-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DMrc63AsGWJfV0O6igEf80lcTHlxqECC6mLNBmxGlTWwOQx6EAuosTK4fc0/BNPw KGvWFsdtlyG4BQN0RwdVqg== 0000950144-99-011508.txt : 19991227 0000950144-99-011508.hdr.sgml : 19991227 ACCESSION NUMBER: 0000950144-99-011508 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLIGHTSERV COM CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 001-08662 FILM NUMBER: 99719090 BUSINESS ADDRESS: STREET 1: 3343 PEACHTREE ROAD N E STREET 2: SUITE 530 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 8508940018 MAIL ADDRESS: STREET 1: 2930 WELLINGTON CIRCLE SUITE 101 CITY: TALLAHASSEE STATE: FL ZIP: 32308 FORMER COMPANY: FORMER CONFORMED NAME: PROACTIVE TECHNOLOGIES INC DATE OF NAME CHANGE: 19950921 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MEDICAL CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MEDICAL CORP INC DATE OF NAME CHANGE: 19910103 10KSB40 1 FLIGHTSERV.COM 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1999 FLIGHTSERV.COM (formerly Proactive Technologies, Inc.) (Exact name of registrant as specified in its charter) DELAWARE 1-8662 23-2265039 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 3343 PEACHTREE ROAD NE SUITE 530 ATLANTA, GA 30326 (404) 869-2599 (Address of registrant's principal executive offices including zip code and telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934: TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, par value $0.04 American Stock Exchange Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act of 1934: NONE Check 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 twelve 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 [ ] Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B 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 the Form 10-KSB or any amendment to this Form 10-KSB. [X] The Registrant's revenues for its most recent fiscal year (12 months ending June 30, 1999): $602,026. The aggregate market value of the voting stock held by non-affiliates as of September 27, 1999 was $100,688,248. Check whether the issuer filed all reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] The number of shares outstanding of the Registrant's Common Stock as of September 27, 1999: 30,543,235 Transitional Small Business Disclosure Format: Yes [ ] No [X] 2 TABLE OF CONTENTS
Page PART I ITEM 1. Description of Business 3 General 3 Acquisition and Dispositions 3 Private Aviation Travel Services 4 Commercial Real Estate Operations 7 Discontinued Operations-Residential Real Estate 8 Employees 8 ITEM 2. Properties 8 ITEM 3. Legal Proceedings 10 ITEM 4. Vote Of Security Holders 10 PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters 10 ITEM 6. Management's Discussion and Analysis or Plan of Operations 12 ITEM 7. Financial Statements 13 ITEM 8. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure 25 PART III ITEM 9. Directors, Executive Officers 26 ITEM 10. Executive and Director Compensation 27 ITEM 11. Security Ownership of Certain Beneficial Owners and Management 28 ITEM 12. Certain Relationships and Related Transactions 30 PART IV ITEM 13. Exhibits Lists and Reports on Form 8-K 31
2 3 PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL flightserv.com ("FSW" or the "Company") is a Delaware corporation incorporated in 1982. FSW is primarily engaged in the general development of an Internet-based private aviation travel services business and certain limited commercial real estate activities. See "Private Aviation Travel Services" and "Commercial Real Estate Operations" below. In fiscal 1999, the Company discontinued its residential real estate development operations. Prior to 1996, the Company, then known as Proactive Technologies, Inc. operated a drug-screening and testing lab and a computer software development business. In 1996 the Company discontinued these operations when it acquired Capital First Holdings, Inc., a residential real estate development company. Since fiscal 1996 and through the first half of fiscal 1999 the Company engaged primarily in the design, development and sale of single-family subdivisions. During the second half of fiscal 1999, the Company decided to discontinue its residential real estate development operations and focus primarily on developing an Internet Web site to provide, as agent, access to private aviation travel services. The Company changed its name to flightserv.com in June 1999 to reflect the new business direction. Certain statements contained in this report, including, without limitation, statements containing the words "believes", "anticipates", "expects", and words of similar import, constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: international, national and local general economic and market conditions; demographic changes; national interest rates; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing governmental regulations and changes in or the failure to comply with, governmental regulations; adverse publicity, competition; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this report. Certain of these factors are discussed in more detail elsewhere in this report. Given these uncertainties, readers of this report and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. ACQUISITIONS AND DISPOSITIONS The Company made the following two acquisitions during its third quarter of fiscal 1999. The Company acquired the stock of West Side Investors, Inc. ("West Side"), a Georgia corporation which owns the Stonebridge Village Shopping Center located in Dekalb County, Georgia and the Headland-DeLowe Shopping Center located in Atlanta, Georgia. The purchase price for the West Side stock was the issuance of 3,100,000 shares of the Company's Common Stock valued at $.25 per share based on its then current trading history. The two shopping centers have an appraised value of $9,130,000 and are subject to $7,886,000 non-recourse, participating mortgages entitling the lender to 50% of the net cash flows realized from the shopping centers and 50% of the excess of the appraised values over the loan balances upon sale of the properties or maturity of the loans. The Company acquired the stock of PDK Properties, Inc. (the "PDK" Stock), a Georgia corporation which owns Stratos Inns, LLC, a Georgia limited liability company ("Stratos Inns"), located in Atlanta, Georgia that was formed to develop hospitality facilities at private aviation airports. The purchase price for the PDK Stock was the issuance of 3,600,000 shares of the Company's Common Stock valued at $.25 per share based on its then current trading history. 3 4 In connection with discontinuing its residential real estate development business, the Company sold a substantial portion of its residential real estate holdings during fiscal 1999, including the following sales: In the second quarter of fiscal 1999, the Company transferred back two residential real estate projects to an independent third party. The consideration for the sale was approximately $4,000,000 consisting of cancellation of mortgages on the properties. Also in the second quarter of fiscal 1999, the Company sold 58 developed subdivision lots to an independent third party for approximately $1,560,000 and approximately 280 acres of undeveloped land to an entity controlled by a former director for $1,732,000. On January 21, 1999, the Company sold Henry Holdings, Inc. ("HHI"), a Florida corporation, to Mark A. Conner, the former CEO of the Company, in exchange for 5,000,000 shares of the Company's Common stock held by Mr. Conner. At the time of the closing, HHI held $700,000 in cash from the sale of certain real estate in the Tallahassee, Florida area and a contract with a third party for the purchase of HHI's remaining real estate assets which included lots, raw land, and the Company's office building in Tallahassee, Florida. On June 30, 1999, the Company sold two real estate subsidiaries, Barrier Dunes Development Corporation ("Barrier Dunes") and Regional Developers of Albany, Inc. ("RDA") to Inland Communities, Inc. Barrier Dunes owned approximately 50 lots in Cape San Blas, Florida and RDA owned approximately 175 acres of undeveloped land in Albany, Georgia. Also on June 30, 1999, the Company sold (i) approximately 260 acres of undeveloped land in Thomasville, Georgia and certain other real estate assets to Regional Developers of Thomasville, Inc. (a company affiliated with a former officer of the Company) and (ii) approximately 100 developed lots and other real estate assets in Tallahassee, Florida to HHI. The consideration for the June 30 1999 transactions was $6,109,000, consisting of $900,000 in cash and thirty-day secured notes and approximately $5,209,000 in assumed debt. Subsequent to June 30, 1999, the Company sold or contracted to sell its remaining residential real estate properties, including the sale of 749 acres in Walton County, Florida (consisting of the Magnolia Bluff subdivision) and certain other real estate assets to Magnolia Bluff, Inc., an entity affiliated with a former chief executive officer and another former officer of the Company. The consideration for the sale of these properties was $5,000,000 consisting of $180,000.000 cash, $1,000,000 of non-recourse promissory notes from Magnolia Bluff, Inc., and assumption of mortgages totaling approximately $2,300,000. PRIVATE AVIATION TRAVEL SERVICES General FSW is in the process of developing an internet Web site to provide, as agent, travel services to the private aviation marketplace. Based on information published by the National Business Aviation Association, an industry group, private aviation generates more than $51 billion in annual economic activity. Private aviation aircraft are reported to carry over 145 million passengers per year. FSW intends for its Web site, www.flightserv.com, to distribute private charter services, lodging, personal and aircraft protection services, ground transportation, concierge and other services. FSW will be compensated by a commission or fee for its services from the service provider. Supplier Agreements Simultaneously with the development of the Web site, FSW has been negotiating preferred partner agreements with suppliers of services to the privation aviation marketplace. Its strategy in selecting preferred partners is to contract with premium service providers. To date, FSW has executed a preferred hospitality agreement with the Ritz-Carlton Hotel Company, LLC, a leading provider of luxury hotel rooms worldwide, and a Master Executive Protection Agreement with Vance International, Inc., a leading provider of personal and asset protection services. Under the agreement with Ritz-Carlton, member-users of the FSW Web site will be able to reserve hotel accommodations with Ritz-Carlton through the Web site and will be accorded Ritz-Carlton's "last room account" status, providing added assurance of being able to obtain a confirmed reservation. Under the agreement with Vance International, FSW is designated the exclusive private aviation Internet distributor of Vance's worldwide personal and aircraft protection services. 4 5 FSW is in the process of negotiating agreements with other service providers including certified charter flight operators. Authority to operate charter aircrafts granted by the Federal Aviation Administration (the "FAA") and the Department of Transportation of which the FAA is a part. FSW will serve as agent for operators having certificates from the FAA under Part 135 of Title 14 of the Code of Federal Regulations to provide such services. FSW does not intend to own or operate any aircraft and will be dependent upon certified charter operators to provide all flight services. FSW is currently negotiating with certified charter operators and is confident that it will be able to contract with suitable charter operators to act as their agent in reserving and collecting payment for flight services. Web Site Development FSW has a working model of its Web site which it is testing and refining as it negotiates agreements with preferred suppliers. In addition to retaining Web site developers, FSW has worked closely with legal and other advisers to comply with all applicable legal and other requirements. Marketing FSW is currently evaluating the most effective methods to publicize its Web site and attract users to the Web site. It is also seeking strategic partners who can help publicize the Web site and attract customer traffic to it. FACTORS AFFECTING FUTURE RESULTS AND FORWARD-LOOKING STATEMENTS The Company's business, results of operations and financial condition are subject to many risks, including those set forth below. The following discussion highlights some of these risks and others are discussed elsewhere herein or in other documents filed by the Company with the Securities and Exchange Commission. Availability of Services FSW will not provide private aviation travel services directly but, instead, will offer, as agent, services provided by independent vendors through its Web site. As a result, the ability of FSW to enter into agreements, such as the preferred provider agreements with Ritz-Carlton and Vance, and to otherwise arrange for services to be available through its Web site is critical for the success of its business. While multiple sources exist for the services to be offered through the Web site, FSW will act only as an agent and have limited or no control of the availability, actual delivery, or quality of the services offered to its member-users or the price offered for such services. In addition, there is no guarantee that FSW will be able to enter into additional preferred partnership agreements with other service providers. At this time, FSW is negotiating contracts with certified charter providers and management believes that certified charter operators will want to provide charter services through the Web site. Failure to contract with certified charter operators would have a material adverse effect on FSW. Competition The services to be offered by FSW are available directly from the providers and through other channels including the Internet. Many of FSW's competitors have financial resources substantially greater than FSW. However, to FSW's knowledge, it is the only company planning to offer charter reservations and the more frequently used travel services together on a single Internet Web site. In addition, FSW has contracted exclusive or preferred Internet distribution rights with certain of service providers and intends to seek such rights from other service providers, but there can be no assurance that FSW will be able to obtain exclusive or preferred or rights in the future. Lack of Operating History/Expectation of Operating Losses The Company has discontinued its residential real estate development business and has not yet implemented its Web site. As a result, there is no meaningful operating history upon which to base an evaluation of the Company's Internet-based private aviation travel services business and prospects. The Company has incurred losses in fiscal 1999 and may continue to incur losses in fiscal 2000 as the result of the need to incur substantial marketing and promotion costs and systems and development costs. 5 6 Dependence on the Internet and Development of Brand Name The Company's future success depends upon the continued growth in the use of the Internet generally and the active use of its Web site by private aviation passengers to make flight reservations and arrange for other travel related services. The Company believes that its Web site will be the first time both charter flight reservations and other travel related services are offered through one Web site and, therefore, it is impossible to predict the number of existing private aviation passengers and the number of new private aviation passengers that will use the Web site. The Company believes that broad recognition and favorable consumer perception of the flightserv.com SM brand name will be essential to attract existing and new private aviation passengers to the Web site and that successful development of the flightserv.com SM brand will depend on the success of the Company's marketing efforts, the breadth and quality of the services available on the Web site, the successful completion of transactions through the Web site and the ability of the Company to provide adequate support and customer service. There is no assurance that the Company will be able to adequately develop its brand name or otherwise attract a sufficient number of Web site users. Risk of System Failure/Lack of Capacity The successful implementation and continued operation of the Web site will depend upon communications hardware and computer hardware and software made available by a third party and any interruptions in service caused by the failure of these systems will be outside of the control of the Company. A system failure that causes an interruption in service to the Web site or that results in slower response times from the Web site could be disruptive to FSW's business and could damage FSW's brand name and result in fewer visits to the Web site. In addition, high volume could strain the capacity of the software or hardware used in connection with the Web site resulting in slower response times or system failures which could adversely affect sales and services. Internet Security Issues The secure transmission of confidential information over the Internet will be important in maintaining user and vendor confidence in the Web site. The Company will rely on encryption and authentication technology licensed from third parties to effect secure transmission of confidential information including confidential credit card information. However, there can be no assurance that advances in computer capabilities or other developments will not result in unauthorized persons obtaining access to confidential customer information in the Web site exposing the Company to potential losses. Management of Potential Growth The Company is expected to expand its business after the implementation of the Web site. This growth is expected to place significant demands on the Company's management, operational, and financial resources. In order to manage expected growth, the Company will be required to expand existing operations and to train, manage and expand its employee base. Further, the Company's management will be required to maintain relationships with various service providers and to maintain control over the strategic direction of the Company. If the Company is unable to manage growth effectively, the Company's business, results of operations, and financial condition will be adversely affected. Intellectual Property The Company regards its copyrights, service marks, trademarks, trade dress, trade secrets, domain names and similar intellectual property as critical to its success and relies on trademark and copyright law, trade secret protection and confidentiality agreements to protect its intellectual property rights. Nonetheless, there can be no assurance that the Company will be able to secure significant protection for its intellectual property rights. Government Regulation Certain segments of the travel industry are regulated by the United States Government and certain services offered by the Company are affected by such regulations. The operators of charter flights upon whom the Company's service depend are subject to rigorous and continuous certification requirements of the FAA. The Company is also subject to regulations applicable to businesses generally and laws or regulations directly applicable to the Internet. 6 7 While currently there are few laws directly applicable to the Internet, the increase in Internet commerce may result in new laws or regulations relating to Internet commerce including regulations regarding privacy, pricing and state and local taxation which could affect the Company. Year 2000 The Year 2000 issue relates to the risk that computer systems may not properly recognize the Year 2000. While the Company believes, after consulting with its Web site developer, that the systems being developed for its Web site will be Year 2000 compliant, the Company relies on, and the Web site after it is operational will rely on, information technology supplied by third parties. In addition, the providers of private aviation travel services sold through the Web site are dependent on their own information technology systems and their third party vendors' systems. The Company will seek assurance from such suppliers that their systems are Year 2000 compliant but there is no guarantee that the Company, its third party vendors or the suppliers of the private aviation services available on the Web site will not experience significant Year 2000 issues. It is also possible that member-users' access to the Web site might be disrupted as the result of Year 2000 issues. Any of these potential Year 2000 issues could adversely affect the Company Volatility of Stock Price/Potential for Future Sales of Restricted Securities The market price of the Company's Common Stock is highly volatile and is likely to continue to be subject to wide fluctuations in response to factors including the announcement by the Company of future partnership agreements or other corporate developments, the limited number of freely tradable shares in public hands, and the timing and successful implementation of the Web site. Additionally, in recent years many companies with Internet related businesses have experienced extreme price and volume fluctuations that have often been unexplained by the operating performance of such companies. The Company's stock price could also be negatively effected by the future sale of shares of restricted Common stock or shares underlying options and warrants that have been issued by the Company. Approximately 24,000,000 issued and outstanding shares of the Company's Common Stock are believed to be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. Rule 144 provides generally that restricted securities must be held for one year prior to resale and provides certain additional limitations on the volume of such shares that a beneficial owner may sell in any three month period. Generally, non-affiliated owners may sell restricted securities without the volume limitations, after the shares have been held for at least two years. In addition, the Company has issued warrants and options which, if exercised, could result in up to an additional 14,660,000 shares of the Company's Common Stock. COMMERCIAL REAL ESTATE OPERATIONS Shopping Centers The Company owns two commercial shopping centers in the Atlanta area. The Headland-DeLowe Shopping Center is a strip center, shopping mall facility on approximately 11 acres of land with approximately 97,000 square feet of leasable space. Headland is fully leased with a large, regional grocery store as the anchor tenant. Headland historically has experienced an occupancy rate in excess of 90%. The Stonebridge Village Shopping Center is a strip center, shopping mall facility on approximately 20 acres of land with approximately 98,000 square feet of leasable space. Stonebridge recently lost its large regional grocery store chain as anchor tenant and a major drug store chain and is currently seeking replacement tenants. The remainder of the facility is currently under lease. Stonebridge historically has experienced an occupancy rate in excess of 90%. The Company plans to continue to own and operate Headland and Stonebridge but does not plan to acquire other shopping center properties. The Company utilizes professional commercial real estate management companies to operate its shopping centers. The companies maintain and market the property for a management fee typically based on rental revenues. The Company plans to continue the utilization of professional management companies for its commercial real estate properties. 7 8 The Company is subject to a variety of Federal, state and local regulations concerning protection of health and the environment. The Company is unaware of any environmental liability or compliance with applicable environmental laws or regulations arising out of its properties that the Company believes would have a material adverse effect on its business, assets or results of operations. Stratos Inns The Company's Stratos Inns subsidiary holds a lease on approximately two acres at the Dekalb-Peachtree Airport in Dekalb County, Georgia (the "PDK Property") and owns the Stratos Inns business concept. Stratos Inns is evaluating available properties at other general aviation airports that primarily serve the private aviation industry. These airport properties provide an opportunity for Stratos Inns or a strategic partner to develop and provide a variety of lodging and related hospitality services to private aviation pilots and passengers. The Company has not begun development of any facilities on the PDK Property and is in the process of considering its options with respect to the PDK Property. The Company does not expect to generate revenues from its Stratos Inns subsidiary in fiscal 2000. DISCONTINUED OPERATIONS - RESIDENTIAL REAL ESTATE The Company discontinued its residential real estate development business in fiscal 1999. During fiscal 1999 the Company disposed of the majority of its residential real estate holdings. Subsequent to June 30, 1999, the Company sold or contracted to sell substantially all of its remaining residential real estate properties. EMPLOYEES As of June 30, 1999, the Company employed eight people. The Company has no collective bargaining agreements with any unions and believes that overall relations with its employees are excellent. ITEM 2. PROPERTIES General The Company leases approximately 4300 square feet in an office building located at 3343 Peachtree Road NE, Atlanta, Georgia for its headquarters. The Company also leases office space in Tallahassee, Florida for its residential real estate development operations. The Company will vacate the Tallahassee space on September 30, 1999. Management believes that all property occupied by the Company and its subsidiaries is adequately covered by insurance. Shopping Centers In January 1999, the Company acquired West Side which owns the Headland-DeLowe Shopping Center located at 2020 Headland Drive, Atlanta, Georgia ("Headland") and the Stonebridge Village Shopping Center located at 7982 Rockbridge Road, Dekalb County, Georgia ("Stonebridge"). Headland and Stonebridge are retail strip shopping centers with approximately 97,000 and 98,000 of leaseable space, respectively. 8 9 Schedule of Properties: The following reflects information on tenants occupying 10% or more of the leasable square footage for Headland and Stonebridge, respectively.
