<PAGE>
SERVICES AGREEMENT
Services Agreement, dated July 26, 2000 between SkyAuction.com, Inc.
("Sky") and Magical Holidays, Inc. ("Magical").
WHEREAS, Magical desires to provide to Sky and Sky desires to receive
from Magical certain services, as described below.
NOW THEREFORE, the parties have agreed to enter into this Agreement on
the following terms.
1. The Services. During the term of this Agreement, Magical shall provide
Sky the following services (collectively, the "Services"):
a. Upon Sky's request, Magical shall provide ticketing
fulfillment services for travel inventory sold by Sky
including, without limitation, printing tickets, record
keeping, electronic file maintenance, file access, data
storage, security features, report writing functionality and
communications with Sky's customers and inventory suppliers
(the "Fulfillment Services") for tickets sold and specifically
identified by Sky.
b. Magical shall: (i) conduct a day-to-day transaction review of
Sky's records of fulfilled transactions (the "Transaction
Review"); (ii) identify, analyze and report results with
respect to the adequacy and accuracy of its records; and (iii)
consult Sky with respect to the establishment, development,
management and implementation of an automated Transaction
Review system for Sky's records ((i), (ii) and (iii)
collectively, the "Transaction Review Services").
c. Magical shall: (i) allow Sky to use a reasonable amount of
resources maintained or held by Magical, including, without
limitation, office supplies and equipment, secretarial and
clerical services, telephone and data systems, etc.; and (ii)
make available to Sky volume discounts with suppliers
including credit card processing fees, and use of its credit
cards with higher limits than those currently available to Sky
(collectively, the "Additional Services").
d. Magical shall, at the request of Sky and in consideration for
fair market value (based on other offers for such room), make
available to Sky, for all periods other than periods
identified by Magical to Sky on two weeks advance notice, room
33B at Antigua Village, Dickinson Bay, Antigua, British West
Indies for the purposes of being auctioned on Sky's website.
e. To the extent reasonably requested by Sky consistent with
Magical's needs, Magical shall allow Sky to use a portion of
the office premises that Magical rents from third parties.
All Services shall be provided according to the reasonable instructions
of Sky officers.
2. Compensation. In consideration for the Services, and in addition to
any other amounts specified in Section 1 above, Sky shall pay Magical
as follows:
a. For each ticket for which Fulfillment Services are provided by
Magical, Sky shall pay Magical (i) a fulfillment fee, the
amount of which shall be: $20 for the period commencing on the
date hereof and ending on May 31, 2001, $25 for the period
commencing June 1, 2001 through May 31, 2002, and an amount
which shall be negotiated between the parties for any further
period (the "Fulfillment Fee"); and (ii) a $5
<PAGE>
additional services fee (in connection with the provision of
additional services) (the "Additional Services Fee").
b. Sky shall pay Magical $50,000 per quarter in consideration for
the Transaction Review Services (the "Transaction Review
Services Fee").
c. Sky shall pay its pro-rata portion (based on the average
square footage used by each party for each payment period) of
any rent paid with respect to office space which Magical
enables it to use.
3. Right of First Refusal. Magical shall grant Sky a right of first
refusal to purchase any inventory to which it has access. For any such
inventory sold by Sky it shall pay Magical: (i) the direct cost to
Magical of such inventory; plus (ii) the Fulfillment Fee and the
Additional Services Fee, if applicable.
4. Non-Exclusive. This Agreement shall be a non-exclusive arrangement
between the parties hereto and, subject to the provisions herein, will
not limit the ability of Sky to purchase or Magical to sell, inventory
or any other services from or to any third party.
5. Non-Compete. For as long as this Agreement is in effect and for a
period of two years thereafter, Magical shall not compete with Sky in
the business of marketing and selling excess travel inventory utilizing
an auction process through the Internet.
6. Representations. Each party hereby warrants, represents and covenants
to the other that: (i) it is a duly organized corporation, validly
existing and in good standing in the state of its incorporation; (ii)
it has the full authority to execute, deliver and perform this
Agreement; (iii) this Agreement has been duly approved by the
necessary corporate organs of such party, was duly executed by such
party, and shall be enforceable against it in accordance with its
terms; and (iv) the execution of this Agreement by such party does not
contradict such party's Certificate of Incorporation, By-laws and any
contract or other instrument to which such party is a party or is
otherwise subject. In addition, Magical hereby warrants, represents
and covenants to Sky that the provision of the Services and all other
obligations of Magical under this Agreement comply with all applicable
laws and regulations and Magical has all licenses and approvals
necessary in order to provide the Services and fulfill its obligations
as described herein.
7. Term of Certain Services. Sky shall use its reasonable commercial
efforts to effect, within 180 days of the date hereof, a transition of
the knowledge and expertise and to implement systems, which shall
enable it to provide itself with the Transaction Review Services and
Administrative Services. Upon the completion of such transition and
implementation and the provision of written notification to such
effect by Sky to Magical, Magical shall cease providing the
Transaction Review Services and the Additional Services and Sky shall
cease paying Magical the Transaction Review Services Fee and the
Additional Services Fee. At such time, the parties shall renegotiate
the amount of the Fulfillment Fee.
8. Term; Termination. This Agreement shall be in effect for a period of
three years from the date first noted above and unless notice is given
as provided below shall be automatically renewed for one year periods
thereafter. Notwithstanding the above: (i) Sky may terminate this
Agreement at any time, immediately upon providing written notice to
Magical; and (ii) Magical may terminate this Agreement at any time,
upon providing Sky 180 days prior written notice.
9. No Partnership. Magical shall act as a contractor of Sky and nothing
in this Agreement shall be construed to create a partnership, agency
or similar relationship between the parties or otherwise to permit
Magical, in any way, to undertake any obligation or to bind or make
any commitment on behalf of Sky.
<PAGE>
10. Records. Magical shall create and maintain records concerning or
related to any Services provided to Magical for no less than twelve
months after such were provided. In addition, Magical shall not dispose
of any such records without the prior written consent of Sky. Magical
shall keep confidential and shall not disclose to any person, at any
time, whether or not this Agreement is then in effect, any such records
and any and all other information it receives from Sky in connection
with this Agreement.
11. Miscellaneous. This Agreement: shall supersede any other agreements
and contracts (written or oral) between the parties with respect to
the subject matter hereof; be binding upon the parties and their
respective successors and assigns; may be amended by the parties only
by a written document signed by both parties hereto; shall be
construed for all purposes in accordance with the laws of the State of
New York; any and all disputes, disagreements and controversies with
respect to this Agreement shall first be mediated by the parties
hereto and, in the event such mediation is unsuccessful, thereafter
resolved by binding arbitration by a single arbitrator, in New York,
New York, pursuant to the Commercial Arbitration Rules of the American
Arbitration Association; and neither party may assign this Agreement
or any rights herein, or delegate any obligations hereunder, without
the other party's prior written consent.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth herein.
SKYAUCTION.COM, INC.
By: /s/Salvatore Esposito
---------------------------
Name: Salvatore Esposito
Title: Chief Operating Officer
MAGICAL HOLIDAYS, INC.
By: /s/ Gail Hering
---------------------------
Name: Gail Hering
Title: Chief Executive Officer
