this Agreement, Content Partner hereby grants to
Infoseek a worldwide, non-exclusive right and license to use,
reproduce, adopt, incorporate, integrate, and otherwise
exploit the Travel Content on the Service and a license and
right to use Content Partner's trade names, trade dress, and
trademarks consistent with Content Partner's guidelines,
attached hereto as Appendix I as reasonably necessary with
respect to the display and use of the Travel Content on the
Service as contemplated by this Agreement.
3.2 Grant of License by Infoseek. Subject to the terms and
conditions of this Agreement, Infoseek hereby grants to
Content Partner a limited, non-exclusive license to use the GO
Wrapper and related GO Network Trademarks solely on the GO
Network-Wrapped Pages and as otherwise described herein and
solely as expressly approved in writing by Infoseek. At
Infoseek's election, GO Network branding will appear, in the
form approved by Infoseek, at Content Partner's reasonable
expense, on all printed jackets for airline tickets and
itineraries and in all email confirmation messages relating to
transactions completed on GO Network-Wrapped Pages. An
advertising that appears with the GO Network branding shall be
subject to the ad guidelines attached hereto as Appendix F. In
no event shall GO Network-Wrapped Pages, emails, airline
ticket jackets and other materials which contain GO Network
branding include the advertisements of any Go Network
competitor, as listed on the attached Appendix E.
ARTICLE 4. USER IDATA
4.1 User Registration.
(a) Content Partner shall ensure that its privacy policy
applicable to the Content Partner Service, to the
extent applicable to its performance under this
Agreement, is consistent with Infoseek's privacy
policy, as may be changed from time to time,
including, without limitation, including a mechanism
that allows Users to opt out of sharing of User data
with Infoseek and GO Network.
(b) The following illustrates the User registration
experience that shall be implemented pursuant to this
Agreement (although not all features may be available
at launch):
(i) Unless otherwise determined by Infoseek, in its
sole discretion, Users who have not registered on GO
Network shall not be required to register with or
provide any personal information to Content Partner
in order to access the Travel Content on GO Network
unless and until the User elects to purchase travel
services from Content Partner. In the future,
Infoseek and Content Partner may mutually agree to
require Users to register with GO Network before
accessing Travel Content on the Service.
(ii) Users accessing the GO Network-Wrapped Pages
from GO Network who have not registered on GO
Network, but have registered with Content Partner on
the Content Partner Service, will be invited to
register on GO Network upon logging in to Content
Partner's Service through the GO Network-Wrapped
Pages. In the event any such User wishes to register
on GO Network, the User shall be provided, to the
extent reasonably possible to implement, (***).
(iii) Users who have registered with GO Network and
wish to purchase travel services or products from
Content Partner via GO Network-Wrapped Pages will be
offered a (***) registration process pursuant to
which, subject to the User's express consent and
knowledge, the User's GO Network Username and
password will be transferred to Content Partner and
GO Network will receive and maintain a Content
Partner generated ID and password to facilitate the
User's
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use of the Travel Content. Content Partner may
request additional information from Users as
necessary to provide the Travel Content and related
services.
(iv) Infoseek and Content Partner shall exercise
(***) to integrate Content Partner's registration and
booking systems with the global registration system
of GO Network to maximize a (***).
4.2 Ownership of User Data
a. Content Partner shall (***) in all User data
generated on pages hosted by Content Partner
("Content Partner Users"). Content Partner shall make
available to Infoseek, via a method and timing to be
mutually agreed upon (but at minimum on a monthly
basis), all names and email addresses from each such
Content Partner User obtained through the Go
Network-Wrapped Pages provided that such User has not
opted out of sharing his/her data with parties and
provided such disclosure is not prohibited by law or
regulation. In addition, except as prohibited by law
or regulation and subject to User consent, Content
Partner shall provide to Infoseek all available data
concerning such Users who access this Content Partner
Service from GO Network, concerning products and/or
services purchased by such Users, survey and
promotion responses, and other demographic
information concerning such Users. Infoseek shall
have a perpetual, irrevocable, nonexclusive license
to reproduce, modify, distribute and otherwise use
such information as it deems appropriate, subject to
restrictions imposed by applicable law or regulation;
provided, however, in no event may Infoseek provide
any such information to a Travelocity Competitor, or
sell, transfer, rent or disclose such information to
third parties, unless such information has been
aggregated with other date from GO Network and is not
identifiable as Content Partner related data.
b. Infoseek shall own (***) all data concerning Users
which data is generated on all pages of the Service
hosted by Infoseek; provided, however, User data
generated on the Reservation Launch pages will be
sent to Content Partner as necessary in order to
facilitate provision of Travel Content to Users.
Content Partner shall have a perpetual, irrevocable,
nonexclusive license to reproduce, modify, distribute
and otherwise use such information as it deems
appropriate, subject to restrictions imposed by
applicable law or regulation; provided, however, in
no event may Content Partner provide any such
information to a competitor of Infoseek named in
Appendix E, or sell, transfer, rent or disclose such
information to third parties, unless such information
has been aggregated with other data from GO Network
and is not identifiable as GO Network related data.
4.3 Traffic/Usage Reports
Content Partner shall collect and provide to Infoseek, on a
monthly basis, the following information concerning User
traffic on the GO Network-Wrapped Pages hosted by Content
Partner, and Infoseek shall have an unrestricted, perpetual,
irrevocable, nonexclusive license to reproduce, modify,
distribute and otherwise use such information as it deems
appropriate, subject to restrictions imposed by applicable law
or regulation:
a. total number of visits to Content Partner's booking
engine through the GO Network-Wrapped Pages;
b. the number of times each visitor to such pages makes
a travel reservation or engages in other travel
related transactions;
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c. total number of impressions on GO Network-Wrapped
Pages,
d. with respect to travel tickets sold: the average
ticket price, airlines for which tickets are sold;
total percentage of tickets booked as "e-tickets"
(e.g., paperless tickets) on Content Partner's
Service; individual booking ticket information (e.g.,
destinations, dates of travel, etc.); and
e. total number of calls to Content Partners San Antonio
customer service center (described in Appendix A).
Infoseek shall collect and provide to Content Partner, on a
monthly basis the following aggregate information: number of
unique Users visiting the GO Network Travel Center, number of
page views on the Travel Center home page, number of page
views generated by the Reservations Launch Pages, and the
number of redirects from each of the Reservations Launch Pages
to GO Network-Wrapped Pages. Such reporting will begin as soon
as such information becomes available to Infoseek; the parties
acknowledge that such information may not be available during
the first few months of the Agreement. Content Partner shall
have an unrestricted, perpetual. irrevocable, nonexclusive
license to reproduce. modify, distribute and otherwise use all
such information as it deems appropriate, subject to
restrictions imposed by applicable law or regulation.
4.4 Communications with GO Network Users
During the term of this Agreement, Content Partner shall not
send communications or emails of any kind to Users who
registered with the Content Partner Service through the GO
Network-Wrapped Pages. except a welcome email, travel
confirmations as contemplated by this Agreement, and such
other communications as may be expressly requested by Users or
approved by Infoseek (for example. a Fare Watcher update). All
such communications shall be co-branded unless otherwise
requested by Infoseek.
During the term of this Agreement, Infoseek shall not send
communication or emails of any kind to Users who registered
with the Content Partner Service through the GO
Network-Wrapped Pages, which contain any advertisement or
sponsorship from a Travelocity Competitor.
ARTICLE 5. FEES AND PAYMENTS
5.1 Payments. Content Partner will make payments to
Infoseek in the amounts and at the times specified in
Appendix C. Content Partner will be responsible for
the proper payment of all taxes, including sales,
excise and value added taxes, which may be levied in
connection therewith, exclusive of taxes based upon
Infoseek's net income.
5.2 Wire Transfers. All payments made to Infoseek
hereunder shall be made via wire transfer in
accordance with the following instructions, or such
other instructions as may be provided to Content
Partner in writing by an authorized representative of
Infoseek:
Wire transfer, EFT/ACH Payment remittance
instructions:
(***)
(***)
ABA Number: (***)
Account Name: (***)
Account Number (***)
Swift ID: (***)
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ARTICLE 6. CONFIDENTIAL INFORMATION
6.1 Disclosures. Either Infoseek or Content Partner may
disclose to the other (the "Receiving Party") certain
information that the disclosing party deems to be
confidential and proprietary ("Proprietary
Information"), and technical and other business
information of the disclosing party that is not
generally available to the public.
6.2 Obligations of Receiving Party. The Receiving Party
agrees to use Proprietary Information solely in
conjunction with its performance under this Agreement
and not to disclose or otherwise use such information
in any other manner. The Receiving Party, however,
will not be required to keep confidential such
Proprietary Information that becomes generally
available without fault on its part; is already
rightfully in the Receiving Party's possession
without restriction prior to its receipt from the
disclosing party; is independently developed by the
Receiving Party; is disclosed by third parties
without similar restrictions; is rightfully obtained
by the Receiving Party from third parties without
restriction; or (to the extent required) is otherwise
required by law or judicial process, including, but
not limited to, filings required by the Securities
and Exchange Commission or similar bodies: provided,
however, that the disclosing party shall, to the
extent, reasonable, request confidential treatment of
such disclosures and shall, to the extent
permissible, redact confidential materials before
making such filings.
6.3 Limitations. Unless required by law or to assert its
rights under this Agreement, and except for
disclosure on a "need to know basis" to its own
employees, Affiliates, and their legal, investment,
financial and other professional advisers on a
confidential basis, each party agrees not to disclose
the terms of this Agreement or matters related
thereto without the prior written consent of the
other party.
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ARTICLE 7. REPRESENTATION AND WARRANTIES
7.1 Content Partner. Content Partner represents, warrants
and covenants that it is the owner of the Travel
Content and/or has the right to grant the rights
hereunder. Content Partner represents, warrants and
covenants to Infoseek that it holds the necessary
rights to permit the use of the Travel Content by
Infoseek and its Users for the purpose of this
Agreement; that its entry into this Agreement does
not violate any agreement with any other party; that
its performance under this Agreement will conform to
applicable laws and government rules and regulations;
(***), the Travel Content is true, accurate and does
not contain material errors; Content Partner further
represents, warrants, and covenants that the use,
reproduction, distribution, transmission, or display
of the Travel Content and the sale of products and
services by Content Partner or through the Travel
Content as contemplated in this Agreement will not
(a) violate any laws or any rights of any third
parties, including, but not limited to, such
violations as infringement or misappropriation of any
copyright, patent, trademark, trade dress, trade
secret, music, image, or other proprietary or
property right, false advertising, unfair
competition, defamation, invasion of privacy or
publicity rights, moral or otherwise, or rights of
celebrity, violation of any antidiscrimination law or
regulation, or any other right of any person or
entity or (b) contain any material that is unlawful,
fraudulent, defamatory, or obscene. Content Partner
shall use commercially reasonable efforts to insure
that the Content complies with the Content Guidelines
attached hereto as Appendix H.
7.2 Year 2000 - Content Partner. Content Partner
represents, warrants and covenants that, to the best
of its knowledge after reasonable inquiry, the
systems and technology utilized to operate the
Content Partner Service (including, without
limitation, Content Partner's reservation systems)
are compliant with the following Year 2000
requirements: (a) the occurrence in or use by such
systems of dates before, on or after January 1, 2000
will not adversely affect the performance of such
systems with respect to date-dependent data,
computations, output, or other functions (including,
without limitation, calculating, comparing and
sequencing); and (b) such systems will not abnormally
end or provide invalid or incorrect results as a
result of date dependent data.
7.3 Year 2000 - Infoseek. Infoseek represents, warrants,
and covenants that to the best of its knowledge after
reasonable inquiry the systems and technology
utilized by Infoseek to operate the GO Network are
compliant with the following Year 2000 requirements:
(a) the occurrence in or use by such systems of dates
before, on or after January 1, 2000 will not
adversely affect the performance of such systems with
respect to date-dependent data, computations, output,
or other functions (including, without limitations,
calculating, comparing and sequencing); and (b) such
systems will not abnormally end or provide invalid or
incorrect results as a result of date dependent data.
7.4 Infoseek. Infoseek represents, warrants and covenants
to Content Partner that its entry into this Agreement
does not violate any agreement with any other party
and that Infoseek Content will not (a) violate any
laws or any rights of any third parties, including,
but not limited to, such violations as infringement
or misappropriation of any copyright, patent,
trademark, trade dress, trade secret, music, image,
or other proprietary or property right, false
advertising, unfair competition, defamation, invasion
of privacy or publicity rights, moral or otherwise,
or rights of celebrity, violation of any
antidiscrimination law or regulation, or any other
right of any person or entity; or (b) contain any
material that is: unlawful, harmful, fraudulent,
threatening, abusive, harassing,
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defamatory, vulgar, obscene, profane, hateful,
racially, ethnically, or otherwise objectionable,
including, without limitation, any material that
supports, promotes or otherwise encourages wrongful
conduct that would constitute a criminal offense,
give rise to civil liability, or otherwise violate
any applicable local, state, national or
international laws. As used herein, "Infoseek
Content" means any content on the Travel Center that
has been authored and created solely by Infoseek or
its employees, contractors or agents.
ARTICLE 8. LIMITATION OF LIABILITY; DISCLAIMER
8.1 NO CONSEQUENTIAL DAMAGES. EXCEPT FOR EITHER PARTY'S
LIABILITY FOR THIRD PARTY CLAIMS AS SPECIFIED IN
ARTICLE 12 BELOW, OR EITHER PARTY'S BREACH OF ARTICLE
6, OR DAMAGES ARISING FROM PERSONAL INJURY, IN NO
EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE
TO THE OTHER PARTY OR ITS AFFILIATES FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY
NATURE ARISING OUT OF OR RELATED TO THIS AGREEMENT,
EVEN IF SUCH PARTY SHALL HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL
APPLY REGARDLESS OF THE NEGLIGENCE OR OTHER FAULT OF
EITHER PARTY AND REGARDLESS OF WHETHER SUCH LIABILITY
SOUNDS IN CONTRACT, NEGLIGENCE, TORT, STRICT
LIABILITY OR ANY OTHER THEORY OF LIABILITY.
8.2 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE
7, NEITHER PARTY MAKES ANY, AND EACH PARTY
ACKNOWLEDGES THAT THE OTHER HAS NOT MADE ANY, AND
HEREBY SPECIFICALLY DISCLAIMS ANY, REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE
SERVICE, THE CONTENT PARTNER SERVICE, THE TRAVEL
CONTENT OR THE OPERATION OF THE TRAVEL CONTENT ON THE
SERVICE, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
ARTICLE 9. TERM AND TERMINATION
9.1 Term. This Agreement shall be effective on the date
executed by both parties ("Effective Date") and shall
continue in force for an initial term ending
twenty-four (24) months from the Effective Date. Upon
prior mutual written agreement, the then current term
of this Agreement may be renewed at the end of such
initial term and each anniversary date thereafter for
one (1) year renewal terms. Notwithstanding the
foregoing, either party may terminate this Agreement
for convenience and without cause upon ninety (90)
days prior notice beginning at any time nine (9)
months after the Effective Date.
9.2 Breach. Either party will have the right to
immediately terminate this Agreement if the other
party is in default of any material obligation herein
and such breach is incapable of being cured, or if
such breach is capable of cure, such breach is not
cured within thirty (30) days (or fourteen (14) days
with respect to any default in any payment
obligation) after receipt of written notice of such
default from the non-defaulting party or within such
additional cure period as the non-defaulting party
may authorize.
9.3 Content Provider Performance. The average response
time of the Go Network-Wrapped Pages hosted by
Content Partner will be equal to or better than the
average response time provided on Travelocity.com
(Response time is
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measured as the time between the receipt of a query
over the Internet to the posting of a response on the
Internet). Additionally, if the GO Network-Wrapped
Pages hosted by Content Partner do not meet the
following performance standards, and such failure is
not due to force majeure events or the failure of any
third party services, hardware, software or
telecommunications systems not controlled by Content
Partner, Infoseek shall notify the Content Partner in
writing and Content Partner shall use reasonable
efforts to cure the breach within 24 hours. In the
event of more than three (3) such performance
failures, of which Infoseek has notified Content
Partner and provided an opportunity to cure pursuant
to this Section 9.3, in any sixty (60) day period,
Infoseek shall have the right to terminate this
Agreement upon notice to Content Partner delivered
within seven (7) days after the fourth (or greater)
such occurrence, without providing any further
opportunity to cure. The performance standards are as
follows:
a. Uptime/Downtime. For any given month during
the Term, the GO Network-Wrapped Pages
hosted by Content Partner will have a
minimum monthly uptime operation of (***)
excluding permitted maintenance downtime,
provided that such scheduled downtime does
not occur at peak traffic times.
b. Maintenance Downtime. Actual scheduled
maintenance downtime will not exceed (***)
in any calendar month. Content Partner has
(***) maintenance windows and (***)
scheduled (***) maintenance windows each
week during which implementations can take
place. Implementations are managed so as to
avoid system outages, but the possibility
exists that the Content Partner Service may
become inoperable during an implementation.
Currently, these maintenance windows are
scheduled during off-peek hours Wednesday,
Friday and Saturday, but are subject to
change at the sole discretion of Content
Partner. Content Partner will notify
Infoseek of any changes to the standard
maintenance schedule at least (***) in
advance of any such change.
9.4 Infoseek Performance. The average response time of
the Travel Center home page and the Reservations
Launch Pages hosted by Infoseek will be equal to or
better than the average response time for similar
pages hosted by Infoseek on the other GO Network
Centers (Response time is measured as the time
between the receipt of a query over the Internet to
the posting of a response on the Internet). Infoseek
agrees that in any given month during the Term, the
Travel Center and Reservation Launch Pages hosted by
Infoseek will have a minimum uptime operation of
(***) excluding Infoseek scheduled maintenance (which
shall not exceed (***) per month). If such pages do
not meet the preceding performance standards, and
such failure is not due to force majeure events or
the failure of any third party services, hardware,
software or telecommunications systems not controlled
by lnfoseek, Content Partner shall notify Infoseek in
writing and Infoseek shall use reasonable efforts to
cure the breach within (***). In the event of more
than (***) such performance failures, of which
Content Partners has notified Infoseek and provided
an opportunity to cure pursuant to this Section 9.4,
in any (***) period, Content Partner shall have the
right to terminate this Agreement upon notice to
Infoseek delivered within (***) after the (***) such
occurrence, without providing any further opportunity
to cure.
9.5 Survival. The following provisions of this Agreement
shall survive the termination or expiration of this
Agreement: Section 4.2 (a) (first and last sentences
only), Section 4.2(b), 4.3 (as to license granted
only), Article 5 (as to fees accrued prior to
termination or expiration); Article 6, Article 7 (as
to claims
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arising prior to termination or expiration or claims
based on events arising prior to termination or
expiration), Article 8, Sections 9.5-9.6, Article 12,
and Article 13.
9.6 Return of Materials. Upon the termination or
expiration of this Agreement, each party shall (a)
promptly return all Proprietary Information, and
other information, documents, manuals and other
materials belonging to the other party, except as may
be otherwise provided in this Agreement; and (b)
promptly remove the other party's content, branding,
links, and any other material provided under this
Agreement.
ARTICLE 10. FORCE MAJEURE
Neither party will be liable for delay or default in the performance of
its obligations under this Agreement (other than for non-payment) if
such delay or default is caused by conditions beyond its reasonable
control, including, but not limited to, fire, flood, accident,
earthquakes, telecommunications line failures, storm, acts of war,
riot, government interference, strikes and/or walk-outs. In the event
of a force majeure event which lasts longer than fifteen (15) days, the
party not experiencing the force majeure event may terminate this
Agreement upon prior written notice to the other party.
ARTICLE 11. ADVERTISING AND PROMOTION; PUBLICITY
11.1 Press Releases. Content Partner shall not issue or permit the
issuance of any press release or publicity regarding, or grant
any interview, or make any public statements whatsoever
CONCERNING this Agreement or the Walt Disney Company, without
prior coordination with and written approval from Infoseek,
which approval may be granted or withheld in Infoseek's sole
discretion. Content Partner shall not issue or permit the
issuance of any press release or publicity regarding Infoseek
or GO NetworK, nor shall Content Partner issue any public
statements regarding Infoseek or GO Network, (other than
factual statements concerning publicly available information),
without the prior written approval of Infoseek. Infoseek shall
not issue or permit the issuance of any press releases or
publicity regarding, or grant any interview, or make any
public statements (other than factual public statements
concerning publicly available information) whatsoever
concerning this Agreement or Content Partner without prior
coordination with and written approval from Content Partner,
which approval may be granted or withheld in Content Partner's
sole discretion. Content Partner shall not state or imply, in
advertisements, writings, or otherwise, that Infoseek or its
Affiliates endorse Content Partner's products or services or
any other product or service. Within 30 days of the execution
of this Agreement, the parties shall each issue a press
release announcing the execution of this Agreement; each party
shall have the right to review and approve the other party's
press release.
11.2 Joint Marketing Efforts. Content Partner and Infoseek may
undertake such joint marketing efforts as may be mutually
agreed upon from time to time. Each party shall cooperate and
assist the other party by supplying, without charge,
reasonable quantities of materials for the other party's
marketing and promotional activities. Neither party shall be
obligated to participate in any joint marketing efforts,
except as expressly provided in Section 11.1 above.
11.3 Content Partner Advertising. Content Partner will purchase and
Infoseek will provide the advertising specified on Appendix C.