Headland Nature of Business Square Footage Annual Rent Lease Expiration ------------------ -------------- ----------- ---------------- 1. Grocery store 38,752 sq. ft. $180,680 8/04/2002 2. Carpet store 15,000 36,000 6/30/2002 Stonebridge Nature of Business Square Footage Annual Rent Lease Expiration ------------------ -------------- ----------- ---------------- Grocery store 35,000 sq. ft. $233,493 3/14/2010
For fiscal 1999 the average annual rental rate for Headland and Stonebridge was $3.99 and $7.98/per square foot respectively. The average occupancy rate for Headland and Stonebridge was 94% and 90% respectively. Stonebridge recently lost its large, regional grocery store chain as the anchor tenant and a large drug store chain tenant and is currently seeking replacement tenants. While the grocery store and drug store tenants have ceased their operations, they remain obligated under their leases through 2010. The following is a schedule of lease expirations for the years 1999-2010.
% of Gross Number of Expirations Square Feet Annual Rent Annual Rent --------------------- --------------- ----------- ----------- Headland 1999 1 4,000 sq. ft. $ 12,000 3% 2000 4 25,548 85,299 22 2001 2 2,390 14,666 4 2002 7 57,208 264,402 68 2003 - - - - 2004 1 1,680 12,960 3 Stonebridge 1999 2 2,625 sq. ft. $ 22,071 4% 2000 5 6,045 52,585 8 2001 4 14,840 86,360 14 2002 3 4,310 34,963 6 2003 3 10,220 61,157 10 2004 4 6,730 55,339 9 2005 - 2009 - - - - 2010 2 43,640 315,480 49
The real estate taxes during fiscal 1999 for Headland and Stonebridge were $27,420 and $30,054, respectively. The leasing of commercial retail properties is highly competitive. There are other commercial retail properties within the market area served by Headland and Stonebridge and the number and quality of such properties could have a material adverse effect on the occupancy and rental rates of Headland and Stonebridge and the ability of Stonebridge to attract a new anchor tenant. The outstanding aggregate mortgage balance on Headland and Stonebridge at June 30, 1999 was $7,830,211. The mortgages include principal and interest payments based on an 8% interest rate and a 25-year amortization period with a lender call option on the principal balance after three years (on or after October 1, 2000). The mortgages also include an additional interest agreement which provides for the lender to receive 50% of the net cash flow of the properties and 50% of the appraised value over the mortgage balance at the time of a sale of the properties or maturity of the loans. 9 10 Set forth below is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal income tax basis of the properties.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis - -------- ----- ------------ ---- ------ --------- Headland $3,707,592 $42,677 39 yrs S/L $3,707,592 Stonebridge 4,663,679 54,110 39 yrs S/L 4,663,679
The Company believes that Headland and Stonebridge are adequately covered by insurance. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are involved from time to time in various claims and legal actions in the ordinary course of business. In the opinion of management, the Company is not party to any legal proceedings that the adverse outcome of which would have any material adverse effect on its business, its assets, or results of operations. ITEM 4. VOTE OF SECURITY HOLDERS On April 21, 1999, the Company held its Annual Meeting of Stockholders at which the only item submitted to a vote of stockholders was the election of the Board of Directors. The following five nominees were elected by the stockholders:
Votes Cast ---------------------------------------------- Director Nominee For Against or Withheld ---------------- ---------- ------------------- William B. Astrop 12,751,478 353 Joel A. Goldberg 12,751,478 353 C. Beverly Lance 12,751,478 353 Dr. James A. Verbrugge 12,751,478 353 Arthur G. Weiss 12,751,478 353
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The Company's Common Stock stock is listed on the American Stock Exchange ("AMEX"). Effective June 21, 1999 the stock symbol changed from "PTE" to ""FSW". The following table shows the high and low trading and closing prices of the Common Stock during the last two fiscal years as reported on AMEX:
1999 High Low Close ---- ---- --- ----- First Quarter $ 0.88 $ 0.44 $ 0.63 Second Quarter 0.56 0.25 0.25 Third Quarter 0.63 0.25 0.44 Fourth Quarter 3.50 0.38 2.44 1998 ---- First Quarter $ 1.00 $ 0.69 $ 0.69 Second Quarter 0.75 0.38 0.44 Third Quarter 0.56 0.25 0.50 Fourth Quarter 1.06 0.19 0.81
The prices reflect inter-dealer prices, without retail markup, mark-down or commission and may not represent actual transactions. 10 11 Dividends The Company has never paid cash dividends and currently intends to retain any future earnings to expand its operations. Therefore, it is not contemplated that cash dividends will be paid on the Company's Common stock in the foreseeable future. Record Holders The number of record holders of the Company's Common stock as of September 24, 1999 was 1,034. Sales of Unregistered Securities During fiscal 1999, the Company sold the following shares in private placements: On January 29, 1999, the Company sold 2,500,000 shares of restricted Common stock for $1,000,000 in cash to the Wendell M. Starke Trust (the "Starke Trust"). In connection with the sale, the Company entered into a Registration Rights Agreement with the Starke Trust. On March 18, 1999, the Company sold 2,500,000 shares of restricted Common stock for $1,000,000 in cash to the Godley Morris Group, LLC (the "GMG") In connection with the sale, the Company entered into a Registration Rights Agreement with the GMG. On June 29, 1999, the Company sold a total of 4,600,000 shares of Common stock which the Company held as treasury shares for $3,450,000 in cash. Of these shares, 2,300,000 were sold to the Starke Trust and 2,300,000 were sold to the GMG. The shares have the same registration rights as the shares sold to the. Starke Trust and the GMG on January 29, 1999 and March 18, 1999, respectively. In February 1999, the Company issued a total of 2,765,000 shares (350,000 of treasury shares) to third party consultants in payment of invoices for services provided to the Company. The shares were issued at prices which represented the approximate market value of unrestricted Common stock at the time the purchase price was agreed to by the parties. During fiscal 1999 in connection with its new Internet-based private aviation travel services business, the Company issued warrants to individuals and firms for consulting services and for strategic vendor alliances as follows:
No. of Shares Purchasable Per Share Exercise Price Grant Date ------------------------- ------------------------ ---------- 200,000 $ .42 4/10/99 200,000 $ .44 2/10/99 400,000 $ .50 2/10/99 1,050,000 $ .50 4/15/99 400,000 $ .75 4/30/99 100,000 $ 1.75 6/15/99
The above warrants are exercisable as of June 30, 1999 and each warrant has a ten year term. During fiscal 1999, the Company issued options to its directors and officers as follows:
No. Of Shares Purchasable Per Share Exercise Price Grant Date ------------------------- ------------------------ ---------- 2,600,000 $ .42 4/16/99 2,000,000 $ .44 2/10/99 50,000 $ .50 4/16/99 200,000 $ 1.00 6/24/99
11 12 The above options are exercisable on June 30, 1999, except that 2,650,000 of the options are subject to stockholder approval and 200,000 vest over a two-year period. The options expire ten years after the grant date. The foregoing transactions were affected in reliance on the registration exemption provided for by Section 4(2) of the Securities Act of 1933, as amended, as sales by an issuer not involving a public offering. Information regarding other sales of unregistered securities by the Company during the fiscal year ended June 30, 1999 is contained in the Company's Quarterly Reports on Form 10QSB for the quarters ended September 30, 1998, December 31, 1999 and March 31, 1999. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview Effective January 1, 1999 the Company discontinued its residential real estate development business. As a result, the statement of operations for fiscal 1999 and 1998 reflect the operating loss and loss on disposal of that business as discontinued operations. The continuing operations include development of an Internet-based private aviation travel services business, commercial real estate operations and other investments. Results of Continuing Operations The Company's revenues in fiscal 1999 were $602,026 which represents lease income generated from the Company's shopping centers acquired in fiscal 1999. All of the Company's revenues in 1998 were generated by the residential real estate development operations and were reclassified to discontinued operations. General and administrative expenses increased by $2,961,606 from $278,178 in fiscal 1998 to $3,239,784 in fiscal 1999. This increase is due to consulting and legal fees associated with the development of the new Internet-based private aviation travel services business. In addition the Company incurred $1,411,000 of consulting fees in fiscal 1999 related to a search for possible business combination alternatives. The Company in fiscal 1999 issued stock options to officers and directors and warrants to outside third parties and recognized $1,736,048 of related compensation expense. The Company's fiscal 1999 depreciation and amortization expense of $259,748 and interest expense of $334,226 reflect the costs of the shopping center operations acquired in January 1999. Management expects revenues to increase significantly in fiscal 2000 due to the implementation of the Company's Internet-based private aviation travel services business. However, management expects to continue to incur losses in connection with the development of its private aviation travel services prior to implementing the Web site and cannot be certain as to when the private aviation travel business will generate income. Discontinued Operations From July 1, 1998 through December 31, 1999, the Company incurred a loss of $4,291,505 on its residential real estate business compared to a $372,144 loss a year ago. From January 1, 1999 through June 30, 1999, the Company incurred a loss of $6,913,728 on disposal of the assets of its discontinued operations compared to $230,055 in fiscal 1998. The fiscal 1999 amount includes estimated losses on assets to be sold subsequent to June 30, 1999. The fiscal 1999 losses were impacted by (i) the bulk sales of properties in order to more quickly liquidate the properties and thereby reduce interest costs and operational expenses and (ii) the weak residential real estate market in the Tallahasee, Florida area. Liquidity and Capital Resources The net loss in fiscal 1999 of $16,173,010 was partially offset by Common Stock issuances resulting in a net decrease in stockholders' equity of $8,065,173. In fiscal 2000, the Company expects to invest approximately $400,000 in capitalized computer software development prior to implementing the private aviation travel services Web site. In addition, the Company will continue to incur start up costs and operating expenses prior to implementing its Web site. 12 13 The Company's cash balance at June 30, 1999 is $3,486,221 compared to $7,240 a year ago. This cash reserve is adequate, in management's opinion, to complete the implementation of private aviation travel services business on the Internet Web site. The Company's need to raise additional capital to implement and maintain the private aviation travel services business will depend upon, among other things, the initial level of customer interest in the services offered on the Company's Web site and the Company's ability to market the flightserv.com SM brand. The Company is presently reviewing the potential impact of Year 2000 compliance issues with regard to its information and accounting systems and business operations. The preliminary determination made by management is that any costs, problems, or uncertainties associated with the potential consequences of Year 2000 issues are not expected to have a material impact on its future operations or financial condition, but the Company's Web site business could be materially adversely effected if Year 2000 issues cause disruptions in the systems of the Company's third party vendors or suppliers of private aviation travel services. ITEM 7. FINANCIAL STATEMENTS The following financial statements are contained in this Item 7: Report of Independent Accountants. Consolidated Balance Sheets as of June 30, 1999 and 1998. Consolidated Statements of Operations for the years ended June 30, 1999 and 1998. Consolidated Statements of Changes in Shareholders' Equity for the years ended June 30, 1999 and 1998. Consolidated Statements of Cash Flows for the years ended June 30, 1999 and 1998. Notes to the Consolidated Financial Statements. 13 14 Report of Independent Certified Public Accountants Board of Directors flightserv.com and Subsidiaries We have audited the accompanying consolidated balance sheets of flightserv.com (formerly Proactive Technologies, Inc.) and Subsidiaries as of June 30, 1999 and 1998 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of flightserv.com and Subsidiaries as of June 30, 1999 and 1998, and the consolidated results of their operations and cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ JONES AND KOLB Atlanta, Georgia September 24, 1999 14 15 FLIGHTSERV.COM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1999 AND 1998 ASSETS
1999 1998* ------------ ------------ Cash and cash equivalents $ 3,486,221 $ 7,240 Accounts and notes receivable 914,096 -- Net assets of discontinued operations 122,656 15,782,714 Investments in equity securities -- 130,000 Deferred costs and other assets 469,949 47,812 Predevelopment costs 1,085,048 -- Property and equipment, net 8,414,445 409,665 ------------ ------------ Total assets $ 14,492,415 $ 16,377,431 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 7,830,211 $ -- Accounts payable and accrued expenses 631,457 1,608,219 Accrued interest payable 861,942 -- Income taxes payable -- 1,237,495 Deferred income tax liability -- 297,739 ------------ ------------ Total liabilities 9,323,610 3,143,453 ------------ ------------ Commitments and contingent liabilities Shareholders' equity: Common stock, $.04 par value, 60,000,000 shares authorized, 30,543,235 and 16,410,465 issued and outstanding, respectively 1,263,729 683,706 Additional paid-in capital 18,089,625 12,657,420 Retained earnings (deficit) (13,852,557) 2,320,453 Treasury stock - at cost (1,050,000 and 682,192 shares, respectively) (331,992) (1,950,077) Note receivable collateralized by company stock -- (477,524) ------------ ------------ Total shareholders' equity 5,168,805 13,233,978 ------------ ------------ Total liabilities and shareholders' equity $ 14,492,415 $ 16,377,431 ============ ============
*Reclassified The accompanying notes are an integral part of these consolidated financial statements. 15 16 FLIGHTSERV.COM AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998* ---- ----- Revenue and other income: Revenue $ -- $ -- Other income 602,026 -- ------------ ------------ Total revenues 602,026 -- ------------ ------------ General and administrative expenses 3,236,243 278,178 Compensation expense related to issuance of stock options and accounts 1,736,048 -- Depreciation and amortization 263,286 -- Interest Expense 334,226 -- ------------ ------------ Loss before income taxes and discontinued operations (4,967,777) (278,178) Income tax expense -- -- ------------ ------------ Net loss before discontinued operations (4,967,777) (278,178) Discontinued operations: Loss from discontinued operations (4,291,505) (372,144) Loss on disposal of discontinued operations (6,913,728) (230,055) ------------ ------------ Net loss $(16,173,010) $ (880,377) ============ ============ Basic and diluted loss per share: Loss per share before discontinued operations $ (.24) $ (.02) Discontinued operations (.54) (.04) ------------ ------------ Net loss $ (.78) $ (.05) ============ ============ Weighted average shares outstanding 20,793,855 16,845,746 ============ ============
* Reclassified The accompanying notes are an integral part of these consolidated financial statements. 16 17 FLIGHTSERV.COM AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
Additional Common Stock Paid-In Retained Treasury Note Shares Amount Capital Earnings Stock Receivable Total ------ ------ ------- -------- ----- ---------- ----- Balance at June 30, 1997 18,151,918 $ 726,077 $14,266,837 $ 3,200,830 $ -- $(2,380,784) $ 15,812,760 Net loss June 30, 1998 -- -- -- (880,377) -- -- (880,377) Stock issued for services 43,195 1,727 30,356 -- -- -- 32,083 Purchase price adjustment on real estate acquisition (1,102,456) (44,098) (1,639,773) -- -- (1,683,871) Collection on notes receivable -- -- -- -- (1,950,077) 1,903,460 (46,617) ----------- ---------- ----------- ------------ ----------- ----------- ------------ Balance at June 30, 1998* 17,092,657 $ 683,706 $12,657,420 $ 2,320,453 $(1,950,077) $ (477,524) $ 13,233,978 Net loss June 30, 1999 -- -- -- (16,173,010) -- -- (16,173,010) Issuance of stock 5,000,000 200,000 1,800,000 -- -- -- 2,000,000 Stock issued for services 2,503,778 100,151 1,142,430 -- -- -- 1,242,581 Purchase of businesses 6,700,000 268,000 1,407,000 -- -- -- 1,675,000 Issuance of options and warrants -- -- 1,736,048 -- -- -- 1,736,048 Sale of real estate -- -- -- -- (2,240,792) -- (2,240,792) Issuance of treasury stock -- -- 1,676,200 -- 1,773,800 -- 3,450,000 Issuance of treasury stock services -- -- 110,000 -- 135,000 -- 245,000 Cancellation of notes receivable -- -- (2,427,601) -- 1,950,077 477,524 -- Reinstatement of cancelled shares 296,800 11,872 (11,872) -- -- -- -- ----------- ---------- ----------- ------------ ----------- ----------- ------------ Balance on June 30, 1999 31,593,235 $1,263,729 $18,089,625 $(13,852,557) $ (331,992) $ -- $ 5,168,805 ----------- ---------- ----------- ------------ ----------- ----------- ------------
*Reclassified The accompanying notes are an integral part of these consolidated financial statements. 17 18 FLIGHTSERV.COM AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998 ----------- ----------- Cash flows from operating activities: Loss before discontinued operations $(4,967,777) $ (278,178) Adjustments to reconcile net loss to net cash provided by operating activities: Compensation expense related to issuance of options and warrants 1,736,048 -- Depreciation and amortization 263,286 -- Loss on disposal of property and equipment -- Issuance of common stock for services 1,421,000 -- Changes in operating assets and liability: Accounts and notes receivables (10,114) -- Deferred costs and other assets (4,431) -- Accounts payable and accrued expenses 382,538 -- ----------- ----------- Cash used by operating activities before discontinued operations (1,179,450) (278,178) ----------- ----------- Discontinued operations, net (397,771) (2,618,997) ----------- ----------- Net cash used by operating activities (1,577,221) (2,897,175) ----------- ----------- Cash flows from investing activities: Predevelopment costs (185,048) -- Purchase of property and equipment (85,091) (10,758) Investing activities of discontinued operations, net -- 4,586,579 ----------- ----------- Net cash (used) provided by investing activities (270,139) 4,575,821 ----------- ----------- Cash flows from financing activities: Principal debt payments (55,951) -- Proceeds from issuance of common stock 5,450,000 -- Financing activities of discontinued operations, net (67,708) (1,853,891) ----------- ----------- Net cash provided (used) by financing activities 5,326,341 (1,853,891) ----------- ----------- Net increase (decrease) in cash and cash equivalents 3,478,981 (175,245) Cash and cash equivalents at beginning of year 7,240 182,485 ----------- ----------- Cash and cash equivalents at end of year $ 3,486,221 $ 7,240 =========== =========== Supplemental disclosures of cash flow information: Cash paid during period for: Interest $ 1,526,896 $ 1,304,557 =========== =========== Income Taxes $ -- $ 253,998 =========== ===========
* Reclassified The accompanying notes are an integral part of these consolidated financial statements. 18 19 FLIGHTSERV.COM AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements include the operations of flightserv.com ("FSW") and its subsidiaries (collectively "Company"). In June, 1999 FWS changed its name from Proactive Technologies, Inc. to reflect the new business direction of the Company. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the fiscal 1999 presentation. Cash and Cash Equivalents The Company classifies as cash equivalents any investments which can be readily converted to cash and have an original maturity of less than three months. At times cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions. The Company is required under certain mortgages to maintain cash deposits or certificates of deposit as collateral. Such balances are reflected either as restricted cash or certificates of deposit on the accompanying balance sheet. Real Estate Investments Real estate investments are recorded at the lower of cost or estimated fair value. Development costs and real estate taxes are capitalized while development is in progress. Depreciation commences at the time the Company begins collecting rental income. Total interest capitalized during 1999 and 1998 was approximately $493,676 and $943,950, respectively. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line basis over the assets' estimated useful lives. Expenditures for maintenance and repairs are expensed as incurred, and expenditures for improvements which extend the useful life or add value to the asset are capitalized. Sales and disposals of assets are recorded by removing the related cost and accumulated depreciation amounts with any resulting gain or loss reflected in income. Net Loss Per Share The Company computes net loss per share in accordance with SFAS No. 128, "Earnings per Share" which requires dual presentations of basic earnings per share ("EPS") and diluted EPS. Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding and potentially dilutive shares outstanding during the period. Options and warrants to purchase 7,200,000 shares of common stock were outstanding at June 30, 1999. Outstanding options and warrants could potentially dilute basic earnings per share in the future but have not been included in the computation of diluted net loss per share in 1999 as the impact would have been antidilutive. There were no options or warrants outstanding at June 30, 1998. Income Taxes The Company's income taxes are accounted for in accordance with the liability method as provided under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, deferred income taxes are recognized for the tax consequences of differences between the financial statement carrying 19 20 amounts and the tax bases of existing assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any benefits that, based on available evidence, are not expected to be realized. Use of Estimates 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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. NOTE 2. BUSINESS ACQUISITIONS Commercial Real Estate Investments In January 1999, the Company purchased from the current Chairman and his children an entity that owns two shopping center properties in the Atlanta, Georgia area in exchange for 3,100,000 shares of the Company's Common Stock which was valued at $775,000 based on the then current market value of the Common Stock. The mortgage financing on the shopping center properties includes an additional interest agreement which provides that the lender receive 50% of the cash flow and excess of appraised value over the mortgage loan balance at the time of any sale of the property. The Company has recorded a $436,262 deferred debt discount cost and a corresponding accrued interest liability to reflect the lenders allocation of the excess appraisal value provided in the additional interest agreement. The deferred debt discount is being amortized over the 36 month term of the mortgage loans. Stratos Inns Concept In fiscal 1999, the Company purchased PDK Properties, Inc. ("PDK") from a trust of which the Company's President is trustee in exchange for 3,600,000 shares of Common Stock which was valued at $900,000 based on the then current market value of the Common Stock. PDK holds a 30-year ground lease at a regional airport in Dekalb County, Georgia and owns Stratos Inns, a hotel and hospitality business concept. The lease provides for a 54 month development period and a 30 year lease term after a hotel is constructed and opened. The Company has completed a preliminary study for development of its first Stratos Inn hotel and is evaluating its options in connection with PDK. At June 30, 1999, the Company's investment in predevelopment costs of PDK is $1,085,048. NOTE 3. PRIVATE AVIATION TRAVEL SERVICES BUSINESS In recent months FSW has been developing an Internet-based private aviation travel services business including an Internet Web site. In fiscal 1999 FSW incurred approximately $ 850,000 of general and administrative expense in connection with development of this new business. The expense includes aviation industry, Internet operations, Web site development, marketing, and business plan consulting and other professional services. In addition FSW issued warrants to purchase its Common stock for strategic vendor alliances related to the private aviation travel services business. See Note 10. Options and Warrants. At June 30, 1999 FSW had capitalized $88,500 in Internet Web site software costs. NOTE 4. DISCONTINUED OPERATIONS Effective January 1, 1999 the Company discontinued its residential real estate development operations. Residential real estate operations include developed lots, undeveloped land, and equity investments in residential real estate development companies, partnerships, and joint ventures. The fiscal 1998 financial statement amounts have 20 21 been reclassified to reflect the discontinued operations. The fiscal 1999 statement of operations reflects the Loss From Discontinued Operations through December 31, 1998 and the Loss on Disposal of Discontinued Operations from January 1, 1999 through June 30, 1999. The Company made certain estimates regarding the fair asset values and costs to dispose of the remaining assets of the discontinued operations at June 30, 1999. The fiscal 1999 Loss on Disposal of Discontinued Operations includes transactions with a former chief executive officer and a former officer of the Company. These former executives purchased assets with an aggregate book value of $16,000,000. The Company received cash, notes receivable or FSW Common Stock in these transactions. In addition the purchasers assumed all of the Company's mortgage indebtedness outstanding on the properties. At June 30, 1999 the Company held notes receivable in the amount of $465,000 in connection with certain real estate sales transactions with the former Company executives. The Company received full payment on the notes subsequent to June 30, 1999. In November 1998, the Company sold certain residential real estate holdings to a company director and stockholder in exchange for the return of 1,000,000 shares of FSW Common Stock and residential real estate to an entity in which a director held a controlling interest for $610,000. The Loss on Disposal of Discontinued Operations in fiscal 1998 reflects the Company's disposal of the remaining assets of Decocrete Worldwide, Inc., a former Company subsidiary that closed operations in 1997. Subsequent to June 30, 1999, the Company sold certain assets of discontinued operations with a net carrying value of approximately $1,100,000 for cash and contracted to sell the remaining real estate assets of discontinued operations to an entity in which a former chief executive officer and a former officer are investors. The Company has recognized the estimated net loss on these sales as of June 30, 1999. Following is a summary of the Net Assets of Discontinued Operations at June 30:
1999 1998 ------------ ------------ Real estate inventories $ 4,595,912 $ 33,052,580 Accounts and notes receivable -- 3,366,436 Investments in real estate equity securities 676,500 1,446,450 Notes payable (4,449,756) (21,848,933) Estimated expenses and other liabilities (700,000) (233,819) ------------ ------------ $ 122,656 $ 15,782,714 ============ ============
NOTE 5. PROPERTY AND EQUIPMENT At June 30, 1999 and 1998 property and equipment consists of the following:
1999 1998 ----------- --------- Land and land improvements $ 739,650 $ 151,960 Buildings and building improvements 7,761,347 249,361 Leasehold investments 4,995 -- Computer software 88,500 -- Furniture, fixtures and equipment 21,825 242,927 ----------- --------- 8,516,319 644,248 Accumulated depreciation (101,874) (234,583) ----------- --------- Total net $ 8,414,445 $ 409,665 =========== =========
21 22 In fiscal 1999, the Company sold its corporate headquarters land, building, property and equipment to an entity owned by a former chief executive officer in connection with the discontinuation of the residential real estate business and relocation of the Company's headquarters to Atlanta, Georgia. Also in fiscal 1999, the Company acquired two strip shopping center properties and a commercial property lease. See Note 2. Business Acquisitions. NOTE 6. INVESTMENTS IN EQUITY SECURITIES At June 30, 1998, the Company reported a $130,000 investment in a restaurant company in Florida. Due to significant operating losses of the restaurant, the Company wrote off its investment in fiscal 1999. An unrealized net holding loss of approximately $66,000 related to marketable securities was reported in the consolidated statement of operations for the year ended June 30, 1998. NOTE 7. NOTES PAYABLE The notes payable outstanding at June 30, 1998 have been reclassified on the Consolidated Balance sheet to Net Assets of Discontinued Operations. (See Note 4. Discontinued Operations). Notes payable as of June 30, 1999 consisted of mortgage notes payable to an insurance company with interest rates of 8%. Interest and principal on the mortgage notes are due monthly based on a 25 year amortization with the principal callable on or after October 1, 2000. The notes are collateralized by shopping center properties. The mortgage notes payable include an additional interest agreement which provide for an equal allocation between the Company and lender of cash flow and any excess value between the appraised value and mortgage note balances upon sale of the properties or maturity of the mortgage notes. In fiscal 1999 the Company recognized $334,226 of interest expense on the mortgage notes including $134,023 to reflect the lenders allocation of additional interest. At June 30, 1999 the accrued additional interest liability is $ 731,216. Maturities of the notes payable at June 30, 1999 are $118,821 in fiscal 2000 and $7,711,390 in fiscal 2001. Based on the relatively short maturities of fixed rate debt, and the market rates of interest such debt bears, management believes the aggregate carrying amount of its fixed rate debt approximates such debt's fair value. Interest rates on variable rate debt fluctuate with market conditions. NOTE 8. INCOME TAXES The Company has incurred significant net operating losses ("NOL's") from both its continuing and discontinued operations. Due to the substantial limitations placed on the utilization of such NOL's following a change in control and the uncertainties related to the Company's ability to generate taxable income from continuing operations, no related deferred tax benefit for future periods has been recorded at June 30, 1999. The Loss from Discontinued Operations in fiscal 1999 is net of an income tax credit of $1,237,495 related to the carryback of NOL's to offset prior years' tax liabilities. The deferred income tax liability at June 30, 1998 was due primarily to tax basis differences of residential real estate assets. In the fiscal 1999 the Loss from Discontinued Operations includes a deferred tax credit due to the sale of the assets related to the deferred liability at June 1998. The Company's 1996 and one of its subsidiary's 1994 and 1995 tax returns are currently under examination by the Internal Revenue Service, but no reports have yet been issued. 22 23 NOTE 9. COMMON STOCK AND PAID IN CAPITAL In fiscal 1999, the Company sold 9,600,000 shares of restricted Common Stock for $5,450,000 which represented the approximate market value of the Company's unrestricted Common Stock at the time the parties agreed to purchase the shares. The Company entered into Registration Rights Agreements with the parties in connection with the stock sales. During fiscal 1999 and 1998, the Company issued 2,853,778 and 43,195 shares, respectively, of Common stock for services rendered and recognized $1,487,582 and $32,000 of expense, respectively, in connection with these transactions. The Company issued 6,700,000 shares of Common stock in connection with the purchase of certain business in fiscal 1999. See Note 2. Business Acquisitions. At June 30, 1998 the Company reported treasury stock and a note receivable related to the sale of Common stock through third parties in fiscal 1997. The Company does not anticipate any additional payments on these obligations; and therefore, reclassified the amounts to paid in capital to reflect actual net proceeds from the sales of Common stock. NOTE 10. STOCK OPTIONS AND WARRANTS In fiscal 1999, FSW issued nonqualified stock options to purchase its Common stock to directors and officers. The following table summarizes the stock options outstanding at June 30, 1999:
Option Shares Price ------ ------ 2,000,000 $ .44 2,600,000 .42 50,000 .50 200,000 1.00 --------- 4,850,000 =========
No options were exercised in 1999. All of the options have a 10 year term and were fully vested at June 30, 1999, except for 200,000 options with an exercise price of $1.00 that vest over a two year period. Subsequent to June 30, 1999 FSW issued 4,600,000 additional stock options to directors and certain officers at an exercise price of $2.50 per share. Also, in September 1999, the Company proposes to issue, subject to Board approval, 75,000 stock options to certain officers and employees at an exercise price of $1.75 per share. Of the 9,525,000 options granted or proposed to date, 7,525,000 require shareholder or Board approval. In connection with its new private aviation services business FSW issued warrants to purchase its Common stock in exchange for consulting and legal services and for strategic vendor alliances provided by outside third parties. The following table summarizes the outstanding warrants at June 30, 1999 issued to outside third parties:
Exercise Shares Price ------ ------- 200,000 $ .42 200,000 .44 1,450,000 .50 400,000 .75 100,000 1.75 --------- 2,350,000 =========
23 24 Subsequent to June 30, 1999, FSW proposes to issue, subject to Board approval, additional warrants to purchase 2,785,000 shares of it's Common stock at an exercise price of $1.75 in exchange for consulting and legal services for its private aviation travel services business. All of the warrants issued to date by FSW are excisable, except for 50,000 warrants that vest over two years. The weighted average exercise prices for all options and warrants granted during fiscal 1999 and outstanding at the end of the year were $.45 and $.58, respectively. The weighted average exercise price and fair value per share of options granted during fiscal 1999 were $.44 and $.34, respectively, for options granted with exercise prices equal to the then market value of the stock and $.46 and 4.33, respectively, for options granted with exercise prices below the then market value of the stock. The weighted average exercise price and fair value per share of warrants granted during fiscal 1999 were $.63 and $.48, respectively, for warrants granted with exercise prices equal to the then market value of the stock and $.43 and $.32, respectively, for warrants granted with exercise prices below the then market value of the stock. The total compensation cost recognized during fiscal 1999 for these awards was $1,736,048. The Company accounts for options issued to employees under APB No. 25 and options and warrants issued to nonemployees under FASB No. 123. The following pro forma information is based on estimating the fair value of grants under the above plans based on the provisions of FASB No. 123. For the stock options issued to employees, the fair value of each option has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 5%, expected life for the options of 5 years, no expected dividend yield and expected volatility of 100%. For the options and warrants issued to nonemployees, the fair value of each award has been estimated using the same assumptions. Accordingly, the Company's pro forma net loss and net loss per share assuming compensation cost was determined under FASB No. 123 for all options and warrants would have been the following: Net loss before discontinued operations $ (5,907,424) Net loss from discontinued operations $(11,205,233) Net loss $(17,114,657) Net loss per share before discontinued operations $ (.28) Net loss per share from discontinued operations $ (.54) Net loss per share $ (.82)
NOTE 11. RELATED PARTY TRANSACTIONS See Note 2. Business Acquisitions and Note 4. Discontinued Operations regarding certain related party transactions. At June 30, 1999 Stonebridge has an account receivable of $438,982 from an entity which is owned by the Company Chairman and his children. The Company had a deferred compensation agreement with a former Chief Executive Officer. In fiscal 1998, the Chief Executive Officer ceased employment with the Company and entered into a termination agreement whereby his deferred compensation payable would be payable in full and certain other property transferred to him as payment for past services. As a result, the Company paid the remaining $387,000 due under the deferred compensation arrangement and transferred to him cash and additional property with a total book value of $183,055, which are classified as compensation expense. During fiscal 1998, the Company satisfied its note payable to a director in exchange for the transference of certain residential real estate holdings and notes receivable of $1,720,000. From time to time during his term as President, the Company made advances and repayments of loans to and from Mr. Conner which were repaid either through cash payments or increases in compensation expense. During fiscal 1998, the Company borrowed approximately $172,000 from Mr. Conner from funds acquired through the sale of his personal stock. As of June 30, 1998, the President owed $109,111 to the Company. All advances and loans have been repaid. In fiscal 1997, the Company acquired from a subsequent director all of the voting Common stock of three real estate development companies in exchange for stock. In 1998, the Company and the directors completed a reevaluation of the assets acquired and reduced the original purchase price. As a result, the purchaser returned to the Company 1,102,456 shares of FSW stock originally issued for the acquisition. The Company entered into certain transactions with a corporation of which an officer is the father of the Company's former President. During the year ended June 30, 1998, the Company had lot sales of $208,000 to such corporation. In addition the corporation owed the Company $636,395 under a note receivable created upon the sale of an entire subdivision. All sales to the corporation were made at prices equivalent to third party transactions. During 1999 the remaining balance of $619,395 on the note was written off. In connection with consulting services related to the Company's Internet-based private aviation travel service business provided by Mr. Bert Lance, the father of the Company's President and Chief Executive Officer, the Company in fiscal 1999 granted warrants to purchase 400,000 shares of its Common Stock to the Bert Lance Grantor Trust. Subsequent to June 30, 1999 the Company proposes to issue, subject to Board approval, an additional 600,000 warrants to the Bert Lance Grantor Trust. Of these warrants, 400,000 have an exercise price of $.50 per share and 600,000 a $1.75 per share price. NOTE 12. CONTINGENCIES Legal Proceedings During the normal course of business, the Company is subject to various lawsuits which may or may not have merit. Management intends to defend such suits vigorously and believes that they will not result in any material loss to the Company. 24 25 Operating Leases During fiscal 1999 the Company leased office space in Tallahassee, Florida and Atlanta, Georgia to conduct its business. The Tallahassee lease terminates on September 30, 1999 in connection with the discontinuation of the Company's residential real estate business. The future minimum payments under the non cancelable leases having an initial or remaining term of more than one year are $110,794, $111,690, and $52,214 for fiscal 2000, 2001, and 2002, respectively. NOTE 13. SUBSEQUENT EVENTS Subsequent to June 30, 1999 the Company sold or contracted to sell certain assets of discontinued operations. See Note 4. Discontinued Operations. In September 1999, the Company granted certain options and warrants to purchase shares of its Common Stock. See Note 10. Stock Options and Warrants. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Jones and Kolb replaced Coopers and Lybrand, L.L.P. ("Coopers") as the Company's independent auditors on September 5, 1997. Coopers served as independent auditors of the Company for the fiscal year ended June 30, 1996, but was replaced by the Board of Directors after Coopers and the Company could not resolve a dispute with respect to the fees to be paid to Coopers in connection with the audit of the Company for fiscal 1997. The Company's principal accountants' report on the financial statements for the year preceding the dismissal of Coopers did not contain an adverse opinion or disclaimer opinion, nor was it modified as to uncertainty, audit scope or accounting principles. The decision to change accountants was approved by the Company's Board of Directors. There were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure. The Company had no discussions with the new accountants as to specific accounting matters or type of opinion that might be rendered, other than those related to the normal engagement of certified accountants. PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS Set forth below are the names, ages (at September 27, 1999), positions and offices held and a brief description of the business experience during the past five years of each person nominated to serve as a director of the Company. WILLIAM B. ASTROP (age 69) has served as a director of the Company since February 5, 1999 when he was appointed by the Board to fill the vacancy created by the resignation of a director of the Company. Mr. Astrop was elected to the Board at the April 21, 1999 Shareholders Meeting. Mr. Astrop is a Chartered Financial Analyst and the founder and Chairman of Astrop Advisory Corporation, a money-management firm which he established in 1991. Mr. Astrop is a member of both the American Stock Exchange and the New York Stock Exchange and is a member of the Dean's Advisory Board of the Emory University Graduate Business School. JOEL A. GOLDBERG (age 26) has served as a director of the Company since February 10, 1999 when he was appointed by the Board to fill the vacancy created by the resignation of a director of the Company. Mr. Goldberg was elected to the Board at the April 21, 1999 Shareholders Meeting. From July, 1995, to September, 1997, Mr. Goldberg was a financial analyst with J.C. Bradford & Co. Mr. Goldberg currently serves as Director of Finance of Prison Realty Trust and is an associate with DC Investment Partners, LLC, positions he has held since September 1997. C. BEVERLY LANCE (age 38) has served as Chief Executive Officer, President and a director of the Company since February 10, 1999 when he was appointed to fill the vacancy created by the resignation of a director of the Company. Mr. Lance was elected to the Board at the April 21, 1999 Shareholders Meeting. From January 8, 1999 to February 10, 1999, Mr. Lance was President of the Company's Stratos Inns subsidiary which the Company acquired in connection with its acquisition of PDK Properties, Inc. in January, 1999. During the five years prior to joining the Company, Mr. Lance managed family investments and was a business consultant. 25 26 DR. JAMES A. VERBRUGGE (age 58) has served as a director of the Company since January 11, 1999 when he was appointed by the Board to fill the vacancy created by the resignation of a director of the Company. Mr. Verbrugge was elected to the Board at the April 21, 1999 Shareholders Meeting. Dr. Verbrugge is a Professor of Finance and Chairman, Department of Banking and Finance of the University of Georgia, where he has been employed since 1968. Dr. Verbrugge is also actively involved in executive education programs at the University of Georgia and teaches executive education programs at the University of Washington, University of Florida and University of Colorado. Dr. Verbrugge is a director of nFront, Inc. ARTHUR G. WEISS (age 60) has served as Chairman of the Board of the Company since January 21, 1999 and has served as a director since January 11, 1999 when he was appointed to fill the vacancy created by the resignation of a director of the Company. Mr. Weiss was elected to the Board at the April 21, 1999 Shareholders Meeting. From January 21, 1999 to February 10, 1999, Mr. Weiss also served as President and Chief Executive Officer of the Company. Prior to assuming his positions at the Company, Mr. Weiss was the President and a shareholder of West Side Investors, Inc., which was acquired by the Company in January, 1999. Mr. Weiss is a private real estate investor. From March, 1993 through April, 1994, Mr. Weiss served as Chairman of the board of directors of Medical Resources Companies of America. In addition, Mr. Weiss manages private real estate investments. WILLIAM L. WORTMAN (age 52) has served as Vice President and Chief Financial Officer of the Company since June 24, 1999. For the year prior to joining the Company, Mr. Wortman was a partner and general manager of a new car automobile dealership. From 1994 through 1998, Mr, Wortman was Vice President and Chief Financial Officer of A.F.A. Services Corporation, a marketing services company. There are no family relationships among any of the executive officers or directors of the Company. No arrangement or understanding exists between any executive officer or any other person pursuant to which any executive officer was selected as an executive officer of the Company. Executive officers of the Company are elected or appointed by the Board and hold office until their successors are elected or until their death, resignation or removal. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires the Company's directors, executive officers, and persons who own beneficially more than 10% of a registered class of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of such securities of the Company. Directors, executive officers and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and representations that no other reports were required, all Section 16(a) filing requirements applicable to its directors, executive officers and greater than 10% beneficial owners were complied with during the fiscal year ended June 30, 1999. 26 27 ITEM 10. EXECUTIVE AND DIRECTOR COMPENSATION EXECUTIVE COMPENSATION The following table sets forth for the fiscal years ended 1997, 1998 and 1999 the cash and non-cash compensation awarded or paid by the Company to all individuals serving as Chief Executive Officer of the Company at any time during fiscal year 1999 and all executive officers of the Company or any of its subsidiaries who received salary and bonuses in excess of $100,000 during fiscal year 1999 (collectively, the "Named Executives").
