<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996
REGISTRATION NO. 333-09747
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
THE SABRE GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7375 75-2662240
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
4255 AMON CARTER BOULEVARD
FORT WORTH, TEXAS 76155
(817) 931-7300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
MICHAEL J. DURHAM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE SABRE GROUP HOLDINGS, INC.
4255 AMON CARTER BOULEVARD
FORT WORTH, TEXAS 76155
(817) 931-7300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
<TABLE>
<S> <C> <C>
Anne H. McNamara, Esq. John B. Brady, Jr., Esq. Andrew D. Soussloff, Esq.
Senior Vice President Debevoise & Plimpton Sullivan & Cromwell
and General Counsel 875 Third Avenue 125 Broad Street
AMR Corporation New York, New York 10022 New York, New York 10004
4333 Amon Carter Blvd. (212) 909-6000 (212) 558-4000
Fort Worth, Texas 76155
(817) 963-1234
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold and offers to buy may not be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* and there shall not be any sale of these securities in any State in *
* which such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1996
<TABLE>
<S> <C>
[LOGO] 20,200,000 SHARES
THE SABRE GROUP HOLDINGS, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
</TABLE>
-------------------
Of the 20,200,000 shares of Class A Common Stock offered, 16,160,000 shares
are being offered hereby in the United States and 4,040,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting."
All of the shares of Class A Common Stock offered hereby are being issued
and sold by the Company. The Company is a wholly-owned subsidiary of AMR
Corporation and, upon completion of the Offerings, AMR will own 100% of the
outstanding Class B Common Stock of the Company, which will represent
approximately 84.2% of the economic interest in the Company (approximately 82.2%
if the Underwriters' over-allotment options are exercised in full). See "Use of
Proceeds" and "Relationship with AMR and Certain Transactions."
Holders of Class A Common Stock generally have rights identical to those of
holders of Class B Common Stock, except that holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to 10 votes per share on all matters submitted to a vote of
stockholders. Holders of Class A Common Stock are generally entitled to vote
with the holders of Class B Common Stock as one class on all matters as to which
the holders of Class B Common Stock are entitled to vote. Following the
Offerings, the shares of Class B Common Stock will represent approximately 98.2%
of the combined voting power of all classes of voting stock of the Company
(approximately 97.9% if the Underwriters' over-allotment options are exercised
in full). See "Description of Capital Stock."
Prior to the Offerings, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
of the Class A Common Stock will be between $20.00 and $23.00 per share. For
factors to be considered in determining the initial public offering price, see
"Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application has been made for listing of the Class A Common Stock on the New
York Stock Exchange under the symbol "TSG."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total(3).......................... $ $ $
</TABLE>
- ---------------
(1) The Company and AMR have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting estimated expenses of $1,350,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 2,424,000 shares of Class A Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company has granted the
International Underwriters a similar option with respect to an additional
606,000 shares as part of the concurrent international offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
certificates for the shares will be ready for delivery in New York, New York on
or about , 1996.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
-------------------
The date of this Prospectus is , 1996.
<PAGE> 3
Date: 08/06/96 Page: 1
- --------------------------------------------------------------------------------
GATEFOLD COVER
Logo: The SABRE Group
Head: A Leader in Travel Information Technology
Associate Names (Screened Back):
(Names of Travel Providers)
COPY: These companies represent just a few of the businesses that
utilize the SABRE global distribution system.
LEGAL: IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
<PAGE> 4
Date: 08/06/96 Page: 2
- --------------------------------------------------------------------------------
INSIDE GATEFOLD SPREAD
Copy: The SABRE Group is a world leader in electronic distribution of
travel and is a leading provider of information technology
solutions for the airline industry. The SABRE Group's business
is focused on:
1. Electronic distribution of travel and travel-related
services around the globe, through one of the world's
largest privately-owned, real-time computer systems.
2. Information technology solutions, including software
development and product sales, transactions
processing, and consulting.
More than 350 airlines, 55 car rental agencies, and 30,000 hotel
properties use the comprehensive electronic marketplace created
by SABRE to reach more than 29,000 travel agency locations in
over 70 countries and, through the Internet and On Line
Services, over two million individual consumers worldwide.
CAPTIONS
Travel Agencies
Planet SABRE is designed to be a low cost, high performance,
Windows-based tool for the professional travel agent.
Corporations
SABRE Business Travel Solutions (BTS), scheduled for release in
the fourth quarter of 1996, will give corporations integrated
control over travel booking, policy management, expense
reporting and more.
Individual Consumers
Through Travelocity, millions of consumers can access the power
of SABRE on the Internet at HTTP://WWW.TRAVELOCITY.COM
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, references
herein to the "Company" include The SABRE Group Holdings, Inc. and its
consolidated subsidiaries and, for any period prior to the July 2, 1996
reorganization (the "Reorganization") of the businesses of AMR Corporation
("AMR"), the businesses of AMR constituting The SABRE Group, an operating unit
of AMR.
THE COMPANY
OVERVIEW
The Company is a world leader in the electronic distribution of travel
through its proprietary travel reservation and information system, SABRE(R), and
is the largest electronic distributor of travel in the United States. In
addition, the Company is a leading provider of solutions to the airline industry
and fulfills substantially all of the data processing, network and distributed
systems needs of American Airlines, Inc. ("American") and AMR's other
subsidiaries.
The Company believes that its competitive strengths give it a leadership
position in its markets and a foundation from which to pursue further growth.
During the last 20 years, the Company has developed core competencies that
include a comprehensive knowledge of the travel industry, the capability to
perform high-volume, high-reliability, real-time transactions processing and
expertise in the application of operations research, information technology and
industrial engineering skills to solve complex operations problems. These core
competencies enable the Company to create an efficient electronic marketplace
for the sale and purchase of travel and to offer a broad and deep array of
technological solutions to the airline industry. In providing its products and
services, the Company operates one of the largest, privately-owned, real-time
transactions processing systems in the world in its underground central computer
facility (the "Data Center"), which is connected to over 120,000 computer access
terminals and operates 24 hours a day, seven days a week. The SABRE system
maintains over 52 million air fares (updated five times per business day),
processes an average of 93 million requests for information per day and has
processed up to 4,969 requests for information per second (in July 1996).
The Company has generated consistent annual revenue growth, from $1,097
million in 1991 to $1,530 million in 1995, and operating earnings growth, from
$220 million in 1991 to $380 million in 1995. A majority of the Company's
revenues, 59.1%, is attributable to bookings made by travel agents using SABRE.
The Company has had long-standing relationships with most of its travel agency
subscribers. For example, approximately 97% of the travel agency locations that
were SABRE subscribers at the beginning of 1995 were SABRE subscribers at the
end of 1995. In addition, a significant portion of the Company's revenues, 24.2%
in 1995, is derived from information technology solutions provided to American
and its affiliates. Such services are currently provided to American and its
affiliates pursuant to an Information Technology Services Agreement, dated as of
July 1, 1996 (the "Technology Services Agreement"), which has a term of 10 years
for most services (three and five years for other services). See "Relationship
with AMR and Certain Transactions -- Contractual Arrangements."
The Company's non-affiliated customer revenues have grown at a 13.5%
compound annual rate during the last five years, to $982 million in 1995, and
have grown from 53.9% of total revenues in 1991 to 64.2% in 1995. The Company
expects that the proportion of its revenues represented by non-affiliated
customer revenues will continue to increase. The Company has identified several
opportunities for future revenue growth, including increasing the use of SABRE
outside of the United States, offering new products in emerging distribution
channels, such as corporate direct distribution and the Internet, expanding
participation of travel providers in SABRE and providing technology solutions
products and services more broadly.
3
<PAGE> 6
ELECTRONIC TRAVEL DISTRIBUTION
SABRE and other global distribution systems are the principal means of air
travel distribution in the United States and a growing means of air travel
distribution internationally. Through SABRE, travel agencies, corporate travel
departments and individual consumers ("subscribers") can access information on
and book reservations with airlines and other providers of travel and travel-
related products and services ("associates"). As of June 30, 1996, travel
agencies with more than 29,000 locations in over 70 countries on six continents
subscribed to SABRE, and more than 2.5 million individuals subscribed to
Travelocity(sm) and easySABRE(sm), the Company's consumer-direct products. SABRE
subscribers are able to book reservations with more than 350 airlines and, other
than through Travelocity, to make reservations with more than 55 car rental
companies and more than 190 hotel companies covering approximately 30,000 hotel
properties worldwide.