ARTICLE 12. INDEMNIFICATION
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12.1 Content Partner. Content Partner agrees to defend, indemnify
and hold Infoseek and its officers, directors, agents,
employees, and Affiliates harmless from and against any and
all third party claims, demands, liabilities, actions,
judgments, and expenses, including reasonable fees and
expenses of attorneys, paralegals and other professionals,
arising out of or related to (i) any breach or alleged breach
of any of Content Partner's representations and warranties set
forth in Section 7.1; (ii) any injury to person or property
caused by any products or services sold by Content Partner, or
any User's use of or reliance on the Travel Content; (iii) any
injury to person or property caused by any products or
services sold through the Travel Content; (iv) any other claim
with respect to Content Partner, the Travel Content, or
products or services sold by or through Content Partner or its
agents, including without limitation, any claim relating to a
breach of security relating to any transactions processed by
or through Content Partner, or (v) Content Partner's sales or
marketing practices. Content Partner shall bear full
responsibility for the defense (including any settlements) of
any such claim; provided, however, that (a) Content Partner
shall keep Infoseek informed of, and consult with Infoseek in
connection with the progress of such litigation or settlement;
and (b) Content Partner shall not have any right, without
Infoseek's written consent, to settle any such claim if such
settlement arises from or is part of any criminal action, suit
or proceeding or contains a stipulation to or admission or
acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of Infoseek or its
Affiliates or otherwise requires Infoseek or its Affiliates to
take or refrain from taking any material action (such as the
payment of fees).
12.2 Infoseek. Infoseek agrees to defend, indemnify and hold
Content Partner and its officers, directors, agents and
employees harmless from and against any and all third party
claims, demands, liabilities, actions, judgments, and
expenses, including reasonable fees and expenses of attorneys,
paralegals and other professionals, arising out of or related
any breach or alleged breach of any of (***). Infoseek shall
bear full responsibility for the defense (including any
settlement) of any such claim; provided, however, that (a)
Infoseek shall keep Content Partner informed of, and consult
with Content Partner in connection with the progress of such
litigation or settlement; and (b) Infoseek shall not have any
right, without Content Partner's written consent, to settle
any such claim if such settlement arises from or is part of
any criminal action, suit or proceeding or contains a
stipulation to or admission or acknowledgment of, any
liability or wrongdoing (whether in contract, tort or
otherwise) on the part of Content Provider or its Affiliates
or otherwise requires Content Partner or its Affiliates to
take or refrain from taking any material action (such as the
payment of fees).
ARTICLE 13. GENERAL TERMS AND CONDITIONS
13.1 Independent Contractors. The parties to this Agreement are
independent contractors. Neither party is an agent,
representative or partner of the other party. Neither party
shall have any right, power or authority to enter into any
agreement for or on behalf of, or to incur any obligation or
liability for, or to otherwise bind, the other party. This
Agreement shall not be interpreted or construed to create an
association, joint venture. co-ownership, co-authorship, or
partnership between the parties, or to impose any partnership
obligation, fiduciary duty or liability upon either party.
13.2 No Assignment. Neither party shall assign, sublicense or
otherwise transfer (voluntarily, by operation of law, through
a change of control or otherwise) this Agreement or any right,
interest or benefit under this Agreement, without the prior
written consent of the other party; provided, however, that
(i) either party may assign this Agreement to any entity that
acquires all or substantially all of the assets or shares of
such party; provided that the acquiring entity is not a direct
competitor of the other party; and (ii) Content Partner may
assign this Agreement to any entity that acquires all or
substantially all of the assets of the travelocity.com
division of Content Partner (through a sale, spinoff,
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merger, change of control or otherwise), provided that the
acquiring entity is not a direct competitor of Infoseek or
owned or controlled by any direct competitor. Any attempted
assignment, sublicense or transfer by a party in derogation
hereof shall be null and void. Subject to the foregoing, this
Agreement shall be fully binding upon, inure to the benefit of
and be enforceable by the parties hereto and their respective
successors and assigns. It Is specifically agreed that
Infoseek may assign this Agreement to The Walt Disney Company
or one of its Affiliates pursuant to a merger or acquisition
of Infoseek by such assignee.
13.3 No Modifications. No change, amendment or modification of any
provision of this Agreement or waiver of any of its terms will
be valid unless set forth in writing and signed by the party
to be bound thereby.
13.4 Governing Law. This Agreement shall be interpreted, construed
and enforced in all respects in accordance with the laws of
the State of New York.
13.5 No Waiver. The failure of either party to insist upon or
enforce strict performance by the other party of any provision
of this Agreement or to exercise any right under this
Agreement shall not be construed as a waiver or relinquishment
to any extent of such party's right to assert or rely upon any
such provision or right in that or any other instance; rather
the same shall be and remain in full force and effect.
13.6 Notices. Any notice, approval, request, authorization,
direction or other communication under this Agreement shall be
given in writing, will reference this Agreement, and shall be
deemed to have been delivered and given (a) when delivered
personally; (b) three (3) business days after having been sent
by registered or certified U.S. mail, return receipt
requested, postage and charges prepaid; or (c) one (1)
business day after deposit with a commercial overnight
courier, with written verification of receipt. All
communications will be sent to the addresses set forth below
or to such other address as may be designated by a party by
giving written notice to the other party pursuant to this
Section 13.6.
If to Infoseek:
Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, CA 94089-1134
Attention: Legal Department
Tel: (408) 543-6000
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If to Content Partner:
The SABRE Group, Inc.
4255 Amon Carter Blvd.
MD 4204
Fort Worth, Texas 76155
Attention: General Counsel
Tel: (817) 967-6897
13.7 Entire Agreement. This Agreement and the Appendices attached
hereto and incorporated herein by reference constitute the
entire agreement between the parties and supersede any and all
prior agreements or understandings between the parties with
respect to the subject matter hereof. Neither party shall be
bound by, and each party specifically objects to, any term,
condition or other provision or other condition which is
different from or in addition to the provisions of this
Agreement (whether or not it would materially alter this
Agreement) and which is proffered by the other party in any
purchase order, correspondence or other document, unless the
party to be bound thereby specifically agrees to such
provision in writing.
13.8 Headings/Construction. The headings used in this Agreement are
for convenience only and are not to be construed to have legal
significance. In the event that any provision of this
Agreement conflicts with the law under which this Agreement is
to be construed or if any such provision is held invalid by a
court with jurisdiction over the parties to this Agreement,
such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the parties in
accordance with applicable law, and the remainder of this
Agreement shall remain in full force and effect.
13.9 Counterparts: Facsimile Signatures. This Agreement may be
executed in counterparts which taken together shall be
regarded as one and the same Agreement. Either party's
facsimile signature will be deemed a binding acceptance of
this Agreement by such party.
INFOSEEK CORPORATION THE SABRE GROUP, INC.
By: /s/ Andrew Newton By: /s/ T.B. Jones
------------------------------ ------------------------------
Authorized Signature Authorized Signature
Print Name: Andrew Newton Print Name: T.B. Jones
Title: VP General Counsel Title: President Travelocity.com
Date:7/22/99 Date: 7/21/99
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APPENDIX A
MILESTONES FOR DEVELOPMENT AND IMPLEMENTATION OF GO NETWORK-WRAPPED PAGES:
Content Partner and Infoseek will use commercially reasonable efforts to meet
the development and implementation milestones outlined below. The GO
Network-Wrapped Pages will be developed and implemented in accordance with the
following schedule:
August 13,1999
o GO Network-Wrapped Pages with access to air, car, and hotel modules via
Links (not wizards). Best Fare Finder feature, Link to departures and
arrivals, and access to map in Content Partner's destination module
o Co-branded Fare Watcher Emails
o Customized ticket jackets and invoices
August 27, 1999
o Wizards for air, car, and hotel modules
o Hotel database
September 22, 1999
o Customized flight paging
November 3, 1999
o Seamless login
CUSTOMER SUPPORT
(a) Content Partner shall be solely responsible for (a) processing and
fulfilling all product and service orders and transactions through the GO
Network-Wrapped Pages; (b) all accounting with respect to such orders and
transactions, and (c) all customer service and support with respect to such
orders and transactions. Content Partner shall provide all of the foregoing
services in the same manner as it provides such services with respect to
orders received by Content Partner in any other manner and with the high
quality consistent with Content Partner's name and reputation, and industry
standards.
(b) To facilitate prompt and effective customer support, Content Partner
shall establish a virtual GO Network call center service within its San
Antonio customer service center, which call center shall be referred to as
the "GO Travel" customer service center. Such center shall employ a
sufficient number of customer service representatives who shall process all
User inquiries regarding the Travel Content. Inquiries concerning GO
Network shall be redirected to the GO Network customer service center.
CUSTOMER SERVICE METRICS
E-MAIL:
o Each page hosted by Content Partner shall have an e-mail link to customer
service.
o All e-mail questions/comments will receive e-mail responses within (***) of
receipt if received on a business day (excluding holidays), otherwise as of
the next business day.
TELEPHONE SERVICE:
o Content Partner shall provide telephone access to customer service to
resolve ticketing and other issues via a toll-free number, which number
shall be prominently displayed on the reservation
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confirmation page. Such telephone number shall be staffed from (***) or
during the hours in which Content Partner's primary customer service line
is staffed, whichever is greater.
o The average time to answer customer service telephone calls, through either
human or mechanical means, shall not be greater than (***).
o The per-call average hold time, measured from when a User selects a
customer service option to when a human operator answers the call, shall be
less than or equal to (***) for at least (***) of all customers, measured
on a daily basis.
FULFILLMENT:
o (***) of all tickets ordered by GO Network Users will be fulfilled or
shipped, as required, no later than (***) after receipt of the applicable
order, provided that all information supplied by GO Network Users is
accurate and complete, as measured on a daily basis. The remaining (***)
will be fulfilled no later then (***) after receipt of the applicable
order, provided the same criteria is met.
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APPENDIX B
Mock Up Pages (Travel Center Home Page and Travel Reservation Launch
Page)
Subject to the terms and conditions of the Agreement, these mock ups may change
from time to time.
TRAVEL CENTER HOME PAGE
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APPENDIX B (CONT.)
Mock Up Pages
Subject to the terms and conditions of the Agreement, these mock ups may change
from time to time.
RESERVATION LAUNCH PAGES
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APPENDIX C
FEES AND PAYMENTS
1. Advertising. Content Partner shall purchase from Infoseek advertising on GO
Network as follows:
a. Guaranteed minimum of (***) during the first year of this Agreement,
payable in equal monthly installments. In consideration of this
payment, Content Partner shall be entitled to advertising on GO
Network, based on the following CPM rates, up to an amount equal to
(***): Run of site - (***); keywords - (***) spotlights- (***). (These
CPM rates represent discounted pricing provided to Content Partner,
together with a (***) "frequency" discount, and do not include charges
Content Partner may incur for third party advertising agency
commissions.)
b. Guaranteed minimum of (***) during the second year of this Agreement,
payable in equal monthly installments. In consideration of this
payment, Content Partner shall be entitled to advertising on GO
Network, based on the following CPM rates, up to an amount equal to
(***): Run Site: (***); keywords - (***); and spotlights - (***) (These
CPM rates represent discounted pricing provided to Content Partner,
together with a (***) "frequency" discount and do not include charges
Content Partner may incur for third party advertising agency
commissions.)
d. Content Partner shall receive the same rates as described above on all
additional advertising (beyond the Guaranteed Minimums described above
and subject to availability) placed under this Agreement. Additionally,
Content Partner may elect to receive (***) run of site ads per month
during the first year and (***) run of site ads per month during the
second year, at no additional charge. Content Partner may purchase,
subject to available inventory, advertising at various locations within
GO Network in the form of keywords, banner ads, spotlights and/or run
of site advertising, as determined by Content Partner, with input from
Infoseek.
2. Revenue Share/Guarantee.
(a) Content Partner shall pay quarterly to Infoseek (a) (***) of
all Net Revenues received by Content Partner from the sale of
products and/or services to Users through GO Network-Wrapped
Pages and the Content Partner International Service available
through GO Network-Wrapped Pages, if any, and (b) (***) of all
Net Revenues received by Content Partner from the sale of
advertising on GO Network Wrapped Pages hosted by Content
Partner. As used herein, "Net Revenues" means:
(i) (***) by (1) any amounts (***); (2) any amounts
(***); and (3) any (***);
(ii) (***);
(iii) (***); and
(iv) (***).
(b) Content Partner guarantees that Infoseek's shares of Net
Revenue payable under this Agreement shall be no less than:
(***) in the first year of this Agreement (minimum payment of
(***) per quarter, until (***) minimum has been met, at which
time such (***) minimum payment shall no longer apply).
(***) in the second year of this Agreement (minimum payment of
(***) per quarter; until (***) minimum has been met, at which
time such (***) minimum payment shall no longer apply).
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To the extent Infoseek's revenue share payment earned each
quarter exceeds the minimum payments listed above, such
additional fees shall be paid to Infoseek each quarter (with
the minimum payments). In no event will Content Partner be
required to pay Infoseek more than the annual minimum in each
year unless the actual revenue share, disregarding the
minimums, at such time exceeds the annual minimum in such
year.
The following example is provided to illustrate the operation
of the foregoing provisions:
Example: In the first quarter, if Infoseek's share of Net
Revenues is (***) Content Partner would make a payment to
Infoseek of (***); if, in the second quarter, Infoseek's
shares of Net Revenues is (***); Content Partner would pay
Infoseek (***), in the third quarter, Infoseek's share of Net
Revenues is (***), Content Partner would make a payment to
Infoseek of (***); and there would be no minimum payment in
the fourth quarter of Year 1 of the Agreement; if, in the
fourth quarter, Infoseek's share of Net Revenues is (***),
Content Partner would make a payment to Infoseek of (***).
3. Infoseek shall have the right to retain a U.S. nationally prominent or other
mutually agreeable independent auditor to whom Content Partner shall allow
reasonable access to Content Partner's applicable books of account for the
purpose of verifying the amounts due and payable to Infoseek under this
Agreement. Access to Content Partner's documentation shall be during Content
Partner's regular business hours upon at least fifteen (15) business days prior
written notice. In the event that an audit discloses an underpayment of more
than (***) of the amount due to Infoseek, Content Partner shall immediately pay
to Infoseek the amount of such underpayment and shall pay the reasonable costs
of such audit but no more than an amount equal to the underpayment.
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APPENDIX D - KEYWORDS
The keywords set forth below are the initial keywords which Content Partner may
purchase, subject to availability. Content Partner may add and modify the list
of keywords upon notice to Infoseek, subject to availability and preexisting
agreements with third parties.
(***)
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APPENDIX E - INFOSEEK COMPETITORS
(***)
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<PAGE> 25
APPENDIX F - INFOSEEK ADVERTISING GUIDELINES
Guidelines for Advertising on GO Network
The advertising environment must be appropriate in the context of the GO
Network. This "advertising environment" includes the ad unit itself, the
advertiser's web site and direct links off of it, the specific destination URL,
interstitial or buffer pages, and all other elements that define the guest's
online experience.
An advertising environment or advertising materials of the types enumerated in
the first grouping below will not be accepted.
In the event that Infoseek notifies Content Partner of any advertisement on a GO
Network-Wrapped Page which Infoseek reasonable determines falls into one of the
following inappropriate or "potentially" inappropriate categories, Infoseek may
request, in writing, that Content Partner remove the ad from the GO
Network-Wrapped pages, and Content Partner shall within 48 hours remove the
offending ad from such pages.
What is clearly not appropriate?
o Hard liquor-related (brown goods, white goods, etc.)
o Tobacco-related (cigarettes, cigars, pipes, chewing tobacco, etc.)
o Guns/weapons-related (firearms, bullets, etc.)
o Drugs-related (marijuana, etc.)
o Gambling-related (casinos, lotteries, etc.)
o Pornographic-related (sex sites)
o Crime-related (dealing with the notorious)
o Death-related (funeral homes, mortuaries)
o Graphic violence (including certain types of game sites)
What may also be considered by Infoseek as inappropriate?
o Involves unauthorized or unapproved use of GO Network creative assets
(including ESPN talent, ABC logos, Disney characters, movie logos, them
park imagery, names and marks used in GO Network).
o Involves an advertiser in a category where the privilege of exclusivity has
previously been sold to another advertiser. (Only applied to pages with a
go.com domain).
o Involves a copy or parody of current or past GO Network product.
o Policies-related (lobbyists, PAC sites, political campaigns)
o Non-hard liquor related (beer, non-alcoholic beer, wine, champagne, etc.)
o Other "controversial topics" (politics, social issues, etc.) as determined
by Infoseek in its discretion
o Involves an implied affiliation or favored status with GO Network.
o Involves unreasonable or highly unlikely product or service
claims.
Solicitation of Personal Information from Users shall be governed by the terms
of Article 4 of the Agreement. Use of the GO Network-Wrapped Pages will be
governed by terms of use that include a representation on behalf of Users, the
substance of which provides, that they are of sufficient legal age to use the
site and to create a binding legal obligation for any liability they may create
by using the GO Network-Wrapped Pages.
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APPENDIX G - HOTEL DATABASE ELEMENTS
Content Partner will make available to Infoseek the following elements from
Content Partner's hotel database:
Property Number
Chain Code
Property Name
Address
Phone Number
Fax Number
Check in time
Check out time
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APPENDIX H - INFOSEEK CONTENT GUIDELINES
GUIDELINES FOR CONTENT ON GO NETWORK
All editorial and creative content ("the Content") of the GO Network must be
appropriate to the intended user experience and to the content of The Walt
Disney Company Sites, ESPN sites, and ABC Sites that will have prominent
positioning within GO Network.
Infoseek, at its discretion may offer search results or directory listings that
may include links to content outside the GO Network that might otherwise not be
appropriate.
What is clearly not appropriate
The following types of Content are clearly not appropriate to be on GO Network
or presented in any context that may create a direct or implied associate with
The Walt Disney Company Sites:
o Pornographic or obscene material;
o Content whose primary purpose is to encourage gambling or betting (i.e.,
poker or 21 card games, roulette, slot machines, etc...) other than sports
fantasy games, or approved sweepstakes or games of skill or chance 9certain
card games are appropriate and may be included on Infoseek, i.e., solitaire,
go fish, matching games, etc...);
o Threatening (i.e., harassment, hate speech) material or content that
promotes, encourages, describes, or provides instruction in conduct that
would constitute a criminal offense or otherwise violates any law in
jurisdictions where the products is marketed.
o Content that is defamatory, illegal or infringes upon the privacy rights of
any person or entity.
What may also be considered by Infoseek as inappropriate
Certain types of Content, unless offered in the format of an independent
observer providing objective, fair, accurate and impartial information (as may
be provided by a news site such as ABCNews.com), may be considered inappropriate
for GO Network if it involves, without limitation:
o unauthorized copies, use or parodies of current or past Infoseek products or
the product of its affiliates,
o a direct or implied endorsement, affiliation or favored status with
Infoseek, GO Network, ESPN, ABC or The Walt Disney Company;
o inaccurate or misleading information;
o unreasonable or highly unlikely claims;
o highly controversial issues (politics, social issues, etc.);
o death, crime, drugs or violence in an inappropriate context.
Guidelines for Requests for User Information: See Article 4 of the Agreement
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APPENDIX I CONTENT PARTNER CONTENT AND TRADEMARK GUIDELINES
CONTENT GUIDELINES
You may not use Travel Content in any manner that is disparaging or that
otherwise portrays Content Partner in a negative light. This includes, but is
not limited to (a) use of Travel Content in association with any material that
is unlawful, harmful, fraudulent, defamatory, vulgar, obscene, profane,
racially, ethnically or otherwise similarly objectionable, including, without
limitation any material that encourages conduct that would constitute a criminal
offense, give rise to civil liability, or otherwise violate any applicable
local, state, national or international law, and (b) or used on a page that
contains advertising for the promotion of products or services related to
tobacco, firearms, sexually explicit material, or the direct sale of alcoholic
beverages.
On any page where the Travelocity Best Fare Finder Feature is displayed, it will
be displayed with appropriate attribution (`by Travelocity.com")/ You will
clearly identify any page that has Travel Content a notice to include, in a
legal font size, "Copyright @ 1996-1999 The SABRE Group, Inc. All rights
reserved. Travelocity is a service mark of an affiliate of The SABRE Group,
Inc." Or such other notice as Content Partner provides from time to time.
TRADEMARK GUIDELINES
All uses of Content Partner's trademarks must be preapproved by Content Partner.
All uses of Content Partner's trademarks, and associated goodwill, will accrue
to the benefit of Content Partner.
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EXHIBIT 10.13
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
[Home Network Letterhead]
@HOME NETWORK
CONTENT PARTNER AGREEMENT
At Home Corporation, a Delaware corporation with principal offices at 425
Broadway, Redwood City, CA 94063 ("@Home") and The SABRE Group, Inc., through
its SABRE Interactive division, a Delaware corporation with principal offices at
4255 Amon Carter Blvd., Fort Worth, TX ("TSG") hereby enter into this Content
Partner Agreement (this "Agreement") as of the Effective Date (defined below) to
establish a presence for TSG on the @Home Service (defined below) in accordance
with the terms and subject to the conditions of this Agreement.
In consideration of the representations, warranties and covenants contained
herein, and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Parties agree to be bound by the terms and conditions
contained on the following pages 2 through 16 of this Agreement.
AT HOME CORPORATION THE SABRE GROUP, INC.
By: /s/ Charles Molkaw By: /s/ J D Mariscano
--------------------- --------------------------
Name: Charles Molkaw Name: J D Mariscano
--------------------- --------------------------
Title: VP, Marketing Dept. Title: VP & GM
--------------------- --------------------------
Date: March 13, 1998 Date: March 13, 1998
--------------------- --------------------------
<PAGE> 2
@HOME NETWORK
CONTENT PARTNER AGREEMENT
@Home and TSG agree as follows:
1. GENERAL DEFINITIONS.
(a) "@HOME SERVICE" means all electronic information and/or navigation
services provided via the Internet or any successor public data networks,
including, without limitation, all related points of presence on such networks
that are created or maintained by @Home for general use by subscribers of @Home
and @Home's Distribution Affiliates.
(b) "CHANNEL" means a subject-specific content feature of the @Home Service
which has been labeled as a "Channel" by @Home and which has a persistent
element on the @Home Channel navigation area.
(c) "COMPETITOR(S)" means (***).
