SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-KSB
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
X Annual Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of
1934
For the fiscal year ended December 31, 1997
or
Transitional Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from to
Commission File Number 033-19522-NY
GENISYS RESERVATION SYSTEMS, INC.
(formerly Robotic Lasers, Inc.)
(Exact Name of registrant as specified in its charter)
New Jersey 22-2719541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2401 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 810-8767 Securities
registered pursuant to Section 12(b) of the Act: NONE Securities registered
pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
Class A Redeemable Warrants
Class B Redeemable Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes - X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
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State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
$8,258,954 as of the close of business on March 25, 1998
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The number of shares
outstanding of the registrant's Common Stock as of March 25, 1998 was 4,355,594
shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) any annual report to security-holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
1. Rule 424(b) Prospectus dated March 20, 1997 is incorporated by reference into
Parts I, II and III
3.1* Registrant's Articles of Incorporation
3.2* Registrant's By-Laws
4.1* Form of Common Stock Certificate
4.2* Redeemable Warrant Agreement with Form of Class A and Class B
Warrant
10.1 Employment Agreement dated June 23, 1997 between Registrant
and Lawrence E. Burk filed herein with this report.
10.2* Consulting Agreement dated October 18, 1996 between Registrant
and Mark Kenny.
10.3* Employment Agreement dated October 17, 1996 between
Registrant and John Wasko.
10.4* Copy of lease dated November 1, 1995
between Unicom and Corporate Travel Link, Inc. 10.5 Copy of
Agreement dated June 22, 1995 between American Airlines, Inc.
and Corporate Travel Link, Inc., relating to Sabre
Extension Program - Associate Distribution and Services
Agreement.
10.5* Copy of Agreement dated June 22, 1995 between American
Airlines, Inc. and Corporate Travel Link, Inc., relating to
Sabre Extension Program - Associate Distribution and Services
Agreement
10.6* Copy of Agreement dated June 30, 1995 between American
Airlines, Inc. and Corporate Travel Link, Inc. relating to
Associate Sabre Equipment Lease Agreement.
10.7* Copy of Agreement dated June 30, 1995 between American
Airlines, Inc. and Corporate Travel Link, Inc., non-standard
system amendment to Corporate Sabre Equipment Lease Agreement.
10.8* Copy of Script Consulting Agreement dated June 21, 1995
between Worldspan, LP and Corporate Travel Link, Inc.
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10.9* Copy of Script Services agreement dated June 21, 1995 between
Worldspan, LP and Corporate Travel Link, Inc.
10.10* Copy of Galileo Services Display and Reservation Agreement
dated August 28, 1995 between Galileo International
Partnership and Corporate Travel Link, Inc.
10.11* Copy of Ancillary Services Agreement dated August 28, 1995
between Galileo International Partnership and Corporate Travel
Link, Inc.
10.12* Copy of Worldspan Car Rental Associate Reservation Agreement
between Worldspan, LP and Corporate Travel Link, Inc.
10.13* Copy of interim Loan Agreement between the Registrant and Loeb
Holding Corporation and certain executives of the Registrant
10.14* Prosoft Consulting Agreement
10.15 Copy of Agreement dated February 1, 1998 between the
TranspoNet Companies, Inc. and the REgistrant filed herein
with this report.
21* List of Subsidiaries
All of the above referenced documents, are incorporated herein by references to
the Exhibit bearing the same number in the Registrant's Registration Statement
on Form SB-2, File No. 333-15011.
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Part I
Item 1. Business
History
On August 11, 1995, the Company acquired Corporate Travel Link, Inc. (a
development-stage enterprise) which was incorporated on March 7, 1994, by
issuing 1,682,924 shares of restricted Common Stock of the Company (after July
16, 1996 one-for-two reverse split. See Notes 1 and 3 to December 31, 1996
Financial statements) in exchange for 200 shares of the Common Stock of
Corporate Travel Link ("Travel Link") which represented all of the authorized,
issued and outstanding shares of common stock of Travel Link.
On March 20, 1997, the Company consummated a public offering of its
securities consisting of 1,035,000 shares of Common Stock at $5.00 per share,
1,725,000 Class A Redeemable Warrants at $.20 per Class A Redeemable Warrant and
1,035,000 Class B Redeemable Warrants at $.10 per Class B Redeemable Warrant.
Total Proceeds from the public offering, net of related costs of $1,115,619,
were $4,507,914.
On June 20, 1997, the Company acquired 80% of the outstanding common
stock of Prosoft, Inc. for an aggregate purchase price of $34,602. This
Transaction has been accounted for as a purchase and is included in the
Company's consolidated financial statements as of the date of acquisition. The
assets acquired consist principally of cash and equipment.
Presently the Company's business and operations consist solely of the
business and operations of Travel Link and Prosoft which continue to operate as
subsidiaries of the Company.
General
The principal business activity of the Company is operating a
computerized limousine reservation and payment system for the business traveler.
The proprietary software that the Company developed enables limousine
reservations to be completely computerized i.e., be entirely automatic and
operate without human intervention except for the initial inputting of travel
information.
At the present time, there are four major airline computer reservation
systems in operation in the United States -- Sabre, Worldspan, Apollo and
System One (each reservation system referred to hereinafter as a ACRS). Each
CRS allows a travel agency or corporate travel department to make an airline
reservation and receive instantaneously a confirmation and a printed airline
ticket on any airline. It is also possible to make a hotel reservation with any
of the major hotel chains through any CRS and receive an instantaneous
confirmation of room availability. Additionally, a travel agent or corporate
travel manager may make a rental car reservation with any of the major car
rental companies (Hertz, Avis and the like) through any CRS and receive an
immediate confirmation of the car rental reservation.
When it comes to limousine reservations, however, prior to the
introduction of the Company's system there was no method for making a
reservation through a CRS and receiving an immediate guaranteed confirmation.
The usual method of making a limousine reservation in a destination city is to
call a limousine company, if the corporate travel department or travel agent
knows of one. This use of the telephone, with its attendant inconveniences such
as telephone tag and missed communications, can make securing a confirmed
limousine reservation inconvenient.
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In today's cost-conscious business world, corporations must explore
every possible way to cut costs and save time. With the current CRS', there is
no quick, direct, and efficient way to reserve limousine service. Today
reservations are still being booked, changed, canceled and reconfirmed largely
by telephone and telefax.
The Company works with travel agents and corporate travel departments
by providing a computerized system for securing limousine reservations.
A typical reservation with the Company's system may be demonstrated as
follows:
Assume that a corporate executive wishes to travel from Newark, New
Jersey to Phoenix, Arizona. The executive will contact the travel manager/agent
with his (or her) travel plans. The travel manager/agent will then determine
which airline flies between Newark and Phoenix on the date and at the time when
the executive wishes to travel.
The travel manager/agent will then go to the airline reservation
computer to enter the information necessary to book the reservation. The
information originated by the travel manager/agent will be transmitted to one or
more CRS' mainframe computers and, in turn, will be relayed to the mainframe
computer of the selected airline. The airline's computer will ascertain seat
availability and it will transmit a reservation back to the CRS' mainframe
computer. The CRS will then retransmit the information to the travel
manager/agent and a ticket will be issued.
If the corporate executive also decides that he wishes to stay at a
particular hotel while in Phoenix, this reservation, too, may be made through
the CRS. The travel manager/agent inputs the data already in the computer
pertaining to the airline reservation, and adds the data necessary to secure a
hotel reservation. The information is transmitted to the CRS' mainframe
computer, and it is then relayed to the hotel's mainframe. The latter computer
searches to ascertain room availability and relays a confirmed reservation to
the CRS. The CRS then transmits the information to the travel manager/agent and
a confirmed reservation slip is printed.
Finally, the corporate executive advises his travel manager/agent to
obtain four limousine reservations: (a) from home to Newark Airport; (b) from
Phoenix Airport to the hotel; (c) from the hotel to the Phoenix Airport at the
end of the trip; and (d) from Newark Airport to the executive's home. The travel
manager/agent, however, cannot presently effect these reservations through the
CRS and receive an immediate, error-free confirmed limousine reservation.
Instead, the travel manager/agent must use the telephone or telefax.
While a corporate travel manager/agent based in Newark will undoubtedly know of
a limousine company in the Newark area to call, he may not know of any in the
Phoenix area. Confirmed reservations cannot be made quickly or efficiently.
The Company's system remedies this dilemma. The Company has created its
own computerized system which is linked with the SABRE CRS'. The company is
completing development of the interfaces to the Apollo and Worldspan CRS' and
expects to bring them on-line in mid 1998. Limousine reservations made through
the SABRE CRS are relayed instantaneously to the Company's computer and then to
a service provider of the clients choice--all without human intervention--and an
immediate limousine reservation is confirmed. In the event that the client has
no relationship with a service provider or has no preference, they soon will be
able to access a national network service provider through the Genisys
Reservation System. The
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Company is in the process of arranging access to such national network services.
In January 1998, the Company signed a participation agreement with
Carlson Wagonlit Travel, one of the world leaders in business travel management
with $9.5 billion in annual worldwide sales. Under this agreement, all Carlson
Wagonlit offices worldwide are licensed to install and operate the Company's
software to facilitate the delivery of limousine/car service reservations to the
CRS'. Using the Company's proprietary software, Carlson Wagonlit agents can make
fast and accurate ground transportation reservations for corporate customers and
their preferred suppliers directly through the Sabre CRS. Several Carlson
accounts in the northeast are currently utilizing Genisys through the Sabre CRS.
The Company is currently field testing its application for the Apollo CRS.
In February 1998, the Company and the TranspoNet Companies, Inc signed
a contractual revenue sharing agreement to fully automate the limousine booking
process from the CRS directly into the computerized back office system of
service providers. Under this agreement which renews automatically after the
initial two year term, the Company and TranspoNet have developed the technology
to channel the limousine reservation from the Corporate travel agents directly
into the back office dispatch system of contracted service providers utilizing
an existing TranspoNet product.
Employees
The Company presently has 2 executive officers and 11 non-executive
employees, including 4 employees of the Company's majority-owned subsidiary.
None of these employees is covered by a collective bargaining agreement. The
Company utilizes several software and marketing consultants on a part-time
basis.
The company believes its personnel relations to be satisfactory.
Item 2. Properties
The Company and its subsidiaries presently lease approximately 2,380
square feet of office space at 2401 Morris Avenue, Union, New Jersey, 07083, and
1,750 square feet of office space at 15 Clyde Road, Somerset, New Jersey, 08873.
The five-year Union lease expires in March 2002 and provides for a monthly
rental of $3,731.53. The Somerset lease expires in November 2002 and provides
for a monthly rental of $1,968.76 though November 30, 1999 and $2,012.50 though
November 30, 2002.
The properties have been leased from unaffiliated third parties and
adequately satisfy the present needs of the Company and its subsidiaries.
Item 3. Legal Proceedings
On February 20, 1997, two individuals filed an action against the
Company and Travel Link in the Superior Court of New Jersey seeking, among other
things, damages in the amount of 8% of any financing secured by Travel Link
resulting from plaintiffs efforts and as well as 5% of the Company's Common
Stock allegedly due for services rendered in connection with the Company's
acquisition of Travel Link in 1995. The claim for monetary damages is based upon
an alleged written agreement between Travel Link and plaintiffs, while the claim
for the shares of Common Stock is based upon alleged oral representations and
promises made by a former officer of Travel Link. The Company believes that the
plaintiff's claims are without merit and
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intends to vigorously defend the action and to assert numerous defenses in its
answer. On March 4, 1998, Travel Link filed an application with the Court to
assert a claim for indemnification against Joseph Cutrona and Steven Pollan, two
former directors and officers of Travel Link and the Company, and Mark A. Kenny,
currently a director and employee of the Company and Travel Link, based upon a
1995 agreement whereby such individuals agreed to hold Loeb Holding Corporation
and Travel Link harmless and to indemnify them from any and all claims or
liabilities for brokerage commissions or finder's fees incurred by reason of any
action taken by it or them, including the claims of the plaintiffs in this
action.
On April 17, 1997, a former officer of the Company filed an action in
the United States District Court, District of New Jersey, against the Company,
Travel Link, the officers of both companies, and various related and unrelated
parties seeking among other things a declaratory judgment that the former
officer is the owner of 333,216 shares of Common Stock of the Company which had
been issued to him at the inception of Travel Link for services he was to have
provided (see Note 3) and for unspecified compensatory and punitive damages. The
Company believes that the plaintiff's claims are without merit and intends to
vigorously defend the action and to assert numerous defenses and counterclaims
in its answer.
On December 23, 1997, an individual filed an action in the Superior
Court of New Jersey against the Company and a former officer of the Company,
alleging that the former officer of the Company induced such person to leave her
place of employment to assume employment with the Company. The claim seeks
monetary damages based upon an oral promise of employment allegedly made by the
same former officer of the Company. The Company believes that the plaintiff's
claim is without merit and intends to vigorously defend the action and to assert
numerous defenses in its answer
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held at the
offices of Corporate Travel Link, Inc., 2401 Morris Avenue, 3rd floor, Union,
New Jersey, 07083, on Wednesday, December 17, 1997 at 10:30a.m. Of the 4,355,654
shares entitled to vote at the meeting, the holders of 3,503,698 shares were
present at the meeting in person or by proxy.
Following are the results of the balloting for the election of the nominees to
the Board of Directors:
NAME VOTES IN FAVOR VOTES WITHHELD
Lawrence E. Burk 3,184,621 319,076
John H. Wasko 3,185,621 318,076
Mark A. Kenny 3,184,633 319,064
David W. Sass 3,185,633 318,064
S. Charles Tabak 3,178,733 324,964
Warren D. Bagatelle 3,183,721 319,976
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The six directors have been elected to serve until their successors are
elected at the 1998 annual meeting of shareholders of the Company and have
qualified.
The shareholders approved the Company's 1997 Stock Incentive Plan dated
May 12, 1997 by a vote of 1,851,932 in favor, 367,999 against and 12,529
withheld.
The shareholders ratified the appointment of Wiss & Company as the
independent auditor to examine and report on the Financial Statements of the
Company for fiscal 1997 by a vote of 3,496,142 in favor and 606 against.
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Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Market Information
Prior to 1997, the Company's Common Stock was eligible to trade in the
over-the counter market, however, the Company was unable to locate a quoted
price for its stock. The Following table indicates the quarterly high and low
bid prices for the last two years for the Company's Common Stock.
Bid Price Bid Price
1997 1996
Quarter Ended High Low High Low
------------- ---- --- ---- ---
March 31 6.5 5.75 Not Available
June 30 9 5.75 Not Available
September 30 9 3.875 Not Available
December 31 5.375 2.75 Not Available
The foregoing prices were provided by National Quotation Bureau.
As of March 20, 1997, the Effective Date of the Company's Registration
Statement, it's Common Stock, Class A Redeemable Warrants and Class B Redeemable
Warrants trade on The NASDAQ Stock MarketSM under the symbols, GENS, GENSW and
GENSZ respectively.
Approximate Number of Equity Security Holders
Approximate Number of
Holders of Record as
Title of Class of March 5, 1998
-------------- ----------------------
Common Stock,
$.0001 par value 1,100
Included in the number of stockholders of record are shares held in
"nominee" or "street" name.
Dividends
The Company has never paid any cash dividends. The Company presently
intends to retain any future earnings for use in its operations and, therefore,
does not expect to pay cash dividends in the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Components of Revenues and Expenses
Revenues. The Company has been in the development-stage, and just commenced
generating limited revenues in August 1997. The Company did not generate any
revenues from operations during the fiscal year ended December 31, 1996. The
Company brought its Genisys Reservation and Payment Systems on-line through the
Sabre CRS in August 1997 at which time the Company commenced generating limited
revenues. The Company is completing development of the interfaces to the Apollo
and Worldspan CRS' and expects to bring them on-line in the 1st half of 1998,
which will accelerate the rate of growth of the Company's revenues.
The Genisys Reservation and Payment Systems generate revenue from the
following sources: (i) a booking fee charged for use of the Genisys Reservation
System and billed through the Genisys Payment System, (ii) a processing fee
generated by charges processed through the Genisys Payment System, (iii) an
annual software licensing fee charged to the limousine service providers who
utilize the Genisys Reservation and Payment Systems.
Expenses. Cost of service includes all costs directly attributable to the
Company's provision of services to its corporate clients and the limousine
service providers. The most significant component of cost of service is the
booking fee charged by the CRS for reservations made by the Genisys systems
utilizing the CRS. Booking fees are a set amount charged by each CRS for
transactions posted through the system. Cost of service also includes the access
and file fees charges by a commercial bank acting as the Company's Automated
Clearing House in distributing payments made to limousine service providers
through the Genisys Payment System.
General and administrative expenses include salaries, commissions and
benefits, travel costs, professional fees, rent, telephone and other operating
costs of the Company. The only internal expenditures capitalized with respect to
the costs of developing and implementing the Genisys Reservation and Payment
Systems have been $94,780 of salaries paid to Prosoft employees subsequent to
its acquisition in June 1997.
Results of Operations
The Company has been in the development stage and just commenced
generating limited revenues in August 1997. The Company has been unprofitable
since inception and expects to incur additional operating losses over the next
several fiscal quarters. Total revenues for the year ended December 31, 1997
were $25,863 compared to no revenues for the years ended December 31, 1996 and
August 31, 1995. The corresponding cost of sales for fiscal 1997 was $24,992.
The net loss for the year ended December 31, 1997 amounted to $1,590,125 or $.39
cents a share compared to a loss of $1,051,203 or $.36 cents a share for the
year ended December 31, 1996 and $269,080 or $.16 cent a share for the year
ended August 31, 1995. As reflected in the accompanying financial statements,
the Company has incurred losses totaling $3,235,128 since inception and at
December 31, 1997, had working capital of $1,350,787.
General and administrative expenses were $1,318,203 for the year ended
December 31, 1997 as compared to $819,205 for the year ended December 31, 1996
and $256,621 for the year ended August 31, 1995. The primary reason for the
difference between the two years ended December 31, 1997 and December 31, 1996
is the early stage of operations during the earlier period when the Company had
only 5 full-time
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employees, while during the latter period the Company was fully operational and
by the end of the period had increase its staff to 13 employees. The primary
reason for the difference between the year ended December 31, 1996 and August
31, 1995 is the commencement of development stage activities during the earlier
period when the Company had only 4 part-time employees for approximately half
the period, while during the latter period the Company had 5 full-time
employees.
Payroll and payroll-related costs increased approximately $266,000 during the
fiscal year ended December 31, 1997. Other approximate cost increases during
fiscal 1997 consist of consulting fees ($60,000), travel costs ($21,000),
marketing costs ($41,000), insurance costs ($24,000), other administrative costs
($97,000). Professional fees decreased $11,000 during fiscal 1997. Professional
and consulting fees for the year ended December 31, 1997 totaled $286,000. Such
amount consisted of attorneys fees of $110,000, accounting fees of $20,000,
outside bookkeeping fees of $28,000, consulting fees of $51,000 payable to Loeb
partners, $29,000 in consulting fees to Mark A. Kenny and miscellaneous fees of
$48,000.
Payroll and payroll related cost increased approximately $229,000
during the fiscal year ended December 31, 1996. Other approximate cost increases
during fiscal 1996 consist of consulting fees ($54,000), travel costs ($23,000),
marketing costs ($16,000), other administrative costs ($83,000) and professional
fees ($136,000). Professional and consulting fees for the year ended December
31, 1996 totaled $237,000. Such amount consisted of attorney's fees of $84,000,
accounting fees of $23,370, outside bookkeeping fees of $18,630, accrued
consulting fees of $36,000 payable to Loeb Partners, $48,000 payable to John H.
Wasko (accrued prior to his becoming an employee of the Company), $16,000 in
consulting fees payable to Mark A. Kenny and miscellaneous fees of $11,000. Loeb
partners, Mr. Kenny and Mr. Wasko are affiliates of the Company.
The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000" issue
and is developing an implementation plan to resolve the issue. The Year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. No easy technological "quick fix" has yet been developed for
this problem. This Year 2000 problem creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions. Such failures of the Company's
and/or third parties computer systems could have a material impact on the
Company's ability to conduct its business, and especially to process and account
for the transfer of funds electronically.
Liquidity and Capital Resources
Since commencement of its development stage activities, the Company has
incurred losses and net cash out-flows from operations. The Company has
developed a computerized limousine reservation and payment system for the
business traveler. Although planned operations have commenced, revenues to date
have not been significant. However, management expects the Company will have
sufficient liquidity at least until March 1999 even if significant revenues from
operations are not generated and no additional financing is obtained.
The Company's funds have principally been provided from Loeb Holding
Corporation, as escrow agent ("Loeb"), for Warren D. Bagatelle, HSB Capital,
trusts for the benefit of families of two principals of Loeb Holding
Corporation, and three unaffiliated individuals, LTI Ventures Leasing
Corporation, a private offering and a public offering, as described below.
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In February 1995, Loeb agreed to loan the Company up to a maximum of
$500,000 as evidenced by Convertible Notes. In addition, pursuant to five
interim loan agreements, Loeb loaned the Company an additional $250,000 from
December 1995 through March 1996. In November and December 1996, Loeb Holding
Corporation loaned the Company $210,000 evidenced by a series of eighteen month
term Promissory Notes bearing interest at the annual rate of 10%. Total loan
proceeds from Loeb and Loeb Holding Corporation to date are $960,000.
In September 1995, January 1996 and December 1996, the Company entered
into sale and lease-back arrangements with LTI Ventures Leasing Corp. (LTI)
whereby the Company sold the bulk of its computer hardware and commercially
purchased software to LTI. In consideration for the sales, the Company received
a total of $295,000 and agreed to lease back the hardware and software for
varying terms at a monthly rental totaling $11,960.
Pursuant to a private offering, the Company issued 11.5 units to
sixteen unaffiliated third parties in May and June 1996. Each $50,000 unit
consisted of a $49,000 promissory note and a Class A Redeemable Warrant valued
at $1,000 per unit. Each such warrant entitles the holder to purchase 25,000
shares of the Company's Common Stock at $5.75 per share. The proceeds from this
offering totaled $575,000 and Class A Redeemable Warrants to purchase 287,500
shares of Common Stock were issued by the Company.
In February 1997, Joseph Cutrona, who at the time was President of the
Company, made a capital contribution to the Company in the amount of $19,700.
In February and March 1997, the Company borrowed a total of $65,000
from three unaffiliated third parties pursuant to three eighteen (18) month
Promissory Notes bearing interest at 10% per annum payable at maturity. These
notes were secured by 16,250 shares of the Company's restricted Common Stock
owned by Joseph Cutrona and 16,250 shares owned by Mark A. Kenny. In April 1997,
the Company paid the principal and interest due on these Promissory Notes in
full.
On March 26, 1997, the Company consummated a public offering of its
securities consisting of 1,035,000 shares of Common Stock at $5.00 per share,
1,725,000 Class A Redeemable Warrants at $.20 per Class A Redeemable Warrant and
1,035,000 Class B Redeemable Warrants at $.10 per Class B Redeemable Warrant.
The net proceeds of such offering totaled $4,507,914.
In May 1997, two convertible notes payable, issued in April and June
1996 when the Company borrowed a total of $30,000 from two unaffiliated third
parties, were converted into 15,000 shares of Common Stock of the Company.