During 1995, more airline bookings in the United States were made through
SABRE than through any other global distribution system. The Company estimates
that in 1995 over 40% of all airline bookings made through travel agencies in
the United States were made through SABRE. In 1995, 65.8% of the Company's
revenues was generated by the electronic distribution of travel, primarily
through booking fees paid by associates.
INFORMATION TECHNOLOGY SOLUTIONS
The Company is a leading provider of solutions to the airline industry. The
Company also employs its airline expertise to offer solutions to other
industries that face similar complex operations issues, including the airport,
railroad, logistics, hospitality and financial services industries. The
solutions offered by the Company include software development and product sales,
transactions processing and consulting. The Company believes that its suite of
airline-related software solutions is the most comprehensive in the world. In
addition, pursuant to the Technology Services Agreement, the Company provides
data processing, network and distributed systems services to American and AMR's
other subsidiaries, fulfilling substantially all of their information technology
requirements. In 1995, 34.2% of the Company's revenues was generated by the
provision of information technology solutions services.
MARKET POSITION AND STRATEGY
The Company intends to maintain its leadership positions and to expand its
business in electronic travel distribution and information technology solutions.
The Company believes that it has many competitive strengths, including (i) a
strong market position as a world leader in, and the largest provider in the
United States of, the electronic distribution of travel, (ii) established
relationships with travel agencies and providers of travel products and
services, (iii) comprehensive product and service offerings in electronic travel
distribution and information technology solutions, (iv) a comprehensive
knowledge of the travel industry and (v) economies of scale and sizable
investments in its technological infrastructure and network. The Company intends
to use these strengths to achieve continued revenue and earnings growth. Key
components of this strategy include:
- INCREASING PENETRATION IN INTERNATIONAL TRAVEL DISTRIBUTION MARKETS. The
Company believes that the international market for travel and
travel-related products and services presents opportunities for the
Company to expand by building on its existing base in Europe and Latin
America and by pursuing additional opportunities in Asia. The Company
will pursue international opportunities directly and through the
formation of international alliances. The Company's revenues from its
travel distribution products outside the United States have grown at a
compound annual rate of 29.8% during the last five years, to $250
million in 1995.
- EXPANDING AND CUSTOMIZING ASSOCIATE PARTICIPATION. The Company plans to
continue to expand participation in SABRE by associates, such as air
charters, car rental companies, hotels, railroads and tour operators,
and has initiated an effort to increase the value provided
4
<PAGE> 7
to associates by tailoring available participation options to the needs
of different travel providers.
- ENHANCING THE VALUE OF THE TRAVEL DISTRIBUTION PRODUCT TO TRAVEL AGENTS.
The Company plans to maximize the value of its products to travel agents
by increasing the depth and breadth of information available through
SABRE and the ease of use and reliability of its products. The Company
will also continue to develop products to enhance the competitiveness of
its travel agent subscribers. For example, the Company has developed two
user interface products, Turbo SABRE(sm) and Planet SABRE(sm), that
provide travel agencies with greater productivity through data
integration and increased ease of use, respectively.
- PARTICIPATING IN EMERGING DISTRIBUTION CHANNELS. With products such as
Business Travel Solutions(sm) ("BTS"), which is scheduled for release in
the fourth quarter of 1996, and Travelocity, the Company intends to
continue to compete in emerging distribution channels, such as corporate
direct distribution, the Internet and computer on-line services.
- ENHANCING TECHNOLOGY AND OPERATING CAPABILITIES. The Company has
budgeted capital expenditures of over $210 million for 1996, which the
Company anticipates funding with operating cash flow. In addition, the
Company has begun a multi-year development effort, for which the Company
has budgeted over $100 million during the next five years, to improve
SABRE's core operating capabilities. The goals of this development
effort are to accelerate new product development, increase flexibility,
power and functionality for subscribers and associates, improve data
management capabilities, raise capacity levels and lower operating
costs.
- ENHANCING THE COMPANY'S POSITION IN INFORMATION TECHNOLOGY SOLUTIONS.
The Company intends to expand its information technology solutions in
the airline industry and to employ its airline industry expertise to
continue to expand into other industries with similar complex operations
issues.
- PURSUING STRATEGIC ACQUISITIONS AND ALLIANCES. The Company expects to
enhance its competitive position through strategic acquisitions of and
alliances with businesses that augment the Company's product offerings
or provide entry into new markets or access to new technologies. The
Company believes that it will generate sufficient cash flow beyond
internal capital requirements to fund significant acquisitions and
alliances in the future. During 1995, the Company generated
approximately $215 million of net cash flow from operating activities,
after its internal capital requirements were met.
RELATIONSHIP WITH AMR
The Company is a newly-formed Delaware corporation and, prior to the
Offerings, a direct wholly-owned subsidiary of AMR. AMR is also the parent
corporation of American and other subsidiaries. Upon completion of the
Offerings, AMR will own 100% of the outstanding Class B common stock, par value
$.01 per share, of the Company (the "Class B Common Stock"), representing
approximately 98.2% of the combined voting power of all classes of voting stock
of the Company (approximately 97.9% if the Underwriters' over-allotment options
are exercised in full). As long as AMR beneficially owns a majority of the
combined voting power, it will have the ability to elect all of the members of
the Board of Directors of the Company (the "Board of Directors") and thereby
ultimately to control the management and affairs of the Company.
Pursuant to the Reorganization consummated on July 2, 1996, the Company
became the successor to the businesses of The SABRE Group which were formerly
operated as divisions or subsidiaries of American or AMR. In connection with the
Reorganization, the Company issued an $850 million subordinated debenture (the
"Debenture") payable to American, which was transferred to AMR and the amount of
which exceeds the historical book value of the assets contributed by American
and AMR to the Company by $120.9 million. The Company will have $482 million of
5
<PAGE> 8
long-term indebtedness outstanding after approximately $368 million of the net
proceeds of the Offerings is used to repay a portion of such indebtedness. See
"Use of Proceeds" and Pro Forma Condensed Consolidated Financial Information.
The Company in the past has been and will continue to be dependent upon American
and its affiliates for a substantial portion of the Company's business. In
connection with the Reorganization, the Company has entered into certain
agreements with AMR and its affiliates (the "Affiliate Agreements"), the
financial terms of which were generally effective as of January 1, 1996. Those
agreements include the Technology Services Agreement pursuant to which the
Company will provide information technology services to American for a term of
10 years for most services (three and five years for others). On a pro forma
basis, giving effect to the Reorganization and the Affiliate Agreements as
though effective as of January 1, 1995, the Company's revenues for 1995 were
$1,463 million, representing a decrease of $66 million from historical 1995
revenues, and net income was $127 million, representing a decrease of $99
million from historical 1995 net income. See "Risk Factors -- Dependence on
American Airlines," "Risk Factors -- Relationship with AMR," "Relationship with
AMR and Certain Transactions -- Contractual Arrangements" and Pro Forma
Condensed Consolidated Financial Information.
6
<PAGE> 9
THE OFFERINGS
The offering hereby of 16,160,000 shares of Class A common stock, par value
$.01 per share, of the Company (the "Class A Common Stock" and, collectively
with the Class B Common Stock, the "Common Stock") initially being offered in
the United States (the "U.S. Offering") and the offering of 4,040,000 shares of
Class A Common Stock initially being offered in a concurrent international
offering outside of the United States (the "International Offering") are
collectively referred to as the "Offerings." The closing of each Offering is
conditioned upon the closing of the other Offering.
<TABLE>
<S> <C>
Class A Common Stock offered by the
Company(1)
U.S. Offering......................... 16,160,000 shares
International Offering................ 4,040,000 shares
Total......................... 20,200,000 shares
Common Stock to be outstanding after the
Offerings(1)
Class A Common Stock.................. 20,200,000 shares
Class B Common Stock.................. 107,374,000 shares
Total......................... 127,574,000 shares
Use of proceeds(2)...................... Approximately $368 million will be used to
repay a portion of the Debenture to AMR.
The remaining net proceeds will be used for
general corporate purposes.
Proposed NYSE symbol.................... TSG
Voting rights........................... The holders of Class A Common Stock
generally have rights identical to holders
of Class B Common Stock, except that
holders of Class A Common Stock are
entitled to one vote per share and holders
of Class B Common Stock are entitled to 10
votes per share. The Class A Common Stock
and Class B Common Stock generally will
vote together as a single class on all
matters except as otherwise required by
Delaware law. See "Description of Capital
Stock -- Common Stock -- Voting Rights."