Long-Term Fiscal Compensation Other Annual Name and Principal Position Year Salary Bonus Stock Options Compensation - --------------------------- ------ ------ ----- ------------- ------------ Arthur G. Weiss (1) 1999 $90,000 -- 1,700,000 $ 9,600 C. Beverly Lance (2) 1999 $85,000 -- 1,700,000 $ 9,638 Mark A. Conner (3) 1999 $35,308 -- -- $ 52,148 1998 $61,200 -- -- $ 109,360 (4) 1997 $61,200 -- -- $ 168,125 (5)
(1) Mr. Weiss has been Chairman of the Company since January 21, 1999. Mr. Weiss's annual base salary is $180,000. (2) Mr. Lance has been President and Chief Executive Officer since February 10, 1999. Mr. Lance's annual base salary is $170,000. (3) Mr. Conner was President and Chairman of the Board from February 12, 1996 until January 21, 1999 and was Chief Executive Officer from March 9, 1998 until January 21, 1999. Mr. Conner resigned his positions with the Company on January 21, 1999. (4) Includes personal expenses paid by the Company on behalf of Mr. Conner. (5) Includes $75,990 in debt service payments made by and the Company on behalf of Mr. Conner and $92,135 in other personal expenses paid by the Company on behalf of Mr. Conner. Long-term Compensation - Stock Options Messrs. Weiss and Lance were issued stock options in 1999. On February 10, 1999 each received options to purchase 700,000 shares of Common stock at an exercise price of $.4375 per share. These options are excisable. In April 1999, the Company issued to each executive options to purchase 1,000,000 shares at an exercise price of $.4177 per share. These options vested immediately, but are subject to stockholder approval. In July 1999, each of Messrs. Weiss and Lance executive received options to purchase 1,700,000 shares of Common stock at an excise price of $2.50. These options vested immediately, but are subject to stockholder approval. The following table sets forth information regarding the grant of stock options to the Named Executives during the fiscal year ended June 30, 1999. OPTION GRANTS IN LAST FISCAL YEAR
NO. OF SECURITIES AVERAGE UNDERLYING OPTIONS % TOTAL OPTIONS GRANTED TO EXERCISE PRICE NAME GRANTED EMPLOYEES IN FISCAL YEAR PER SHARE EXPIRATION DATE ---- ------- ------------------------ --------- --------------- C. Beverly Lance 700,000 19.2% $ .4375 2/10/09 C. Beverly Lance 1,000,000 27.3% $ .4177 4/21/09 Arthur G. Weiss 700,000 19.2% $ .4375 2/10/09 Arthur G. Weiss 1,000,000 27.3% $ .4177 4/21/09
The following table sets forth information concerning the value of unexercised options held by the Named Executives as of June 30, 1999. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER PF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY SHARES ACQUIRED VALUE AT 6/30/99 OPTIONS AT 6/30/99 NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ---- --------------- ------------ ------------------------- -------------------------- C. Beverly Lance 0 0 700,000/1,000,000 $1,400,000/$2,019,800 Arthur G. Weiss 0 0 700,000/1,000,000 $1,400,000/$2,019,800
COMPENSATION OF DIRECTORS Directors of the Company who are not employees of the Company receive compensation of $1,000 per month plus $1,000 for each quarterly Board meeting. Directors are also entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in attending Board meetings. In fiscal 1999, the Company expensed $31,000 for Director Fees. In February 1999, the Company granted non-qualified stock options to purchase an aggregate of 600,000 shares of Common Stock at an exercise price of $0.4375 per share, which options are fully vested and exercisable, in connection with Mr. Astrop's, Mr. Goldberg's and Dr. Verbrugge's services as directors of the Company. Also in this connection, the Company, in April, 1999, issued options to purchase 600,000 shares of Common stock at an exercise price of $.4177 per share, which options are fully vested. These options were issued as follows: (i) options for 400,000 shares to Dr. Verbrugge, (ii) options for 400,000 shares to Four Corners Capital, LLC (in which Mr. Goldberg has a 25% interest) and (iii) options for 200,000 shares to each of Mr. Astrop's adult children. In July 1999, the Company granted options to purchase 1,200,000 shares of Common stock at an exercise price of $2.50 per share, which options are fully vested. The options were issued as follows: options for 400,000 shares to each Mr. Verbrugge and Mr. Astrop and options for 400,000 shares to Four Corners Capital, LLC. The stock options granted in April and July are subject to shareholder approval. 27 28 As discussed above, in February 1999, each of Messrs. Lance and Weiss were granted non-qualified stock options to purchase 700,000 shares of Common stock of which 200,000 were granted in connection with their services as directors of the Company and the remaining 500,000 were granted in connection with their services as officers of the Company. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of the Company's Common Stock as of September 28, 1999: (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each of the Company's directors; (iii) each of the Company's executive officers included in the Summary Compensation Table included elsewhere herein; and (iv) all of the Company's directors and executive officers as a group. Except as otherwise noted, the person or entity named has sole voting and investment power over the shares indicated.
Shares of Common Stock Beneficially Owned (1) --------------------------------------------- NAME NUMBER PERCENT - -------------------------- ------ ------- Godley Morris Group, LLC (2) 4,800,000 15.7% Wendell M. Starke Trust (3) 4,800,000 15.7 C. Beverly Lance (4) ++ + 4,300,000 13.8 Lance Children's Trust (5) 3,600,000 11.8 Caroline Weiss Kyriopoulos (6) 2,463,000 8.1 Arthur G. Weiss (7) + ++ 2,250,000 7.2 Mark A. Conner (8) 2,000,000 6.5 C. Frank Moore (9) 1,688,000 5.5 Dr. James A. Verbrugge (10)++ 200,000 * Joel A. Goldberg (11)++ - 0 - * William B. Astrop (12) ++ - 0 - * All Current Executive Officers and Directors as a Group (5 Persons)(13) 6,750,000 21.0%
- -------------------------------------- ++ Director of the Company + Executive Officer of the Company * Less than 1% (1) Information as to beneficial ownership of Common Stock has either been furnished to the Company by or on behalf of the indicated person or is taken from reports on file with the Securities and Exchange Commission. (2) Based upon its Schedule 13G/A filed on July 6, 1999, William C. Morris and Johnny C. Godley are the Managing Members of Godley Morris Group, LLC, which owns 4,800,000 shares and, in such capacity, share voting and investment power over the shares owned by Godley Morris Group, LLC. Godley Morris Group, LLC's address is 800 West Main Street, Lake City, South Carolina 29560. (3) Based upon its Schedule 13D/A filed on July 2, 1999, Wendell M. Starke is the trustee and of the Wendell M. Starke Trust which owns 4,800,000 shares. The Wendell M. Starke address is 2660 Peachtree Rd. NW, Atlanta, Georgia 30305. 28 29 (4) Represents the 3,600,000 shares owned by the Lance Children's Trust, a trust for the benefit of Mr. Lance's minor children, of which Mr. Lance is the sole trustee, plus 700,000 shares issuable upon the exercise of options that are exercisable on or within 60 days of September 28, 1999. Mr. Lance disclaims beneficial ownership of the shares beneficially owned by the Lance Children's Trust. Mr. Lance's minor children are also the beneficiaries of the Dogwood Trust established by their grandfather which has the right to acquire up to 1,000,000 shares from Mark A. Conner pursuant to an Option that expires September 30, 1999. Additionally Mr. Lance's children are beneficiaries to the HJR Trust which is a 50% partner in K & L Partnership ("K&L"), a Georgia general partnership, which owns 688,000 shares of Common Stock. See Footnote 9. Mr. Lance is not the trustee of the Dogwood Trust or the HJR Trust and disclaims any beneficial ownership of the shares beneficially owned by these trusts. Excludes 2,700,000 shares issuable upon exercise of options that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999. (5) Excludes 1,688,000 shares that may deemed to be owned by the Dogwood Trust and the HJR Trust (collectively, the "Trusts"). See Footnote 9. C. Frank Moore is the sole trustee of the Trusts. The minor children of C. Beverly Lance are the beneficiaries of the Trusts, but do not have the power to vote or dispose of the shares. Neither the Lance Children's Trust nor Mr. Lance, as its trustee, has the power to vote or dispose of any shares owned by the Trusts. As a result, both the Lance Children's Trust and Mr. Lance disclaim beneficial ownership of the shares owned by the Trusts. (6) Includes 1,000,000 shares which she has the right to acquire from Mark A. Conner pursuant to an option agreement that expires September 30, 1999 and 688,000 shares owned by K&L of which Ms. Kyriopoulos hold a 50% general partnership interest. Ms. Kyriopoulos disclaims beneficial ownership of the shares owned by Arthur G. Weiss and Charles G. Weiss. (7) Includes 700,000 shares issuable upon the exercise of options that are exercisable on or within 60 days of September 28, 1999. In addition to the shares beneficially owned by Mr. Weiss, (i) Caroline Weiss Kyriopoulos is the beneficial owner of 2,463,000 shares including 1,000,000 shares which she has the right to acquire from Mark A. Conner pursuant to an option agreement that expires September 30, 1999 and (ii) Charles G. Weiss is the beneficial owner of 775,000 shares. Caroline Weiss Kyriopolous and Charles G. Weiss are the adult children of Arthur G. Weiss and Arthur G. Weiss disclaims beneficial ownership of the shares owned by Caroline Weiss Kyriopolous and Charles G. Weiss. Excludes 2,700,000 shares issuable upon exercise of options that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999. (8) Based upon his Schedule 13D/A filed January 21, 1999 and information provided by him, Mr. Conner has beneficial ownership of 2,000,000 shares which are subject to Option Agreements granting the optionees the right to acquire the shares at a fixed price on or before September 30, 1999. Mr. Conner retains sole voting power over the optioned shares until such time as the options are exercised. (9) Based upon his Schedule 13G filed July 28, 1999, C. Frank Moore, as trustee of the Trusts may be deemed to be the owner of 1,688,000 shares that may be deemed to be owned by the Trusts. The Dogwood Trust may be deemed to be the beneficial owner of 1,000,000 shares of Common Stock presently owned by Mark A. Conner which the Dogwood Trust has the right to acquire pursuant to an Option Agreement which expires on September 30, 1999. The HJR Trust may be deemed to be the beneficial owner of 688,000 shares of common stock owned by K&L. The minor children of C. Beverly Lance are the beneficiaries of the Trusts but do not have the right to vote or dispose of the shares of Common Stock beneficially owned by the Trusts. C. Beverly Lance is the sole trustee of the Lance Children's Trust and neither the Trusts nor Mr. Moore have the power to vote or dispose of any shares owned by the Lance Children's Trust. As a result, both the Trusts and Mr. Moore disclaim beneficial ownership of the shares owned by the Lance Children's Trust. Mr. Moore disclaims beneficial ownership of the shares owned by the Trusts. The Trusts address is 366 Powder Springs St., Marietta, Georgia 30064. (10) Represents 200,000 shares issuable upon the exercise of options that are exercisable on or within 60 days of September 28, 1999. Excludes 600,000 shares issuable upon exercise of options that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999. (11) Mr. Goldberg has a 25% interest in Four Corners Capital, LLC, a limited liability company which is the beneficial owner of 200,000 shares issuable upon the exercise of options that are exercisable on or within 60 29 30 days of September 28, 1999. Except to the extent of his 25% interest in Four Corners Capital, LLC, Mr. Goldberg disclaims beneficial ownership of the shares owned by Four Corners Capital, LLC. Excludes 600,000 shares issuable upon exercise of options that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999. (12) Mr. Astrop's adult children are the beneficial owners of an aggregate of 200,000 shares issuable upon the exercise of options that are exercisable on or within 60 days of September 28, 1999. Mr. Astrop disclaims beneficial ownership of the shares owned by his adult children. Excludes 200,000 shares issuable to Mr. Astrop's adult children that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999 and 400,000 shares issuable to Mr. Astrop upon exercise of options that are subject to stockholder approval and are not exercisable on or within 60 days of September 28, 1999. (13) Includes 1,600,000 shares issuable upon the exercise of options that are exercisable on or within 60 days of September 28, 1999. Exclude 6,400,000 shares issuable upon exercise of options that are not exercisable on or within 60 days of September 28, 1999. See Item 10. Executive and Director Compensation. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1998, Mr. Preiss, the Company's former Chief Executive Officer, terminated his employment with the Company and entered into a termination agreement pursuant to which the Company paid the remaining $387,000 due under a deferred compensation arrangement and transferred to him cash and additional property with a total book value of $183,055. From time to time during his terms as President, the Company made advances and repayments of loans to and from Mr. Mark Conner which were repaid either through cash payments or increases in compensation expense. During the fiscal year ended June 30, 1998, the Company borrowed approximately $172,000 from Mr. Conner from funds acquired through his sale of Common Stock owned by him. All advances and loans have been repaid. In November 1998, the Company sold (i) approximately 100 acres to an entity in which Mr. Langdon Flowers, a former director, held a controlling interest for $610,000, which purchase price was the highest bona fide price offered for such property and (ii) sold approximately 230 acres in Albany, Georgia to Mr. Flowers and a Company stockholder in exchange for the return of 1,000,000 shares of Common Stock. In January 1999, the Company acquired one hundred percent (100%) of the issued and outstanding shares of West Side Investors, Inc., a Georgia corporation which owns P & W Stonebridge, LLC and P & W Headland, LLC, which own respectively, the Stonebridge Village Shopping Center located in Dekalb County, Georgia and the Headland-DeLowe Shopping Center located in Atlanta, Georgia. Arthur G. Weiss was the President of West Side Investors, Inc. and, together with his adult children, owned one hundred percent (100%) of the issued and outstanding Common stock of West Side Investors, Inc. (the "West Side Stock") prior to the transaction. The purchase price for the West Side Stock was the issuance of 3,100,000 shares of the Company's Common Stock as follows: Arthur G. Weiss, 1,550,000 shares; Charles G. Weiss, 775,000 shares and Caroline Weiss Kyriopolous, 775,000 shares. The two shopping centers have an appraised value of $9,130,000 and are subject to a $7,886,000 non-recourse participating mortgage entitling the lender to 50% of the profits realized from shopping centers. The consideration paid was determined as a result of arms-length negotiations prior to Mr. Weiss becoming a stockholder, director or officer of the Company. In connection with consulting services related to the Company's Internet-based private aviation travel service business provided by Mr. Bert Lance, the father of the Company's President and Chief Executive Officer, the Company in fiscal 1999 granted warrants to purchase 400,000 shares of its Common Stock to the Bert Lance Grantor Trust. Subsequent to June 30, 1999 the Company proposes to issue, subject to Board approval, an additional 600,000 warrants to the Bert Lance Grantor Trust. Of theses warrants, 400,000 have an exercise price of $ .50 per share and 600,000 a $1.75 per share price. In January 1999, the Company acquired one hundred percent (100%) of the total issued and outstanding Common stock of PDK Properties, Inc., a Georgia corporation, (the "PDK Stock") which owns one hundred percent (100%) of Stratos Inns, LLC, a Georgia limited liability company, located in Atlanta, Georgia. The purchase price for the PDK 30 31 Stock was the issuance of 3,600,000 shares of the Company's Common Stock to the Lance Children's Trust, of which Mr. Lance is trustee. The consideration paid was determined as a result of arms-length negotiations prior to Mr. Lance becoming a stockholder, officer or director of the Company. In January 1999, the Company closed the sale of its wholly-owned subsidiary, Henry Holdings, Inc., a Florida corporation (the "Subsidiary") to Mr. Conner, in exchange for 5,000,000 shares of Common Stock that were held by Mr. Conner. Under the terms of the acquisition agreement, Mr. Conner was to received cash or cash and property with an agreed upon value of not greater than $2,000,000. At the time of the sale, the Subsidiary held $700,000 in cash, certain real estate holdings, and mortgage indebtedness. On January 28, 1999, the Subsidiary sold its real estate holdings realizing net proceeds of $1,228,292. The Real Estate Holdings had a book value of $6,396,416 as of December 31, 1998 and were sold at a contract price of $5,112,902. As a result, the amount paid for the 5,000,000 shares of Common Stock was $1,928,292. At June 30 1999, Stonebridge has an account receivable of $438,982 due from an entity which is owned by the Company's Chairman and his adult children. On or about January 29, 1999, the Wendell M. Starke Trust (the "Starke Trust") purchased 2,500,000 shares of restricted Common Stock for $1,000,000 and on June 29, 1999 another 2,300,000 shares for $1,725,000. In connection with the sale of the shares, the Company entered into a Registration Rights Agreement with the trust. On or about March 18, 1999, the Godley Morris Group, LLC (the "GMG") purchased 2,500,000 shares of restricted Common Stock for $1,000,000 and on June 29, 1999 another 2,300,000 shares for $1,725,000. In connection with the sale of the shares, the Company entered into a Registration Rights Agreement with the GMG. On June 29, 1999, the Company sold a total of 4,600,000 shares of Common Stock which the Company held as treasury shares for $3,450,000 in cash. Of these shares, 2,300,000 were sold to the Starke Trust and 2,300,000 were sold to the GMG. The shares have the same registration rights as the shares sold the Starke Trust and the GMG on January 29, 1999 and March 18, 1999 respectively. PART IV ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit Number Exhibit Description - ------ ------------------- 2.1 Agreement and Plan of Reorganization dated as of December 28, 1998 among the Company, Arthur Weiss and Kay Weiss and West Side Investors, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed January 19, 1999) 2.2 Agreement and Plan of Reorganization by and among the Company, the Lance Children's Trust and PDK Properties, Inc. (incorporated herein by reference to the Company's Current Report on Form 8-K filed January 25, 1999) 3.1 Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3(i) to the Company's Quarterly Report on Form 10QSB for the period ended December 31, 1998) 3.2 Certificate of Ownership and Merger merging PT Merger Corp. into Proactive Technologies, Inc. amending the Restated Certificate of Incorporation to change Registrant's name to flightserv.com