On May 29, 1997, an officer of the Company exercised stock options for
25,000 shares of Common Stock of the Company at $.60 per share, resulting in
total proceeds of $15,000.
On July 28, 1997, pursuant to an agreement dated October 10, 1996,
Joseph Cutrona and Mark Kenny each contributed 14,533 shares of the Company's
Common Stock owned by them and valued at $109,000, to Prosoft in payment of
computer software design and other consulting services provided to the Company
by Prosoft.
On October 14, 1997, the Company registered under the Securities Act of
1933, as amended, 442,098 shares of common stock, par value $.0001 per share.
22,098 shares of Common Stock offered underlie certain outstanding warrants held
by LTI. The remaining 420,000 shares of the Common Stock
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offered may not be transferred until September 20, 1998, subject to earlier
release at the sole discretion of R.D. White & Co., Inc. which acted as the
underwriter in connection with the March 1997 public offering of the Company's
securities. The certificates evidencing such 420,000 shares of Common Stock
include a legend evidencing such restriction. The Underwriter may release such
420,000 shares of Common Stock held by certain of the Selling Stockholders
at any time.
The Company did not receive any of the proceeds from the sales of the
Common Stock by the Selling Stockholders but may receive proceeds upon the
exercise of certain outstanding warrants. All costs incurred in the registration
of the securities of the Selling Stockholders was borne by the Company.
Inflation is not expected to have any material effect on the Company.
Item 7. Financial Statements and Supplementary Data.
See Pages F-1 through F-18.
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable
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PART III
Item 9. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect to each
of the Company's directors and executive officers.
NAME AGE POSITION
Lawrence E. Burk 56 President, Chief Executive Officer
and Director
John H. Wasko 59 Chief Financial Officer,
Secretary, Treasurer
and Director
Warren D. Bagatelle 59 Chairman of the
Board of Directors
Mark A. Kenny 44 Director
David W. Sass 62 Director
S. Charles Tabak 65 Director
The Company's Audit and Compensation Committees consist of Messrs. Warren D.
Bagatelle, S. Charles Tabak and David W. Sass. All officers of the Company
devote their full time to the Company's business.
Lawrence E. Burk joined the Company on June 23, 1997, as President,
Chief Executive Officer, and Director following a 27 year career with Alexander
& Alexander Services. From 1993 to early 1996, Mr. Burk served as Chairman and
CEO of Alexander & Alexander, Inc., the U.S. Retail Subsidiary of A & A
Services, and from early 1996 until the company's acquisition by AON Corporation
in late 1996, Mr. Burk served as President and Chief Operating Officer of A & A
International, the company's global retail operation. Mr. Burk served on the
company's Global Retail Board from 1985; on A & A Services Operations Board from
1989; and on A & A Inc.'s Executive Committee and Operations Board from 1989. A
& A was a NYSE listed Financial Services firm with revenues of over $1.3
billion. Mr. Burk has a B.A. degree in Economics from Southern Illinois
University and is a member of the schools' Advisory Board.
John H. Wasko has served the Company as a Director since April 1986, as
Secretary since September 1995, and as Treasurer and Chief Financial Officer
since April 1996. Mr. Wasko has also served the Company as President and
Chairman of the Board since its inception to August 1995, and as Treasurer from
April 1986 to September 1987 and from May 1988 to August 1995. Mr. Wasko has
also served as Chairman of the Board, President and Director of JEC Lasers, Inc.
("JEC") since it was organized in September 1977. He was awarded a bachelor of
science degree in physics in 1963 and a master of science degree in physics
(summa cum laude) in 1965 from Fairleigh Dickinson University.
13
<PAGE>
Warren D. Bagatelle has been a Director and chairman of the Board of
Directors of the Company since August 1995. He also served as Chief Executive
Officer of the Company from December 1996 through June 1997. Since 1998, he has
been a Managing Director at Loeb Partners Corporation, a New York City
investment banking firm. Mr. Bagatelle is also a director of Energy Research
Corporation, a company engaged in the development and commercialization of
electrical storage and power generation equipment, principally fuel cells and
rechargeable storage batteries. Mr. Bagatelle has a BA in economics from Union
College and a MBA from Rutgers University.
Mark A. Kenny, currently an employee of the Company, served as the
Company's Executive Vice President from August 1995 to October 1996 and as a
Director since August 1995. He has also served as Executive Vice President of
Travel Link from inception, March 1974 to November 1996 and as a Director since
inception. From 1974 to November 1996, he was a partner of Country Club
Transportation Services, a provider of limousine services, which he co-founded
in 1974. Mr. Kenny is one of the original members of the New Jersey Business
Travel Association and attended Seton Hall Preparatory School and Seton Hall
University. He is also a member of the Association of Corporate Travel
Executives and a charter member of the New Jersey Limousine Association.
David W. Sass has been a Director since April, 1997 and has been a practicing
attorney in New York City for the past 37 years and is currently a senior
partner in the law firm of McLaughlin & Stern, LLP, securities counsel to the
Company. Mr. Sass is also an officer of Ionic Fuel Technology, Inc., a company
engaged in the sale and distribution of emission control systems, a director of
The Harmat Organization, Inc., a New York based construction company and a
member and Vice Chairman of the Board of Trustees of Ithaca College. Mr. Sass
earned a B.A. from Ithaca College, a J.D. from Temple University School of Law
and an L.L.M. (in taxation) from New York University School of Law
S. Charles Tabak has been a Director since April, 1997. Since 1991 he
has been the Chief Executive Officer of Arc Medical & Professional, Inc., an
employment agency specializing in placement of scientific, medical and office
personnel. From 1969 to 1990, he was the Executive Vice President and General
Counsel for Channel Home Centers Inc. From 1967 to 1969, he was the Director of
Finance of J.J. Newbury Co. Mr. Tabak is a past member of the Board of Directors
of Channel Home Centers, Inc. and Charge A Plate Group of Greater New York. He
is a graduate of both NYU School of Business and School of Law, and is admitted
to practice law in New York state and before the U.S. Supreme Court.
14
<PAGE>
Item 10. Executive Compensation
The following tabulation shows the total compensation paid by the
Company for services in all capacities during the years ended December 31,
1997,1996 and 1995 to the officers of the Company and total compensation for all
Officers as a group for such period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Annual Compensation Long Term Compensation
Awards Payout
Other Restricted All
Annual Stock Options LTIP Other
Name and Year Salary Bonus Compensation Awards /SAR's Payout Compensation
- -------- ---- ------ ----- ------------ ------ ------ ------ ------------
Principal
- ---------
Position (Mgmt. Fee)
Lawrence E. Burk 1997 $75,000 (1) $0 $0 $0 $0 $0 $0
President, & Chief 1996 $0 $0 $0 $0 $0 $0 $0
Executive Officer 1995 $0 $0 $0 $0 $0 $0 $0
Joseph Cutrona(2) 1997 $41,639 $0 $ 6,667 $0 $0 $0 $0
1996 $73,500 $0 $ 5,000 $0 $0 $0 $0
1995 $45,000 $0 $ 3,840 $0 $0 $0 $0
Mark A. Kenny (3) 1997 $64,231 $0 $28,967 $0 $0 $0 $0
1996 $42,000 $0 $16,250 $0 $0 $0 $0
1995 $44,795 $0 $ 3,840 $0 $0 $0 $0
John H. Wasko 1997 $81,247 $0 $ 20,000 $0 $0 $0 $0
Chief Financial Officer, 1996 $10,000 $0 $ 49,500 $0 $0 $0 $0
Secretary & Treasurer 1995 $0 $0 $ 2,500 $0 $0 $0 $0
Warren D. Bagatelle 1997 $0 $0 $59,500(4) $0 $0 $0 $0
Chairman 1996 $0 $0 $36,000(5) $0 $0 $0 $0
1995 $0 $0 $0 $0 $0 $0 $0
</TABLE>
(1) Salary paid to Mr. Burk for the period June 23, 1997 thru December 31, 1997.
Mr. Burk's annual salary is $150,000.
(2) As of May 12, 1997, Mr. Cutrona is no longer an employee, officer or
Director of the Company.
(3) Mr. Kenny formerly was the Company's Executive Vice President and is
currently an employee and a Director of the Company but, not an officer
of the Company.
(4) Includes $51,000 of consulting fees paid to Loeb Partners Corporation
of which Warren D. Bagatelle is Managing Director.
(5) Represents consulting fees paid to Loeb Partners Corporation.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following tabulation shows the security ownership as of December
31, 1997 of (i) each person known to the Company to be the beneficial owner of
more than 5% of the Company's outstanding Common Stock, (not including 333,216
shares issued to Steven E. Pollan which the Company has given notice of
cancellation as a result of certain disputes between Mr. Pollan and the
Company), (ii) each Director and officer of the Company and (iii) all Directors
and Officers as a group.
NUMBER OF PERCENT
NAME & ADDRESS SHARES OWNED OF CLASS
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway
New York, NY 10006 1,053,679 22.16%
Warren D. Bagatelle (1)
Loeb Partners Corporation
61 Broadway
New York, NY 10006 1,053,679 22.16%
Joseph Cutrona
Corporate Travel Marketing
PO Box 1180
Sayerville, NJ 08872 377,350 8.66%
Mark A. Kenny
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 574,175 13.18%
John H. Wasko (2)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 112,046 2.54%
Lawrence E. Burk (3)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 205,000 4.50%
S. Charles Tabak (4)
ARC Medical Professional Personnel
36 Route 10W, Suite D
East Hanover, NJ 07936 14,000 *
David W. Sass (4)
McLaughlin & Stern, LLP
260 Madison Avenue, 18th FL.
New York, NY 10016 15,000 *
All Officers and Directors
as a group (6 persons) 1,973,900 39.39%
- --------------------------
* less than 1%
<PAGE>
(1) Includes 653,679 shares of Common Stock purchased by Loeb Holding
Corporation, as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital (of which Warren Bagatelle is a partner), trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated persons and 400,00 shares of Common Stock issuable upon conversion
of two Convertible Notes aggregating $37,500. Loeb Holding Corporation disclaims
any beneficial interest in these shares.
(2) Includes 14,362 shares of Common Stock owned of record by Joan E.
Wasko, John Wasko's wife, of which Mr. Wasko disclaims beneficial ownership, but
of which he may be deemed beneficial owner and a five (5) year option to
purchase 35,000 shares of the Company's Common Stock at a price of $2.00 per
share granted to Mr. Wasko by the Company on November 1, 1996 and 5,333 shares
of Common Stock issuable upon conversion of Mr. Wasko's prorate share of a
Convertible Note in the principal amount of $12,500.
(3) Includes a five (5) year option to purchase an aggregate of 200,000
shares of Common Stock at a price of $6.00 per share issued on September 23,
1997.
(4) Includes a five (5) year option to purchase 10,000 shares of Common
Stock at a price of $6.00 per share issued September 23, 1997.
Messrs. Cutrona and Kenny may be deemed to be "parents" and "promoters" of the
Company, as those terms are defined in the rules and regulations of the
Securities Act of 1933, as amended. In August 1994 and February 1995, Messrs.
Cutrona and Kenny each received their Common Stock in the Company for services
to be provided to the Company. For accounting purposes the value of these shares
was recorded at $7,840 for each individual. Mr. Pollan received his Common Stock
in August 1994 for services to have been provided to the Company. See "Certain
Transactions."
Item 12. Certain Relationships and Related Transactions
In August 1994, Joseph Cutrona and Mark A. Kenny each received a total
of 666,433 shares of the Company's common stock for services to be provided to
the Company.
During February 1995, the Company issued 45,765 shares of its Common
Stock in repayment of certain liabilities totaling $251,702. Those liabilities
include notes payable to Saddle Brook Investors of $149,633, note payable plus
accrued interest to an officer and Director of $34,273 and certain accounts
payable of $67,796.
In February 1995, Loeb Holding Corporation, as escrow agent ("Loeb"),
for Warren D. Bagatelle, HSB Capital, trusts for the benefit of families of two
principals of Loeb Holding Corporation and three unaffiliated individuals,
agreed to loan the Company $500,000 evidenced by a series of Convertible
Promissory Notes. In September 1995, Loeb converted the Convertible Promissory
Notes into 841,455 common shares of the Company and two Term Promissory Notes,
one in the principal amount of $475,000 and the other in the principal amount of
$25,000.
The Term Promissory Note in the principal amount of $475,000 and an
additional Term Promissory Note in the principal amount of $237,500 issued in
December 1995 and described below, have been modified. Such Notes provide for
accrued interest at the rate of 9% per annum payable quarterly commencing
September 1997 and unless previously converted, the principal amount of each
note is to be repaid in twelve quarterly installments, commencing September 1,
1998, or on such earlier date as such notes provide. The notes and the unpaid
interest accrued thereon, are convertible at the sole option of the holder into
shares of Series A Preferred Stock of the Company at a conversion price of
$2.125 per share.
<PAGE>
The shares of Series A Preferred Stock are convertible, in whole or in
part, into fully paid and nonassessable Common Shares on a one-for-one basis at
the option of the respective holders thereof. Holders of Series A Preferred
Stock are entitled to notice of shareholders' meetings and are entitled to vote
in common with the Common Stock of the Company. The Series A Preferred Stock is
not entitled to the declaration or payment of dividends. The Company, at its
sole option, has the right to redeem all or, from time to time, any number of
the then outstanding shares of Series A Preferred Stock at a redemption price of
$2.125 per share, such amount to be increased at the rate of ten (10%) percent
per annum for the period such Series A Preferred Shares are outstanding.
In March 1998, the holder of the notes converted $400,000 of the
principal amount of such notes into 188,235 shares of the Series A Preferred
Stock of the Company.
The Term Promissory Note in the amount of $25,000 and an additional
Note in the amount of $12,500 issued in December 1995 and discussed below have
been modified. Such Notes provide for accrued interest at the rate of 9% per
annum payable quarterly commencing September 1997 and unless previously
converted the principal amount of each note is to be repaid in twelve equal
quarterly installments, commencing September 1, 1998, or on such earlier date as
such notes provide. The notes are convertible at the sole option of the holder
into an aggregate of 400,000 common shares of the Company.
During March 1995, John H. Wasko, then President of the Company, upon
exercise of his option, acquired 70,520 shares of the Common Stock of the
Company at an exercise price of $0.02145 per share.
On March 3, 1995, the Company and JEC signed a purchase agreement
whereby JEC acquired all of the assets, rights and properties relating to the
Company's CO2 laser research and development agreement with LCL, subject to
certain liabilities, in full consideration for the forgiveness of the
indebtedness of the Company to JEC in the amount of $345,593 owed as of February
28, 1995.
On August 11, 1995, Robotic Lasers acquired Corporate Travel Link, Inc.
by issuing 1,682,924 shares of restricted Common Stock of the Company in
exchange for the shares of the common stock of Corporate Travel Link owned by
Joseph Cutrona, Mark A. Kenny and Steven E. Pollan which represented all the
authorized, issued and outstanding shares of common stock of Corporate Travel
Link.
On September 5, 1995, the Company entered into a three year consulting
and investment banking agreement with Loeb Partners Corporation which has been
extended for an additional three year period. Under the terms of the agreement,
the Company pays Loeb Partners Corporation $3,000 per month. Loeb Partners
Corporation will also receive a fee for arranging private financing and
acquisitions. Mr. Warren D. Bagatelle, a Director and Chairman of the Company,
is a Managing Director of Loeb Partners Corporation.
During December 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes ("Convertible Promissory
Notes"). In November 1996, Loeb converted the Convertible Promissory Notes into
(i) two Term Promissory Notes, one in the principal amount of $237,500 and the
other in the principal amount of $12,500 issued in December 1995 and (ii)
420,728 shares of Common Stock of the Company, of which 420,000 shares of Common
Stock are owned by four unaffiliated parties. Loeb Holding Corporation did not
receive any shares of Common Stock in this transaction.
In August 1996, the Company gave notice to Mr. Pollan that it was
canceling the 333,216 shares of Common Stock which had been issued to him in
August of 1995. It is the Company's position that the Common Stock should be
canceled because, among other reasons, Mr. Pollan failed to provide the services
to the Company which were to be the consideration for the issuance of the
shares. Mr. Pollan has commenced an
<PAGE>
action against the Company and others in the New Jersey Federal Court which
contests the Company's effort to cancel the shares issued to him, and which
seeks monetary damages and other relief. The action is in its preliminary
stages, and no assurance can be given as to its ultimate outcome.
During the quarters ended September 30, 1996, and December 31, 1996, in
order to raise additional working capital for the Company, Joseph Cutrona,
former President of the Company, sold a total of 37,600 shares of restricted
common stock of the Company owned by him, to nineteen unaffiliated third parties
at prices ranging from $2.00 to $2.50 per share for total proceeds of $76,500
which Mr. Cutrona remitted to the Company in the form of a capital contribution.
In February 1997, Mr. Cutrona sold an additional 9,850 shares of restricted
Common Stock to 5 unaffiliated third parties at a price of $2.00 per share for
total proceeds of $19,700, which Mr. Cutrona remitted to the Company in the form
of an additional capital contribution. Mr. Mark A. Kenny has issued 23,725 of
his own shares of restricted common stock of the Company to reimburse Mr.
Cutrona for one-half of the number of shares sold by Mr. Cutrona.
On October 10, 1996, the Company, Joseph Cutrona, Mark A. Kenny and
Prosoft, Inc. signed an agreement whereby Mr. Cutrona and Mr. Kenny each agreed
to transfer 14,533 shares of restricted Common Stock owned by them to Prosoft,
Inc., or its designees, upon completion of the design and satisfactory
development of the Genisys Payment System. Prosoft agreed to accept the 29,066
shares valued at $3.75 per share in satisfaction of $108,997.50 which would be
owned to Prosoft, Inc. by the Company upon completion of the Genisys Payment
System. This transfer has been completed. The Company has agreed to issue an
equal number of new shares of restricted Common Stock to Messrs. Cutrona and
Kenny in six equal installments if the Company meets certain performance
criteria on six specific dates.
In October and November 1996, and February 1997, Joseph Cutrona, in
recognition of extensive valuable services rendered to the Company by three
employees of the Company, made gifts aggregating 35,000 shares of restricted
Common Stock owned by him to the three employees, including a gift of 20,000
shares of restricted Common Stock to John H. Wasko.
In November 1996, the Company granted Mr. Wasko a five (5) year option
to purchase 35,000 shares of Common Stock at a price of $2.00 per share.
During November and December 1996, the Company and Loeb Holding Corporation
signed four eighteen (18) month Promissory Notes whereby Loeb Holding
Corporation loaned the Company the sums of $75,000, $30,000, $10,000 and $95,000
(totaling $210,000). The Promissory Notes which have been modified and bear
interest at 10%, mature on September 1, 1998. The Promissory Notes and any
unpaid interest accrued thereon, are convertible at the sole option of the
holder into shares of Series A Preferred Stock of the Company at a conversion
price of $2.125 per share.
In February and March 1997, the Company borrowed a total of $65,000
from three unaffiliated third parties pursuant to three eighteen (18) month
Promissory Notes bearing interest at 10% per annum payable at maturity. These
notes were secured by 16,250 shares of the Company's restricted Common Stock
owned by Joseph Cutrona and 16,250 shares owned by Mark A. Kenny. In April 1997,
the Company paid the principal and interest due on these Promissory Notes in
full.
The Company believes that each of these transactions was entered into
on terms at least a favorable to the Company as could have been obtained from
unaffiliated third parties.
<PAGE>
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-k
(a) (1) Financial Statements
Included in Part II of this report:
Balance Sheets - December 31, 1997 and 1996.
Statements of Operations During the Development Stage - For the
Period from Inception through December 31, 1997 and the Years
Ended December 31, 1997 and December 31, 1996.
Statements of Cash Flows - For the Period from Inception through
December 31, 1997 and for the Years Ended December 31, 1997 and
December 31, 1996.
Statement of Changes in Stockholders' Equity - For the Years Ended
December 31, 1997 and December 31, 1996.
Notes to Financial Statements
(2) Exhibits
3.1* Registrant's Articles of Incorporation
3.2* Registrant's By-Laws
4.1* Form of Common Stock Certificate
4.2* Redeemable Warrant Agreement with Form of Class A and
Class B Warrant
10.1 Employment Agreement dated June 23, 1997 between
Registrant and Lawrence E. Burk filed herein with
this report.
10.2* Consulting Agreement dated October 18, 1996 between the
Registrant and Mark A. Kenny.
10.3* Employment Agreement dated October 17, 1996 between
Registrant and John H. Wasko.
10.4* Copy of lease dated November 1, 1995 between Unicom and
Corporate Travel Link, Inc.
10.5* Copy of Agreement dated June 22, 1995 between American
Airlines, Inc., and Corporate Travel Link, Inc.,
relating to Sabre Extension Program - Associate
Distribution and Services Agreement.
10.6* Copy of Agreement dated June 30, 1995 between American
Airlines, Inc. and Corporate Travel Link, Inc., relating
to Associate Sabre Equipment Lease Agreement.
10.7* Copy of Agreement dated June 30, 1995 between American
Airlines, Inc. and Corporate Travel Link, Inc.
non-standard system amendment to Corporate Sabre
Equipment Lease Agreement.
10.8* Copy of Script Consulting Agreement dated June 21, 1995
between Worldspan, LP and Corporate Travel Link, Inc.
<PAGE>
10.9* Copy of Script Services agreement dated June 21, 1995
between Worldspan, LP and Corporate Travel Link, Inc.
10.10* Copy of Galileo Services Display and Reservation Agreement
dated August 28, 1995, between Galileo International
Partnership and Corporate Travel Link, Inc.
10.11* Copy of Ancillary Services Agreement dated August 28, 1995
between Galileo International Partnership and Corporate
Travel Link, Inc.
10.12* Copy of Worldspan Car Rental Associate Reservation
agreement between Worldspan, LP and Corporate Travel Link,
Inc.
10.13* Copy of Interim Loan Agreement between the Registrant and
Loeb Holding Corporation and certain executives of the
Registrant.
10.14* Prosoft Consulting Agreement.
10.15 Employment Agreement dated May 1, 1997 between the
Registrant and Mark A. Kenny.
10.16 Copy of Agreement dated February 1, 1998 between the
TransNet Companies, Inc. and the Registrant filed herein
with this report.
21* List of Subsidiaries
All of the above referenced documents, marked with an (*) are incorporated
herein by reference to the Exhibit bearing the same number in the Registrant's
Registration Statement on Form SB-2, File No. 333-15011.
