<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
flightserv.com
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
FLIGHTSERV.COM
3343 PEACHTREE ROAD, N.E.
SUITE 530
ATLANTA, GEORGIA 30326
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 11, 2000
To the Stockholders of flightserv.com:
Notice is hereby given that the Annual Meeting of Stockholders (together with
any adjournments or postponements thereof, the "Meeting") of flightserv.com, a
Delaware corporation (the "Company"), will be held at _________________,
Atlanta, Georgia 30303 on Tuesday, July 11, 2000 at 10:00 a.m., local time, for
the purpose of considering and voting upon the following matters:
(1) To elect a board of five directors, each to serve a one-year term;
(2) To approve an amendment to the Company's Certificate of Incorporation
to (i) increase the number of authorized shares of the Company's Common
Stock from 60,000,000 to 100,000,000 and (ii) authorize the Company to
issue up to 10,000,000 shares of preferred stock;
(3) To approve the Company's 2000 Stock Option Plan;
(4) To ratify and approve the grant of non-qualified stock options to the
Company's directors and certain of the Company's officers and
employees;
(5) To ratify and approve the grant of certain warrants to Four Corners
Capital, LLC;
(6) To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending June 30, 2000;
and
(7) To transact such other business as may properly come before the
Meeting.
These items are more fully described in the accompanying Proxy Statement, which
is hereby made a part of this Notice of Annual Meeting of Stockholders.
The Board has fixed the close of business on June 9, 2000 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Meeting.
A copy of the Company's Annual Report for the fiscal year ended June 30, 1999 is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this Notice.
By Order of the Board,
Judy M. Gordon
Secretary
Atlanta, Georgia
June ___, 2000
================================================================================
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE-PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST BRING TO THE MEETING A
LETTER FROM THE BROKER, BANK OR OTHER NOMINEE CONFIRMING YOUR BENEFICIAL
OWNERSHIP OF THE SHARES. ADDITIONALLY, IN ORDER TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
================================================================================
<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
FLIGHTSERV.COM
JULY 11, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement (the "Proxy Statement") and the accompanying form
of proxy are being furnished to the stockholders of flightserv.com (the
"Company") in connection with the solicitation of proxies by the Board of the
Company (the "Board") from holders of its outstanding common stock (the "Common
Stock"), for use at the Annual Meeting of Stockholders of the Company (together
with any adjournments or postponements thereof, the "Meeting") to be held at
___________________________, Atlanta, Georgia 30303 on Tuesday, July 11, 2000 at
10:00 a.m., local time. This Proxy Statement, the accompanying form of proxy and
the Annual Report to Stockholders are expected to be mailed to stockholders of
the Company on or about June 20, 2000.
SOLICITATION
The expense of this solicitation will be borne by the Company.
Solicitation will be primarily by use of the mails. Executive officers and other
employees of the Company may solicit proxies, without additional compensation,
personally and by telephone and other means of communication. The Company will
also reimburse brokers and other persons holding Common Stock in their names or
in the names of their nominees for their reasonable expenses in forwarding
proxies and proxy materials to beneficial owners.
VOTING RIGHTS AND OUTSTANDING SHARES
Stockholders of record as of the close of business on June 9, 2000 (the
"Record Date") will be entitled to vote at the Meeting. Each share of
outstanding Common Stock is entitled to one vote. As of the Record Date, there
were [33,118,654] shares of Common Stock outstanding and entitled to vote. The
Company has been advised that certain beneficial owners, directors and executive
officers of the Company, who hold in the aggregate approximately 42% of the
outstanding Common Stock, intend to vote their shares in favor of the nominees
and each of the proposals, and in accordance with the recommendations of the
Board.
The presence at the Meeting, in person or by proxy, of a majority of
the outstanding shares of Common Stock as of the Record Date will constitute a
quorum for transacting business at the Meeting. Abstentions and broker non-votes
are counted towards a quorum. Provided a quorum is present at the Meeting,
directors will be elected and each proposal, other than the proposal to amend
the Certificate of Incorporation to increase the number of authorized shares
("Proposal 2"), will be approved by a plurality of the votes present in person
or represented by proxy and entitled to vote at the Meeting. Proposal 2 will be
approved only by the affirmative vote of a majority of the total number of
shares issued and outstanding as of the Record Date.
All votes will be tabulated by the inspector of elections appointed for
the Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of votes cast with respect to a particular matter.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business but will not be counted for
or against the particular proposal on which the broker has expressly not voted.
Except for Proposal 2, Broker non-votes with respect to proposals set forth in
this Proxy Statement will not be considered votes cast and, accordingly, will
not affect the determination as to whether a majority of votes cast has been
obtained with respect to such matters. Broker non-votes with respect to Proposal
2 will have the effect of a vote against such proposal.
REVOCABILITY OF PROXIES
The shares of Common Stock represented by proxy will be voted as
instructed if received in time for the Meeting. If no instructions are
indicated, such shares will be voted in favor of (FOR) (i) each nominee for
election as a director specified herein, (ii) the amendment of the Certificate
of Incorporation to increase the number of authorized shares of the Company's
Common Stock to 100,000,000 and to authorize the Company to issue up to
10,000,000 shares of preferred stock, (iii) the adoption of the Company's 2000
Stock Option Plan, (iv) the approval of the grant of non-qualified options to
the Company's directors and certain officers and key employees, (v) the
<PAGE> 4
issuance of certain warrants to Four Corners Capital, LLC, a Delaware limited
liability company ("Four Corners"); (vi) the ratification of the appointment of
Ernst & Young, LLP as the Company's independent accountants for the fiscal year
ended June 30, 2000, and (vii) in the discretion of the proxy holder as to any
other matter that may properly come before the Meeting. Any person signing and
mailing the proxy may, nevertheless, revoke it at any time before it is
exercised by written notice to the Company (Attention: C. Beverly Lance, 3343
Peachtree Road, Suite 530, Atlanta, Georgia 30326), or by attending in person
and voting at the Meeting. Attendance at the Meeting, however, will not itself
constitute the revocation of a proxy.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Five directors, constituting the entire Board, are to be elected at the
Meeting and, if elected, will serve until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified. The
Company's Bylaws, as amended, provide that the Board shall consist of a minimum
of three and a maximum of nine members and, unless otherwise established by
resolution of the Board, shall be five members.
The nominees of the Board are set forth below. All of the current
members of the Board have been nominated to continue to serve as directors of
the Company. In the event any nominee is unable or declines to serve as a
director at the time of the Meeting, the proxies will be voted for any nominee
who shall be designated by the present Board to fill the vacancy. If additional
persons are nominated for election as directors, then the proxy holders intend
to vote all proxies received by them for the nominees listed below unless
instructed otherwise. As of the date of this Proxy Statement, the Company is not
aware of any nominee who is unable or who will decline to serve as a director,
if elected.
NOMINEES FOR ELECTION AS DIRECTORS
Set forth below are the names, ages at June 1, 2000, positions and
offices held and a brief description of the business experience during the past
five years of each person nominated to serve as a director of the Company.
WILLIAM B. ASTROP (age 70) has served as a director of the Company
since February 5, 1999. Mr. Astrop is a Chartered Financial Analyst and the
founder and Chairman of Astrop Advisory Corporation, a money-management firm
that he established in 1991. Mr. Astrop is a member of both the American Stock
Exchange and the New York Stock Exchange and is a member of the Dean's Advisory
Board of the Emory University Graduate Business School.
SYLVIA A. de LEON (age 50) has served as a director of the Company
since December 12, 2000 when she was appointed by the Board to fill the vacancy
created by the resignation of Joel A. Goldberg as a director of the Company. Ms.
de Leon is a Senior Partner with the law firm of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., where she has been employed since 1977. Ms. de Leon also serves on
the Board of Directors of the National Railroad Passenger Corporation (Amtrak).
During the last five years, Ms. de Leon has also served on the National Civil
Aviation Review Commission, the National Commission to Ensure a Strong
Competitive Airline Industry and the White House Conference on Travel and
Tourism, where she co-chaired the infrastructure and investment committee.
C. BEVERLY LANCE (age 38) has served as Chief Executive Officer and a
director of the Company since February 10, 1999. From February 10, 1999 to May
16, 2000, Mr. Lance also served as President of the Company. From January 8,
1999 to February 10, 1999, Mr. Lance was President of the Company's Stratos Inns
subsidiary, which the Company acquired in connection with its acquisition of PDK
Properties, Inc. in January 1999. During the five years prior to joining the
Company, Mr. Lance managed family investments and was a business consultant.
DR. JAMES A. VERBRUGGE (age 59) has served as a director of the Company
since January 11, 1999. Dr. Verbrugge is a Professor of Finance and Chairman,
Department of Banking and Finance of the University of Georgia, where he has
been employed since 1968. Dr. Verbrugge is also actively involved in executive
education programs at the University of Georgia and teaches executive education
programs at the University of Washington, University of Florida and University
of Colorado.
ARTHUR G. WEISS (age 60) has served as Chairman of the Board of the
Company since January 21, 1999 and has served as a director since January 11,
1999. From January 21, 1999 to February 10, 1999, Mr. Weiss served as President
and Chief Executive Officer of the Company. Prior to assuming his positions at
the Company, Mr. Weiss was the President and a shareholder of West Side
Investors, Inc., which was acquired by the Company in January, 1999. From March,
1993 through April, 1994, Mr. Weiss served as Chairman of the board of directors
of Medical Resources Companies of America. In addition, Mr. Weiss manages
private real estate investments.
2
<PAGE> 5
There are no family relationships among any of the executive officers
or directors of the Company. No arrangement or understanding exists between any
executive officer or any other person pursuant to which any executive officer
was selected as an executive officer of the Company. Executive officers of the
Company are elected or appointed by the Board and hold office until their
successors are elected or until their death, resignation or removal.
CERTAIN INFORMATION CONCERNING THE BOARD
The Board is currently comprised of the five individuals set forth
above. During the fiscal year ended June 30, 1999, the Board met ten times. From
the time each director was appointed to the Board, each director attended, in
person or by telephone, all of such meetings of the Board. As of June 30, 1999,
the Board was comprised of Messrs. Astrop, Lance, Weiss, Dr. Verbrugge and Joel
A. Goldberg. Mr. Goldberg resigned as of December 7, 1999 and the Board
appointed Sylvia de Leon to fill the vacancy created by his resignation.
The Board has established an audit committee (the "Audit Committee").
The Audit Committee is comprised of Mr. Astrop, Ms. de Leon and Dr. Verbrugge
with Dr. Verbrugge serving as its Chairman. The Audit Committee convenes when
deemed appropriate or necessary by its members. The primary functions of the
Audit Committee are to: (i) recommend an accounting firm to be appointed by the
Company as its independent auditors; (ii) consult with the Company's independent
auditors regarding the audit plan; and (iii) determine that management placed no
restrictions on the scope or implementation of the independent auditors'
examination. Messrs. Astrop, Goldberg and Dr. Verbrugge were appointed to the
Audit Committee on February 10, 1999. During the fiscal year ended June 30,
1999, one meeting of the Audit Committee was held at which Messrs. Astrop,
Goldberg and Dr. Verbrugge were present. Mr. Goldberg resigned from the Audit
Committee simultaneously with his resignation from the Board on December 7,
2000. Ms. de Leon was not a member of the audit committee during the fiscal year
ended June 30, 1999.
The Board had not established a compensation committee or a nominating
committee.
EXECUTIVE OFFICERS
Set forth below are the names, ages at June 1, 2000, positions and
offices held and a brief description of the business experience during the past
five years of each of the Company's executive officers who are not also
directors.
TODD BOTTORFF (age 32) has served as President and Chief Operating
Officer of the Company since May 16, 2000. Prior to joining the Company, Mr.
Bottorff was a co-founder and a member of the executive committee of
HeliosHealth.com, an Internet-based provider of health information and services.
From 1995 to 1999, Mr. Bottorff was a manager at McKinsey & Company, a global
consulting firm.
WILLIAM L. WORTMAN (age 52) has served as Vice President and Chief
Financial Officer of the Company since June 24, 1999. For the year prior to
joining the Company, Mr. Wortman was a partner and general manager of a new car
dealership. From 1994 through 1998, Mr. Wortman was Vice President and Chief
Financial Officer of A.F.A Services Corporation, a marketing services company.
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 31, 2000 by: (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock; (ii) each of the Company's directors; (iii)
each of the Company's executive officers included in the Summary Compensation
Table included elsewhere herein; and (iv) all of the Company's directors and
executive officers as a group. Except as otherwise noted, the person or entity
named has sole voting and investment power over the shares indicated.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY OWNED(1)
-----------------------------------------------
NAME NUMBER PERCENT
---- ------ -------
<S> <C> <C>
C. Beverly Lance(2) + ++ 7,669,000 20.4%
Arthur G. Weiss(3) + ++ 5,950,000 15.9
Wendell M. Starke Trust(4) 4,800,000 14.5
Four Corners Capital, LLC (5) 4,713,842 12.5
Lance Children's Trust(6) 3,269,200 9.9
Johnny C. Godley(7) 2,550,000 7.7
William C. Morris(8) 2,550,000 7.7
Acqua Wellington Value Fund, Ltd.(9) 2,455,429 7.1
Caroline Weiss Kyriopoulos(10) 2,263,000 6.8
Bert Lance Grantor Trust (11) 2,000,000 5.7
Lazard Freres & Co., LLC(12) 2,000,000 5.7
Dr. James A. Verbrugge(13)++ 1,000,000 2.9
Sylvia A. de Leon (14)++ 1,000,000 2.9
William B. Astrop(15)++ 500,000 1.5
All Current Executive Officers and Directors
as a Group (7 Persons)(16) 16,319,000 25.8%
---------- -----
</TABLE>
---------------
+ Executive Officer of the Company
++ Director of the Company
(1) Information as to beneficial ownership of Common Stock has either been
furnished to the Company by or on behalf of the indicated person or is
taken from reports on file with the Securities and Exchange Commission
("SEC").
(2) Represents 3,269,000 shares owned by the Lance Children's Trust, a
trust for the benefit of Mr. Lance's minor children, of which Mr. Lance
is the sole trustee, plus 4,400,000 shares issuable upon the exercise
of options, 700,000 of which are currently exercisable and 3,700,000 of
which will be exercisable within 60 days of May 31, 2000 assuming
approval of Proposals 2 and 4 herein. Mr. Lance disclaims beneficial
ownership of the shares beneficially owned by the Lance Children's
Trust. Mr. Lance's minor children are also the beneficiaries of the
Dogwood Trust established by their grandfather, which is the beneficial
owner of 500,000 shares. Additionally, Mr. Lance's children are
beneficiaries to the HJR Trust, which is a 50% partner in K & L
Partnership ("K&L"), a Georgia general partnership, which owns 688,000
shares of Common Stock. See Footnote 6. Mr. Lance is not the
trustee of the Dogwood Trust or the HJR Trust (collectively, the
"Trusts"), and disclaims any beneficial ownership of the shares
beneficially owned by these Trusts.
(3) Includes 4,400,000 shares issuable upon the exercise of options,
700,000 of which are currently exercisable and 3,700,000 of which will
be exercisable within 60 days of May 31, 2000 assuming approval of
Proposals 2 and 4 herein. In addition to the shares beneficially owned
by Mr. Weiss, (i) Caroline Weiss Kyriopoulos is the beneficial owner of
2,263,000 shares, and (ii) Charles G. Weiss is the beneficial owner of
775,000 shares. Caroline Weiss Kyriopoulos and Charles G. Weiss are the
adult children of Arthur G.
4
<PAGE> 7
Weiss and Arthur G. Weiss disclaims beneficial ownership of the shares
owned by Caroline Weiss Kyriopoulos and Charles G. Weiss.
(4) Based upon its Schedule 13D/A filed on July 2, 1999, Wendell M. Starke
is the trustee of the Wendell M. Starke Trust, which owns 4,800,000
shares. The trust's address is Suite 100, One Midtown Plaza, 1360
Peachtree Street, N.E., Atlanta, Georgia.
(5) Includes options for 800,000 shares that will be exercisable within 60
days of May 31, 2000 assuming approval of Proposal 4 and warrants to
purchase 3,799,866 shares, 2,280,510 of which are currently exercisable
and 1,519,356 of which will be exercisable within 60 days of May 31,
2000 assuming approval of Proposal 5. The address of Four Corners
Capital, LLC is 10 Burton Hills Boulevard, Suite 120, Nashville,
Tennessee 37215.
(6) Excludes 1,188,000 shares that may be deemed to be owned by the Trusts.
See footnote 2. C. Frank Moore is the sole trustee of the Trusts. The
minor children of C. Beverly Lance are the beneficiaries of the Trusts,
but do not have the power to vote or dispose of the shares. Neither the
Lance Children's Trust nor Mr. Lance, as its trustee, has the power to
vote or dispose of any shares owned by the Trusts. As a result, both
the Lance Children's Trust and Mr. Lance disclaim beneficial ownership
of the shares owned by the Trusts.
(7) Includes 300,000 shares owned by Godley Morris Group, LLC of which Mr.
Godley is a Managing Member, and, in such capacity, shares voting and
investment power over such shares. Includes shares owned by each of the
following entities in which Mr. Godley is the Managing Member, and, in
such capacity, has sole voting and investment power over such shares:
Johnny Godley's Kids, LLC - 750,000 shares, Frankie Godley's Kids, LLC
- 750,000 shares and Jimmy Godley's Kids, LLC - 750,000 shares. Mr.
Godley's address, and the address of each such entity is 4918 Rozzell
Ferry Road, Charlotte, North Carolina 28216.
(8) Includes 300,000 shares owned by Godley Morris Group, LLC of which Mr.
Godley is a Managing Member, and, in such capacity, shares voting and
investment power over such shares. Mr. Morris' address is 307 Scotland
Road, Lake City, South Carolina 29560.
(9) Includes 1,630,075 shares issuable upon exercise of warrants that are
exercisable on or within 60 days of May 31, 2000. Such warrants are
included for disclosure purposes only and the Company reserves any and
all of its rights with respect to such warrants as the result of Acqua
Wellington Value Fund's breach of the provisions of the Purchase
Agreement between the Company and Acqua Wellington Value Fund described
in the Section of this Proxy titled "Certain Relationships and Related
Transactions". The address of Acqua Wellington Value Fund Ltd is P.O.
Box SS 6238, Montague Sterling Centre, East Bay Street, Nassau,
Bahamas.
(10) Includes 688,000 shares owned by K&L of which Ms. Kyriopoulos hold a
50% general partnership interest. Ms. Kyriopoulos disclaims beneficial
ownership of the shares owned by Arthur G. Weiss, her father, and
Charles G. Weiss, her brother.
(11) Includes warrants to purchase 2,000,000 shares exercisable on or within
60 days of May 31, 2000. The address of the Bert Lance Grantor Trust is
P.O. Box 2228, Calhoun, Georgia 30703.
(12) Includes warrants to purchase 2,000,000 shares exercisable on or within
60 days of May 31, 2000. The address of Lazard Freres & Co LLC is 30
Rockefeller Plaza, New York, New York 10020.
(13) Represents 1,000,000 shares issuable upon the exercise of options,
200,000 of which are currently exercisable and 800,000 of which will be
exercisable within 60 days of May 31, 2000 assuming approval of
Proposal 4 herein.
(14) Represents 1,000,000 shares issuable upon the exercise of options that
are or will be exercisable on or within 60 days of May 31, 2000
assuming approval of Proposal 4 herein.