(d) "CONFIDENTIAL INFORMATION" means all non-public confidential and
proprietary information which the disclosing party identifies in writing as
confidential before or within thirty (30) days after disclosure to the receiving
party or which, under the circumstances surrounding disclosure, the receiving
party should have understood was delivered in confidence, subject to the
exceptions set out in Section 15 below.
(e) "CONTRACT YEAR" means each 12 month period beginning on the Effective
Date and on the first and second anniversary of the Effective Date.
(f) "DISTRIBUTION AFFILIATES" means @Home's distribution partners
(currently TCI, Cablevision, Cox, Comcast, Rogers, Shaw, Intermedia, and
Marcus), as they exist now and in the future.
(g) "EFFECTIVE DATE" means the date set out under @Home's signature on the
first page of this Agreement.
(h) "LIFESTYLE CHANNEL" means the Channel or its functional equivalent that
provides information and editorial features on issues related to Travel, Health,
and other lifestyle topics.
(i) "NOT ADVERTISING REVENUE" means amounts received by TSG directly
related to advertising and sponsorship less related third party agency costs and
third party commissions.
(j) "NET TRANSACTION REVENUE" shall mean (i) for air ticket commissions,
the amount of commission income received by TSG for air tickets generated from
@Home Service subscribers who are ticketed through any Travelocity customer
service center less all Airline Reporting Corporation refunds and/or rebates,
exchanges, and other normal adjustments (e.g. commission errors or regulatory
adjustments), (ii) for other goods and services sold by
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<PAGE> 3
TSG to @Home subscribers, the amount of commission income or gross margin
received by TSG and (iii) for any car and hotel commissions that cannot be
tracked by @Home subscriber, for each, the number of such Travelocity bookings
made each month by Chime Service subscribers divided by the total number of such
bookings made on the Travelocity Website multiplied by the total commission
income received by TSG for such bookings made on the Travelocity Website.
(k) "ONLINE PROMOTION DATE" means the first day of the month closest to the
actual date on which TSG promotional links or advertising first appear on the
@HomeService.
(1) "PARTIES" means TSG and @Home.
(m) "QUARTER" means a three month period during the Contract Year, with the
first Quarter commencing on the Effective Date and successive Quarters following
thereafter.
(n) "SERVICES COMMENCEMENT DATE" means the actual date on which production
begins for the Travelocity placements within an @Home `infomercial', which @Home
estimates to be March 13, 1998.
(o) "SHOPPING GUIDE" means the @Home shopping interface or its functional
equivalent.
(p) "TRAVEL AREA" means the sub-channel in any Channel (e.g. wherein the
Channel is intended to be the Lifestyle Channel at launch) on the @Home Service
that provides travel information, travel reservations and/or travel features, as
described more fully below in Section 2(b).
(q) "TRAVEL MULTI-WIZARD" means an @Home-developed tool that provides an
easy-to-use familiar interface to common travel requests (information &/or
transactions) on the @Home Service, as described more fully below in Section
2(a).
(r) "TRAVELOCITY" means the travel information website maintained by TSG
which is commonly known as "Travelocity."
(s) "TRAVELOCITY CONTENT" means such Travelocity Website content as is
mutually agreed upon by the Parties to be provided by TSG and included in the
Travel Area.
(t) "TRAVELOCITY WEBSITE" means any travel information site maintained on
the World Wide Web by TSG, currently at www.travelocity.com, except for the Easy
Sabre site at www.easysabre.com.
2. PROMOTION ON THE @HOME SERVICE. In addition to the services provided in
connection with the "Exclusive Person" described in Section 3 below, @Home will
promote Travelocity on the @Home Service as follows:
(a) TRAVEL MULTI-WIZARD. @Home will provide a Travel Multi-Wizard that
includes car, air, & hotel booking capabilities, which will be listed as the
first buttons in the interface. Both
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Parties will work together in good faith to jointly define the booking
functionality. The Travel Multi-Wizard will reside in the "How Do I" section of
the @Home Service, and a Travel Multi-Wizard link will also appear in the
popular "Search" area of the @Home Service when a user selects a directory
choice related to travel. Both "How Do I" and "Search" are accessible from any
page on the @Home Service. It can also be linked as appropriate from any page
within the @Home Service. During the term of this agreement, all booking
transactions from the Travel Area, other @Home Service Channels and otherwise
within the @Home Service will utilize the Travel Multi-Wizard or the Travelocity
Website. During the term of this agreement, Travelocity will be the exclusive
car booking engine and air booking engine and the default hotel booking engine
accessed using the Travel Multi-Wizard.
(b) TRAVEL AREA.
(i) @Home will work with TSG to create mutually agreed-upon Travelocity
Content within the Travel Area. The Travel Area may also include, but is not
limited to: (***) that do not violate the exclusivity provisions set out in
Section 3 below. A feature in this Travel Area could be a "Travelocity video
wall" that displays video on the top destinations and vacation packages. TSG
will (***) these video elements to @Home design and technical specifications.
(ii) TSG and @Home will mutually agree upon the promotion of
Travelocity in this Travel Area along with the specifications for any multimedia
content on the @Home Service. Notwithstanding the foregoing, @Home will include
in the Travel area a space for an editorial feature, programmed at its
discretion, and a space for daily TSG promotion; this promotion will allow TSG
to highlight fare specials, vacation packages, and other TSG functionality. In
the event @Home creates a Travel Channel, the overall design and content of the
Travel Channel will be at the (***); provided, however. that (***) will provide
(***) persistent and prominent placement on the Travel Channel front page which
overall shall be (***) than the placement or promotion (***) provides to any
other Travel content provider. (***) may include a main editorial feature in a
(***) manner as other Channels.
(iii) The Travel Area and Travel Channel will use @Home's technology
platforms (e.g. replication) to serve downloadable multimedia content ("Media
Assets"), as more fully described in Section 7(b) below. The Travel Area and
Travel Channel will have links to Travelocity designed to drive @Home customers
to the Travelocity Website.
(c) @HOME SHOPPING GUIDE. @Home shall include Travelocity in the @Home
Shopping Guide.
(d) @HOME LIFESTYLE CHANNEL. From time to time @Home will create a feature
story related to travel within the Lifestyle Channel. If an opportunity exists
in @Home's reasonable judgment to contextually link a feature with a travel
transaction or relevant Travelocity content, @Home will link to the bookings
portion of the Travel Multi-Wizard or the relevant Travelocity Website pages.
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<PAGE> 5
(e) CONTEXTUAL LINKING FOR ALL OTHER TRAVEL-RELATED CONTENT: Within all
Channels and the @Home home page, @Home may create a feature related to travel.
If an opportunity exists in @Home's reasonable judgment to contextually link for
a travel transaction, @Home will link to the bookings portion of the Travel
Multi-Wizard or Travelocity Website.
(f) USER INTERFACE.
(i) @Home and TSG will mutually agree upon the user interface ("UI")
design for the Travelocity portion(s) of the Travel Area and Travel
Multi-Wizards (which shall be consistent with the @Home look-and-feel).
(ii) @Home reserves the right to change the @Home Service user
interface in its reasonable discretion; provided that (a) @Home will give TSG
reasonable advance notice of any change that is reasonably likely to have an
impact on TSG promotional placements, and (b) following any such change, @Home
will provide TSG with promotional placements materially similar to those prior
to the change.
3. EXCLUSIVE POSITION.
(a) TRAVELOCITY EXCLUSIVE POSITION. Subject to Section 3(b) below,
Travelocity will hold an "Exclusive Position" within the @Home Service. For
these purposes, "EXCLUSIVE POSITION" means and includes the following:
(i) Exclusive Travel Area. @Home will not create a Travel Area or
Travel Channel for a Competitor or include persistent navigation (e.g., a
button) to pages displaying content from Competitors.
(ii) Elimination of Promotional Placement. @Home will not permit
any Competitor to have any promotional buttons, promotional links, outbound
marketing materials, or other promotional materials related to travel services
on the @Home Service other than as permitted in this agreement.
(iii) Advertising Placement. @Home shall have no restriction on the
sale of ads to Competitors, but may not place Competitors' ads in the portions
of the Travel Multi-Wizard, Travel Area or Travel Channel where Travelocity has
persistent placement.
(iv) Exclusive Position on Travel Multi-Wizard. Travelocity will be
the sole booking engine on the Travel Multi-Wizard that provides car &/or air
booking functionality and Travelocity will be the default hotel booking engine
accessed using the Travel Multi-Wizard.
(v) Anchor Tenancy in Shopping Guide. Travelocity will be the
Anchor Tenant for the Travel Area in the Shopping Guide. Such inclusion shall be
on the terms set out on Attachment I hereto.
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(vi) Lifestyle Channel. Until such time as a Travel Channel is
created, a persistent navigation button to the Travel Area will exist on all
pages of the Lifestyle Channel within the @Home Service.
(b) LIMITS ON EXCLUSIVITY. Notwithstanding Section 3(a) above,
Travelocity's Exclusive Position will not preclude @Home from the following:
(i) Editorial Content. @Home's editors may place editorial content
on the @Home Service from time to time which content may include links to third
party sites including competitor sites. However, @Home may not persistently
promote Competitor content on the @Home Service with the exception of editorial
listings. Within such editorial listings section, TSG will have a promotional
placement `above the fold', either in the banner advertising space or in a
sponsor space above the editorial listings.
(ii) Non-Competitive Agreements. @Home may enter into agreements
with any travel sites or travel content providers that are not Competitors.
(c) @HOME NON-EXCLUSIVE. @Home does not require (***) on the Travelocity
Website. TSG may, at its discretion, distribute the Travelocity Content through
alternative broadband networks including, but not limited to, (***).
4. FUTURE OPPORTUNITIES
(a) MULTIMEDIA INTEGRATION. As TSG categorizes its Media Assets into
database form, @Home will work with TSG to link and display the Media Assets
from time to time in conjunction with relevant features on the @Home Service.
(b) PREMIUM SERVICES: @Home intends to offer a variety of premium services
to its subscribers in the future. @Home will provide the network and systems
infrastructure, transaction management, co-promotion, marketing resources, and a
distribution channel for premium offerings. TSG may (but is not required to)
participate with its own premium service offering (e.g. pay-per-play video
tours) if so desired. In the event a premium service is created, such service
will be a subscription based product whose price would be set by TSG and @Home
subject to approval of @Home Distributor Affiliates. A revenue share for such
premium service shall be negotiated in good faith between @Home and Travelocity
prior to the offering.
5. OBLIGATIONS OF TSG. In addition to its other obligations under the
Agreement, TSG agrees to the following:
(a) ACTIVE WEB PRESENCE. During the term of this Agreement, TSG will
maintain an "Active Web Presence. For these purposes, Active Web Presence means:
(i) the maintenance of a site on the World Wide Web that offers at
least the level of performance and functionality as offered on the Commencement
Date (including breadth and depth of offerings, services and suppliers); and
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(ii) to the extent commercially reasonable, the quality of the
primary features and functions of the Travelocity Website and the Travelocity
Content (including, frequency of updates, breadth and depth of services and
suppliers, tools, usability, etc.) are substantially equal to or better than the
analogous functions and features provided by comparable third party content
providers of travel transactions and information; and
(iii) to the extent commercially reasonable, the Travelocity
Website(s) continue to integrate the latest and most common features of
functionality as comparable websites, including (without limitation and by way
of example only): back-end security, appropriate transactional mechanisms,
customer service, user interface enhancements, and navigation tools.
(b) SPECIAL PROMOTIONS. TSG agrees to offer promotions at no cost to @Home
subscribers on a quarterly basis that are of (***) that will be featured
prominently in the Travel Area and will be used primarily to promote
Travelocity.
(c) DIRECT CONNECTION TO @HOME NETWORK. In the event the response time from
the Travelocity Website to @Home subscribers becomes unacceptably slow (in the
reasonable discretion of @Home), TSG and @Home shall work together to establish
and maintain a direct connection from the TSG servers to the @Home network. TSG
and @Home shall equally share the total cost of this connection, the speed of
which shall be no less than (***). Any price for the connection offered by @Home
shall be no greater than the price charged to similar @Home content providers.
6. MARKETING; CUSTOMER INFORMATION.
(a) OUTBOUND MARKETING. @Home will use reasonable efforts with its
Distribution Affiliates to include Travelocity in any content-related external
marketing pieces. Any such marketing pieces in which @Home chooses to include
Travelocity will, at a minimum, include the Travelocity name but may also
include the Travelocity logo, descriptions, screen shots, etc. TSG will provide,
and @Home will comply with, guidelines for how to describe/display Travelocity
in @Home outbound marketing efforts. Possible marketing avenues may include, but
are not limited to, cable TV spots/infomercials, newspaper ads, bill stuffers,
postcards, door hangers, direct mail, and take-one brochures. TSG shall have the
right of prior approval of any mention or representation of TSG in any such
marketing materials. @Home shall include TSG in its 30 minute `informercial' to
be shot on or about March 13, 1998.
(b) ONLINE MARKETING. @Home and TSG will work together to include
Travelocity in other appropriate online mechanisms for showcasing Travelocity
Content and other offerings as these mechanisms are developed.
(c) USAGE DATA. When technically feasible and if legally and contractually
permitted, each Party will provide the other with aggregated usage data
concerning access by @Home subscribers to the Travelocity promotional areas.
Usage data reports will be provided quarterly and as reasonably requested. The
reports will be delivered in the format most commonly collected by such Party.
All usage data will be considered Confidential
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<PAGE> 8
Information of the Party furnishing the usage data. Unless legally required,
each Party agrees not to provide usage data specific to the other that has not
been aggregated with other data to any third-party (other than, with respect to
@Home, to Distribution Affiliates), without such Party's prior consent.
(i) Usage Data Provided by TSG. TSG will provide @Home the
following information pertaining to @Home customers: number of visitors, page
views per visit, @Home visitors who register with Travelocity, total
transactions, total revenue per transaction, and products/services purchased per
visit. TSG Usage Data shall not include specific customer names.
(ii) Usage Data Provided by @Home. @Home will provide TSG with
aggregate usage data on the Travel Category of the Shopping Guide as compared to
aggregate usage data in all Categories offered by the Shopping Guide; and the
number of clicks-through to the Travel Area from @Home links.
(d) CUSTOMER SUPPORT. @Home will forward all calls and e-mails regarding
Travelocity services to TSG personnel if TSG support is needed.
7. DISTRIBUTION.
(a) @HOME DISTRIBUTION AFFILIATES. @Home will distribute the Travelocity
Content through its Distribution Affiliates. The territory governed by this
Agreement will be North America (including Canada and U.S.) and any other
country where @Home offers the @Home Service.
(b) REPLICATION SERVICES. @Home will replicate mutually agreed-upon
Travelocity media assets to ensure cost-efficient and reliable delivery of Media
Assets to its subscribers. Specifically, @Home will provide TSG the replication
data storage space for each replication data @Home regional data center
according to the following schedule:
Year Total Replication Space
---- -----------------------
Per RDC (MB)
------------
1998 (***)
1999 (***)
2000 (***)
TSG may purchase additional replication space in the future at a mutually agreed
upon price, but no greater than the price charged to similar @Home content
providers.
(c) RIGHT TO CACHE ETC. Without limiting any rights @Home may have under
applicable laws, TSG agrees that @Home may transport (i.e. transmit, distribute,
and serve), cache on proxy servers, replicate on replication servers and
reproduce on related storage devices operated by @Home and its Distribution
Affiliates Travelocity Content as necessary to efficiently deliver the
Travelocity Content as provided herein. TSG will retain complete discretion to
set "TTL" (time to live) variables for the Travelocity Content (i.e. use the
standard mechanism to allow no cache of specified content). If necessary, TSG
agrees to adapt (or permit the adaptation by @Home of) the Travelocity Content
for compatibility with reasonable technology solutions adopted by @Home.
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(d) @HOME SERVICE UPTIME. @Home will use reasonable efforts to ensure that
it minimizes any downtime of the @Home service. In the event the @Home Service
is down for a substantial period of time (other than as the result of a Force
Majeure event or routine maintenance), @Home will extend the term of the
Agreement for the period of time equal to the period of downtime.
(e) SUBSCRIBERS. Unless otherwise agreed in writing by TSG, @Home shall
make the Travelocity Content available to all basic subscribers of the @Home
Service (subject to Section 17j below).
(f) ADVERTISING IMPRESSIONS. During the term of the Agreement, @Home will
provide broadband advertising inventory to TSG to promote TSG within the @Home
Service equivalent in total value to a (***) purchase of such inventory at a
discounted price of (***) off the then-current CPM rate card (as established
each month by @Home). Current @Home CPM rates are (1) (***) for @Home-created
ads and (2) (***) for advertiser-created ads. This advertising inventory will be
allocated as follows: in calendar year 1998, @Home will provide TSG with
impressions equal in value to (***); for calendar year 1999, @Home will provide
TSG with impressions equal in value to (***); and for calendar year 2000, @Home
will provide TSG with impressions equal in value to (***).
(i) If using its own advertisements, TSG will deliver
advertisements to @Home in a format that conform to the then current advertising
specification.
(ii) @Home will provide TSG creative services to produce up to four
B*Box advertisements, which may include spawned files (as defined in the then
current advertising specifications). in each calendar year.
(iii) @Home will provide customized B*Box rotation and positioning
within guide channels (i.e., News, Finance, Technology, etc.) as well as within
region, city, and zip code when technically feasible.
(iv) Pursuant to SECTION 6 c) above, the parties will provide one
another with information regarding advertising yields and subscriber usage data.
@Home will provide such information to TSG in the form of customized online
reports.
8. COMPENSATION.
(a) CASH PAYMENTS TO @HOME. During the term of the Agreement, TSG will make
minimum annual cash payments (the "GUARANTEED PAYMENTS") to @Home as follows:
First Contract Year: (***)
Second Contract Year: (***)
Third Contract Year: (***)
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Subject to the adjustments described in Sections 8(b) and (c) below, the
Guaranteed Payment for each Contract Year will be payable in equal quarterly
installments (the "QUARTERLY PAYMENTS"), and each Quarterly Payment will be due
no later than thirty (30) days following the last day of the relevant Quarter;
provided, however, that the first Quarterly Payment due with respect to the
Guaranteed Payment for the First Contract Year shall be due no later than ten
(10) days after the Effective Date.
(b) OFFSET TO GUARANTEED PAYMENT. If, at the end of any Contract Year, (i)
the total amount of revenue share payments due to @Home under this agreement is
less than the total Guaranteed Payments made by TSG for that Contract Year, and
(ii) the average number of @Home subscribers during that Contract Year is less
than (***) of the projected subscriber levels indicated below; then the
Guaranteed Payment due to @Home for the following year will be reduced by an
amount equal to that Contract Year's Guaranteed Payment multiplied by the
percentage of the subscriber shortfall. (For example, if in Contract Year 1,
subscriber numbers are (***) below the projected number, then TSG's Year 2
Guaranteed Payment amount would be reduced by (***) of the total Contract Year 1
Guaranteed Payments). If any amount is owed to TSG after the final Contract Year
of this Agreement, @Home will extend the term of this Agreement until TSG has
recouped such amount in the value of services provided by @Home.
For these purposes, projected subscriber levels will be:
Year Average Subscribers
---- -------------------
1998 (***)
2000 (***)
1999 (***)
If the Travel Channel link is not implemented on the @Home Service home page on
or before (***), then the Offset to Guaranteed Payments will be calculated using
the (***), rather than (***). Offsets to the Guaranteed Payments will be
calculated as above, but (***).
(***):
Year Average Unique Visitors
---- -----------------------
1999 (***)
2000 (***)
(c) ADDITIONS TO GUARANTEED PAYMENT. In the event that the @Home share of
the sum of Advertising Revenue and Transaction Revenue as described below is
greater than the scheduled Quarterly Payment for any given Quarter during the
term of this Agreement, TSG will pay @Home the difference between such @Home
revenue share and the scheduled Quarterly Payment, in addition to the Quarterly
Payment, within 30 days of the end of the given Quarter.
(i) Advertising Revenue Share: TSG will pay to @Home (***) of the
Net Advertising Revenue on pages on the Travelocity site served to @Home
subscribers.
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(ii) Transaction Revenue Share: TSG will remit to @Home (***) of
its Net Transaction Revenue.
9. TERM AND TERMINATION.
(a) INITIAL TERM. The initial term of this Agreement will begin on the
Effective Date and will end three years following the Online Promotion Date,
unless earlier terminated according to its terms. @Home will promptly notify TSG
of the Services Commencement Date.
(b) SUSPENSION AND TERMINATION FOR CESSATION OF TRAVEL SERVICES. In the
event @Home ceases to offer travel services at any time during the term of this
Agreement: (i) within thirty (30) days of such cessation, @Home will refund to
TSG any unearned Guaranteed Payments made by TSG in the form of advertising
inventory; and (ii) TSG's obligation to make future Guaranteed Payments to @Home
will be suspended until such time that @Home reinstates travel services;
provided, however, that TSG's obligation to make revenue share payments to @Home
hereunder shall continue. In the event @Home does not reinstate travel services
within one year of the date it first ceases such services, this agreement shall
automatically terminate, and neither party will have any liability to the other
as a result of such termination.
(c) TERMINATION FOR FAILURE TO MAINTAIN ACTIVE WEB PRESENCE. In the event
that TSG fails to maintain its Active Web Presence, @Home may terminate the
Agreement upon 30 days written notice, provided that TSG has not resumed Active
Web Presence within such 30 day period.
(d) NO LIABILITY FOR TERMINATION. Neither @Home nor TSG will have any
liability to the other merely as a result of proper termination of this
Agreement in accordance with this Section 9, however all amounts earned but
unpaid by either party to the other as of the date of such termination shall be
due and payable to the other party in accordance with the terms set forth in
this Agreement.
(e) TERMINATION DUE TO BREACH. Either party may terminate this Agreement,
effective upon thirty (30) days' written notice, if the other party fails to
cure any breach of its material obligations under this Agreement within thirty
(30) days following written notice to such party.
10. PUBLIC ANNOUNCEMENT. Both parties will periodically promote the
TSG/@Home relationship through press releases and other announcements, the
timing and content of which the parties have mutually agreed, which agreement
shall not be unreasonably withheld.