(b) (1) Reports on Form 8-K
None
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997 and 1996 and the Period From March 7,
1994 (commencement of development stage activities) to
December 31, 1997 F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) for the Years Ended December 31, 1997 and F-5
1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996, and the Period From March 7,
1994 (commencement of development stage activities) to
December 31 ,1997 F-6
Notes to Consolidated Financial Statements F-7 to F-18
F-1
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Genisys Reservation Systems, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Genisys
Reservation Systems, Inc. and Subsidiaries as of December 31, 1997 and 1996 and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years ended December 31, 1997 and 1996, and for
the period from March 7, 1994 (commencement of development stage activities) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Genisys Reservation
Systems, Inc. and Subsidiaries at December 31, 1997 and 1996 and the results of
their operations and their cash flows for the years ended December 31, 1997 and
1996, and for the period from March 7, 1994 (commencement of development stage
activities) to December 31, 1997, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company and has
suffered recurring losses from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
WISS & COMPANY, LLP
Livingston, New Jersey
February 5, 1998 (except as to Note 6
for which the date is March 10, 1998)
F-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED BALANCE SHEETS
ASSETS December 31,
1997 1996
CURRENT ASSETS:
Cash and equivalents $ 2,207,841 $ 91,548
Accounts receivable 8,784 -
Prepaid expenses 5,127 1,081
__________ _______
Total Current Assets 2,221,752 92,629
__________ _______
PROPERTY AND EQUIPMENT 261,643 235,285
OTHER ASSETS: _________ ________
Computer software costs, less accumulated
amortization 581,193 312,171
Deferred offering costs - 153,210
Debt issue costs, less accumulated amortization 26,609 45,393
Deposits and other 61,669 64,910
_________ _________
669,471 575,684
___________ __________
$3,152,866 $ 903,598
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 114,957 $ 161,282
Accounts payable and accrued expenses 189,712 304,490
Due to related parties - 29,652
Accrued interest payable - related parties 163,296 95,748
Accrued consulting fees - related parties 3,000 101,500
________ _________
Total Current Liabilities 470,965 692,672
LONG-TERM DEBT:
Long-term debt, less current maturities 982,742 1,009,757
10% Promissory notes payable - 563,500
Convertible notes payable - 30,000
__________ ___________
Total Liabilities 1,453,707 2,295,929
__________ ___________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.0001 par value: 25,000,000 shares
authorized; none outstanding - -
Common stock, $.0001 par value: 75,000,000 shares
authorized; 4,355,594 shares (1997) and 3,280,594 436 328
shares (1996) issued and outstanding
Additional paid-in capital 4,933,851 252,344
Deficit accumulated during development stage (3,235,128) (1,645,003)
___________ ___________
Total Stockholders' Equity (Deficiency) 1,699,159 (1,392,331)
___________ ___________
$3,152,866 $ 903,598
========== ============
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED STATEMENTS OF OPERATIONS
Period From
March 7, 1994
(Commencement of Development
Stage Activities) to
Year Ended December 31, December 31,
________________________
1997 1996 1997
_____________ ________ ______________
SERVICE REVENUES $ 25,863 $ - $ 25,863
_________ ________ _________
EXPENSES:
Cost of services 24,992 - 24,992
General and administrative 1,318,203 819,205 2,675,899
Depreciation and amortization 217,386 97,721 333,894
Interest expense, net 55,407 134,277 226,206
_________ __________ ___________
1,615,988 1,051,203 3,260,991
__________ ___________ ___________
NET LOSS INCURRED DURING THE
DEVELOPMENT STAGE $(1,590,125) $ (1,051,203) $(3,235,128)
============ ============= ==============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.39) $ (0.36) $ (1.19)
============= ============= ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,121,000 2,904,000 2,725,000
============= ============ ==============
See accompanying notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Par Value Capital Stage Total
______ _________ _________ _____________ ________
BALANCES, DECEMBER 31, 1995
(Note 1) 2,804,866 $ 280 $ 18,639 $ (593,800) $ (574,881)
YEAR ENDED DECEMBER 31, 1996:
Issuance of common stock -
For cash at $2 per share 55,000 6 109,994 - 110,000
For conversion of stockholder
note into common stock 420,728 42 6,661 - 6,703
Contribution to capital by
stockholder/officer - - 76,700 - 76,700
Issuance of warrants, less
related costs - - 10,350 - 10,350
Common stock (15,000 shares)
transferred to certain
employees by a stockholder
in consideration of services
rendered at $2 per share - - 30,000 - 30,000
Net loss - - - (1,051,203) (1,051,203)
__________ _______ _________ ____________ ___________
BALANCES, DECEMBER 31, 1996 3,280,594 328 252,344 (1,645,003) (1,392,331)
YEAR ENDED DECEMBER 31, 1997:
Contribution to capital by
stockholder/officer - - 128,700 - 128,700
Proceeds from public offering
of common stock at $5 per
share and warrants, less
related costs 1,035,000 103 4,507,812 - 4,507,915
Conversion of convertible
notes into common stock 15,000 2 29,998 - 30,000
Issuance of common stock
at $.60 per share upon
exercise of option 25,000 3 14,997 - 15,000
Net loss - - - (1,590,125) (1,590,125)
__________ ______ _________ __________ ___________
BALANCES, DECEMBER 31, 1997 4,355,594 $ 436 $4,933,851 $(3,235,128) $1,699,159
========== ====== ========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period From
March 7, 1994
(Commencement
of Development
Stage Activities)
Year Ended December 31,to December 31,
1997 1996 1997
_________ ___________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,590,125) $(1,051,203) $(3,235,128)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization 217,387 97,721 333,894
Contribution to capital of services rendered - 30,000 49,600
Changes in operating assets and liabilities:
Accounts receivable (8,784) - (8,784)
Prepaid expenses (4,286) (378) (5,367)
Deposits and other 3,241 (38,162) (62,323)
Accounts payable and accrued expenses (147,669) 365,630 339,982
____________ _________ ___________
Net cash flows from operating activities (1,530,236) (596,392) (2,588,126)
____________ __________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (457,202) (327,999) (1,104,975)
Acquisition of Prosoft, Inc. (34,602) - (34,602)
___________ _________ ___________
Net cash flows from investing activities (491,804) (327,999) (1,139,577)
___________ __________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 5,000 - 5,000
Payments on long-term debt (78,340) - (78,340)
Proceeds from public offering of common
stock and warrants net of deferred offering costs 4,661,125 (153,210) 4,507,915
Conversion of convertible notes payable
to common stock 30,000 - 30,000
Issuance of common stock upon exercise of option 15,000 - 15,000
Loans and advances from related parties (29,652) 10,526 -
Proceeds from issuance of notes payable - 305,000 955,000
Payments under computer equipment leases - (53,352) (63,076)
Proceeds from sale and lease-back - 150,162 294,644
Proceeds on payments of convertible notes (30,000) 30,000 -
Proceeds from sale of common stock - 110,000 110,000
Contribution to capital - stockholder/officer 128,700 76,700 205,400
Proceeds from issuance of 10% promissory notes
and related warrants, less related costs - 517,500 517,500
Payments on 10% promissory notes and related
warrants (563,500) - (563,500)
__________ ________ ___________
Net cash flows from financing activities 4,138,333 993,326 5,935,543
__________ ________ _________
NET CHANGE IN CASH AND EQUIVALENTS 2,116,293 68,935 2,207,841
CASH AND EQUIVALENTS, BEGINNING OF YEAR 91,548 22,613 -
___________ __________ ___________
CASH AND EQUIVALENTS, END OF YEAR $2,207,841 $ 91,548 $ 2,207,841
__________ _________ ___________
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 94,822 $ 37,250 $ 140,498
__________ _________ ___________
Net liabilities assumed in reverse acquisition $ - $ - $ 14,087
___________ _________ ____________
Conversion of related party debt into common
stock $ - $ 6,703 $ 20,109
___________ _________ ____________
See accompanying notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 History of the Company, Nature of the Business and Summary of
Significant
Accounting Policies:
History of the Company and Nature of the Business - Genisys Reservation Systems,
Inc. (the "Company"), formerly Robotic Lasers, Inc., changed to its current name
in July 1996. On August 11, 1995, the Company acquired Corporate Travel Link,
Inc. ("Travel Link") a development stage company, by issuing 1,682,924 shares of
its restricted common stock in exchange for all of the then issued and
outstanding shares of common stock of Travel Link. For accounting purposes, the
share exchange transaction and combination of Travel Link with the Company has
been treated as a reverse acquisition by, and a recapitalization of, Travel
Link. The net assets of the Company of $(14,000) consisted primarily of accounts
payable. The previous historical financial statements of the Company are no
longer reported and the financial statements of Travel Link (since its formation
in March 1994) are now reported as the historical consolidated financial
statements of the Company and its subsidiaries.
Although planned principal operations have commenced, revenues to date have not
been significant; accordingly, the Company and its subsidiaries continue to be
in the development stage. The Company has developed a computerized limousine
reservation and payment system for the business traveler. The Company
anticipates that the proprietary software will enable a system of limousine
reservations to be completely computerized and operate without human
intervention, except for the initial inputting of travel information.
In June 1997, the Company acquired 80% of the outstanding common stock of
Prosoft, Inc. ("Prosoft") for an aggregate purchase price of $34,602. This
transaction has been accounted for as purchase and is included in the Company's
consolidated financial statements as of the date of acquisition. The assets
acquired consist principally of equipment. Pro forma results assuming the
acquisition had occurred as of January 1,1996 have not been presented as the
acquisition was not deemed significant.
Estimates and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
F-7
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Travel Link and
Prosoft. All significant intercompany transactions and accounts have been
eliminated in consolidation.
Financial Instruments - Financial instruments include cash and equivalents,
other assets, accounts payable, accrued expenses and long-term debt. The amounts
reported for financial instruments are considered to be reasonable
approximations of their fair values, based on market information available to
management.
Cash and Equivalents - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Concentration of Credit Risk - The Company maintains its cash balances in
several financial institutions. The accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000. At December 31,1997,
the Company had no uninsured cash balances, as approximately $2,125,000 was
invested in an insured money market fund.
Property and Equipment - Property and equipment is stated at cost and
depreciated using the straight-line method over an estimated useful life of 5
years.
Computer Software Costs Relating to Reservation and Payment Systems - The
Company capitalizes the direct costs of materials and services and interest
consumed in the development of the Genisys Reservation and Payment System. Such
costs are being amortized on a straight-line basis over three years, subject to
periodic evaluation for impairment. It is reasonably possible that the remaining
economic life of these systems will be reduced significantly in the near term
due to competitive developments. As a result, the carrying amounts of the
Genisys Reservation and Payment System may be reduced materially in the near
term.
The Company believes that Statement of Position 98-1, expected to be issued in
March 1998, will have no material effect on its financial statements, as the
policies presently being used by the Company substantially conform to the
related Exposure Draft.
Debt Discount and Debt Issue Costs - Costs related to the issuance of debt are
capitalized and amortized over the term of the related debt as an adjustment to
interest expense.
F-8
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes - Deferred tax assets and liabilities are computed for temporary
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Stock Based Compensation - Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," ("FAS 123") encourages, but does not
require companies to record compensation cost at fair value for stock- based
employee compensation plans. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
options granted by the Company is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. Since the exercise price equaled or
exceeded the estimated fair value of the underlying shares at the date of grant,
no compensation was recognized in 1997 and 1996.
Had compensation cost been based upon the fair value of the option on the date
of grant, as prescribed by FAS 123, the Company's proforma net loss and net loss
per share would have been approximately $(2,801,000) ($.68 per share) in 1997
and approximately $(1,086,000) ($.37 per share) in 1996. The fair value of the
options were estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions, respectively:
risk-free interest rates of 5.0%, dividend yield of 0.0% volatility factor equal
to 59.2% and an expected life equaling the options exercise periods.
Net Loss Per Common Share - As of December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per share" which
had no effect on loss per share as previously reported. Basic loss per share is
based upon the weighted average number of outstanding common shares. The shares
issuable upon the exercise of outstanding warrants and options or upon
conversion of outstanding debt have been excluded since the effect would be
antidilutive, due to net losses for all periods presented; accordingly, diluted
loss per share is the same as basic loss per share for all periods reported.
Note 2 Operating and Liquidity Difficulties and Management's Plans to Overcome:
The accompanying financial statements of the Company have been presented on the
basis that it is a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company has reported net losses since inception and expects to incur additional
F-9
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
operating losses over the next several quarters. The Company has also
experienced liquidity difficulties since inception, and in order to continue the
marketing and sales efforts of the Company's reservation and payment system may
need additional financing. The Company has financed its operations since
inception with the proceeds from the issuance of long-term debt and more
recently, with the proceeds from its public offering and loans from a related
party.
Since inception, the operations of the Company have been limited to market
research and developing a software and hardware system for computerizing the
limousine reservation and payment system. The development of both the
reservation and payment systems have been completed and the Company has
commenced generating limited revenues. No assurance can be given that the
Company's reservation and payment system will achieve commercial feasibility.
The Company's working capital and its capital requirements will depend upon
numerous factors, including, without limitation, the progress of the Company's
system modifications, competition, industry technological advances and the
ability of the Company to market its limousine reservation system. The Company
will require additional significant financing to market the system, cover
anticipated losses and sustain operations in 1998 and beyond and, in addition,
to satisfy the repayment of long-term debt. There can be no assurance that the
financing needed for attaining commercial viability of the Company's reservation
and payment system will be obtained. If the Company is unable to raise
sufficient capital, it will delay and could prevent the Company's ability to
bring the reservation and payment systems to market.
Although management believes that the Company has sufficient resources to
provide for its planned operations over the next twelve months, there can be no
assurance that its resources will be adequate for this period.
Reference should be made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein for additional
information.
Note 3 Property and Equipment:
Property and equipment at December 31, 1997 and 1996 are summarized as follows:
December 31,
1997 1996
_________ _______
Computer equipment $349,075 $296,009
Furniture and fixtures 46,392 4,378
_________ _________
395,467 300,387
Less: Accumulated depreciation 133,824 65,102
_________ ________
$ 261,643 $235,285
========= ========
F-10
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 Long-term Debt:
Notes Payable - Stockholder - A Term Promissory Note in the principal amount of
$475,000 and an additional Term Promissory Note in the principal amount of
$237,500 have been modified. Such Notes provide for accrued interest at the rate
of 9% per annum payable quarterly commencing September 1997 and unless
previously converted, the principal amount of each note is to be repaid in
twelve quarterly installments, commencing September 1, 1998, or on such earlier
date as such notes provide. The notes and the unpaid interest accrued thereon,
are convertible at the sole option of the holder into shares of Series A
Preferred Stock of the Company at a conversion price of $2.125 per share.
The Term Promissory Note in the amount of $25,000 and an additional Note in the
amount of $12,500 issued in December 1995 and discussed below have been
modified. Such notes provide for accrued interest at the rate of 9% per annum
payable quarterly commencing September 1997 and unless previously converted the
principal amount of each note is to be repaid in twelve equal quarterly
installments, commencing September 1, 1998, or on such earlier date as such
notes provide. The notes are convertible at the sole option of the holder into
an aggregate of 400,000 common shares of the Company.
Total borrowings from the stockholder totalled $750,000 at December 31, 1997 and
1996 and accrued interest was $140,594 and $94,003, respectively. The Company
has not paid any interest under these loan agreements to date.
Notes Payable - Related Party - During November and December 1996, the Company
and Loeb Holding Corporation signed four eighteen (18) month Promissory Notes
whereby Loeb Holding Corporation loaned the Company the sums of $75,000,
$30,000, $10,000 and $95,000 (totalling $210,000). The Promissory Notes which
have been modified and bear interest at 10% mature on September 1, 1998. The
Promissory Notes and any unpaid interest accrued thereon, are convertible at the
sole option of the holder into shares of Series A Preferred Stock of the Company
at a conversion price of $2.125 per share.
Capital Leases - In September 1995, January 1996 and December 1996, the Company
entered into sale and lease-back arrangements whereby the Company sold the bulk
of its computer hardware and commercially purchased software to a lessor for
amounts totalling $295,000 and agreed to lease back such equipment for initial
terms ranging from 24 to 30 months. The net book value of capitalized equipment
at December 31, 1997 and 1996 is approximately
F-11
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$230,000 and $220,000, respectively. The obligations under these leases at
December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Imputed
Interest
Description Rate
____________ _______
Capital leases payable in monthly installments
totalling $10,276 through various expiration 25.4%
dates, collateralized by the computer to
equipment and software 26.6% $186,438
Less: Amount representing interest 39,085
_________
Present value of minimum lease payments 147,353
Less: Current maturities 81,957
_________
$65,396
========
Summary of long-term debt:
December 31,
1997 1996
_____ _____
Notes payable - stockholder, less unamortized
debt discount of $9,654 and $15,529 in 1997
and 1996, respectively $740,346 $734,471
Notes payable - related party 210,000 205,000
Capital leases 147,353 231,568
__________ __________
1,097,699 1,171,039
Less: Current maturities 514,957 161,282
__________ ___________
$582,742 $1,009,757
========== ===========
Long-term debt matures as follows:
Year Ending December 31,
________________________
1998 $514,957
1999 295,552
2000 224,815
2001 62,375
___________
$1,097,699
===========
</TABLE>
Note 5 Income Taxes:
Deferred income taxes reflect the net effects of temporary differences between
the amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The principal temporary difference arises
from net operating loss carryforwards and results in a deferred tax asset of
approximately $1,300,000 at December 31, 1997.
F-12
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
determined, based on its recurring net losses, and it being a development stage
company, that a full valuation allowance is appropriate at December 31, 1997.
A reconciliation of the provision (benefit) for income taxes computed at the
federal statutory rate of 34% and the effective tax rate of income (loss) before
income taxes is as follows:
Year Ended December 31,
1997 1996
_________ ___________
Computed tax benefit on net loss at
federal statutory rate $(550,000) $(347,000)
State income tax benefit, net of federal
income tax effect (100,000) (61,000)
Tax effect of net operating losses not
currently usable 650,000 408,000
__________ __________
Provision (benefit) for income taxes $ - $ -
=========== ============
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $3,300,000 expiring through 2012.
Current tax law limits the use of net operating loss carryforwards after there
has been a substantial change in ownership (as defined) during a three year
period. Because of the possible future changes in common stock ownership, the
use of the Company's net operating loss carryforwards may be subject to an
annual limitation. To the extent amounts available under the annual limitation
are not used, they may be carried forward for the remainder of 15 years from the
year the losses were originally incurred.
Note 6 Stockholders' Equity:
Preferred Stock - The Company's Certificate of Incorporation authorizes the
issuance of up to 25,000,000 shares of Preferred Stock. On March 10, 1998, the
Board of Directors designated 706,000 shares of Series A Preferred Stock which
are convertible, in whole or in part, into fully paid and nonassessable Common
Shares on a one-for-one basis at the option of the respective holders thereof.
The Series A Preferred Stock is not entitled to the payment of dividends. The
Company, at its sole option, has the right to redeem all or, from time to time,
any number of the then outstanding shares of Series A Preferred Stock at a
redemption price of $2.125 per share plus a 10% per year increase in the
redemption rate.
F-13
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors is authorized to issue additional shares of Preferred
Stock from time to time in one or more series and to establish and designate any
such series and to fix the number of shares and the relative conversion rights,
voting rights, terms of redemption and liquidation.
In March 1998, the holder of the notes converted $400,000 of the principal
amount of such notes into 188,235 shares of the Series A Preferred Stock of the
Company.
The following schedule gives the pro forma effects to the December 31, 1997
consolidated balance sheet as if the March 1998 conversion had occurred as of
that date:
Current maturities of long-term debt $114,957
Long-term debt, less current maturities 582,742
Total liabilities 1,053,707
Preferred stock 400,000
Total Stockholders' Equity 2,099,159
Sales of Common Stock - During the quarter ended March 31, 1996, the Company
sold 5,000 shares of its restricted common stock to a former officer and
director of the Company for $10,000. In addition, the Company sold, to an
unaffiliated private investor, 25,000 shares of its restricted common stock for
$50,000. In November 1996, the Company sold 25,000 shares of the Company's
restricted common stock to another unaffiliated party for $50,000.
Public Offering - On March 26, 1997, the Company consummated a public offering
of its securities consisting of 1,035,000 shares of common stock, 1,725,000
Class A Redeemable Warrants and 1,035,000 Class B Redeemable Warrants. Each
redeemable warrant is exercisable for a period of 48 months, commencing
September 20, 1997 and entitles the holder to acquire one share of common stock
at $5.75 (Class A) or $6.75 (Class B) per share. Commencing March 20, 1998, the
Company will have the right at any time to redeem all, but not less than all, of
the Class A or Class B warrants at a price equal to $.20 per Class A warrant and
$.10 per Class B warrant, provided that the closing bid price of the common
stock equals or exceeds $6.25 (Class A) or $7.25 (Class B) per share for any
twenty trading days within a period of thirty consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption.
Stock Splits - In July 1996, the Company's stockholders approved a one for two
reverse stock split which has been retroactively reflected in the accompanying
consolidated financial statements.
F-14
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Private Offering - Pursuant to a private offering totalling $575,000, the
Company issued 11.5 units to various unrelated parties in May and June 1996.
Each $50,000 unit consists of a $49,000 three-year promissory note (bearing
interest at 10% per annum) and a Class A redeemable common stock purchase
warrant valued at $1,000 per unit. Each warrant entitles the holder to purchase
25,000 shares of the Company's common stock at $5.75 per share resulting in
Class A Redeemable Warrants to purchase 287,500 shares of the Company's common
stock being issued.
Cancellation of Shares - In August 1996, the Company gave notice to a former
officer and director of the Company that it was cancelling the 333,216 shares of
its common stock which had been issued to the former officer in connection with
services to be provided at the inception of Travel Link. Such cancellation
relates to various claims made by the Company against the former officer and
failure to provide services to the Company. The former officer has contested the
attempt by the Company to cancel his shares. Pending return of the shares, they
are considered outstanding for all periods presented herein. (See Note 7 for
information concerning litigation commenced by the former officer.)
Warrants and Options:
Non-incentive Options - In August 1995, the Company granted an option to
purchase 25,000 shares of its common stock to an officer, exercisable at $.60
per share through August 2000. In November 1995, the Company granted an option
to purchase 35,000 shares of its common stock to the same officer exercisable at
$2 per share through November 2001.
In connection with the leases described in Note 4, the Company granted to the
lessor warrants to purchase a 22,098 shares of common stock at an exercise price
of $2 per share.
In May 1997, the Company granted to each of the two minority owners of Prosoft,
non-incentive stock options to purchase 40,000 shares of common stock. The
options expire five years from the date of grant and are immediately exercisable
at $8.625. In December 1997, the Company's Board of Directors resolved to modify
the options to purchase 80,000 shares of the Company's common stock granted in
May 1997 to an exercise price of $6.00 per share with three year vesting through
September 2000. On May 29, 1997, an officer of the Company exercised options for
25,000 shares of common stock at $.60 per shares, resulting in total proceeds of
$15,000.
F-15
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Incentive Options - Effective May 12, 1997, the Company's Board of Directors
approved the Genisys Reservation Systems, Inc. 1997 Stock Incentive Plan, (the
"Plan"). Information on incentive stock options activity for this Plan for the
year ended December 31, 1997 is as follows:
Weighted -
Shares Average
Under Exercise
Option Price
______ ________
Balance, beginning of year - $ -
Options granted 374,000 6.14
Options exercised - -
Options cancelled - -
________ ________
Balance, end of year 374,000 $6.14
======== ========
Options exercisable, end of year 374,000 $6.14
======== ========
Contribution to Capital - During the year ended December 31, 1996, in order to
raise additional working capital, the Company's former President sold 37,600
shares of restricted common stock of the Company owned by him to nineteen
unaffiliated third parties at prices ranging from $2.00 to $2.50 per share for
total proceeds of $76,700. Such proceeds were remitted to the Company in the
form of a capital contribution.
