Travelzoo 2010 Annual Report Download - page 78

other reasons, the identity, residency and eligibility of the holders in question cannot be determined. There were
certain conditions applicable to the issuance of shares to the Netsurfer stockholders, including requirements that
(i) they be at least 18 years of age, (ii) they be residents of the U.S. or Canada and (iii) they not apply for shares more
than once. The Netsurfer stockholders were required to confirm their compliance with these conditions, and were
advised that failure to comply could result in cancellation of their shares in Travelzoo.com Corporation.
Travelzoo.com Corporation was not able to verify that the applicants met the requirements referred to above at
the time of their applications for issuance of shares. If claims are asserted by persons claiming to be former
stockholders of Travelzoo.com Corporation, the Company intends to assert that their rights to receive their shares
expired two years following the effective date of the merger, as provided in the merger agreement. The Company
also expects to take the position, if escheat or similar claims are asserted in respect of the unissued shares in the
future, that it is not required to issue such shares. Further, even if it were established that unissued shares were
subject to escheat claims, the Company would assert that the claimant must establish that the original Netsurfer
stockholders complied with the conditions to issuance of their shares. The Company is not able to predict the
outcome of any future claims which might be asserted relating to the unissued shares. If such claims were asserted,
and were fully successful, that could result in the Company’s being required to issue up to an additional
approximately 4,067,000 shares of common stock for no additional payment.
Representatives of the State of Delaware are currently conducting an unclaimed property review of the
Company. In response to information requests in this review, the Company has provided information concerning
uncashed checks and other unclaimed property which may be in the custody of the Company. It is the Company’s
understanding that, if it holds unclaimed property of third parties whose addresses are unknown, that property may
be subject to escheat to the State of Delaware, because it is the jurisdiction of incorporation of the Company. In the
review, the Company has also been requested to provide, and has provided, information concerning the unissued
shares referred to above. No escheat claims have been asserted in respect of any such unissued shares, but it is
possible that such claims may be asserted as a result of the review. The Company is unable to predict the outcome of
the unclaimed property review.
On October 15, 2004, the Company announced a program under which it would make cash payments to people
who establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit requests
to convert shares into Travelzoo Inc. within the required time period. The accompanying consolidated financial
statements include a charge in general and administrative expenses of $20,000 for the year ended December 31,
2010. The total cost of this program is not reliably estimable because it is based on the ultimate number of valid
requests received and future levels of the Company’s common stock price. The Company’s common stock price
affects the liability because the amount of cash payments under the program is based in part on the recent level of the
stock price at the date valid requests are received. The Company does not know how many of the requests for shares
originally received by Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion
of such requests were valid. As noted above, in order to receive payment under the program, a person is required to
establish that such person validly held shares in Travelzoo.com Corporation. Assuming 100% of the requests from
1998 were valid, former stockholders of Travelzoo.com Corporation holding approximately 4,067,000 shares had
not submitted claims under the program.
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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)