11. BUSINESS MARKS. @Home and TSG each will have the right, without charge,
to use in promoting the Travelocity Content and the @Home Service the other's
business name and any trade names, trademarks and service marks (collectively,
"MARKS") that @Home may adopt for use with the @Home Service and that TSG may
adopt for use with the
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Travelocity Website and/or the Travelocity Content distributed and used by
@Home. However, any such use must be identical to use by the party that owns the
Mark, and as approved by the owner in writing in advance, or otherwise in
accordance with any Mark usage guidelines communicated by the owner. The owner
retains all goodwill and all other rights thereto, and the other party obtains
no goodwill or any other rights thereto as a result of the use of the owner's
Marks. Except as explicitly set forth herein, no other licenses or rights are
granted or implied.
12. LIMITATION OF LIABILITY. @HOME, @HOME'S DISTRIBUTION AFFILIATES AND TSG
WILL NOT BE LIABLE TO ONE ANOTHER OR ANY THIRD PARTY, UNDER ANY LEGAL OR
EQUITABLE THEORY, FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR INDIRECT DAMAGES
OF ANY KIND, SUFFERED BY OR OTHERWISE COMPENSABLE TO THE OTHER, ARISING OUT OF,
UNDER OR RELATING TO THIS AGREEMENT, WHETHER OR NOT ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. EXCEPT FOR REFUNDS WHICH ARE DUE TSG HEREUNDER, IN NO EVENT
WILL EITHER PARTY HAVE ANY LIABILITY OF ANY NATURE OR AMOUNT WHATSOEVER TO THE
OTHER OR ANY THIRD PARTY ARISING OUT OF, UNDER, OR RELATING TO, ANY FAILURE OF
THE DISTRIBUTION OF THE CONTENT OR ANY PART THEREOF OR ANY SOFTWARE PROGRAM,
SOFTWARE 08 WEB SITE LINK OR LINK MECHANISM, OR OTHER MATERIAL OR ITEMS THROUGH
THE @HOME NETWORK OR OTHERWISE (INCLUDING BUT NOT LIMITED TO ANY SUCH FAILURE OF
DISTRIBUTION RESULTING FROM DISTRIBUTION AFFILIATES' ELECTION NOT TO DISTRIBUTE
MATERIAL OR ITEMS OR DUE TO TECHNICAL DIFFICULTIES). ADDITIONALLY, IN NO EVENT
SHALL EITHER PARTY'S LIABILITY TO THE OTHER UNDER THIS AGREEMENT OR OTHERWISE
EXCEED THE AMOUNT OF (***) SET FORTH UNDER SECTION 8. The limitations in this
Section 12 shall not apply to compensation due or obligations set out in
Sections 13 and 14 below.
13. PROPRIETARY RIGHTS GENERALLY. @Home and TSG each retain any and all
right, title and interest in and to all intellectual property of any nature
(including patents, rights under patent applications and patents issuing on such
applications, trade secrets, copyrights, trademarks and other business names
(including goodwill in such marks), among others), subject to the rights granted
by the parties in Section 11 of this Agreement or as otherwise explicitly set
forth in this Agreement. @Home and TSG each agree to reproduce, and agree not to
remove or obscure proprietary rights legends (such as copyright notices, among
others) or license terms and conditions included with any intellectual property
deliverable provided in connection with this Agreement. TSG agrees to ensure
that the Travelocity Content and its Marks and their use, reproduction and
distribution (alone and not in combination with other material or items) will
not infringe the intellectual property rights of any third party when
distributed on the @Home Service. @Home agrees to ensure that its Marks and the
@Home Service and their use, reproduction and distribution (alone and not in
combination with other material or items) do not infringe the intellectual
property rights of any third party. If, as a result of any collaboration by
@Home or TSG under this Agreement, they become joint owners of any newly created
intellectual property (excluding that which each party contributes on its own)
by operation of law, then they will cooperate, subject to prudent business
judgment, to establish, register, maintain and protect such intellectual
property.
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14. INDEMNIFICATION. Each party will indemnity the other party and its
customers and affiliates for, and hold them harmless from, any loss, expense
(including reasonable, attorneys fees and court costs), damage or liability
arising out of any third party claim, demand or suit resulting from a breach of
any of the warranties of the indemnifying party in Section 13. As a condition to
indemnification (a) the indemnified party will promptly inform the indemnifying
party in writing of any such claim, demand or suit and the indemnifying party
will fully cooperate in the defense thereof; and (b) the indemnified party will
not agree to the settlement of any such claim, demand or suit prior to a final
judgment thereon without the consent of the indemnifying party, which will not
be unreasonably withheld.
15. CONFIDENTIAL INFORMATION.
(a) NONDISCLOSURE. Each party agrees (a) to hold the other party's
Confidential Information in strict confidence, (b) not to disclose such
Confidential Information to any third party, and (c) not to use the other
party's Confidential Information for any purpose other than to further this
Agreement. Each party may disclose the other party's Confidential Information to
its responsible employees and independent contractors, and, in the case of
@Home, the employees of @Home's Distribution Affiliates, with a bona fide need
to know such information and subject to a nondisclosure agreement but only to
the extent necessary to carry out this Agreement. Each party agrees to instruct
all such employees and independent contractors not to disclose such Confidential
Information to third parties, without the prior written permission of the
disclosing party.
(b) EXCEPTIONS. Notwithstanding the foregoing, Confidential Information
will not include information which:
(i) Is now, or hereafter becomes, through no act or failure to act
on the part of the receiving party, generally known or available to the public;
(ii) was acquired by the receiving party before receiving such
information from the disclosing party and without restriction as to use or
disclosure;
(iii) Is hereafter rightfully furnished to the receiving party by a
third party, without restriction as to use or disclosure;
(iv) Is information which the receiving party can document was
independently developed by the receiving party without use of the disclosing
party's Confidential Information;
(v) Is required to be disclosed by law, provided that the
receiving party uses reasonable efforts to give the disclosing party reasonable
notice of such required disclosure and to limit the scope of material disclosed;
or
(vi) is disclosed with the prior written consent of the disclosing
party.
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(c) RETURN. Upon the disclosing party's request, the receiving party will
promptly return to the disclosing party all tangible items containing or
consisting of the disclosing party's Confidential Information.
(d) INJUNCTIVE RELIEF. Each party acknowledges that all of the disclosing
party's Confidential Information is owned solely by the disclosing party (or its
licensors) and that the unauthorized disclosure or use of such Confidential
Information would cause irreparable harm and significant injury to the
disclosing party, the degree of which may be difficult to ascertain.
Accordingly, each party agrees that the disclosing party will have the right to
pursue an immediate injunction enjoining any breach of this Section 15 as well
as the right to pursue any and all other rights and remedies available at law or
in equity in the event of such a breach.
16. WARRANTIES AND DISCLAIMERS. EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT: (a) @HOME DOES NOT MAKE ANY WARRANTIES CONCERNING THE @HOME NETWORK
OR THE @HOME SERVICE, EXPRESS, IMPLIED OR OTHERWISE, (b) @HOME SPECIFICALLY
DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT WITH RESPECT TO THIRD PARTY RIGHTS, AND (c) THE
@HOME NETWORK, THE @HOME SERVICE, AND ANY AND ALL CONTENT AND TOOLS AND RELATED
DELIVERABLES PROVIDED BY @HOME IN CONNECTION WITH THIS AGREEMENT ARE PROVIDED BY
@HOME "AS IS". SIMILARLY, EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, TSG
DOES NOT MAKE ANY WARRANTIES CONCERNING THE TRAVELOCITY CONTENT, EXPRESS,
IMPLIED OR OTHERWISE, AND SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH
RESPECT TO CONTENT PROVIDED BY TSG TO @HOME IN CONNECTION WITH THIS AGREEMENT,
ALL OF WHICH ARE PROVIDED BY TSG `AS IS'.
17. GENERAL PROVISIONS.
(a) GOVERNING LAW AND VENUE. This Agreement and any disputes arising under,
in connection with, or relating to this Agreement will be governed by the laws
of the State of California. The state and federal courts in San Mateo County,
California will have exclusive venue and jurisdiction for such disputes, and the
parties hereby submit to personal jurisdiction in such courts. The prevailing
party in any such dispute will be entitled to recover costs of suit (including
the reasonable fees of attorneys and other professionals).
(b) NOTICES. All notices or other communications to or upon @Home or TSG
under this Agreement shall be by telecopy or in writing and telecopied, mailed,
or delivered to each party at its address set forth in the introductory
paragraph of this Agreement or such other address or telecopier number as either
party shall notify the other. All such notices and communications: when sent by
delivery service, shall be effective on the third business day following the
deposit with such service; when mailed, first class postage prepaid and
addressed as aforesaid in the mails, shall be effective upon receipt; when
delivered by hand, shall be effective upon delivery; and when telecopied, shall
be effective upon confirmation of receipt.
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(c) COMPLIANCE WITH LAWS. Subject to the express provisions of this
Section, each party agrees to comply with applicable laws in connection with
this Agreement. To the best of Travelocity's knowledge, the use, reproduction
and distribution of Travelocity Content, in and of itself, does not and will not
violate applicable laws or related legal rights of third parties.
(d) ASSIGNMENT. Neither party may assign or transfer its rights or
obligations under Agreement without the prior written permission of the other
party (which permission shall not be unreasonably withheld or delayed); provided
that either party may assign its rights and obligations under this Agreement in
the event of a corporate reorganization, merger, or sale of all or substantially
all of a Party's assets or to any commonly controlled affiliate or wholly-owned
subsidiary without the consent of the other party so long as the original party
remains liable for its obligations hereunder. Any transferee must agree to
accept the burdens as well as the benefits of this Agreement. Any attempt to
transfer, sublicense or assign any of the rights or duties hereunder in
violation of this Section is hereby prohibited and shall be null and void.
Subject to the foregoing, this Assignment shall inure to the benefit of and be
binding upon the parties and their successors and assigns.
(e) RELATIONSHIP OF PARTIES. Neither this Agreement nor the parties'
business relationship established hereunder will be construed as a partnership,
joint venture, fiduciary relationship or agency relationship or as granting a
franchise. Accordingly, neither party shall have any right to act on behalf of
the other party for any purpose. The parties warrant to one another that they
have consulted legal counsel in reviewing and/or negotiating this Agreement.
(f) RECORDS AND AUDITING. TSG will maintain its records relating to Net
Advertising Revenue and Net Transaction Revenue earned and related payments made
to @Home for at least three (3) years after their creation, and will permit
@Home or its representative to examine such records upon reasonable notice at
reasonable times. @Home or any such representative agree to hold information
obtained in such examination in confidence and shall only reveal to @Home such
information as is necessary to verity TSG's compliance or noncompliance with
this Agreement. TSG will promptly pay any payments found due by such an
examination, plus interest, and if any examination discloses a shortfall in any
payments due @Home in any quarter of more than five percent (5%), TSG will pay
the reasonable fee of the auditors for that examination.
(g) WAIVER. No waiver of any breach of any provision of this Agreement will
be considered to be a waiver of any prior, concurrent or later breach of the
same provisions or different provisions, and will not be effective unless made
in writing and signed by an officer of the waiving party.
(h) AMENDMENTS. This Agreement may only be amended by a written agreement
or addendum signed by duly authorized representatives of both parties.
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<PAGE> 16
(i) SURVIVAL. Sections 12, 13, 14, 15, 16, and 17 of this Agreement, along
with any other provisions which by their nature extend beyond termination of
this Agreement shall survive termination. Termination shall not affect either
part's obligation to pay amounts due prior to termination or which (under the
terms of this Agreement) become due following termination.
(j) FORCE MAJEURE. Neither party will have liability to the other party
under, in connection with or for any reason relating to this Agreement as a
result of any failure of performance by or on behalf of such party as a result
of an event of "force majeure". For purposes of this Agreement, "force majeure"
means an event beyond a party's reasonable control whether or not foreseeable
and includes, in any case, the following events that may prevent or
significantly hinder such party from performing this Agreement or acting in
connection with this Agreement: armed conflicts, famine, floods, Acts of God,
labor strikes or shortages, governmental decree or regulation, court order,
severe weather, fire, earthquake, failure of suppliers, unavailability of
communications transport facilities and breakdowns in communications transport
facilities. Notwithstanding the foregoing, in the event that the @Home Service
is not available, as a result of a Force Majeure event, to more than 20% of the
@Home Service subscribers for a period of 10 consecutive days, or 15
non-consecutive days, then the performance of the Parties under this Agreement
shall be suspended, including TSG's obligation to make Guaranteed Payments,
until such time that the Force Majeure event is over, and the term of this
Agreement will be extended by an amount of time equal to the length of the
suspension.
(k) DISTRIBUTION AFFILIATES. Notwithstanding other term of this Agreement,
TSG acknowledges and agrees that the Distribution Affiliates will have the right
under certain circumstances to elect not to distribute the Travelocity Content
and promotional material and that, pursuant to its agreement with such
Distribution Affiliates, @Home may be subject to restrictions regarding the
promotion or distribution of the Travelocity Content and promotional materials.
TSG agrees not to bring any action or threaten to bring any action against the
Distribution Affiliates or @Home in connection with any such election,
restriction or failure to distribute. Any @Home subscribers which do not receive
Travelocity Content as a result of the foregoing shall not be counted as @Home
subscribers for the purposes of Section 8 of this Agreement. @Home will notify
TSG in THE EVENT that any Distribution Affiliates elect not to distribute the
Travelocity Content.
(l) ENTIRE AGREEMENT. This Agreement, including its Attachments,
constitutes the entire understanding of @Home and TSG with respect to its
subject matter and supersedes all prior agreements between @Home and TSG.
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ATTACHMENT I
TERMS OF @HOME SHOPPING GUIDE TENANCY
1. @Home Shopping Guide. The @Home Shopping Guide is a shopping service
provided by @Home to its subscribers. The Shopping Guide will feature a general
Shopping Page, as well as shopping interfaces in particular categories ("ANCHOR
TENANT CATEGORIES") established from time to time by @Home.
2. Anchor Tenants. "ANCHOR TENANTS" will be featured in Anchor Tenant
Categories. Travelocity will be an Anchor Tenant in the `Travel" Category. @Home
and TSG agree to work together to create a strong branded presence for
Travelocity in the Travel Category.
3. Responsibilities of @Home. @Home is responsible for the following
promotional activity for the duration of this Agreement to its Anchor Tenants.
This will be implemented in a reasonable time frame after the Effective Date:
Travelocity will be promoted above-the-fold as an Anchor Tenant in the Shopping
Guide. @Home will promote Travelocity within its Anchor Tenant Category in
accordance with the standard Shopping Guide promotional guidelines as amended
from time to time by @Home. The Travelocity promotion will be displayed when an
@Home user enters its Anchor Tenant Category and there will be links to the
Travelocity portion of the Travel Multi-Wizard or various parts of the Travel
Area or Travelocity Website.
4. Responsibilities Of TSG. TSG is responsible for all processing of
customer orders generated pursuant to this Agreement. TSG shall provide customer
service to @Home customers, which service shall cover all steps in the process
of taking orders to the final delivery of product to customers. Customer service
shall include conducting business in a professional manner consistent with
industry standards. TSG shall use reasonable efforts to comply with @Home
"merchant certification" requirements as defined by @Home from time to time.
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EXHIBIT 10.14
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
TRAVEL SERVICES ADVERTISING AND PROMOTION AGREEMENT
THIS TRAVEL SERVICES ADVERTISING AND PROMOTION AGREEMENT (this "Agreement")
is entered into as of June 29, 1997 (the "Effective Date") between Yahoo! Inc.,
a California corporation ("Yahoo!"), and SABRE Interactive ("SI"), a division of
The SABRE Group, Inc., a Delaware corporation.
RECITALS
A. Yahoo! operates a search engine and World Wide Web directory under the
brand "Yahoo!".
B. SI operates a travel booking engine and interactive Internet travel
services through its "Travelocity" site, located at http://www.travelocity.com
(the "Travelocity Site").
C. Yahoo! and SI wish to provide Yahoo! users with travel booking services
by distributing SI's booking engine on the Yahoo! Site and to advertise and
promote SI's interactive Internet travel services, all in accordance with the
terms and conditions of this Agreement.
AGREEMENT
SECTION 1. DEFINITIONS.
1.1 "Booking Engine" means a database containing availability, schedule,
and price information connected to a graphical user interface that allows users
of the World Wide Web to make reservations for Travel Services, as a minimum,
and complete payment for such Travel Services online.
1.2 "Exclusivity Period" means (***) through (***).
1.3 "Metro Travel Pages" means the first page in the travel category on
each Yahoo! Metro.
1.4 "Net SI Commissions" means (i) for air commissions the amount of
commission income received from (***), and (ii) for each of car and hotel
commissions the number of (***) for each of car and hotel commissions.
1.5 "Packaged Services" means a package of (***), for which a customer is
quoted a ____ price.
1.6 "Yahoo! Travel Page" means the Yahoo! Travel Page located in the travel
category on the Yahoo! Site, currently located at
http://travel.yahoo.com/travel. A screen image of the Yahoo! Travel Page is
attached to this Agreement in Exhibit A.
<PAGE> 2
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
1.7 "Travel Services" means booking services for air travel, hotels and car
rentals.
1.8 "Yahoo! Metros" means all World Wide Web sites localized for a
particular United States metropolitan area whose functionality is substantially
similar to the Yahoo! Site and which are solely Yahoo!-branded and owned. As of
the Effective Date, Yahoo! Metros are: Yahoo! Atlanta, Yahoo! Austin, Yahoo!
Boston, Yahoo! Chicago, Yahoo! Dallas/Fort Worth, Yahoo! Los Angeles, Yahoo!
Minneapolis/St. Paul, Yahoo! New York, Yahoo! SF Bay, Yahoo! Seattle and Yahoo!
Washington, D.C.
1.9 "Yahoo! Site" any Web site that is (a) targeted at users in the United
States, (b) wholly-owned by Yahoo!, (c) wholly developed by Yahoo! and/or its
contractors and (d) solely "Yahoo!" branded (including Yahoo!'s primary World
Wide Web site, including its Internet search engine and World Wide Web
directory, currently located at http://www.yahoo.com).
SECTION 2. BOOKING ENGINE.
During the Exclusivity Period, Yahoo! shall feature SI's Booking Engine on
the Yahoo! Site in accordance with this Section 2.
2.1 Yahoo! Travel Page. Yahoo! shall provide a prominent hyperlink on the
Yahoo! Travel Page to the Co-Branded Pages described in Section 2.2. Such
hyperlink shall be placed above the fold on the Yahoo! Travel Page.
2.2 Co-Branded Pages. SI shall create and serve a series of co-branded
pages that guide Yahoo! site users through the booking process for the Travel
Services, at a minimum (the "Co-Branded Pages"). The Co-Branded Pages shall
include all pages through the first page containing a price quotation for
travel-related services, but shall not include any pages in payment process.
(a) Masthead. The masthead on each Co-Branded Page shall conform to the
specifications set forth in Exhibit B and shall display Yahoo!'s name and logo
and SI's name and logo in equal relative prominence. A representative screen
image of the masthead is attached to this Agreement in Exhibit A.
(b) User Interface. The Co-Branded Pages shall conform to the graphical
user interface utilized by Yahoo! across Yahoo!'s network of branded Internet
properties as of the first date of the Exclusivity Period, and Yahoo! shall have
the right reasonably to approve the final design of all Co-Branded Pages. Any
material changes to the co-Branded pages thereafter shall be made upon the
mutual agreement of the parties. Yahoo! shall assign one individual to work with
SI to ensure that the co-Branded Pages satisfy Yahoo!'s requirements. Yahoo!
will use reasonable best efforts to ensure continuity of Yahoo! personnel
involved in the design process. All pages displayed to Yahoo! Site users, other
than the Co-Branded Pages, shall conform to the graphical interface utilized by
SI, provided however Yahoo! shall have a reasonable right of approval with
respect to such interface.
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<PAGE> 3
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
(c) Number of Pages. SI shall design the Co-Branded Pages so as
reasonably to minimize the number of pages a Yahoo! Site user must view prior to
obtaining final results for such user's query.
2.3 Customer Fulfillment and Service. SI shall be solely responsible for
fulfilling all booking requests from Yahoo! Site users through the Co-Branded
Pages. SI shall comply with the customer service metrics set forth in Exhibit B.
SI and Yahoo! shall jointly establish a procedure for Yahoo! to refer customer
calls received by Yahoo! to SI.
2.4 User Registration and Information.
(a) No Registration. Yahoo! Site users shall not be required to
register with or otherwise provide any personal information to SI until such
time in the booking sequence as a Yahoo! Site user chooses to book or purchase
one or more Travel Services.
(b) Collection of User Information. SI shall collect user information
from Yahoo! Site users who originally register through the Co-Branded Pages (the
"User Information") at such time as such users complete the booking process and
shall promptly provide Yahoo! with such User Information at least (***) and as
of the last date of this Agreement. User Information shall include the
information set forth in Exhibit B, including, without limitation, updates and
corrections to previously provided information as well as any new information,
such as usage information, as SI may solicit or collect from such users from
time to time, and such other information as the parties may agree from time to
time. SI and Yahoo! will cooperate and use their best efforts to develop and
implement technological and policy safeguards to prevent any unauthorized access
by third parties to any User Information.
(c) Ownership and Use of User Information. All User Information shall
be the sole property of (***), provided that (***) shall have an (***) right to
(***) such User Information in any manner (***) deems appropriate, subject to
applicable laws and regulations.
(d) Technical Cooperation. Yahoo! and SI shall cooperate in order to
integrate the registration process of the booking service with other services on
the Yahoo! Site which require registration such that user information is shared
across registration processes.
2.5 Performance Specifications. SI shall ensure that the Co-Branded Pages
and any other pages on the Travelocity Site displayed to Yahoo! Site users
comply with the performance specifications set forth in Exhibit B. Yahoo! will
use reasonable efforts to provide performance to users of the Yahoo! Travel Page
comparable to performance on the remainder of the Yahoo! Site.