(15) Represents 500,000 shares issuable upon the exercise of options that
will be exercisable within 60 days of May 31, 2000 assuming approval of
Proposal 4 herein. Mr. Astrop's adult children are the beneficial
owners of an aggregate of 500,000 shares issuable upon the exercise of
options, 200,000 of which are currently exercisable and 300,000 of
which will be exercisable within 60 days of May 31, 2000 assuming
approval of Proposal 4 herein. Mr. Astrop disclaims beneficial
ownership of the shares owned by his adult children.
(16) Includes 11,500,000 shares issuable upon the exercise of options,
1,800,000 of which are currently exercisable and 9,700,000 of which
will be exercisable within 60 days of May 31, 2000 assuming approval of
Proposal 4 herein.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors of the Company who are not employees of the Company receive
compensation of $1,000 per month plus $1,000 for attendance at each quarterly
Board meeting. In addition, the Company from time to time has issued options to
its non-employee directors in connection with their service on the Board, a
description of which
5
<PAGE> 8
follows. In February, 1999, the Company granted non-qualified stock options to
purchase shares of Common Stock at an exercise price of $0.4375 per share, which
options are fully vested and exercisable after May 11, 1999 in connection with
Mr. Astrop's, Mr. Goldberg's and Dr. Verbrugge's services as directors of the
Company. The options were issued as follows: (i) options for 200,000 shares to
Dr. Verbrugge, (ii) options for 200,000 shares to Four Corners (in which Mr.
Goldberg has a 25% interest) and (iii) options for 100,000 shares to each of Mr.
Astrop's two adult children. In April 1999, the Company granted non-qualified
options to purchase 600,000 shares of Common Stock at an exercise price of
$0.4177 per share, which options are fully vested, but are subject to
stockholder approval, in connection with Mr. Astrop's, Mr. Goldberg's and Dr.
Verbrugge's services as directors of the Company. The options were issued as
follows: (i) options for 200,000 shares to Dr. Verbrugge, (ii) options for
200,000 shares to Four Corners (in which Mr. Goldberg has a 25% interest) and
(iii) options for 100,000 shares to each of Mr. Astrop's two adult children. In
July 1999, the Company granted non-qualified options to purchase 1,200,000
shares of Common Stock at an exercise price of $2.50 per share, which options
are fully vested, but are subject to stockholder approval, in connection with
Mr. Astrop's, Mr. Goldberg's and Dr. Verbrugge's services as directors of the
Company. The options were issued as follows: (i) options for 400,000 shares to
Dr. Verbrugge, (ii) options for 400,000 shares to Four Corners (in which Mr.
Goldberg has a 25% interest) and (iii) options for 400,000 shares to Mr. Astrop.
In December 1999, the Company granted non-qualified options to purchase 600,000
shares of Common Stock at an exercise price of $4.00 per share, which options
are fully vested, but are subject to stockholder approval, in connection with
Mr. Astrop's, Dr. Verbrugge's and Mr. Goldberg's services as directors of the
Company. The options were issued as follows: (i) options for 200,000 shares to
Dr. Verbrugge, (ii) options for 200,000 shares to Four Corners (in which Mr.
Goldberg has a 25% interest), (iii) options for 100,000 shares to Mr. Astrop and
(iv) options for 50,000 to each of Mr. Astrop's two adult children. In addition,
as an inducement to Ms. de Leon to join the Board, in December, 1999 the Company
issued options for 1,000,000 shares to Ms. de Leon at the following exercise
prices: (i) 200,000 options at $0.4375 per share, (ii) 200,000 shares at $0.4177
per share; (iii) 400,000 shares at $2.50 per share; and (iv) 200,000 shares at
$4.00 per share. All such options are fully vested, but are subject to
stockholder approval. Directors are also entitled to reimbursement of reasonable
out-of-pocket expenses incurred by them in attending Board meetings.
In December 1999, Four Corners exercised options with respect to
200,000 shares with an exercise price of $0.4375 per share, in a "cashless"
exercise, which resulted in Four Corners receiving 188,976 shares of Common
Stock. The fair market value of such shares as of the date of exercise was
$1,499,997.
6
<PAGE> 9
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth for the fiscal years ended June 30,
1997, 1998 and 1999 the cash and non-cash compensation awarded or paid by the
Company to all individuals serving as Chief Executive Officer of the Company at
any time during fiscal year 1999 and all executive officers of the Company or
any of its subsidiaries who received salary and bonuses in excess of $100,000
during fiscal year 1999 (collectively, the "Named Executives").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
LONG-TERM
FISCAL COMPENSATION OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION
--------------------------- ------ ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Arthur G. Weiss(1) 1999 $90,000 -- 1,700,000 $ 9,600(4)
C. Beverly Lance(2) 1999 $85,000 -- 1,700,000 $ 9,638(4)
Mark A. Conner(3) 1999 $35,308 -- -- $ 52,148(5)
1998 $61,200 -- -- $ 109,360(5)
1997 $61,200 -- -- $ 168,125(6)
</TABLE>
---------------
(1) Mr. Weiss has been Chairman of the Company since January 21, 1999. Mr.
Weiss's annual base salary is $180,000.
(2) Mr. Lance has been Chief Executive Officer since February 10, 1999 and
was President of the Company from February 10, 1999 to May 16, 2000.
Mr. Lance's annual base salary is $170,000.
(3) Mr. Conner was President and Chairman of the Board from February 12,
1996 until January 21, 1999 and was Chief Executive Officer from March
9, 1998 until January 21, 1999. Mr. Conner resigned his positions with
the Company on January 21, 1999.
(4) Includes automobile expenses and medical insurance paid by the Company
on behalf of Messrs. Weiss and Lance.
(5) Includes personal expenses paid by a former subsidiary of the Company
and the Company on behalf of Mr. Conner.
(6) Includes $75,990 in debt service payments made by a former subsidiary
of the Company and the Company on behalf of Mr. Conner and $92,135 in
other personal expenses paid by a former subsidiary of the Company and
the Company on behalf of Mr. Conner.
LONG-TERM COMPENSATION - STOCK OPTIONS
In February, 1999, each of Messrs. Lance and Weiss were granted
non-qualified stock options to purchase 700,000 shares of Common Stock at an
exercise price of $0.4375 per share, which options are fully vested and
exercisable after May 11, 1999. Of the options granted to Messrs. Lance and
Weiss, 200,000 were granted in connection with their services as directors of
the Company and the remaining 500,000 were granted in connection with their
services as officers of the Company. In April 1999, the Company issued to each
of Messrs. Lance and Weiss options to purchase 1,000,000 shares at an exercise
price of $0.4177 per share. These options vested immediately, but are subject to
stockholder approval. In July 1999, each of Messrs. Lance and Weiss received
options to purchase 1,700,000 shares of Common Stock at an exercise price of
$2.50 per share (the "July Options"). These options vested immediately, but are
subject to stockholder approval. In December 1999, each of Messrs. Lance
received options to purchase 1,000,000 shares of Common Stock at an exercise
price of $4.00 per share (the "December Options"). These options vested
immediately, but are subject to stockholder approval. In January 2000, the
agreements governing both the July and December Options were amended to further
condition their exercisability on the approval by the stockholders of an
amendment to the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock by at least 4,200,000 shares. See
Proposal 2 of this Proxy Statement.
7
<PAGE> 10
Option Grants in Last Fiscal Year
The following table sets forth information regarding the grant of stock
options to the Named Executives during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
NO. OF SECURITIES % TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES AVERAGE EXERCISE
NAME GRANTED IN FISCAL YEAR PRICE PER SHARE
---- ------------------ -------------------- ----------------
<S> <C> <C> <C>
Arthur G. Weiss 700,000 19.2% $.43
Arthur G. Weiss 1,000,000 27.3% $.41
C. Beverly Lance 700,000 19.2% $.43
C. Beverly Lance 1,000,000 27.3% $ 41
</TABLE>
---------------
The following table sets forth information concerning the value of
unexercised options held by the Named Executives as of June 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END VALUES
The following table sets forth information concerning the value of the
options exercised by the Named Executives during fiscal year 1999 and the value
at June 30, 1999 of unexercised options held by each Named Executive.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF OPTIONS
ACQUIRED ON VALUE OPTIONS AT 6/30/99 EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE AT 6/30/99
---- ------------ ------------ ------------------------- ------------------------
<S> <C> <C> <C> <C>
Arthur G. Weiss 0 0 700,000/1,000,000 $1,400,000/$2,019,800
C. Beverly Lance 0 0 700,000/1,000,000 $1,400,000/$2,019,800
</TABLE>
---------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, Mr. Preiss, the Company's former Chief Executive Officer,
terminated his employment with the Company and entered into a termination
agreement pursuant to which the Company paid the remaining $387,000 due under a
deferred compensation arrangement and transferred to him cash and additional
property with a total book value of $183,055.
In November 1998, the Company sold (i) approximately 100 acres to an
entity in which Mr. Langdon Flowers, a former director, held a controlling
interest for $610,000, which purchase price was the highest bona fide price
offered for such property and (ii) sold approximately 230 acres in Albany,
Georgia to Mr. Flowers and a Company stockholder in exchange for the return of
1,000,000 shares of Common Stock.
In January 1999, the Company acquired one hundred percent (100%) of the
issued and outstanding shares of West Side Investors, Inc., a Georgia
corporation which owns P & W Stonebridge, LLC and P & W Headland, LLC, which own
respectively, the Stonebridge Village Shopping Center located in Dekalb County,
Georgia and the Headland-DeLowe Shopping Center located in Atlanta, Georgia.
Arthur G. Weiss was the President of West Side Investors, Inc. and, together
with his adult children, owned one hundred percent (100%) of the issued and
outstanding common stock of West Side Investors, Inc. (the "West Side Stock")
prior to the transaction. The purchase price for the West Side Stock was the
issuance of 3,100,000 shares of the Company's Common Stock as follows: Arthur G.
Weiss, 1,550,000 shares; Charles G. Weiss, 775,000 shares and Caroline Weiss
Kyriopoulos, 775,000 shares. In January, 1999, the two shopping centers had an
appraised value of $9,130,000, and were subject to $7,886,000 of non-recourse
participating mortgages, which entitled the lender to 50% of the profits
realized from
8
<PAGE> 11
the shopping centers. The consideration paid was determined as a result of
arms-length negotiations prior to Mr. Weiss becoming a stockholder, director or
officer of the Company.
In January 1999, the Company acquired one hundred percent (100%) of the
total issued and outstanding Common Stock of PDK Properties, Inc., a Georgia
corporation, (the "PDK Stock") which owns one hundred percent (100%) of Stratos
Inns, LLC, a Georgia limited liability company, located in Atlanta, Georgia. The
purchase price for the PDK Stock was the issuance of 3,600,000 shares of the
Company's Common Stock to the Lance Children's Trust, of which Mr. Lance is
trustee. The consideration paid was determined as a result of arms-length
negotiations prior to Mr. Lance becoming a stockholder, officer or director of
the Company.
In January 1999, the Company closed the sale of its wholly-owned
subsidiary, Henry Holdings, Inc., a Florida corporation (the "Subsidiary") to
Mr. Conner, in exchange for 5,000,000 shares of the Company's Common Stock that
were held by Mr. Conner. Under the terms of the acquisition agreement, Mr.
Conner was to receive cash or cash and property with an agreed upon value of not
greater than $2,000,000. At the time of the sale, the Subsidiary held $700,000
in cash, certain real estate holdings, and mortgage indebtedness. On January 28,
1999, the Subsidiary sold its real estate holdings, realizing net proceeds of
$1,228,292. The real estate holdings had a book value of $6,396,416 as of
December 31, 1998 and were sold at a contract price of $5,112,902. As a result,
the amount paid for the 5,000,000 shares of Common Stock was $1,928,292.
At June 30, 1999, Stonebridge has an account receivable of $438,982 due
from an entity which is owned by the Company's Chairman and his adult children.
On or about January 29, 1999, the Wendell M. Starke Trust (the "Starke
Trust") purchased 2,500,000 shares of restricted Common Stock for $1,000,000 in
a private placement transaction. On June 29, 1999 the Starke Trust purchased an
additional 2,300,000 shares for $1,725,000 in a private placement transaction.
In connection with the sale of the shares, the Company entered into a
Registration Rights Agreement with the Starke Trust.
On or about March 18, 1999, the Godley Morris Group, LLC (the "GMG")
purchased 2,500,000 shares of restricted Common Stock for $1,000,000 in a
private placement transaction. On June 29, 1999 GMG purchased an additional
2,300,000 shares for $1,725,000 in a private placement transaction. In
connection with the sale of the shares, the Company entered into a Registration
Rights Agreement with the GMG.
In January 2000, the Company entered into a common stock purchase
agreement (the "Four Corners Purchase Agreement") with Four Corners which
provides for an equity financing package consisting of the sale of restricted
Common Stock and warrants. Under the terms of the Four Corners Purchase
Agreement, Four Corners purchased from the Company, for an aggregate purchase
price of $1 million, (i) 165,070 shares of restricted common stock, (ii)
warrants (the "Four Corners Fixed Warrants") to purchase up to 1,485,638 shares
of common stock at an exercise price of $6.058 per share and (iii) warrants (the
"Four Corners Variable Warrants") to purchase up to 1,238,030 shares of common
stock at a per share exercise price equal to the lesser of (x) $9.772 or (y) 90%
of the volume weighted average price of the common stock for the 5 trading days
prior to the date of the exercise of the warrants. The Four Corners Fixed
Warrants and 1,114,228 of the Four Corners Variable Warrants expire 18 months
after the date of issuance. The remaining Four Corners Variable Warrants expire
5 years after the date of issuance. The exercise of the Four Corners Fixed
Warrants and the Four Corners Variable Warrants are limited to 660,976 shares
and 495,732 shares, respectively, unless and until the exercise of such warrants
is approved by the Company's stockholders. Approval of such warrants is the
subject of Proposal 5 of this Proxy Statement. In connection with the Four
Corners Purchase Agreement, the Company entered into a Registration Rights
Agreement with respect to the Common Stock purchased by Four Corners and the
Common Stock underlying all options or warrants held by Four Corners. The terms
of the Purchase Agreement were the result of arms' length negotiations between
the parties. Mr. Goldberg, a former director of the Company, owns a 25% interest
in Four Corners.
In January 2000, the Company entered into a common stock purchase
agreement (the "AW Purchase Agreement") with Acqua Wellington Value Fund, Ltd.,
a company organized under the laws of the Bahamas ("AW"), which provides for an
equity financing package consisting of the sale of restricted Common Stock and
warrants. Under the terms of the AW Purchase Agreement, AW agreed to purchase
from the Company for aggregate consideration of $10,000,000 (i) 1,650,709 shares
of Common Stock and (ii) warrants to purchase up to 3,260,151 shares of Common
Stock. The AW Purchase Agreement required AW to complete the acquisition of the
Common Stock and warrants in two equal tranches. The first tranche (the terms of
which are described more fully below) for $5,000,000 closed simultaneously with
the execution of the AW Purchase Agreement. AW was required to close the second
tranche by February 29, 2000 but has failed to do so. At the closing of the
first tranche, AW purchased from the Company, for an aggregate purchase price of
$5 million, (i) 825,354 shares of
9
<PAGE> 12
restricted Common Stock; (ii) warrants (the "AW Fixed Warrants") to purchase up
to 577,748 shares of common stock at a purchase price equal to $6.058 per share
and (iii) warrants (the "AW Variable Warrants") to purchase up to 1,052,328
shares of common stock at a purchase price equal to the lesser of (x) $9.772 per
share or (y) 90% of the volume weighted average price of the common stock for
the 5 trading days prior to the exercise of the warrants. The AW Fixed Warrants
and 433,312 of the AW Variable Warrants expire 18 months after the date of
issuance. The remaining AW Variable Warrants expire 5 years after the date of
issuance. In connection with the AW Purchase Agreement, the Company entered in a
Registration Rights Agreement. However, as a result of AW's breach of the AW
Purchase Agreement, no registration statement has been filed. The terms of the
AW Purchase Agreement were the result of arms' length negotiations between the
parties.
In connection with the equity financing contemplated by the Four
Corners Purchase Agreement and the AW Purchase Agreement, the Company agreed to
pay Four Corners a fee for services provided to the Company equal to 6% of the
proceeds actually received by the Company and to reimburse Four Corners for
expenses relating to the financing. To date, the Company has paid fees to Four
Corners in the amount of $360,000 and has reimbursed Four Corners for
approximately $58,000 in expenses.
In a series of transactions consummated during the 1999 fiscal year,
Mark Conner (a former chief executive officer of the Company) and a former
officer of the Company purchased real property assets used in connection with
certain discontinued operations of the Company with an aggregate book value of
$16 million and assumed all related mortgage indebtedness. The Company received
cash, notes receivable or Common Stock in these transactions. As of June 30,
1999, the Company held notes receivable for $465,000 with respect to these
transactions, and received payment in full subsequent thereto. Subsequent to
June 30, 1999, the company sold additional assets used in connection with
discontinued operations with a carrying value of approximately $1.1 million for
cash and other assets of discontinued operations for $1 million in notes
receivable plus assumption of approximately $2.2 million in mortgage
indebtedness. These transactions were entered into with entities in which the
former chief executive officer and former officer are investors. All such
transactions were the result of arms' length negotiations.
From time to time during his term as President of the Company, the
Company made advances and repayments of loans to and from Mr. Conner, which were
repaid either through cash payments or by increases in compensation expense.
During the 1999 fiscal year, advances totaling $109,111 owed to the company were
repaid by Mr. Conner.
In December 1999, the Company issued 400,000 shares of restricted
Common Stock from treasury to certain parties including Langdon Flowers, Jr. (a
former director of the Company), Mr. Flower's father and a former officer of the
Company. The shares were issued pursuant to an agreement that resolved
outstanding issues related to certain transactions involving the Company's
discontinued real estate operations which reduced the related asset valuations
by $139,000. The transaction was the result of arms' length negotiations. In
connection therewith, the Company entered into a Registration Rights Agreement
providing the holders of such shares with certain registration rights.
During fiscal year 1999, the Company wrote off the $619,395 balance
remaining on a note owed by a corporation, an officer of which is Mr. Conner's
father. The note was given in connection with the sale during the 1998 fiscal
year of certain real property owned by the Company, the terms of which were at
prevailing market prices.
Mr. Lance's father has provided consulting services to the Company in
connection with its Internet-based private aviation travel service business. As
compensation for such services, during fiscal year 1999, the Company issued
warrants to purchase 400,000 shares of Common Stock with an exercise price of
$.50 per share to the Bert Lance Grantor Trust. Since June 30, 1999, the Company
has issued an additional 1.6 million warrants to the Bert Lance Grantor Trust
for consulting services provided by Mr. Lance's father. Of these warrants,
600,000 have an exercise price of $1.75 per share and 1,000,000 have an exercise
price of $4.00 per share.
In January 2000, the Company advanced $150,000 and, in May 2000, an
additional $125,000 in anticipation of an equity investment in a newly formed
entity that would acquire private jets for use in connection with flights
arranged through Private Seats (TM). The entity was formed and is managed by
Four Corners. Certain related parties of the Company have had discussions with
respect to participating in the entity. As a result
10
<PAGE> 13
of the breach by AW as described above and the Company's need to preserve its
capital for other purposes, the Company's current plans with respect to the
entity are being reconsidered.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and persons who own
beneficially more than 10% of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of such securities of the Company. Directors, executive
officers and greater than 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners were
complied with during the fiscal year ended June 30, 1999.