In February 1997, the former President of the Company sold shares of the
Company's restricted common stock owned by him and simultaneously remitted the
proceeds of $19,700 to the Company in the form of a capital contribution. The
Company's former Executive Vice President, using his own shares of restricted
common stock of the Company, has reimbursed the Company's former President for
one-half of the number of shares he sold.
On July 28, 1997, the Company's former President and former Executive Vice-
President each contributed 14,553 shares of the Company's common stock, valued
at a total of $109,000, to Prosoft for payment for computer software design and
other consulting services provided to the Company. The Company has agreed to
issue an equal number of new shares of restricted common stock to such
stockholders in six equal installments, if the Company meets certain performance
criteria on six specified dates.
F-16
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 Commitments and Contingencies:
Leases - The Company leases its administrative facilities under a five-year
lease expiring in March 2002. The lease provides for annual rent of
approximately $45,000. The Company also has an office lease expiring in November
2002 which provides for annual rent of approximately $23,500.
Rent expense totalled $52,900 and $26,000 for the year ended December 31, 1997
and 1996, respectively.
Consulting Agreements - The Company entered into a consulting agreement in
October 1996 with a director, who formerly served as the Company's Executive
Vice-President. The agreement provides for monthly consulting fees of $6,500
through February 1997 and $8,400 per month thereafter, until modified by the
Company. Fees during 1997 and 1996 pursuant to this agreement totalled $97,000
and $16,000, respectively. The consulting agreement was terminated by mutual
agreement on May 1, 1997, at which time the former officer resumed his
employment with the Company.
In September 1995, the Company entered into a three year consulting agreement
with an investment banking firm whose managing director is a stockholder and the
Chairman of the Board of Directors of the Company. The agreement provides for a
consulting fee of $3,000 per month and has been extended by the Company for an
additional three year period. Accrued consulting fees for the investment banking
firm were $3,000 and $36,000 at December 31, 1997 and 1996, respectively. Also
included in accrued consulting fees in 1996 is $49,500 of fees for consulting
services provided to the Company by its current Chief Financial Officer.
Contingencies - On February 20, 1997, two individuals filed an action against
the Company and Travel Link in the Superior Court of New Jersey seeking, among
other things, damages in the amount of 8% of any financing secured by Travel
Link resulting from the Plaintiff's efforts as well as 5% of the Company's
Common Stock allegedly due for services rendered in connection with the
Company's acquisition of Travel Link in 1995. The claim for monetary damages is
based upon an alleged written agreement between Travel Link and plaintiffs,
while the claim for the shares of the Company's Common Stock is based upon
alleged oral representations and promises made by a former officer of Travel
Link. Management believes that the plaintiffs have not introduced any financing
to the Company and intends to vigorously defend the action. On March 4, 1998
Travel Link filed an application with the Court to assert a claim for
indemnification against the two individuals, two former directors and officers
of Travel Link and the Company, and a current director and employee of the
Company and Travel Link, based upon a 1995 agreement whereby such individuals
agreed to hold Loeb Holding Corporation and Travel Link harmless and to
indemnify them from any and all claims or liabilities for brokerage commissions
F-17
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
or finder's fees incurred by reason of any action taken by it or them, including
the claims of the plaintiffs in this action. No assurances can be given that the
Company will prevail in this matter.
On April 17, 1997, a former officer of the Company filed an action in the United
States District Court, District of New Jersey, against the Company, Travel Link,
the officers of both companies, and various related and unrelated parties
seeking among other things a declaratory judgment that the former officer is the
owner of the 333,216 shares of Common Stock of the Company which had been issued
to him at the inception of Travel Link for services he was to have provided (see
Note 6) and for unspecified compensatory and punitive damages. The Company
believes that the plaintiff's claims are without merit and intends to vigorously
defend the action and to assert numerous defenses and counterclaims in its
answer.
On December 23, 1997, an individual filed an action in the Superior Court of New
Jersey against the Company and the former President of the Company, alleging
that the former President of the Company induced such person to leave her place
of employment to assume employment with the Company. The claim seeks monetary
damages based upon an oral promise of employment allegedly made by the same
officer of the Company. The Company believes that the plaintiff's claim is
without merit and intends to vigorously defend the action and to assert numerous
defenses in its answer.
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENISYS RESERVATION SYSTEMS, INC.
March 30, 1998 By: /s/ Lawrence E. Burk
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
/s/ Lawrence E. Burk President, Chief Executive
Officer, and Director March 30, 1998
Lawrence E. Burk
/s/ John H. Wasko Secretary, Treasurer,
Chief Financial March 30, 1998
John H. Wasko Officer and Director
/s/ Warren D. Bagagtelle Chairman and Director March 30, 1998
Warren D. Bagatelle
/s/ Mark A. Kenny Director March 30, 1998
Mark A. Kenny
/s/ David W. Sass Director March 30, 1998
David W. Sass
/s/ S. Charles Tabak Director March 30, 1998
S. Charles Tabak
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made this 23rd day of June, 1997, between
GENISYS RESERVATION SYSTEMS, INC., 2401 Morris Avenue, Union, New Jersey, 07083
(the "Employer"), and LAWRENCE E. BURK, residing at 6 Seminole Way, Chatham, New
Jersey, 07928 (the "Employee").
In consideration of the mutual covenants and agreements set forth
below, the parties agree as follows:
ARTICLE I
EMPLOYMENT AND TERM OF AGREEMENT
1.01. The Employer hereby employs the Employee and the Employee hereby
accepts employment with the Employer upon the terms and conditions hereinafter
set forth.
1.02. The term of this Agreement shall commence on the date first set
forth above and shall continue indefinitely until this Agreement is terminated
in accordance with the terms and provisions hereof.
ARTICLE II
DUTIES OF EMPLOYEE
2.01. The duties to be performed by the Employee shall be determined
from time to time by the Board of Directors of the Employer.
2.02. The Employer shall have the right at any time during the term of
this Agreement to assign the Employee to perform duties which are different from
the duties originally assigned to the Employee pursuant to Section 2.01 hereof.
2.03. If at any time during the term of this Agreement the Employee
should be unable because of personal injury, illness, or any other cause to
perform his duties under this Agreement, the Employer may assign the Employee to
other duties, and the compensation to be paid to the Employee for performing
those other duties shall be determined by the Employer in
<PAGE>
its sole discretion. If the Employee is unwilling to accept the modification in
duties and compensation made by the Employer, this Agreement shall terminate
immediately.
ARTICLE III
COMPENSATION
3.01. As compensation for services rendered pursuant to this Agreement,
the Employee shall be entitled to receive from the Employer a salary of
$________________ per annum. The Board of Directors of the Employer shall review
the Employee's salary at least annually with a view to increasing it if, in the
sole judgment of the Board of Directors, the earnings of the Employer or the
services of the Employee merit such an increase. Said salary shall be payable in
equal weekly installments, pro-rated for any partial employment period. There
shall be no additional compensation for overtime work.
3.02. As addition compensation for services to be rendered under this
Agreement, Employee may receive from the Employer an incentive bonus to be
determined in the sole discretion of the Board of Directors of the Employer.
ARTICLE IV
EMPLOYEE BENEFITS
4.01. The Employer agrees to immediately include the Employee in the
hospital, surgical, medical and dental benefits plan offered by Genisys from
time to time, so long as the Employee continues to be eligible for such coverage
in accordance with the rules and regulations adopted by the insurance company.
4.02. The Employee shall be entitled to an annual vacation leave of
four weeks per year at full pay. The vacation period may be increased by the
Employer from time to time. The time for vacation shall be selected by the
Employee and approved by the Employer. Any unused vacation may be accrued and
carried forward from year to year. In lieu of the vacation leave specified
above, the Employee may elect to receive payment for the whole or portion of the
vacation to which
<PAGE>
he is entitled, the vacation time to be valued at the amount of salary earned by
the Employee during an equivalent period of time.
4.03. The Employee shall be entitled to the following holidays with
full pay: January 1 (New Year's Day), third Monday in February (President's
day), last Monday in May (Memorial Day), July 4 (Independence Day), first Monday
in September (Labor Day), fourth Thursday in November (Thanksgiving Day),
December 25 (Christmas).
4.04. The Employee shall be entitled to five days per year as sick
leave with full pay. Such sick leave may not be accumulated and may not be
carried forward from year to year.
<PAGE>
ARTICLE V
REIMBURSEMENT OF EXPENSES
5.01. Subject to the provisions of Section 5.02 hereof, the Employer
shall reimburse the Employee for ordinary and necessary business expenses
incurred in the performance of his duties pursuant to this Agreement.
5.02. The Employee is authorized to incur reasonable business expenses
for promoting the business of the Employer, including expenditures for
entertainment and travel. The Employer will reimburse the Employee from time to
time for all business expenses provided that the Employee presents to the
Employer documentary evidence (such as receipts or paid bills), stating
sufficient information to establish the amount, date, place, essential character
and deductibility for such expenditure.
5.03. In the event that the Employee is transferred by the Employer to
a new principal place of work during the term of this Agreement, the Employer
shall reimburse the Employee for all reasonable moving and traveling expenses
incurred by the Employee as a result of such transfer.
5.04. The Employee shall receive from the Employer such legal
indemnification as is provided to other officers and directors of Employer.
ARTICLE VI
PROPERTY RIGHTS
6.01. During the term of this Agreement, the Employee will have access
to and become familiar with various trade secrets consisting of, among other
things, business plans and practices, patents, devices, secret processes,
compilations of information, records, and specifications that are owned by the
Employer and that are regularly used in the operation of the business of the
Employer. The Employee shall not disclose any of these trade secrets, directly
or indirectly, or use them in anyway, unless authorized by the Board of
Directors of the Employer. All files, records, documents, drawings,
specifications, equipment, and similar items relating to the business of the
Employer, whether prepared by the Employee or otherwise coming into his
possession, shall remain the exclusive property of the Employer and shall not be
removed from the premises of the Employer under any circumstances whatsoever
without the prior written consent of the Employer.
<PAGE>
6.02. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of the
Employer. During the term of this Agreement and for the period of one year after
the termination of this Agreement, the Employee shall not, directly or
indirectly, solicit for employment or employ any employee of the Employer
regardless of whether the employee is employed on the date of this Agreement or
at any other time during the term of this Agreement.
6.03. The Employee hereby acknowledges and agrees that it is important
to the Employer that its goodwill be protected, maintained and increased.
Accordingly, the Employee covenants and agrees as follows: Upon termination of
this Agreement, whether for cause or otherwise, the Employee shall not directly
or indirectly enter into or engage generally in competition with products in
development or operated by the Employer at the time of termination, whether as
an individual on his own or as a partner or joint venturer, or as an employee or
agent for any person, or as an officer, director, or shareholder or otherwise,
for a period of one year after the date of termination of this Agreement. This
covenant on the part of the Employee shall be construed as an agreement
independent of any other provision of this Agreement; and the existence of any
claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of this covenant.
6.04. The Employee acknowledges that he has read and understood the
provisions of this Article, and that its provisions will not impose an undue
hardship upon him. The Employee further acknowledges that due to the fact that
the Employer's operations are or will be worldwide in scope, the
post-termination restraints set forth herein will apply worldwide.
ARTICLE VII
TERMINATION
7.01. If the Employee wilfully breaches or habitually neglects his
duties under this Agreement, the Employer may, at its option, elect to terminate
this Agreement by causing a notice to be mailed to the Employee at his last
known
<PAGE>
address stating the cause or causes of the termination and giving the Employee a
period of fifteen days to cure the default resulting from such cause or causes.
If at the end of the aforesaid fifteen day period the Employee has not cured the
default resulting from such cause or causes, the Employer may terminate this
Agreement immediately by mailing written notice to such effect to the Employee
at his last known address and thereupon this Agreement shall immediately
terminate, become null and void and be of no further force or effect. The remedy
set forth in this Section 7.01 shall be without prejudice to any other remedy to
which the Employer may be entitled at law, in equity, or under this Agreement.
7.02. This Agreement may be terminated at any time by either party at
its option upon the giving of thirty days' prior written notice of termination
to the other party. Termination of this Agreement pursuant to this Section 7.02
shall not prejudice any other remedy that the Employer may have at law, in
equity or under this Agreement.
7.03. This Agreement may be terminated immediately by either party at
its option and without prejudice to any other remedy available at law, in
equity, or under this Agreement by giving written notice of termination to the
other party if the Employer:
(1) has a receiver of its assets or property appointed because of
insolvency; or
(2) makes a general assignment for the benefit of creditors;
or (3) files a petition for the bankruptcy under any chapter
of the United
States Bankruptcy Code.
7.04. In the event of the termination of this Agreement, the Employee
shall be entitled to the compensation earned prior to the date of termination as
provided for in this Agreement, computed pro rata up to and including the date
of termination of this Agreement.
7.05. In the event of a breach of this Agreement by either the Employer
or the Employee resulting in damages to the other party, the non-breaching party
may recover from the party breaching the Agreement any and all damages that may
be sustained.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.01. Any notices to be given under this Agreement by either party to
the other may be effected by personal delivery in writing or by mail, registered
or certified, postage prepaid with return receipt requested. Mailed notices
shall be addressed to the parties at the addresses appearing in the introductory
paragraph of this Agreement, but each party may adopt a new address by notifying
the other party in writing. Notices posted by mail shall be deemed received as
of three days after mailing.
8.02. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties with respect to the employment of the
Employee by the Employer and this Agreement contains all of the covenants and
agreements between the parties with respect to this subject matter hereof.
8.03. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey.
8.04. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief that may be proper.
8.05. If the Employee dies prior to the termination of this Agreement,
any moneys that may be due him from the Employer under this Agreement as of the
date of the death shall be paid to the executor, administrator, or other
personal representative of the Employee's estate.
GENISYS RESERVATION SYSTEMS, INC.
By:__________________
WARREN D. BAGATELLE
Title: Chairman
---------------------
LAWRENCE E. BURK
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made this 1st day of May, 1997, between
GENISYS RESERVATION SYSTEMS, INC., 2401 Morris Avenue, Union, New Jersey, 07083
(the "Employer"), and MARK A. KENNY, residing at 10 Lisa Drive, Chatham, New
Jersey, 07928 (the "Employee").
In consideration of the mutual covenants and agreements set forth
below, the parties agree as follows:
ARTICLE I
EMPLOYMENT AND TERM OF AGREEMENT
1.01. The Employer hereby employs the Employee and the Employee hereby
accepts employment with the Employer upon the terms and conditions hereinafter
set forth.
1.02. The term of this Agreement shall commence on the date first set
forth above and shall continue indefinitely until this Agreement is terminated
in accordance with the terms and provisions hereof.
ARTICLE II
DUTIES OF EMPLOYEE
2.01. The duties to be performed by the Employee shall be determined
from time to time by the Board of Directors of the Employer. Nothing in this
Agreement, however, shall be construed to obligate the Employee to furnish
ground transportation to or for the benefit of the Employer.
2.02. The Employer shall have the right at any time during the term of
this Agreement to assign the Employee to perform duties which are different from
the duties originally assigned to the Employee pursuant to Section 2.01 hereof.
2.03. If at any time during the term of this Agreement the Employee
should be unable because of personal injury, illness, or any other cause to
perform his duties under this Agreement, the Employer may assign the Employee to
other duties, and the compensation to be paid to the Employee for performing
those other duties shall be determined by the Employer in
<PAGE>
its sole discretion. If the Employee is unwilling to accept the modification in
duties and compensation made by the Employer, this Agreement shall terminate
immediately.
ARTICLE III
COMPENSATION AND INCENTIVE BONUS
3.01. As compensation for services rendered pursuant to this Agreement,
the Employee shall be entitled to receive from the Employer a salary of $100,000
per annum commencing May 1, 1997. Thereafter, the Board of Directors of the
Employer shall review the Employee's salary at least annually with a view to
increasing it if, in the sole judgment of the Board of Directors, the earnings
of the Employer or the services of the Employee merit such an increase. Said
salary shall be payable in equal weekly installments, pro-rated for any partial
employment period. There shall be no additional compensation for overtime work.
3.02. As additional compensation for services rendered under this
Agreement, the Employee may receive from the Employer, in any year in which the
Employer has net profits, an incentive bonus to be determined in the sole
discretion of the Board of Directors of the Employer. In determining the amount,
in any, of the incentive bonus for the Employee, the Employer shall take into
account the following factors:
a. The Employee's gross salary,
b. The salaries of comparable employees in other similar
businesses, c. The Employer's gross sales, d. The Employer's
gross profits, e. Whether the Employer has or will pay
dividends on its common stock, f. The Employee's experience in
his job, g. The Employee's abilities, h. The time which the
Employee has devoted to providing
services pursuant to this Agreement, and
i. Any other similar factors pertinent to the amount and size of
<PAGE>
the incentive bonus.
If the Employer will be paying an incentive bonus to the Employee
pursuant to this Section 3.02, the Employer shall pay such bonus to the Employee
within ten days after the receipt by the Employer of the annual audit conducted
by its accountants of the preceding fiscal year of the Employer. The Employee
understands that the Employer will allocate no more than 20% of the audited
pre-income tax profits for the payment of all bonuses for all employees and and
consultants, and that bonuses will be paid only out of available funds without
impairing the ability of the Employer to meet all other obligations, including
the payment of bonds, notes, loans and other obligations. For any fiscal year in
which the Employee has not worked for a full twelve (12) months, the Employer
may, at the Employer's discretion, adjust accordingly the incentive bonus to be
paid in accordance with this Section 3.02. As used herein, net profits shall be
determined as the net income from operations after expenses but before taxes as
determined according to generally accepted accounting principles and in
conformity with the prior accounting practices of the Employer.
ARTICLE IV
EMPLOYEE BENEFITS AND BONUSES
4.01. The Employer agrees to immediately include the Employee in the
hospital, surgical, and medical benefit plan adopted by the Employer on or about
March 1, 1995, so long as the Employee continues to be eligible for such
coverage in accordance with the rules and regulations adopted by the insurance
company.
4.02. The Employee shall be entitled to an annual vacation leave of
four weeks per year at full pay. The vacation period may be increased or
decreased by the Employer from time to time. The time for vacation shall be
selected by the Employee and approved by the Employer. Any unused vacation may
be accrued and carried forward from year to year. In lieu of the vacation leave
specified above, the Employee may elect to receive payment for the whole or
portion of the vacation to which he is entitled, the vacation time to be valued
at the amount of salary earned by the Employee during an equivalent period of
time.
4.03. The Employee shall be entitled to the following holidays with
full pay: January 1 (New Year's Day), third Monday in February (President's
day), last Monday in May (Memorial Day), July 4 (Independence Day), first Monday
in
<PAGE>
September (Labor Day), fourth Thursday in November (Thanksgiving Day),
December 25 (Christmas).
4.04. The Employee shall be entitled to five days per year as sick
leave with full pay. Such sick leave may not be accumulated and may not be
carried forward from year to year.
ARTICLE V
REIMBURSEMENT OF EXPENSES
5.01. Subject to the provisions of Section 5.02 hereof, the Employer
shall reimburse the Employee for ordinary and necessary business expenses
incurred in the performance of his duties pursuant to this Agreement.
5.02. The Employee is authorized to incur reasonable business expenses
for promoting the business of the Employer, including expenditures for
entertainment and travel. The Employer will reimburse the Employee from time to
time for all business expenses provided that the Employee presents to the
Employer documentary evidence (such as receipts or paid bills), stating
sufficient information to establish the amount, date, place, essential character
and deductibility for such expenditure.
5.03. In the event that the Employee is transferred by the Employer to
a new principal place of work during the term of this Agreement, the Employer
shall reimburse the Employee for all reasonable moving and traveling expenses
incurred by the Employee as a result of such transfer.
ARTICLE VI
PROPERTY RIGHTS
6.01. During the term of this Agreement, the Employee will have access
to and become familiar with various trade secrets consisting of, among other
things, business plans and practices, patents, devices, secret processes,
compilations of information, records, and specifications that are owned by the
Employer and that are regularly used in the operation of the business of the
Employer. The Employee shall not disclose any of these trade secrets, directly
or indirectly, or use them in anyway, unless authorized by the Board of
Directors of the Employer. All files, records, documents, drawings,
specifications, equipment, and similar items relating to the business of the
Employer, whether prepared by the Employee
<PAGE>
or otherwise coming into his possession, shall remain the exclusive property of
the Employer and shall not be removed from the premises of the Employer under
any circumstances whatsoever without the prior written consent of the Employer.
6.02. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of the
Employer. During the term of this Agreement and for the period of one year after
the termination of this Agreement, the Employee shall not, directly or
indirectly, solicit for employment or employ any employee of the Employer
regardless of whether the employee is employed on the date of this Agreement or
at any other time during the term of this Agreement.
6.03. The Employee hereby acknowledges and agrees that it is important
to the Employer that its goodwill be protected, maintained and increased.
Accordingly, the Employee covenants and agrees as follows: Upon termination of
this Agreement, whether for cause or otherwise, the Employee shall not directly
or indirectly enter into or engage generally in competition with the Employer,
whether as an individual on his own or as a partner or joint venturer, or as an
employee or agent for any person, or as an officer, director, or shareholder or
otherwise, for a period of one year after the date of termination of this
Agreement. This covenant on the part of the Employee shall be construed as an
agreement independent of any other provision of this Agreement; and the
existence of any claim or cause of action of the Employee against the Employer,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Employer of this covenant.
6.04. The Employee acknowledges that he has read and understood the
provisions of this Article, and that its provisions will not impose an undue
hardship upon him. The Employee further acknowledges that due to the fact that
the Employer's operations are or will be worldwide in scope, the
post-termination restraints set forth herein will apply worldwide.
<PAGE>
ARTICLE VII
TERMINATION
7.01. If the Employee wilfully breaches or habitually neglects his
duties under this Agreement, the Employer may, at its option, elect to terminate
this Agreement by causing a notice to be mailed to the Employee at his last
known address stating the cause or causes of the termination and giving the
Employee a period of fifteen days to cure the default resulting from such cause
or causes. If at the end of the aforesaid fifteen day period the Employee has
not cured the default resulting from such cause or causes, the Employer may
terminate this Agreement immediately by mailing written notice to such effect to
the Employee at his last known address and thereupon this Agreement shall
immediately terminate, become null and void and be of no further force or
effect. The remedy set forth in this Section 7.01 shall be without prejudice to
any other remedy to which the Employer may be entitled at law, in equity, or
under this Agreement.
7.02. This Agreement may be terminated at any time by either party at
its option upon the giving of thirty days' prior written notice of termination
to the other party. Termination of this Agreement pursuant to this Section 7.02
shall not prejudice any other remedy that the Employer may have at law, in
equity or under this Agreement.
7.03. This Agreement may be terminated immediately by either party at
its option and without prejudice to any other remedy available at law, in
equity, or under this Agreement by giving written notice of termination to the
other party if the Employer:
(1) has a receiver of its assets or property appointed because
of insolvency; or
(2) makes a general assignment for the benefit of creditors;
or (3) files a petition for the bankruptcy under any chapter
of the United
States Bankruptcy Code.