2.6 Log Files and Statistics. SI shall provide Yahoo!, at least (***), with
electronic copies of all log files and statistics resulting from Yahoo! Site
users' use of the Co-Branded Pages and other SI-branded pages on the Travelocity
Site which follow the Co-Branded Pages in the booking sequence. SI will promptly
provide Yahoo! with reasonable assistance upon request to permit Yahoo! to read
and utilize such electronic files.
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<PAGE> 4
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
2.7 Development Schedule. SI and Yahoo! each shall devote appropriate
technical, financial and other necessary resources in order to meet the
development schedule and milestones, set forth in Exhibit B, for the
implementation of the Co-Branded Pages and other services contemplated by this
Agreement in order to permit the launch of such Co-Branded Pages and other
services on November 1, 1997.
SECTION 3. EXCLUSIVITY.
3.1 SI Exclusivity. During the Exclusivity Period, (i) SI's Booking Engine
shall be (***), and (ii) Yahoo! will ensure that SI's Booking Engine is (***)
Booking Engine for the Travel Services on the Yahoo! Site. Without limiting the
foregoing, with respect to any other Web site that is (A) owned or developed in
substantial party by Yahoo! or (B) (***) and that in either case will include
(***) for any of the Travel Services, Yahoo! will (***) provided that (i) there
are no other constraints on Yahoo!'s ability to (***) (including without
limitation any restriction relating to any partner or co-owner of the Web site
but other than constraints imposed by (***)), (ii) all (***) offered by SI in
connection with such transaction (***) (a copy of which will be provided by
Yahoo! to SI with the notice of the opportunity), and (iii) SI provides (***).
3.2 Packaged Services. Notwithstanding Section 3.1, nothing in this
Agreement shall limit Yahoo!'s ability to include (***) for Packaged Services
anywhere on the Yahoo! Site; provided that (i) Yahoo! shall not include any
(***) for Packaged Services on the Yahoo! Site, which (***) is provided by
(***), and (ii) any such (***) for Package Services do not allow users to (***)
prior to the completion of booking a reservation for Packages Services. SI
agrees that users of SI's booking Engine will not be able to (***) on pages that
appear to the user prior to the user's completion of booking a reservation for
any of the Travel Services.
3.3 Termination of Exclusivity. Notwithstanding Section 3.1, the
Exclusivity Period shall terminate, (***) in the event that SI does not comply
with the (***), in each case measured as an (***). The foregoing remedy shall be
in addition to any other legal and/or equitable remedies Yahoo! may have,
including without limitation the right to terminate this Agreement pursuant to
Section 11.2 for material breach of (***) (provided that the above criteria
establish whether a material breach has occurred for failure to comply with
(***)), and termination of the Exclusive Period shall not in any way affect SI's
obligation to pay all amounts set forth in Section 6. Notwithstanding the
foregoing, notice of termination for failure to comply with the foregoing (***),
whether under this section or Section 11.2 must be delivered within (***)
following receipt by Yahoo! of the report on compliance with (***) during the
period in which such failure has occurred, or else (***).
SECTION 4. ADVERTISING RIGHTS.
4.1 Sale of Advertising Rights. (***) shall have the sole right to sell
advertising rights and promotional rights (collectively, "Advertising Rights")
on all co-Branded Pages, and (***) shall be entitled to retain all revenue
generated from such sales.
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<PAGE> 5
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
4.2 Ad Serving. Yahoo! shall serve, or shall have served, all Advertising
Rights on all Co-Branded Pages and shall be responsible for the scheduling of
all such Advertising Rights. Yahoo! and SI shall cooperate to enable Advertising
Rights to be served on Co-Branded Pages.
4.3 Advertising Exclusions.
(a) By Yahoo!. Yahoo! shall not display any banner advertisements or
other promotional materials on any Co-Branded Pages for (***). Further, no
banner advertisement or other promotional materials on any Co-Branded pages
shall (***) except that (i) separate Travel Services may be (***), and (ii)
Yahoo! may provide to third party Travel Service providers (such as an airline,
hotel or car rental provider) advertising that (***) such advertisers' Travel
Services, provided that Yahoo! uses reasonable good faith efforts to ensure that
(***).
(b) By SI. SI shall not display to Yahoo! users any banner
advertisements or other promotional materials on any pages on the Travelocity
Site which follow the Yahoo! Co-Branded Pages in the booking sequence for (***).
SECTION 5. ADVERTISING AND PROMOTIONAL ACTIVITIES.
5.1 Banner Advertisements. Prior to the Effective Date, SI has placed with
Yahoo! insertion order #6180 for (***) of Advertising Rights on the Yahoo! Site.
In addition, Yahoo! shall run banner advertisements for the Travelocity Site as
set forth in Exhibit C. SI shall be permitted to (***) subject to Yahoo!'s
reasonable approval, provided (i) SI provides Yahoo! with reasonable prior
written notice of (***), (ii) (***) completes and submits Yahoo!'s form of
insertion order in accordance with Yahoo!'s policies then in effect, and (iii)
SI provides such other information regarding (***) as Yahoo! may reasonably
request. Except as expressly provided in the foregoing sentence, SI shall not
(***). All such banner advertisements shall be subject to Yahoo!'s standard
terms and conditions as set forth in Exhibit D, which Yahoo! may modify from
time to time in its reasonable discretion upon written notice to SI. In the
event of any conflict between the provisions of this Agreement and such standard
terms and conditions or any advertising insertion order, (***) shall govern.
5.2 Beatrice Sponsorship. SI shall be a sponsor of the "Travel Content"
page on the Beatrice Web Guide, located at
http://www.bguide.com/fabfinds/travel.html, beginning July 1, 1997 through
December 31, 1998. A screen image of this page is attached to this Agreement in
Exhibit A.
5.3 Front-Page Promotion. Yahoo! shall feature an SI promotion for the
Travelocity Site on the front page of the Yahoo! Site for (***) during each of
the(***) beginning (***). Yahoo! shall be responsible for running such promotion
and shall have the right reasonably to approve all aspects of the promotion
based on Yahoo! standard guidelines.
5.4 Cross-Links. In addition to any hyperlinks and buttons described
elsewhere in this Agreement, during the Exclusivity Period (a) Yahoo! shall
include hyperlinks on the Yahoo! Site
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<PAGE> 6
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
to mutually acceptable content located or accessible on the Travelocity Site and
(b) SI shall include hyperlinks to mutually acceptable content located or
accessible on the Yahoo! Site.
5.5 1998 Activities. Yahoo! shall place Advertising Rights on the Yahoo!
Site, the Yahoo! Metros and the Beatrice Web Guide on behalf of SI during
calendar year 1998 as provided in Exhibit C.
SECTION 6. PAYMENTS.
6.1 Fees. SI shall pay Yahoo! (***) fees in accordance with the schedule
set forth in Exhibit E.
6.2 Commissions on Qualified Bookings. In addition the fees set forth in
Section 6.1 SI shall pay Yahoo!, on a (***) basis, SI Net commissions for
booking of Travel Services by Yahoo! Site users through SI's Booking Engine on
the co-Branded Pages (collectively, "Qualified Bookings") in accordance with the
commission schedule set forth in Exhibit F ____ [sic] payments shall be due and
payable on or before the (***) following the end of the (***) and shall be
accompanied by a report setting forth in sufficient detail, the calculation of
Yahoo!'s commission for such (***) and such other information relating to
commissions as Yahoo! may reasonably request from time to time.
6.3 Tracking Procedures; Audit Rights. To ensure compliance with the terms
of Section 6.2, SI shall establish reasonable mechanisms acceptable to Yahoo! to
track, and shall keep reasonably detailed records concerning, Qualified Bookings
and the payments due Yahoo! under this Agreement. SI shall provide Yahoo!,
within ten (10) days following the end of each month, a report containing the
information set forth in Exhibit G, and such other information related to
commissions due and compliance with performance specifications set forth in
Exhibit B under this Agreement as Yahoo! may reasonably request from time to
time. Yahoo! shall have the right, no more than (***) and at its own expense, to
have a representative inspect and audit all the accounting and sales books and
records of SI which are relevant to the payments set out in Section 6.2,
provided, however, that Yahoo! provides SI with reasonable notice prior to such
audit and any such inspection and audit shall be conducted during regular
business hours in such a manner as not to interfere with normal business
activities. In the event that any audit shall reveal an underpayment of more
than five percent (7.5%) [sic] of the amounts due to Yahoo! for any calendar
quarter, SI shall reimburse Yahoo! for the reasonable cost of such audit.
SECTION 7. LICENSE GRANT.
Yahoo! hereby grants to SI, during the Term of this Agreement, a (***)
license to (***) on the Travelocity Site and the Co-Branded Pages. Yahoo!'s
name, logo and such other trademarks as Yahoo! uses from time to time with
respect to the Yahoo! Site solely for the purpose of fulfilling its obligations
under this Agreement and solely in accordance with Yahoo!'s trademark guidelines
in effect from time to time. Yahoo! shall have the right to approve any such
uses of Yahoo!'s name, logo and other trademarks.
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<PAGE> 7
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
SECTION 8. CONFIDENTIAL INFORMATION AND PUBLICITY.
8.1 Terms and Conditions. The terms and conditions of this Agreement shall
be considered confidential and shall not be disclosed to any third parties
except to such party's accountants or attorneys, or except as otherwise required
by law. Neither party shall make any public announcement regarding the existence
of this Agreement without the other party's prior written approval and consent.
8.2 Publicity. Yahoo! and SI shall issue a joint press release regarding
the relationship contemplated by this Agreement, which press release shall be
approved by both parties prior to distribution to the media. Such press release
shall not discuss the financial terms of such relationship or SI's role in
developing travel booking services for the Yahoo! Site.
8.3 Nondisclosure Agreement. Yahoo! and SI previously have entered into a
Mutual Nondisclosure Agreement and expressly acknowledge that such Mutual
Nondisclosure Agreement remains in full force and effect in accordance with its
terms.
SECTION 9. LIMITATION OF LIABILITY.
9.1 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY AND EXCEPT
WITH RESPECT TO SECTION 10, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER
ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR (A) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE OR GOODWILL OR ANTICIPATED
PROFITS OR LOST BUSINESS), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OR (B) THE COST OR PROCUREMENT OF SUBSTITUTE
SERVICES.
9.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, ANY INDEMNIFICATION OBLIGATION, IN NO EVENT SHALL
THE CUMULATIVE LIABILITY OF EITHER PARTY ARISING OUT OF OR RELATED TO THIS
AGREEMENT, WHETHER BASED IN CONTRACT, TORT OR OTHERWISE, EXCEED (***); PROVIDED
THAT THE FOREGOING LIMITATION SHALL NOT APPLY TO ANY OBLIGATION OF SI TO PAY
MONEY UNDER SECTION 5.1, SECTION 6 OR EXHIBITS E AND F OF THIS AGREEMENT.
SECTION 10. INDEMNIFICATION
10.1 By SI. SI, at its own expense, will indemnify, defend and hold
harmless Yahoo! and its employees, representatives, agents and affiliates,
against any claim, suit, action, or other proceeding brought against Yahoo!
based on or arising from a claim that (a) any products, promotions or services
of SI or its affiliates have resulted in any (***) or (b) any material,
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<PAGE> 8
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
product, information, data or service produced, distributed, offered or provided
by SI or its affiliates, or any material presented on the Travelocity Site or
the Co-Branded Pages produced, maintained, or published solely by SI or its
affiliates, (***). SI will pay any and all costs, damages, and expenses,
including, but not limited to, reasonable attorneys' fees and costs awarded
against or otherwise incurred by Yahoo! in connection with or arising from any
such claim, suit, action or proceeding.
10.2 By Yahoo!. Yahoo!, at its own expense, will indemnify, defend and hold
harmless SI and its employees, representatives, agents and affiliates, against
any claim, suit, action, or other proceeding brought against SI based on or
arising from a claim that (a) any products, promotions or services of Yahoo! or
its affiliates have resulted in any (***) or (b) any material, product,
information, data or service produced, distributed, offered or provided by
Yahoo! or its affiliates, or any material presented on the Yahoo! Site or the
Co-Branded Pages produced, maintained, or published solely by Yahoo! or its
affiliates, (***). Yahoo! will pay any and all costs, damages, and expenses,
including, but not limited to, reasonable attorneys' fees and costs awarded
against or otherwise incurred by SI in connection with or arising from any such
claim, suit, action or proceeding.
10.3 Procedure. All indemnification obligations under this Section 10 shall
be subject to the following requirements: (a) the indemnified party shall
provide the indemnifying party with prompt written notice of any claim; (b) the
indemnified party shall permit the indemnifying party to assume and control the
defense of any action upon the indemnifying party's written acknowledgment of
the obligation to indemnify (unless, in the opinion of counsel of the
indemnified party, such assumption would result in a material conflict of
interest); and (c) the indemnifying party shall not enter into any settlement or
compromise of any claim without the indemnified party's prior written consent,
which shall not be unreasonably withheld. In addition, the indemnified party
may, at its own expense, participate in its defense of any claim. In the event
that no indemnifying party assumes the defense of any such claim, the
indemnifying party shall have no liability for attorney's fees and costs
incurred by the indemnified party.
SECTION 11. TERM AND TERMINATION.
11.1 Term. This Agreement shall commence on the Effective Date and continue
through December 31, 1998 unless terminated earlier in accordance with Section
11.2 (the "Term"). For purposes of the commission schedule for Qualified
Bookings set forth in Exhibit F, Net SI Commissions during any renewal term of
this Agreement shall include (***).
11.2 Early Termination.
(a) By Either Party. This Agreement may be terminated, by either party
(i) immediately upon written notice if the other party (A) becomes insolvent;
(B) files a petition in bankruptcy; or (C) makes an assignment of the benefit of
its creditors; or (ii) 30 days after written notice to the other party of such
other party's breach of any of its obligations, under this Agreement in any
material respect, which breach is not remedied within such 30-day period.
Without in any way limiting Yahoo!'s right to terminate this Agreement for SI'
material breach of
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<PAGE> 9
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
any other obligation under this Agreement, the parties specifically recognize
Yahoo! __ [sic] have the right to terminate this Agreement for any material
breach by SI of Section 2.3 (Customer Fulfillment and Service) and/or Section
2.5 (Performance Specifications) as qualified by Section 3.3.
(b) By Yahoo!. This Agreement may be terminated by Yahoo! 10 days
after written notice to SI of SI's breach of its payment obligations hereunder,
which breach remedied within such 10-day period.
(c) Non-Exclusive Remedy. The foregoing rights of termination shall be
in addition to any other legal or equitable remedies that the terminating party
may have.
11.3 Effect of Termination. Upon any expiration or termination of this
Agreement, all rights and licenses granted by Yahoo! to SI under this Agreement
shall terminate.
11.4 Survival of Certain Provisions. The provisions of Sections 1
(Definitions), 2.4(c) (Registration and User Information), 8.1 (Confidential
Information and Publicity - Terms and Conditions), 8.3 (Non-Disclosure
Agreement), 9 (Limitation of Liability), 10 (Indemnification), 11.3 (Term and
Termination - Effect of Termination), 12 (General Provisions) and this Section
11.4, as well as SI's obligation to pay all amounts accrued under this Agreement
shall survive any expiration or termination of this Agreement.
SECTION 12. GENERAL PROVISIONS
12.1 Independent Contractors. It is the intention of Yahoo! and SI that
Yahoo! and SI are, and shall be deemed to be, independent contractors with
respect to the subject matter of this Agreement, and nothing contained in this
Agreement shall be deemed or construed in any manner whatsoever as creating any
partnership, joint venture, employment, agency, fiduciary or other similar
relationship between Yahoo! and SI.
12.2 Entire Agreement. This Agreement, together with all Exhibits,
represents the entire agreement between Yahoo! and SI with respect to the
subject matter hereof and thereof and shall supersede all prior agreements and
communications of the parties, oral or written, including without limitation the
Letter of Agreement dated as of May 27, 1997 between Yahoo! and SI.
12.3 Amendment and Waiver. No amendment to, or waiver of, any provision of
this Agreement shall be effective unless in writing and signed by both parties.
The waiver by any party of any breach or default shall not constitute a waiver
of any different or subsequent breach or default.
12.4 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
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Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
12.5 Legal Fees. The prevailing party in any legal action brought by one
party against the other and arising out of this Agreement shall be entitled, in
addition to any other rights and remedies it may have, to reimbursement for its
expenses, including court and arbitration costs, as well as reasonable
attorneys' fees.
12.6 Successors and Assigns. Neither party shall assign its rights or
obligations under this Agreement without the prior written consent of the other
party, which shall not be unreasonably withheld. Notwithstanding the foregoing,
either party may assign this Agreement to an entity who acquires substantially
all of the stock or assets of a party to this Agreement, provided that consent
will be required in the event that the non-assigning party reasonably determines
that the assignee will not have sufficient capital or assets to perform its
obligations hereunder, or that the assignee is a direct competitor of the
non-assigning party. All terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted transferees, successors and assigns.
12.7 Force Majeure. Neither party shall be liable for failure to perform or
delay in performing any obligation (other than the payment of money) under this
Agreement if such failure to delay is due to fire, flood, earthquake, strike,
war (declared or undeclared) embargo, blockade, legal prohibition, governmental
action, riot, insurrection, damage, destruction or any other similar cause
beyond the control of such party.
12.8 Notices. All notices, requests, consents and other communications
which are required or permitted hereunder shall be in writing, and shall be
delivered by registered U.S. mail, postage prepaid (effective (***) after
mailing) or sent by facsimile or electronic mail, with a confirmation copy
simultaneously sent by U.S. mail, postage prepaid (effective upon transmission),
at the address set forth on the signature page hereto. Notice of change of
address shall be given in the same manner as other communications.
12.9 Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable for any reason, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
12.10 Headings. The section headings contained in this Agreement are
included for convenience only, and shall not limit or otherwise affect the terms
of this Agreement.
12.11 Counterparts. This Agreement may be executed in two counterparts,
both of which taken together shall constitute a single instrument. Execution and
delivery of this Agreement may be evidenced by facsimile transmission.
12.12 Dispute Resolution. Any controversy, dispute, difference or claim
between the parties arising out of or relating to this Agreement, including any
question concerning the existence, validity, termination, interpretation,
performance or enforcement of this Agreement. ("Dispute") shall first be
discussed in good faith between the parties at a mutually convenient location in
order to try and find an amicable solution. If the parties are unable to resolve
such
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Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
Dispute within (***) after receipt of notice from either party that a Dispute
exists, such Dispute shall be referred to J*A*M*S/Endispute ("JAMS") for
mediation in Los Angeles, California. JAMS shall appoint a single mediator and
shall designate the time and procedure for mediation. The parties shall attend
such mediation for a period of at least three (3) ____ [sic] consecutive working
days. If the parties are unable to resolve the Dispute through such mediation,
then such Dispute shall be submitted to JAMS for binding arbitration in Los
Angeles, California, and neither party shall have the right to file suit against
the other, provided that nothing herein shall prohibit a party from requesting
temporary injunctive relief from any court of competent jurisdiction. Any
Dispute submitted for arbitration shall be finally settled by arbitration
according to the Comprehensive Arbitration Rules and Procedures ("Rules") of
JAMS, subject to the provisions set forth in this Section. The number of
arbitrators shall be three (unless the parties agree upon a single mutually
acceptable arbitrator). The arbitrators nominated by the parties shall select
the Chairperson of the Arbitral Tribunal. The parties shall use their best
efforts to conclude any arbitral proceedings within (***) from the date that the
last arbitrator accepts his or her appointment, provided that if the arbitral
award is not issued within such (***), then the arbitration proceedings shall
continue until an award is made. Any decision or award of the arbitrators shall
be based solely on the terms of this Agreement and the facts presented at the
hearing. The decision of the arbitrators shall be final and conclusive and shall
be binding on the parties. Any award rendered by the arbitrators may be enforced
by any court of competent jurisdiction. The arbitrators shall have the authority
to award specific performance or an injunction to the prevailing party, or to
make an award of direct damages but shall have no right to grant special,
punitive or exemplary damages, or indirect or consequential damages (including
lost profit, or losses due to a prospective business opportunity.
12.13 Authority. Each of Yahoo! and SI represents and warrants that the
recognition and entry of this Agreement will not violate, conflict with,
interfere with, result in a breach of, or constitute a default under any other
agreement to which they are a party.
(signatures appear on the following pages)
-11-
<PAGE> 12
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
This Travel Services Advertising and Promotion Agreement has been executed
by the parties effective as of the Effective Date.
YAHOO! INC. SABRE INTERACTIVE, a division of The
SABRE Group, Inc.
By: /s/ Jeffrey A. Mallet By: /s/ Michael Durham
--------------------- ------------------
Name: Jeffrey A. Mallet Name: Michael Durham
----------------- --------------
Title: Senior VP Business Operations Title: CEO
----------------------------- ---
Address:
Attn.: Senior V.P. Business Operations Attn.: Corporate Secretary
3400 Central Expressway, Suite 201 MD 4202
Santa Clara, CA 95051 4255 Amon Carter Blvd.
Tel.: (408) 731-3300 Fort Worth, TX 76155
Fax: (408) 731-3302 Tel.: (817) 967-6877
email: [email protected] Fax: (817) 967-1215
-12-
<PAGE> 13
EXHIBIT A
SCREEN IMAGES
Insert images of:
http://travel.yahoo.com/travel
Masthead
http://www.bguide.com/fabfinds/travel.html
<PAGE> 14
YAHOO!
TRAVEL
- --------------------------------------------------------------------------------
Welcome to Yahoo!'s Flight Information Center. Planning a trip to visit the
inlaws in Amarillo? A vacation to Vancouver? On the following pages, you will be
able to check flight times and schedules, and gather the latest info that may
impact your trip. You can also link to our partners at Flifo to search millions
of flights for the lowest fares, and to purchase your ticket.