PROPOSAL 2 -- AMENDMENT OF CERTIFICATE OF INCORPORATION
The Board believes it is advisable to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of capital stock
from 60,000,000 shares of Common Stock to 110,000,000 shares, of which
100,000,000 shares would be authorized shares of Common Stock and 10,000,000
shares would be authorized shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). On May 16, 2000, the Board adopted a resolution
approving an amendment to Article FOURTH of the Certificate of Incorporation and
directing that the amendment be presented to the stockholders for approval (the
"Proposed Amendment"). Listed on Exhibit A hereto and incorporated herein by
reference is the complete text of the Proposed Amendment.
The Proposed Amendment both increases the number of authorized shares
of Common Stock from 60,000,000 to 100,000,000 shares of Common Stock and
authorizes the issuance of up to 10,000,000 shares of Preferred Stock. The Board
believes that the authorization of the increase in the number of shares of
Common Stock and the creation of the Preferred Stock is in the best interests of
the Company and its stockholders and believes it advisable to authorize such
shares to have them available for, among other things, possible issuance in
connection with such activities as public or private offers of shares for cash,
dividends payable in stock of the Company, acquisitions of other companies,
implementation of employee benefit plans, including the Company's 2000 Stock
Option Plan, which is the subject of Proposal 3 hereof, and other stock-based
incentive compensation to attract or retain key employees or consultants and
otherwise. In addition, amendments to the option agreements governing the July
and December Options granted to Messrs. Lance and Weiss (described in Proposal 4
hereof) provide that such options will not be fully exercisable unless the
Company's Certificate of Incorporation is amended to increase the authorized
shares of Common Stock by at least 4,200,000 shares. The Company has no present
plans with respect to the increased shares of Common Stock (other than with
respect to the options discussed above) or the Preferred Stock.
Of the 60,000,000 presently authorized shares of Common Stock,
33,118,654 shares were issued and outstanding and 435,930 were held by the
Company in treasury as of May 31, 2000. In addition, an aggregate of 28,913,743
shares of Common Stock have been reserved for issuance as of May 31, 2000 in
respect of certain option and warrant agreements (which amount includes certain
shares that are reserved for issuance subject to an increase in the number of
authorized shares of Common Stock). The holders of such options and warrants may
immediately exercise such options and warrants for an aggregate of 15,707,035
shares of Common Stock. The remaining options and warrants are either (i)
subject to stockholder approval, which approval is being sought in Proposals 4
and 5 hereof or (ii) vest over time. Additional shares of Common Stock, if
authorized, may be issued at such times, for such purposes and for such
consideration as the Board may determine to be appropriate without further
stockholder approval, except as otherwise required by applicable law. The
increase in authorized shares will not have an immediate effect on the rights of
existing stockholders but, to the extent the shares are issued in the future,
they will decrease the existing stockholders' percentage ownership in the
Company and, depending on the price at which they are issued, may be
economically dilutive to the existing stockholders. The stockholders do not have
preemptive rights with respect to issuance of any shares of Common Stock.
The Company currently has no authorized stock other than Common Stock.
The Preferred Stock created in the Proposed Amendment, if approved, would be
so-called "blank check" preferred stock, which means that the designation,
preferences, conversion rights, cumulative, relative, participating, optional or
other rights, including voting rights, qualifications, limitations or
restrictions (collectively, the "Limitations and Restrictions") may be
determined by the Board. If the Proposed Amendment is approved, the Board will
be entitled to authorize the
11
<PAGE> 14
creation and issuance of up to 10,000,000 shares of Preferred Stock in one or
more series with such Limitations and Restrictions as may be determined in the
Board's sole discretion, with no further authorization by the stockholders.
Stockholders will not have preemptive rights to subscribe for shares of
Preferred Stock.
It is not possible to determine the actual effect of the Preferred
Stock on the rights of the stockholders of the Company until the Board
determines the rights of the holders of a series of the Preferred Stock. Such
effects might include (i) restrictions on the payment of dividends to holders of
the Common Stock; (ii) dilution of voting power to the extent that the holders
of shares of Preferred Stock are given voting rights; (iii) dilution of the
equity interest and voting power if the Preferred Stock is convertible into
Common Stock; and (iv) restrictions upon any distribution of assets to the
holders of the Common Stock upon liquidation or dissolution and until the
satisfaction of any liquidation preference granted to the holders of Preferred
Stock.
The Board is required by Delaware law to make any determination to
issue shares of Common Stock or Preferred Stock based upon its judgment as to
the best interests of the Company. Although the Board has no present intention
of doing so, it could issue shares of Common Stock or Preferred Stock (within
the limits imposed by applicable law) that could, depending on the terms of such
series, make more difficult or discourage any attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or other means. When
in the judgment of the Board such action would be in the best interest of the
stockholders and the Company, the issuance of shares of Common Stock or
Preferred Stock could be used to create voting or other impediments or to
discourage persons seeking to gain control of the Company. For example, such
shares could be privately placed with purchasers favorable to the Board in
opposing such actions. In addition, the Board could authorize a holder of a
series of Preferred Stock to vote either separately as a class or with the
holders of Common Stock, on any merger, sale or exchange of assets by the
Company or any other extraordinary corporation transaction. The existence of
additional authorized shares could have the effect of discouraging unsolicited
takeover attempts. The issuance of new shares could also be used to dilute the
stock ownership of a person or entity seeking to obtain control of the Company
should the Board consider the action of such entity or person not to be in the
best interests of the stockholders and the Company.
While the Company may consider effecting an equity offering of Common
Stock or Preferred Stock in the future for the purposes of raising additional
working capital or otherwise, as of the date hereof, the Company has no
agreements or understandings with any third party to effect any such offering
and no assurances are given that any offering will in fact be effected. As noted
in the discussion accompanying Proposal 4, the exercisability of certain options
awarded to certain executive officers of the Company is expressly conditioned
upon the approval by the stockholders of Proposal 2. If Proposals 2 and 4 are
approved, such options will become fully exercisable by the holders thereof. The
Company has also proposed that the stockholders approve the Company's 2000 Stock
Option Plan, which is the subject of Proposal 3 of this Proxy Statement.
Although the Company has no agreements or understandings with any eligible
participant in such plan, if Proposals 2 and 3 are approved by the stockholders,
additional shares of Common Stock authorized by Proposal 2 could be used to make
awards to eligible participants under such plan.
The affirmative vote of holders of at least a majority of the
outstanding shares of Common Stock entitled to vote at the meeting is required
in order to adopt the Proposed Amendment. Unless indicated to the contrary, the
enclosed proxy will be voted FOR the proposed Amendment. Votes "withheld" or
abstaining from voting or broker non-votes will have the same effect as a
negative vote or AGAINST the proposed Amendment.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE PROPOSED AMENDMENT.
PROPOSAL 3 -- APPROVAL OF 2000 STOCK OPTION PLAN
On May 16, 2000, the Board adopted the flightserv.com 2000 Stock Option
Plan (the "Plan"), subject to approval of stockholders at the Meeting. As of the
date of adoption of the Plan by the Board, there were approximately 31 officers,
directors and employees of the Company and its subsidiaries who are eligible to
participate in the Plan.
The principal provisions of the Plan are summarized below. Such summary
does not, however, purport to be complete and is qualified in its entirety by
the terms of the Plan, a copy of which is attached hereto as Exhibit B and is
incorporated herein by reference.
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<PAGE> 15
DESCRIPTION OF THE PLAN
The Plan provides for the granting of options to acquire Common Stock,
which may be either incentive stock options (an "ISO") or nonqualified stock
options (an "NSO"). The Plan is administered by the Board or, if so established,
a committee of the Board established for that purpose (the "Committee"), and all
directors, officers and employees of the Company or any subsidiary and any
consultant or adviser providing services to the Company or any subsidiary whose
participation in the Plan is determined by the Board or, if applicable, the
Committee, to be in the best interests of the Company are eligible to receive
option grants under the Plan. There is no termination date under the Plan, but
no options may be granted under the Plan after the tenth anniversary of its
adoption by the Board. Receipt of option grants under the Plan is contingent
upon the execution by each prospective option holder of an agreement in such
form as the Board or, if applicable, the Committee, may from time to time
determine.
The Plan provides for the grant of options to purchase up to 10,000,000
shares of Common Stock. The purchase price per share of Common Stock subject to
an option is fixed by the Board or, if applicable, the Committee when the option
is granted. In the case of any ISO, such exercise price shall be no less than
the fair market value of the Common Stock at the time of grant (110% of such
value, in the case of any shareholder owning directly or indirectly more than
10% of the total voting power of the Company), as determined by the Board or, if
applicable, the Committee under procedures prescribed in the Plan. Additional
terms of options granted under the Plan, including the vesting provisions of
such options, will be also established at the time of grant. The Board or, if
applicable, the Committee in its sole discretion, may rescind, modify or waive
any limitation or condition on the exercise of an option contained in any option
agreement so as to accelerate the time at which an option may be exercised or
extend the period during which the option may be exercised. In addition to the
requirement requiring minimum exercise price described above, the terms of an
option agreement for an ISO must meet other requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). For example, any ISOs
granted under the Plan would not be transferable except by will or by the laws
of descent and distribution upon the death of the option holder.
Payment for shares purchased under the Plan may be made: (i) in cash;
(ii) by surrender of all or part of an option (including the option being
exercised); (iii) by exchanging shares of Common Stock with a fair market value
equal to the total option price; (iv) by delivery of other property rights and
credits deemed acceptable by the Board or, if applicable, the Committee
including the optionee's promissory note; or (v) any combination of the above
payment methods. Notwithstanding the foregoing, payment other than in cash may
be made only with the consent of the Board or, if applicable, the Committee or
if and to the extent provided for in the option agreement governing such
exercise.
In the event of any stock split, stock dividend, spin-off, split-up,
spin-out, recapitalization or similar transaction, the Plan provides that the
Board or, if applicable, the Committee shall make appropriate adjustments to the
number of shares available for issuance under the Plan and to the number and
price of options previously granted. In the event of any merger, consolidation
or share exchange with another corporation, whether or not the Company is the
surviving corporation, or if substantially all of the assets or all of the
shares of Common Stock are acquired by another corporation, or in the event of a
separation, reorganization or liquidation of the Company (each a "Significant
Transaction"), the Board or the board of directors of the corporation that
assumes the Company's obligations shall make appropriate provisions with respect
to any outstanding options by substitution on an equitable basis of appropriate
capital stock of the Company of the surviving or successor corporation, provided
that the difference between the aggregate fair market value of the shares so
substituted and the exercise price thereof is not greater that the difference
between the aggregate fair market value of the Common Stock subject to such
options prior to substitution and the exercise price thereof. Notwithstanding
the foregoing, if a Significant Transaction occurs, the Board or the board of
directors of the surviving or successor corporation may, upon written notice to
the holder of any such option, require that such option be exercised within
sixty (60) days of the date of such notice or such option will be terminated.
The Plan may be amended or terminated at any time by the Board or, if
applicable, the Committee provided, however that the Board or, if applicable,
the Committee may not amend the Plan if the amendment is not approved by the
stockholders and such approval is required under Section 422 of the Code or by
the Board. The Board or, if applicable, the Committee may, in its discretion,
postpone the issuance or delivery of shares following exercise of an option
until the completion of a registration, or other qualification or exemption of
such shares, under applicable state or federal laws. If the Plan is approved by
the stockholders, the Company may, at such time as the Board may determine,
register the shares of Common Stock issuable under the Plan under appropriate
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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<PAGE> 16
FEDERAL INCOME TAX CONSEQUENCE
Incentive Stock Options. Neither the grant nor the exercise of an ISO
will result in a taxable event to the option holder, and any gain realized upon
a disposition of shares of Common Stock received upon exercise of an ISO will be
taxed as long-term capital gain if the optionee holds the shares for at least
two years after the date the ISO was granted and one year after the date the ISO
was exercised (the "holding period requirement"). The Company is not entitled to
any business expense deduction when an ISO is exercised, except as discussed
below.
For the exercise of an ISO to qualify for the foregoing tax treatment,
the optionee must be an employee of the Company or a subsidiary from the date
that the ISO is granted through a date within three months before the date of
exercise. If an optionee is disabled, he or she has one year to exercise an ISO
following termination for disability. If the optionee dies, both the holding
period requirement and the three-month exercise period are waived.
If all of the foregoing requirements are met except the holding period
requirement (a "Disqualifying Disposition"), the optionee will recognize
ordinary income upon the disposition of the stock generally equal to the
difference between the fair market value of the stock at the time the ISO was
exercised and the option exercise price, but in no event shall such amount
exceed the gain realized upon sale of such stock. The balance of any gain
realized, if any, will be treated as a capital gain. The Company will be allowed
a business expense deduction in such cases to the extent that the optionee
recognizes ordinary income, subject to Section 162(m) of the Code as discussed
below.
If an optionee exercises an ISO by tendering shares of Common Stock
with a fair market value equal to part or all of the option exercise price, the
exchange of shares will be treated as a nontaxable exchange (unless the tender
of such shares would be a Disqualifying Disposition). If the exercise is a
tax-free exchange, the optionee would have no taxable income from the exchange
and exercise, and the tax basis of the shares surrendered would be treated as
the carryover basis for an equivalent number of option shares received, with the
additional option shares received taking a tax basis equal to the amount of
cash, if any, paid to exercise the ISO. If the optionee makes a Disqualifying
Disposition in the exercise of an ISO, the exchange would be treated as a
taxable event with respect to the surrendered shares as described above, with a
number of option shares equivalent in number to the surrendered shares taking a
tax basis equal to fair market value, and the remaining option shares taking a
tax basis equal to the amount of cash, if any, paid to exercise the ISO.
If, pursuant to the terms of an option agreement, the Company withholds
shares in payment of the exercise price for an ISO, the transaction generally
should be treated as if the withheld shares had been sold in a Disqualifying
Disposition after exercise of the option, so that the optionee will realize
ordinary income with respect to such shares. The tax basis of the option shares
generally would be determined in the same manner as described above where the
optionee physically surrenders ISO shares in a Disqualifying Disposition.
Non-Qualified Options. The grant of an NSO will not be a taxable event
for the optionee or the Company. Upon exercising a NSO, an optionee will
recognize ordinary income generally equal to the difference between the exercise
price and the fair market value of the stock on the date of exercise (except
that, if the optionee is subject to certain restrictions imposed by the
securities laws, the measurement date will be deferred, unless the optionee
makes a special tax election within 30 days after exercise). Upon a subsequent
sale or exchange of shares acquired pursuant to the exercise of a NSO, the
optionee will have taxable gain or loss measured by the difference between the
amount realized on the disposition and the tax basis of the shares (generally,
the amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If the Company complies with applicable reporting requirements and with
the restrictions of Section 162(m) of the Code, it generally will be entitled to
a business expense deduction in the same amount and at the same time as the
optionee recognizes ordinary income. Under Section 162(m) of the Code, if the
optionee is one of certain specified executive officers, then, unless certain
exceptions apply, the Company is not entitled to deduct compensation with
respect to the optionee, including compensation related to the exercise of stock
options, to the extent such compensation in the aggregate exceeds $1 million for
the taxable year.
If the optionee surrenders shares of Common Stock in payment of part or
all of the exercise price for NSOs, no gain or loss will be recognized with
respect to the shares surrendered (regardless of whether the shares were
acquired pursuant to the exercise of an ISO) and the optionee will be treated as
receiving an equivalent number of shares pursuant to the exercise of the option
in a nontaxable exchange. The tax basis of the shares surrendered will be
treated as the carryover basis for an equivalent number of option shares
received, with such option shares being treated as having been held for the same
holding period as had expired with respect to the surrendered shares. The fair
market value of the additional option shares received will constitute ordinary
compensation income to the optionee, with such additional shares taking a tax
basis in that amount.
14
<PAGE> 17
If pursuant to an option agreement, the Company withholds shares in
payment of the option price for NSOs or in payment of tax withholding, the
transaction should generally be treated as if the withheld shares had been
physically surrendered as described above.
OTHER OUTSTANDING OPTIONS
No awards have been made under the Plan as of the date of this Proxy
Statement and the Company has no present plans to make any such awards. Because
the terms and conditions of any such awards are subject to the discretion of the
Board or, if applicable, the Committee, the number of options awardable to and
value thereof to eligible participants is not determinable. In the past, the
Company has issued stock options for an aggregate of 13,825,000 shares of Common
Stock to officers, directors and key employees of the Company. Ratification and
approval of such grants are the subject of Proposal 4 hereof. A description of
the terms and conditions of such awards is set forth in the discussion of
Proposal 4 herein.
REASONS FOR OBTAINING STOCKHOLDER APPROVAL
The Board has approved the Plan subject to stockholder approval at the
Meeting. The Company is submitting the Plan for stockholder approval at the
Meeting because such approval is required to qualify the Plan under Section 422
of the Code relating to the grant of ISOs and also to permit the Company to make
stock option grants to eligible participants without the need for stockholder
ratification or approval of each such grant pursuant to the rules and
regulations of any exchange upon which shares of the Common Stock may be listed.
The rules and regulations of the American Stock Exchange, which is the
stock exchange upon which the Common Stock is listed and traded, require that
the stockholders approve options granted to officers, directors or key employees
unless, among other exceptions, the options are granted under a plan that (a)
has been approved by the stockholders or (b) does not authorize issuance of more
than 5% of the outstanding Common Stock in any one year provided that all such
arrangements adopted without stockholder approval in any five-year period do not
permit the issuance of options for more than an aggregate of 10% of the
outstanding Common Stock in any five-year period. If approved by the
stockholders, the Company could issue options pursuant to the Plan without
obtaining further stockholder approval for such issuances.
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock cast is required for the approval of the Plan. Abstentions and
broker non-votes will not be counted as shares voting on such matters and
accordingly will have no effect on the approval of Proposal 3.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PLAN.
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<PAGE> 18
PROPOSAL 4 - RATIFICATION AND APPROVAL OF OPTION AGREEMENTS
At various times since February 1, 1999, the Board authorized, and the
Company entered into, non-qualified stock option agreements (the "Option
Agreements") with certain officers, directors and employees of the Company
(each, an "Optionee", and collectively, the "Optionees") as set forth below. The
following chart sets forth the material terms of the Option Agreements. Unless
otherwise noted, all such options are fully vested but not exercisable until the
Option Agreements are approved by the Stockholders.