31 32 3.3 Bylaws of the Company (as amended and restated) (incorporated herein by reference to Exhibit 3(ii) to the Company's Quarterly Report on Form 10QSB for the period ended December 31, 1998) 4.1 Registration Rights Agreement between the Company and the Wendell M. Starke Trust (incorporated by reference to Exhibit 99 to the Schedule 13D filed by the Wendell M. Starke Trust on January 29, 1999) 4.2 Registration Rights Agreement between the Company and the Godley-Morris Group, LLC (incorporated by reference to Exhibit 4.1 hereof the terms of which are substantially similar). 10.1 Stock Exchange Agreement between the Company and Mark A. Conner dated January, 1999 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed February 5, 1999). 10.2 Stock Purchase Agreement dated June, 1999 between the Company, Inland Communities, Inc. and Regional Developers of Albany, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 15, 1999). 10.3 Stock Purchase Agreement dated June, 1999 between the Company, Inland Communities, Inc. and Barrier Dunes Development Corporation (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed July 15, 1999). 10.4 Deposit Receipt and Contract for Sale and Purchase dated June, 1999 between Regional Developers, Inc. and Inland Communities, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed July 15, 1999). 10.5 Master Executive Protection Agreement between the Company and Vance Protection, Inc. dated June 23, 1999. 10.6 Preferred Hospitality Partners agreement between the Company and The Ritz-Carlton Hotel Company, LLC dated September, 1999 10.7 Form of Officer/Director Non-Qualified Option Agreement dated February 10, 1999 10.8 Form of Officer/Director Non-Qualified Option Agreement dated April 16, 1999 10.9 Form of Officer/Director Non-Qualified Option Agreement dated July 2, 1999 10.10 Schedule of Option Agreements 21.1 Subsidiaries of the Company 27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K and 8-K/A The Company filed the following reports on Form 8-K or 8-K/A with the Securities and Exchange Commission during the quarter ended June 30, 1999: (ii) The Company's Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 14, 1999 amending the report of the acquisition of PDK Properties, Inc. (ii) The Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 1999 reporting the disposition of certain residential real estate assets of the Company on June 30, 1999. 32 33 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. flightserv.com Date: September 28, 1999 By: /s/ Arthur G. Weiss Arthur G. Weiss Chairman of the Board In accordance with the requirements of the Exchange Act, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: September 28, 1999 By: /s/ Arthur G. Weiss Arthur G. Weiss Chairman of the Board (principal executive officer) Date: September 28, 1999 By: /s/ C. Beverly Lance C. Beverly Lance Director/President/CEO Date: September 28, 1999 By: /s/ William L. Wortman William L. Wortman Vice President and Chief Financial Officer (principal financial and accounting officer) Date: September 28, 1999 By: /s/ Dr. James A. Verbrugge Dr. James A. Verbrugge Director Date: September 28, 1999 By: /s/ Joel A. Goldberg Joel A. Goldberg Director Date: September 28, 1999 By: /s/ William B. Astop William B. Astop Director 33 EX-3.2 2 CERTIFICATE OF OWNERSHIP AND MERGER 1 EXHIBIT 3.2 CERTIFICATE OF OWNERSHIP AND MERGER MERGING PTE MERGER CORP. INTO PROACTIVE TECHNOLOGIES, INC. (Pursuant to Section 253 of the General Corporation Law of Delaware) Proactive Technologies, Inc., a corporation organized and existing under the laws of Delaware (the "Corporation"), does hereby certify: FIRST: That the Corporation owns all of the outstanding shares of each class of stock of PTE Merger Corp., a Delaware corporation incorporated on the 14th day of June, 1999, pursuant to the Delaware General Corporation Law. SECOND: That the Corporation, by the following resolutions of its Board of Directors, duly adopted at a meeting held on the 8th day of June, 1999, determined to merge into itself said PTE Merger Corp., on the conditions set forth in such resolutions: RESOLVED, that the Corporation merge into itself PTE Merger Corp. and assume all of its obligations. RESOLVED, that said merger shall become effective upon the filing of a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware together with the Affidavit of Assets attached as Annex A. RESOLVED, that upon effectiveness of said merger, the name of the Corporation shall be changed to flightserv.com and the First Article of the Certificate of Incorporation of the Corporation, as heretofore amended, shall be amended to read as follows: "I. The name of the corporation is flightserv.com." RESOLVED, that except for the foregoing amendment to the First Article, the Certificate of Incorporation, as previously amended, shall remain unchanged by the merger and in full force and effect until further amended in accordance with the Delaware General Corporation Law. RESOLVED, that the proper officers of the Corporation be, and they hereby are, directed to make and execute a Certificate of Ownership and Merger setting forth a copy of the resolutions to so merge PTE Merger Corp. and to assume its obligations, and to so change the name of the Corporation, and the date of adoption thereof, and to cause the same to be filed with the Secretary of State of the State of Delaware and to do all acts and things whatsoever, whether within or without the State of Delaware, which may be necessary or proper to effect said merger and change of name. THIRD: That the name of the Corporation is changed to flightserv.com in accordance with the Affidavit of Assets attached hereto as Annex A. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized officer, this 14th day of June, 1999. PROACTIVE TECHNOLOGIES, INC. By: ----------------------------------- C. Beverly Lance, President EX-10.5 3 MASTER EXECUTIVE PROTECTION AGREEMENT 1 EXHIBIT 10.5 MASTER EXECUTIVE PROTECTION AGREEMENT THIS AGREEMENT is made as of June 23, 1999, among PROACTIVE TECHNOLOGIES, INC., a Delaware corporation ("PTE") and VANCE EXECUTIVE PROTECTION, INC. and its affiliate ASSET PROTECTION, INC., each Delaware corporations (collectively "Vance"). WHEREAS, PTE proposes to engage in the business of distributing through its exclusive internet web site flightserv.com(SM) (the "Web Site"), a comprehensive package of services to passengers, pilots and other participants in the private aviation services marketplace and desires, subject to the terms and conditions hereof, to include the services of Vance in its offerings; WHEREAS, Vance is in the business of providing, among other services, personal protection services and asset protection services (such protection services as provided to pilots, passengers and other participants in the private aviation services marketplace are hereinafter referred to as the "Services") and desires for PTE, subject to the terms and conditions set forth herein to include the Services in the services obtainable through the Web Site; NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, do hereby agree as follows: 1. Inclusion on Web Site; Exclusivity. VANCE HEREBY AUTHORIZES PTE, AND PTE HEREBY AGREES, TO INCLUDE THE SERVICES IN THE PACKAGE OF SERVICES OFFERED AND OBTAINABLE THROUGH THE WEB SITE. PTE AGREES FOR THE TERM HEREOF THAT VANCE SHALL BE THE EXCLUSIVE PROVIDER OF THE SERVICES TO THE PRIVATE AVIATION SERVICES MARKETPLACE REPRESENTED ON, OR OTHERWISE INCLUDED IN THE SERVICES OBTAINABLE THROUGH, THE WEB SITE. VANCE AGREES THAT PTE SHALL BE, FOR THE TERM HEREOF, THE EXCLUSIVE INTERNET DISTRIBUTOR OF THE SERVICES PROVIDED BY VANCE. 2. Development. THE WEB SITE DEVELOPMENT TO INCLUDE THE SERVICES SHALL BE THE RESPONSIBILITY OF PTE AND SHALL BE AT ITS SOLE COST AND EXPENSE. VANCE, AT ITS COST AND EXPENSE SHALL COOPERATE WITH PTE IN THE DEVELOPMENT THROUGH ACCESS TO INFORMATION AND REPRESENTATIVES OF VANCE NECESSARY OR USEFUL TO PTE IN THE DEVELOPMENT PROCESS. VANCE SHALL ADVISE PTE OF THE TYPE OF INFORMATION CONCERNING THE CUSTOMER THAT VANCE WOULD LIKE FOR PTE TO GATHER THROUGH THE WEB SITE THAT WILL ASSIST VANCE IN PROVIDING THE SERVICES IN A SATISFACTORY AND LAWFUL MANNER. 1 2 3. CUSTOMERS; PROVISION OF SERVICES. PTE shall include contractual commitments for the Services on the part of the customer within the master contract that PTE employs with its customers (the "Customer Contract"). The Customer Contract shall contain provisions relating to the Services satisfactory to Vance, whose approval shall not be unreasonably withheld, and Vance agrees to be bound by the terms of the Customer Contract as approved by Vance. The provisions of the Customer Contract shall include exculpation and limitation of liability for the benefit of Vance and PTE and provisions pursuant to which customers will agree to refrain soliciting Vance employees for employment. Vance agrees to provide the Services to each customer accepted through the Web Site in accordance with procedures mutually agreed upon from time to time. Vance shall have the right to accept or reject any customer in its discretion. The initially agreed upon procedures shall be mutually agreed upon at the conclusion of the Web Site development. From time to time the parties may amend by mutual agreement such procedures. 4. COLLECTION AND BILLING. PTE shall be responsible for billing and collection of (i) fees for the Services and (ii) amounts for reimbursement of the reasonable expenses incurred in connection with the rendition of the Services. Attached as Exhibit A is a schedule of fees to be paid Vance for the Services and fees to be collected by PTE. This fee schedule shall govern until and unless the parties subsequently agree otherwise; provided, however, that Vance shall have the right to reasonably adjust its rates on an annual basis. PTE is authorized to charge the customers of the Services the amount set forth on the schedule of fees and to retain the difference between the amounts charged and the amounts due Vance. Once a month, Vance shall bill PTE for the fees and expenses for the Services incurred for the previous month identifying specifically the charges by customer and service. PTE shall pay the amounts so billed by Vance within ten days of receipt by PTE of good funds from the customer. It is anticipated that most Services shall be paid by charge or credit card. The parties agree to bear all credit risks, including the risk of charge backs, in proportion to their respective interest in the payments. 5. COMPLIANCE WITH LAW. Vance represents that it is and will be fully licensed to provide the Services in all applicable jurisdictions contracted through the Web Site; provided, however, that the Services offered in any jurisdiction may vary based on the applicable laws or regulations of such jurisdiction and Vance may not provide services in some jurisdictions. Vance will not engage in any illegal activity nor assist any customer in any illegal activity. Vance is authorized and expected to discontinue all Services to any customer engaged in an illegal activity known to Vance. 6. INDEMNIFICATION; LIMITATION OF LIABILITY. (a) The parties acknowledge that the purpose of Vance's personal protection services is to reduce the risk of personal injury to the protectee designated by the customer (the "Protectee"). Neither Vance nor any of its owners, directors, officers, employees, independent contractors or subcontractors shall be deemed to have insured or guaranteed the personal safety of the Protectee. Vance neither warrants nor represents that the protective services to be provided will, in fact, successfully protect the Protectee, from personal injury. Vance shall not 2 3 be liable for any failure to perform under this Agreement or the Customer Contract caused by any event or occurrence outside of its control, including, without limitation, state action, orders or actions of law enforcement authorities. (b) Vance shall indemnify, defend and hold PTE harmless against any and all claims, liabilities, obligations, penalties, demands, causes of action, suits, losses, damages, costs and expenses (hereinafter called "Customer Claims") which they may suffer, incur, be responsible for or pay out as a result of any bodily injuries (including death) to any person (other than other providers of services through the Web Site), to the extent directly attributable to the negligence or willful misconduct of Vance or its employees; provided that with respect to any Customer Claim by, from or through a customer of PTE, the customer, in its engagement with PTE, has agreed to the standard limitation of liability language approved by Vance as set forth in the Customer Contract. (c) VANCE HEREBY INDEMNIFIES AND AGREES TO HOLD PTE HARMLESS FROM ANY AND ALL LOSSES, COSTS, EXPENSES, DAMAGES (INCLUDING COMPENSATORY, CONSEQUENTIAL, EXEMPLARY AND PUNITIVE DAMAGES) PENALTIES, FINES, CHARGES, DEMANDS, LIABILITIES AND OBLIGATIONS OF ANY KIND (INCLUDING INTEREST, PENALTIES AND REASONABLE ATTORNEYS' FEES AND CONSULTANTS' FEES, EXPENSES AND DISBURSEMENTS) INCURRED OR SUFFERED BY PTE TO THE EXTENT DIRECTLY ATTRIBUTABLE TO A FAILURE OF VANCE TO COMPLY WITH ANY OF ITS OBLIGATIONS HEREUNDER, OR UNDER ANY APPLICABLE LAW OR REGULATION OR OTHERWISE ARISING OUT OF THE NEGLIGENT PROVISION, OR FAILURE TO PROVIDE, THE SERVICES (OTHER THAN A CLAIM BY OTHER PROVIDERS OF SERVICES THROUGH THE WEB SITE AND OTHER THAN CUSTOMER CLAIMS WHICH SHALL BE SUBJECT TO THE INDEMNIFICATION PROVISIONS OF SUBSECTION (B) HEREOF). IF A CLAIM BY A THIRD PARTY IS MADE AGAINST PTE, PTE SHALL PROMPTLY GIVE NOTICE THEREOF TO VANCE WHICH SHALL HAVE THE RIGHT TO ASSUME THE DEFENSE OF SUCH CLAIM. NO FAILURE TO GIVE OR PROMPTLY GIVE NOTICE OF A CLAIM SHALL EXCUSE VANCE FROM ITS INDEMNIFICATION OBLIGATIONS HEREUNDER EXCEPT TO THE EXTENT THAT VANCE IS PREJUDICED THEREBY. (d) With respect to any Customer Claim asserted against Vance arising from or related to this Agreement, or for any act or omission on the part of Vance or its personnel, Vance's liability shall be limited to the proceeds or insurance obtained by Vance, with respect to the incidents or occurrences involved therein. Further, neither Vance nor PTE shall be liable to the other for any indirect, incidental, special or consequential damages arising from or related to this Agreement, any act or omission in connection with the providing of Services hereunder or any act or omission of their personnel. Vance shall not be liable to PTE for any claim against PTE by any other provider of Services through the Web Site. (e) PTE hereby indemnifies and agrees to hold Vance harmless from any and all losses, costs, expenses, damages (including compensatory, consequential, exemplary and punitive damages) penalties, fines, charges, demands, liabilities and obligations of any kind (including interest, penalties and reasonable attorneys' fees and consultants' fees, expenses and disbursements incurred or suffered by Vance as a result of a breach of any of its obligations under this Agreement by PTE (other than claims by Vance against other providers of services through the web site). If a claim by a third party is made against Vance, Vance shall promptly give notice thereof to PTE which shall have the right to assume the defense of such claim. No failure to give or promptly give notice of a claim shall excuse PTE from its indemnification obligations hereunder except to the extent that PTE is prejudiced thereby. 3 4 7. INSURANCE. Vance shall furnish at its expense, and keep in full force and effect through the term of this Agreement, the following insurance coverages which shall be underwritten by carriers reasonably acceptable to PTE: (a) Worker's Compensation Insurance. As required by the laws and regulations applicable to and covering employees of Vance engaged in the performance of the work under the Agreement. (b) Employer's Liability Insurance. Protecting Vance against common law liability, in the absence of statutory liability, for employee bodily injury with a limit of not less than $1,000,000. (c) Commercial General Liability Insurance. With combined single limits of liability of not less than $15,000,000 bodily injury and property damage for each occurrence and aggregate. Such insurance shall include provisions or an endorsement to the general liability policy naming PTE as an additional insured with respect to the negligent acts, errors or omissions of Vance employees in the performance of the Services provided under this Agreement. 8. CONFIDENTIALITY. Vance and PTE acknowledge that in the performance of their respective duties hereunder, each will come into possession confidential information and trade secrets of the other, and each agree that they and their respective officers, directors, employees and agents shall not disclose and shall keep confidential any and all such confidential information and trade secrets of the other except information that entered the public domain otherwise then through a breach of this Section 8, unless Vance or PTE, respectively came into rightful possession of such information from an unrelated third party or unless Vance or PTE, as the case may be, independently developed such information. 9. NON-SOLICITATION. PTE and Vance, each agrees on its own behalf and on behalf of each of its officers, directors, employees and agents that it will not, without the express prior written consent of the other, either during the term of this Agreement or for a period of twenty-four (24) months after the termination hereof, hire, employ or otherwise engage the services of any officer, director, employee or agent of the other. Each party hereto recognizes that the employment relations protected by this Section 9 are unique, no adequate remedy at law exists for a violation of this Section 9 and the other party's right to specific performance is essential to protect such other party's business interests. 10. ARBITRATION; VENUE. ANY DISPUTE, CONTROVERSY, CLAIM OR DEMAND BETWEEN THE PARTIES HERETO RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE SETTLED BY BINDING ARBITRATION CONDUCTED AT A LOCATION AGREED TO BY THE PARTIES (PROVIDED THAT IF THE PARTIES DO NOT AGREE TO A LOCATION, THE LOCATION SHALL BE DETERMINED BY THE PRESIDENT OF THE AMERICAN ARBITRATION ASSOCIATION (OR HIS DESIGNEE) AFTER TAKING INTO ACCOUNT THE CONVENIENCE OF THE PARTIES), IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION. IN THE EVENT OF ANY SUCH DISPUTE, CONTROVERSY, CLAIM OR DEMAND EITHER PARTY MAY COMMENCE THE ARBITRATION PROCESS BY GIVING WRITTEN NOTICE TO THE OTHER PARTY SETTING FOR THE NAME OF AN ARBITRATOR. THE PARTY RECEIVING ANY SUCH NOTICE SHALL HAVE THIRTY (30) DAYS FROM RECEIPT THEREOF TO NAME AN ADDITIONAL ARBITRATOR WRITTEN NOTICE GIVEN TO THE OTHER PARTY HERETO. THE TWO ARBITRATORS SHALL THEN MEET AS PROMPTLY AS PRACTICAL AND NAME A THIRD ARBITRATOR. IF THE TWO ARBITRATORS CANNOT AGREE WITHIN THIRTY (30) DAYS ON THE THIRD ARBITRATION, THE THIRD ARBITRATOR SHALL BE NAMED BY THE PRESIDENT OF THE AMERICAN ARBITRATION ASSOCIATION. 4 5 11. NOTICES. ANY NOTICE REQUIRED OR PERMITTED UNDER THIS AGREEMENT SHALL BE GIVEN IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN UPON PERSONAL DELIVERY, UPON DELIVERY BY REPUTABLE OVERNIGHT COURIER OR THREE BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, POSTAGE PRE-PAID, BY REGISTERED OR CERTIFIED MAIL, ADDRESSED (i) if to Proactive Technologies, Inc. to Suite 530, 3343 Peachtree Road, N.E., Atlanta, GA 30326, Facsimile 404-240-4101, Telephone 404-240-4060, Attention: C. Beverly Lance, Chief Executive Officer; With a copy to: Edward J. Hardin ROGERS & HARDIN 2700 International Tower 229 Peachtree Street, NE Atlanta, GA 30303 Facsimile 404-525-2224 TELEPHONE 404-522-4700 (ii) if to Vance to 10467 White Granite Drive, Oakton, VA 22124-2700, Facsimile 703-359-8456, TELEPHONE 703-385-6754 Attention: David P. Johnson, President 12. TERM. This Agreement shall extend for an initial term of two (2) years and shall continue from year to year thereafter until sixty (60) days after either party gives written notice of the termination of the agreement to the other party. 13. MISCELLANEOUS. (a) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall together constitute one and the same instrument. (b) Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any party hereto without the express written consent of the other party. Neither a merger, sale of stock or other business combination of PTE shall be considered an assignment hereof. 5 6 14. THIRD PARTY BENEFICIARIES. This Agreement has been entered into for the sole benefit of the parties who are signatories hereto. It is not intended to benefit, or create any rights whatsoever in favor of, any persons other than PTE or Vance. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their respective duly authorized officers as of the date first above written. VANCE EXECUTIVE PROTECTION, INC. ------------------------------------------------------- By: Andrew G. Podolax, Director of Operations ASSET PROTECTION TEAM, INC ------------------------------------------------------- By: Gary O. Sheppard, Vice-President PROACTIVE TECHNOLOGIES, INC. ------------------------------------------------------- By C. Beverly Lance, its Chief Executive Officer 6 EX-10.6 4 PREFERRED HOSPITALITY PARTNERS AGREEMENT 1 EXHIBIT 10.6 PREFERRED HOSPITALITY PARTNER AGREEMENT This PREFERRED HOSPITALITY PARTNER AGREEMENT (this "Agreement") is made this ___ day of September, 1999, by and between flightserv.com(TM), a Delaware corporation ("flightserv.com(TM)") and The Ritz-Carlton Hotel Company, L.L.C., a Delaware limited liability company ("Ritz-Carlton"). WHEREAS, flightserv.com(TM), through its exclusive Internet web site (the "Web Site") proposes to provide to the private aviation marketplace facilities for the reservation and purchase of various services incident to private aircraft travel including, without limitation, aircraft charter, ground transportation, personal and aircraft security services, hotel space, food service and other hospitality services; WHEREAS, Ritz-Carlton is in the business of operating premier luxury hotels (guest room accommodations only as provided by Ritz-Carlton are hereinafter referred to as the "Services") and, subject to the terms and conditions set forth herein, desires for flightserv.com(TM) to advertise and promote the Services provided by Ritz-Carlton through the Web Site; WHEREAS, flightserv.com(TM), subject to the terms and conditions hereof, desires to include the Services of Ritz-Carlton, on the Web Site: 1 2 NOW, THEREFORE, in consideration of the premises set forth above and the mutual promises set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: 1. RECITALS. The Recitals set forth above are an integral part of this Agreement and are incorporated into and made a part of this Agreement. 2. INCLUSION ON WEB SITE; CONTINUED USE OF SERVICES; FLIGHTSERV. COM(TM) EXCLUSIVity. Ritz-Carlton hereby authorizes flightserv.com(TM), and flightserv.com(TM) hereby agrees, during the term of this Agreement, to identify and include a description of the Services it provides, the price and the other terms and conditions related thereto (the "Information") on the Web Site. If any person (the "Customer") utilizes the Services of Ritz-Carlton pursuant to reservations made through the Web Site, flightserv.com(TM) shall be entitled to the flightserv.com(TM) Fee as set forth in, and pursuant to, Section 9 below. For those Services performed by Ritz-Carlton, for such Customer subsequent to the expiration or termination of this Agreement but which were reserved through the Web Site, flightserv.com(TM) shall also be entitled to, and Ritz-Carlton shall pay the flightserv.com(TM) Fee to flightserv.com(TM). Ritz-Carlton and flightserv.com(TM) agree that, during the term of this Agreement, flightserv.com(TM) shall be a non-exclusive but preferred internet distribution facility of the Services to Customers in the private aviation marketplace provided by Ritz-Carlton but nothing in this Agreement, except as specifically set forth herein, shall be deemed to be a prohibition against flightserv.com(TM) advertising and promoting the Services of any other provider of hospitality services on the Web Site. Nothing in this Agreement shall prevent Ritz-Carlton from operating its own web site or permitting it services to be distributed through other web sites. 3. CUSTOMIZATION AND MAINTENANCE OF WEB SITE; DESCRIPTION OF SERVICES; COMPILATION OF CUSTOMER INFORMATION. flightserv.com(TM) shall be responsible, at its sole cost and expense, for the customization and maintenance of the Web Site. Ritz-Carlton, at its sole cost and expense, shall provide flightserv.com(TM) with access to Ritz-Carlton information, including the Information, as well as access to the appropriate representatives of Ritz-Carlton that flightserv.com(TM) reasonably deems to be necessary and/or useful in connection with the operation of the Web Site. flightserv.com(TM), may modify the description of Ritz-Carlton's Services on the Web Site, 2 3 provided that flightserv.com(TM) obtain the prior written approval of Ritz-Carlton. Provided that the Information as set forth on the Web Site is substantially similar to the Information provided by Ritz-Carlton to flightserv.com(TM), Ritz-Carlton, and not flightserv.com(TM), shall be responsible for the accuracy thereof including with respect to any claim, cause of action or damages between Ritz-Carlton, flightserv.com(TM), the Customer and/or any third party. Ritz-Carlton promptly shall advise flightserv.com(TM) of the type of reasonable information it would like flightserv.com(TM) to obtain about the Customer's profile and flightserv.com(TM) shall use reasonable efforts to collect through the Web Site, but will not guarantee either the collection of such information or the accuracy of the information collected. 4. CITY AND AIRPORT LISTINGS OF SERVICES; PRIORITY. The Web Site shall permit a Customer using the Web Site to ascertain the availability of, and terms and conditions related to, the Services for specific locations or cities (the "Locations") as provided by those entities who have entered into arrangements satisfactory to flightserv.com(TM) for using the Web Site, including Ritz-Carlton. Notwithstanding the preceding sentence, in the event that a Customer using the Web Site inquires about information for hospitality services in any Location in which Ritz-Carlton has one or more facilities, then, prior to providing information about other hospitality services, the Web Site shall include Ritz-Carlton's Information in a priority listing. If a Customer wishes to view other options for any reason, then the Web Site will allow the Customer to further search the Web Site for the Information of other entities who have entered into appropriate contracts or similar arrangements with flightserv.com(TM) without priority commitments. Ritz-Carlton shall treat any Customer seeking reservations through the Web Site as a "Last Room Account" with access to all facilities of Ritz-Carlton equal in access and priority as the most favored customers of Ritz-Carlton. 5. PRICING; RESERVATION OF SERVICES. The Web Site shall set forth pricing information for the Services offered to Customers by Ritz-Carlton and other entities. The actual charges to be paid by the Customer for the Services provided by Ritz-Carlton to the Customer (the "Charges"), shall be established when a Customer properly makes a reservation for the Services provided by Ritz-Carlton. Any Customer accessing the Web Site who desires to use Ritz-Carlton's Services shall be instructed by the Web Site how to make a reservation for Ritz-Carlton's Services through the Internet. A reservation shall be made by a Customer in the following manner: (i) the Customer shall advise flightserv.com(TM), through the Web Site, that the Customer desires to reserve hospitality facilities and the Web Site will cite a pricing structure. If the reservation selected is for Services offered by Ritz-Carlton, flightserv.com(TM) shall promptly forward this request to Ritz-Carlton; (ii) thereafter Ritz-Carlton shall provide flightserv.com(TM) with either an acceptance of the reservation with a firm Charge quote and 3 4 confirmation number or, if the requested Services are not available to any Customer, with alternative Services or a declination of the reservation. In either case, flightserv.com(TM) shall promptly provide the response to the Customer. Ritz-Carlton shall provide confirmation to flightserv.com(TM) for all reservations for Services made by the Customer, and the Charges therefore, as promptly as possible after receipt of the reservation request from flightserv.com, and (iii) upon receipt of the Charge quote, the Customer shall confirm his/her reservation to flightserv.com(TM). which shall promptly confirm to Ritz-Carlton. In order to make a reservation for the Services of Ritz-Carlton, the Customer shall be obligated to provide flightserv.com(TM) with an acceptable credit card or other payment facility to pay for the Services provided by Ritz-Carlton in according to Ritz-Carlton's customary payment policies. At the time flightserv.com(TM)confirms the reservation to Ritz-Carlton as described in clause (iii) above, flightserv.com(TM)shall confirm to the Customer its reservation of the Services to be provided by Ritz-Carlton and the terms and conditions related thereto and, at such time, flightserv.com(TM)shall provide the Customer with a confirmation number and, if the Customer seeks services for banquet, meeting facilities or other services requiring special arrangement, with the name of a person and a telephone number at Ritz-Carlton for such arrangements. The confirmation of the Services and the terms and conditions related thereto by Ritz-Carlton shall be binding on Ritz-Carlton and the Customer. Ritz-Carlton covenants that it will not confirm a reservation unless it has availability for that Service in accordance with its terms. Ritz-Carlton further covenants that it will provide the confirmed and reserved Services upon the agreed upon terms and conditions to the Customer. 6. CUSTOMER CONTRACT. The Web Site shall contain the Customer contracts which shall by conspicuous language advise all Customers that, upon their confirmation and reservation of the Services to be provided by Ritz-Carlton and the Charges to be paid by the Customer, the Customer shall be bound to flightserv.com(TM) and Ritz-Carlton by the terms and conditions related thereto (the "Customer Contract"). All Customers shall be advised that, upon their breach of the Customer Contract, they shall be liable and responsible for payment in accordance with Ritz-Carlton's customary payment terms and any other damages Ritz-Carlton may suffer. The Customer Contract shall include standard exculpation and limitation of liability provisions for the benefit of flightserv.com(TM). Ritz-Carlton and Customers shall each be bound by the provisions of the Customer Contract to the extent that they relate to the Services. 7. RITZ-CARLTON LIAISON REPRESENTATIVE. Ritz-Carlton shall designate in writing, from time to time, the name of a representative to act as a liaison between Ritz-Carlton and flightserv.com(TM) regarding, among other things, special services and requirements of Customers. 4 5 8. SPECIAL COVENANTS OF RITZ-CARLTON. Ritz-Carlton represents that it: (i) is a limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (ii) has all requisite authority to operate its properties and carry on its business as contemplated by this Agreement; (iii) is duly qualified, licensed and otherwise authorized to transact business in each jurisdiction in which the Services contemplated to be performed by this Agreement make such qualification for license necessary; (iv) has all licenses, certificates of occupancy and other permits necessary to conduct its business; and (v) covenants that it shall during the term of this Agreement maintain in good standing all certificates, licenses, qualifications and other privileges necessary to fully comply with its obligations under this Agreement and to perform the Services under all applicable law. 9. BILLING AND COLLECTION; FLIGHTSERV.COM(TM) Fees. Ritz-Carlton shall be responsible for billing Customers and collecting the Charges from the Customers for the Services agreed to be performed by Ritz-Carlton. No later than five (5) business days after the close of each month, Ritz-Carlton shall provide flightserv.com(TM) with a written statement setting forth the total of all guest room accommodations received by Ritz-Carlton from Customers for reservations made through the Web Site. Ritz-Carlton shall provide with such written statement, payment of the flightserv.com(TM) which shall be 10% of the amount received by Ritz-Carlton pursuant to reservations made through the Web Site (excluding all amounts received for meals and all other incidentals to a hotel room stay). All risk of non-payment of the Charges by the Customers for the Services provided by Ritz-Carlton to the Customer pursuant to the terms of the reservation made by the Customer and Ritz-Carlton shall be borne by Ritz-Carlton and flightserv.com(TM) in proportion to their respective interests in the Charges. 10. INDEMNIFICATION; LIMITATION OF LIABILITY; EXCULPATION. (a) Ritz-Carlton hereby indemnifies, and agrees to defend and hold harmless flightserv.com(TM) and its affiliates, officers, directors, employees, independent contractors and agents, including its attorneys (each a "flightserv.com(TM) Indemnified Party") from and against any and all losses, costs, expenses, damages penalties, fines, charges, demands, liabilities and obligations of any kind (including interest, penalties and reasonable attorneys' fees and consultants' fees, expenses and disbursements) incurred or suffered by a flightserv.com(TM) Indemnified Party, when incurred or suffered, as a result of a failure of Ritz-Carlton to comply with applicable law or otherwise to comply with any of its obligations under this Agreement or the Customer, without limitation injury or damage to persons or property that may be caused to any third party resulting from any Ritz-Carlton Service, or under any applicable law or regulation or otherwise arising out of the provision, or failure to provide, the Services. If a claim by a third party is made against a flightserv.com(TM) Indemnified Party, such flightserv.com(TM) Indemnified Party shall promptly give notice thereof to Ritz-Carlton which shall have the right to assume the defense of such claim. No failure to give or promptly give notice of a claim shall excuse Ritz-Carlton from its indemnification and hold harmless obligations hereunder except to the extent that Ritz-Carlton is prejudiced thereby. This Section 10(a) shall survive the expiration or termination of this Agreement. (b) flightserv.com(TM) hereby indemnifies and agrees to defend and hold harmless Ritz-Carlton and its affiliates, officers, directors, employees, independent contractors and agents, including its attorneys 5 6 (each a "Ritz-Carlton Indemnified Party") from and against any and all losses, costs, expenses, damages, penalties, fines, charges, demands, liabilities and obligations of any kind (including interest, penalties and reasonable attorneys' fees and consultants' fees, expenses and disbursements) incurred or suffered, when incurred or suffered, by a Ritz-Carlton Indemnified Party as a result of a failure of flightserv.com(TM) to comply with applicable law or otherwise breach of any of its obligations under this Agreementor to the Customer. If a claim by a third party is made against a Ritz-Carlton Indemnified Party, a Ritz-Carlton Indemnified Party shall promptly give notice thereof to flightserv.com(TM) which shall have the right to assume the defense of such claim. No failure to give or promptly give notice of a claim shall excuse flightserv.com(TM) from its indemnification obligations hereunder except to the extent that flightserv.com(TM) is prejudiced thereby. This Section 10(b) shall survive the expiration or termination of this Agreement. 11. CONFIDENTIALITY. Ritz-Carlton and flightserv.com(TM) acknowledge that in the performance of their respective duties under this Agreement, each will come into possession of confidential information and trade secrets of the other, and each agrees that they, and their respective officers, directors, employees and agents, shall not disclose and shall keep confidential any and all such confidential information and trade secrets of the other except information that entered the public domain otherwise than through a breach of this Section 11, unless Ritz-Carlton or flightserv.com(TM), respectively, came into the rightful possession of such information from an unrelated third party or unless Ritz-Carlton or flightserv.com(TM), as the case may be, independently developed such information. This Section 11 shall survive the expiration or proper termination of this Agreement. 12. NON-SOLICITATION. flightserv.com(TM) and Ritz-Carlton, each agrees on its own behalf and on behalf of each of its officers, directors, employees and agents, that it will not, without the express prior written consent of the other, either during the term of this Agreement or for a period of twelve (12) months after the termination hereof, hire, employ or otherwise engage the services of any officer, director, employee or agent of the other. Each party hereto recognizes that the employment relations protected by this Section 12 are unique, no adequate remedy at law exists for a violation of this Section 12, and both parties shall have the right of specific performance, or any other equitable relief, in addition to all other remedies, in order to protect such party's business interests. This Section 12 shall survive the expiration or proper termination of this Agreement. 13. NOTICES. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery, upon delivery by reputable overnight courier or three (3) business days after deposit in the United States mail, postage pre-paid, by registered or certified mail, addressed: (i) if to flightserv.com(TM) to 3343 Peachtree Road, N.E. Suite 530 Atlanta, GA 30326 Facsimile 404-240-4101 Telephone 404-240-4060 Attention: C. Beverly Lance, President With a copy to: Edward J. Hardin, Esquire Rogers & Hardin 2700 International Tower 229 Peachtree Street Atlanta, Georgia 30303 Facsimile 404-525-2224 Telephone 404-420-4601 6 7 (ii) if to Ritz-Carlton to The Ritz-Carlton Hotel Company, L.L.C. 3414 Peachtree Road, N.E. Suite 300 Atlanta, Georgia 30326 Attention: Associate General Counsel 14. TERM. This Agreement shall be for an initial term of three (3) years and, until terminated pursuant to the termination provision set forth in Section 16 below, shall continue from year to year thereafter. 15. TERMINATION. This Agreement may be terminated as follows: (i) By either party upon a material breach by the other party of its obligations hereunder which has not been cured after thirty days written notice specifying the breach and the action required to correct; (ii) By either party upon thirty days written notice to the other, without cause or penalty. Upon the expiration or termination of this Agreement, all rights and obligations of the parties hereto shall cease except as otherwise set forth in this Agreement. Ritz-Carlton immediately shall pay flightserv.com(TM) the flightserv.com(TM) Fee for Services contracted prior to the effective date of the expiration or termination of this Agreement. This Section 16 shall survive the expiration or termination of this Agreement. 16. COUNTERPARTS; FACSIMILE COPY. This Agreement may be executed in one (1) or more facsimile counterparts each of which shall together constitute one (1) and the same instrument. 17. NON-ASSIGNMENT. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any party hereto without the express written consent of the other party. Neither a merger, sale of all or substantially all of the assets of or the sale of the stock of flightserv.com(TM) or other business combination of flightserv.com(TM) shall be considered an assignment hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date first above written. FLIGHTSERV.COM(TM) Attest By: ---------------------------- ------------------------ C. Beverly Lance President THE RITZ CARLTON HOTEL ATTEST COMPANY, L.L.C. By: ---------------------------- ------------------------- Vice President Assistant Secretary 7 EX-10.7 5 FORM OF OFFICER/DIRECTOR NON-QUALIFIED OPTION AGMT 1 EXHIBIT 10.7 FORM OF DIRECTOR/OFFICER NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made as of the 10th day of February 1999, by and between PROACTIVE TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and _______________________, an individual resident of the State of ________ ("Optionee"). W I T N E S S E T H: WHEREAS, in connection with Optionee agreeing to serve as a Director of the Company , the Company desires to grant non-qualified stock options to Optionee; and WHEREAS, the Optionee has agreed to serve as a Director of the Company. NOW, THEREFORE, in consideration of their mutual undertakings, it is agreed by and between parties hereto as follows: 1. The Company hereby grants to Optionee as of the date hereof stock options to purchase _______________ shares of the common stock, $.04 par value, of the Company (the "Common Stock") exercisable at any time after May 11, 1999 and prior to 11:59 p.m., Atlanta time, on February 10, 2009 (the "Expiration Date") at a price of $0.4375 per Option Share. "Option Share(s)" shall mean the share(s) of Common Stock which shall be purchased or shall be available for purchase upon exercise of the stock option granted hereby and any security which shall be issued in lieu of or in addition to any other Option Share by reason of any recapitalization, special dividend transaction or other such event as provided in Section 5 below. 