FLIGHT AVAILABILITY:
Yahoo! Travel lets you look up domestic or international flights, then searches
millions of possible alternatives to bring back just what you want to see. Once
you decide upon a flight, bounce over to Flifo to get a price, find a better
fare and even book your ticket!
IS YOUR FLIGHT ON TIME?
If you need to see when a flight is arriving or whether your flight is leaving
on time, use Yahoo! Flight Info to access up-to-date travel information, even if
you can't remember the flight number.
TRAVEL NEWS:
Has one of the airlines been impacted by a strike threat? Why are rental cars
becoming more expensive every day? Keep up-to-date on information that may
effect your trip with stories brought to you by our partners at Preview Travel.
- --------------------------------------------------------------------------------
Copyright(C) 1994-1997 Yahoo! Inc. All rights reserved.
Copyright(C) 1997 Travelogix. All rights reserved.
Copyright(C) 1997 Preview Travel. All rights reserved.
Comments to: [email protected]
1 of 1
<PAGE> 15
- -------------------------------------------------------------------------------
BGUIDE
PICK A TOPIC:
Arts
Careers
Cars
Education We
Entertainment stock up
Fashion & Beauty on our
Food & Wine hottest
Health & Nutrition [PICTURE] items.
Home
Improvement We
House & Garden get
Kids' Stuff too
Mags & 'Zines excited.
Money
News & Politics We
Off The Wall take
Parenting a hit,
Relationships you
Shopping score
Sports & Fitness big.
Travel
Women & The Net
Women's Issues
Your Favorite Site
[PICTURE]
Fab finds
Ask B
Home
Go, Fish!
Tired of trying your luck at the same old fishing hole summer after summer? Want
to cast your fly on a new continent? Then you'll fall hook, line and sinker for
these out-of-the-way spots:
The Complete Fly-Fishing School Of Iceland web site offers info on Iceland's
rivers and what they have to offer (hint: think salmon). Look at the photo
album and find out about the school's lodge, meals, prices, even the number of
yards from your room to the river. The site is available in English, French,
German and Spanish.
Learn all about fly-fishing in Japan (in English and Japanese) from Ken
Kamoshida's Fly Fishing Page, a collection of trout stream photos plus useful
patterns for tying some of the most productive flies. And this guy isn't even
trying to sell you anything!
Head down under and hook up with a guide, lodge, tackle and nearly everything
else you'll need at Fishinternet Australia. Databases here let you pick a fish
species and find out where to go to catch it, plus check weather charts,
satellite pictures, rainfall maps and tide tables.
Find out about fishing in Norwegian saltwater or its country streams at The
Norwegian Flyshop. Plan for accommodations and events you might want to attend
while you're there. Once you've booked your trip, look up reputable fishing
shops in the towns you'll be visiting.
In Argentina, Fly Fishing Andes invites you to fish dozens of streams that pass
through private estancias (ranches) in Patagonia. Bring your friends along for
group rates.
1 of 2
<PAGE> 16
EXHIBIT B
TECHNICAL SPECIFICATIONS, CUSTOMER SERVICE METRICS
PERFORMANCE SPECIFICATIONS AND DEVELOPMENT MILESTONES
TECHNICAL SPECIFICATION
o HTML Block
o Width = 460 pixels
o Height = 60 els
o Full size less than or equal to 2.5K
CUSTOMER SERVICE METRICS
o Email links to customer service on each Co-Branded Page.
o Non-ticketing related questions will be responded to via email within
(***) of receipt.
o Questions relating to previously issued tickets will be responded to
via email within (***) of receipt.
o SI shall design the customer service interface so as to encourage users
to resolve questions via email and to complete as much of the booking
process as possible without necessitating telephone access to customer
service representatives. SI shall provide telephone access to customer
service to resolve ticketing and other issues via a toll-free number,
which number shall be prominently displayed on a customer service page
linked to each Co-Branded Page. Such telephone number shall be staffed
from 8:00 a.m. until 6:00 p.m. (Central Time) or during the hours in
which SI's primary customer service line is staffed, whichever is
greater.
PERFORMANCE SPECIFICATIONS
o SI service must be functional at least (***) of each (***) in which it
is linked to from the Netscape Guide (excluding scheduled maintenance
as provided to Yahoo! promptly following the date of this Agreement).
o During the (***) of the Exclusivity Period, SI shall determine the
average turnaround time measured from when SI receives a user request
until the time SI completes the transmission in response to the user
request. This average shall serve as the minimum turnaround standard
for the remainder of this Agreement.
DEVELOPMENT MILESTONES
o Functional Specifications (***)
o Working prototype (***)
o Beta (***)
<PAGE> 17
User information
o Personal: first name, last name, street address, city, state, country,
postal code, user name, password, email address
o Other: frequent flyer accounts, airplane seat preference and airplane
special meal preference
<PAGE> 18
EXHIBIT C
ADVERTISING AND PROMOTIONAL ACTIVITIES
1997 Banner Advertisements
<TABLE>
<CAPTION>
Date Placement Page Views
-------- ----------------- ----------
<S> <C> <C> <C> <C>
YAHOO! Total for Metro (***) (***)
METROS Properties
BEATRICE'S (***) Travel Content Sponsorship (***)
WEB GUIDE
MAIN SITE (***) Travel Package (***)
(***) Travel Category Banners (***)
(***) Business Category Banners (***)
(***) News Banners (***)
(***) Run of Yahoo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) Search Keywords (***)
(***) Search Keywords (***)
----------
(***)
==========
YELLOW PAGES All Metros 7/1/97 - 12/31/97 Hotels, Resorts, Bed &
Breakfasts (***)
----------
(***)
==========
Total (***)
----------
</TABLE>
The parties acknowledge that the foregoing schedule supersedes Insertion Order
#1087, which is canceled.
<PAGE> 19
EXHIBIT C (continued)
ADVERTISING AND PROMOTIONAL ACTIVITIES
<TABLE>
1998 Banner Advertisements
Date Placement Page Views
<S> <C> <C> <C>
YAHOO! Total for Metro
METROS Properties (***) (***)
BEATRICE'S (***) Travel Content Sponsorship (***)
WEB GUIDE
MAIN SITE (***) Travel Category Banners (***)
(***) Run of Yahoo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) Search keywords (***)
----------
YELLOW PAGES All Metros 7/1/97-12/31/97 (***)
----------
Hotels, Resorts, Bed & Breakfasts (***)
----------
(***)
----------
Total (***)
----------
</TABLE>
- 2 -
<PAGE> 20
EXHIBIT D
TERMS AND CONDITIONS FOR ADVERTISING INSERTION ORDERS
STANDARD TERMS AND CONDITIONS FOR YAHOO! ADVERTISING
The following terms and conditions (the "Standard Terms") shall be deemed to be
incorporated into the attached insertion order (the "Insertion Order"):
1. POSITIONING. Except as otherwise expressly provided in the Insertion
Order, positioning of advertisements within the Yahoo Guide or on any page is
at the sole discretion of Yahoo. Advertiser acknowledges that Yahoo has not
made any guarantees with respect to usage statistics or levels of impressions
for any advertisement. Yahoo provides Advertiser with estimated usage
statistics only as a courtesy to the Advertiser and shall not be held liable
for any claims relating to said usage statistics.
2. LIMITATION LIABILITY. In the event that Yahoo fails to publish an
advertisement in accordance with the schedule agreed upon pursuant to this
Agreement (or in the event of any other failure, technical or otherwise, of such
advertisement to appear as provided in the Insertion Order), the sole liability
of Yahoo to Advertiser shall be limited to either a refund of the advertising
fee or placement of the advertisement at a later time in a comparable position
at customer's sole option.
3. PROVISION OF ADVERTISING MATERIALS. Advertiser will provide all materials
for the advertisement (including GIF files), in accordance with Yahoo's
policies in effect from time to time, including (without limitation) the manner
of transmission to Yahoo and the time prior to publication of the
advertisement. Yahoo shall not be required to publish any advertisement that is
not received in accordance with such policies.
4. RIGHT TO REJECT ADVERTISEMENT. All contents of advertisements are subject
to Yahoo's approval in accordance with policies generally applicable to Yahoo!
advertisers. Yahoo reserves the right to reject or cancel any advertisement,
insertion order, space reservation or position commitment at any time. In
addition, Yahoo shall have the absolute right to reject any URL link embodied
within any advertisement.
<PAGE> 21
EXHIBIT E
PAYMENTS
<TABLE>
<CAPTION>
Month Fee Payment Due Date
----- --- ----------------
<S> <C> <C>
(***) $(***) (***)
(***) $(***) (***)
(***) $(***) (***)
(***) $(***) (***)
(***) $(***) (***)
(***) $(***) (***)
(***) $(***) On or before the (***)
of applicable (***)
</TABLE>
<PAGE> 22
EXHIBIT F
COMMISSIONS
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
- ----------------- -------------------
<S> <C>
(***) (***)
(***) (***)
(***) (***)
</TABLE>
Commissions shall be calculated on a (***) basis (i.e., beginning on the
Effective Date and continuing through the Term, or any renewal term as set forth
in Section 10.1) (***) payments by SI shall not have (***) the Net SI
Commissions. As an illustrative example, if Net SI Commissions from Qualified
Bookings are (***) in August 1997, (***) in September 1997, (***) in October
1997 and (***) in November 1997, SI would make the following payments to Yahoo!:
(1) (***), (2) (***).
<PAGE> 23
EXHIBIT G
COMMISSION TRACKING REPORTS
Information for each transaction:
o Date of transaction
o Time of transaction
o Service vendor
o Number of bookings/tickets
o Cost to customer
o SI commission
o Cumulative Net SI Commissions (from the Effective Date)
o Yahoo! commission
<PAGE> 1
EXHIBIT 10.15
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
FIRST AMENDMENT TO
TRAVEL SERVICES ADVERTISING AND PROMOTION AGREEMENT
THIS FIRST AMENDMENT TO THE TRAVEL SERVICES ADVERTISING AND PROMOTION
AGREEMENT (the "First Amendment"), dated as of November __, 1998 (the "First
Amendment Effective Date") is made and entered into between Yahoo! Inc., a
California corporation ("Yahoo!") and SABRE Interactive ("SI"), a division of
The SABRE Group, Inc., a Delaware corporation. Yahoo! and SI may be referred to
individually as a "Party" and collectively as the "Parties."
RECITALS
A. Yahoo! and SI entered into the Travel Services Advertising and
Promotion Agreement, dated as of June 30, 1997 (the "Agreement"); and
B. The Parties desire to make various changes to the Agreement
including, without limitation, extending the Term of the Agreement for an
additional two years, and the Parties are entering into this Amendment to
document such changes to the Agreement.
AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree to amend the Agreement as set forth below:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. Terms used in this First Amendment but not defined
herein shall have the meaning given them in the Agreement.
SECTION 2. AMENDMENTS.
2.1 The Agreement is hereby amended as follows:
(a) Section 1.2 is deleted in its entirety and replaced with the
following:
"1.2 `Exclusivity Period' means (***) through (***)."
(b) Section 2.1 is deleted in its entirety and replaced with the
following:
"2.1 Operation and Continued Development of the Travel
Services. The parties will collaborate to operate, promote and further
develop the Yahoo! Travel Page and the Co-Branded Pages. In this
regard, the parties shall have the following rights and
responsibilities:
<PAGE> 2
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
(a) Yahoo! Rights and Responsibilities.
(1) Yahoo! Travel Page. Yahoo! shall distribute the
Yahoo! Travel Page and the Co-Branded Pages (***). Yahoo!
shall provide a prominent hyperlink on the Yahoo! Travel Page
to the Co-Banded Pages, as such term is described in Section
2.2. Such hyperlink shall be placed above the fold on the
Yahoo! Travel Page. Subject to Sections 2.1(a)(8) and
2.1(b)(6), Yahoo! shall provide a hyperlink to the Yahoo!
Travel page from Yahoo!'s home page, currently located at
http://www.yahoo.com (the "Home Page Link").
(2) Yahoo! Enhancements. From time to time, Yahoo!
may request that SI make modifications, enhancements, or other
changes to the Co-Branded Pages or elsewhere in the Yahoo!
network on properties (each such requested modification,
enhancement or change being a "Yahoo! Enhancement"). Upon each
such request, the parties will negotiate for the purpose of
determining mutually acceptable terms and conditions regarding
(i) the nature and scope of the Yahoo! Enhancement, (ii) the
allocation of resources necessary by both parties to create
the Yahoo! Enhancement, (iii) the schedule for creating and
implementing the Yahoo! Enhancement, (iv) such other matters
as either party deems appropriate. Although the parties have
no obligation to reach any agreement, upon reaching an
agreement the parties will develop the Yahoo! Enhancement in
accordance with the terms thereof. For the purposes of this
Agreement, any operational inconsistencies or programming
errors relating to the use of the Co-Branded Pages shall not
be considered a Yahoo! Enhancement and shall be cured by the
parties immediately.
(3) SI Enhancements. Upon notice from SI of a
proposed SI Enhancement (as defined below) and Yahoo!'s
decision to launch such SI Enhancement on the Co-Branded Pages
or elsewhere in the Yahoo! network of properties, Yahoo! will
allocate those engineering resources reasonably necessary to
consult with SI engineering resources during the development
of any SI Enhancements. Yahoo! will collaborate with SI
engineering resources during the development of SI
Enhancements, as necessary, and will continue to interface
with SI engineering resources after the development process
for each SI Enhancement is complete. Yahoo! shall be
responsible for making any modifications, enhancements, or
changes to the Yahoo! Hosted Pages (as described below) that
are necessary for SI to launch any SI Enhancement on the
Co-Branded Pages.
(4) Graphical User Interface Development. Yahoo! will
have the right to reasonably approve all graphical user
interface development with respect to the Yahoo! Travel Page
and the Co-Branded Pages.
(5) Page Hosting. Yahoo! will host the following
Co-Branded Pages (the "Yahoo! Hosted Pages"):
-2-
<PAGE> 3
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
http://travel.yahoo.com/destinations/travelocity_air/yfinal_flts_roundtrip.html
http://travel.yahoo.com/destinations/travelocity/air/yfinal_flts_oneway.html
http://travel.yahoo.com/destinations/travelocity/air/yfinal_flts_multiseg.html
http://travel.yahoo.com/destinations/travelocity_car/yfinal_car.html
http://travel.yahoo.com/destinations/travelocity_hotel/yfinal_hotel.html
http://travel.yahoo.com/destinations/travelocity/terms/tcyterms.html
http://travel.yahoo.com/destinations/travel_disclaimer.html
(6) Performance Standards. Yahoo! shall use
reasonable best efforts to ensure that the performance of the
Yahoo! Travel Page and the Yahoo! Hosted Pages remain
comparable (in terms of, among other things, speed) to other
similarly functional pages on the Yahoo! Site.
(7) Yahoo! Representative: Yahoo! shall designate one
(1) individual to serve as the primary point of contact for
any issues arising from or related to the development,
promotion and other operations contemplated by this Agreement
(the "Yahoo! Contact"). Initially, Susan Briggs shall serve as
the Yahoo! Contact. Yahoo! may replace the Yahoo! Contact at
any time and for any reason upon written notice to SI.
(8) Removal of Home Page Link. Yahoo! may discontinue
the Home Page Link for any reason upon (***) prior written
notice to SI. In the event that Yahoo! exercises such option,
for the period in which the Home Page Link is discontinued,
SI's monthly payment obligations under Exhibit E shall be
adjusted according to the formulae set forth on Exhibit H. If
Yahoo! discontinues the Home Page Link pursuant to this
Section, then Yahoo! may, in its discretion, contact Yahoo!
Users to notify them of, among other things, the
discontinuance of the Home Page Link and inform them of other
hyperlinks or URL addresses through which they may access SI's
Booking Engine.
(b) SI Rights and Responsibilities.
(1) SI Enhancements. SI shall be responsible for, and
shall have sole discretion in, the design, function and
creation of any enhancement to the Travel Services offered
through the Travelocity Site. SI shall notify Yahoo! of any
such proposed enhancement. If Yahoo! then determines to launch
such proposed enhancement (each such enhancement, as so
launched, being a "SI Enhancement") on the Co-Branded Pages or
elsewhere in the Yahoo! network of properties, SI will
allocate those engineering resources reasonably necessary to
develop the SI Enhancement in consultation with Yahoo!
according to a schedule mutually agreed upon by the parties.
SI will consult with the Yahoo! resources referenced in
Section 2.1(a)(2) early in the design specification phase of
the development process for each SI Enhancement so that such
Yahoo! resources may be an active part of the team working to
create SI Enhancements. SI shall provide
-3-
<PAGE> 4
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
Yahoo! technical specifications or other information
reasonably requested by Yahoo! so that Yahoo! may make those
modifications, enhancements or other changes to the Co-Branded
Pages or elsewhere in the Yahoo! network of properties
necessary to launch SI Enhancements on such pages. Provided
that Yahoo! has completed any such modifications, enhancements
or other changes, and otherwise approves of the SI
Enhancements, SI will launch the SI Enhancements on the
Co-Branded Pages or elsewhere in the Yahoo! network of
properties simultaneously with SI's launch of any SI
Enhancements on the Travelocity Site.
(2) Page Hosting. SI will host all pages in the
booking process subsequent to the Yahoo! Hosted Pages (the "SI
Hosted Pages").
(3) Enhancement Performance. SI will ensure that the
performance of each SI Enhancement adheres to the Performance
Specifications identified in Exhibit B, part (3).
(4) Customer Fulfillment. SI shall be solely
responsible for processing orders on a real-time basis, and
for fulfilling booking requests, from the users obtaining
Travel Services through the Yahoo! Site ("Yahoo! Users")
through the Co-Branded Pages, and shall ensure that
fulfillment of such transactions is performed according to the
Performance Specifications set forth in Exhibit B, part (3).
Additionally, SI will apply Yahoo! branding in a form subject
to Yahoo!'s prior written approval ("Yahoo! Branding") to the
packaging used to ship all tickets purchased through the
Co-Branded Pages, and all tickets, jackets and itineraries
will also include Yahoo! Branding. Yahoo! Branding may not be
altered without Yahoo!'s prior written consent. SI and
Travelocity branding will likewise be prominently displayed.
(5) Customer Service. SI will allocate a unique
800/888 phone number as the customer service line for Travel
Services furnished through the Co-Branded Pages. This phone
number will be the customer service line for Yahoo! Users. SI
will establish a customer care team to collaborate with a
customer care team established by Yahoo! to strive for high
levels of customer service. SI will comply with the Customer
Service Metrics set forth in Exhibit B, part (2); provided
that in any event, SI will provide, in all material respects,
the same level of customer service to Yahoo! Users as SI
provides to users of the Travelocity Site and provided further
that SI shall ensure that its customer service performance
pursuant to this Agreement meets or exceeds all generally
accepted industry standards.
(6) Performance Penalties. In the event that SI fails
to achieve the Performance Specifications identified in
Exhibit B, part (3), then Yahoo! may (i) (***), and (ii)
(***), provided that the (***) will be (***) no more than
(***) after SI satisfactorily demonstrates to Yahoo! that the
problem(s)
-4-
<PAGE> 5
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
causing SI to fail to meet such Performance Specifications
have been addressed to the extent necessary to cause such
Performance Specifications to be met. In the event that SI
fails to meet the Customer Service Metrics identified in
Exhibit B, part (2), for (***), then Yahoo! may (***) until
such time as SI meets the Customer Service Metrics for (***).
(7) SI Representative. SI shall designate one (1)
individual to serve as the single point of contact for any
issues arising from or related to the development, promotion
and other operations contemplated by this Agreement (the "SI
Contact"). Initially, Michael Altomari shall serve as the SI
Contact. SI may replace the SI Contact at any time and for any
reason upon written notice to Yahoo!.
(c) Ownership of SI Enhancements and Look and Feel
of Pages. SI shall own all right, title and interest in and to any and
all copyrights, patents, trademarks, trade secrets, and other
intellectual or industrial property rights in or related to the SI
Enhancements and the "look and feel" of the SI Hosted Pages where such
look and feel is consistent with the look and feel of the Travelocity
Site. Yahoo! shall own all right, title and interest in and to any and
all copyrights, patents, trademarks, trade secrets, and other
intellectual or industrial property rights in or related to the "look
and feel" of the Yahoo! Hosted Pages where such look and feel is
consistent with the look and feel of the Yahoo! Site."
(c) Section 2.3 is deleted in its entirety and replaced with the
following:
"2.3 Year 2000. Yahoo! and SI each covenants for
themselves that the equipment and software such party will
use to host and display the Yahoo! Hosted Pages or the SI
Hosted Pages during the Term will not be materially impaired
by failures to process, calculate, compare or sequence date
data accurately. This covenant does not cover the
transmission to such party of any data from third parties or
any equipment or software not controlled by such party,
including without limitation Internet connections and
backbones, third party servers and software, end-user
equipment and software, internet service provider equipment
and software, and telecommunications and/or satellite
equipment, or the effects produced by any of the foregoing."
(d) Section 2.4(c) is deleted in its entirety and replaced with
the following:
"(c) Registration and User Information.
(1) Ownership of User Information. All User
Information registered prior to (***) shall be the
sole property of (***), provided that (***) shall
have an (***) right to (***) such User Information in
any manner (***) deems appropriate, subject to
applicable laws and
-5-
<PAGE> 6
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
regulations. All User Information registered on or
after (***) shall be the sole property by (***),
provided that (***).
(2) SI's Use of User Information. SI's use
of User Information shall be restricted as follows:
(i) Under no circumstances, and at
no time (whether during or after the Term),
shall SI use User Information in violation
of any applicable law or regulation or to
communicate with Yahoo! Users unless such
Yahoo! Users have expressly consented to
receive such communications. Further, all
such communications shall be subject to
Yahoo!'s prior approval, which approval
shall not be unreasonably withheld.
(ii) Notwithstanding Section
2.4(c)(2)(i), SI may send (***) to Yahoo!