<TABLE>
<CAPTION>
DATE OF NUMBER EXERCISE CLOSING PRICE
GRANTEE GRANT OF SHARES PRICE ON DATE OF GRANT
------- ------- --------- -------- ----------------
<S> <C> <C> <C> <C>
A. Weiss(1) 2/10/99 700,000 $0.4375 $0.4375
Chairman, 4/21/99 1,000,000 0.4177 0.5625
Director 7/7/99 1,700,000 2.5000 2.5000
12/2/99 1,000,000 4.0000 7.1250
C. Lance(1) 2/10/99 700,000 0.4375 0.4375
Chief Executive 4/21/99 1,000,000 0.4177 0.5625
Officer, Director 7/7/99 1,700,000 2.5000 2.5000
12/2/99 1,000,000 4.0000 7.1250
W. Astrop(2) 2/10/99 200,000 0.4375 0.4375
Director 4/21/99 200,000 0.4177 0.5625
7/7/99 400,000 2.5000 2.5000
12/2/99 200,000 4.0000 7.1250
J. Goldberg(3) 4/21/99 200,000 0.4177 0.5625
Former Director 7/7/99 400,000 2.5000 2.5000
12/2/99 200,000 4.0000 7.1250
S. de Leon(4) 12/2/99 200,000 0.4375 7.1250
Director 12/2/99 200,000 0.4177 7.1250
12/2/99 400,000 2.5000 7.1250
12/2/99 200,000 4.0000 7.1250
J. Verbrugge(5) 2/10/99 200,000 0.4375 0.4375
Director 4/21/99 200,000 0.4177 0.5625
7/7/99 400,000 2.5000 2.5000
12/2/99 200,000 4.0000 7.1250
W. Wortman(6) 6/24/99 200,000 1.0000 1.75
Vice-President, 4/24/00 100,000 2.0000 2.00
Chief Financial
Officer
T. Bottorff(7) 5/16/00 500,000 1.4375 1.4375
President, Chief
Operating Officer
Non-Executive Officer 4/16/99(8) 50,000 0.5000 0.5625
Employee Group 8/13/99(9) 100,000 1.7500 2.8750
9/17/99(10) 50,000 4.0000 4.5625
12/27/99(11) 125,000 4.0000 7.9375
4/24/00(12) 100,000 2.0000 2.0000
</TABLE>
---------------
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<PAGE> 19
(1) Options awarded in February, 1999 are currently exercisable. Pursuant to
amendments to the July and December, 1999 Option Agreements, Messrs. Weiss and
Lance further agreed that certain options awarded thereunder would not be
exercisable unless and until the Certificate of Incorporation of the Company
were amended to increase the number of authorized shares of Common Stock by no
less than 4,200,000 shares. See Proposal 2 of this Proxy Statement.
(2) Options awarded in February, 1999 are currently exercisable. At the request
of Mr. Astrop, options for an aggregate of 500,000 shares that were otherwise
issuable to him were issued to his two adult sons.
(3) At the request of Mr. Goldberg, options for an aggregate of 800,000 shares
that were otherwise issuable to him were issued to Four Corners, of which Mr.
Goldberg has a 25% interest. At the request of Mr. Goldberg, Four Corners was
also awarded options with respect to 200,000 shares on February 10, 1999 at an
exercise price of $.4375 per share. Four Corners exercised those options on
December 21, 1999.
(4) As an inducement to Ms. de Leon to join the Board, the Company agreed to
award Ms. de Leon stock options as if she had been a member of the Board since
February 1999.
(5) Options awarded in February, 1999 are currently exercisable.
(6) Options awarded in September 1999 are fully vested. One half of the Options
awarded in April 2000 vest on October 24, 2000 with the balance vesting on April
24, 2001.
(7) One half of the Options vest on the November 16, 2000 with the balance
vesting on the first anniversary of the date of grant.
(8) Options vested on the date of grant.
(9) Fifty percent of the Options vested on the date of the grant, Twenty-five
percent of the Options vest on the first anniversary of the grant and
Twenty-five percent of the Options vest on the second anniversary of the date
of grant.
(10) Fifty percent of the Options are vested, Twenty-five percent vest on July
1, 2000 and Twenty-five percent vest on October 1, 2000.
(11) Options awarded vest at the rate of 12.5% of the total number of options
awarded each quarter commencing April 1, 2000, and become fully vested on
January 1, 2002.
(12) Fifty percent of the Options vest on October 24, 2000 with the balance
vesting on April 24, 2001.
The closing price of the Common Stock on the American Stock Exchange
on May 31, 2000 was $1.25.
PURPOSE OF THE OPTION AGREEMENTS
The Option Agreements were entered into to compensate the recipients
for the significant contributions that they had made on behalf of the Company
prior to the date of each grant and to provide incentive for each Optionee to
continue to make contributions to the Company in the future.
TERMS OF OPTION AGREEMENTS
The principal provisions of the Option Agreements are summarized below. Such
summary does not, however, purport to be complete and is qualified in its
entirety by reference to the full text of the standard form of Option Agreement,
a copy of which is attached hereto as Exhibit C and is incorporated herein by
reference.
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<PAGE> 20
Each Option Agreement grants an option to purchase the specified number
of shares of Common Stock at the exercise price (the "Options"). The exercise
price at the time of each of the grants was determined by the Board after taking
into account the range of closing prices of the Common Stock in periods prior to
the date of such grant, the volatility of the market price of the Common Stock
and the contributions that the recipients of the grants had made and were likely
to make after the grant.
The exercise of any of the Options granted under the Option Agreements
is contingent upon the Company receiving advice from its counsel that any shares
issuable upon exercise of the Options (i) have been listed on the principal
exchange upon which the Company's securities are traded, and (ii) are registered
or are exempt from registration under the applicable securities laws. Subject to
the vesting provisions applicable to individual Option Agreements described in
the footnotes to the chart above, and, in the case of certain Option Agreements
as noted in the footnotes to the chart above, after receipt of stockholder
approval, the Options may be exercised at any time until 10 years after the date
of grant. The exercise price may be paid in cash, in shares of Common Stock held
by the Optionee or through a so-called "cashless exercise", whereby the Optionee
surrenders the number of Options that equals the number of shares that would
otherwise have been delivered by the Optionee if the exercise price had been
paid with previously issued shares of Common Stock.
The Option Agreements provide that in the event of any stock split,
stock dividend, spin-off, split-up, spin out, recapitalization or similar
transaction, the Board shall make appropriate adjustments to the number and
price of Options then outstanding. In the event of any merger, consolidation or
share exchange with another corporation, whether or not the Company is the
surviving corporation, or if substantially all of the assets or all of the
shares of Common Stock are acquired by another corporation, or in the event of a
separation, reorganization or liquidation of the Company (each a "Significant
Transaction"), the Board of the Company or the board of directors of the
corporation that assume the Company's obligations shall make appropriate
provisions with respect to any outstanding options by substitution on an
equitable basis of appropriate capital stock of the Company of the surviving or
successor corporation, provided that the difference between the aggregate fair
market value of the shares so substituted and the exercise price thereof is not
greater that the difference between the aggregate fair market value of the
Common Stock subject to such options prior to substitution and the exercise
price thereof. Notwithstanding the foregoing, if a Significant Transaction
occurs, the Board of the Company or the board of directors of the surviving or
successor corporation may, upon written notice to the holder of any such option,
require that such option be exercised within sixty (60) days of the date of such
notice or such option will be terminated.
The Option Agreements are not assignable or transferable by the
Optionee other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order. Only the Optionee may exercise an
Option during such Optionee's lifetime. In the case of Options awarded to
certain non-executive employees and to Mr. Wortman in April, 2000, if such
Optionee's employment with the company is terminated for reasons other than
death, only that portion of the Options that are vested prior to such
termination may be exercised by such Optionee thereafter. If such Optionee dies
during the term of his Option Agreement, his executor or personal representative
may exercise only that portion of the Options that were vested as of the date of
such Optionee's death. In the case of Options awarded to Mr. Bottorff, Options
awarded will become fully vested upon a termination of Mr. Bottorff's employment
by the Company "Without Cause", or by Mr. Bottorff for "Good Reason" or upon the
occurrence of a "Change of Control." "Without Cause" means a termination of Mr.
Bottorff's employment with the Company for any reason other than the death,
disability or for "Cause," which means that Mr. Bottorff (i) has been convicted
of a misdemeanor involving moral turpitude or any felony; (ii) has committed an
act of fraud upon the Company or an act evidencing dishonesty toward the Company
which has materially damaged or prejudiced the Company; (iii) has
misappropriated funds, property or rights of the Company (iv) has failed to
comply in any material way with written policies or directives of the Board or
Chief Executive Officer of the Company, which failure has a material adverse
effect on the Company and has not been corrected by Mr. Bottorff within thirty
(30) days after written notice from the Board of any such act or omission; or
(v) has violated or breached Mr. Bottorff's nondisclosure and nonsolicitation
obligations to the Company. "Good Reason" means the occurrence of any of the
following circumstances without Mr. Bottorff's consent: (i) the Company has
materially altered Mr. Bottorff's responsibilities, duties or position within
the management hierarchy of the Company; (ii) the Company has reduced Mr.
Bottorff's base salary in effect immediately prior to such reduction; (iii) the
Company transfers Mr. Bottorff to a location that is more than thirty (30) miles
from the city limits of Atlanta, Georgia or the city limits of such other city
in which Mr. Bottorff maintains his principal place of business for the Company
because he has previously consented in writing to a transfer to another
location; or (iv) the Company fails to comply in any material respect with its
obligations to Mr. Bottorff under any employment contract between Mr. Bottorff
and the Company.
18
<PAGE> 21
The options are non-qualified stock options, which are not entitled to
special tax treatment under Section 422 of the Internal Revenue Code. The tax
treatment of the options subject to the Option Agreements is that described in
Proposal 3 regarding non-qualified options generally.
REASONS FOR SEEKING STOCKHOLDER APPROVAL
As noted above, certain of the Option Agreements provide that the
Options granted thereunder may not be exercised by the Optionee unless and until
such Option Agreements are approved by the stockholders. Rules and regulations
of the American Stock Exchange provide that stockholder approval is required if
Options are granted pursuant to a plan or arrangement if such arrangements could
result in the issuance of more than 5% of the outstanding Common Stock in any
one year or if all arrangements adopted without stockholder approval in any
five-year period authorize, in the aggregate, the issuance of more than 10% of
the outstanding Common Stock. Because exercise of the Options awarded pursuant
to the Option Agreements could result in issuance of more than 5% of the
outstanding Common Stock in any one year or more than 10% of the outstanding
Common Stock in any five-year period, the Board conditioned the exercise of
certain of the Option Agreements on the prior approval of the Company's
stockholders. Although the Board anticipates that future grants of stock options
will be made pursuant to the Plan, which is the subject of Proposal 3 in this
Proxy Statement, it is possible that circumstances may require that the Board
award options outside the Plan to certain key individuals. Approval of all of
the Option Agreements by the stockholders will give the Board flexibility in
making such determinations with respect to future grants of stock options other
than pursuant to the Plan.
If approval of the stockholders is not received, those Optionees who
have Option Agreements that do not require stockholder approval prior to
exercise will be able to exercise those Options, assuming other conditions and
requirements contained in those agreements are met. Optionees who have Option
Agreements that require stockholder approval prior to exercise will not be able
to exercise the Options subject to such agreements or to receive the shares of
Common Stock underlying those Options until the stockholders approve such
agreements. In the case of Options granted to Mr. Bottorff, if approval of the
stockholders is not received and Mr. Bottorff seeks to exercise all or any part
of the Options, the Company must pay to Mr. Bottorff an amount equal to the
difference between the number of shares Mr. Bottorff sought to acquire
multiplied by the closing price of a share of Common Stock on the date of such
attempted exercise, on the one hand, and the option price per share multiplied
by the number of shares Mr. Bottorff sought to acquire, on the other hand, plus,
an amount sufficient for Mr. Bottorff to pay any federal, state and local
income, payroll and employment taxes and any additional taxes owed with respect
to such tax payments.
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock cast is required for the approval of the Option Agreements.
Abstentions and broker non-votes will not be counted as shares voting on such
matters and accordingly will have no effect on the approval of Proposal 4.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE RATIFICATION AND APPROVAL OF THE OPTION AGREEMENTS.
PROPOSAL 5 - RATIFICATION AND APPROVAL OF THE GRANT OF CERTAIN
WARRANTS TO FOUR CORNERS CAPITAL, LLC
In January 2000, the Company entered into a common stock purchase
agreement (the "Four Corners Purchase Agreement") with Four Corners Capital,
LLC, a Delaware limited liability company ("Four Corners"). Under the terms of
the Four Corners Purchase Agreement, Four Corners purchased from the Company,
for an aggregate purchase price of $1 million, (i) 165,070 shares of restricted
Common Stock; (ii) warrants (the "Four Corners Fixed Warrants") to purchase up
to 1,485,638 shares of Common Stock at an exercise price of $6.058 per share;
(iii) warrants (the "Four Corners Variable Warrants") to purchase up to
1,114,228 shares of Common Stock at a per share exercise price equal to the
lesser of (x) $9.772 ("Fixed Exercise Price") or (y) 90% of the volume weighted
average price of the Common Stock for the 5 trading days prior to the date of
the exercise of the warrants (the "VWAP"); and (iv) warrants (the "Five Year
Warrants") to purchase up to 123,802 shares of Common Stock at a per share
exercise price equal to the lesser of $9.772 or 90% of the VWAP. The
19
<PAGE> 22
Four Corners Fixed Warrants and the Four Corners Variable Warrants expire 18
months after the date of issuance. The Five Year Warrants expire 5 years after
the date of issuance. The exercise of the Four Corners Fixed Warrants and the
Four Corners Variable Warrants are limited to 660,976 shares and 495,732 shares,
respectively, unless and until the exercise of such warrants is approved by the
Company's stockholders. The Four Corners Fixed Warrants and the Four Corners
Variable Warrants are collectively referred to herein as the "Four Corners
Warrants." In addition, the Company and Four Corners entered into a registration
rights agreement pursuant to which the Company provided certain registration
rights to Four Corners with respect to the Common Stock and the shares
underlying the warrants issued to them (including shares underlying warrants
previously issued to Four Corners).
Other provisions of the Four Corners Warrants provide that in the event
of a recapitalization, reclassification, consolidation, merger or sale of
substantially all of the assets of the Company (each a "Triggering Event"), a
holder of the Four Corners Warrants is entitled to (a) receive upon exercise of
such warrants the securities, cash and property (the "Event Consideration") to
which such holder would have been entitled had such holder exercised the Four
Corners Warrants immediately prior to the consummation of the Triggering Event
or (b) sell such warrants concurrently with the consummation of the Triggering
Event to the entity continuing after such consummation for a price equal to the
difference between the value of the Event Consideration less the exercise price
of such warrants. In addition, the Company shall not consummate a Triggering
Event unless prior thereto, the party required to deliver Event Consideration
assumes the obligations of the Company under the Four Corners Warrants.
If the Company effects any stock splits, reverse stock splits or
declares a stock dividend, appropriate adjustments must be made to the exercise
price of the Four Corners Warrants. If the Company makes an in-kind distribution
with respect to its Common Stock or makes a rights or similar offering to all of
is holders of Common Stock, holders of the Four Corners Warrants shall also be
entitled to participate in such distribution as if such holders had exercised
such warrants prior to such distribution unless, not less than five days prior
to the record date for such distribution, the Company notifies the holders of
the Four Corners Warrants of the record date for such distribution, if the
holders do not exercise the Four Corners Warrants prior to such record date,
then such holders will not be entitled to receive such distribution.
If the Company issues shares of Common Stock (or securities convertible
into Common Stock) other than pursuant to the exercise of options or warrants
issued prior to the date of the Four Corners Warrants or shares issued in
connection with strategic corporate partnering arrangements, at a price per
share that is less than the exercise price of the Four Corners Warrants then in
effect, then the exercise price shall be proportionately adjusted to such lower
offering price. If the Company purchases shares of Common Stock at a price
greater than the trading price of the Common Stock, then the exercise price of
the Four Corners Warrant shall be proportionately adjusted.
The principal provisions of the Four Corners Warrants are summarized
above. Such summary does not, however, purport to be complete and is qualified
in its entirety by the terms of such warrants, copies of which are attached
hereto as Exhibits D-1 and D-2 and are incorporated herein by reference.
20
<PAGE> 23
REASONS FOR SEEKING STOCKHOLDER APPROVAL
In connection with the closing of the Purchase Agreement, the Company
was required to have the Common Stock underlying the Four Corners Warrants,
together with Common Stock underlying other warrants issued to another investor,
approved for listing on the American Stock Exchange. Pursuant to certain rules
and regulations of the American Stock Exchange, such listing was conditioned
upon the Company receiving stockholder approval of the exercise of the portion
of the Four Corners Warrants as described above. Approval of the exercise of the
Four Corners Warrants will permit Four Corners to derive the full benefit of the
Purchase Agreement. If approval of the stockholders is not received, Four
Corners will not be able to exercise 824,662 of the Four Corners Fixed Warrants
or 618,496 of the Four Corners Variable Warrants or to receive the shares of
Common Stock underlying such warrants until the Stockholders approve such
agreements. Four Corners will be able to exercise 660,976 of the Four Corners
Fixed Warrants and 495,732 of the Four Corners Variable Warrants, which are not
subject to such restrictions, assuming other conditions and requirements
contained in those agreements are met.
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock cast is required for the approval of the exercise of the Four
Corners Warrants. Abstentions and broker non-votes will not be counted as shares
voting on such matters and accordingly will have no effect on the approval of
Proposal 5.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE RATIFICATION AND APPROVAL OF THE FOUR CORNERS WARRANTS
PROPOSAL 6 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has selected Ernst & Young, LLP as the
independent accountants of the Company for the fiscal year ending June 30, 2000.
The Company has been advised by Ernst & Young, LLP that neither it nor any
member of Ernst & Young, LLP has any financial interest, direct or indirect, in
the Company or any of its subsidiaries. In addition to examining and reporting
upon the Company's financial statements, Ernst & Young, LLP also reviews the
Company's filings with the SEC and provides consultations on financial statement
implications of matters under consideration by the Company.
The Company has been advised that representatives of Ernst & Young, LLP
will be present at the Meeting and will have the opportunity to make a statement
at the meeting is they so desire. Such representatives will also be available to
answer questions and provide information to the stockholders.
Ernst & Young is replacing Jones and Kolb, who served as independent
auditors of the Company for the fiscal years ended June 30, 1999, June 30, 1998
and June 30, 1997. The Company's principal accountant's report on the financial
statements for the years preceding the dismissal of Jones and Kolb did not
contain an adverse opinion or disclaimer opinion, nor was it modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by the Audit Committee of the Board. There were no
disagreements with the Jones and Kolb on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure. The
Company had no discussions with Ernst & Young, LLP as to specific accounting
matters or type of opinion that might be rendered, other than those related to
the normal engagement of certifying accountants. The Company does not expect
that any representatives of Jones and Kolb will be available at the Meeting.
The affirmative vote of the holders of a majority of the shares of
Common Stock cast is required for the ratification of the appointment of Ernst &
Young, LLP as independent accountants of the Company. Abstentions and broker
non-votes will not be counted as shares voting on such matters and accordingly
will have no effect on the approval of Proposal Five. If this Proposal 5 is not
approved by the stockholders, the Audit Committee will reconsider the selection
of Ernst & Young, LLP.
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<PAGE> 24
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 2000.
OTHER MATTERS
The Board does not know of any other matters that may come before the
Meeting. If any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
to act, in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's
Meeting of Stockholders for fiscal year ending June 30, 2000 must be received by
the Company no later than August 15, 2000, in order to be included in the proxy
statement and proxy relating to that annual meeting.
Whether or not you plan to attend, you are urged to complete, sign and
return the enclosed proxy in the accompanying envelope. A prompt response will
greatly facilitate arrangements for the Meeting, and your cooperation will be
appreciated. Stockholders who attend the Meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board,
Judy M. Gordon
Secretary
Atlanta, Georgia
June ___, 2000
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EXHIBIT A
If the Proposed Amendment is approved by the stockholders, upon the
filing of the Proposed Amendment with the Secretary of State of the State of
Delaware, Article FOURTH of the Certificate of Incorporation would read in its
entirety as follows:
"FOURTH: (A) The aggregate number of shares of stock of all classes
which the Corporation shall have authority to issue is 110,000,000
shares, of which 100,000,000 shares shall be common stock of the par
value of $.04 per share (the "Common Stock") and 10,000,000 shares
shall be preferred stock of the par value of $.01 per share (the
"Preferred Stock").