7.04. In the event of the termination of this Agreement, the Employee
shall be entitled to the compensation earned prior to the date of termination as
provided for in this Agreement, computed pro rata up to and including the date
of termination of this Agreement.
7.05. In the event of a breach of this Agreement by either the
Employer or the Employee resulting in damages
<PAGE>
to the other party, the non-breaching party may recover from the party breaching
the Agreement any and all damages that may be sustained.
ARTICLE VIII
GENERAL PROVISIONS
8.01. Any notices to be given under this Agreement by either party to
the other may be effected by personal delivery in writing or by mail, registered
or certified, postage prepaid with return receipt requested. Mailed notices
shall be addressed to the parties at the addresses appearing in the introductory
paragraph of this Agreement, but each party may adopt a new address by notifying
the other party in writing. Notices posted by mail shall be deemed received as
of three days after mailing.
8.02. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties with respect to the employment of the
Employee by the Employer and this Agreement contains all of the covenants and
agreements between the parties with respect to the subject matter hereof. In
particular this Agreement supersedes the Consulting Agreement dated October 18,
1996 between Genisys Reservation Systems, Inc. and Mark A. Kenny.
8.03. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey.
8.04. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief that may be proper.
8.05. If the Employee dies prior to the termination of this Agreement,
any moneys that may be due him from the Employer under this Agreement as of the
date of the death shall be paid to the executor, administrator, or other
personal representative of the Employee's estate.
GENISYS RESERVATION SYSTEMS, INC.
By:__________________________
MARK A. KENNY
Exhibit 10.16
RESERVATION DELIVERY AGREEMENT
by and between
GENISYS RESERVATION SYSTEMS, INC.
and
THE TRANSPONET COMPANIES, INC.
Dated as of
February 1, 1998
<PAGE>
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TABLE OF CONTENTS (continued)
Page
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definition of Terms......................................................................... 2
ARTICLE II
COMPLETION AND OPERATION OF THE
TRANSPONET SYSTEM
Section 2.01. Operation of the TranspoNet System.......................................................... 7
Section 2.02. Availability................................................................................ 7
Section 2.03. Contingency Plan............................................................................ 8
ARTICLE III
OPERATION OF THE GENISYS SYSTEM
Section 3.01. Operation of the Genisys System............................................................. 9
Section 3.02. Availability................................................................................ 9
Section 3.03. Contingency Plan........................................................................... 10
ARTICLE IV
COMPLETION AND OPERATION OF THE
GENISYS/TRANSPONET INTERFACE
Section 4.01. Completion of the Genisys/TranspoNet Interface.............................................. 11
Section 4.02. Cooperation in Completion of the Genisys/TranspoNet Interface
and Costs Related Thereto................................................................ 11
Section 4.03. Project Schedule............................................................................ 11
Section 4.04. Ownership and Use of the Genisys/TranspoNet Interface....................................... 11
Section 4.05. Maintenance and Support of the Genisys/TranspoNet Interface................................. 12
Section 4.06. Changes, Modifications, Upgrades, Etc. to the
Genisys/TranspoNet Interface............................................................. 12
Section 4.07. Availability................................................................................ 12
-i-
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TABLE OF CONTENTS (continued)
Page
Section 4.08. Confidential Treatment...................................................................... 12
Section 4.09. Bi-Weekly Reports to Genisys................................................................ 12
ARTICLE V
COMPLETION OF THE TRANSPONET
SOFTWARE PROGRAM INTERFACE
Section 5.01. Operation and Effectiveness of this Article V............................................... 14
Section 5.02. Completion of the TranspoNet Software Program Interface..................................... 14
Section 5.03. TranspoNet's Cooperation in Completion of the TranspoNet
Software Program Interface............................................................... 14
Section 5.04. Ownership of the TranspoNet Software Program Interface...................................... 14
Section 5.05. Changes, Modifications, Upgrades, Etc. to the TranspoNet
Software Program Interface............................................................... 15
Section 5.06. Contingency Plan............................................................................ 15
Section 5.07. Confidential Treatment...................................................................... 15
Section 5.08. Bi-Weekly Reports to TranspoNet............................................................. 15
Section 5.09. Failure to Complete the TranspoNet Software Program Interface............................... 16
Section 5.10. Consent of TranspoNet Required for Use of the TranspoNet
Software Program Interface.............................................................. 16
ARTICLE VI
FINANCIAL ARRANGEMENTS
Section 6.01. Payments to Genisys and TranspoNet.......................................................... 17
Section 6.02. Payments to TranspoNet Service Providers.................................................... 17
Section 6.03. Calculation of Payments to Genisys and TranspoNet When
Utilizing the Genisys/TranspoNet Interface............................................... 18
Section 6.04. Calculation of Payments to Genisys and TranspoNet When
Utilizing the TranspoNet Software Program Interface...................................... 19
Section 6.05. Payments to TranspoNet...................................................................... 20
Section 6.06. Payments to Genisys......................................................................... 21
Section 6.07. Cost of Dedicated Lease Line................................................................ 21
Section 6.08. No Connection Charges to TranspoNet Service Providers....................................... 21
Section 6.09. Promotional and Advertising Expenses........................................................ 21
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Section 6.10. Free Trial Offer............................................................................ 22
Section 6.11. No Additional Charges....................................................................... 22
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ARTICLE VII
COVENANTS, AGREEMENTS, OBLIGATIONS
AND RIGHTS OF GENISYS
Section 7.01. Mutually Acceptable Press Release........................................................... 23
Section 7.02. Advertising, Promotional Material and Future Press Releases................................. 23
Section 7.03. Title and Possession........................................................................ 24
Section 7.04. Rights and Access to TranspoNet Data........................................................ 24
Section 7.05. Prohibition on Use and Distribution of TranspoNet Data...................................... 24
Section 7.06. Training in the Genisys System.............................................................. 24
Section 7.07. Maximization of Business.................................................................... 24
ARTICLE VIII
COVENANTS, AGREEMENTS, OBLIGATIONS
AND RIGHTS OF TRANSPONET
Section 8.01. Agreement Between Genisys and Custom Transportation......................................... 25
Section 8.02. Mutually Acceptable Press Release........................................................... 25
Section 8.03. Advertising, Promotional Material and Future Press Releases................................. 25
Section 8.04. Title and Possession........................................................................ 26
Section 8.05. Rights and Access to Genisys Data........................................................... 26
Section 8.06. Prohibition on Use and Distribution of Genisys Data......................................... 26
Section 8.07. Training in the TranspoNet System and the TranspoNet
Software Programs........................................................................ 26
Section 8.08. Maximization of Business.................................................................... 27
ARTICLE IX
INDEMNIFICATION
Section 9.01. Indemnification of TranspoNet............................................................... 28
Section 9.02. Indemnification of Genisys.................................................................. 29
Section 9.03. Conditions to Indemnification Obligations................................................... 30
Section 9.04. Survival of this Article.................................................................... 30
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ARTICLE X
NON-COMPETITION
Section 10.01. Non-Competition by TranspoNet............................................................... 31
Section 10.02. Non-Competition by Genisys.................................................................. 31
Section 10.03. Injunctive Relief........................................................................... 31
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
Section 11.01. Representations and Warranties of Genisys................................................... 32
Section 11.02. Representations and Warranties of TranspoNet................................................ 33
Section 11.03. Disclaimer of Other Warranties.............................................................. 34
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
Section 12.01. Events of Default........................................................................... 35
Section 12.02. Remedies on Default......................................................................... 36
Section 12.03. No Remedy Exclusive......................................................................... 36
Section 12.04. Limitation of Waiver........................................................................ 36
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Term of Agreement and Renewals Thereof...................................................... 37
Section 13.02. Early Termination for Failure to Meet Minimum
Reservation Criteria.................................................................... 37
Section 13.03. Agreements Upon Termination................................................................. 37
Section 13.04. Fees, Costs and Expenses.................................................................... 38
Section 13.05. Notices..................................................................................... 38
Section 13.06. Assignments................................................................................. 38
Section 13.07. Amendments.................................................................................. 38
Section 13.08. Successors and Assigns...................................................................... 38
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Section 13.09. Captions.................................................................................... 39
Section 13.10. Severability................................................................................ 39
Section 13.11. Survival of Certain Provisions.............................................................. 39
Section 13.12. Execution of Counterparts................................................................... 39
Section 13.13. Arbitration................................................................................. 39
Section 13.14. Governing Law............................................................................... 40
Section 13.15. Entire Agreement............................................................................ 40
Section 13.16. Headings.....................................................................................40
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<PAGE>
RESERVATION DELIVERY AGREEMENT
THIS RESERVATION DELIVERY AGREEMENT (the "Agreement") dated as
of this 1st day of February, 1998, by and between GENISYS RESERVATION SYSTEMS,
INC. ("Genisys"), a corporation duly organized under the laws of the State of
New Jersey, with offices presently located at 2401 Morris Avenue, Union, New
Jersey 07083, and THE TRANSPONET COMPANIES, INC. ("TranspoNet"), a corporation
duly organized under the laws of the State of New York, with offices presently
located at 12 West Thirty-First Street, New York, New York 10001.
W I T N E S S E T H:
WHEREAS, Genisys has developed and completed a computerized
reservation and payment system known as the "Genisys Reservation System" (the
"Genisys System"), which accepts and processes reservations for, and processes
payments for, ground transportation services made by corporations and
individuals through computerized reservation systems ("CRSs") owned and operated
by entities other than Genisys; and
WHEREAS, TranspoNet has developed and completed a computerized
reservation and delivery system (the "TranspoNet System") which delivers
reservations for ground transportation services over the Internet directly into
the computer systems of ground transportation service providers whose computer
systems utilize certain "back-office" software programs owned and marketed by
TranspoNet (the "TranspoNet Service Providers"); and
WHEREAS, Genisys and TranspoNet desire to enter into an
agreement which will provide that all reservations which are received by the
Genisys System and which are reservations for ground transportation services to
be provided by the TranspoNet Service Providers will be processed by the Genisys
System and delivered to the TranspoNet Service Providers through the TranspoNet
System or otherwise, all on the terms and conditions more fully set forth
herein; and
WHEREAS, Genisys and TranspoNet now desire to enter into this
Agreement in order to set forth the respective rights, duties and obligations of
the legal relationship between Genisys and TranspoNet.
NOW THEREFORE, in consideration of good and valuable
consideration, the receipt of which is hereby acknowledged, and of the premises
and the mutual covenants and representations contained herein, Genisys and
TranspoNet hereby agree as follows:
863115.06 (115493.004)
1
<PAGE>
ARTICLE I
DEFINITIONS
- -------------------------------------------------------------------------------
Section 1.01. Definition of Terms. Unless the context clearly requires
otherwise, the following terms shall have the following meanings for all
purposes of this Agreement:
"Agreement" means this Reservation Delivery Agreement dated as
of February 1, 1998, by and between Genisys and TranspoNet, as this Agreement
may be hereafter amended and supplemented.
"Basic Service Provider Booking Fee" means the fee agreed upon
from time to time by Genisys and TranspoNet which is to be charged to each
TranspoNet Service Provider who receives or processes less than an average of
100 reservations per day during the preceding calendar month through the Genisys
System and/or the TranspoNet System. The Basic Service Provider Booking Fee
shall be the same no matter which CRS initially delivered the reservation to the
Genisys System. As of the date of this Agreement, Genisys and TranspoNet agree
that the initial Basic Service Provider Booking Fee shall be $3.90 per
reservation received and processed by the Genisys System and/or the TranspoNet
System, regardless of whether such reservation is thereafter changed and/or
cancelled. The Basic Service Provider Booking Fee may hereafter only be modified
by a written agreement executed by Genisys and TranspoNet.
"CRS" means any computerized reservation system owned and
operated by an entity other than Genisys with which (i) Genisys has entered into
an agreement pursuant to which such computerized reservation system has agreed
to accept reservations for Ground Transportation Services and deliver such
reservations to the Genisys System and (ii) the Genisys System is able to
commercially accept, process and transmit the reservations delivered to the
Genisys System by such computerized reservation system. As of the date of this
Agreement, a "CRS" includes, but is not limited to, the computerized reservation
systems generally known as "Apollo" and "Sabre". As of the date of this
Agreement, Genisys has entered into an agreement with the CRS generally known
"Worldspan" pursuant to which "Worldspan" has agreed to accept reservations for
Ground Transportation Services and deliver such reservations to the Genisys
System, but the Genisys System is not currently able to commercially accept,
process and transmit the reservations delivered to the Genisys System by
"Worldspan". Genisys anticipates that the Genisys System will be able to
commercially accept, process and transmit the reservations delivered to the
Genisys System by "Worldspan" within ninety (90) days after the execution of
this Agreement. Whenever the Genisys System hereafter becomes capable of
commercially accepting, processing and transmitting reservations for Ground
Transportation Services made through "Worldspan" or any other CRS other than
"Apollo" and "Sabre", Genisys shall give written notice of such fact to
TranspoNet as soon as practicable after the Genisys System acquires such
capability.
"CRS Processing Fee" means the fee which is charged to Genisys
by a CRS for each reservation for Ground Transportation Services which is
received and processed by such CRS and delivered to the Genisys System, as such
fee may be changed from time to time in accordance with the contract between
Genisys and such CRS. As of the date of this Agreement, the CRS Processing Fee
charged by "Sabre" and "Worldspan" is $1.00 per reservation (regardless of
whether such reservation is thereafter changed or cancelled) and the CRS
Processing Fee charged by "Apollo" is $0.75 per reservation with an additional
$0.75 charge for each change to, or cancellation of, such reservation. Genisys
shall give written notice of any change in the CRS Processing Fee to TranspoNet
as soon as practicable after Genisys receives notification of such change from
the CRS or such change has been agreed upon by Genisys and the CRS.
"Discounted Service Provider Booking Fee" means the fee agreed
upon from time to time by Genisys and TranspoNet which is to be charged to each
TranspoNet Service Provider who receives or processes an average of 100 or more
reservations per day during the preceding calendar month through the Genisys
System and/or the TranspoNet System. The Discounted Service Provider Booking Fee
shall be the same no matter which CRS initially delivered the reservation to the
Genisys System. As of the date of this Agreement, Genisys and TranspoNet agree
that the initial Discounted Service Provider Booking Fee shall be $3.70 per
reservation received and processed by the Genisys System and/or the TranspoNet
System, regardless of whether such reservation is thereafter changed and/or
cancelled. The Discounted Service Provider Booking Fee may hereafter only be
modified by a written agreement executed by Genisys and TranspoNet.
"Disputed Charge" means the fee which, except for the
provisions of Section 6.02 of this Agreement and the terms and provisions of the
service provider agreement between Genisys and the TranspoNet Service Provider,
the TranspoNet Service Provider would have been entitled to receive in
connection with a Disputed Reservation.
"Disputed Reservation" means a reservation relating to Ground
Transportation Services for which Genisys receives notice after the provision of
the Ground Transportation Services that the client or customer of the TranspoNet
Service Provider is disputing the validity or size of the charge by the
TranspoNet Service Provider to such client or customer or the quality of the
Ground Transportation Services rendered by the TranspoNet Service Provider in
connection with such TranspoNet Reservation.
"Genisys" means Genisys Reservation Systems, Inc., a New
Jersey corporation, including all successors and assigns thereof.
"Genisys Confidentiality Agreement" means the Confidentiality
Agreement made and effective as of November 15, 1997, by and between Genisys and
TranspoNet.
"Genisys Data" means any and all data and information which is
input into, or received or processed by the Genisys System relating to any
reservation for Ground Transportation Services, including, without limitation,
any TranspoNet Reservation.
"Genisys System" means the computerized reservation and
payment system for Ground Transportation Services which has been developed and
completed by Genisys and is known as the "Genisys Reservation System," and all
upgrades, modifications and enhancements to such computerized reservation system
as may be developed by Genisys during the term of this Agreement.
"Genisys/TranspoNet Interface" means (i) the computer system
or other hardware and software that functions as an interface between the
Genisys System and the TranspoNet System to deliver and process information
relating to TranspoNet Reservations between the Genisys System and the
TranspoNet System, and (ii) all upgrades, modifications and enhancements to the
computer system or other hardware described in clause (i) of this definition as
may be developed during the term of this Agreement. All right, title and
interest in and to the Genisys/TranspoNet Interface shall be owned by TranspoNet
as more fully provided in Section 4.04 hereof.
"Ground Transportation Services" means the transportation of
one or more individuals from one or more locations to another location or
locations, or a round trip between two locations, through the use of any and all
vehicles used or intended to be used for the picking up and discharging of
passengers for hire, including, but not limited to, stretch limousines, sedans,
vans, black car services, executive services, shuttle service, bus service and
airport service vehicles.
"Intra-Service Provider Reservation" means any reservation
relating to Ground Transportation Services which is accepted and processed by
the Genisys System and delivered to the TranspoNet System through the
Genisys/TranspoNet Interface and thereafter is transferred from one TranspoNet
Service Provider to another TranspoNet Service Provider through the TranspoNet
System.
"Off-Peak Hours" means any hours other than Peak Hours.
"Peak Hours" means all hours in the period commencing at
8:00 a.m. on Monday and ending at 6:00 p.m. on Friday during each week.
"SEC" means the United States Securities and Exchange
Commission and any successor or successors thereto.
"Service Provider" means any individual, firm, partnership,
corporation or other entity which is in the business of providing Ground
Transportation Services for business and leisure travellers.
"Specifications" means the functional, technical and
performance specifications for the Genisys System, the TranspoNet System, the
Genisys/TranspoNet Interface, the TranspoNet Software Program Interface, or the
TranspoNet Software Programs, as the case may be.
"TranspoNet" means The TranspoNet Companies, Inc., a New York
Corporation, including all subsidiaries, affiliated companies, successors and
assigns thereof.
"TranspoNet Confidentiality Agreement" means the
Confidentiality Agreement made and effective as of November 15, 1997, by and
between TranspoNet and Genisys.
"TranspoNet Data" means any and all data and information which
is input into, or received or processed by, the TranspoNet System relating to
any reservation for Ground Transportation Services which is delivered to any
TranspoNet Service Provider.
"TranspoNet Reservation" means any reservation relating to
Ground Transportation Services which are to be provided by a TranspoNet Service
Provider.
"TranspoNet Service Provider" means any Service Provider which
(i) has entered into an agreement with TranspoNet to receive reservations for
Ground Transportation Services through the TranspoNet System and has entered
into a service provider agreement with Genisys to receive payment for each
TranspoNet Reservation for which it has rendered Ground Transportation Services
in accordance with the terms and conditions of such service provider agreement,
or (ii) utilizes a TranspoNet Software Program to perform its "back-office"
functions and has entered into a service provider agreement with Genisys to
receive payment for each TranspoNet Reservation for which it has rendered Ground
Transportation Services in accordance with the terms and conditions of such
service provider agreement.
"TranspoNet Software Programs" means any and all computer
software programs which are currently owned and marketed by TranspoNet, or which
may hereafter be developed, owned and marketed by TranspoNet and which are
designed to perform certain "back-office" functions for Service Providers such
as accounting, accounts payable, accounts receivable, etc. As of the date of
this Agreement, "TranspoNet Software Programs" consist of the computer software
programs commonly known as "CARS," "Limoware", "LMS" and "Odyssey". If
TranspoNet hereafter develops any additional TranspoNet Software Program,
TranspoNet shall give Genisys written notice of such fact as soon as possible
after such development is complete and before TranspoNet begins to market such
additional TranspoNet Software Program.
"TranspoNet Software Program Interface" means (i) the computer
system or other hardware and software that functions as an interface between the
Genisys System and TranspoNet Software Programs to deliver and process
information relating to TranspoNet Reservations between the Genisys System and
the TranspoNet Software Programs, and (ii) all upgrades, modifications and
enhancements to the computer system or other hardware described in clause (i) of
this definition as may be developed during the term of this Agreement.
"TranspoNet System" means the computerized reservation and
delivery system which has been developed by TranspoNet which will deliver
TranspoNet Reservations over the Internet directly into the computer systems of
TranspoNet Service Providers through a TranspoNet Software Program.
When used in this Agreement, the phrase "term of this
Agreement" or other similar term, shall be deemed to include the original term
of this Agreement and any renewals thereof as provided in Section 13.01 hereof,
unless the context clearly indicates otherwise.
Except where the context otherwise requires, words used in
this Agreement importing the singular number shall include the plural number and
vice versa, words importing persons shall include firms, associations,
corporations, partnerships and other entities, and pronouns stated in either the
masculine, feminine or the neuter gender shall also include the masculine,
feminine or the neuter gender, as the case may be.
2
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ARTICLE II
COMPLETION AND OPERATION OF THE TRANSPONET SYSTEM
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Section 2.01. Operation of the TranspoNet System. At all times
after the Genisys/TranspoNet Interface becomes operational and the TranspoNet
System begins to accept and transmit reservations for Ground Transportation
Services received from the Genisys System to TranspoNet Service Providers,
TranspoNet shall operate the TranspoNet System in such a manner so that the
TranspoNet System shall:
(a) Accept and process all reservations for Ground
Transportation Services delivered to the TranspoNet System from the Genisys
System through the Genisys/TranspoNet Interface;
(b) Be capable of accepting from and transmitting to the
computer systems of each TranspoNet Service Provider through the TranspoNet
Software Programs all information relating to each reservation delivered from
the Genisys System;
(c) Transmit all information relating to each reservation made
through the Genisys System through the Genisys/TranspoNet Interface to
TranspoNet Service Providers in a timely and efficient manner consistent with
acceptable industry standards;
(d) Be capable of accepting from, and transmitting to, the
various computer systems of the TranspoNet Service Providers all information
relating to each Intra-Service Provider Reservation which is intended to be
delivered or transmitted through the TranspoNet System;
(e) Be kept in good working order and repair consistent with
industry standards and practice, perform in accordance with the performance
criteria and be otherwise free of errors.
Section 2.02. Availability. Except during shutdowns for
scheduled maintenance and during any other unanticipated or unscheduled
emergency maintenance or other shutdowns, the TranspoNet System shall be
available 24 hours each day, Monday through Sunday, to accept and process
reservations from the Genisys System. During any period of time in excess of two
hours during the Peak Hours, or in excess of six hours during the Off-Peak
Hours, where the TranspoNet System is unable to deliver reservations to the
TranspoNet Service Providers as contemplated in Section 2.01 hereof, Genisys
shall be entitled to utilize the contingency plan developed in accordance with
Section 2.03 of this Agreement to transmit to the TranspoNet Service Providers
all reservations which otherwise would have been transmitted to TranspoNet
Service Providers in accordance with Section 2.01 hereof. Notwithstanding
anything herein to the contrary, so long as the TranspoNet Service Providers
shall accept, process and provide
Ground Transportation Services for reservations which are transmitted to
TranspoNet Service Providers pursuant to the contingency plan developed in
accordance with Section 2.03 of this Agreement, TranspoNet shall not in any way
be liable for any loss of business or revenue suffered by Genisys as a result of
reservations being transmitted pursuant to such contingency plan.