Under certain circumstances, Class B Common
Stock will automatically convert to Class A
Common Stock. See "Relationship with AMR
and Certain Transactions" and "Description
of Capital Stock -- Common Stock -- Con-
version."
</TABLE>
- ---------------
(1) Exclusive of up to 3,030,000 shares of Class A Common Stock subject to
over-allotment options granted by the Company to the Underwriters. See
"Underwriting."
(2) After deducting the underwriting discount and estimated expenses of the
Offerings, and assuming no exercise of the Underwriters' over-allotment
options.
7
<PAGE> 10
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
Set forth below are the summary historical consolidated financial and other
data of the Company for the periods and dates indicated. This information should
be read in conjunction with the Consolidated Financial Statements, and the
related notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996(4)
-------- -------- --------- -------- --------- --------- -------
(IN MILLIONS, EXCEPT OTHER DATA WHERE INDICATED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues........................... $1,097.1 $1,173.8 $ 1,258.2 $1,406.7 $ 1,529.6 $ 767.5 $838.3
Operating Expenses................. 876.9 929.5 1,004.5 1,056.5 1,149.2 548.0 640.7
-------- -------- --------- -------- --------- --------- -------
Operating Income................... $ 220.2 $ 244.3 $ 253.7 $ 350.2 $ 380.4 $ 219.5 $197.6
Other Income (Expense), net(2)..... (7.6) (173.2) (84.7) (26.1) (10.3) (10.4) (2.4 )
-------- -------- --------- -------- --------- --------- -------
Income Before Income Taxes......... $ 212.6 $ 71.1 $ 169.0 $ 324.1 $ 370.1 $ 209.1 $195.2
Income Taxes....................... 77.6 38.8 69.0 126.9 144.2 82.0 76.1
-------- -------- --------- -------- --------- --------- -------
Income Before Cumulative Effect of
Accounting Change................ $ 135.0 $ 32.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
Cumulative Effect of Accounting
Change(3)........................ -- 19.0 -- -- -- -- --
-------- -------- --------- -------- --------- --------- -------
Net Earnings....................... $ 135.0 $ 13.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
======== ======== ========= ======== ========= ========= =======
BALANCE SHEET DATA (AT END OF
PERIOD)(1):
Current Assets..................... $ 55.1 $ 91.1 $ 107.1 $ 404.3 $ 271.2 $ 259.2 $449.6
Total Assets....................... 558.8 550.1 584.3 873.5 729.4 737.8 855.8
Current Liabilities(2)............. 108.5 154.2 346.4 503.2 218.6 176.5 225.8
Stockholders' Equity............... 411.0 244.7 158.0 289.5 432.1 477.8 551.2
OTHER DATA(1):
Operating Income as a Percentage of
Revenue.......................... 20.1% 20.8% 20.2% 24.9% 24.9% 28.6% 23.6%
Percentage of Revenue from
Non-affiliated Customers......... 53.9% 55.0% 56.6% 58.1% 64.2% 64.4% 68.8%
Reservations Booked Using
SABRE............................ 220.2 255.3 275.2 311.1 325.5 170.6 181.2
Net Cash Provided by
Operating Activities............. $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $ 168.3 $143.2
Net Cash Used for Investing
Activities....................... $ (183.0) $ (122.4) $ (171.7) $ (177.3) $ (174.7) $ (105.4) $(66.6 )
Net Cash Provided by (Used for)
Financing Activities(5).......... $ (130.9) $ (204.7) $ (160.7) $ 215.3 $ (385.2) $ (246.4) $ 15.7
Capital Expenditures............... $ 171.0 $ 128.8 $ 176.6 $ 168.9 $ 164.6 $ 104.4 $ 82.0
</TABLE>
- ---------------
(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.
(2) The operating results for the years ended December 31, 1992 and 1993 include
a provision for losses of $165 million and $71 million, respectively,
associated with a reservations system project and resolution of related
litigation. The balance sheets as of December 31, 1992 and 1993 include
current liabilities for the losses of $28 million and $133 million,
respectively. See Note 5 to the Consolidated Financial Statements.
(3) Effective January 1, 1992, the Company adopted FAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," changing the method of
accounting for these benefits. The cumulative effect of adopting FAS 106 as
of January 1, 1992 was a charge of $19 million, net of income taxes of $10
million.
(4) The operating results for the six months ended June 30, 1996 reflect the
impact of the Affiliate Agreements, the financial terms of which were
effective as of January 1, 1996. See Note 11 to the Consolidated Financial
Statements.
(5) Consists of advances to or from affiliates and contributions from or
distributions to affiliates.
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<PAGE> 11
SUMMARY PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
Set forth below are the summary pro forma consolidated financial and other
data of the Company for the periods indicated. This information should be read
in conjunction with the Consolidated Financial Statements, and the related notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Pro Forma Condensed Consolidated Financial
Information, and the related notes thereto, included elsewhere in this
Prospectus. The pro forma financial information below assumes the Reorganization
and Offerings were consummated, and the Affiliate Agreements were effective, on
January 1, 1995 with respect to the income statement data and at June 30, 1996
with respect to the balance sheet data. The pro forma information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if the
transactions had been consummated at the assumed dates, nor is it necessarily
indicative of future results of operations.
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR THE
REORGANIZATION, THE AFFILIATE
AGREEMENTS AND THE OFFERINGS
----------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1995 1995 1996
------------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.................................................... $1,463.3 $736.7 $832.2
Operating Expenses.......................................... 1,178.7 561.2 635.1
-------- ------ ------
Operating Income............................................ $ 284.6 $175.5 $197.1
Other Income (Expense), net................................. (39.8) (25.1) (17.3)
-------- ------ ------
Income Before Income Taxes.................................. $ 244.8 $150.4 $179.8
Income Taxes................................................ 95.4 59.1 70.2
-------- ------ ------
Net Earnings................................................ $ 149.4 $ 91.3 $109.6
======== ====== ======
Pro Forma Earnings Per Share(2)............................. $ 1.17 $ .72 $ .86
======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
AS ADJUSTED
FOR THE
REORGANIZATION AS FURTHER
AND THE ADJUSTED
AFFILIATE FOR THE
AGREEMENTS OFFERINGS
-------------- ----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA(1):
Current Assets.................................................... $ 449.6 $ 490.5
Total Assets...................................................... 1,049.0 1,090.0
Current Liabilities............................................... 171.7 171.7
Debenture Payable to AMR.......................................... 850.0 481.8
Stockholders' Equity (Deficit).................................... (120.9) 288.2
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR THE
REORGANIZATION, THE AFFILIATE
AGREEMENTS AND THE OFFERINGS
-------------------------------
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ---------------
1995 1995 1996
------------ ----- -----
<S> <C> <C> <C>
OTHER DATA(1):
Operating Income as a Percentage of Revenue.................... 19.4% 23.8% 23.7%
Percentage of Revenue from Non-affiliated Customers............ 67.1% 67.1% 69.3%
</TABLE>
- ---------------
(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.
(2) The Company was formed on June 25, 1996 and became a wholly-owned subsidiary
of AMR on July 2, 1996 in connection with the Reorganization. As part of the
Reorganization, AMR caused to be transferred to the Company the subsidiaries
and divisions through which AMR has historically conducted its electronic
travel distribution and information technology solutions operations. The pro
forma earnings per common share calculation is based upon weighted average
common shares outstanding after the Reorganization and the Offerings. See
Notes 10 and 11 to the Consolidated Financial Statements.
9
<PAGE> 12
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors:
DEPENDENCE ON AMERICAN AIRLINES
The Company's revenues and earnings are highly dependent on its business
with American and its affiliates. In 1995, 35.8% of the Company's revenues was
generated by information technology solutions provided to American and its
affiliates and through booking fees paid by American for bookings on American
through SABRE (32.9% on a pro forma basis after giving effect to the financial
impact of the Affiliate Agreements). Pursuant to certain of the Affiliate
Agreements, the Company provides information technology solutions to American,
gains access to SABRE subscribers such as travel agencies and corporations
through marketing services provided by American and, under certain
circumstances, lends to and borrows from American. See "Relationship with AMR
and Certain Transactions." American is the largest single travel provider in
SABRE, generating booking fees that account for a substantial portion of the
Company's revenues.