(B) The Board, or a duly authorized committee thereof, is authorized,
subject to limitations prescribe by law and the provisions of this
Article FOURTH, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable
law of the State of Delaware, to establish from time to time the number
of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof. The
authority of the Board with respect to each series shall include but
not be limited to, determination of the following:
(1) the number of shares constituting that series and the
distinctive designation of that series;
(2) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on
shares of that series;
(3) whether that series shall have voting rights, in additions
to the voting rights provided by law, and , if so, the terms of such
voting rights;
(4) whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board shall
determine;
(5) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(6) whether that series shall have a sinking fund for the
redemption or purchase of that series, and if so, the terms and amount
of such sinking fund;
(7) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(8) any other relative rights, preferences and limitations of
that series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid
or declared and set apart for payment on the Common Stock with respect
to the same dividend period. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets
available for distribution to holder of shares of Preferred Stock of
all series shall be insufficient to pay such holders the full
preferential amount to which they are entitled, then such assets shall
be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including
unpaid cumulative dividends, if any) payable with respect thereto.
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EXHIBIT B
FLIGHTSERV.COM
2000 STOCK OPTION PLAN
ARTICLE 1
NAME AND PURPOSE
1.1 Name. The name of this Plan is the "flightserv.com Stock Option Plan."
1.2 Purpose. The purpose of the Plan is to enhance the profitability and
value of the Company for the benefit of its stockholders by providing
equity ownership opportunities to better align the interests of
officers, key employees and valued directors, consultants, independent
contractors and other agents with those of the Company's stockholders.
The Plan is also designed to enhance the profitability and value of the
Company for the benefit of its stockholders by providing stock options
to attract, retain and motivate officers, key employees and valued
directors, consultants, independent contractors and other agents who
make important contributions to the success of the Company.
ARTICLE 2
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions. The following words and phrases, when used in the
Plan, unless otherwise specifically defined or unless the context
clearly otherwise requires, shall have the following respective
meanings:
(a) Affiliate. A Parent or Subsidiary or any other entity
designated by the Committee in which the Company owns at least
a 50% interest (including, but not limited to, partnerships
and joint ventures).
(b) Board. The Board of Directors of the Company.
(c) Code. The Internal Revenue Code of 1986, as amended. Any
reference to the Code includes the regulations promulgated
thereunder.
(d) Company. flightserv.com, a Delaware corporation.
(e) Committee. The Board, or to the extent authorized by the
Board, the Company's Compensation Committee or its successors.
(f) Common Stock. The common stock, $.04 par value, of the
Company.
(g) Consultant. Any person engaged by the Company or any Affiliate
to provide consulting services to the Company or any Affiliate
as an Independent Contractor and not as an Employee.
(h) Directors. A duly-elected member of the Board.
(i) Effective Date. The date that the Plan is approved by the
stockholders of the Company, which must occur within 12 months
after adoption by the Board. Any grants of Options prior to
the approval by the stockholders of the Company shall be void
if such approval is not obtained.
(j) Employee. Any individual employed by the Employer.
(k) Employer. The Company and all Affiliates.
(l) Exchange Act. The Securities Exchange Act of 1934, as amended.
<PAGE> 27
(m) Fair Market Value. For so long as the Common Stock of the
Company is listed or admitted to unlisted trading privileges
on a national securities exchange or designated as a national
market systems security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. ("NASD")
or if sales or bid and offer quotations are reported for the
Common Stock in the automated quotation system ("NASDAQ")
operated by the NASD ("publicly traded"), "Fair Market Value"
shall mean the closing price of the Common Stock as of the day
in question or, if such day is not a trading day in the
principal securities market or markets for such stock, on the
nearest preceding trading day, as reported with respect to the
market (or the composite of markets, if more than one) in
which shares of such stock are then traded, or, if no such
closing prices are reported, on the basis of the mean between
the high bid and low asked prices that day on the principal
market or quotation system on which shares of such stock are
then quoted, or, if not so quoted, as furnished by a
professional securities dealer making a market in such stock
selected by the Board. If the Common Stock is no publicly
traded, "Fair Market Value" means with respect to shares of
Common Stock, the amount that a willing buyer would pay for
such shares to a willing seller, neither being under any
compulsion to buy or to sell and both having reasonable
knowledge of all relevant factors, as such amount is
determined by the Board in good faith using any reasonable
valuation method as of the date of any grant of an ISO (or on
any other relevant valuation date specified herein).
(n) Fiscal Year. The taxable year of the Company, which end June
30 of each year.
(o) Independent Contractor. A Person engaged to provide services
to the Company or any Affiliate on an independent basis and
not as an Employee.
(p) ISO. An Incentive Stock Option as defined in Section 422 of
the Code.
(q) NQSO. A Non-Qualified Stock Option, which is an Option that
does not meet the statutory requirements of an ISO.
(r) Option. An option to purchase Shares granted under the Plan.
(s) Option Agreement. The document which evidences the grant of an
Option under the Plan and which sets forth the terms,
conditions and provisions of, and restrictions relating to,
such Option.
(t) Parent. Any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if, at
the time of the grant of an Option, each of the corporations
(other than the Company or a Subsidiary) owns stock possessing
50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(u) Participant. An Employee, Director, Consultant, Independent
Contractor or other agent who is granted an Option under the
Plan.
(v) Person. An individual, corporation, partnership, limited
liability company, joint venture, association, syndicate,
trust, unincorporated organization or other entity.
(w) Plan. The flightserv.com 2000 Stock Compensation Plan and all
amendments and supplements to it.
(x) Shares. A share of Common Stock reserved for issuance upon the
exercise of options.
(y) Subsidiary. Any corporation (other than the Company), in an
unbroken chain of corporations, beginning with the Company,
if, at the time of grant of an Option, each of such
corporation, other than the last such corporation in the
unbroken chain, owns stock or other equity interests
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
2.2 Other Definitions. In addition to the above definitions, certain words
and phrases used in the Plan and any Option Agreement may be defined in
other portions of the Plan or in such Option Agreement.
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2.3 Conflicts in Plan. In the case of any conflict in the terms of the
Plan, or between the Plan and an Option Agreement, relating to an
Option, the provisions in the article of the Plan which specifically
grants such Option shall control those in a different article or in
such Option Agreement.
ARTICLE 3
COMMON STOCK
3.1 Numbers of Shares. The number of Shares for which Options may be
granted under the Plan shall be 10,000,000. Such Shares may be
authorized but unissued Shares, reacquired Shares, or any combination
thereof.
3.2 Reusage. If an Option expires or is terminated, surrendered or canceled
without having been fully exercised, the unused Shares covered by any
such Option shall again be available for grant under the Plan to any
Participant.
3.3 Adjustments. If there is any change in the Common Stock by reason of
any stock split, stock dividend, spin-off, split-up, spin-out or
recapitalization, or any other similar transactions, the number of
Shares under the Plan or subject to or granted pursuant to an Option
and the price thereof, as applicable, shall be appropriately adjusted
by the Committee.
3.4 Reorganization. If the Company is merged, consolidated or effects a
share exchange with another corporation (whether or not the Company is
the surviving corporation), or if substantially all of the assets or
all of the shares of Common Stock are acquired by another corporation,
or in the event of a separation, reorganization or liquidation of the
Company, the Board or the board of directors of any corporation
assuming the obligations of the Company hereunder, shall make
appropriate provision for the protection of any outstanding Options by
the substitution on an equitable basis of appropriate capital stock of
the Company, or of the merged, consolidated or otherwise reorganized
corporation which will be issuable in respect to the Shares, provided
only that the excess of the aggregate Fair Market Value of the Shares
subject to the Options immediately after such substitution over the
exercise price thereof is not more than the excess of the aggregate
Fair Market Value of the Shares subject to the Options immediately
before such substitution over the exercise price thereof.
Notwithstanding the preceding sentence, if the Company is merged,
consolidated or effects a share exchange with another corporation or if
substantially all of the assets or all of the shares of Common Stock of
the Company are acquired by another corporation, or in the event of a
separation, reorganization or liquidation of the Company, the Board or
the board of directors of any corporation assuming the obligations of
the Company hereunder may, upon written notice to the holder of any
outstanding Option, provide that such Option must be exercised within
sixty (60) days of the date of such notice or it will be terminated.
ARTICLE 4
ELIGIBILITY
4.1 Determined By Committee. The Participants and the Options they receive
under the Plan shall be determined by the Committee in its sole
discretion. In making its determinations, the Committee shall consider
past, present and expected future contributions of Participants and
potential Participants to the Company.
ARTICLE 5
ADMINISTRATION
5.1 Committee. The Plan shall be administered by the Company's Board or, to
the extent authorized by the Board, the Company's Compensation
Committee which shall consist of two or more members of the Board.
5.2 Authority. Subject to the terms of the Plan, the Committee shall have
sole discretionary authority to:
(a) determine the individuals to whom Options are granted, the
type and amounts of Options to be granted and the date of
issuance and duration of all such grants;
(b) determine the terms conditions and provisions of, and
restrictions relating to, each Option granted;
(c) interpret and construe the Plan and all Option Agreements;
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(d) prescribe, amend and rescind rules and regulations relating to
the Plan;
(e) determine the content and form of all Option Agreements;
(f) determine all questions relating to Options under the Plan;
(g) maintain accounts, records and ledgers relating to Options;
(h) maintain records concerning the Committee's decisions and
proceedings;
(i) employ agents, attorneys, accountants or other Persons for
such purposes as the Committee considers necessary or
desirable under the Plan; and
(j) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and to carry
out the purposes of the Plan.
5.3 Delegation. The Committee may delegate all or any part of its authority
under the Plan to any Employee or committee of Employees.
5.4 Decisions of Committee and its Delegates. All decisions made by the
Committee, or (unless the Committee has specified an appeal process to
the contrary) any other Person to whom the Committee has delegated
authority, pursuant to the provisions hereof shall be final and binding
on all Persons.
5.5 Indemnification of the Board and the Committee. In addition to such
other rights of indemnification as they may have as Directors, the
Directors and members of the Committee shall be indemnified by the
Company as and to the fullest extent permitted by law, including,
without limitation, indemnification against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal thereof, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with this Plan, or any Options granted hereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Company), or paid by them in satisfaction of a judgment in any such
action, suit or proceeding except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Director
or Committee member is liable for gross negligence, bad faith or
affirmative misconduct in his duties.
ARTICLE 6
AMENDMENT OF PLAN
6.1 Power of Committee. The Committee shall have the sole right and power
to amend the Plan at any time and from time to time, provided, however,
that the Committee may not amend the Plan without approval of the
stockholders of the Company if such stockholder approval is required
under Section 422 of the Code or if directed by the Board.
ARTICLE 7
TERM AND TERMINATION OF PLAN
7.1 Term. The Plan shall be effective as of the Effective Date. No Option
shall be granted pursuant to the Plan on or after the tenth (10th)
anniversary date of the adoption of the Plan by the Board, but Options
granted prior to such tenth anniversary may extend beyond that date to
the date(s) specified in the Option Agreement(s) covering such Options.
7.2 Termination. Subject to Article 8 hereof, the Plan may be terminated at
any time by the Committee.
ARTICLE 8
MODIFICATION OR TERMINATION OF OPTIONS
8.1 General. Subject to the provisions of Section 8.2, the amendment or
termination of the Plan shall not adversely affect a Participant's
rights to or under any Option granted prior to such amendment or
termination.
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8.2 Committee's Right. Except as may be provided in an Option Agreement,
any Option granted may be converted, modified, forfeited or canceled,
prospectively or retroactively in whole or in part, by the Committee in
its sole discretion; provided, however, that, subject to Section 8.3,
no such action may impair the rights of any Participant without his or
her consent. Except as may be provided in an Option Agreement, the
Committee may, in its sole discretion, in whole or in part, waive any
restrictions or conditions applicable to, or may accelerate the vesting
of, any Option.
8.3 Termination of Options under Certain Conditions. The Committee, in its
sole discretion, may cancel any unexpired or deferred Options at any
time if the Participant is not in compliance with all applicable
provisions of this Plan or with any Option Agreement or if the
Participant, whether or not he or she is then an Employee, Director,
Consultant, Independent Contractor or other agent, acts in a manner
contrary to the best interests of the Company or any Affiliate.
ARTICLE 9
OPTION AGREEMENTS; LIMITATIONS
9.1 Grant Evidenced by Option Agreement. The grant of any Option under the
Plan shall be evidenced by an Option Agreement which shall describe the
Option granted and the terms and conditions thereof. The granting of
any Option shall be subject to, and conditioned upon, the recipient's
execution of an Option Agreement with respect thereto. All capitalized
terms used in both the Option Agreement and the Plan shall have the
same meaning as in the Plan, and the Option Agreement shall be subject
to all of the terms of the Plan.
9.2 Provisions of Option Agreement. Each Option Agreement shall contain
such provisions as the Committee shall determine in its sole discretion
to be necessary, desirable and appropriate for the Option granted,
which may include, without limitation, the following: description of
the type of Option; the Option's duration; its transferability;
exercise price, exercise period and the Person or Persons who may
exercise; the manner in which any withholding tax obligation of the
Company or any Affiliate arising as the result of such exercise will be
satisfied; the effect upon such Option of the Participant's death,
disability, change of duties or termination of employment; the Option's
conditions; subject to the provisions of Article 10, when, if, and how
any Option may be forfeited, converted into another Option, modified,
exchanged for another Option, or replaced; and the restrictions on any
Shares purchased under the Plan.
9.3 Limitations on Right to Exercise ISO's. No ISO may be exercised after
the expiration of three (3) months after the earlier of the date the
employment of an Employee terminates with the Company or the date an
Employee is given written notice of his or her discharge from such
employment. The expiration period described in the preceding sentence
shall be waived in the event such termination occurs because of death
or because of disability within the meaning of Code Section 22(e)(3)
("Disability"); provided, however, that no ISO may be exercised after
the expiration of one (1) year after the earlier of the date the
employment of the Employee terminates with the Company or the date the
Employee is given written notice of his or her discharge from such
employment because of Disability. Absence or leave approved by the
Company, to the extent permitted by the applicable provisions of the
Code, shall not be considered an interruption of employment for any
purpose under this Plan.
9.4 Limitations on Transfer of ISO. No ISO shall be transferable otherwise
than by will or the laws of descent and distribution and, during the
lifetime of the Employee to whom such ISO was granted, no ISO may be
exercised or other rights or benefits claimed under the Plan by any
Person other than such Employee (other than the Employee's guardian or
legal representative). After the death of such original grantee, the
"holder" of the ISO shall be deemed to be the Person to whom the
original grantee's rights shall pass under the original grantee's will
or under the laws of descent and distribution. Notwithstanding the
foregoing, no transfer of an ISO by will or the laws of descent or
distribution will be binding on the Company unless the Board is
furnished with sufficient proof establishing the validity of such
transfer.
9.5 Additional Limitations on Issuance of Shares. The transfer or issuance
of Shares upon the exercise of any Option granted under the Plan will
be contingent upon the advice of counsel to the Company that the Shares
to be issued pursuant thereto have been duly registered or are exempt
from registration under the applicable securities laws.
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ARTICLE 10
SURRENDER AND REISSUANCE OF OPTIONS
10.1 Cancellation and Reissuance of Options. With the prior written consent
of any affected grantee of Options hereunder, the Committee may grant
to one or more such grantees, in exchange for their surrender and the
cancellation of such Options, new Options which may have different
exercise prices than the exercise prices provided in the Options so
surrendered and canceled and containing such other terms and conditions
consistent with the Plan as the Committee may deem appropriate.
ARTICLE 11
TERMS OF OPTIONS
11.1 Types of Options. It is intended that both ISOs and NQSOs may be
granted by the Committee under the Plan.
11.2 Option Price. The purchase price for Shares under any ISO shall be no
less than the Fair Market Value of the Common Stock at the time the
Option is granted (or, in the case of a ten-percent-or-greater
stockholder under Section 422(b)(6) of the Code, 110 percent of Fair
Market Value).
11.3 Other Requirements for ISOs. The terms of each Option which is intended
to qualify as an ISO shall meet all requirements of Section 422 of the
Code or any successor statute in effect from time to time, including,
without limitation the requirement that the grantee be an Employee.
11.4 NQSOs. The terms of each NQSO shall provide that such Option will not
be treated as an ISO. The purchase price for Shares under any NQSO
shall be established by the Committee, in its sole discretion, at the
time of granting such NQSO.
11.5 Determination by Committee. Except as otherwise provided in Sections
11.2 through Section 11.4, the terms of all Options shall be determined
by the Committee.
ARTICLE 12
PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING
12.1 Payment. Upon the exercise of an Option, the amount due the Company is
to be paid:
(a) in cash;
(b) by the surrender of all or part of an Option (including the
Option being exercised);
(c) by the tender to the Company of shares of Common Stock owned
by the Participant and registered in his or her name having a
Fair Market Value equal to the amount due to the Company;
(d) in other property, rights and credits, deemed acceptable by
the Committee, including the Participant's promissory note; or
(e) by any combination of the payment methods specified in (a)
through (d) above.
Notwithstanding the foregoing, any method of payment other
than in cash may be used only with the consent of the Committee or if
and to the extent so provided in an Option Agreement. The proceeds of
the sale of Shares purchased pursuant to an Option shall be added to
the general funds of the Company or to the reacquired Shares held by
the Company, as the case may be, and used for the corporate purposes of
the Company as the Board shall determine.
12.2 Withholding. The Company may, at the time any Option is exercised,
withhold from such exercise of an Option, any amount necessary to
satisfy federal, state and local withholding requirements with respect
to such exercise of such Option. Such withholding may be satisfied, at
the Company's option, either by cash or the Company's withholding of
Shares.
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ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect
to any payments or deliveries of Shares not yet made to a Participant
by the Company, nothing contained herein shall give any rights that are
greater than those of a general creditor of the Company. No provision
of the Plan shall require or permit the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place
any assets in a trust or other entity to which contributions are made
or otherwise to segregate any assets, nor shall the Company maintain
separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund
for such purposes.
13.2 Underscored References. The underscored references contained in the
Plan and in any Option Agreement are included only for convenience, and
they shall not be construed as a part of the Plan or Option Agreement
or in any respect affecting or modifying its provisions.
13.3 Number and Gender. The masculine, feminine and neuter, wherever used in
the Plan or in any Option Agreement, shall refer to either the
masculine, feminine or neuter; and, unless the context otherwise
requires, the singular shall include the plural and the plural the
singular.
13.4 Governing Law. The place of administration of the Plan and each Option
Agreement shall be in the State of Georgia, and this Plan and each
Option Agreement shall be construed and administered in accordance with
the laws of the State of Delaware, without giving effect to principles
relating to conflicts of laws, including, without limitation, issues
related to the validity and issuance of the Shares.
13.5 Purchase for Investment. The Committee may require each Person
purchasing the Shares pursuant to an Option to represent to and agree
with the Company in writing that such Person is acquiring the Shares
for investment and without a view to distribution or resale. The
certificates for such Shares may include any legend which the Committee
deems appropriate to reflect the restrictions on transfer set forth in
this Plan. All certificates for the Shares delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under all applicable laws, rules
and regulations, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate references to such
restrictions.
13.6 No Employment or Service Contract. Neither the adoption of the Plan nor
any Option granted hereunder shall confer upon any Employee, Director,
Consultant, Independent Contractor or other agent any right to
continued employment with or services to the Company or any Affiliate,
nor shall the Plan or any Option interfere in any way with the right of
the Company or any Affiliate to terminate the employment or services of
any of its Employees, Directors, Consultants, Independent Contractors
or other agents at any time.