2. Except as otherwise provided below, the option granted hereby may be exercised at any time, or from time to time, in whole or in part, until the Expiration Date. The exercise of all or any portion of the stock option granted hereby will be contingent upon receipt by the Company of the advice of counsel to the Company that such Option Shares have been duly listed on the principal exchange on which the Company's securities are traded, and duly registered or are exempt from registration under the applicable securities laws and, in the absence of registration of the Option Shares and to the extent required by such counsel, the receipt from the Optionee of a representation that the Optionee intends at the time of such exercise to acquire the Option Shares for investment only and not for distribution or resale. 3. The Optionee may exercise all or any part of the stock option (in whole Option Shares) by delivering written notice to the Company of the number of Option Shares to be purchased together with cash or check, in payment of the full purchase price of the Option Shares to be acquired. Notice shall be sent to the Company at Proactive Technologies, Inc., 3343 Peachtree Road, N.E., Suite 530, Atlanta, Georgia 30326. The stock option shall be deemed to have been exercised on the date the Company receives the written notice and the required cash or check in full payment for the purchased Option Shares, or shares of Common Stock if the payment is to be made in such manner. A form of notice which will be deemed satisfactory by the Company is attached to this Agreement as Exhibit A. Upon any exercise of the stock option the Company shall cause to be delivered to the Optionee a certificate or certificates registered in the name or the Optionee for the number of Option Shares purchased. The Optionee shall not have any of the rights of a Stockholder with respect to the Option Shares except to the extent that the Optionee duly exercises the stock option granted hereby with respect to such Option Shares. As a condition of exercise of this option, the Company may, in its 1 2 sole discretion, withhold or require the Optionee to pay or reimburse the Company for any taxes which the Company determines are required to be withheld in connection with the grant or any exercise of this option. 4. Notwithstanding the foregoing provisions requiring payment by cash or check, if stock of the class then subject to this option is then "publicly traded" (as hereafter defined), then payment of the purchase price or any portion thereof may also be made in whole or in part with shares of the same class of stock as that then subject to this option, surrendered in lieu of the payment of cash concurrently with such exercise, the shares so surrendered to be valued on the basis of the Fair Market Value of the stock (as hereinafter provided) on the date of exercise, in which event the stock certificates evidencing the shares so to be used shall accompany the notice of exercise and shall be duly endorsed or accompanied by duly executed stock powers to transfer the same to the Company; provided, however, that such payment in stock instead of cash shall not be effected and shall be rejected by the Company if (a) the Company is then prohibited from purchasing or acquiring shares of the class of its stock thus tendered to it or (b) the right or power of the person exercising the option to deliver such shares in payment of the purchase price is subject to the prior interest of any person (other than the Company) as indicated by legends upon the certificate(s) or known to the Company. If the Company rejects the payment in stock, the tendered notice of exercise shall not be effected hereunder unless promptly after being notified of such rejection the person exercising the option pays the purchase price in acceptable form. If and while payment with stock is permitted in accordance with the foregoing provision, then the person then entitled to exercise this option may, in lieu of using previously outstanding stock therefor, use a portion of the shares as to which this option is then being exercised, in which case the notice of exercise need not be accompanied by any stock certificates but shall include a statement directing the Company to retain so many shares that would otherwise have been delivered by the Company upon that exercise of this option as equals the number of shares that would have been surrendered to the Company if the purchase price had been paid with previously issued stock. If the Company is required to withhold on account of any federal, state or local tax imposed as a result of any exercise of this option with previously issued stock or by retention of a portion of Option Shares under this section, then the stock surrendered or retained shall include an additional number of shares whose Fair Market Value equals the amount thus required to be withheld. For purposes hereof, "publicly traded" shall mean that a class of the capital stock of the Company is listed or admitted to unlisted trading privileges on a national securities exchange or designated as a national market systems security on an interdealer quotation system by the National Association of Securities Dealers, Inc. ("NASD") or if sales or bid and offer quotations are reported for that class of stock in the automated quotation system ("NASDAQ") operated by the NASD. Further, "Fair Market Value" shall mean the closing price of such stock as of the day in question or, if such day is not a trading day in the principal securities market or markets for such stock, on the nearest preceding trading day, as reported with respect to the market (or the composite of markets, if more than one) in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if not so quoted, as furnished by a professional securities dealer making a market in such stock selected by the Board of Directors of the Company. 5. In the event of changes in the outstanding shares of Common Stock by reason of stock dividends, stock splits, subdivisions or combinations of shares, the number of Option Shares shall be correspondingly and fairly adjusted by the Board of Directors of the Company, the decision of which shall be final and conclusive. A corresponding adjustment shall be made without change in the total exercise price applicable to the unexercised portion of the Option Shares with a corresponding adjustment in the exercise price per share. 6. If the Company is merged, consolidated or effects a share exchange with another corporation (whether or not the Company is the surviving corporation), or if substantially all of the assets or all of the Common Stock is acquired by another corporation, or in the event of a separation, reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, shall make appropriate provision for the protection of the option granted hereby by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect to the shares of Common Stock, provided only that the excess of the aggregate fair market value of the Option Shares immediately after such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the Option Shares immediately before such substitution over the exercise price thereof. Notwithstanding the preceding sentence, if the Company is merged, consolidated or effects a share exchange with another corporation or if substantially all of the assets or all of the Common Stock is acquired by another 2 3 corporation, or in the event of a separation, reorganization or liquidation of the Company, then the Board of Directors of the Company or the board of directors of any corporation assuming the obligations of the Company hereunder may, on or before the thirtieth (30th) day following such event and upon written notice to the Optionee, provide that the option granted hereby must be exercised within sixty (60) days of the date of such notice or it will be terminated. 7. This Agreement shall not be assignable or transferable by Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order and the stock option hereby granted shall not be exercised by any person other than Optionee during Optionee's lifetime. After the death of Optionee, the person to whom Optionee's rights hereunder pass under Optionee's will or under the laws of descent and distribution shall be deemed the holder of the stock option granted hereby. 8. To the extent not superseded by federal law, the laws of Delaware shall control in all matters relating to this Agreement. 9. Optionee understands that the Option Shares are not registered under the Securities Act of 1933 (the "1933 Act") or any state securities act and will be issued to Optionee pursuant to exemptions from registration thereunder. Optionee also understands that applicable securities laws may restrict the right of Optionee to exercise the stock option or to dispose of any shares which Optionee may acquire upon any such exercise and may govern the manner in which such shares must be sold. Optionee shall not offer, sell or otherwise dispose of any of the Option Shares acquired by reason of the exercise of the stock option in any manner which would violate the 1933 Act or any other state or federal law or cause the Company to have to make any filing or take any action to avoid such a violation. 10. Optionee hereby represents that all Option Shares purchased by him pursuant to his exercise of all or any portion of the stock option will be acquired only for investment and not with a view to distribution or resale. 11. All pronouns, defined nouns and any variations thereof in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender and to either singular or plural, whenever the context of this Agreement so requires. IN WITNESS WHEREOF, Optionee has executed and delivered this Agreement and the Company has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative, as of the day and year above written. PROACTIVE TECHNOLOGIES, INC. By: ------------------------------------ Its: ------------------------------------ OPTIONEE ---------------------------------------- 3 4 EXHIBIT A TO: Proactive Technologies, Inc. 3343 Peachtree Road, N.E. Suite 530 Atlanta, Georgia 30326 Pursuant to the Non-Qualified Stock Option Agreement (herein called the "Agreement"), dated as of February 10, 1999, by and between Proactive Technologies, Inc. (the "Company") and me, I hereby give notice that I elect to exercise the stock option granted under the Agreement with respect to ______ shares of the common stock of the Company as of the date on which this notice is delivered to the Company, and accordingly I hereby agree to purchase such shares at the price and on the terms established under the Agreement. Full payment for such shares is enclosed. Such payment consists of: __________ Cash __________ Check __________ shares of the Company's common stock, _____ of which are previously owned. I hereby represent and warrant that I am purchasing such shares for investment purposes only and not with a view to distribution or resale. I hereby agree that the stock option granted under the Agreement shall be deemed to have been exercised to the extent specified in this notice on the exercise date below my signature, and I hereby warrant that on such date this notice was delivered to the Company. Sincerely, ---------------------------------------- (Sign Name) ---------------------------------------- (Print Name) DATED:___________________ 4 EX-10.8 6 FORM OF OFFICER/DIRECTOR NON-QUALIFIED OPTION AGMT 1 EXHIBIT 10.8 FORM OF DIRECTOR/OFFICER NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made as of the 16th day of April 1999, by and between PROACTIVE TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and __________________, an individual resident of the State of _______ ("Optionee"). W I T N E S S E T H: WHEREAS, in connection with Optionee agreeing to serve as a Director of the Company, the Company desires to grant non-qualified stock options to Optionee; and WHEREAS, the Optionee has agreed to serve as a Director of the Company. NOW, THEREFORE, in consideration of their mutual undertakings, it is agreed by and between parties hereto as follows: 12. The Company hereby grants to Optionee as of the date hereof stock options to purchase _____________________ shares of the common stock, $.04 par value, of the Company (the "Common Stock") at a price of $0.4177 per Option Share. The option vests and becomes exercisable on the following schedule: 25% on the first date on which the Closing Price is greater than or equal to $1.00 for ten consecutive trading days; 50% on the first date on which the Closing Price is greater than or equal to $1.25 for ten consecutive trading days; 75% on the first date on which the Closing Price is greater than or equal to $1.50 for ten consecutive trading days; 100% on the first date on which the Closing Price is greater than or equal to $1.75 for ten consecutive trading days. The option expires at 11:59 p.m., Atlanta time, on April 21, 2009 (the "Expiration Date"). "Option Share(s)" shall mean the share(s) of Common Stock which shall be purchased or shall be available for purchase upon exercise of the stock option granted hereby and any security which shall be issued in lieu of or in addition to any other Option Share by reason of any recapitalization, special dividend transaction or other such event as provided in Section 5 below. "Closing Price" means the closing price per share of the Common Stock on the American Stock Exchange. 13. Except as otherwise provided below, the option granted hereby may be exercised at any time, or from time to time, in whole or in part, until the Expiration Date. The exercise of all or any portion of the stock option granted hereby will be contingent upon receipt by the Company of the advice of counsel to the Company that such Option Shares have been duly listed on the principal exchange on which the Company's securities are traded, and duly registered or are exempt from registration under the applicable securities laws and, in the absence of registration of the Option Shares and to the extent required by such counsel, the receipt from the Optionee of a representation that the Optionee intends at the time of such exercise to acquire the Option Shares for investment only and not for distribution or resale. 14. The Optionee may exercise all or any part of the stock option (in whole Option Shares) by delivering written notice to the Company of the number of Option Shares to be purchased together with cash or check, in payment of the full purchase price of the Option Shares to be acquired. Notice shall be sent to the Company at Proactive Technologies, Inc., 3343 Peachtree Road, N.E., Suite 530, Atlanta, Georgia 30326. The stock option shall be deemed to have been exercised on the date the Company receives the written notice and the required cash or check in full payment for the purchased Option Shares, or shares of Common Stock if the payment is to be made in such manner. A form of notice which will be deemed satisfactory by the Company is attached to this Agreement as Exhibit A. Upon any exercise of the stock option the Company shall cause to be delivered to the Optionee a certificate or certificates registered in the name or the Optionee for the number of Option Shares purchased. The Optionee shall not have any of the rights of a Stockholder with respect to the Option Shares except to the extent that the Optionee duly exercises the stock option granted hereby with respect to such Option Shares. As a condition of exercise of this option, the Company may, in its sole discretion, withhold or require the Optionee to pay or reimburse the Company for any taxes which the Company determines are required to be withheld in connection with the grant or any exercise of this option. 15. Notwithstanding the foregoing provisions requiring payment by cash or check, if stock of the class then subject to this option is then "publicly traded" (as hereafter defined), then payment of the purchase price or any portion thereof may also be made in whole or in part with shares of the same class of stock as that then subject to this option, surrendered in lieu of the payment of cash concurrently with such exercise, the shares so surrendered to be valued on the 1 2 basis of the Fair Market Value of the stock (as hereinafter provided) on the date of exercise, in which event the stock certificates evidencing the shares so to be used shall accompany the notice of exercise and shall be duly endorsed or accompanied by duly executed stock powers to transfer the same to the Company; provided, however, that such payment in stock instead of cash shall not be effected and shall be rejected by the Company if (a) the Company is then prohibited from purchasing or acquiring shares of the class of its stock thus tendered to it or (b) the right or power of the person exercising the option to deliver such shares in payment of the purchase price is subject to the prior interest of any person (other than the Company) as indicated by legends upon the certificate(s) or known to the Company. If the Company rejects the payment in stock, the tendered notice of exercise shall not be effected hereunder unless promptly after being notified of such rejection the person exercising the option pays the purchase price in acceptable form. If and while payment with stock is permitted in accordance with the foregoing provision, then the person then entitled to exercise this option may, in lieu of using previously outstanding stock therefor, use a portion of the shares as to which this option is then being exercised, in which case the notice of exercise need not be accompanied by any stock certificates but shall include a statement directing the Company to retain so many shares that would otherwise have been delivered by the Company upon that exercise of this option as equals the number of shares that would have been surrendered to the Company if the purchase price had been paid with previously issued stock. If the Company is required to withhold on account of any federal, state or local tax imposed as a result of any exercise of this option with previously issued stock or by retention of a portion of Option Shares under this section, then the stock surrendered or retained shall include an additional number of shares whose Fair Market Value equals the amount thus required to be withheld. For purposes hereof, "publicly traded" shall mean that a class of the capital stock of the Company is listed or admitted to unlisted trading privileges on a national securities exchange or designated as a national market systems security on an interdealer quotation system by the National Association of Securities Dealers, Inc. ("NASD") or if sales or bid and offer quotations are reported for that class of stock in the automated quotation system ("NASDAQ") operated by the NASD. Further, "Fair Market Value" shall mean the closing price of such stock as of the day in question or, if such day is not a trading day in the principal securities market or markets for such stock, on the nearest preceding trading day, as reported with respect to the market (or the composite of markets, if more than one) in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if not so quoted, as furnished by a professional securities dealer making a market in such stock selected by the Board of Directors of the Company. 16. In the event of changes in the outstanding shares of Common Stock by reason of stock dividends, stock splits, subdivisions or combinations of shares, the number of Option Shares shall be correspondingly and fairly adjusted by the Board of Directors of the Company, the decision of which shall be final and conclusive. A corresponding adjustment shall be made without change in the total exercise price applicable to the unexercised portion of the Option Shares with a corresponding adjustment in the exercise price per share. 