Section 2.03. Contingency Plan. As soon as practicable after
the execution of this Agreement, Genisys and TranspoNet shall develop a mutually
acceptable contingency plan designed to enable Genisys to transmit, and the
TranspoNet Service Providers to receive and process, reservations for Ground
Transportation Services through means other than the TranspoNet System. Once
Genisys and TranspoNet have agreed on such a contingency plan, Genisys and
TranspoNet shall keep such contingency plan in place at all times during the
term of this Agreement and Genisys and TranspoNet shall use such plan in each
instance in which the TranspoNet System is unable to deliver reservations to the
TranspoNet Service Providers as contemplated in Section 2.01 of this Agreement
for a period of time greater than two hours during the Peak Hours or six hours
during the Off-Peak Hours. During the term of this Agreement, Genisys and
TranspoNet shall test the implementation of such contingency plan on a periodic
basis at least once every year.
3
<PAGE>
ARTICLE III
OPERATION OF THE GENISYS SYSTEM
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Section 3.01. Operation of the Genisys System. At all times
after the Genisys/TranspoNet Interface or the TranspoNet Software Program
Interface becomes operational and either Interface begins to accept and transmit
reservations for Ground Transportation Services from the Genisys System to the
TranspoNet Service Providers, Genisys shall operate the Genisys System in such a
manner so that the Genisys System shall:
(a) Accept and process all reservations for Ground
Transportation Services made through the CRSs;
(b) Be capable of accepting from, and transmitting to the
TranspoNet Service Providers through the use of either the Genisys/TranspoNet
Interface or the TranspoNet Software Program Interface certain information
relating to each TranspoNet Reservation made through the CRSs;
(c) Transmit all information relating to each TranspoNet
Reservation made through the CRSs through either the Genisys/TranspoNet
Interface or the TranspoNet Software Program Interface in a timely and efficient
manner consistent with acceptable industry standards and practice; and
(d) Be kept in good working order and repair consistent with
industry standards and practice, perform in accordance with the performance
criteria and otherwise be free from errors.
Section 3.02. Availability. Except during shutdowns for
scheduled maintenance and during any other unanticipated or unscheduled
emergency maintenance or other shutdowns, the Genisys System shall be available
24 hours each day, Monday through Sunday, to process and deliver requests for
reservations from CRSs to either the TranspoNet System through the
Genisys/TranspoNet Interface or the TranspoNet Software Programs through the
TranspoNet Software Program Interface. During any period of time in excess of
two hours during the Peak Hours, or in excess of six hours during the Off-Peak
Hours, where the Genisys System is unable to deliver reservations to the
TranspoNet Service Providers as contemplated in Section 3.01 hereof, TranspoNet
and the TranspoNet Service Providers shall be entitled to utilize the
contingency plan developed in accordance with Section 3.03 of this Agreement to
receive all reservations which otherwise would have been transmitted to the
TranspoNet Service Providers in accordance with Section 3.01 hereof.
Notwithstanding anything herein to the contrary, so long as the TranspoNet
Service Providers shall accept, process and provide Ground Transportation
Services for reservations which are transmitted to TranspoNet Service Providers
pursuant to the contingency plan developed in accordance with Section 3.03 of
this Agreement, Genisys shall not in any way be liable for any loss of business
or revenue suffered by TranspoNet as a result of reservations being transmitted
pursuant to such contingency plan.
Section 3.03. Contingency Plan. As soon as practicable after
the execution of this Agreement, Genisys and TranspoNet shall develop a mutually
acceptable contingency plan designed to enable the TranspoNet Service Providers
to receive and process reservations for Ground Transportation Services from the
CRSs through means other than the Genisys System. Once Genisys and TranspoNet
have agreed on such a contingency plan, Genisys and TranspoNet shall keep such
contingency plan in place at all times during the term of this Agreement and
Genisys and TranspoNet shall use such plan in each instance in which the Genisys
System is unable to deliver reservations to the TranspoNet Service Providers as
contemplated in Section 3.01 of this Agreement for a period of time greater than
two hours during the Peak Hours or six hours during the Off-Peak Hours. During
the term of this Agreement, Genisys and TranspoNet shall test the implementation
of such contingency plan on a periodic basis at least once every year.
4
<PAGE>
ARTICLE IV
COMPLETION AND OPERATION OF THE GENISYS/TRANSPONET INTERFACE
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Section 4.01. Completion of the Genisys/TranspoNet Interface.
TranspoNet has heretofore begun to design, develop, construct and test the
Genisys/TranspoNet Interface and, after the date of execution of this Agreement,
TranspoNet shall continue to diligently proceed with the design, development,
construction and testing of the Genisys/TranspoNet Interface and shall use its
best efforts to complete the Genisys/TranspoNet Interface in accordance with the
Project Schedule referred to in Section 4.03 hereof.
Section 4.02. Cooperation in Completion of the
Genisys/TranspoNet Interface and Costs Related Thereto. Genisys shall give its
full and complete cooperation to TranspoNet in connection with the design,
development, construction and testing of the Genisys/TranspoNet Interface and
shall provide to Transponet all information, requirements and Specifications
relating to the Genisys System which may reasonably be needed in order to
design, develop, construct and test the Genisys/TranspoNet Interface. Genisys
and TranspoNet shall each be responsible for paying all of their own costs, fees
or expenses incurred by them in connection with the design, development,
construction or testing of the Genisys/TranspoNet Interface and of complying
with the provisions of this Section 4.02. Except for its obligations to give its
full and complete cooperation and to pay its own costs, fees and expenses as
previously set forth in this Section 4.02, Genisys shall have no other
obligation relating to the design, development, construction and testing of the
Genisys/TranspoNet Interface and TranspoNet shall have the sole responsibility
to complete the design, development, construction or testing of the
Genisys/TranspoNet Interface.
Section 4.03. Project Schedule. TranspoNet shall use its best efforts to
complete the Genisys/TranspoNet Interface in accordance with the Project
Schedule attached hereto as Schedule A.
Section 4.04. Ownership and Use of the Genisys/TranspoNet
Interface. Subject to the provisions of Section 4.06 hereof, all right, title
and interest in and to the Genisys/TranspoNet Interface, including, without
limitation, all patent rights, copyrights, copyright registrations, trade
secrets, trademarks, service marks and trademark and service mark registrations
relating to the Genisys/TranspoNet Interface, shall be owned by TranspoNet at
all times during the term of this Agreement and Genisys shall have no rights in
the Genisys/TranspoNet Interface except as expressly provided in this Agreement.
At all times during this Agreement, Genisys and TranspoNet shall each have the
unrestricted right to use the Genisys/TranspoNet Interface for the purposes
contemplated by this Agreement and each shall have the right to copy the same as
is reasonably necessary for archival and backup purposes. Upon termination of
this Agreement, and subject to the obligations set forth in Section 13.03
hereof, the Genisys/TranspoNet Interface shall continue to be owned by
TranspoNet.
Section 4.05. Maintenance and Support of the
Genisys/TranspoNet Interface. During the term of this Agreement, TranspoNet
shall provide, at its cost and expense, the necessary services related to the
support and maintenance of the Genisys/TranspoNet Interface so that the
Genisys/TranspoNet Interface performs in accordance with the agreed upon
performance criteria and is otherwise free from errors.
Section 4.06. Changes, Modifications, Upgrades, Etc. to the
Genisys/TranspoNet Interface. TranspoNet shall not make any programming change,
addition, deletion, upgrade, modification or enhancement to the
Genisys/TranspoNet Interface which adversely affects the operation of the
Genisys/TranspoNet Interface or its ability to transmit information relating to
TranspoNet Reservations between the Genisys System and the Genisys/TranspoNet
Interface, without the prior written consent of Genisys.
Section 4.07. Availability. Except during shutdowns for
scheduled maintenance and during any other unanticipated or unscheduled
emergency maintenance or other shutdowns, the Genisys/TranspoNet Interface shall
be available 24 hours each day, Monday through Sunday, to accept and process
information relating to reservations for Ground Transportation Services between
the Genisys System and the TranspoNet System. During any period of time in
excess of two hours during the Peak Hours, or in excess of six hours during the
Off-Peak Hours, where the Genisys/TranspoNet Interface is not operational or not
operating properly, Genisys shall be entitled to utilize the contingency plan
developed in accordance with Section 2.03 of this Agreement to transmit to the
TranspoNet Service Providers all reservations which otherwise would have been
transmitted to TranspoNet Service Providers in accordance with Section 2.01
hereof. Notwithstanding anything herein to the contrary, so long as the
TranspoNet Service Providers shall accept, process and provide Ground
Transportation Services for reservations which are transmitted to TranspoNet
Service Providers pursuant to the contingency plan developed in accordance with
Section 2.03 of this Agreement, TranspoNet shall not in any way be liable for
any loss of business or revenue suffered by Genisys as a result of reservations
being transmitted pursuant to such contingency plan.
Section 4.08. Confidential Treatment. To the extent that the
Genisys/TranspoNet Interface represents or contains Confidential Information as
defined in the Genisys Confidentiality Agreement, if and when TranspoNet has
access to such Confidential Information, TranspoNet shall treat such
Confidential Information in accordance with the provisions of the Genisys
Confidentiality Agreement. To the extent that the Genisys/TranspoNet Interface
represents or contains Confidential Information as defined in the TranspoNet
Confidentiality Agreement, if and when Genisys has access to such Confidential
Information, Genisys shall treat such Confidential Information in accordance
with the provisions of the TranspoNet Confidentiality Agreement.
Section 4.09. Bi-Weekly Reports to Genisys. After the
Genisys/TranspoNet Interface becomes operational and begins to accept and
process reservations from the Genisys System in accordance with Section 2.01
hereof, TranspoNet shall provide to Genisys on a bi-weekly basis computerized
reports which describe all of the reservations made through the
TranspoNet System in the preceding two weeks which were confirmed for, and
transmitted to, TranspoNet Service Providers in accordance with Section 2.01
hereof. The form and content of such bi-weekly reports shall be hereafter
mutually agreed upon by Genisys and TranspoNet; provided, however, that in any
event, such bi-weekly reports shall include, among other things, a detailed
listing of all Intra-Service Provider Reservation transactions among the various
TranspoNet Service Providers. TranspoNet shall deliver such bi-weekly reports to
Genisys not later than the Friday following the end of the preceding bi-weekly
period. Upon reasonable notice and request by Genisys, TranspoNet shall make
available for review and inspection by Genisys and/or its accountants, attorneys
and other agents, all books, records, reports, statements, print-outs and other
documents and information upon which the bi-weekly reports produced by
TranspoNet in accordance with this Section 4.09 are based.
5
<PAGE>
ARTICLE V
COMPLETION OF THE TRANSPONET
SOFTWARE PROGRAM INTERFACE
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Section 5.01. Operation and Effectiveness of this Article V.
This Article V shall become operational and effective and be in full force and
effect if: (i) at any time TranspoNet elects to have the provisions of this
Article V become operational and effective by delivering written notice of such
election to Genisys, in which case this Article shall become operational and
effective immediately upon Genisys' receipt of such notice; or (ii) at any time
when Genisys and TranspoNet mutually agree that the provisions of this Article V
shall become operational and effective, in which case this Article shall become
operational and effective at the time mutually agreed upon by Genisys and
TranspoNet. The provisions of this Article V are intended to supplement, and be
in addition to, the provisions of Articles II and IV of this Agreement, are not
intended, in any way, to be an alternative to, or substitution for, the
provisions of Articles II and IV.
Section 5.02. Completion of the TranspoNet Software Program
Interface. As soon as practicable after the provisions of this Article V become
operational, Genisys and TranspoNet shall commence with the design, development,
construction and testing of the TranspoNet Software Program Interface and such
Interface shall be completed as soon as possible thereafter.
Section 5.03. TranspoNet's Cooperation in Completion of the
TranspoNet Software Program Interface. TranspoNet shall give its full and
complete cooperation to Genisys in connection with the design, development,
construction and testing of the TranspoNet Software Program Interface and shall
provide to Genisys all information, requirements and Specifications relating to
the TranspoNet Software Programs, which Genisys may reasonably need in order to
design, develop, construct and test the TranspoNet Software Program Interface.
Genisys and TranspoNet shall each be responsible for paying all of their own
costs, fees or expenses incurred by them in connection with the design,
development, construction or testing of the TranspoNet Software Program
Interface and of compliance with the provisions of this Section 5.03. Except for
its obligations to give its full and complete cooperation and to pay its own
costs, fees and expenses as previously set forth in this Section 5.03,
TranspoNet shall have no other obligation relating to the design, development,
construction and testing of the TranspoNet Software Program Interface and
Genisys shall have the sole responsibility to complete the design, development,
construction or testing of the TranspoNet Software Program Interface.
Section 5.04. Ownership of the TranspoNet Software Program Interface. Subject to
the provisions of Section 5.05 hereof, all right, title and interest in and to
the TranspoNet Software Program Interface, including, without limitation, all
patent rights, copyrights, copyright registrations, trade secrets, trademarks,
service marks and trademark and service mark registrations relating to the
TranspoNet Software Program Interface, shall be owned by Genisys at all times
during the term of this Agreement and TranspoNet shall have no rights in the
TranspoNet Software Program Interface except as expressly provided in this
Agreement. At all times during this Agreement, Genisys and TranspoNet shall each
have the unrestricted right to use the TranspoNet Software Program Interface for
the purposes contemplated by this Agreement and each shall have the right to
copy the same as is reasonably necessary for archival and backup purposes. Upon
termination of this Agreement, and subject to the obligations set forth in
Section 13.03 hereof, the TranspoNet Software Program Interface shall continue
to be owned by Genisys.
Section 5.05. Changes, Modifications, Upgrades, Etc. to the
TranspoNet Software Program Interface. Genisys shall not make any programming
change, addition, deletion, upgrade, modification or enhancement to the
TranspoNet Software Program Interface which adversely affects the operation of
the TranspoNet Software Program Interface or its ability to transmit information
relating to TranspoNet Reservations between the Genisys System and the
TranspoNet Software Program Interface, without the prior written consent of
TranspoNet.
Section 5.06. Contingency Plan. As soon as practicable after
the execution of this Agreement, Genisys and TranspoNet shall develop a mutually
acceptable contingency plan designed to enable Genisys to transmit, and the
TranspoNet Service Providers to receive and process reservations for Ground
Transportation Services through means other than the TranspoNet Software Program
Interface. Once Genisys and TranspoNet have agreed on such a contingency plan,
Genisys and TranspoNet shall keep such contingency plan in place at all times
during the term of this Agreement and Genisys shall use such plan in each
instance in which the TranspoNet Software Program Interface is not operational
or is otherwise unavailable for a period of time greater than two hours during
the Peak Hours or six hours during the Off-Peak Hours. During the term of this
Agreement, Genisys and TranspoNet shall test the implementation of such
contingency plan on a periodic basis at least once every year.
Section 5.07. Confidential Treatment. To the extent that the
TranspoNet Software Program Interface represents or contains Confidential
Information as defined in the Genisys Confidentiality Agreement, if and when
TranspoNet has access to such Confidential Information, TranspoNet shall treat
such Confidential Information in accordance with the provisions of the Genisys
Confidentiality Agreement. To the extent that the TranspoNet Software Program
Interface represents or contains Confidential Information as defined in the
TranspoNet Confidentiality Agreement, if and when Genisys has access to such
Confidential Information, Genisys shall treat such Confidential Information in
accordance with the provisions of the TranspoNet Confidentiality Agreement.
Section 5.08. Bi-Weekly Reports to TranspoNet. After the
TranspoNet Software Program Interface becomes operational and begins to accept
and process reservations delivered from the Genisys System, Genisys shall
provide to TranspoNet on a bi-weekly basis computerized reports which describe
all of the reservations made through the Genisys System and the TranspoNet
Software Program Interface in the preceding two weeks which were
confirmed for, and transmitted to, TranspoNet Service Providers. The form and
content of such bi-weekly reports shall be hereafter mutually agreed upon by
Genisys and TranspoNet; provided, however, that in any event, such bi-weekly
reports shall include, among other things, the date the reservation was made, a
description of the origination and destination of the ride, the date of such
ride and the fee received for such Ground Transportation Services. Genisys shall
deliver such bi-weekly reports to TranspoNet not later than the Friday following
the end of the preceding bi-weekly period. Upon reasonable notice and request by
TranspoNet, Genisys shall make available for review and inspection by TranspoNet
and/or its accountants, attorneys and other agents, all books, records, reports,
statements, print-outs and other documents and information upon which the
bi-weekly reports produced by Genisys in accordance with this Section 5.08 are
based.
Section 5.09. Failure to Complete the TranspoNet Software
Program Interface. If the TranspoNet Software Program Interface is not
operational by no later than sixty (60) days after the provisions of this
Article V shall have become operational and effective, then, unless Genisys and
TranspoNet mutually agree otherwise, this Agreement shall immediately terminate
and thereafter shall become null and void in its entirety, except as otherwise
provided in Section 13.11 hereof. If this Agreement terminates and becomes null
and void as a result of the preceding sentence, Genisys and TranspoNet shall be
completely free and unrestricted to pursue and enter into alternative
contractual arrangements with any third parties which cover the same subject
matter, in whole or in part, as is the subject of this Agreement.
Section 5.10. Consent of TranspoNet Required for Use of the
TranspoNet Software Program Interface. Notwithstanding anything in this Article
V or elsewhere in this Agreement to the contrary, whenever Genisys desires to
have the Genisys System utilize the TranspoNet Software Program Interface to
transmit reservations to a particular TranspoNet Service Provider, Genisys must
obtain the prior written consent of TranspoNet before the Genisys System begins
to transmit reservations to each such TranspoNet Service Provider through the
use of the TranspoNet Software Program Interface.
6
<PAGE>
ARTICLE VI
FINANCIAL ARRANGEMENTS
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Section 6.01. Payments to Genisys and TranspoNet. Genisys and
TranspoNet agree that Genisys, TranspoNet and each TranspoNet Service Provider
shall receive payment in accordance with the terms and provisions of this
Article VI for their services rendered in connection with each reservation for
Ground Transportation Services received and processed by the Genisys System in
accordance with the terms and provisions of this Agreement.
Section 6.02. Payments to TranspoNet Service Providers. Within
five (5) business days after a TranspoNet Service Provider inputs the
information required to be inputted into the Genisys System in connection with
each reservation for Ground Transportation Services received and processed by
such TranspoNet Service Provider, Genisys will make payment to such TranspoNet
Service Provider of all amounts due and owing to such TranspoNet Service
Provider on the terms and conditions set forth in this paragraph. At the
conclusion of each business day, Genisys shall calculate and make payment to
such TranspoNet Service Provider of all amounts due and owing to such TranspoNet
Service Provider as follows:
(i) Genisys shall calculate the aggregate dollar amount (gross amount) due
to the TranspoNet Service Provider for all reservations received and processed
by the TranspoNet Service Provider in accordance with this Agreement and the
terms of the service provider agreement between Genisys and such TranspoNet
Service Provider at least five (5) business days prior thereto and for which the
TranspoNet Service Provider has not previously been paid;
(ii) Except as otherwise set forth in Section 6.10 hereof, Genisys shall
deduct from the amount calculated in accordance with clause (i) above the total
aggregate dollar amount of: (a) all payment processing fees which Genisys must
pay in connection with the reservations for which the TranspoNet Service
Provider is entitled to receive payment under clause (i) above; (b) in the case
of a TranspoNet Service Provider who received and processed less than an average
of 100 reservations per day during the preceding calendar month, all Basic
Service Provider Booking Fees relating to all reservations for which the
TranspoNet Service Provider is entitled to receive payment under clause (i)
above; and (c) in the case of a TranspoNet Service Provider who received and
processed an average of 100 or more reservations per day during the preceding
calendar month, all Discounted Service Provider Booking Fees relating to all
reservations for which the TranspoNet Service Provider is entitled to receive
payment under clause (i) above;
(iii) Genisys shall deduct from the remaining amount the sum of all
Disputed Charges which it is entitled to withhold from the TranspoNet Service
Provider in accordance with the terms of the service provider agreement between
Genisys and such TranspoNet Service Provider; and
(iv) Genisys shall add to the remaining amount the sum of all Disputed
Charges which have been resolved in favor of the TranspoNet Service Provider in
accordance with the terms of the service provider agreement between Genisys and
such TranspoNet Service Provider.
The amount remaining after the calculations, deductions and
additions required by clauses (i), (ii), (iii) and (iv) above shall be the net
amount payable by Genisys to the TranspoNet Service Provider.
Section 6.03. Calculation of Payments to Genisys and
TranspoNet When Utilizing the Genisys/TranspoNet Interface. If the Genisys
System transmits reservations to the TranspoNet Service Providers through the
Genisys/TranspoNet Interface as contemplated by Articles II and IV of this
Agreement, then, on Saturday of each week, Genisys shall make the following
calculations:
(i) Genisys shall calculate the total aggregate dollar amount of all CRS
Processing Fees deducted by Genisys in accordance with clause (ii) of Section
6.02 in connection with all reservations for Ground Transportation Services
which were transmitted through the Genisys/TranspoNet Interface and for which
all TranspoNet Service Providers received payment from Genisys during such
preceding week;
(ii) Genisys shall: (a) calculate the total aggregate dollar amount of all
Basic Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from any CRS
other than "Apollo" and transmitted through the Genisys/TranspoNet Interface and
for which all TranspoNet Service Providers received payment from Genisys during
such preceding week; (b) calculate the dollar amount which equals 70.7% of the
total aggregate dollar amount calculated in accordance with clause (a) of this
subparagraph and such amount shall be retained by Genisys; and (c) calculate the
dollar amount which equals 29.3% of the total aggregate dollar amount calculated
in accordance with clause (a) of this subparagraph and such amount shall be
payable to TranspoNet;
(iii) Genisys shall: (a) calculate the total aggregate dollar amount of all
Basic Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from the
"Apollo" CRS and transmitted through the Genisys/TranspoNet Interface and for
which all TranspoNet Service Providers received payment from Genisys during such
preceding week; (b) calculate the dollar amount which equals 71.5% of the total
aggregate dollar amount calculated in accordance with clause (a) of this
subparagraph and such amount shall be retained by Genisys; and (c) calculate the
dollar amount which equals 28.5% of the total aggregate dollar amount calculated
in accordance with clause (a) of this subparagraph and such amount shall be
payable to TranspoNet;
(iv) Genisys shall: (a) calculate the total aggregate dollar amount of all
Discounted Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from any CRS
other than "Apollo" and transmitted through the Genisys/TranspoNet Interface and
for which all TranspoNet Service Providers received payment from Genisys during
such preceding week; (b) calculate the dollar amount which equals 70.0% of the
total aggregate dollar amount calculated in accordance with clause (a) of this
subparagraph and such amount shall be retained by Genisys; and (c) calculate the
dollar amount which equals 30.0% of the total aggregate dollar amount calculated
in accordance with clause (a) of this subparagraph and such amount shall be
payable to TranspoNet; and
(v) Genisys shall: (a) calculate the total aggregate dollar amount of all
Discounted Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from the
"Apollo" CRS and transmitted through the Transponet Interface and for which all
TranspoNet Service Providers received payment from Genisys during such preceding
week; (b) calculate the dollar amount which equals 70.0% of the total aggregate
dollar amount calculated in accordance with clause (a) of this subparagraph and
such amount shall be retained by Genisys; and (c) calculate the dollar amount
which equals 30.0% of the total aggregate dollar amount calculated in accordance
with clause (a) of this subparagraph and such amount shall be payable to
TranspoNet.