13.7 No Effect on Other Benefits. The receipt of Options under the Plan
shall have no effect on any benefits to which a Participant may be
entitled from the Company or any Affiliate under another plan or
otherwise, or preclude a Participant from receiving any such benefits.
13.8 Registration of Shares. The Committee, in its discretion, may postpone
the issuance and/or delivery of the Shares issuable upon any exercise
of an Option until completion of any registration, or other
qualification or exemption of such Shares under applicable state and/or
federal laws, rules or regulations as the Committee considers
appropriate, and may require any grantee to make such representations
and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the Shares in compliance
with applicable laws, rules and regulations.
13.9 Rights as a Stockholder. Any recipient of an Option shall have no
rights as a stockholder with respect to any Shares related thereto
until the issuance of a stock certificate for such Shares following the
exercise of such Option. Except as otherwise provided for in Sections
3.3 and 3.4 hereof, no adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities, or other property) or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued.
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13.10 Plan Financing. The Company may extend and maintain, or arrange for the
extension and maintenance of, financing to any grantee (including a
grantee who is a Director) to purchase Shares pursuant to exercise of
an Option granted hereunder on such terms as may be approved by the
Committee in its sole discretion. In considering the terms for
extension or maintenance of credit by the Company, the Committee shall,
among other factors, consider the cost to the Company of any financing
extended by the Company.
13.11 ERISA. The Plan is not an employee benefit plan which is subject to the
provisions of the Employee Retirement Income Security Act of 1974, and
the provisions of Code Section 401(a) are not applicable to the Plan.
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EXHIBIT C
FORM OF DIRECTOR/OFFICER
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made as
of the ____ day of ______________, by and between FLIGHTSERV.COM, a Delaware
corporation (the "Company"), and __________________, an individual resident of
the State of _______ ("Optionee").
WITNESSETH:
WHEREAS, in connection with Optionee agreeing to serve as a Director of
the Company, the Company desires to grant non-qualified stock options to
Optionee; and
WHEREAS, the Optionee has agreed to serve as a Director of the Company.
NOW, THEREFORE, in consideration of their mutual undertakings, it is
agreed by and between parties hereto as follows:
1. The Company hereby grants to Optionee as of the date hereof
stock options to purchase _____________________ shares of the common stock, $.04
par value, of the Company (the "Common Stock") at a price of $_______ per Option
Share. The option expires at 11:59 p.m., Atlanta time, on __________, 20__ (the
"Expiration Date"). "Option Share(s)" shall mean the share(s) of Common Stock
which shall be purchased or shall be available for purchase upon exercise of the
stock option granted hereby and any security which shall be issued in lieu of or
in addition to any other Option Share by reason of any recapitalization, special
dividend transaction or other such event as provided in Section 5 below.
"Closing Price" means the closing price per share of the Common Stock on the
American Stock Exchange.
2. Except as otherwise provided below, the option granted hereby
may be exercised at any time, or from time to time, in whole or in part, until
the Expiration Date. The exercise of all or any portion of the stock option
granted hereby will be contingent upon receipt by the Company of the advice of
counsel to the Company that such Option Shares have been duly listed on the
principal exchange on which the Company's securities are traded, and duly
registered or are exempt from registration under the applicable securities laws
and, in the absence of registration of the Option Shares and to the extent
required by such counsel, the receipt from the Optionee of a representation that
the Optionee intends at the time of such exercise to acquire the Option Shares
for investment only and not for distribution or resale.
3. The Optionee may exercise all or any part of the stock option
(in whole Option Shares) by delivering written notice to the Company of the
number of Option Shares to be purchased together with cash or check, in payment
of the full purchase price of the Option Shares to be acquired. Notice shall be
sent to the Company at Proactive Technologies, Inc., 3343 Peachtree Road, N.E.,
Suite 530, Atlanta, Georgia 30326. The stock option shall be deemed to have been
exercised on the date the Company receives the written notice and the required
cash or check in full payment for the purchased Option Shares, or shares of
Common Stock if the payment is to be made in such manner. A form of notice which
will be deemed satisfactory by the Company is attached to this Agreement as
Exhibit A. Upon any exercise of the stock option the Company shall cause to be
delivered to the Optionee a certificate or certificates registered in the name
or the Optionee for the number of Option Shares purchased. The Optionee shall
not have any of the rights of a Stockholder with respect to the Option Shares
except to the extent that the Optionee duly exercises the stock option granted
hereby with respect to such Option Shares. As a condition of exercise of this
option, the Company may, in its sole discretion, withhold or require the
Optionee to pay or reimburse the Company for any taxes which the Company
determines are required to be withheld in connection with the grant or any
exercise of this option.
4. Notwithstanding the foregoing provisions requiring payment by
cash or check, if stock of the class then subject to this option is then
"publicly traded" (as hereafter defined), then payment of the purchase price or
any portion thereof may also be made in whole or in part with shares of the same
class of stock as that then subject to
<PAGE> 35
this option, surrendered in lieu of the payment of cash concurrently with such
exercise, the shares so surrendered to be valued on the basis of the Fair Market
Value of the stock (as hereinafter provided) on the date of exercise, in which
event the stock certificates evidencing the shares so to be used shall accompany
the notice of exercise and shall be duly endorsed or accompanied by duly
executed stock powers to transfer the same to the Company; provided, however,
that such payment in stock instead of cash shall not be effected and shall be
rejected by the Company if (a) the Company is then prohibited from purchasing or
acquiring shares of the class of its stock thus tendered to it or (b) the right
or power of the person exercising the option to deliver such shares in payment
of the purchase price is subject to the prior interest of any person (other than
the Company) as indicated by legends upon the certificate(s) or known to the
Company. If the Company rejects the payment in stock, the tendered notice of
exercise shall not be effected hereunder unless promptly after being notified of
such rejection the person exercising the option pays the purchase price in
acceptable form. If and while payment with stock is permitted in accordance with
the foregoing provision, then the person then entitled to exercise this option
may, in lieu of using previously outstanding stock therefor, use a portion of
the shares as to which this option is then being exercised, in which case the
notice of exercise need not be accompanied by any stock certificates but shall
include a statement directing the Company to retain so many shares that would
otherwise have been delivered by the Company upon that exercise of this option
as equals the number of shares that would have been surrendered to the Company
if the purchase price had been paid with previously issued stock. If the Company
is required to withhold on account of any federal, state or local tax imposed as
a result of any exercise of this option with previously issued stock or by
retention of a portion of Option Shares under this section, then the stock
surrendered or retained shall include an additional number of shares whose Fair
Market Value equals the amount thus required to be withheld. For purposes
hereof, "publicly traded" shall mean that a class of the capital stock of the
Company is listed or admitted to unlisted trading privileges on a national
securities exchange or designated as a national market systems security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. ("NASD") or if sales or bid and offer quotations are reported for that
class of stock in the automated quotation system ("NASDAQ") operated by the
NASD. Further, "Fair Market Value" shall mean the closing price of such stock as
of the day in question or, if such day is not a trading day in the principal
securities market or markets for such stock, on the nearest preceding trading
day, as reported with respect to the market (or the composite of markets, if
more than one) in which shares of such stock are then traded, or, if no such
closing prices are reported, on the basis of the mean between the high bid and
low asked prices that day on the principal market or quotation system on which
shares of such stock are then quoted, or, if not so quoted, as furnished by a
professional securities dealer making a market in such stock selected by the
Board of Directors of the Company.
5. In the event of changes in the outstanding shares of Common
Stock by reason of stock dividends, stock splits, subdivisions or combinations
of shares, the number of Option Shares shall be correspondingly and fairly
adjusted by the Board of Directors of the Company, the decision of which shall
be final and conclusive. A corresponding adjustment shall be made without change
in the total exercise price applicable to the unexercised portion of the Option
Shares with a corresponding adjustment in the exercise price per share.
6. If the Company is merged, consolidated or effects a share
exchange with another corporation (whether or not the Company is the surviving
corporation), or if substantially all of the assets or all of the Common Stock
is acquired by another corporation, or in the event of a separation,
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company hereunder, shall make appropriate provision for the protection of
the option granted hereby by the substitution on an equitable basis of
appropriate stock of the Company, or of the merged, consolidated or otherwise
reorganized corporation which will be issuable in respect to the shares of
Common Stock, provided only that the excess of the aggregate fair market value
of the Option Shares immediately after such substitution over the exercise price
thereof is not more than the excess of the aggregate fair market value of the
Option Shares immediately before such substitution over the exercise price
thereof. Notwithstanding the preceding sentence, if the Company is merged,
consolidated or effects a share exchange with another corporation or if
substantially all of the assets or all of the Common Stock is acquired by
another corporation, or in the event of a separation, reorganization or
liquidation of the Company, then the Board of Directors of the Company or the
board of directors of any corporation assuming the obligations of the Company
hereunder may, on or before the thirtieth (30th) day following such event and
upon written notice to the Optionee, provide that the option granted hereby must
be exercised within sixty (60) days of the date of such notice or it will be
terminated.
7. This Agreement shall not be assignable or transferable by
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and the stock option hereby
granted shall not be exercised by any person other than Optionee during
Optionee's lifetime. After the death of Optionee, the person to whom Optionee's
rights hereunder pass under Optionee's will or under the laws of descent and
distribution shall be deemed the holder of the stock option granted hereby.
2
<PAGE> 36
8. To the extent not superseded by federal law, the laws of
Delaware shall control in all matters relating to this Agreement.
9. Optionee understands that the Option Shares are not registered
under the Securities Act of 1933 (the "1933 Act") or any state securities act
and will be issued to Optionee pursuant to exemptions from registration
thereunder. Optionee also understands that applicable securities laws may
restrict the right of Optionee to exercise the stock option or to dispose of any
shares which Optionee may acquire upon any such exercise and may govern the
manner in which such shares must be sold. Optionee shall not offer, sell or
otherwise dispose of any of the Option Shares acquired by reason of the exercise
of the stock option in any manner which would violate the 1933 Act or any other
state or federal law or cause the Company to have to make any filing or take any
action to avoid such a violation.
10. Optionee hereby represents that all Option Shares purchased by
him pursuant to his exercise of all or any portion of the stock option will be
acquired only for investment and not with a view to distribution or resale.
11. All pronouns, defined nouns and any variations thereof in this
Agreement shall be deemed to refer to the masculine, feminine or neuter gender
and to either singular or plural, whenever the context of this Agreement so
requires.
IN WITNESS WHEREOF, Optionee has executed and delivered this Agreement
and the Company has caused this Agreement to be executed and delivered on its
behalf by its duly authorized representative, as of the day and year above
written.
FLIGHTSERV.COM
By:
--------------------------------------------
Its:
------------------------------------------
OPTIONEE
-----------------------------------------------
3
<PAGE> 37
EXHIBIT A
TO: Flightserv.com
3343 Peachtree Road, N.E.
Suite 530
Atlanta, Georgia 30326
Pursuant to the Non-Qualified Stock Option Agreement (herein called the
"Agreement"), dated as of _________________, by and between flightserv.com (the
"Company") and me, I hereby give notice that I elect to exercise the stock
option granted under the Agreement with respect to ______ shares of the common
stock of the Company as of the date on which this notice is delivered to the
Company, and accordingly I hereby agree to purchase such shares at the price and
on the terms established under the Agreement. Full payment for such shares is
enclosed. Such payment consists of:
<TABLE>
<S> <C>
__________ Cash
__________ Check
__________ shares of the Company's common stock, _____ of which are previously owned.
</TABLE>
I hereby represent and warrant that I am purchasing such shares for
investment purposes only and not with a view to distribution or resale.
I hereby agree that the stock option granted under the Agreement shall
be deemed to have been exercised to the extent specified in this notice on the
exercise date below my signature, and I hereby warrant that on such date this
notice was delivered to the Company.
Sincerely,
------------------------------------------
(Sign Name)
------------------------------------------
(Print Name)
DATED:
---------------------------
<PAGE> 38
EXHIBIT D-1
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR FLIGHTSERV.COM SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
FLIGHTSERV.COM
Expires July 18, 2001
No.: W-__ Number of Shares: 1,485,638
Date of Issuance: January 18, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, flightserv.com, a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that Four Corners
Capital, LLC or its registered assigns is entitled to subscribe for and
purchase, during the period specified in this Warrant, up to 1,485,228 shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of
Warrant Stock represented hereby shall commence on the date of issuance of this
Warrant and shall expire at 5:00 p.m., eastern time, on July 18, 2001 (such
period being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer
and Exchange.
(1) Time of Exercise. The purchase rights represented by
this Warrant may be exercised in whole or in part at any time and from time to
time during the Term; provided, however, that the approval of the stockholders
of the Company shall be required for the exercise of this Warrant for more than
660,976 shares of Common Stock.
(2) Method of Exercise. The Holder hereof may exercise
this Warrant, in whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election by certified or official bank
check or wire transfer of immediately available funds.
(3) Issuance of Stock Certificates. In the event of any
exercise of the rights represented by this Warrant in accordance with and
subject to the terms and conditions hereof, (i) certificates for the shares of
Warrant Stock so purchased shall be dated the date of such exercise and
delivered to the Holder hereof within a reasonable time, not exceeding three
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the Holder of the shares of Warrant Stock so purchased as of the
date of such exercise, and (ii) unless
<PAGE> 39
this Warrant has expired, a new Warrant representing the number of shares of
Warrant Stock, if any, with respect to which this Warrant shall not then have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer's expense within such time.
(4) Transferability of Warrant. Subject to Section 2(e),
this Warrant may be transferred by a Purchaser without the consent of the
Company. If transferred pursuant to this paragraph and subject to the provisions
of subsection (e) of this Section 2, this Warrant may be transferred on the
books of the Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants for the purchase of the same aggregate number
of shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant hereto.
(5) Compliance with Securities Laws.
(1) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(2) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock
issued upon exercise hereof shall be stamped or imprinted with a legend
in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
FLIGHTSERV.COM SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
(3) The restrictions imposed by this subsection (e) upon
the transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or
(C) upon the Issuer's receipt of other evidence reasonably satisfactory
to the Issuer that such registration and qualification under state
securities laws is not required. Whenever such restrictions shall cease
and terminate as to any such securities, the Holder thereof shall be
entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(6) Continuing Rights of Holder. The Issuer will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the Holder hereof, acknowledge in writing the extent, if any, of its continuing
obligation to afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such Holder shall fail to make any such request,
the failure shall not affect the continuing obligation of the Issuer to afford
such rights to such Holder.
2
<PAGE> 40
3. Stock Fully Paid: Reservation and Listing of Shares:
Covenants.
(1) Stock Fully Paid. The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of Common Stock to provide for the exercise of this Warrant.
(2) Reservation. If any shares of Common Stock required
to be reserved for issuance upon exercise of this Warrant or as otherwise
provided hereunder require registration or qualification with any governmental
authority under any federal or state law before such shares may be so issued,
the Issuer will in good faith use its best efforts as expeditiously as possible
at its expense to cause such shares to be duly registered or qualified. If the
Issuer shall list any shares of Common Stock on any securities exchange or
market it will, at its expense, list thereon, maintain and increase when
necessary such listing, of, all shares of Warrant Stock from time to time issued
upon exercise of this Warrant or as otherwise provided hereunder, and, to the
extent permissible under the applicable securities exchange rules, all unissued
shares of Warrant Stock which are at any time issuable hereunder, so long as any
shares of Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.
(3) Covenants. The Issuer shall not by any action
including, without limitation, amending the Certificate of Incorporation or the
by-laws of the Issuer, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any provision of the Certificate of Incorporation or by-laws of
the Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(4) Loss, Theft, Destruction of Warrants. Upon receipt of
evidence satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to the
Issuer or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(5) Rights and Obligations under the Registration Rights
Agreement. The shares of Warrant Stock are entitled to the benefits and
subject to the terms of the Registration Rights Agreement dated as of even date
herewith between the Issuer and the Holders listed on the signature pages
thereof (as amended from time to time, the "Registration Rights Agreement"). The
Issuer shall keep or cause to be kept a copy of the Registration Rights
Agreement, and any amendments thereto, at its chief executive office and shall
furnish, without charge, copies thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The
number and kind of Securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(1) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
3
<PAGE> 41
(1) In case the Issuer after the Original Issue Date
shall do any of the following (each, a "Triggering Event"): (a)
consolidate with or merge into any other Person and the Issuer shall
not be the continuing or surviving corporation of such consolidation or
merger, or (b) permit any other Person to consolidate with or merge
into the Issuer and the Issuer shall be the continuing or surviving
Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for
Securities of any other Person or cash or any other property, or (c)
transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or
reclassification of its Capital Stock, then, and in the case of each
such Triggering Event, proper provision shall be made so that, upon the
basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof
at any time after the consummation of such Triggering Event, to the
extent this Warrant is not exercised prior to such Triggering Event, or
is redeemed in connection with such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the
consummation of such Triggering Event in lieu of the Common Stock
issuable upon such exercise of this Warrant prior to such Triggering
Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if
such Holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments and increases
(subsequent to such corporate action) as nearly equivalent as possible
to the adjustments provided for in Section 4 hereof or (y) to sell this
Warrant (or, at such Holder's election, a portion hereof) concurrently
with the Triggering Event to the Person continuing after or surviving
such Triggering Event, or to the Issuer (if Issuer is the continuing or
surviving Person) at a sales price equal to the amount of cash,
property and/or Securities to which a holder of the number of shares of
Common Stock which would otherwise have been delivered upon the
exercise of this Warrant would have been entitled upon the effective
date or closing of any such Triggering Event (the "Event
Consideration"), less the amount or portion of such Event Consideration
having a fair value equal to the aggregate Warrant Price applicable to
this Warrant or the portion hereof so sold.
(2) Notwithstanding anything contained in this Warrant to
the contrary, the Issuer will not effect any Triggering Event unless,
prior to the consummation thereof, each Person (other than the Issuer)
which may be required to deliver any Securities, cash or property upon
the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the
Holder of this Warrant, (A) the obligations of the Issuer under this
Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall
not release the Issuer from, any continuing obligations of the Issuer
under this Warrant) and (B) the obligation to deliver to such Holder
such shares of Securities, cash or property as, in accordance with the
foregoing provisions of this subsection (a), such Holder shall be
entitled to receive, and such Person shall have similarly delivered to
such Holder an opinion of counsel for such Person, which counsel shall
be reasonably satisfactory to such Holder, stating that this Warrant
shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(3) If with respect to any Triggering Event, the Holder
of this Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a
portion thereof, the Issuer agrees that as a condition to the
consummation of any such Triggering Event the Issuer shall secure such
right of Holder to sell this Warrant to the Person continuing after or
surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof
the amounts of cash, property and/or Securities required under such
clause (y) are delivered to the Holder of this Warrant. The obligation
of the Issuer to secure such right of the Holder to sell this Warrant
shall be subject to such Holder's cooperation with the Issuer,
including, without limitation, the giving of customary representations
and warranties to the purchaser in connection with any such sale. Prior
notice of any Triggering Event shall be given to the Holder of this
Warrant in accordance with Section 11 hereof.