17. If the Company is merged, consolidated or effects a share exchange with another corporation (whether or not the Company is the surviving corporation), or if substantially all of the assets or all of the Common Stock is acquired by another corporation, or in the event of a separation, reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, shall make appropriate provision for the protection of the option granted hereby by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect to the shares of Common Stock, provided only that the excess of the aggregate fair market value of the Option Shares immediately after such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the Option Shares immediately before such substitution over the exercise price thereof. Notwithstanding the preceding sentence, if the Company is merged, consolidated or effects a share exchange with another corporation or if substantially all of the assets or all of the Common Stock is acquired by another corporation, or in the event of a separation, reorganization or liquidation of the Company, then the Board of Directors of the Company or the board of directors of any corporation assuming the obligations of the Company hereunder may, on or before the thirtieth (30th) day following such event and upon written notice to the Optionee, provide that the option granted hereby must be exercised within sixty (60) days of the date of such notice or it will be terminated. 18. This Agreement shall not be assignable or transferable by Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order and the stock option hereby granted shall 2 3 not be exercised by any person other than Optionee during Optionee's lifetime. After the death of Optionee, the person to whom Optionee's rights hereunder pass under Optionee's will or under the laws of descent and distribution shall be deemed the holder of the stock option granted hereby. 19. To the extent not superseded by federal law, the laws of Delaware shall control in all matters relating to this Agreement. 20. Optionee understands that the Option Shares are not registered under the Securities Act of 1933 (the "1933 Act") or any state securities act and will be issued to Optionee pursuant to exemptions from registration thereunder. Optionee also understands that applicable securities laws may restrict the right of Optionee to exercise the stock option or to dispose of any shares which Optionee may acquire upon any such exercise and may govern the manner in which such shares must be sold. Optionee shall not offer, sell or otherwise dispose of any of the Option Shares acquired by reason of the exercise of the stock option in any manner which would violate the 1933 Act or any other state or federal law or cause the Company to have to make any filing or take any action to avoid such a violation. 21. Optionee hereby represents that all Option Shares purchased by him pursuant to his exercise of all or any portion of the stock option will be acquired only for investment and not with a view to distribution or resale. 22. All pronouns, defined nouns and any variations thereof in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender and to either singular or plural, whenever the context of this Agreement so requires. IN WITNESS WHEREOF, Optionee has executed and delivered this Agreement and the Company has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative, as of the day and year above written. PROACTIVE TECHNOLOGIES, INC. By: ---------------------------- Its: --------------------------- OPTIONEE ------------------------------- 3 4 EXHIBIT A TO: Proactive Technologies, Inc. 3343 Peachtree Road, N.E. Suite 530 Atlanta, Georgia 30326 Pursuant to the Non-Qualified Stock Option Agreement (herein called the "Agreement"), dated as of April 16, 1999, by and between Proactive Technologies, Inc. (the "Company") and me, I hereby give notice that I elect to exercise the stock option granted under the Agreement with respect to ______ shares of the common stock of the Company as of the date on which this notice is delivered to the Company, and accordingly I hereby agree to purchase such shares at the price and on the terms established under the Agreement. Full payment for such shares is enclosed. Such payment consists of: __________ Cash __________ Check __________ shares of the Company's common stock, _____ of which are previously owned. I hereby represent and warrant that I am purchasing such shares for investment purposes only and not with a view to distribution or resale. I hereby agree that the stock option granted under the Agreement shall be deemed to have been exercised to the extent specified in this notice on the exercise date below my signature, and I hereby warrant that on such date this notice was delivered to the Company. Sincerely, -------------------------- (Sign Name) -------------------------- (Print Name) DATED: ------------------- 4 EX-10.9 7 FORM OF OFFICER/DIRECTOR NON-QUALIFIED OPTION AGMT 1 EXHIBIT 10.9 FORM OF DIRECTOR/OFFICER NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made as of the 2nd day of July, 1999, by and between FLIGHTSERV.COM, a Delaware corporation (the "Company"), and _______________, an individual resident of the State of ________ ("Optionee"). W I T N E S S E T H: WHEREAS, in connection with Optionee agreeing to serve as a Director of the Company, the Company desires to grant non-qualified stock options to Optionee; and WHEREAS, the Optionee has agreed to serve as a Director of the Company. NOW, THEREFORE, in consideration of their mutual undertakings, it is agreed by and between parties hereto as follows: 23. The Company hereby grants to Optionee as of the date hereof stock options to purchase ___________________ shares of the common stock, $.04 par value, of the Company (the "Common Stock") exercisable at any time prior to 11:59 p.m., Atlanta time, on July 7, 2009 (the "Expiration Date") at a price of $2.50 per Option Share. "Option Share(s)" shall mean the share(s) of Common Stock which shall be purchased or shall be available for purchase upon exercise of the stock option granted hereby and any security which shall be issued in lieu of or in addition to any other Option Share by reason of any recapitalization, special dividend transaction or other such event as provided in Section 5 below. 24. Except as otherwise provided below, the option granted hereby may be exercised at any time, or from time to time, in whole or in part, until the Expiration Date. The exercise of all or any portion of the stock option granted hereby will be contingent upon stockholder approval of the Agreement and upon receipt by the Company of the advice of counsel to the Company that such Option Shares have been duly listed on the principal exchange on which the Company's securities are traded, and duly registered or are exempt from registration under the applicable securities laws and, in the absence of registration of the Option Shares and to the extent required by such counsel, the receipt from the Optionee of a representation that the Optionee intends at the time of such exercise to acquire the Option Shares for investment only and not for distribution or resale. 25. The Optionee may exercise all or any part of the stock option (in whole Option Shares) by delivering written notice to the Company of the number of Option Shares to be purchased together with cash or check, in payment of the full purchase price of the Option Shares to be acquired. Notice shall be sent to the Company at flightserv.com, 3343 Peachtree Road, N.E., Suite 530, Atlanta, Georgia 30326. The stock option shall be deemed to have been exercised on the date the Company receives the written notice and the required cash or check in full payment for the purchased Option Shares, or shares of Common Stock if the payment is to be made in such manner. A form of notice which will be deemed satisfactory by the Company is attached to this Agreement as Exhibit A. Upon any exercise of the stock option the Company shall cause to be delivered to the Optionee a certificate or certificates registered in the name or the Optionee for the number of Option Shares purchased. The Optionee shall not have any of the rights of a Stockholder with respect to the Option Shares except to the extent that the Optionee duly exercises the stock option granted hereby with respect to such Option Shares. As a condition of exercise of this option, the Company may, in its sole discretion, withhold or require the Optionee to pay or reimburse the Company for any taxes which the Company determines are required to be withheld in connection with the grant or any exercise of this option. 26. Notwithstanding the foregoing provisions requiring payment by cash or check, if stock of the class then subject to this option is then "publicly traded" (as hereafter defined), then payment of the purchase price or any portion thereof may also be made in whole or in part with shares of the same class of stock as that then subject to this option, surrendered in lieu of the payment of cash concurrently with such exercise, the shares so surrendered to be valued on the basis of the Fair Market Value of the stock (as hereinafter provided) on the date of exercise, in which event the stock certificates evidencing the shares so to be used shall accompany the notice of exercise and shall be duly endorsed or accompanied by duly executed stock powers to transfer the same to the Company; provided, however, that such payment in stock instead of cash shall not be effected and shall be rejected by the Company if (a) the Company is then prohibited from purchasing or acquiring shares of the class of its stock thus tendered to it or (b) the right or power of the person exercising the option to deliver such shares in payment of the purchase price is subject to the prior interest of any person (other than the Company) as indicated by legends upon the certificate(s) or known to the Company. If the Company rejects the payment in stock, the tendered notice of exercise shall not be effected hereunder unless promptly after being 1 2 notified of such rejection the person exercising the option pays the purchase price in acceptable form. If and while payment with stock is permitted in accordance with the foregoing provision, then the person then entitled to exercise this option may, in lieu of using previously outstanding stock therefor, use a portion of the shares as to which this option is then being exercised, in which case the notice of exercise need not be accompanied by any stock certificates but shall include a statement directing the Company to retain so many shares that would otherwise have been delivered by the Company upon that exercise of this option as equals the number of shares that would have been surrendered to the Company if the purchase price had been paid with previously issued stock. If the Company is required to withhold on account of any federal, state or local tax imposed as a result of any exercise of this option with previously issued stock or by retention of a portion of Option Shares under this section, then the stock surrendered or retained shall include an additional number of shares whose Fair Market Value equals the amount thus required to be withheld. For purposes hereof, "publicly traded" shall mean that a class of the capital stock of the Company is listed or admitted to unlisted trading privileges on a national securities exchange or designated as a national market systems security on an interdealer quotation system by the National Association of Securities Dealers, Inc. ("NASD") or if sales or bid and offer quotations are reported for that class of stock in the automated quotation system ("NASDAQ") operated by the NASD. Further, "Fair Market Value" shall mean the closing price of such stock as of the day in question or, if such day is not a trading day in the principal securities market or markets for such stock, on the nearest preceding trading day, as reported with respect to the market (or the composite of markets, if more than one) in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if not so quoted, as furnished by a professional securities dealer making a market in such stock selected by the Board of Directors of the Company. 27. In the event of changes in the outstanding shares of Common Stock by reason of stock dividends, stock splits, subdivisions or combinations of shares, the number of Option Shares shall be correspondingly and fairly adjusted by the Board of Directors of the Company, the decision of which shall be final and conclusive. A corresponding adjustment shall be made without change in the total exercise price applicable to the unexercised portion of the Option Shares with a corresponding adjustment in the exercise price per share. 28. If the Company is merged, consolidated or effects a share exchange with another corporation (whether or not the Company is the surviving corporation), or if substantially all of the assets or all of the Common Stock is acquired by another corporation, or in the event of a separation, reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, shall make appropriate provision for the protection of the option granted hereby by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect to the shares of Common Stock, provided only that the excess of the aggregate fair market value of the Option Shares immediately after such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the Option Shares immediately before such substitution over the exercise price thereof. Notwithstanding the preceding sentence, if the Company is merged, consolidated or effects a share exchange with another corporation or if substantially all of the assets or all of the Common Stock is acquired by another corporation, or in the event of a separation, reorganization or liquidation of the Company, then the Board of Directors of the Company or the board of directors of any corporation assuming the obligations of the Company hereunder may, on or before the thirtieth (30th) day following such event and upon written notice to the Optionee, provide that the option granted hereby must be exercised within sixty (60) days of the date of such notice or it will be terminated. 29. This Agreement shall not be assignable or transferable by Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order and the stock option hereby granted shall not be exercised by any person other than Optionee during Optionee's lifetime. After the death of Optionee, the person to whom Optionee's rights hereunder pass under Optionee's will or under the laws of descent and distribution shall be deemed the holder of the stock option granted hereby. 30. To the extent not superseded by federal law, the laws of Delaware shall control in all matters relating to this Agreement. 2 3 31. Optionee understands that the Option Shares are not registered under the Securities Act of 1933 (the "1933 Act") or any state securities act and will be issued to Optionee pursuant to exemptions from registration thereunder. Optionee also understands that applicable securities laws may restrict the right of Optionee to exercise the stock option or to dispose of any shares which Optionee may acquire upon any such exercise and may govern the manner in which such shares must be sold. Optionee shall not offer, sell or otherwise dispose of any of the Option Shares acquired by reason of the exercise of the stock option in any manner which would violate the 1933 Act or any other state or federal law or cause the Company to have to make any filing or take any action to avoid such a violation. 32. Optionee hereby represents that all Option Shares purchased by him pursuant to his exercise of all or any portion of the stock option will be acquired only for investment and not with a view to distribution or resale. 33. All pronouns, defined nouns and any variations thereof in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender and to either singular or plural, whenever the context of this Agreement so requires. IN WITNESS WHEREOF, Optionee has executed and delivered this Agreement and the Company has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative, as of the day and year above written. FLIGHTSERV.COM By: ----------------------------------- Its: ---------------------------------- OPTIONEE -------------------------------------- 3 4 EXHIBIT A TO: flightserv.com 3343 Peachtree Road, N.E. Suite 530 Atlanta, Georgia 30326 Pursuant to the Non-Qualified Stock Option Agreement (herein called the "Agreement"), dated as of July 2, 1999, by and between flightserv.com (the "Company") and me, I hereby give notice that I elect to exercise the stock option granted under the Agreement with respect to ______ shares of the common stock of the Company as of the date on which this notice is delivered to the Company, and accordingly I hereby agree to purchase such shares at the price and on the terms established under the Agreement. Full payment for such shares is enclosed. Such payment consists of: __________ Cash __________ Check __________ shares of the Company's common stock, _____ of which are previously owned. I hereby represent and warrant that I am purchasing such shares for investment purposes only and not with a view to distribution or resale. I hereby agree that the stock option granted under the Agreement shall be deemed to have been exercised to the extent specified in this notice on the exercise date below my signature, and I hereby warrant that on such date this notice was delivered to the Company. Sincerely, --------------------------- (Sign Name) --------------------------- (Print Name) DATED: ------------------- 4 EX-10.10 8 SCHEDULE OF OPTION AGREEMENTS 1 EXHIBIT 10.10 SCHEDULE OF OPTION AGREEMENTS The following documents are substantially similar to the Form of Option Agreement included as Exhibit 10.5 herewith: Option Agreement between the Company and C. Beverly Lance dated as of February 10, 1999 for 700,000 shares. Option Agreement between the Company and Arthur G. Weiss dated as of February 10, 1999 for 700,000 shares. Option Agreement between the Company and Dr. James Verbrugge dated as of February 10, 1999 for 200,000 shares. Option Agreement between the Company and Four Corners Capital, LLC dated as of February 10, 1999 for 200,000 shares. Option Agreement between the Company and William B. Astrop, Jr. dated as of February 10, 1999 for 100,000 shares. Option Agreement between the Company and Douglas D. Astrop dated as of February 10, 1999 for 100,000 shares. The following documents are substantially similar to the Form of Option Agreement included as Exhibit 10.6 herewith: Option Agreement between the Company and C. Beverly Lance dated as of April 21, 1999 for 1,000,000 shares. Option Agreement between the Company and Arthur G. Weiss dated as of April 21, 1999 for 1,000,000 shares. Option Agreement between the Company and Dr. James Verbrugge dated as of April 21, 1999 for 200,000 shares. Option Agreement between the Company and Four Corners Capital, LLC dated as of April 21, 1999 for 200,000 shares. Option Agreement between the Company and William B. Astrop, Jr. dated as of April 21, 1999 for 100,000 shares. Option Agreement between the Company and Douglas D. Astrop dated as of April 21, 1999 for 100,000 shares. 1 2 The following documents are substantially similar to the Form of Option Agreement included as Exhibit 10.7 herewith: Option Agreement between the Company and C. Beverly Lance dated as of July 2, 1999 for 1,700,000 shares. Option Agreement between the Company and Arthur G. Weiss dated as of July 2, 1999 for 1,700,000 shares. Option Agreement between the Company and Dr. James Verbrugge dated as of July 2, 1999 for 400,000 shares. Option Agreement between the Company and Four Corners Capital, LLC dated as of July 2, 1999 for 400,000 shares. Option Agreement between the Company and William B. Astrop dated as of July 2, 1999 for 400,000 shares. 2 EX-21.1 9 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY
STATE OF SUBSIDIARY INCORPORATION - ---------- ------------- Regional Developers, Inc. Florida Westside Investors, Inc. Georgia PDK Properties, Inc. Georgia Flowers Properties, Inc. Georgia P&W Stonebridge, LLC Georgia P&W Headland, LLC Georgia Stratos Inns, LLC Georgia
EX-27.1 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION THE FINANCIAL STATEMENTS OF FLIGHTSERV.COM FOR THE PERIOD ENDED JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUN-30-1999 JUN-30-1999 3,486,221 0 914,096 0 0 0 8,516,319 101,874 14,492,415 0 0 0 0 1,263,729 3,905,076 14,492,415 0 602,026 0 5,325,577 0 0 334,226 (4,967,777) 0 (4,967,777) (11,205,233) 0 0 (16,173,010) (.78) 0
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