Users who registered prior to (***), subject
to Yahoo!'s prior approval. Such
communication shall be co-branded and shall
explain Yahoo!'s privacy policy, give such
Yahoo! Users the ability to expressly
consent to receive additional communications
from SI and Yahoo!, describe the type of
information they would receive and the
potential benefits they could obtain, and
any other information agreed upon by the
parties.
(iii) SI may place a dialog box on
(***) Co-Branded Page mutually selected by
the parties, allowing Yahoo! Users to
expressly consent to receive communications
from SI and Yahoo! related to Travel
Services. The parties shall agree upon the
design and specific placement of such dialog
box. Such communications shall be subject to
the restrictions of this Section 2.4(c).
(iv) It is expressly understood
that, subject to Section 2.4(C)(2)(I), SI
may use User Information to deliver (***)
communications to Yahoo! Users during the
(***) prior to the expiration of the Term
and to deliver (***) communication within
(***) after the expiration of the Term. Such
communications shall be for the purpose of
thanking Yahoo! Users for their patronage of
the Co-Branded Pages, informing them that
access to SI's Travel Services in
conjunction with Yahoo! is no longer
available, informing such Yahoo! Users of
the Travel Services available through the
Travelocity Site, or other sites, including
relevant URL addresses, and providing Yahoo!
Users with the option to consent to receive
additional such communications from SI. SI
may copy the User Information of those
Yahoo! Users who consent to receive such
further communications. Such copy shall not
be considered User Information and shall not
be subject to the restrictions of this
Agreement. Rather, such copy shall be the
sole property of SI. However, SI shall have
-6-
<PAGE> 7
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
no right to deliver the communications
described in this Section 2.4(c)(2)(iv) in
the event of the Agreement's termination
pursuant to Section 11.2.
(v) General, nonspecific
demographic or other statistical information
derived or gathered from the User
Information that does not identify
particular Yahoo! Users or their respective
accounts shall not be considered User
Information. SI will make such information
available to Yahoo! to the extent that SI
possesses such information.
(vi) SI shall have (***) for
routine internal business purposes
including, for example, record-keeping,
audits and responses to litigation or
governmental investigations. Under no
circumstances, however, shall SI (i) use
such User Information to communicate with
Yahoo! Users other than as expressly
provided for in this Agreement; or (ii)
disclose any such User Information to third
parties except (x) as required by law or
government authority, or (y) in order to
facilitate the completion of Travel Services
transactions for individual Yahoo! Users
(e.g., SI may provide an individual Yahoo!
User's User Information to an airline to
complete the purchase of an airline ticket
by such Yahoo! User)."
(e) Section 2.5 is deleted in its entirety and replaced with the
following:
"2.5 (***). Prior to (***) Yahoo! will provide
written notice (the "First Presentment Notice") to SI in the
event that Yahoo! intends to offer Yahoo! Users (***). Yahoo!
shall describe the opportunity and Yahoo!'s business
requirements for the opportunity in the First Presentment
Notice. Thereafter, if Yahoo! receives a written proposal from
SI to furnish such services to Yahoo! (the "SI Proposal")
within (***) of SI's receipt of the First Presentment Notice,
the parties will (***). Without limitation, Yahoo! will notify
SI of its objections to SI's proposal and give SI a reasonable
opportunity to address those objections. If SI declines to
commence negotiations with Yahoo! regarding any opportunity
described in the First Presentment Notice (or fails to submit
the SI Proposal within (***) after receiving the First
Presentment Notice), or if the parties fail to reach agreement
in principle subject to definitive documentation within (***)
following Yahoo!'s receipt of the SI Proposal (or such later
date as is agreed by the parties), Yahoo! may (***) relating
to the opportunity described in the First Presentment Notice,
with (***)."
(f) Section 2.6 is deleted in its entirety and replaced with the
following:
"2.6 Log Files and Statistics. SI shall provide
Yahoo!, at least (***), with electronic copies of all log
files and statistics resulting from
-7-
<PAGE> 8
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
Yahoo! Users use of the Co-Branded Pages and other SI-branded
pages on the Travelocity Site which follow the Co-Branded
Pages in the booking sequence, including those statistics
relating to the Performance Specifications identified in
Exhibit B, part (3), the Customer Service Metrics identified
in Exhibit B, part (2), the information identified Exhibit G,
and any other statistics the parties may agree are important
for understudying the performance of the Travel Services. In
addition, the parties will use good faith efforts to jointly
enhance the on-line reporting mechanism utilized as of the
First Amendment Effective Date to provide the log files and
statistics to Yahoo! pursuant to this Section 2.6. SI will
promptly provide Yahoo! with reasonable assistance upon
request to permit Yahoo! to read and utilize such electronic
files."
(g) Section 3.2 and Section 3.3 are deleted in their entirety and
replaced with the following:
"3.2 Package Services. Notwithstanding Section 3.1,
nothing in this Agreement shall limit Yahoo!'s ability to
include one or more (***) for Packaged Services anywhere on
the Yahoo! Site; provided that (i) Yahoo! shall not include
any (***) for Packaged Services on the Yahoo! Site, which
(***) is provided by (***), and (ii) any such (***) for
Package Services do not allow Yahoo! Users to (***) prior to
the completion of booking a reservation for Package Services.
SI agrees that Yahoo! Users will not be able to (***) on
pages that appear to the Yahoo! Users prior to the Yahoo!
User's completion of booking a reservation for any of the
Travel Services."
(h) Section 4.3 is deleted in its entirety and replaced with the
following:
"(a) By Yahoo!. Yahoo! shall not display any banner
advertisements or other promotional materials on the
Co-Branded Pages for (***). Further, Yahoo! shall not display
any banner advertisements or other promotional materials on
the Yahoo! Travel Page for any of the following (***). In
addition, Yahoo! shall sell no more than (***) of available
advertising inventory on the Yahoo! Travel Page to (***). SI
may add additional third parties that (***) to (***) upon
giving (***) written notice to Yahoo!; provided that, Yahoo!
shall be permitted to (***) to any such party provided that
such obligation exists (or would cause Yahoo! to (***) if
revoked) as of the date of such notice. It is expressly
understood that for the purposes of this Section 4.3(a), third
parties that (***) (such as an airline, hotel or car rental
provider), shall not be considered (***) and Yahoo! may
provide such third parties advertising services. If the
parties do not execute an insertion order for any Advertising
Rights SI may purchase in (***) pursuant to Section 5.1, then
(***).
-8-
<PAGE> 9
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
(b) By SI. SI shall not display Yahoo! Users any
banner advertisements or other promotional materials on any
pages of the Travelocity Site that follow the Co-Branded Pages
in the booking sequence for the following (***). Yahoo! may
add additional third parties that (***) to the exclusion
identified in the previous sentence upon giving (***) written
notice to SI; provided that, SI shall be permitted to (***) to
any such party provided that such obligation exists (or would
cause SI to (***) if revoked) as of the date of such notice."
(i) Section 5.1 is deleted in its entirety and replaced with the
following:
"5.1 Banner Advertisements. Prior to the Effective
Date, SI has placed with Yahoo! insertion order #6180 for
(***) of Advertising Rights on the Yahoo! Site. Prior to the
First Amendment Effective Date, SI will place an insertion
order for (***) of Advertising Rights on the Yahoo! Site
during (***) as provided on Exhibit C-1. The parties will
(***) for Advertising Rights on the Yahoo! Site during (***).
Although the parties shall have (***), they hereby set a goal
of (***) on or before (***).
In addition, Yahoo! shall run banner
advertisements for the Travelocity Site as set forth in
Exhibit C. SI shall be permitted to (***) subject to Yahoo!'s
reasonable approval, provided that (i) SI provides Yahoo!
with reasonable prior written notice of (***), (ii) (***)
completes and submits Yahoo!'s form of insertion order in
accordance with Yahoo!'s policies then in effect, and (iii)
SI provides such other information regarding (***) as Yahoo!
may reasonably request. Except as expressly provided in the
foregoing sentences, SI shall (***). All such banner
advertisements shall be subject to Yahoo!'s standard terms
and conditions as set forth in Exhibit D, which Yahoo! may
modify from time to time in its reasonable discretion upon
written notice to SI. In the event of any conflict between
the provisions of this Agreement and such standard terms and
conditions or any advertising insertion order, (***) shall
govern."
(j) Section 5.3 is deleted in its entirety and replaced with the
following:
"5.3 Front Page Promotion. Yahoo! shall feature (***)
SI promotions for the Travelocity Site on the Yahoo! Home Page
during the period from (***) through (***). Each such
promotion shall run for a period of (***) according to the
schedule identified in Exhibit C-1. SI shall be responsible
for the content offerings and value of such promotions,
subject to the written approval of Yahoo!. Yahoo! shall be
solely responsible for running such promotions and shall have
the right to reasonably approve design specifications based on
Yahoo!'s standard guidelines."
(k) Section 7 is deleted in its entirety and replaced with the
following:
-9-
<PAGE> 10
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
"Yahoo! hereby grants to SI, during the Term of this
Agreement, a (***) license to (***), Yahoo!'s name, logo and
such other trademarks as Yahoo! uses from time to time with
respect to the Yahoo! Site solely for the purposes of
fulfilling its obligations under this Agreement and solely in
accordance with Yahoo!'s trademark guidelines in effect from
time to time. Yahoo! shall have the right to approve any such
use of Yahoo!'s name, logo and other trademarks. SI hereby
grants to Yahoo!, during the Term of this Agreement, a (***)
license (***) SI's name, logo and such other trademarks as SI
uses from time to time with respect to the Travelocity Site
solely for the purposes of fulfilling its obligations under
this Agreement and solely in accordance with SI's trademark
guidelines in effect from time to time. SI shall have the
right to approve any such use of SI's name, logo and other
trademarks."
(l) Section 11.1 is deleted in its entirety and replaced with the
following:
"11.1 Term. This Agreement shall commence on the
Effective Date and continue through December 31, 2000 unless
terminated earlier in accordance with Section 11.2 (the
"Term").
(m) Section 11.2(a) is deleted in its entirety and replaced with
the following:
"(a) By Either Party. This Agreement may be
terminated by either party (i) immediately upon written
notice if the other party (A) becomes insolvent; (B) files a
petition in bankruptcy; or (C) makes an assignment for the
benefit of its creditors; or (ii) (***) after written notice
to the other party of such other party's breach of any of its
obligations under this Agreement in any material respect,
which breach is not remedied within (***) of such notice.
Without in any way limiting Yahoo!'s right to terminate this
Agreement for SI's material breach of any other obligation
under this Agreement and subject to the procedure described
in this Section 11.2(a), the parties specifically recognize
Yahoo! shall have the right to terminate this Agreement for
any material breach by SI of Section (***) and Section (***)
and/or Section (***)."
(n) Section 12.7 is deleted in its entirety and replaced with the
following:
"12.7 Force Majeur. Neither party shall be liable
for failure to perform or delay in performing any obligation
(other than the payment of money) under this Agreement if
such failure or delay is due to (a) fire, flood, earthquake,
strike, war (declared or undeclared), embargo, blockade,
legal prohibition, governmental action, riot, insurrection,
damage, destruction or any other similar cause beyond the
control of such party, or (b) any adverse impact on the
Yahoo! Site, the Yahoo! Travel
-10-
<PAGE> 11
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
Page, the Co-Branded Pages, or the Travelocity Site resulting
from a software, systems, hardware and related equipment of
any third party not being Year 2000 Compliant or from any
inaccuracies, delays, interruptions or errors as a result of
receiving data in two digit year date other formats that are
not Year 2000 Compliant from any third parties. For purposes
of this Section the term "Year 2000 Compliant" means that the
software program or system (x) will operate and produce data
before, on or after January 1, 2000 (including taking into
effect that such year is a leap year), accurately and without
delay, interruption or error relating to the fact that the
time at which and the date on which such items are operating
is on or after 12:00 a.m. on January 1, 2000, or (y) will
accept, calculate, process, maintain, write and output,
accurately and without delay, interruption or error relating
to the fact that the time at which and the date on which such
items are operating is on or after 12:00 a.m. on January 1,
2000, or both, and any time period determined or to be
determined based on any such times or date, or both."
(o) Section 12.14 is added to the agreement as follows:
"12.4 Intellectual Property. No licenses will be
deemed to have been granted by either party to any of its
copyrights, patents, trademarks, trade secrets, or other
intellectual or industrial property rights, except as
otherwise expressly provided in this Agreement."
2.2 Exhibit A of the Agreement is deleted in its entirety and replaced with
"Exhibit A" as attached to this First Amendment.
2.3 Exhibit B of the Agreement is deleted in its entirety and replaced with
"Exhibit B" as attached to this First Amendment.
2.4 Exhibit C of the Agreement is deleted in its entirety and replaced with
"Exhibit C" as attached to this First Amendment.
2.5 Exhibit D of the Agreement is deleted in its entirety and replaced with
"Exhibit D" as attached to this First Amendment.
2.6 Exhibit E of the Agreement is deleted in its entirety and replaced with
"Exhibit E" as attached to this First Amendment.
2.7 Exhibit F of the Agreement is deleted in its entirety and replaced with
"Exhibit F" as attached to this First Amendment.
2.8 Exhibit G of the Agreement is deleted in its entirety and replaced with
"Exhibit G" as attached to this First Amendment.
-11-
<PAGE> 12
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
2.9 Exhibit H as attached to this First Amendment is inserted as "Exhibit
H" of the Agreement.
SECTION 3. MISCELLANEOUS.
3.1 Counterparts. This First Amendment may be executed in several
counterparts, all of which taken together shall constitute one single
agreement between the Parties.
3.2 Entire Agreement. This First Amendment constitutes the entire
agreement between the Parties with respect to the subject matter of
this First Amendment and there are no representations, understandings
or agreements relating to this First Amendment which are not fully
expressed herein, including without limitation the Letter of
Understanding dated as of October, 1998 between Yahoo! and SI.
[SIGNATURE PAGE FOLLOWS]
-12-
<PAGE> 13
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the Parties have each caused this First Amendment
to be signed and delivered by its duly authorized officer, all as of the First
Amendment Effective Date.
<TABLE>
<S> <C>
YAHOO! INC. SABRE INTERACTIVE, a division
of The SABRE Group, Inc.
By: /s/ Ellen Siminoff By: /s/ Michael Durham
------------------ ------------------
Name: Ellen Siminoff Name: Michael Durham
Title: VP Title: CEO
Address: Address:
Attn: Ellen Siminoff, VP, Business and Attn: Corporate Secretary
Strategy Development MD 4204
3400 Central Expressway, Suite 201 4255 Amon Carter Blvd.
Santa Clara, CA 95051 Fort Worth, TX 76155
Tel: (408) 731-3300 Tel: (817) 967-6877
Fax: (408) 731-332 Fax: (817) 967-1215
email: [email protected]
With a copy to:
With a copy to:
Haynes and Boone, L.L.P.,
Yahoo! Inc. Attn: Terry W. Conner
Attn: John Place, General Counsel 901 Main Street, Suite 3100
3420 Central Expressway Dallas, TX 75202-3789
Santa Clara, CA 95051 Tel: (214) 651-5604
Tel: (408) 731-3474 Fax: (214) 651-5940
Fax: (408) 731-3400 e-mail: [email protected]
e-mail: [email protected]
</TABLE>
-13-
<PAGE> 14
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT A
SCREEN IMAGES
-14-
<PAGE> 15
YAHOO!TRAVEL Home - Yahoo! - Help
- --------------------------------------------------------------------------------
Enter Your E-mail:
------------------
Email not collected without your approval...click GO for details
HELLO, [GUEST] CURRENT RESERVATIONS - SIGN IN
YAHOO! TRAVEL
EXPRESS BOOKING MAKE RESERVATIONS
Search for roundtrip flights AIR CAR HOTEL VACATIONS CRUISES SPECIALS
From: To:
---------- ----------
Total passengers? 1 PLAN YOUR TRIP
-----
Departing: Jan 1 Search
---------
Returning: Jan 5 ----------------------------------
---------
For more options, please select Air
MY TRIPS
o Current Reservations
o Check Flight Time
BY DESTINATION:
o AFRICA o EUROPE
o ANTARCTICA o MIDDLE EAST
o ASIA o NORTH AMERICA
o CARIBBEAN o OCEANIA
o CENTRAL AMERICA o SOUTH AMERICA
- --------------------------------------------------------------------
BY ACTIVITY:
o ARTS & EDUCATION o RESORTS
o CRUISES & TOURS o SPORTS & ADVENTURE
- --------------------------------------------------------------------
BY LIFESTYLE:
o LIFESTYLE TRAVEL information for families, seniors, LGB, etc...
BEST FARES Edit SPOTLIGHT
Travel and Leisure
Arrival City: Fare Book It
[PICTURE]
DEPARTURE: NEW YORK CITY, NY
THE HOLIDAYS
Paris, France $308.00 Fare Info ON FIFTH
AVENUE
DEPARTURE: SEATTLE/TACOMA, WA No street is more
festive in December.
Honolulu, HI $388.00 Book It Choose a quiet time
(late at night, early
DEPARTURE: SAN FRANCISCO, CA Sunday morning) and
take a tour by foot, in
London, UK $428.00 Fare Info a...
How do I use this? - Disclaimer
Add to My Yahoo!
TRAVEL COMMUNITY
o UNITED STATES o EUROPE
clubs, message boards clubs, message boards
o CRUISES o RESORTS
clubs, message boards clubs
o FAMILY TRAVEL o GENERAL TRAVEL
clubs, message boards clubs, message boards, chat
More community information...
- --------------------------------------------------------------------------------
Copyright(C)1999 Yahoo! Inc. All rights reserved.
http://travel.yahoo.com/destinations 11/22/99
<PAGE> 16
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT B
TECHNICAL SPECIFICATIONS, CUSTOMER SERVICE METRICS,
PERFORMANCE SPECIFICATIONS AND DEVELOPMENT MILESTONES
(1) Technical Specifications
o SI branding incorporated in the Co-Branded Pages
o Width = 170 pixels
o Height = 40 pixels
o File size less than or equal to 2.5K
(2) Customer Service Metrics
o E-mail:
o Each SI Hosted Page shall have an e-mail link to
customer service.
o All e-mail questions/comments will receive e-mail
responses within (***) of receipt.
o Questions relating to previously issued tickets will
be responded to via e-mail or telephone within(***)
of receipt.
o SI shall design the customer service interface so as
to encourage Yahoo! Users to resolve questions via
e-mail and to complete as much of the booking
process as reasonably possible without necessitating
telephone access to customer service representatives
o Telephone Service:
o SI shall provide telephone access to customer
service to resolve ticketing and other issues via a
toll-free number, which number shall be prominently
displayed on a customer service age linked to each
Co-Branded Page. Such telephone number shall be
staffed from 8:00 a.m. until 6:00 p.m. (Central
Time) or during the hours in which SI's primary
customer service line is staffed, whichever is
greater.
o The time to answer customer service telephone calls,
through either human or mechanical means, shall not
be greater than (***).
o The per-call average hold time, measured from when a
Yahoo! User selects a customer service option to
when a human operator answers the call, shall be
less than or equal to (***) for at least (***) of
all customers, measured on a daily basis.
-15-
<PAGE> 17
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
(3) Performance Specifications
o Downtime: While linked to the Yahoo! Site, the SI
service must be functional at least (***) of each
calendar month, excluding downtime scheduled by SI
for routine maintenance purposes; provided that, SI
shall provide Yahoo! no less than (***) prior written
notice of any such routine maintenance that shall
cause the SI service to be inoperable for greater
than (***) on any one occasion.
o Fulfillment: (***) of all tickets ordered by Yahoo!
Users will be fulfilled or shipped, as required, no
later than (***) after receipt of the applicable
order, provided that all information supplied by
Yahoo! Users is accurate and complete, as measured on
a daily basis.
(4) User information
o Personal: first name, last name, street address,
city, state, country, postal code, user name,
password, email address
o Other: frequent flyer accounts, frequent renter
accounts, frequent hotel guest accounts, credit card
accounts if provided, airplane seat preference and
airplane special meal preference
-16-
<PAGE> 18
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT C
ADVERTISING AND PROMOTIONAL ACTIVITIES
1997 Banner Advertisements
<TABLE>
<CAPTION>
DATE PLACEMENT PAGE VIEWS
<S> <C> <C> <C> <C>
YAHOO! METROS Total for (***) (***)
Metro
Properties
BEATRICE'S WEB (***) Travel Content (***)
GUIDE Sponsorship
MAIN SITE (***) Travel Package (***)
(***) Travel Category Banners (***)
(***) Business Category (***)
Banners
(***) News Banners (***)
(***) Run of Yahoo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) Search keywords (***)
(***) Search keywords (***)
-------------
(***)
=============
YELLOW PAGES All Metros (***) Hotels, Resorts, Bed
& Breakfasts (***)
-------------
(***)
=============
TOTAL (***)
-------------
</TABLE>
The parties acknowledge that the foregoing schedule supersedes Insertion Order
#1087, which is canceled.
-17-
<PAGE> 19
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT C
ADVERTISING AND PROMOTIONAL ACTIVITIES
1998 Banner Advertisements
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YAHOO! METROS Total for (***) (***)
Metro
Properties
BEATRICE'S WEB GUIDE (***) Travel Content (***)
Sponsorship
MAIN SITE (***) Travel Category (***)
Banners
(***) Run of Yahoo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) (***) Front Page Promo (***)
(***) Search keywords (***)
-------------
(***)
=============
YELLOW PAGES All Metros (***) Hotels, Resorts, Bed
& Breakfasts (***)
-------------
(***)
=============
TOTAL (***)
-------------
</TABLE>
-18-
<PAGE> 20
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT C-1
ADVERTISING AND PROMOTIONAL ACTIVITIES
<TABLE>
<CAPTION>
MAIN SITE DATES PAGE VIEWS
<S> <C> <C>
Yahoo Front Page Promotions (***) (***) (***)
Business and (***)
Economy/companies/travel*
Yahoo run of network (***)
YAHOO TRAVEL (***)
run of Yahoo! Travel
Destinations
SEARCHWORDS ...