(2) Subdivision or Combination of Shares. If the Issuer,
at any time while this Warrant is outstanding, shall subdivide or combine any
shares of Common Stock, (i) in case of subdivision of shares, the Warrant Price
shall be proportionately reduced (as at the effective date of such subdivision
or, if the Issuer shall take a record of Holders of its Common Stock for the
purpose of so subdividing, as at the applicable record date, whichever is
earlier) to reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Warrant Price shall be proportionately increased (as
at the effective date of such combination or, if the Issuer shall take a record
of Holders of its Common Stock for
4
<PAGE> 42
the purpose of so combining, as at the applicable record date, whichever is
earlier) to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
(3) Certain Dividends and Distributions. If the Issuer,
at any time while this Warrant is outstanding, shall:
(1) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying
the Warrant Price in effect immediately prior to such record date (or
if no such record is taken, then immediately prior to such payment or
other distribution), by a fraction (1) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (2) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that
the Issuer paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Issuer issued
fractional shares in connection with said dividends); or
(2) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common
Stock (other than as described in clause (i) of this subsection (c)),
or in the event that the Company shall offer options or rights to
subscribe for shares of Common Stock, or issue any Common Stock
Equivalents, to all of its holders of Common Stock, then on the record
date for such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer, the
Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer. Notwithstanding the foregoing set forth in clause (ii) of this
subsection (c) to the contrary, if the Company gives the Holder at
least five Business Days prior written notice of the record date for
such non-cash dividend, then the Warrant Price shall not be adjusted
and the Holder shall have the option to exercise this Warrant prior to
the record date, and if the Holder does not exercise this Warrant prior
to such record date, then the Holder shall not be entitled to receive
such payment, distribution or offer.
(4) Issuance of Additional Shares of Common Stock. If the
Issuer, at any time while this Warrant is outstanding, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to that price (rounded to the
nearest cent) determined by multiplying the Warrant Price then in effect by a
fraction:
(1) the numerator of which shall be equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior
to the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the Warrant Price then in effect, and
(2) the denominator of which shall be equal to the number
of shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (Y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
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<PAGE> 43
(5) Issuance of Common Stock Equivalents. If the Issuer,
at any time while this Warrant is outstanding, shall issue any Common Stock
Equivalent and the price per share for which Additional Shares of Common Stock
may be issuable thereafter pursuant to such Common Stock Equivalent shall be
less than the Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the Warrant Price in effect at the time of such
amendment, then the Warrant Price upon each such issuance or amendment shall be
adjusted as provided in the first sentence of subsection (d) of this Section 4
on the basis that (1) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such Common Stock Equivalents shall be deemed to have
been issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier
of (A) the date on which the Issuer shall enter into a firm contract for the
issuance of such Common Stock Equivalent, or (B) the date of actual issuance of
such Common Stock Equivalent, and (2) the aggregate consideration for such
maximum number of Additional Shares of Common Stock shall be deemed to be the
minimum consideration received or receivable by the Issuer for the issuance of
such Additional Shares of Common Stock pursuant to such Common Stock Equivalent.
No adjustment of the Warrant Price shall be made under this subsection (e) upon
the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any adjustment shall previously have been made in the Warrant Price then in
effect upon the issuance of such warrants or other rights pursuant to this
subsection (e).
(6) Purchase of Common Stock by the Issuer. If the Issuer
at any time while this Warrant is outstanding shall, directly or indirectly
through a Subsidiary or otherwise, purchase, redeem or otherwise acquire any
shares of Common Stock at a price per share greater than the Per Share Market
Value then in effect, then the Warrant Price upon each such purchase, redemption
or acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(7) Other Provisions Applicable to Adjustments Under this
Section 4. The following provisions shall be applicable to the making of
adjustments in the Warrant Price hereinbefore provided in Section 4:
(1) Computation of Consideration. The consideration
received by the Issuer shall be deemed to be the following: to the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents shall be issued for a cash consideration, the consideration
received by the Issuer therefor, or if such Additional Shares of Common
Stock or Common Stock Equivalents are offered by the Issuer for
subscription, the subscription price, or, if such Additional Shares of
Common Stock or Common Stock Equivalents are sold to underwriters or
dealers for public offering without a subscription offering, the public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts, commissions, or expenses paid
or incurred by the Issuer for or in connection with the underwriting
thereof or otherwise in connection with the issue thereof; to the
extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the fair market
value of such consideration at the, time of such issuance as determined
in good faith by the Board. The consideration for any Additional Shares
of Common Stock issuable pursuant to any Common Stock Equivalents shall
be the consideration received by the Issuer for issuing such Common
Stock Equivalents, plus the additional consideration payable to the
Issuer upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so
paid or satisfied. In any case in which
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<PAGE> 44
the consideration to be received or paid shall be other than cash, the
Board shall notify the Holder of this Warrant of its determination of
the fair market value of such consideration prior to payment or
accepting receipt thereof. If, within thirty days after receipt of said
notice, the Majority Holders shall notify the Board in writing of their
objection to such determination, a determination of the fair market
value of such consideration shall be made by an Independent Appraiser
selected by the Majority Holders with the approval of the Board (which
approval shall not be unreasonably withheld), whose fees and expenses
shall be paid by the Issuer.
(2) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with
the issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(3) Outstanding Common Stock. The number of shares of
Common Stock at any time outstanding shall (A) not include any shares
thereof then directly or indirectly owned or held by or for the account
of the Issuer or any of its Subsidiaries, and (B) be deemed to include
all shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of Indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(8) Other Action Affecting Common Stock. In case after
the Original Issue Date the Issuer shall take any action affecting its Common
Stock, other than an action described in any of the foregoing subsections (a)
through (g) of this Section 4, inclusive, and the failure to make any adjustment
would not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principle of this Section 4, then the
Warrant Price shall be adjusted in such manner and at such time as the Board may
in good faith determine to be equitable in the circumstances.
(9) Adjustment of Warrant Share Number. Upon each
adjustment in the Warrant Price pursuant to any of the foregoing provisions of
this Section 4, the Warrant Share Number shall be adjusted, to the nearest one
hundredth of a whole share, to the product obtained by multiplying the Warrant
Share Number immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately before
giving effect to such adjustment and the denominator of which shall be the
Warrant Price immediately after giving effect to such adjustment. If the Issuer
shall be in default under any provision contained in Section 3 of this Warrant
so that shares issued at the Warrant Price adjusted in accordance with this
Section 4 would not be validly issued, the adjustment of the Warrant Share
Number provided for in the foregoing sentence shall nonetheless be made and the
Holder of this Warrant shall be entitled to purchase such greater number of
shares at the lowest price at which such shares may then be validly issued under
applicable law. Such exercise shall not constitute a waiver of any claim arising
against the Issuer by reason of its default under Section 3 of this Warrant.
(10) Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number and kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of
this Section 5, each an "adjustment"), the Issuer shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this
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<PAGE> 45
Warrant with respect to the matters set forth in such certificate may at the
option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will
be issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except the Warrant Stock, Common Stock reserved for
issuance upon exercise of existing stock options issued under any
employee incentive stock option, any qualified stock option plan and/or
stock purchase plan adopted by the Issuer, Common Stock issued in
conjunction with strategic corporate partnering transactions and Common
Stock issued upon exercise of options and warrants authorized by the
Board prior to the Closing Date.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Closing Date" means the date of execution of the Purchase
Agreement.
"Common Stock" means the Common Stock, $.04 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
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<PAGE> 46
"Issuer" means flightserv.com, a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means January 18, 2000.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last sales price per share of the Common Stock on such date on the
American Stock Exchange or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any
registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the holder, or (d) if the Common Stock is
not then publicly traded the fair market value of a share of Common
Stock as determined by an Independent Appraiser selected in good faith
by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which case,
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided,
further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The Issuer shall pay all costs
and expenses of each Independent Appraiser. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Purchase Agreement" means the Common Stock Purchase Agreement
dated as of January 18, 2000 between the Issuer and Four Corners
Capital, LLC, a Delaware limited liability company.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange as reported by Bloomberg L.P., or
(b) if the Common Stock is not listed on the American Stock
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<PAGE> 47
Exchange, a day on which the Common Stock is traded on any other
registered national stock exchange, or (c) if the Common Stock is not
quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set forth
in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants.
"Warrant Price" means $6.058, as such price may be adjusted
from time to time as shall result from the adjustments specified in
Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(1) the Issuer shall make any distributions to
the holders of Common Stock; or
(2) the Issuer shall authorize the granting to
all holders of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or of any
Common Stock Equivalents or Convertible Securities or other
rights; or
(3) there shall be any reclassification of the
Capital Stock of the Issuer; or
(4) there shall be any capital reorganization by
the Issuer; or
(5) there shall be any (i) consolidation or
merger involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving
corporation and its shares of Capital Stock shall continue to
be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or
(6) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Issuer or any
partial liquidation of the Issuer or distribution to holders
of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any
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<PAGE> 48
meetings of stockholders is required to be given to stockholders who do not
waive such notice (or, if such requires no notice, then two Trading Days written
notice thereof describing the matters upon which action is to be taken). The
Holder shall have the right to send two representatives selected by it to each
meeting, who shall be permitted to attend, but not vote at, such meeting and any
adjournments thereof. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., pacific
standard time, on any date and earlier than 11:59 p.m., eastern standard time,
on such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder of this Warrant or of Warrant
Stock issued pursuant hereto, addressed to such Holder at its last known address
or facsimile number appearing on the books of the Issuer maintained for such
purposes, or with respect to the Issuer, addressed to:
flightserv.com
3343 Peachtree Road, N.E.
Suite 530
Atlanta, Georgia 30326
Attn: C. Beverly Lance
Telephone Number: (404) 869-2599
Fax: (404) 240-4101
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Issuer shall be sent to Rogers & Hardin
LLP, 2700 International Tower, Peachtree Center, 229 Peachtree Street, N.E.,
Atlanta, Georgia 30303, Attn: Edward J. Hardin, Facsimile no.: (404) 525-2224.
Copies of notices to the Holder shall be sent to Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, Attention: Gary I. Horowitz, Esq.,
Facsimile no.: (212) 455-2502.
12. Warrant Agent. The Issuer may, by written notice to each
Holder of this Warrant, appoint an agent having an office in New York, New York
for the purpose of issuing shares of Warrant Stock on the exercise of this
Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant
pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Issuer in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein)
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<PAGE> 49
the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by
any such Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any
court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.
FLIGHTSERV.COM
By: /s/ C.B. Lance
-------------------------------------------
Name: C. B. Lance
Title: President
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EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: Signature
Address
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated: Signature
Address
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
Address
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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<PAGE> 51
EXHIBIT D-2
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR FLIGHTSERV.COM SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
FLIGHTSERV.COM
Expires July 18, 2001
No.: W-__ Number of Shares: 1,114,228
Date of Issuance: January 18, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, Flightserv.com, a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that Four Corners
Capital, LLC or its registered assigns is entitled to subscribe for and
purchase, during the period specified in this Warrant, up to 1,114,228 shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an
exercise price per share equal to the Warrant Price then in effect, subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth. Capitalized terms used in this Warrant and not otherwise defined herein
shall have the respective meanings specified in Section 7 hereof.
17. Term. The right to subscribe for and purchase shares of
Warrant Stock represented hereby shall commence on the date of issuance of this
Warrant and shall expire at 5:00 p.m., eastern time, on July 18, 2001 (such
period being the "Term").
18. Method of Exercise Payment: Issuance of New Warrant: Transfer
and Exchange.
(1) Time of Exercise. The purchase rights represented by
this Warrant may be exercised in whole or in part at any time and from time to
time during the Term; provided, however, that the approval of the stockholders
of the Company shall be required for the exercise of this Warrant for more than
495,732 shares of Common Stock.
(2) Method of Exercise. The Holder hereof may exercise
this Warrant, in whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is
then being exercised, payable at such Holder's election by certified or
official bank check or wire transfer of immediately available funds.
(3) Issuance of Stock Certificates. In the event of any
exercise of the rights represented by this Warrant in accordance with and
subject to the terms and conditions hereof, (i) certificates for the shares of
Warrant Stock so purchased shall be dated the date of such exercise and
delivered to the Holder hereof within a reasonable time, not exceeding three
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the Holder of the shares of Warrant Stock so purchased as of the
date of such exercise, and (ii) unless
<PAGE> 52
this Warrant has expired, a new Warrant representing the number of shares of
Warrant Stock, if any, with respect to which this Warrant shall not then have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer's expense within such time.
(4) Transferability of Warrant. Subject to Section 2(e),
this Warrant may be transferred by a Purchaser without the consent of the
Company. If transferred pursuant to this paragraph and subject to the
provisions of subsection (e) of this Section 2, this Warrant may be transferred
on the books of the Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the
principal office of the Issuer for Warrants for the purchase of the same
aggregate number of shares of Warrant Stock, each new Warrant to represent the
right to purchase such number of shares of Warrant Stock as the Holder hereof
shall designate at the time of such exchange. All Warrants issued on transfers
or exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant hereto.
(5) Compliance with Securities Laws.
(1) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(2) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock
issued upon exercise hereof shall be stamped or imprinted with a
legend in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
FLIGHTSERV.COM SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
(3) The restrictions imposed by this subsection (e) upon
the transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such
securities shall have been effectively registered under the Securities
Act, (B) upon the Issuer's receipt of an opinion of counsel, in form
and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or
(C) upon the Issuer's receipt of other evidence reasonably
satisfactory to the Issuer that such registration and qualification
under state securities laws is not required. Whenever such
restrictions shall cease and terminate as to any such securities, the
Holder thereof shall be entitled to receive from the Issuer (or its
transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of
Warrant Stock, new stock certificates) of like tenor not bearing the
applicable legend required by paragraph (ii) above relating to the
Securities Act and state securities laws.
(6) Continuing Rights of Holder. The Issuer will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the Holder hereof, acknowledge in writing the extent, if any, of its continuing
obligation to afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with the terms of
this Warrant, provided that if any such Holder shall fail to make any such
request, the failure shall not affect the continuing obligation of the Issuer
to afford such rights to such Holder.
2
<PAGE> 53
19. Stock Fully Paid: Reservation and Listing of Shares:
Covenants.
(1) Stock Fully Paid. The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will, upon issuance, be
duly authorized, validly issued, fully paid and non-assessable and free from
all taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of
shares of Common Stock to provide for the exercise of this Warrant.
(2) Reservation. If any shares of Common Stock required
to be reserved for issuance upon exercise of this Warrant or as otherwise
provided hereunder require registration or qualification with any governmental
authority under any federal or state law before such shares may be so issued,
the Issuer will in good faith use its best efforts as expeditiously as possible
at its expense to cause such shares to be duly registered or qualified. If the
Issuer shall list any shares of Common Stock on any securities exchange or
market it will, at its expense, list thereon, maintain and increase when
necessary such listing, of, all shares of Warrant Stock from time to time
issued upon exercise of this Warrant or as otherwise provided hereunder, and,
to the extent permissible under the applicable securities exchange rules, all
unissued shares of Warrant Stock which are at any time issuable hereunder, so
long as any shares of Common Stock shall be so listed. The Issuer will also so
list on each securities exchange or market, and will maintain such listing of,
any other securities which the Holder of this Warrant shall be entitled to
receive upon the exercise of this Warrant if at the time any securities of the
same class shall be listed on such securities exchange or market by the Issuer.
(3) Covenants. The Issuer shall not by any action
including, without limitation, amending the Certificate of Incorporation or the
by-laws of the Issuer, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of the Holder hereof against
dilution (to the extent specifically provided herein) or impairment. Without
limiting the generality of the foregoing, the Issuer will (i) not permit the
par value, if any, of its Common Stock to exceed the then effective Warrant
Price, (ii) not amend or modify any provision of the Certificate of
Incorporation or by-laws of the Issuer in any manner that would adversely
affect in any way the powers, preferences or relative participating, optional
or other special rights of the Common Stock or which would adversely affect the
rights of the Holders of the Warrants, (iii) take all such action as may be
reasonably necessary in order that the Issuer may validly and legally issue
fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the Issuer
to perform its obligations under this Warrant.
(4) Loss, Theft, Destruction of Warrants. Upon receipt
of evidence satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to the
Issuer or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Issuer will make and deliver, in lieu of such lost,
stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same number of shares of Common Stock.
(5) Rights and Obligations under the Registration Rights
Agreement. The shares of Warrant Stock are entitled to the benefits and subject
to the terms of the Registration Rights Agreement dated as of even date
herewith between the Issuer and the Holders listed on the signature pages
thereof (as amended from time to time, the "Registration Rights Agreement").
The Issuer shall keep or cause to be kept a copy of the Registration Rights
Agreement, and any amendments thereto, at its chief executive office and shall
furnish, without charge, copies thereof to the Holder upon request.
20. Adjustment of Warrant Price and Warrant Share Number. The
number and kind of Securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(1) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
3
<PAGE> 54
(1) In case the Issuer after the Original Issue Date
shall do any of the following (each, a "Triggering Event"): (a)
consolidate with or merge into any other Person and the Issuer shall
not be the continuing or surviving corporation of such consolidation
or merger, or (b) permit any other Person to consolidate with or merge
into the Issuer and the Issuer shall be the continuing or surviving
Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for
Securities of any other Person or cash or any other property, or (c)
transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or
reclassification of its Capital Stock, then, and in the case of each
such Triggering Event, proper provision shall be made so that, upon
the basis and the terms and in the manner provided in this Warrant,
the Holder of this Warrant shall be entitled (x) upon the exercise
hereof at any time after the consummation of such Triggering Event, to
the extent this Warrant is not exercised prior to such Triggering
Event, or is redeemed in connection with such Triggering Event, to
receive at the Warrant Price in effect at the time immediately prior
to the consummation of such Triggering Event in lieu of the Common
Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such
Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented
by this Warrant immediately prior thereto, subject to adjustments and
increases (subsequent to such corporate action) as nearly equivalent
as possible to the adjustments provided for in Section 4 hereof or (y)
to sell this Warrant (or, at such Holder's election, a portion hereof)
concurrently with the Triggering Event to the Person continuing after
or surviving such Triggering Event, or to the Issuer (if Issuer is the
continuing or surviving Person) at a sales price equal to the amount
of cash, property and/or Securities to which a holder of the number of
shares of Common Stock which would otherwise have been delivered upon
the exercise of this Warrant would have been entitled upon the
effective date or closing of any such Triggering Event (the "Event
Consideration"), less the amount or portion of such Event
Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.
(2) Notwithstanding anything contained in this Warrant
to the contrary, the Issuer will not effect any Triggering Event
unless, prior to the consummation thereof, each Person (other than the
Issuer) which may be required to deliver any Securities, cash or
property upon the exercise of this Warrant as provided herein shall
assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of
the Issuer under this Warrant (and if the Issuer shall survive the
consummation of such Triggering Event, such assumption shall be in
addition to, and shall not release the Issuer from, any continuing
obligations of the Issuer under this Warrant) and (B) the obligation
to deliver to such Holder such shares of Securities, cash or property
as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall
have similarly delivered to such Holder an opinion of counsel for such
Person, which counsel shall be reasonably satisfactory to such Holder,
stating that this Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the
Securities, cash or property which such Person may be required to
deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(3) If with respect to any Triggering Event, the Holder
of this Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a
portion thereof, the Issuer agrees that as a condition to the
consummation of any such Triggering Event the Issuer shall secure such
right of Holder to sell this Warrant to the Person continuing after or
surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof
the amounts of cash, property and/or Securities required under such
clause (y) are delivered to the Holder of this Warrant. The obligation
of the Issuer to secure such right of the Holder to sell this Warrant
shall be subject to such Holder's cooperation with the Issuer,
including, without limitation, the giving of customary representations
and warranties to the purchaser in connection with any such sale.
Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.
(2) Subdivision or Combination of Shares. If the Issuer, at
any time while this Warrant is outstanding, shall subdivide or combine any
shares of Common Stock, (i) in case of subdivision of shares, the Warrant Price
shall be proportionately reduced (as at the effective date of such subdivision
or, if the Issuer shall take a record of Holders of its Common Stock for the
purpose of so subdividing, as at the applicable record date, whichever is
earlier) to reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Warrant Price shall be proportionately increased (as
at the effective date of such combination or, if the Issuer shall take a record
of Holders of its Common Stock for
4
<PAGE> 55
the purpose of so combining, as at the applicable record date, whichever is
earlier) to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
(3) Certain Dividends and Distributions. If the Issuer,
at any time while this Warrant is outstanding, shall:
(1) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by
multiplying the Warrant Price in effect immediately prior to such
record date (or if no such record is taken, then immediately prior to
such payment or other distribution), by a fraction (1) the numerator
of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and
(2) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such dividend or
distribution (plus in the event that the Issuer paid cash for
fractional shares, the number of additional shares which would have
been outstanding had the Issuer issued fractional shares in connection
with said dividends); or
(2) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in
liquidation or partial liquidation or by way of return of capital),
the Common Stock (other than as described in clause (i) of this
subsection (c)), or in the event that the Company shall offer options
or rights to subscribe for shares of Common Stock, or issue any Common
Stock Equivalents, to all of its holders of Common Stock, then on the
record date for such payment, distribution or offer or, in the absence
of a record date, on the date of such payment, distribution or offer,
the Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer. Notwithstanding the foregoing set forth in clause (ii) of this
subsection (c) to the contrary, if the Company gives the Holder at
least five Business Days prior written notice of the record date for
such non-cash dividend, then the Warrant Price shall not be adjusted
and the Holder shall have the option to exercise this Warrant prior to
the record date, and if the Holder does not exercise this Warrant
prior to such record date, then the Holder shall not be entitled to
receive such payment, distribution or offer.
(4) Issuance of Additional Shares of Common Stock. If the
Issuer, at any time while this Warrant is outstanding, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to that price (rounded to the
nearest cent) determined by multiplying the Warrant Price then in effect by a
fraction:
(1) the numerator of which shall be equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior
to the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the Warrant Price then in effect, and
(2) the denominator of which shall be equal to the number
of shares of Common Stock outstanding immediately after the issuance
of such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or
(c) of this Section 4. No adjustment of the Warrant Price shall be made under
this subsection (d) upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to any Common Stock Equivalent if upon the issuance
of such Common Stock Equivalent (x) any adjustment shall have been made
pursuant to subsection (e) of this Section 4 or (Y) no adjustment was required
pursuant to subsection (e) of this Section 4. No adjustment of the Warrant
Price shall be made under this subsection (d) in an amount less than $.01 per
share, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment, if any,
which together with any adjustments so carried forward shall amount to $.01 per
share or more, provided that upon any adjustment of the Warrant Price as a
result of any dividend or distribution payable in Common Stock or Convertible
Securities or the reclassification, subdivision or combination of Common Stock
into a greater or smaller number of shares, the foregoing figure of $.01 per
share (or such figure as last adjusted) shall be adjusted (to the nearest
one-half cent) in proportion to the adjustment in the Warrant Price.
5
<PAGE> 56
(5) Issuance of Common Stock Equivalents. If the Issuer,
at any time while this Warrant is outstanding, shall issue any Common Stock
Equivalent and the price per share for which Additional Shares of Common Stock
may be issuable thereafter pursuant to such Common Stock Equivalent shall be
less than the Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the Warrant Price in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock
shall be deemed to be the minimum consideration received or receivable by the
Issuer for the issuance of such Additional Shares of Common Stock pursuant to
such Common Stock Equivalent. No adjustment of the Warrant Price shall be made
under this subsection (e) upon the issuance of any Convertible Security which
is issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e).
(6) Purchase of Common Stock by the Issuer. If the Issuer
at any time while this Warrant is outstanding shall, directly or indirectly
through a Subsidiary or otherwise, purchase, redeem or otherwise acquire any
shares of Common Stock at a price per share greater than the Per Share Market
Value then in effect, then the Warrant Price upon each such purchase,
redemption or acquisition shall be adjusted to that price determined by
multiplying such Warrant Price by a fraction (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
purchase, redemption or acquisition minus the number of shares of Common Stock
which the aggregate consideration for the total number of such shares of Common
Stock so purchased, redeemed or acquired would purchase at the Per Share Market
Value; and (ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such purchase, redemption or
acquisition. For the purposes of this subsection (f), the date as of which the
Per Share Market Value shall be computed shall be the earlier of (x) the date
on which the Issuer shall enter into a firm contract for the purchase,
redemption or acquisition of such Common Stock, or (y) the date of actual
purchase, redemption or acquisition of such Common Stock. For the purposes of
this subsection (f), a purchase, redemption or acquisition of a Common Stock
Equivalent shall be deemed to be a purchase of the underlying Common Stock, and
the computation herein required shall be made on the basis of the full
exercise, conversion or exchange of such Common Stock Equivalent on the date as
of which such computation is required hereby to be made, whether or not such
Common Stock Equivalent is actually exercisable, convertible or exchangeable on
such date.
(7) Other Provisions Applicable to Adjustments Under this
Section 4. The following provisions shall be applicable to the making of
adjustments in the Warrant Price hereinbefore provided in Section 4:
(1) Computation of Consideration. The consideration
received by the Issuer shall be deemed to be the following: to the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents shall be issued for a cash consideration, the
consideration received by the Issuer therefor, or if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the
Issuer for subscription, the subscription price, or, if such
Additional Shares of Common Stock or Common Stock Equivalents are sold
to underwriters or dealers for public offering without a subscription
offering, the public offering price, in any such case excluding any
amounts paid or receivable for accrued interest or accrued dividends
and without deduction of any compensation, discounts, commissions, or
expenses paid or incurred by the Issuer for or in connection with the
underwriting thereof or otherwise in connection with the issue
thereof; to the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided,
the fair market value of such consideration at the, time of such
issuance as determined in good faith by the Board. The consideration
for any Additional Shares of Common Stock issuable pursuant to any
Common Stock Equivalents shall be the consideration received by the
Issuer for issuing such Common Stock Equivalents, plus the additional
consideration payable to the Issuer upon the exercise, conversion or
exchange of such Common Stock Equivalents. In case of the issuance at
any time of any Additional Shares of Common Stock or Common Stock
Equivalents in payment or satisfaction of any dividend upon any class
of Capital Stock of the Issuer other than Common Stock, the Issuer
shall be deemed to have received for such Additional Shares of Common
Stock or Common Stock Equivalents a consideration equal to the amount
of such dividend so paid or satisfied. In any case in which
6
<PAGE> 57
the consideration to be received or paid shall be other than cash, the
Board shall notify the Holder of this Warrant of its determination of
the fair market value of such consideration prior to payment or
accepting receipt thereof. If, within thirty days after receipt of
said notice, the Majority Holders shall notify the Board in writing of
their objection to such determination, a determination of the fair
market value of such consideration shall be made by an Independent
Appraiser selected by the Majority Holders with the approval of the
Board (which approval shall not be unreasonably withheld), whose fees
and expenses shall be paid by the Issuer.
(2) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of
shares of Common Stock deemed to be issued and outstanding by reason
of the fact that they were issuable upon conversion, exchange or
exercise of any such Common Stock Equivalent shall no longer be
computed as set forth above, and the Warrant Price shall forthwith be
readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the Warrant Price made pursuant to
the provisions of this Section 4 after the issuance of such Common
Stock Equivalent) had the adjustment of the Warrant Price been made in
accordance with the issuance or sale of the number of Additional
Shares of Common Stock actually issued upon conversion, exchange or
issuance of such Common Stock Equivalent and thereupon only the number
of Additional Shares of Common Stock actually so issued shall be
deemed to have been issued and only the consideration actually
received by the Issuer (computed as in clause (i) of this subsection
(g)) shall be deemed to have been received by the Issuer.
(3) Outstanding Common Stock. The number of shares of
Common Stock at any time outstanding shall (A) not include any shares
thereof then directly or indirectly owned or held by or for the
account of the Issuer or any of its Subsidiaries, and (B) be deemed to
include all shares of Common Stock then issuable upon conversion,
exercise or exchange of any then outstanding Common Stock Equivalents
or any other evidences of Indebtedness, shares of Capital Stock or
other Securities which are or may be at any time convertible into or
exchangeable for shares of Common Stock or Other Common Stock.
(8) Other Action Affecting Common Stock. In case after
the Original Issue Date the Issuer shall take any action affecting its Common
Stock, other than an action described in any of the foregoing subsections (a)
through (g) of this Section 4, inclusive, and the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principle of this Section
4, then the Warrant Price shall be adjusted in such manner and at such time as
the Board may in good faith determine to be equitable in the circumstances.
(9) Adjustment of Warrant Share Number. Upon each
adjustment in the Warrant Price pursuant to any of the foregoing provisions of
this Section 4, the Warrant Share Number shall be adjusted, to the nearest one
hundredth of a whole share, to the product obtained by multiplying the Warrant
Share Number immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately before
giving effect to such adjustment and the denominator of which shall be the
Warrant Price immediately after giving effect to such adjustment. If the Issuer
shall be in default under any provision contained in Section 3 of this Warrant
so that shares issued at the Warrant Price adjusted in accordance with this
Section 4 would not be validly issued, the adjustment of the Warrant Share
Number provided for in the foregoing sentence shall nonetheless be made and the
Holder of this Warrant shall be entitled to purchase such greater number of
shares at the lowest price at which such shares may then be validly issued
under applicable law. Such exercise shall not constitute a waiver of any claim
arising against the Issuer by reason of its default under Section 3 of this
Warrant.
(10) Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number and kind of Securities purchasable upon the exercise of this
Warrant.
21. Notice of Adjustments. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of
this Section 5, each an "adjustment"), the Issuer shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this
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<PAGE> 58
Warrant with respect to the matters set forth in such certificate may at the
option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of objection. The firm selected by the Holder of this Warrant as provided in
the preceding sentence shall be instructed to deliver a written opinion as to
such matters to the Issuer and such Holder within thirty days after submission
to it of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer.
22. Fractional Shares. No fractional shares of Warrant Stock will
be issued in connection with and exercise hereof, but in lieu of such
fractional shares, the Issuer shall make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Per Share
Market Value then in effect.
23. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Additional Shares of Common Stock" means all shares of
Common Stock issued by the Issuer after the Original Issue Date, and
all shares of Other Common, if any, issued by the Issuer after the
Original Issue Date, except the Warrant Stock, Common Stock reserved
for issuance upon exercise of existing stock options issued under any
employee incentive stock option, any qualified stock option plan
and/or stock purchase plan adopted by the Issuer, Common Stock issued
in conjunction with strategic corporate partnering transactions and
Common Stock issued upon exercise of options and warrants authorized
by the Board prior to the Closing Date.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership
interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability
company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Closing Date" means the date of execution of the Purchase
Agreement.
"Closing Price" means the VWAP of the Common Stock on the
Trading Day immediately preceding the Closing Date.
"Common Stock" means the Common Stock, $.04 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory
or self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state
or local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own
any Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or
major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the
firm that regularly examines the financial statements of the Issuer)
that is regularly engaged in the business of
8
<PAGE> 59
appraising the Capital Stock or assets of corporations or other
entities as going concerns, and which is not affiliated with either
the Issuer or the Holder of any Warrant.
"Issuer" means Flightserv.com, a Delaware corporation, and
its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means January 18, 2000.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last sales price per share of the Common Stock on such date on the
American Stock Exchange or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any
registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the
Common Stock is not then reported by the OTC Bulletin Board or the
National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the
average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the holder, or (d) if the Common Stock
is not then publicly traded the fair market value of a share of Common
Stock as determined by an Independent Appraiser selected in good faith
by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided,
further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The Issuer shall pay all
costs and expenses of each Independent Appraiser. The determination of
fair market value by an Independent Appraiser shall be based upon the
fair market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or
by federal or state securities laws, or to the existence or absence
of, or any limitations on, voting rights.
"Purchase Agreement" means the Common Stock Purchase
Agreement dated as of January 18, 2000 between the Issuer and Four
Corners Capital, LLC, a Delaware limited liability company.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument
convertible into or exchangeable for Securities or a Security, and any
option, warrant or other right to purchase or acquire any Security.
"Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
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<PAGE> 60
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange as reported by Bloomberg L.P.,
or (b) if the Common Stock is not listed on the American Stock
Exchange, a day on which the Common Stock is traded on any other
registered national stock exchange, or (c) if the Common Stock is not
quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set
forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or
a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a
majority of the members of the Board of Directors (or other governing
body) of such corporation, other than Capital Stock having such power
only by reason of the happening of a contingency.
"VWAP" means the volume weighted average price of the Common
Stock (based on a Trading Day from 9:00 a.m. to 4:00 p.m.) on the
American Stock Exchange as reported by Bloomberg Financial using the
AQR function.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange
for any thereof pursuant to the provisions of Section 2(c), 2(d) or
2(e) hereof or of any of such other Warrants.
"Warrant Price" means the lesser of (i) 110% of the Closing
Price (the "Fixed Warrant Price") and (ii) 90% of the VWAP for the
five (5) Trading Days immediately preceding the notice to exercise, as
such price may be adjusted from time to time as shall result from the
adjustments specified in Section 4 hereof, provided, however, that if
the Registration Statement (as defined in the Registration Rights
Agreement) is not declared effective within one hundred twenty (120)
days after the Closing Date, the Fixed Warrant Price shall be reduced
by 10% and by an additional 10% for each thirty day period thereafter
until the Registration Statement has been declared effective, which
shall be pro rated for such periods less than thirty (30) days.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
24. Other Notices. In case at any time:
(1) the Issuer shall make any distributions to
the holders of Common Stock; or
(2) the Issuer shall authorize the granting to
all holders of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or of any
Common Stock Equivalents or Convertible Securities or other
rights; or
(3) there shall be any reclassification of the
Capital Stock of the Issuer; or
(4) there shall be any capital reorganization
by the Issuer; or
(5) there shall be any (i) consolidation or
merger involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving
corporation and its shares of Capital Stock shall continue to
be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or
10
<PAGE> 61
(6) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Issuer or any
partial liquidation of the Issuer or distribution to holders
of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which
action is to be taken). The Holder shall have the right to send two
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This
Warrant entitles the Holder to receive copies of all financial and other
information distributed or required to be distributed to the holders of the
Common Stock.
25. Amendment and Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
26. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
27. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., pacific
standard time, on any date and earlier than 11:59 p.m., eastern standard time,
on such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder of this Warrant or of
Warrant Stock issued pursuant hereto, addressed to such Holder at its last
known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:
flightserv.com
3343 Peachtree Road, N.E.
Suite 530
Atlanta, Georgia 30326
Attn: C. Beverly Lance
Telephone Number: (404) 869-2599
Fax: (404) 240-4101
or to such other address or addresses or facsimile number or numbers as any
such party may most recently have designated in writing to the other parties
hereto by such notice. Copies of notices to the Issuer shall be sent to Rogers
& Hardin LLP, 2700 International Tower, Peachtree Center, 229 Peachtree Street,
N.E., Atlanta, Georgia 30303, Attn: Edward J. Hardin, Facsimile no.: (404)
525-2224. Copies of notices to the Holder shall be sent to Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017, Attention: Gary I.
Horowitz, Esq., Facsimile no.: (212) 455-2502.
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<PAGE> 62
28. Warrant Agent. The Issuer may, by written notice to each
Holder of this Warrant, appoint an agent having an office in New York, New York
for the purpose of issuing shares of Warrant Stock on the exercise of this
Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant
pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
29. Remedies. The Issuer stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Issuer in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
30. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein)
the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable
by any such Holder or Holder of Warrant Stock.
31. Modification and Severability. If, in any action before any
court or agency legally empowered to enforce any provision contained herein,
any provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
32. Headings. The headings of the Sections of this Warrant are
for convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.
FLIGHTSERV.COM
By: /s/ C.B. Lance
-------------------------------
Name: C. B. Lance
Title: President
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<PAGE> 63
EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: Signature
Address
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated: Signature
Address
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
Address
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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<PAGE> 64
[PROXY]
FLIGHTSERV.COM
3343 PEACHTREE ROAD, N.E., SUITE 530
ATLANTA, GEORGIA 30326
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FLIGHTSERV.COM
The undersigned holder of shares of Common Stock of flightserv.com, a
Delaware corporation (the "Company"), hereby appoints C. Beverly Lance and
Arthur G. Weiss, and each of them, with full power of substitution, the proxies
and attorneys of the undersigned, to vote as specified hereon at the Annual
Meeting of Stockholders (the "Annual Meeting") of the Company to be held at
________________, on Tuesday, July 11, 2000 at 10:00 A.M., local time, and at
any adjournments or postponements thereof, with all powers (other than the power
to revoke the proxy) that the undersigned would have if personally present at
the Annual Meeting, to act and vote in their discretion upon any other matter or
matters that may properly be brought before the Annual Meeting and to appear and
vote all the shares of Common Stock of the Company that the undersigned may be
entitled to vote. The undersigned hereby acknowledges receipt of the
accompanying Proxy Statement and Annual Report to Stockholders, and hereby
revokes any proxy or proxies heretofore given by the undersigned relating to the
Annual Meeting.
This proxy may be revoked at any time prior to the voting thereof.
(Continued and to be signed on the other side)
<PAGE> 65
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. To elect the five nominees listed below to the Board of Directors of the
Company.
<TABLE>
<S> <C>
___FOR all nominees (except as marked below) ___WITHHOLD authority to vote for all nominees
NOMINEES: William B. Astrop, Sylvia A. de Leon, C. Beverly Lance, Dr. James A. Verbrugge and
Arthur G. Weiss
INSTRUCTIONS: To withhold authority to vote for any nominee, enter the name of such nominee in the
space provided below:
---------------------------------------------------------------------------------------------------------------
</TABLE>
2. To approve the Amendment to the Company's Certificate of Incorporation
to (i) increase the number of authorized shares of the Company's Common Stock
from 60 million to 100 million shares and (ii) authorize the Company to issue
up to 10 million shares of preferred stock.
___FOR ____AGAINST ____ABSTAIN
3. To approve the Company's 2000 Stock Option Plan.
___FOR ____AGAINST ____ABSTAIN
4. To ratify and approve the grant of non-qualified stock options to the
Company's directors and certain of the Company's officers and employees pursuant
to the Option Agreements.
___FOR ____AGAINST ____ABSTAIN
5. To ratify and approve the grant of certain warrants to Four Corners
Capital, LLC as set forth in the Proxy Statement.
___FOR ____AGAINST ____ABSTAIN
6. To ratify the appointment of Ernst & Young, LLP as independent
accountants for the Company for the fiscal year ending June 30, 2000.
___FOR ____AGAINST ____ABSTAIN
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED "FOR"
THE PROPOSALS ABOVE.
Signature
-------------------------------------
Signature if
jointly held
-------------------------------------
Dated: , 2000
-------------------------------
PLEASE DATE AND SIGN AS NAME APPEARS HEREON. WHEN
SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN OR ATTORNEY, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
CORPORATE OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON. JOINT OWNERS
SHOULD EACH SIGN.
2