The Company derives a substantial portion of its revenues from the
Technology Services Agreement, which has a base term that expires on June 30,
2006 for a majority of the services performed by the Company, with terms
expiring June 30, 1999 and June 30, 2001 for services that represented 5.7% and
0.5%, respectively, of the Company's total revenues for the six months ended
June 30, 1996. American is generally required to continue purchasing from the
Company services currently performed under the Technology Services Agreement for
the term applicable to such service, as specified in the preceding sentence. New
services, however, including most new applications development work, can be
competitively bid by American, with the Company having a right to bid on most of
such services. There can be no assurance that American will purchase new
services from the Company or that it will continue to purchase services from the
Company upon expiration of the Technology Services Agreement.
The Technology Services Agreement also provides for annual price
adjustments. For certain prices, adjustments are made according to formulas
that, commencing in 1998, are reset every two years and that may take into
account the market for similar services provided by other companies.
Consequently, downward market pressures on fees generally charged by computer
outsourcers or increased price competition for provision of services to the
airline industry, both of which the Company believes could occur, would have a
negative impact on the Company's future revenues under the Technology Services
Agreement.
Through subcontracting arrangements with American (the "Canadian
Subcontract"), the Company provides data processing and network and distributed
systems services to Canadian Airlines International ("Canadian"). American has
guaranteed payment to the Company of the fees the Company will be entitled to
receive pursuant to the terms of the Canadian Subcontract from Canadian in
payment for all such services actually performed by the Company. In addition,
American has agreed to reimburse the Company for any capitalized costs incurred
in connection with the implementation of such systems that remain unamortized in
the event of the termination or expiration of such subcontracting arrangement or
for a write down of such costs.
Pursuant to a Marketing Cooperation Agreement (the "Marketing Cooperation
Agreement"), American will provide marketing support for the Company's products
targeted to travel agencies until June 30, 2006 and will support the Company's
promotion of BTS until September 30, 2001 and the Company's promotion of
Travelocity and easySABRE until June 30, 2001. The Company relies on these
services to support its relationship with travel agents who may utilize SABRE
and to promote its products to those corporations and individuals who are
customers of American. With limited exceptions, however, American is not
restricted from distributing its airline products and services directly to
corporate or individual consumers through the Internet or otherwise. For
example, American has recently announced AAccess, an Internet product designed
to allow
10
<PAGE> 13
American to electronically distribute its products directly. American also
participates in other global distribution systems.
Under a credit agreement between the Company and American, dated as of July
1, 1996 (the "Credit Agreement"), designed to permit AMR to manage efficiently
the cash needs of its subsidiaries, the Company is required to lend to American
up to $100 million of excess cash if required by American to meet American's
daily cash needs, and American is required to lend to the Company (either from
its excess cash or from external borrowing facilities) up to $300 million if
required by the Company to meet the Company's daily cash needs. The Company will
be subject to the credit risk of American to the extent American makes
borrowings under the Credit Agreement.
American's collective bargaining agreement with the Allied Pilots
Association, the union that represents all of American's pilots (the "APA"),
became amendable on August 31, 1994. In January 1996, the APA filed a petition
with the National Mediation Board (the "NMB") to appoint a federal mediator. A
mediator was appointed and meetings with the APA, NMB and American were held
commencing in March 1996. On September 2, 1996, American and the APA announced
that they had concluded negotiations on a new labor agreement, subject to
ratification by the Board of Directors of the APA and the APA's members.
If American were to terminate any of the Affiliate Agreements discussed
above early, fail or otherwise become unable to fulfill its principal
obligations thereunder or determine not to renew certain of the Affiliate
Agreements, the Company's financial condition and results of operations would be
materially adversely affected.
COMPETITION
COMPETITION IN ELECTRONIC TRAVEL DISTRIBUTION
The markets in which the Company's electronic travel distribution business
operates are highly competitive. The Company's electronic travel distribution
business competes primarily against other large and well-established global
distribution systems. SABRE's principal competitors include Amadeus/System One,
Galileo/Apollo and Worldspan*, each of which is owned by a separate consortium
of airlines and offers many services similar to the Company's services.
Moreover, although certain barriers exist for any new global distribution
system -- barriers such as the need for significant capital investment to
acquire or develop the hardware, software and network facilities necessary to
operate effectively a global distribution system -- the Company is always faced
with the potential of new competitors, particularly as new channels for travel
distribution develop. Factors affecting competitive success of global
distribution systems include depth and breadth of information, ease of use,
reliability, subscriber and booking fees, service and incentives to travel
agents and range of products available to travel providers, travel agents and
consumers. The Company believes it competes effectively with respect to each of
these factors. Increased competition, however, could require the Company to
reduce prices, to increase spending on marketing or product development or
otherwise to take actions that might adversely affect its operating earnings.
Competitive factors could also lead the Company to change its billing
practices in response to pressure from travel providers who list their products
and services in SABRE. A change in billing practices might adversely affect the
Company's financial condition and results of operations.
Competition to attract and retain travel agent subscribers is particularly
intense. If the Company were unable to compete effectively and a portion of the
Company's travel agency subscribers accounting for a significant percentage of
bookings through SABRE were to cease using SABRE and begin utilizing other
systems, the Company's financial condition and results of operations would be
materially adversely affected.
- ---------------
* Amadeus, System One, Galileo, Apollo and Worldspan are trademarks of their
respective owners and are not trademarks of the Company.
11
<PAGE> 14
The Company believes that the potential for growth in the number of new
travel agent subscribers exists primarily outside the United States, where the
Company's market recognition is not as well developed as in the United States. A
number of trade barriers erected by foreign travel providers -- often
government-owned -- have restricted the ability of the Company to gain market
share abroad. These providers have on occasion precluded SABRE from offering
their products and services, thus making SABRE's product less attractive to
travel agencies in those markets than other global distribution systems that
have such capability. Additionally, some international markets are served by
other global distribution systems that have substantially greater market
presence than the Company or long-standing relationships with travel agency
subscribers or associates.
Although distribution through travel agents continues to be the primary
method of travel distribution, new channels are developing for distribution
directly to businesses and consumers through computer on-line services, the
Internet and private networks. The Company faces competition in these channels
not only from its principal competitors but also from possible new entrants in
the sale of travel products and also from travel providers, including American,
who distribute their products directly. For example, in July 1996, American
Express Co. and Microsoft Corp. announced an on-line travel booking service for
corporations, which they have scheduled for release in the first half of 1997.
The Company expects that this on-line travel booking service, while only in the
developmental stage, will eventually directly compete with BTS. In addition, the
Internet permits consumers to have direct access to travel providers, thereby
by-passing both traditional travel agents and global distribution systems such
as SABRE. Although the Company has positioned its BTS, Travelocity and easySABRE
products to compete in the emerging distribution channels, there can be no
assurance that the Company's products will compete successfully or that the
failure to compete successfully will not have a material adverse effect on the
financial condition and results of operations of the Company.
COMPETITION IN INFORMATION TECHNOLOGY SOLUTIONS
The Company's solutions business competes both against full-service
providers of technology outsourcing services and solutions companies, some of
which have considerably greater financial resources than the Company, and
against smaller companies that offer a limited range of services. Among the
Company's full service competitors are Electronic Data Systems, IBM/ISSC,
Unisys, Andersen Consulting and Lufthansa Systems. Many of these competitors
have formed strategic alliances with large companies in the travel industry, and
the Company's access to such potential customers is thus limited.
DEPENDENCE UPON TRAVEL INDUSTRY; SEASONALITY
The Company's earnings can be significantly affected by events in the
travel industry, from which the Company derives substantially all of its
revenues. Because a significant portion of those revenues are derived from
airline bookings, the Company's earnings are especially sensitive to events that
affect airline travel and the airlines that participate in the SABRE system. Any
event, including political instability, armed hostilities, recession, excessive
inflation, strikes, lockouts or other labor disturbances or other adverse
occurrence, that results in a significant decline in sales of travel products
through SABRE or in an overall downturn in the business and operations of the
Company's customers in the travel industry could have a material adverse effect
on the financial condition and results of operations of the Company.
The travel industry is seasonal in nature. Bookings, and thus fees charged
for bookings through SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to early bookings by customers for travel
during the holiday season and due to a decrease in business travel during the
holiday season.
