Travelzoo 2010 Annual Report Download - page 70

2002, the stockholders of Travelzoo.com Corporation approved the merger with Travelzoo Inc. On April 25, 2002,
the certificate of merger was filed in Delaware upon which the merger became effective and Travelzoo.com
Corporation ceased to exist. Each outstanding share of common stock of Travelzoo.com Corporation was converted
into the right to receive one share of common stock of Travelzoo Inc. Under and subject to the terms of the merger
agreement, stockholders were allowed a period of two years following the effective date of the merger to receive
shares of Travelzoo Inc. The records of Travelzoo.com Corporation showed that, assuming all of the shares applied
for by the Netsurfer stockholders were validly issued, there were 11,295,874 shares of Travelzoo.com Corporation
outstanding. As of April 25, 2004, two years following the effective date of the merger, 7,180,342 shares of
Travelzoo.com Corporation had been exchanged for shares of Travelzoo Inc. Prior to that date, the remaining shares
which were available for issuance pursuant to the merger agreement were included in the issued and outstanding
common stock of Travelzoo Inc. and included in the calculation of basic and diluted earnings per share. After
April 25, 2004, the Company ceased issuing shares to the former stockholders of Travelzoo.com Corporation, and
no additional shares are reserved for issuance to any former stockholders, because their right to receive shares has
now expired. On April 25, 2004, the number of shares reported as outstanding was reduced from 19,425,147 to
15,309,615 to reflect actual shares issued as of the expiration date. Earnings per share calculations reflect this
reduction of the number of shares reported as outstanding. As of December 31, 2010, there were 16,443,828 shares
of common stock outstanding.
It is possible that claims may be asserted against the Company in the future by former stockholders of
Travelzoo.com Corporation seeking to receive shares in the Company, whether based on a claim that the two-year
deadline for exchanging their shares was unenforceable or otherwise. In addition, one or more jurisdictions,
including the Bahamas or the State of Delaware, may assert rights to unclaimed shares of the Company under
escheat statutes. As indicated below, the Company is currently the subject of an unclaimed property review by
representatives of the State of Delaware. If such escheat claims are asserted, whether as a result of such unclaimed
property review or otherwise, the Company intends to challenge the applicability of escheat rights, in that, among
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
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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)