Section 6.04. Calculation of Payments to Genisys and
TranspoNet When Utilizing the TranspoNet Software Program Interface. If the
Genisys System transmits reservations to the TranspoNet Service Providers
through the TranspoNet Software Program Interface as contemplated by Article V
of this Agreement, then, on Saturday of each week, Genisys shall make the
following calculations:
(i) Genisys shall calculate the total aggregate dollar amount of all CRS
Processing Fees deducted by Genisys in accordance with clause (ii) of Section
6.02 in connection with all reservations for Ground Transportation Services
which were transmitted through the TranspoNet Software Program Interface and for
which all TranspoNet Service Providers received payment from Genisys during such
preceding week;
(ii) Genisys shall: (a) calculate the total aggregate dollar amount of all
Basic Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from any CRS
other than "Apollo" and transmitted through the TranspoNet Software Program
Interface and for which all TranspoNet Service Providers received payment from
Genisys during such preceding week; (b) calculate the dollar amount which equals
78.0% of the total aggregate dollar amount calculated in accordance with clause
(a) of this subparagraph and such amount shall be retained by Genisys; and (c)
calculate the dollar amount which equals 22.0% of the total aggregate dollar
amount calculated in accordance with clause (a) of this subparagraph and such
amount shall be payable to TranspoNet;
(iii) Genisys shall: (a) calculate the total aggregate dollar amount of all
Basic Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from the
"Apollo" CRS and transmitted through the TranspoNet Software Program Interface
and for which all TranspoNet Service Providers received payment from Genisys
during such preceding week; (b) calculate the dollar amount which equals 79.0%
of the total aggregate dollar amount calculated in accordance with clause (a) of
this subparagraph and such amount shall be retained by Genisys; and (c)
calculate the dollar amount which equals 21.0% of the total aggregate dollar
amount calculated in accordance with clause (a) of this subparagraph and such
amount shall be payable to TranspoNet;
(iv) Genisys shall: (a) calculate the total aggregate dollar amount of all
Discounted Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from any CRS
other than "Apollo" and transmitted through the TranspoNet Software Program
Interface and for which all TranspoNet Service Providers received payment from
Genisys during such preceding week; (b) calculate the dollar amount which equals
78.0% of the total aggregate dollar amount calculated in accordance with clause
(a) of this subparagraph and such amount shall be retained by Genisys; and (c)
calculate the dollar amount which equals 22.0% of the total aggregate dollar
amount calculated in accordance with clause (a) of this subparagraph and such
amount shall be payable to TranspoNet; and
(v) Genisys shall: (a) calculate the total aggregate dollar amount of all
Discounted Service Provider Booking Fees deducted by Genisys in accordance with
clause (ii) of Section 6.02 in connection with all reservations for Ground
Transportation Services which were received by the Genisys System from the
"Apollo" CRS and transmitted through the TranspoNet Software Program Interface
and for which all TranspoNet Service Providers received payment from Genisys
during such preceding week; (b) calculate the dollar amount which equals 79.0%
of the total aggregate dollar amount calculated in accordance with clause (a) of
this subparagraph and such amount shall be retained by Genisys; and (c)
calculate the dollar amount which equals 21.0% of the total aggregate dollar
amount calculated in accordance with clause (a) of this subparagraph and such
amount shall be payable to TranspoNet.
Section 6.05. Payments to TranspoNet. Genisys shall pay all
amounts due and owing to TranspoNet in accordance with Sections 6.03 and 6.04
hereof as soon as practicable after the calculation of such payments in
accordance with such Sections, but in no event later than Wednesday of the
following week. Notwithstanding anything in this Agreement to the contrary, in
making the weekly payments to TranspoNet required by this Section 6.05, Genisys
shall use its best estimate of the CRS Processing Fees which must be paid to the
"Apollo" CRS in connection with all TranspoNet Reservations for which TranspoNet
is receiving payment as part of such weekly payment. Thereafter, when Genisys
receives the actual statement of all CRS Processing Fees due and owing to the
"Apollo" CRS for the TranspoNet Reservations for which TranspoNet received
payment in the preceding month, Genisys shall make an adjustment to the next
weekly payment due and owing to TranspoNet to reflect the actual CRS Processing
Fees
owed to the "Apollo" CRS for all such TranspoNet Reservations. Each payment made
to TranspoNet pursuant to this Section 6.05 shall be accompanied by a statement,
print-out or other exhibit or schedule detailing the calculations made by
Genisys in accordance with this Article VI in order to determine the amount of
the payment then being made to TranspoNet.
Section 6.06. Payments to Genisys. In addition to all other
amounts which Genisys is entitled to receive in accordance with this Agreement,
TranspoNet agrees to pay to Genisys an amount equal to 28.0% of the fee received
by TranspoNet for each Intra-Service Provider Reservation transaction occurring
during the term of this Agreement. In order to calculate such amounts payable to
Genisys, TranspoNet shall, on Saturday of each week (a) calculate the total
aggregate dollar amount of all fees received by TranspoNet in connection with
all Intra-Service Provider Reservation transactions occurring during the
preceding week, (b) calculate the dollar amount which equals 28.0% of the total
aggregate dollar amount calculated in accordance with clause (a) of this
sentence and such amount shall be payable to Genisys, and (c) calculate the
dollar amount which equals 72.0% of the total aggregate dollar amount calculated
in accordance with clause (a) of this sentence and such amount shall be retained
by TranspoNet. TranspoNet shall pay all amounts due and owing to Genisys in
accordance with this Section 6.06 as soon as practicable after the calculation
of such payments in accordance with this Section, but in no event later than
Wednesday of the following week.
Section 6.07. Cost of Dedicated Lease Line. If the Genisys
System shall be transmitting reservations to the Genisys/TranspoNet Interface as
contemplated by Articles II and IV of this Agreement through the use of a
dedicated leased phone line, then Genisys shall be
responsible for paying 70.0% of the cost of the dedicated lease line and
TranspoNet shall be responsible for paying the remaining 30.0% of such cost.
Section 6.08. No Connection Charges to TranspoNet Service
Providers. No portion of the costs or expenses incurred by Genisys and/or
TranspoNet in connection with the design, development, construction or testing
of the Genisys/TranspoNet Interface or the TranspoNet Software Program Interface
or in connection with soliciting or convincing Service Providers to become
TranspoNet Service Providers and connect with the TranspoNet System and the
Genisys System as contemplated by this Agreement shall be charged in any way to
the TranspoNet Service Providers, provided, however, that TranspoNet shall have
the right to charge any TranspoNet Service Provider for the costs incurred by
TranspoNet in connection with any customization of the TranspoNet Service
Provider's computer system that is necessary to enable such computer system to
receive reservations from the TranspoNet System or through the TranspoNet
Software Program Interface.
Section 6.09. Promotional and Advertising Expenses. Unless
otherwise agreed to in writing prior to the incurrence of any promotional or
advertising expense, Genisys and TranspoNet shall each be responsible for paying
all of their own promotional or advertising costs or expenses incurred by them
in connection with advertising or promoting the availability of receiving and
transmitting reservations through the Genisys System and the TranspoNet System
as contemplated by this Agreement.
Section 6.10. Free Trial Offer. Notwithstanding anything in
this Agreement to the contrary, Genisys and TranspoNet may provide the
TranspoNet Service Providers with free use of the reservation delivery,
processing and payment services of the Genisys System and the TranspoNet System
as set forth in this Agreement. Any such free usage shall be limited to a
fourteen (14) day period and shall be limited to fifteen (15) reservations per
day; provided, however, Genisys and TranspoNet may jointly decide to extend the
length of usage or permit more reservations per day if it is necessary to
accommodate the business needs of a particular TranspoNet Service Provider.
Genisys shall be responsible for paying all CRS Processing Fees for all
reservations delivered to any TranspoNet Service Provider during any such free
usage period contemplated by this Section 6.10. Genisys and TranspoNet shall
jointly purchase all hardware, software and other equipment necessary to provide
a TranspoNet Service Provider with free usage as contemplated by this Section
6.10. Genisys shall be responsible for paying seventy percent (70%) of the cost
of such hardware, software and other equipment and TranspoNet shall be
responsible for paying the remaining thirty percent (30%) of such cost.
Section 6.11. No Additional Charges. Genisys shall have the
sole right, responsibility and obligation to bill each TranspoNet Service
Provider for all amounts payable to Genisys and TranspoNet in connection with
each reservation which is delivered and processed by the Genisys System through
the Genisys/TranspoNet Interface or the TranspoNet Software Program Interface in
accordance with the provisions of this Agreement. Except as otherwise set forth
in Section 6.08, TranspoNet shall not be entitled to bill any charges or amounts
to any TranspoNet Service Provider in connection with any reservation which is
delivered and processed in accordance with this Agreement.
7
<PAGE>
ARTICLE VII
COVENANTS, AGREEMENTS, OBLIGATIONS AND RIGHTS OF GENISYS
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Section 7.01. Mutually Acceptable Press Release. As soon as
practicable after execution of this Agreement, Genisys shall cooperate with
TranspoNet in preparing and releasing a mutually acceptable press release which
announces the execution of this Agreement and describes the business
relationship between Genisys and TranspoNet resulting from the execution of this
Agreement.
Section 7.02. Advertising, Promotional Material and Future
Press Releases. 1. Except as otherwise provided in Section 7.01 hereof, Genisys
shall not distribute, publish or release any press release, newspaper or
magazine article, sales brochure, advertisement or other promotional material or
documentation, which in any manner mentions or references TranspoNet, the
TranspoNet System, the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface, without the prior written approval of TranspoNet, which
approval shall not be unreasonably withheld. If Genisys desires to distribute,
publish or release any press release, newspaper or magazine article, sales
brochure, advertisement or other promotional material or documentation, which in
any manner mentions or references TranspoNet, the TranspoNet System, the
Genisys/TranspoNet Interface or the TranspoNet Software Program Interface,
Genisys shall provide TranspoNet with a copy of the proposed press release,
newspaper or magazine article, sales brochure, advertisement or other
promotional material or documentation prior to its distribution, publication or
release so as to give TranspoNet an opportunity to review it to determine the
accuracy and appropriateness of the references to TranspoNet, the TranspoNet
System, the Genisys/TranspoNet Interface or the TranspoNet Software Program
Interface. Genisys further agrees that, before TranspoNet shall have any
obligation to give its approval of any such press release, newspaper or magazine
article, sales brochure, advertisement or other promotional material or
documentation, Genisys shall make any and all changes in the references to
TranspoNet, the TranspoNet System, the Genisys/TranspoNet Interface or the
TranspoNet Software Program Interface contained therein as shall be requested by
TranspoNet. Notwithstanding anything contained in this Agreement to the
contrary, Genisys' obligation to get TranspoNet's approval of any press release,
newspaper or magazine article, sales brochure, advertisement or other
promotional material or documentation as provided in this Section 7.02 is only
applicable to press releases, newspaper or magazine articles, sales brochures,
advertisements or other promotional material or documentation which are within
Genisys' control or over which Genisys has editorial review or control.
2. Any reports or forms which Genisys may file with the SEC in
compliance with the provisions of the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or any of the rules or regulations
promulgated by the SEC under such Acts, and which in any manner mention or
reference TranspoNet, the TranspoNet
System, the Genisys/TranspoNet Interface or the TranspoNet Software Program
Interface, shall not be deemed to be a press release, newspaper or magazine
article, sales brochure, advertisement or other promotional material or
documentation for purposes of this Section 7.05.
Section 7.03. Title and Possession. Genisys agrees that at all
times during the term of this Agreement all right, title and interest in the
TranspoNet System, the Genisys/TranspoNet Interface or any other computer
software or Internet reservation delivery system developed by TranspoNet during
the term of this Agreement shall remain with and be the property of TranspoNet
and Genisys shall acquire no interest whatsoever in the TranspoNet System, the
Genisys/TranspoNet Interface or any other computer software or Internet
reservation delivery system as a result of entering into this Agreement.
Section 7.04. Rights and Access to TranspoNet Data. Genisys
agrees that TranspoNet owns all right, title and interest in the TranspoNet Data
and shall have the right to full and immediate use and access to all TranspoNet
Data without interference from Genisys.
Section 7.05. Prohibition on Use and Distribution of
TranspoNet Data. Except as otherwise permitted by this Agreement, Genisys shall
not use or distribute any TranspoNet Data without TranspoNet's prior written
consent.
Section 7.06. Training in the Genisys System. Genisys shall
provide training in the proper operation and functioning of the Genisys System
to TranspoNet personnel, at a time and place to be hereafter mutually agreed
upon by Genisys and TranspoNet, in order to ensure a knowledgeable and efficient
marketing effort of the benefits of this Agreement to the TranspoNet Service
Providers.
Section 7.07. Maximization of Business. Genisys shall use its
best efforts, in cooperation with TranspoNet, to maximize the number of
reservations which are delivered and processed for the TranspoNet Service
Providers as contemplated by this Agreement. Such best efforts shall include but
are not be limited to, cross-referencing target customers with those of
TranspoNet, developing joint sales strategies with TranspoNet and the TranspoNet
Service Providers and developing and conducting client-presentations with
TranspoNet and the TranspoNet Service Providers.
8
<PAGE>
ARTICLE VIII
COVENANTS, AGREEMENTS, OBLIGATIONS AND RIGHTS OF TRANSPONET
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Section 8.01. Agreement Between Genisys and Custom
Transportation. TranspoNet acknowledges that Genisys has heretofore entered into
an agreement with the Service Provider known as "Custom Transportation" pursuant
to which Genisys is accepting, processing and delivering, and processing
payments for, reservations for Ground Transportation Services made by customers
and clients of Custom Transportation directly through the Genisys System without
utilizing the TranspoNet System, the Genisys/TranspoNet Interface or the
TranspoNet Software Program Interface. Notwithstanding any provision of this
Agreement to the contrary, TranspoNet agrees that Genisys may continue to
accept, process and deliver, and process payments for, such reservations in
accordance with its agreement with Custom Transportation and that, unless Custom
Transportation hereafter agrees to become a TranspoNet Service Provider as
contemplated by this Agreement, the execution and delivery of this Agreement by
Genisys will not in any way affect, change or alter (i) the manner or means by
which Genisys is currently accepting, processing or delivering, or processing
payments for, such reservations, or (ii) the legal or business relationship
between Genisys and Custom Transportation.
Section 8.02. Mutually Acceptable Press Release. As soon as
practicable after execution of this Agreement, TranspoNet shall cooperate with
Genisys in preparing and releasing a mutually acceptable press release which
announces the execution of this Agreement and describes the business
relationship between Genisys and TranspoNet resulting from the execution of this
Agreement.
Section 8.03. Advertising, Promotional Material and Future
Press Releases. 1. Except as otherwise provided in Section 8.02 hereof,
TranspoNet shall not distribute, publish or release any press release, newspaper
or magazine article, sales brochure, advertisement or other promotional material
or documentation, which in any manner mentions or references Genisys, the
Genisys System, the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface, without the prior written approval of Genisys, which approval
shall not be unreasonably withheld. If TranspoNet desires to distribute, publish
or release any press release, newspaper or magazine article, sales brochure,
advertisement or other promotional material or documentation, which in any
manner mentions or references Genisys, the Genisys System, the
Genisys/TranspoNet Interface or the TranspoNet Software Program Interface,
TranspoNet shall provide Genisys with a copy of the proposed press release,
newspaper or magazine article, sales brochure, advertisement or other
promotional material or documentation prior to its distribution, publication or
release so as to give Genisys an opportunity to review it to determine the
accuracy and appropriateness of the references to Genisys, the Genisys System,
the Genisys/TranspoNet Interface or the TranspoNet Software Program Interface.
Genisys further agrees that, before TranspoNet shall have any obligation to give
its approval of any such press release, newspaper
or magazine article, sales brochure, advertisement or other promotional material
or documentation, Genisys shall make any and all changes in the references to
Genisys, the Genisys System, the Genisys/TranspoNet Interface or the TranspoNet
Software Program Interface
contained therein as shall be requested by Genisys. Notwithstanding anything
contained in this Agreement to the contrary, TranspoNet's obligation to get
Genisys' approval of any press release, newspaper or magazine article, sales
brochure, advertisement or other promotional material or documentation as
provided in this Section 8.03 is only applicable to press releases, newspaper or
magazine articles, sales brochures, advertisements or other promotional material
or documentation which are within Genisys' control or over which Genisys has
editorial review or control.
2. Any reports or forms which TranspoNet may file with the SEC in
compliance with the provisions of the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or any of the rules or regulations
promulgated by the SEC under such Acts, and which in any manner mention or
reference Genisys or the Genisys System shall not be deemed to be a press
release, newspaper or magazine article, sales brochure, advertisement or other
promotional material or documentation for purposes of this Section 8.03.
Section 8.04. Title and Possession. TranspoNet agrees that at
all times during the term of this Agreement all right, title and interest in the
Genisys System, the TranspoNet Software Program Interface and any other computer
software or computer reservation system developed by Genisys during the term of
this Agreement shall remain with and be the property of Genisys and TranspoNet
shall acquire no interest whatsoever in the Genisys System, the TranspoNet
Software Program Interface or any other computer software or computer
reservation system as a result of entering into this Agreement.
Section 8.05. Rights and Access to Genisys Data. TranspoNet
agrees that Genisys owns all right, title and interest in the Genisys Data,
shall have the right to full and immediate use and access to all Genisys Data
without interference from TranspoNet and shall have the exclusive right to
market products developed from the Genisys Data (including Genisys Data which
may also constitute TranspoNet Data for purposes of this Agreement) without
interference from Transponet.
Section 8.06. Prohibition on Use and Distribution of Genisys
Data. Except as otherwise permitted by this Agreement, TranspoNet shall not use
or distribute any Genisys Data without Genisys' prior written consent.
Section 8.07. Training in the TranspoNet System and the
TranspoNet Software Programs. TranspoNet shall provide training in the proper
operation and functioning of the TranspoNet System and the TranspoNet Software
Programs to Genisys personnel, at a time and place to be hereafter mutually
agreed upon by Genisys and TranspoNet, in order to ensure a knowledgeable and
efficient marketing effort of the benefits of this Agreement to the TranspoNet
Service Providers.
Section 8.08. Maximization of Business. TranspoNet shall use
its best efforts, in cooperation with Genisys, to maximize the number of
reservations which are delivered and processed for the TranspoNet Service
Providers as contemplated by this Agreement. Such best efforts shall include but
are not be limited to, cross-referencing target customers with those of Genisys,
developing joint sales strategies with TranspoNet and the TranspoNet Service
Providers and developing and conducting client-presentations with TranspoNet and
the TranspoNet Service Providers.
9
<PAGE>
ARTICLE IX
INDEMNIFICATION
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Section 9.01. Indemnification of TranspoNet. 1. Genisys agrees
to defend, indemnify and hold harmless TranspoNet and its respective directors,
officers, employees and agents (hereinafter in this Article collectively
referred to as "TranspoNet") from any and all claims, liabilities, damages,
losses, costs, fines, penalties, settlements, judgments, and expenses whatsoever
(including reasonable attorney's fees and disbursements) resulting directly or
indirectly, or incurred as a consequence of claims or actions, brought at law or
in equity, against TranspoNet based on an assertion that the Genisys System or
the Specifications relating thereto or the use thereof by TranspoNet pursuant to
this Agreement infringes or otherwise violates any United States patent,
copyright, trademark or any other intellectual property right (including, but
not limited to, misappropriation of trade secrets) without regard to whether
such claim was made in good faith.
2. Genisys agrees to defend, indemnify and hold harmless TranspoNet
from any and all claims, liabilities, damages, losses, costs, fines, penalties,
settlements, judgments, and expenses whatsoever (including reasonable attorney's
fees and disbursements) resulting directly or indirectly, or incurred as a
consequence of claims or actions, brought at law or in equity, against
TranspoNet arising out of the execution and delivery of this Agreement by
Genisys or any transaction between TranspoNet and Genisys contemplated by this
Agreement and which are based on any theory of negligence, breach of contract,
tort or other legal violation by Genisys without regard to whether such claim
was made in good faith.
3. Genisys agrees that if TranspoNet's use of the Genisys System or the
Specifications relating thereto becomes, or in Genisys' opinion is likely to
become, the subject of a claim of infringement or is held to constitute
infringement, Genisys shall, at Genisys' expense and with the understanding that
time is of the essence, procure the right for TranspoNet to continue to use the
Genisys System or the Specifications relating thereto; provided, however that if
Genisys is unable procure such right, then Genisys may terminate this Agreement
by notifying TranspoNet in writing, without incurring any further liability to
TranspoNet. Notwithstanding the foregoing, if TranspoNet is prohibited from
using the Genisys System or the Specifications relating thereto due to such
claim and Genisys proposes to terminate this Agreement, Genisys shall give
TranspoNet thirty (30) days prior written notice during which period TranspoNet
may elect to accept the reduced function, performance and operation of the
Genisys System or any portion thereof and this Agreement shall otherwise remain
in full force and effect.
4. Notwithstanding anything in this Agreement to the contrary, Genisys
shall have no obligation to indemnify TranspoNet with respect to any claim of
infringement based upon or resulting from TranspoNet's use of the Genisys System
or the Specifications relating thereto in violation of any provisions of this
Agreement.
Section 9.02. Indemnification of Genisys. 1. TranspoNet agrees
to defend, indemnify and hold harmless Genisys and its respective directors,
officers, employees and agents (hereinafter in this Article collectively
referred to as "Genisys") from any and all claims, liabilities, damages, losses,
costs, fines, penalties, settlements, judgments, and expenses whatsoever
(including reasonable attorney's fees and disbursements) resulting directly or
indirectly, or incurred as a consequence of claims or actions, brought at law or
in equity, against Genisys based on an assertion that the TranspoNet System, the
Genisys/TranspoNet Interface, the TranspoNet Software Program Interface or the
Specifications relating thereto or the use thereof by Genisys pursuant to this
Agreement infringes or otherwise violates any United States patent, copyright,
trademark or any other intellectual property right (including, but not limited
to, misappropriation of trade secrets) without regard to whether such claim was
made in good faith.
2. TranspoNet agrees to defend, indemnify and hold harmless Genisys
from any and all claims, liabilities, damages, losses, costs, fines, penalties,
settlements, judgments and expenses whatsoever (including reasonable attorney's
fees and disbursements) resulting directly or indirectly, or incurred as a
consequence of claims or actions, brought at law or equity, against Genisys
arising out of the execution and delivery of this Agreement by TranspoNet or any
transaction between Genisys and TranspoNet contemplated by this Agreement and
which are based on any theory of negligence, breach of contract, tort or other
legal violation by TranspoNet without regard to whether such claim was made in
good faith.