12
<PAGE> 15
CHANGING TECHNOLOGY
The Company's future results will depend in part upon its ability to make
timely and cost-effective enhancements and additions to its technology and to
introduce new products and services that meet customer demands. The success of
current and new product and service offerings is dependent on several factors,
including proper identification of customer needs, cost, timely completion and
introduction, differentiation from offerings of the Company's competitors and
market acceptance. In addition, maintaining flexibility to respond to
technological and market dynamics may require substantial expenditures and lead
time. There can be no assurance that the Company will successfully identify and
develop new products or services in a timely manner, that products, technologies
or services developed by others will not render the Company's offerings obsolete
or noncompetitive or that the technologies in which the Company focuses its
research and development investments will achieve broad acceptance in the
marketplace.
DEPENDENCE ON FACILITIES AND NETWORK
SABRE and the Company's data processing and transactions processing
services are dependent on the Data Center. Although the Company has taken what
it considers to be sufficient precautions to protect this facility, a natural
disaster or other calamity that causes significant damage to the facility would
have a material adverse effect on the financial condition and results of
operations of the Company. See "Business -- Facilities."
The Company relies on several communications companies, both in the United
States and internationally, to provide network access between the Data Center
and SABRE access terminals. In particular, the Company relies upon Societe
Internationale de Telecommunications Aeronautiques ("SITA"), which is owned by a
consortium of airlines, including American, to maintain and develop its data
communications in the United States and Canada and to provide network services
in almost all locations served by the Company. Any failure or inability of SITA
or other companies to provide and maintain network access could have a material
adverse effect on the financial condition and results of operations of the
Company.
ACQUISITIONS AND INVESTMENTS
One component of the Company's strategy is to make strategic acquisitions
and to form strategic alliances. There can be no assurance that any acquisition
will be made, that any alliance will be formed, and, if any acquisitions or
alliances are so made or formed, that they will be successful. In addition,
acquisitions that the Company may make will involve risks, including the
successful integration and management of acquired technology, operations and
personnel. The integration of acquired businesses may also lead to the loss of
key employees of the acquired companies and diversion of management attention
from ongoing business concerns.
RELATIONSHIP WITH AMR
AMR currently owns all of the outstanding capital stock of the Company. See
"Relationship with AMR and Certain Transactions." Upon completion of the
Offerings, AMR will own 100% of the Company's outstanding Class B Common Stock,
representing approximately 98.2% of the combined voting power of all classes of
voting stock of the Company (approximately 97.9% if the Underwriters'
over-allotment options are exercised in full). As long as AMR beneficially owns
a majority of the combined voting power, it will have the ability to elect all
of the members of the Board of Directors and thereby ultimately to control the
management and affairs of the Company, including any determinations with respect
to acquisitions, dispositions, borrowings, issuances of Common Stock or other
securities of the Company or the declaration and payment of any dividends on the
Common Stock. In addition, AMR will be able to determine the outcome of any
matter submitted to a vote of the Company's stockholders for approval and to
cause or prevent a change in control of the Company.
13
<PAGE> 16
Although, in negotiating the Affiliate Agreements between the Company and
AMR, American and AMR's other subsidiaries, the parties endeavored to implement
market-based agreements, as a result of AMR's control of the Company, none of
such agreements resulted from "arm's-length" negotiations. There can be no
assurance that the Company would not have received more favorable terms from an
unaffiliated party. For a description of the Affiliate Agreements, see
"Relationship with AMR and Certain Transactions."
The Restated Certificate of Incorporation of the Company (the "Certificate
of Incorporation") provides that any amendment or termination of any agreement
or arrangement, or any new agreement or arrangement, between the Company and AMR
or its affiliates effected with the approval of a majority of the Company's
directors who are not officers of either the Company or AMR or directors of AMR
(the "Disinterested Directors"), or consistent with guidelines or standards
approved by the Disinterested Directors, or approved by the holders of a
majority of the Company's outstanding voting stock (not including that owned by
AMR) shall be deemed fair to the Company and its stockholders, provided that, if
such approval is not obtained, no presumption shall arise that such amendment or
termination (or new agreement) is not fair to the Company and its stockholders.
The Certificate of Incorporation also contains provisions allocating corporate
opportunities between AMR and the Company based primarily on the relationship to
the Company and AMR of the individual to whom an opportunity is presented. See
"Description of Capital Stock -- Certificate of Incorporation and Bylaw
Provisions."
Conflicts of interest may arise between the Company and AMR in a number of
areas relating to their past and ongoing relationships, including the nature and
quality of services rendered by the Company to AMR and its affiliates or by AMR
and its affiliates to the Company, potential competitive business activities,
shared marketing functions, tax and employee benefit matters, indemnity
agreements, registration rights, sales or distributions by AMR of all or any
portion of its ownership interest in the Company or AMR's ability to control the
management and affairs of the Company. There can be no assurance that AMR and
the Company will be able to resolve any potential conflict or that, if resolved,
the Company would not receive more favorable resolution if it were dealing with
an unaffiliated party. In addition, certain of the Affiliate Agreements contain
specific procedures for resolving disputes between the Company and AMR with
respect to the subject matter of those agreements. There can be no assurance
that more favorable results to the Company would not be obtained under different
procedures.
For as long as AMR desires to include the Company in its consolidated group
for federal income tax purposes, which requires that AMR own at least 80% of the
total voting power and stock with a value equal to at least 80% of the total
value of the Company, the Company may be constrained in its ability to raise
equity capital or to issue Common Stock in connection with acquisitions. For any
period of time that the Company continues to be part of AMR's consolidated
group, it will be jointly and severally liable for the federal income tax
liability of other members of the consolidated group and for funding and
termination liabilities applicable to the group's tax-qualified employee benefit
plans.
AMR could decide to sell or otherwise dispose of all or a portion of its
Class B Common Stock (or, upon conversion of the Class B Common Stock, the
resulting Class A Common Stock) at some future date, and there can be no
assurance that, in any transfer by AMR of a controlling interest in the Company,
any holders of Class A Common Stock will be allowed to participate in such
transaction or will realize any premium with respect to their shares of Class A
Common Stock. Sales or distribution by AMR of substantial amounts of Class B
Common Stock (or Class A Common Stock) in the public market or to its
stockholders could adversely affect prevailing market prices for the Class A
Common Stock. See "-- Shares Available for Future Sale," "Relationship with AMR
and Certain Transactions" and "Shares Eligible for Future Sale."
14
<PAGE> 17
INTERNATIONAL EXPANSION AND OPERATIONS
Pursuit of international growth opportunities may require significant
investments for an extended period before returns on such investments, if any,
are realized, and may require support of United States or local government
authorities. See "Business -- Electronic Travel Distribution -- Industry
Regulation." There can be no assurance as to the extent, if at all, that the
Company's plans to expand in international markets will be successful. The
Company's current international activities and prospects could be adversely
affected by factors such as reversals or delays in the opening of foreign
markets, exchange controls, currency and political risks and taxation. In
addition, the laws and policies of the United States affecting foreign trade,
investment and taxation could also adversely affect the Company's international
operations and growth.
UNITED STATES REGULATIONS; FUTURE PARTICIPATION OF CERTAIN AIRLINE ASSOCIATES IN
SABRE
Regulations promulgated by the U.S. Department of Transportation (the
"DOT") govern the relationship of SABRE with airlines and travel agencies. These
regulations (the "U.S. Regulations") generally require airlines affiliated with
global distribution systems to participate in the United States in other global
distribution systems that are affiliated with other airlines. More specifically,
the U.S. Regulations require any airline doing business in the United States
that owns five percent or more of a global distribution system (a
"GDS-Affiliated Airline"), to participate in any other global distribution
system doing business in the United States which is offered by an airline or an
airline affiliate (an "Airline-Affiliated System") at the same level as it does
in the system it owns and to provide data on its flights to the other
Airline-Affiliated System that is as complete, accurate and timely as the
information given to its own system, as long as the other Airline-Affiliated
System offers terms for participation that are commercially reasonable. Although
the Company believes the U.S. Regulations will be extended, the U.S. Regulations
are currently scheduled to expire on December 31, 1997. See
"Business -- Electronic Travel Distribution -- Industry Regulations."
If (i) SABRE were no longer offered or marketed to travel agents by any
airline or airline affiliate or (ii) the U.S. Regulations were to expire (or
were to be revised to eliminate the participation requirement described above),
GDS-Affiliated Airlines, such as Delta Air Lines, United Airlines, USAir,
Continental Airlines and British Airways, would no longer be legally required to
participate in SABRE at any level. Although the Company does not anticipate that
any of these airlines would, as a practical matter, discontinue listing their
flights in SABRE under such circumstances, there can be no assurance that any of
the airlines would continue to participate in SABRE, absent any legal
requirement, on the same commercial terms that prevail today. Decisions by
several airlines to discontinue listing their services in SABRE or a significant
reduction in revenues resulting from such decisions or resulting from the
absence of any legal requirement compelling participation could materially
adversely affect the financial condition and results of operations of the
Company.