(***) (***)
Totals: (***)
- --------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE> 21
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT D
TERMS AND CONDITIONS FOR ADVERTISING INSERTION ORDERS
STANDARD TERMS AND CONDITIONS FOR YAHOO! ADVERTISING
The following terms and conditions (the "Standard Terms") shall be deemed to be
incorporated into any insertion order entered into under this Agreement (the
"Insertion Order"):
1. POSITIONING. Except as otherwise expressly provided in the Insertion Order,
positioning of advertisements within the Yahoo Site or on any page is at the
sole discretion of Yahoo. Advertiser acknowledges that Yahoo has not made any
guarantees with respect to usage statistics or levels of impressions for any
advertisement. Yahoo provides Advertiser with estimated usage statistics only
as a courtesy to the Advertiser and shall not be held liable for any claims
relating to said usage statistics.
2. LIMITATION OF LIABILITY. In the event that Yahoo fails to publish an
advertisement in accordance with the schedule agreed upon pursuant to this
Agreement (or in the event of any other failure, technical or otherwise, of
such advertisement to appear as provided in the Insertion Order), the sole
liability of Yahoo to Advertiser shall be limited to either a refund of the
advertising fee or placement of the advertisement at a later time in a
comparable position at customer's sole option.
3. PROVISION OF ADVERTISING MATERIALS. Advertiser will provide all materials
for the advertisement (including GIF files), in accordance with Yahoo's
policies in effect from time to time, including (without limitation) the manner
of transmission to Yahoo and the time prior to publication of the
advertisement. Yahoo shall not be required to publish any advertisement that is
not received in accordance with such policies.
4. RIGHT TO REJECT ADVERTISEMENT. All contents of advertisements are subject to
Yahoo's approval in accordance with policies generally applicable to Yahoo!
advertisers Yahoo! reserves the right to reject or cancel any advertisement,
insertion order, space reservation or position commitment at any time. In
addition, Yahoo! shall have the absolute right to reject any URL link embodied
within any advertisement.
-20-
<PAGE> 22
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT E
PAYMENTS
<TABLE>
<CAPTION>
Month Fee Payment Due Date
- ----- ------- ----------------
<S> <C> <C>
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) On or before the (***) of
each applicable (***)
(***) $ (***) On or before the (***) of
each applicable (***)
</TABLE>
Payments from (***) (the "(***) Fixed Amount"): The (***) Fixed Amount shall be
paid according to a schedule to be agreed upon by the Parties. If the total
number of tickets issued for air travel through the Co-Branded Pages during the
period from (***) until (***) (the "Completed Air Transactions") is greater
than (***) and less than (***), there shall be no adjustment to the (***) Fixed
Amount. If the number of Completed Air Transactions is less than (***), the
(***) Fixed Amount shall be reasonably adjusted (***). If the number of
Completed Air Transactions is greater than (***), the (***) Fixed Amount shall
be reasonably adjusted (***). If the Parties are unable to negotiate reasonable
adjustments as contemplated by the preceding two sentences by (***), then
either Party (***).
-21-
<PAGE> 23
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT F
COMMISSIONS
F-1 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
more than (***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a (***)
basis, beginning on the Effective Date and continuing through (***).
(***) payments by SI shall not have (***) the Net SI commissions. As
an illustrative example, if Net SI Commissions from Qualified Bookings
are (***) in August 1997, (***) in September 1997, (***) in October
1997 and (***) in November 1997, SI would make the following payments
to Yahoo!: (1) (***) for the (***); and (2) (***) for the (***).
F-2 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a
cumulative basis, beginning on (***) and continuing through (***).
(***) payments by SI shall not have (***) the Net SI Commission.
F-3 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a (***)
basis, beginning on (***) and continuing through (***). (***)payments
by SI shall not have (***) the Net SI Commission.
-22-
<PAGE> 24
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT G
STATISTICAL INFORMATION AND COMMISSION TRACKING REPORTS
(unless otherwise noted, all information shall be calculated on a (***) basis)
Page Views
o By day, by month
o By segment of the site (air v. hotel v. car v. other), by page
Yahoo! Users
o Unique Yahoo! User sessions per day, per month
o New accounts per day, per month
o Yahoo! Users that purchase per day, per month
o Repeat purchasers per day, per month
Financial Performance
o Air Transactions (per day, per month, per service provider)
o Number of transactions completed
o Number of reservations placed
o Conversion of reservations to transactions over preceding 24 hours
o Number of tickets sold
o Gross revenue from sale of tickets
o Hotel Transactions (per day, per month, per service provider)
o Number of reservations completed, per month
o Car Transactions (per day, per month, per service provider)
o Number of reservations completed, per month
Customer Service Performance
o Email
o Number of e-mails received
o Number of e-mails responded to
o Percent e-mails receiving a response within (***) of such e-mail's
receipt
o Primary subject of e-mails
o Phone
o Number of calls received
o Number of calls answered
o Average hold time for all calls
o System Performance
o The percentage amount of time that SI's service is not functionally
operable
o The average system response time for Yahoo! User queries (i.e. the
time between the receipt of a query over the internet to the posting
of a response on the internet)
-23-
<PAGE> 25
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
o Fulfillment:
o Date upon which each order is received and date upon which each
corresponding ticket is shipped or fulfilled
o To the extent collected by SI, the percentage of orders that are
shipped or fulfilled by: electronic ticket, U.S. mail and express mail
-24-
<PAGE> 26
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT H
The following formulae shall be used by the parties for computing the
adjustment to SI's payment obligations in the event Yahoo! (***) pursuant to
Section 21(a)(8). Provided, however, that under no circumstances shall SI's
payment obligations be less than (***) per (***), or less than (***) per (***).
TSBD (Ticket Sales Before (***)) = SI's total ticket sales generated
from the Co-Branded Pages for the (***) prior to Yahoo!'s (***).
TSAD (Ticket Sales At (***)) = SI's total ticket sales generated from
the Co-Branded Pages for the (***) in which Yahoo! (***).
TSPD (Ticket Sales Post (***)) = SI's total ticket sales generated
from the Co-Branded Pages for (***) after the (***) in which Yahoo!
(***).
1. 1998 Payments
A. For the (***) in 1998 in which Yahoo! (***):
(***)
For example, if SI had (***) total ticket sales generated
from the Co-Branded Pages for October 1998, and after (***),
SI's total ticket sales for November 1998 are (***), SI's
November 1998 payment obligation would be (***). (***)
B. For each (***) in 1998 after the (***) in which Yahoo! (***):
(***)
For example, if SI had (***) total ticket sales generated
from the Co-Branded Pages for October 1998, and after Yahoo!
(***) in November 1998, SI's total ticket sales for December
1998 are (***), SI's December 1998 payment obligation would
be (***), due to the application of (***) specified in the
first paragraph of this Exhibit H. If (***) did not exist,
the payment would be (***). (***)
2. 1999 Payments
A. For the (***) in 1999 in which Yahoo! (***):
(***)
-25-
<PAGE> 27
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
For example, if SI had (***) total ticket sales generated
from the Co-Branded Pages for January 1999, and after Yahoo!
(***) in February 1999, SI's total ticket sales for February
1999 are (***), SI's February 1999 payment obligation would
be (***). (***)
B. For each (***) after the (***) in which Yahoo! (***):
(***)
For example, if SI had (***) total ticket sales generated
from the Co-Branded Pages for January 1999, and after Yahoo!
(***) in February 1999, SI's total ticket sales for March
1999 are (***), SI's March 1999 payment obligation would be
(***), due to the application of (***) specified in the first
paragraph of this Exhibit H. If (***)did not exist, the
payment would be (***). (***)
3. 2000 Payments
In the event that this Agreement remains in effect and Yahoo!
(***) in the Year 2000, the parties shall (***) to SI's
monthly payments as determined by the parties in accordance
with the terms of this Agreement.
-26-
<PAGE> 1
EXHIBIT 10.16
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
SECOND AMENDMENT TO
TRAVEL SERVICES ADVERTISING AND PROMOTION AGREEMENT
This SECOND AMENDMENT TO THE TRAVEL SERVICES ADVERTISING AND PROMOTION
AGREEMENT (the `Second Amendment') dated as of October 1, 1999 (the "Second
Amendment Effective Date") is made and entered into between Yahoo! Inc, a
Delaware corporation ("Yahoo!") and SABRE Interactive ("SI"), a division of
Sabre Inc. (formerly, The SABRE Group, Inc.), a Delaware corporation. Yahoo! and
SI may be referred to individually as a "Party" and collectively as the
"Parties."
RECITALS
A. Yahoo! and SI entered into the Travel Services Advertising and
Promotion Agreement, dated as of June 30, 1997 (the "Agreement"); and
B. The Agreement was mended by the Parties pursuant to the First Amendment to
Travel Services Advertising and Promotion Agreement dated November, 1998 (the
"First Amendment"); and
C. The Parties desire to make various changes to the Agreement, including,
without limitation, extending the Term of the Agreement for an additional two
years, and the Parties are entering into this Amendment to document such
changes to the Agreement.
AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree to amend the Agreement as set forth below:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. Terms used in this Second Amendment but not defined herein
shall have the meaning given them in the Agreement and First Amendment.
SECTION 2. AMENDMENTS.
2.2 The Agreement is hereby amended as follows:
(a) Section 1.2 is deleted in its entirety and replaced with the
following:
"1.2 `Exclusivity Period' means (***) through (***)."
(b) Section 1.6 is deleted in its entirety and replaced with the
following:
<PAGE> 2
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
"1.6 `Yahoo! Travel Page' means the first page located in the
travel category on the Yahoo! Site, currently located at
http://travel.yahoo.com/travel. A screen image of the Yahoo!
Travel Page is attached to this Agreement in Exhibit A.
(c) Section 4.3 is deleted in its entirety and replaced with the
following:
"(a) By Yahoo!. Yahoo! shall not display any banner
advertisements or other promotional materials on the
Co-Branded Pages or the Yahoo! Travel Page for any of the
following (***). SI may add additional third parties that
(***) to the above lists of (***) and (***) upon giving (***)
written notice to Yahoo!; provided that Yahoo! shall be
permitted to (***) to any such third party provided that such
obligation exists (or would cause Yahoo! to (***) if revoked)
as of the date of such notice. It is expressly understood that
for the purposes of this Section 4.3(a), third parties that
(***) (such as airline, hotel or car rental provider), shall
not be considered (***) and Yahoo may provide such third
parties advertising services. If the parties do not execute
insertion orders for the Advertising Rights SI is obligated to
purchase pursuant to Section 5.1 as set forth therein, then,
as a non-exclusive remedy, (***). Further, notwithstanding
anything to the contrary in this Agreement, under no
circumstances shall Yahoo! be restricted from promoting any
entity (including, but not limited to, (***)) through (***) on
the Yahoo! site.
(d) Section 5.1 of the Agreement shall be amended by replacing the
third and fourth sentences of the first paragraph with the
following:
"SI will execute Yahoo! insertion orders for Advertising
Rights on the Yahoo! Site, based on available inventory, as
follows: (i) on or before (***), SI will place an insertion
order for (***) for Advertising Rights to be delivered during
(***); (ii) on or before (***), SI will place an insertion
order for (***) for Advertising Rights to be delivered during
(***); and (iii) on or before (***) SI will place an insertion
order for (***), for Advertising Rights to be delivered during
(***). All such advertisements shall be subject to Yahoo!'s
standard terms and conditions as set forth in Exhibit D and
Yahoo's standard policies concerning the collection of user
data, any of which Yahoo! may modify from time to time in its
reasonable discretion upon written notice to SI. In the event
of any conflict between the provisions of this Agreement and
such standard terms and conditions or any advertising
insertion order, (***)."
(e) Section 6.3 of the Agreement shall be replaced in its
entirety with the following:
-2-
<PAGE> 3
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
"Tracking Procedures; Audit Rights. To ensure compliance with
the terms of Section 6.1 and 6.2, SI shall establish
reasonable mechanisms acceptable to Yahoo! to track, and shall
keep reasonably detailed records concerning, Qualified
Bookings and the payments due Yahoo! under this Agreement. SI
shall provide Yahoo!, within ten (10) days following the end
of each month, a report continuing the information set forth
in Exhibit G, and such other information related to commission
s and payments due and compliance with performance
specifications set forth in Exhibits B, E and F under this
Agreement as Yahoo! may reasonably request from time to time.
Yahoo shall have the right, no more than twice a year and at
its own expense, to have a representative inspect and audit
all of the accounting and sales books and records of SI which
are relevant to the payments set out in Sections 6.1 and 6.2,
provided, however, that Yahoo! provides SI with reasonable
notice prior to such audit and any such inspection and audit
shall be conducted during regular business hours in such a
manner as not to interfere with normal business activities. In
the event that any audit shall reveal an underpayment of more
than five percent (5%) of the amounts due to Yahoo! for any
Calendar quarter of the Term, SI shall immediately pay the
amount owed with reasonable interest and reimburse Yahoo! for
the cost of such audit. Within forty-five (45) after the end
of each calendar year of the Term, SI shall furnish Yahoo! a
cumulative report, that has been reviewed and certified as
accurate by SI's Chief Financial Officer (or an SI officer
with similar responsibilities) describing in reasonable detail
the calculation of all fees, commissions and payments due to
Yahoo! under this Agreement during such year then ended."
(f) Section 11.1 is deleted in its entirety and replaced with the
following:
"11.1 Term. This Agreement shall commence upon the Effective
Date and continue through December 31, 2002 unless terminated
earlier in accordance with Section 11.2 (the "Term").
(g) Section 12.6 of the Agreement shall be deleted in its
entirety and replaced with the following:
"12.6 Successors and Assigns. Neither party shall assign its
rights or obligations under this Agreement without the prior
written consent of the other party, which shall not be
unreasonably withheld. Notwithstanding the foregoing, upon
written notice to Yahoo! SI shall have the right to assign
this Agreement to an affiliate in which SI owns a majority
interest or indirectly (e.g., through a holding company)
controls. Further, either party may assign this Agreement to
an entity who acquires substantially all of the stock or
assets of a party to this Agreement; provided that consent
will be required in the event that the non-assigning party
-3-
<PAGE> 4
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
determines that the assignee will not have sufficient capital
or assets to perform its obligations hereunder, or that the
assignee is a direct competitor of the non-assigning party;'
provided that, such consent may not be unreasonably withheld
or delayed.
(h) Exhibit E of the Agreement is deleted in its entirety and
replaced with "Exhibit E" as attached to this Second
Amendment.
(i) Exhibit F of the Agreement is deleted in its entirety and
replaced with "Exhibit F" as attached to this Second
Amendment.
(j) Exhibit H, Section 3 shall be deleted in its entirety and
replaced with the following:
"3 2000-2002 Payments
In the event that this Agreement remains in effect
and Yahoo (***) in the year 2000 through 2002, the parties
shall apply the above formulae, in a consistent manner, to
SI's monthly payments as determined by the parties in
accordance with the terms of this Agreement."
[signature page follows]
-4-
<PAGE> 5
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the Parties have each caused this Second Amendment
to be signed and delivered by its duly authorized officers, all as of
the Second Amendment Effective Date.
YAHOO! INC. SABRE INTERACTIVE, a division of Sabre Inc.
By: /s/ Ellen F. Siminoff By: /s/ Terrell Jones
------------------------ -----------------------------------------
Name: Ellen F. Siminoff Name: Terrell Jones
----------------------- --------------------------------------
Title: V.P. Title: President, Travelocity.com
---------------------- -------------------------------------
-5-
<PAGE> 6
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT E
PAYMENTS
<TABLE>
<CAPTION>
Month Fee Payment Due Date
- ----- ------- -----------------------------
<S> <C> <C>
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) (***)
(***) $ (***) On or before the (***) of each
applicable(***)
(***) $ (***) On or before the (***)of each
applicable (***)
(***) $ (***) On or before the (***) of each
applicable (***)
(***) $ (***) On or before the (***) of each
applicable (***)
(***) $ (***) On or before the (***) of each
applicable (***)
</TABLE>
For the period running from (***) through (***) and (***), in addition to the
amounts provided above and elsewhere in this Agreement, SI will pay Yahoo!
additional fees for Qualified Bookings as set forth below:
<TABLE>
<CAPTION>
Number of Qualified Bookings 2001 2002
- ---------------------------- ---- ----
<S> <C> <C>
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
(***) (***) (***)
</TABLE>
The additional fees set forth above shall be paid within (***) of the (***) in
which the Qualified Bookings thresholds are achieved as identified above. The
number of Qualified Bookings achieved shall (***) (e.g, during the year 2001, SI
shall pay Yahoo!: (i) (***) within (***) following the end of the (***) in which
the (***) Qualified Booking threshold is reached, and (ii) an additional (***)
(for a total of (***)) within (***) following the end of the (***) in which the
(***) additional Qualified Bookings are achieved (for a total of (***) Qualified
Bookings), etc.
-6-
<PAGE> 7
Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
EXHIBIT F
COMMISSIONS
F-1 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
(***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a (***)
basis, beginning on the Effective Date and continuing through (***).
(***) payments by SI shall not (***) the Net SI commissions. As an
illustrative example, if Net SI Commissions from Qualified Bookings are
(***) in August 1997, (***) in September 1997, (***) in October 1997
and (***) in November 1997, SI would make the following payments to
Yahoo!: (1) (***) for the (***) ending (***); and (2) (***) for the
(***) ending (***).
F-2 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a (***)
basis, beginning on (***) and continuing through (***). (***) payments
by SI shall not (***) the Net SI Commission.
F-3 Commissions for (***):
<TABLE>
<CAPTION>
Net SI Commission Commission to Yahoo!
----------------- --------------------
<S> <C>
(***) (***)
(***) (***)
</TABLE>
Commissions for (***) through (***) shall be calculated on a (***)
basis, beginning on (***) and continuing through (***). (***) payments
by SI shall not (***) the Net SI Commission.
-7-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to the
inclusion of (i) our report dated July 30, 1999, except as to Note 10 as to
which the date is October 29, 1999, with respect to the financial statements of
the Travelocity Division and (ii) our report dated October 29, 1999 with respect
to the balance sheet of Travelocity.com Inc. in the Proxy Statement of Preview
Travel, Inc. that is made a part of the Registration Statement (Form S-4) and
Prospectus of Travelocity.com Inc. for the registration of shares of its common
stock.
/s/ Ernst & Young LLP
January 28, 2000
Dallas, Texas
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated January 21, 1999, included in
Preview Travel's annual report on Form 10-K regarding our audit of Preview
Travel's consolidated financial statements for each of the three years in the
period ended December 31, 1998, incorporated by reference to the Proxy Statement
of Preview Travel, Inc. that is made a part of the Registration Statement (Form
S-4) and Prospectus of Travelocity.com Inc. for the registration of shares of
its common stock. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCooper LLP
San Jose, California
January 28, 2000
<PAGE> 1
EXHIBIT 99.2
CONSENT OF HAMBRECHT & QUIST LLC
We hereby consent to the inclusion of our opinion letter dated October 3,
1999 to the Board of Directors of Preview Travel, Inc. as Appendix C-1 to the
Proxy Statement/Prospectus which forms part of the Registration Statement on
Form S-4 of Travelocity.com Inc., relating to the proposed business combination
involving Travelocity.com Inc. and Preview Travel, Inc. and to the references to
such opinion in the Proxy Statement/Prospectus under the captions "Summary --
Opinion of Financial Advisor," "The Merger -- Background," and "--
Recommendation of Preview Travel Board of Directors; Preview Travel's Reasons
for the Merger," and "-- Opinion of Hambrecht & Quist." In giving such consent,
we do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations issued by the Securities and Exchange Commission thereunder
(collectively, the "Securities Act"), nor do we admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "expert" as used in the Securities Act.
Hambrecht & Quist LLC
By: /s/ Paul Cleveland
---------------------
Name: Paul Cleveland
Title: Managing Director
January 31, 2000
<PAGE> 1
EXHIBIT 99.3
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PREVIEW TRAVEL, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Preview Travel Inc., a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and Proxy Statement, each dated _________________, 2000 and
hereby appoints ____________________ and ______________________, or either of
them, as proxies and attorneys-in-fact with full power to each of substitution,
on behalf of the name of the undersigned, to represent the undersigned at the
Special Meeting of Stockholders of Preview Travel, Inc. to be held on
_____________, 2000, at _____________, Pacific time, at ___________________,
located at __________________, and at any adjournment(s) or postponement(s)
thereof, and to vote all shares of Common Stock that the undersigned would be
entitled to vote if then and there personally present, on the matter set forth
below:
Proposal No. 1: To adopt the Agreement and Plan Merger ("Merger Agreement"),
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, Inc. into Travelocity.com Inc.
To approve and adopt the Merger Agreement and the transactions
contemplated by the Merger Agreement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
NOTE: This Proxy should be marked, dated, signed by the
stockholder(s) exactly as his or her name appears hereon, and
returned in the enclosed envelope.
In their discretion, upon such other matter or matters which may properly come
before the meeting or any postponements(s) or adjournment(s) thereof.
<PAGE> 2
THIS PROXY WILL BE VOTED AS DIRECTED AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY POSTPONEMENT(S) OR
ADJOURNMENT(S) THEREOF.
DATED: ,2000
--------------------------
--------------------------------------
Printed name(s) exactly as shown on
Stock Certificates
--------------------------------------
(Signature)
--------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by its President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
THIS PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT IF NO
SPECIFICATION IS MADE.
- 2 -
<PAGE> 1
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 of the Securities Act of 1933, as amended, the
undersigned hereby consents to being named as a nominee for director of
Travelocity.com Inc., a Delaware corporation, and to become director of
Travelocity.com on or prior to the Closing Date of the Merger, as defined in
this Registration Statement on Form S-4, as amended, filed with the Securities
and Exchange Commission.
Dated: February 1, 2000
/s/ F. William Conner
------------------------------
Name: F. William Conner