3. TranspoNet agrees that if Genisys' use of the TranspoNet System,
Genisys/TranspoNet Interface or the TranspoNet Software Program Interface or the
Specifications relating thereto becomes, or in TranspoNet's opinion is likely to
become, the subject of a claim of infringement or is held to constitute
infringement, TranspoNet shall, at TranspoNet's option and expense and with the
understanding that time is of the essence, either (i) procure the right for
Genisys to continue to use the TranspoNet System, Genisys/TranspoNet Interface
or the TranspoNet Software Program Interface or the Specifications relating
thereto, or (ii) use its reasonable best efforts, to modify or replace the
TranspoNet System, the Genisys/TranspoNet Interface of the TranspoNet Software
Program Interface or any portion thereof, within a reasonable time frame, so
that it becomes non-infringing and retains substantially comparable function,
performance and operation; provided, however that if TranspoNet is unable to
accomplish (i) or (ii) above, then TranspoNet may terminate this Agreement by
notifying Genisys in writing without incurring any further liability to Genisys.
Notwithstanding the foregoing, if Genisys is prohibited from using the
TranspoNet System, the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface or the Specifications relating thereto due to such claim and
TranspoNet proposes to terminate this Agreement, TranspoNet shall give Genisys
thirty (30) days prior written notice during which period Genisys may elect to
accept the reduced function, performance and operation of the
TranspoNet System, the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface or any portion thereof and this Agreement shall otherwise
remain in full force and effect.
4. TranspoNet shall have no obligation to indemnify Genisys with respect
to any claim of infringement based upon or resulting from Genisys' use of the
TranspoNet System, the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface or the Specifications relating thereto in violation of this
Agreement.
Section 9.03. Conditions to Indemnification Obligations.
Genisys' and TranspoNet's respective indemnification obligations as set forth in
this Article, are contingent upon the indemnitee: (i) giving the indemnitor
prompt written notice of any claim for which indemnification is sought; (ii)
allowing the indemnitor to have the sole right to control and conduct the
defense of any such claim or action and all negotiations for its settlement or
compromise; and (iii) providing reasonable assistance to the indemnitor, such
assistance to be solely at the cost and expense of the indemnitor. In settling
any claim for which indemnification is sought under this Agreement, the
indemnitor is not authorized to take any action which adversely affects the
indemnitee without obtaining the prior written consent of the indemnitee, which
consent shall not be unreasonably withheld. The indemnitee shall have the right
to participate in the defense of any such claim with its own counsel and shall
be responsible for all fees and costs associated with the same. Notwithstanding
the foregoing (i) in the event the indemnitee fails to provide prompt written
notice to the indemnitor of any such claim for which indemnification is sought,
the indemnitor shall be relieved of its indemnity obligation hereunder solely to
the extent that it is prejudiced thereby, and (ii) if the indemnitor fails or
elects not to defend or settle such claim, the indemnitee may defend or settle
such claim and the indemnitor shall pay to the indemnitee any and all damages
and expenses (including attorney's fees and disbursements) incurred and amounts
paid in settlement by the indemnitee.
Section 9.04. Survival of this Article. The provisions of this
Article shall survive any termination of this Agreement without regard to the
basis of termination or the party terminating.
10
<PAGE>
ARTICLE X
NON-COMPETITION
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Section 10.01. Non-Competition by TranspoNet. During the term
of this Agreement, TranspoNet will not (i) directly compete with Genisys, (ii)
directly or indirectly interfere with, disrupt or attempt to disrupt, the
relationship, contractual or otherwise, between Genisys and any of its
customers, clients, suppliers, consultants or employees, or (iii) with the
exception of any computerized reservation system for Ground Transportation
Services which accepts and processes reservations for Ground Transportation
Services from the CRSs which TranspoNet has heretofore developed for the Service
Providers known as "Boston Coach," "Gem", "Royal Coachman" and "Custom
Transportation" and which is actively in use on the date of execution of this
Agreement, directly or indirectly develop, or have developed for it or any
TranspoNet Service Provider, any computerized reservation system for Ground
Transportation Services which accepts and processes reservations for Ground
Transportation Services through the CRSs.
Section 10.02. Non-Competition by Genisys. During the term of
this Agreement, Genisys will not (i) directly compete with TranspoNet, (ii)
directly or indirectly interfere with, disrupt or attempt to disrupt, the
relationship, contractual or otherwise, between TranspoNet and any of its
customers, clients, suppliers, consultants or employees, or (iii) directly or
indirectly develop, or have developed for it, any Internet reservation delivery
system which provides for the delivery of reservations for Ground Transportation
Services to TranspoNet Service Providers through the Internet or is capable of
delivering Intra-Service Provider Reservations through the Internet.
Section 10.03. Injunctive Relief. Genisys and TranspoNet each
acknowledges that the restrictions contained in this Article, in view of the
nature of the respective businesses in which they are engaged, are reasonable
and necessary to protect their respective legitimate interests. Genisys and
TranspoNet each understands and agrees that the remedies at law for violation of
any of the covenants or provisions of this Article will be inadequate, that such
violations will cause irreparable injury within a short period of time, and that
the aggrieved party shall be entitled to preliminary injunctive relief and other
injunctive relief against such violations without the necessity of proving
actual damages. Such injunctive relief shall be in addition to, and in no way in
limitation of, any and all other remedies the aggrieved party shall have at law
and in equity for the enforcement of those covenants and provisions.
11
<PAGE>
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
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Section 11.01. Representations and Warranties of Genisys. Genisys hereby
represents and warrants as follows:
(a) Genisys is a corporation duly authorized, validly existing and in good
standing under the laws of the State of New Jersey and Genisys has the full
right, power and authority to carry on its business as presently being conducted
and to enter into and perform its obligations under this Agreement.
(b) Neither the execution or delivery of this Agreement nor the
performance by Genisys of its obligations contained herein conflicts with or
will conflict with or results or will result in any breach or violation of any
of the terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest or other restriction of
any kind whatsoever upon, any property or assets (tangible or intangible) of
Genisys pursuant to the terms of (i) the certificate of incorporation or by-laws
of Genisys, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit agreement
or any other agreement or instrument to which Genisys is a party or by which
Genisys is or may be bound or to which its property or assets (tangible or
intangible) is or may be subject, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to Genisys of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over Genisys or any of its
activities or properties.
(c) This Agreement constitutes a legal, valid and binding obligation of
Genisys enforceable against Genisys in accordance with its terms, except as such
enforceability may be limited by (i) any applicable bankruptcy, insolvency, debt
adjustment, reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally; (ii) the exercise of judicial
discretion or the valid exercise of the sovereign police powers of the State of
New Jersey or the constitutional powers of the United States of America; and
(iii) the general principles of equity, the remedy of specific performance and
other equitable remedies.
(d) Genisys is not restricted by agreement from carrying on its business
anywhere in the world.
(e) There are no actions, proceedings, or investigations pending, or to the
knowledge of Genisys, threatened, against Genisys, which would materially
adversely affect Genisys' assets or business; nor does Genisys nor any of its
current officers have any reasonable ground to know of any basis for any such
action, proceeding, or investigation. Neither Genisys nor any of its officers
know or have any reason to believe that there is any event or condition of any
kind or character pertaining to Genisys' business or assets that may materially
adversely affect any such business or assets.
(f) None of the present owners of the stock of Genisys or any of the officers or
directors of Genisys has any direct or indirect interest in any corporation or
business which is involved in any way with or competes with any business
conducted by TranspoNet.
(g) The Genisys System is fully operational and is currently capable of
receiving and processing all reservations for Ground Transportation Services
made through the "Apollo" and "Sabre" CRSs. When the Genisys/TranspoNet
Interface and/or the TranspoNet Software Program Interface are completed in the
manner contemplated by this Agreement, the Genisys System will be capable of
accepting from, and transmitting to, the TranspoNet Service Providers, through
the use of either the Genisys/TranspoNet Interface or the TranspoNet Software
Program Interface, all information relating to each TranspoNet Reservation made
through the CRSs to which the Genisys System is then connected.
Section 11.02. Representations and Warranties of TranspoNet.
TranspoNet hereby represents and warrants as follows:
(a) TranspoNet is a corporation duly authorized, validly existing and in
good standing under the laws of the State of New York and TranspoNet has the
full right, power and authority to carry on its business as presently being
conducted and to enter into and perform its obligations under this Agreement.
(b) Neither the execution or delivery of this Agreement nor the
performance by TranspoNet of its obligations contained herein conflicts with or
will conflict with or results or will result in any breach or violation of any
of the terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest or other restriction of
any kind whatsoever upon, any property or assets (tangible or intangible) of
TranspoNet pursuant to the terms of (i) the certificate of incorporation or
by-laws of TranspoNet, (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which TranspoNet is a party or
by which TranspoNet is or may be bound or to which its property or assets
(tangible or intangible) is or may be subject, or (iii) any statute, judgment,
decree, order, rule or regulation applicable to TranspoNet of any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction over
TranspoNet or any of its activities or properties.
(c) This Agreement constitutes a legal, valid and binding obligation of
TranspoNet enforceable against TranspoNet in accordance with its terms, except
as such enforceability may be limited by (i) any applicable bankruptcy,
insolvency, debt adjustment, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally; (ii) the exercise of
judicial discretion or by the valid exercise of the sovereign police powers of
the State of New York or the constitutional powers of the United States of
America; and (iii) the general principles of equity, the remedy of specific
performance and other equitable remedies.
(d) There are no actions, proceedings, or investigations pending, or to the
knowledge of TranspoNet, threatened, against TranspoNet; nor does TranspoNet or
any of its current officers have any reasonable ground to know of any basis for
any such action, proceeding, or investigation. Neither TranspoNet nor any of its
current shareholders or officers know or have any reason to believe that there
is any event or condition of any kind or character pertaining to TranspoNet's
business or assets that may materially adversely affect any such business or
assets.
(e) TranspoNet is not restricted by agreement from carrying on its
business anywhere in the world.
(f) None of the present officers and directors of TranspoNet has any direct
or indirect interest in any corporation or business which is involved in any way
with or competes with any business conducted by Genisys.
(g) The TranspoNet System has been completed in a manner that permits
the smooth and efficient transmission of all reservations received by the
TranspoNet System to the TranspoNet Service Providers, and that the TranspoNet
System is fully operational and will be capable of receiving and processing
reservations received from the Genisys System when the Genisys/TranspoNet
Interface is completed in the manner contemplated by this Agreement and as
referenced in Schedule A attached hereto.
Section 11.03. Disclaimer of Other Warranties. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT, GENISYS AND TRANSPONET
EXPRESSLY DISCLAIM ANY AND ALL WARRANTIES CONCERNING THE GENISYS
SYSTEM, THE TRANSPONET SYSTEM, THE GENISYS/TRANSPONET INTERFACE OR
THE TRANSPONET SOFTWARE PROGRAM INTERFACE OR ANY OTHER PRODUCTS
OR SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
12
<PAGE>
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
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Section 12.01. Events of Default. The occurrence and
continuation of any one of the following shall constitute an Event of Default
hereunder:
(a) Failure or refusal by either Genisys or TranspoNet, as the case may
be, to make any payment required to be made by such party in accordance with
Article VI of this Agreement and such failure or refusal shall remain uncured
for a period of seven (7) days after written notice thereof has been given to
either Genisys or TranspoNet, as the case may be, by the non-defaulting party;
or
(b) Failure or refusal by either Genisys or TranspoNet, as the case may
be, to observe, perform or comply with any other covenant, condition or
agreement on its part to be observed or performed in this Agreement and such
failure or refusal shall remain uncured for a period of fifteen (15) days after
written notice thereof has been given to either Genisys or TranspoNet, as the
case may be, by the non-defaulting party; provided, however, that if such
default cannot by its nature be cured within fifteen (15) days, such default
shall not become an Event of Default so long as either Genisys or TranspoNet, as
the case may be, is diligently pursuing a cure and delivers a report to the
other party at least once every fifteen (15) days setting forth the status of
its attempts to cure such default; or
(c) Any representation or warranty made by either Genisys or TranspoNet,
as the case may be, pursuant to or in connection with this Agreement shall prove
to be false or misleading in any material respect when made; or
(d) If either Genisys or TranspoNet shall (i) commence a voluntary case
or similar proceeding under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) authorize, apply for or consent
to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or similar official for itself and/or any of its properties,
or (iii) make any general assignment for the benefit of creditors, or (iv) make
a written declaration or admission to the effect that it is unable to meet its
debts as such debts mature, or (v) authorize or take any action in furtherance
of any of the foregoing; or
(e) If a court having jurisdiction in the premises shall enter a decree or
order (i) for relief in respect of either Genisys or TranspoNet in an
involuntary case or similar proceeding under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or (ii) appointing a
receiver, liquidator, assignee, trustee, custodian or similar official for
either Genisys or TranspoNet and/or any of their respective properties, as the
case may be,
or (iii) for the dissolution, liquidation or winding up of either Genisys or
TranspoNet and their respective affairs, or (iv) finding or determining that
either Genisys or TranspoNet is unable to meet its debts as such debts mature;
and any such decree or order shall remain unstayed and in effect for a period of
sixty (60) consecutive days.
Section 12.02. Remedies on Default. Upon the occurrence of an Event of Default
under Section 12.01 hereof, the non-defaulting party may take one or more of the
following actions:
(i) Send written notice to the defaulting party declaring this Agreement
to be immediately terminated, null and void and of no further force or effect;
or
(ii) Institute an action or proceeding to seek monetary damages; or
(iii) Institute an action or proceeding to seek equitable remedies including,
but not limited to, injunctions or specific performance.
The parties hereto agree that monetary damages may be
insufficient to adequately compensate any non-defaulting party and that
equitable remedies shall constitute appropriate remedies upon the occurrence of
an Event of Default hereunder.
Section 12.03. No Remedy Exclusive. No remedy conferred upon
or reserved to the parties hereto in this Agreement is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle any party hereto to exercise any remedy
reserved to it in this Agreement, it shall not be necessary to give any notice
to the other party, other than such notice as may be herein expressly required.
Section 12.04. Limitation of Waiver. The breach, default or
nonperformance of any obligation, covenant, representation, warranty, duty or
agreement contained herein by either party hereto may be waived only by a
written instrument signed by the other party; provided, however, that no such
waiver shall serve to waive any subsequent breach, default or nonperformance,
nor shall any such waiver serve to waive a recurrence of the breach, default or
nonperformance so waived, nor shall the failure to enforce any remedy by any
party with respect to any breach, default or nonperformance serve as a waiver
thereof.
13
<PAGE>
ARTICLE XIII
MISCELLANEOUS
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Section 13.01. Term of Agreement and Renewals Thereof. The
term of this Agreement shall be for a period of two (2) years from the date
hereof, unless renewed or earlier terminated in accordance with the provisions
hereof. This Agreement shall automatically be renewed for successive one (1)
year periods unless at least thirty (30) days prior to the end of the original
two (2) year period or any renewal period, one party notifies the other party
that this Agreement will terminate at the end of said original period or renewal
period.
Section 13.02. Early Termination for Failure to Meet Minimum
Reservation Criteria. Notwithstanding anything in this Agreement to the
contrary, if the Genisys System shall not be accepting and processing not less
than: (i) one hundred (100) TranspoNet Reservations per day by no later than
ninety (90) days after the Genisys/TranspoNet Interface and/or the TranspoNet
Software Program Interface are completed and the services of the Genisys System
and the TranspoNet System contemplated by this Agreement become commercially
available to be marketed to the TranspoNet Service Providers, and/or (ii) two
hundred fifty (250) TranspoNet Reservations per day by no later than one hundred
eighty (180) days after the Genisys/TranspoNet Interface and/or the TranspoNet
Software Program Interface are completed and the services of the Genisys System
and the TranspoNet System contemplated by this Agreement become commercially
available to be marketed to the TranspoNet Service Providers, then either party
shall have the right to terminate this Agreement upon fifteen (15) days prior
written notice to the other party and, thereafter, unless Genisys and TranspoNet
shall otherwise agree, this Agreement shall terminate immediately at the
expiration of the fifteenth (15th) day after delivery of such notice and
thereupon this Agreement shall become null and void in its entirety except as
otherwise set forth in Section 13.11 hereof. Genisys and TranspoNet shall
cooperate fully with each other, and shall each use their best efforts, to
assure that the minimum number of TranspoNet Reservations referred to in the
first sentence of this Section are accepted and processed by the Genisys System
by no later than the dates set forth in such first sentence of this Section.
Section 13.03. Agreements Upon Termination. 1. Upon any
termination of this Agreement, unless otherwise agreed to in writing by Genisys
and TranspoNet, Genisys and TranspoNet shall destroy all copies of the
Genisys/TranspoNet Interface or the TranspoNet Software Program Interface (in
object code and in source code forms, if applicable) in their possession,
partial or complete, in all types of media and computer memory, and all other
materials relating thereto. Within ten (10) days after the date of the
termination of this Agreement, an officer of each party shall certify in writing
to the other party that the certifying party has complied with the provisions of
this paragraph 1 of Section 13.03. The provisions of this Section shall survive
the termination of this Agreement until fulfilled without regard to the basis of
termination or the party terminating.
2. Genisys agrees that, upon request by TranspoNet, and in any event upon
termination of this Agreement, Genisys shall turn over to TranspoNet all
documents, papers or other material in its possession or under its control which
may contain or be derived from Confidential Information (as defined in the
TranspoNet Confidentiality Agreement), together with all documents, notes or
other work product which are connected with or derived from Genisys' services to
TranspoNet whether or not such material is at the date thereof in Genisys'
possession.
3. TranspoNet agrees that upon request by Genisys, and in any event upon
termination of this Agreement, TranspoNet shall turn over to Genisys all
documents, papers or other material in its possession or under its control which
may contain or be derived from Confidential Information (as defined in the
Genisys Confidentiality Agreement), together with all documents, notes or other
work product which are connected with or derived from TranspoNet's services to
Genisys whether or not such material is at the date thereof in TranspoNet's
possession.
Section 13.04. Fees, Costs and Expenses. Except as otherwise
set forth in this Agreement or as otherwise agreed to in a writing signed by the
parties hereto, all fees, costs and expenses incurred by either party hereto in
connection with the performance of its obligations, covenants, duties and
agreements under this Agreement shall be for the account of such party and shall
be paid by such party and the other party hereto shall not have any liability
whatsoever for any such fees, costs and expenses.
Section 13.05. Notices. All notices, certificates or other
communications shall be sufficiently given and shall be deemed given on the
fifth day following the day on which the same have been mailed by certified
mail, postage prepaid, addressed as follows: if to Genisys, at 2401 Morris
Avenue, Union, New Jersey 07083, Attention: Mark A. Kenny, Director, with a copy
to John H. Wasko, Secretary and a copy to John T. Kelly, Esq., Wilentz, Goldman
& Spitzer, P.A., 90 Woodbridge Center Drive, Woodbridge, New Jersey 07095; and
if to TranspoNet, at 12 West Thirty-First Street, New York, New York 10001,
Attention: Apurva Patel, with a copy to Jay Jacobson, Esq., Rosner, Bresler,
Goodman & Unterman, LLP, 521 Fifth Avenue, New York, New York 10175.
Section 13.06. Assignments. This Agreement may not be assigned by either party
without the prior written consent of the other party.
Section 13.07. Amendments. This Agreement may only be modified or amended by a
written instrument signed by the parties hereto.
Section 13.08. Successors and Assigns. All covenants,
representations, warranties, duties, obligations and agreements contained in
this Agreement by or on behalf of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto, whether
or not so expressed.
Section 13.09. Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision thereof.
Section 13.10. Severability. If any provision of this
Agreement shall be held or deemed to be or shall, in fact, be illegal,
inoperative or unenforceable, the same shall not affect any other provision or
provisions herein contained and this Agreement shall be construed and enforced
to the end that the obligations contemplated hereby be enforced as if such
illegal or invalid provisions had not been contained herein.
Section 13.11. Survival of Certain Provisions. Notwithstanding
anything in this Agreement to the contrary, the payment provisions of Sections
4.02, 5.03, 6.09 and the provisions of ARTICLE IX hereof shall survive any
termination or expiration of this Agreement and shall remain in full force and
effect.
Section 13.12. Execution of Counterparts. This Agreement may
be simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument. Both
parties hereto may sign the same counterpart or each party hereto may sign a
separate counterpart.
Section 13.13. Arbitration. To the extent permitted by law,
any controversy arising under this Agreement which the parties are unable to
resolve by mutual agreement shall be submitted to binding arbitration in
accordance with the then current rules of the American Arbitration Association
(the "AAA"), and any decision in such arbitration shall be conclusive as to the
matters submitted to arbitration, shall be final and binding upon the parties
hereto and may be enforced in any court of competent jurisdiction. Either party
may give the other party written notice of its desire to have a matter
arbitrated, in which event a hearing thereon shall be commenced within a
reasonable time thereafter. Any rule of the AAA to the contrary notwithstanding,
the issue submitted to arbitration shall be heard and decided by a panel of
three arbitrators, one of whom shall be designated by Genisys, one of whom shall
be designated by TranspoNet and the third to be mutually acceptable to Genisys
and TranspoNet; provided, however, that in the absence of any such designation
or agreement, the balance of the arbitration panel shall be designated by the
AAA. Any decision as to the issues properly submitted to the arbitration panel,
including the sharing of the costs of the arbitration, which is joined in by at
least two members of the arbitration panel, shall be the decision of the panel
and such decision shall be final and binding upon the parties and not subject to
appeal. Any decision or award of the arbitration panel shall be based solely on
the provisions of this Agreement. If the subject matter for the decision or
award is not covered by the provisions of this Agreement, it shall be based upon
the law (excluding any laws relating to conflicts of laws) of the State of New
Jersey. The arbitration panel shall not be requested nor shall it have the power
to render any decision or award except in accordance with the provisions of this
Section 13.13. Any decision or award not complying with the foregoing shall be
subject to appeal and judicial review upon the petition
of either party. Any arbitration hearing taking place in accordance with the
provisions of this Section 13.13 shall be held in New York, New York, unless
the parties otherwise agree in writing.
Section 13.14. Governing Law. This Agreement shall be governed exclusively by
and construed in accordance with the applicable laws of the State of New Jersey
relating to contracts made and to be entirely performed in such State.
Section 13.15. Entire Agreement. This Agreement contains the
entire agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof other than the Genisys Confidentiality Agreement and the TranspoNet
Confidentiality Agreement.
Section 13.16. Headings. The headings to the various Articles
and Sections of this Agreement have been inserted for convenience only and do
not constitute a part of this Agreement and are not intended in any way to
define, limit or interpret the contents of any such Article or Section.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed in their respective names by their duly authorized officers, all
as of the date first above written.
GENISYS RESERVATION SYSTEMS, INC.
By:_______________________________
Name: Lawrence E. Burk
Title: Chief Executive Officer
THE TRANSPONET COMPANIES, INC.
By:_______________________________
Name: Apurva Patel
Title: Chief Executive Officer
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-KSB AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,207,841
<SECURITIES> 0
<RECEIVABLES> 8,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,221,752
<PP&E> 395,467
<DEPRECIATION> 133,824
<TOTAL-ASSETS> 3,152,866
<CURRENT-LIABILITIES> 470,965
<BONDS> 0
0
0
<COMMON> 436
<OTHER-SE> 1,698,723
<TOTAL-LIABILITY-AND-EQUITY> 3,152,866
<SALES> 25,863
<TOTAL-REVENUES> 25,863
<CGS> 0
<TOTAL-COSTS> 1,615,988
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,590,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,590,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,590,125)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