NEWLY FORMED LEGAL ENTITY; HOLDING COMPANY STRUCTURE
The Company has existed in its present form only since July 2, 1996. Prior
to such time, although the businesses of the Company had been accounted for as a
separate unit of AMR, the Company had not operated as a separate legal entity.
The financial information included herein may not necessarily reflect what the
results of operations, financial position and cash flows would have been had the
Company been a separate entity during the periods presented.
In addition, the Company is a holding company and will thus rely primarily
on dividends and other intercompany transfers of funds from its subsidiaries for
any repayment of debt or, in the event dividends are declared, any payment of
dividends to the Company's stockholders. See "Dividend Policy." Although the
Company intends to retain its earnings to finance future growth and not to
declare any cash dividends in the foreseeable future, and although there are
currently no material contractual restrictions or legal prohibitions on
dividends or other intercompany transfers of funds to the Company by its
subsidiaries, the Company's subsidiaries could become subject to
15
<PAGE> 18
contractual restrictions or legal or regulatory impediments to the making of
dividends or such other transfers to the Company.
INTELLECTUAL PROPERTY RIGHTS
Some of the Company's significant assets are its software and other
proprietary information and intellectual property rights. The Company relies on
a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect these assets. The Company's
software and related documentation, however, are protected principally under
trade secret and copyright laws, which afford only limited protection. In
addition, the laws of some foreign jurisdictions may provide less protection
than the laws of the United States for the Company's proprietary rights.
Unauthorized use of the Company's intellectual property could have a material
adverse effect on the Company, and there can be no assurance that the Company's
legal remedies would adequately compensate it for the damages to its business
caused by such use.
The Company does not believe that any of its products infringe upon the
proprietary rights of third parties in any material respect. There can be no
assurance, however, that third parties will not claim infringement by the
Company with respect to current or future products. Any such claim, with or
without merit, could result in substantial costs and diversion of management
resources, and a successful claim could effectively block the Company's ability
to use or license its products in the United States or abroad or otherwise have
a material adverse effect on the financial condition and results of operations
of the Company.
Licenses for a number of software products have been granted to the
Company. Certain of these licenses, individually and in the aggregate, are
material to the business of the Company. Although management believes that the
risk that the Company will lose any material license is remote, any such loss
could have a material adverse effect on the financial condition and results of
operations of the Company. See "Business -- Intellectual Property."
POTENTIAL ANTI-TAKEOVER CONSIDERATIONS
Under the Company's Certificate of Incorporation, the Board of Directors
has the authority, without action by the Company's stockholders, to fix certain
terms and issue shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and to issue rights to purchase securities or other property
from the Company. Actions of the Board of Directors pursuant to this authority
may have the effect of delaying, deterring or preventing a change in control of
the Company. Other provisions in the Company's Certificate of Incorporation and
in the Restated Bylaws (the "Bylaws") impose procedural and other requirements,
including the requirement that a vote of more than 80% of the voting stock of
the Company is necessary for stockholders to amend the Bylaws and certain
provisions of the Certificate of Incorporation. These requirements could make it
more difficult to effect certain corporate actions, including replacing
incumbent directors. In addition, the Board of Directors is divided into three
classes, each of which is to serve for a staggered three-year term after the
initial classification and election, and, after AMR shall cease to be the
beneficial owner of an aggregate of at least a majority of the voting power of
the Company, incumbent directors may not be removed without cause, all of which
may make it more difficult for a third party to gain control of the Board of
Directors. With certain exceptions, Section 203 of the Delaware General
Corporation Law (the "DGCL") imposes certain restrictions on mergers and other
business combinations between the Company and any holder of 15% or more of the
voting stock of the Company. Section 203 does not apply to AMR's interest in the
Company. See "Description of Capital Stock -- Certificate of Incorporation and
Bylaw Provisions."
SHARES AVAILABLE FOR FUTURE SALE
Subject to applicable law, AMR will be free to sell any and all of the
shares of Common Stock it owns after completion of the Offerings. AMR and the
Company have agreed, however, subject to
16
<PAGE> 19
certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock (other than the shares offered hereby or pursuant to employee stock option
plans existing, or on conversion or exchange of convertible or exchangeable
securities outstanding, on the date of this Prospectus) for a period of 180 days
after the date of this Prospectus without the prior written consent of Goldman,
Sachs & Co., on behalf of the Underwriters. In connection with the Offerings,
the Company and AMR have entered into an agreement which provides that AMR will
have certain rights to have shares of Common Stock owned by it after the
Offerings registered by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), in order to permit the public sale of such shares. In
addition, beginning two years after AMR acquired its shares of Common Stock, AMR
will be permitted to sell in the public market specified amounts of such Common
Stock without registration pursuant to Rule 144 under the Securities Act ("Rule
144"). No prediction can be made as to the effect, if any, that future sales of
Common Stock by AMR, or the availability of Common Stock for future sale, will
have on the market price of the Class A Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices for the Class
A Common Stock. See "Shares Eligible for Future Sale."
ABSENCE OF A PRIOR PUBLIC MARKET; VOLATILITY OF PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price of the Class A Common
Stock will be determined through negotiation between the Company and the
Underwriters and may not be indicative of the market price for the Class A
Common Stock after the Offerings. See "Underwriting."
The market price for the Class A Common Stock may be highly volatile. The
Company believes that factors such as announcements by it, or by its competitors
or travel providers, of quarterly variances in financial results could cause the
market price of the Class A Common Stock to fluctuate substantially. In
addition, the stock market may experience extreme price and volume fluctuations
which often are unrelated to the operating performance of specific companies.
Market fluctuations or perceptions regarding the Company's industry, as well as
general economic or political conditions, may adversely affect the market price
of the Class A Common Stock.
17
<PAGE> 20
THE COMPANY
The Company is a holding company incorporated in Delaware on June 25, 1996.
The SABRE Group, Inc. is the sole direct subsidiary of the Company and, pursuant
to the Reorganization, is the successor to the businesses of The SABRE Group,
which were previously operated as divisions or subsidiaries of American or AMR.
Upon completion of the Offerings, AMR will own 100% of the outstanding
Class B Common Stock, representing approximately 84.2% of the economic interest
in the Company and approximately 98.2% of the combined voting power of all
classes of voting stock of the Company (approximately 82.2% of the economic
interest and 97.9% of the combined voting power if the Underwriters'
over-allotment options are exercised in full). As long as AMR beneficially owns
a majority of the combined voting power, it will have the ability to elect all
of the members of the Board of Directors of the Company and thereby ultimately
to control the management and affairs of the Company. In connection with the
Reorganization, the Company issued the $850 million Debenture to American, which
was transferred to AMR as a dividend. Approximately $368 million of the net
proceeds of the Offerings will be used to repay a portion of such indebtedness.
See "Use of Proceeds" and Pro Forma Condensed Consolidated Financial
Information. The Company has been and will continue to be dependent upon
American and its affiliates for a substantial portion of the Company's business.
In connection with the Reorganization, the Company entered into the Affiliate
Agreements, including the Technology Services Agreement pursuant to which the
Company will provide information technology services to American for a term of
10 years for most services (three and five years for other services). See "Risk
Factors -- Dependence on American Airlines," "Risk Factors -- Relationship with
AMR" and "Relationship with AMR and Certain Transactions -- Contractual
Arrangements."
The Company's executive offices are located at 4255 Amon Carter Boulevard,
Fort Worth, Texas 76155, and its telephone number is (817) 931-7300.
USE OF PROCEEDS
The Company will receive approximately $409.1 million from the sale of the
20.2 million shares of Class A Common Stock in the Offerings based on an assumed
price to the public of $ per share (after deducting underwriting
commissions and estimated expenses payable by the Company). Approximately $368
million of the net proceeds of the Offerings will be used to repay a portion of
the indebtedness represented by the Debenture payable by the Company to AMR. The
Debenture, which matures on September 30, 2004, bears interest, payable
semiannually, at a rate based on the sum of the six-month London Interbank
Offered Rate plus a margin determined by the Company's senior unsecured
long-term debt rating or, if such debt rating is not available, upon the
Company's ratio of debt to total capital. The Debenture was issued in connection
with the Reorganization and exceeds the historical book value of the assets
contributed by American and AMR to the Company by $120.9 million. See
"Relationship with AMR and Certain Transactions." The remaining net proceeds
will be used for general corporate purposes.
18
<PAGE> 21
DIVIDEND POLICY
The Company currently intends to retain its earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Any future determination as to the
payment of dividends will depend upon the future results of operations, capital
requirements and financial condition of the Company and such other factors as
the Board of Directors may consider, including any contractual or statutory
restrictions on the Company's ability to pay dividends.
DILUTION
The pro forma net tangible book value of the Company at June 30, 1996,
giving effect to the Reorganization, was a deficit of approximately $120.9
million, or $(1.13) per share of Common Stock. Net tangible book value per share
of Common Stock represents the amount of total tangible assets less total
liabilities, divided by the total number of shares of Common Stock outstanding.
Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Class A Common Stock in the Offerings and the
pro forma net tangible book value per share of Common Stock immediately after
the completion of the Offerings. After giving effect to the assumed sale of
approximately 20.2 million shares of Class A Common Stock at a price of $21.50
per share by the Company in the Offerings and the application of the estimated
net proceeds therefrom, the pro forma net tangible book value of the Company as
of June 30, 1996 would have been approximately $288.2 million, or $2.68 per
share. This represents an immediate dilution in pro forma net tangible book
value per share of $18.82 to investors who purchase shares of Class A Common
Stock in the Offerings. The following table illustrates the dilution in pro
forma net tangible book value per share to such investors:
<TABLE>
<S> <C> <C>
Initial public offering price per share................ $21.50
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Reorganization... $(1.13)
------
Increase per share attributable to new investors....... $ 3.81
------
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Offerings........ $ 2.68
------
Dilution per share to new investors.................... $18.82
======
</TABLE>
19
<PAGE> 22
CAPITALIZATION
The following table sets forth information regarding the consolidated
long-term debt and capitalization of the Company (i) at June 30, 1996, (ii) as
adjusted for the pro forma effects of the Reorganization and the financial
impact of the Affiliate Agreements and (iii) as further adjusted to reflect (x)
the reclassification of 1,000 shares of common stock, $.01 par value, of the
Company held by AMR into 107,374,000 shares of Class B Common Stock and (y) the
sale of 20,200,000 shares of Class A Common Stock in the Offerings at an assumed
initial public offering price of $21.50 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------
PRO FORMA AS
ADJUSTED FOR THE PRO FORMA AS
REORGANIZATION AND FURTHER ADJUSTED
AFFILIATE FOR THE
HISTORICAL AGREEMENTS(1) OFFERINGS(2)(3)
---------- ------------------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Note Payable to AMR............................. $ 54,102 $ -- $ --
Long-Term Debenture Payable to AMR.............. -- 850,000 481,843
Stockholders' Equity:
Preferred Stock: $.01 par value, 20,000,000
shares authorized; no shares issued........ -- -- --
Common Stock: $.01 par value; 1,000 shares
authorized; 1,000 shares issued and
outstanding................................ -- -- --
Class A Common Stock: $.01 par value;
250,000,000 shares authorized; 20,200,000
shares issued and outstanding, as
adjusted................................... -- -- 202
Class B Common Stock: $.01 par value;
107,374,000 shares authorized; 107,374,000
shares issued and outstanding, as
adjusted................................... -- -- 1,074
Additional Paid-in Capital.................... -- -- 407,788
Retained Earnings (Deficit)................... (120,876) (120,876)
Stockholder's Net Investment.................. 551,187 -- --
-------- --------- ---------
Total Stockholders' Equity
(Deficit)........................... $ 551,187 $ (120,876) $ 288,188
-------- --------- ---------
Total Capitalization.................. $ 605,289 $ 729,124 $ 770,031
======== ========= =========
</TABLE>
- ---------------
(1) Adjusted to reflect the Reorganization, including the issuance of the
Debenture to American, and the financial impact of the Affiliate
Agreements. American subsequently transferred the Debenture to AMR.
(2) Adjusted to reflect the transactions described in note (1) above, the
reclassification of 1,000 shares of common stock, $.01 par value, of the
Company held by AMR into 107,374,000 shares of Class B Common Stock and the
issuance of 20,200,000 shares of Class A Common Stock, assuming an offering
price of $21.50 per share, pursuant to the Offerings, resulting in net
proceeds of approximately $409 million after deducting underwriting
commissions and estimated expenses of the Offerings and to reflect the use
of approximately $368 million of the proceeds of the Offerings to repay a
portion of the Debenture.
(3) Excludes options to purchase the Company's Class A Common Stock outstanding
under the Company's Long-Term Incentive Plan. See Note 11 to the
Consolidated Financial Statements.
20
<PAGE> 23
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected financial information and other data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements,
notes thereto and other financial information included elsewhere in this
Prospectus. The income statement data for the two years ended December 31, 1992,
and the balance sheet data as of December 31, 1991, 1992 and 1993, have been
derived from financial statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. The income statement data for the three
years ended December 31, 1995, and the balance sheet data as of December 31,
1994 and 1995, have been derived from the Consolidated Financial Statements of
the Company included elsewhere in this Prospectus, which also have been audited
by Ernst & Young LLP, independent auditors, whose report thereon appears
elsewhere in this Prospectus. The selected financial data set forth below for
the six months ended June 30, 1995 and 1996 is derived from unaudited
consolidated interim financial statements of the Company. The unaudited interim
consolidated financial statements have been prepared on a basis consistent with
the Consolidated Financial Statements and, in the opinion of management, include
all adjustments, consisting of only normal recurring adjustments, necessary for
a fair presentation of such data. The results for the six month period ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996(4)
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT OTHER DATA WHERE INDICATED)
INCOME STATEMENT DATA(1):
Revenues............................... $1,097.1 $1,173.8 $1,258.2 $1,406.7 $1,529.6 $ 767.5 $838.3
Operating Expenses..................... 876.9 929.5 1,004.5 1,056.5 1,149.2 548.0 640.7
-------- -------- -------- -------- -------- ------ ------
Operating Income....................... $ 220.2 $ 244.3 $ 253.7 $ 350.2 $ 380.4 $ 219.5 $197.6
Other Income (Expense), net(2)......... (7.6) (173.2) (84.7) (26.1) (10.3) (10.4) (2.4 )
-------- -------- -------- -------- -------- ------ ------
Income Before Income Taxes............. $ 212.6 $ 71.1 $ 169.0 $ 324.1 $ 370.1 $ 209.1 $195.2
Income Taxes........................... 77.6 38.8 69.0 126.9 144.2 82.0 76.1
-------- -------- -------- -------- -------- ------ ------
Income Before Cumulative Effect of
Accounting Change.................... $ 135.0 $ 32.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
Cumulative Effect of Accounting
Change(3)............................ -- 19.0 -- -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net Earnings........................... $ 135.0 $ 13.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
======== ======== ======== ======== ======== ====== ======
BALANCE SHEET DATA
(AT END OF PERIOD)(1):
Current Assets......................... $ 55.1 $ 91.1 $ 107.1 $ 404.3 $ 271.2 $ 259.2 $449.6
Total Assets........................... 558.8 550.1 584.3 873.5 729.4 737.8 855.8
Current Liabilities(2)................. 108.5 154.2 346.4 503.2 218.6 176.5 225.8
Stockholder's Net Investment........... 411.0 244.7 158.0 289.5 432.1 477.8 551.2
OTHER DATA(1):
Operating Income as a Percentage of
Revenue.............................. 20.1% 20.8% 20.2% 24.9% 24.9% 28.6% 23.6%
Percentage of Revenue from
Non-affiliated Customers............. 53.9% 55.0% 56.6% 58.1% 64.2% 64.4% 68.8%
Reservations Booked Using SABRE........ 220.2 255.3 275.2 311.1 325.5 170.6 181.2
Net Cash Provided by Operating
Activities........................... $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $ 168.3 $143.2
Net Cash Used for Investing
Activities........................... $ (183.0) $ (122.4) $ (171.7) $ (177.3) $ (174.7) $(105.4) $(66.6 )
Net Cash Provided by (Used For)
Financing Activities(5).............. $ (130.9) $ (204.7) $ (160.7) $ 215.3 $ (385.2) $(246.4) $ 15.7
Capital Expenditures................... $ 171.0 $ 128.8 $ 176.6 $ 168.9 $ 164.6 $ 104.4 $ 82.0
</TABLE>
- ---------------
(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.
(2) The operating results for the years ended December 31, 1992 and 1993 include
a provision for losses of $165 million and $71 million, respectively,
associated with a reservation system project and resolution of related
litigation. The balance sheets as of December 31, 1992 and 1993 include
current liabilities for the losses of $28 million and $133 million,
respectively. See Note 5 to the Consolidated Financial Statements.
(3) Effective January 1, 1992, the Company adopted FAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," changing the method of
accounting for those benefits. The cumulative effect of adopting FAS 106 as
of January 1, 1992 was a charge of $19 million, net of income taxes of $10
million.
(4) The operating results for the six months ended June 30, 1996 reflect the
impact of the Affiliate Agreements, the financial terms of which the parties
agreed to apply as of January 1, 1996. See Note 11 to the Consolidated
Financial Statements.
(5) Consists of advances to or from affiliates and contributions from or
distribution to affiliates.
21
<PAGE> 24
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
The pro forma financial information and other data below assume the
Reorganization and Offerings were consummated, and the Affiliate Agreements were
effective, on January 1, 1995. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transactions had
been consummated at the assumed dates, nor is it necessarily indicative of
future results of operations. The unaudited interim and quarterly consolidated
financial statements have been prepared on a basis consistent with the
Consolidated Financial Statements and, in the opinion of management, include all
adjustments, consisting of only normal recurring adjustments, necessary for fair
presentation of such data. The pro forma information should be read in
conjunction with the Pro Forma Condensed Consolidated Financial Information, and
the related notes thereto, and the Consolidated Financial Statements, and the
related notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues...................................... $ 1,529.6 $ (66.3)(3) $ 1,463.3
Operating Expenses............................ 1,149.2 29.5(4) 1,178.7
-------- ------- --------
Operating Income.............................. $ 380.4 $ (95.8) $ 284.6
Other Income (Expense), net................... (10.3) (29.5)(5) (39.8)
-------- ------- --------
Income Before Income Taxes.................... $ 370.1 $(125.3) $ 244.8
Income Taxes.................................. 144.2 (48.8) 95.4
-------- ------- --------
Net Earnings.................................. $ 225.9 $ (76.5) $ 149.4
======== ======= ========
Pro Forma Earnings Per Share(2)............... $ 1.17
========
OTHER DATA(1):
Operating Income as a Percentage of
Revenue..................................... 24.9% 19.4%
Percentage of Revenue from Non-affiliated
Customers................................... 64.2 67.1
</TABLE>
22
<PAGE> 25
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.......................................... $767.5 $ (30.8)(3) $ 736.7
Operating Expenses................................ 548.0 13.2(4) 561.2
------ ------ ------
Operating Income.................................. $219.5 $ (44.0) $ 175.5
Other Income (Expense), net....................... (10.4) (14.7)(5) (25.1)
------ ------ ------
Income Before Income Taxes........................ $209.1 $ (58.7) $ 150.4
Income Taxes...................................... 82.0 (22.9) 59.1
------ ------ ------
Net Earnings...................................... $127.1 $ (35.8) $ 91.3
====== ====== ======
Pro Forma Earnings Per Share(2)................... $ .72
======
OTHER DATA(1):
Operating Income as a Percentage of Revenue....... 28.6% 23.8%
Percentage of Revenue from Non-affiliated
Customers....................................... 64.4 67.1
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.......................................... $838.3 $ (6.1) $ 832.2
Operating Expenses................................ 640.7 (5.6)(4) 635.1
------ ------ ------
Operating Income.................................. $197.6 $ (0.5) $ 197.1
Other Income (Expense), net....................... (2.4) (14.9)(5) (17.3)
------ ------ ------
Income Before Income Taxes........................ $195.2 $ (15.4) $ 179.8
Income Taxes...................................... 76.1 (5.9) 70.2
------ ------ ------
Net Earnings...................................... $119.1 $ (9.5) $ 109.6
====== ====== ======
Pro Forma Earnings Per Share(2)................... $ .86
======
OTHER DATA(1):
Operating Income as a Percentage of Revenue....... 23.6% 23.7%
Percentage of Revenue from Non-affiliated
Customers....................................... 68.8 69.3
</TABLE>
23
<PAGE> 26
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION -- (CONCLUDED)
<TABLE>
<CAPTION>
QUARTER ENDED:
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA AND OTHER DATA WHERE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues...................... $ 368.6 $368.1 $ 375.8 $350.8 $ 420.8 $411.4
Operating Expenses............ 272.4 288.8 292.8 324.7 311.2 323.9
------ ------ ------ ------ ------ ------
Operating Income.............. $ 96.2 $ 79.3 $ 83.0 $ 26.1 $ 109.6 $ 87.5
Other Income (Expense),
net......................... 15.7 9.4 6.6 8.1 8.4 8.9
------ ------ ------ ------ ------ ------
Income Before Income Taxes.... $ 80.5 $ 69.9 $ 76.4 $ 18.0 $ 101.2 $ 78.6
Income Taxes.................. 31.3 27.8 29.4 6.9 39.3 30.9
------ ------ ------ ------ ------ ------
Net Earnings.................. $ 49.2 $ 42.1 $ 47.0 $ 11.1 $ 61.9 $ 47.7
====== ====== ====== ====== ====== ======
Pro Forma Earnings Per
Share(2).................... $ .39 $ .33 $ .37 $ .08 $ .48 $ .38
====== ====== ====== ====== ====== ======
OTHER DATA(1):
Operating Income as a
Percentage of Revenue....... 26.1% 21.5% 22.1% 7.4% 26.0% 21.3%
Reservations Booked Using
SABRE....................... 86.5 84.1 82.1 72.8 91.9 89.3
</TABLE>
- ---------------
(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.
(2) The Company was formed on June 25, 1996 and became a wholly owned subsidiary
of AMR on July 2, 1996 in connection with the Reorganization. As part of the
Reorganization, AMR caused to be transferred to the Company the subsidiaries
and divisions through which AMR has historically conducted its electronic
travel distribution and information technology solutions operations. The pro
forma earnings per common share calculation is based upon weighted average
common shares outstanding after the Reorganization and the Offerings,
including equivalent shares related to options outstanding under the
Company's Long-Term Incentive Plan. See Notes 10 and 11 to the Consolidated
Financial Statements.
(3) Adjustments include a reduction in marketing support payments from American
and the effect of the Technology Services Agreement with American. See the
notes to the Pro Forma Condensed Consolidated Financial Information.
(4) Adjustments include the following items as applicable: employee travel
costs, marketing support payments, additional general expenses and a
reduction in rent expense. See the notes to the Pro Forma Condensed
Consolidated Financial Information.
(5) Adjustment represents additional interest expense resulting from the
issuance of the Debenture. See the notes to the Pro Forma Condensed
Consolidated Financial Information.
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company generated approximately 65.8% of its revenues in 1995 from
providing electronic travel distribution services using SABRE. As compensation
for services provided, fees are collected from associates for reservations
booked through SABRE. The booking fee per transaction that an associate pays to
the Company depends upon several factors, including the associate's level of
participation in SABRE and the types of products or services provided by the
associate. Booking fees in 1995 represented approximately 89.7% of revenues from
electronic travel distribution services. See "Business -- Electronic Travel
Distribution -- Associate Participation." The Company also derives revenues from
service contracts with subscribers, principally travel agencies, pursuant to
which the Company provides access to SABRE, hardware, software, hardware
maintenance and other support services.
Approximately 34.2% of the Company's revenues in 1995 was generated from
information technology solutions. Although solutions services have been provided
to more than 120 airlines or airline associations, approximately 79.5% of the
Company's revenues in 1995 from information technology solutions was from
American, other AMR affiliates and Canadian.
The following table sets forth revenues by affiliation and geographic
location as a percent of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1993 1994 1995 1995 1996(1)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Affiliation:
Non-affiliated Customers............. 56.6% 58.1% 64.2% 64.4% 68.8%
Affiliated Customers................. 43.4 41.9 35.8 35.6 31.2
----- ----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Geographical:
United States........................ 85.9% 85.0% 83.6% 83.9% 82.8%
International........................ 14.1 15.0 16.4 16.1 17.2
----- ----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Revenues for the six months ended June 30, 1996 reflect the financial impact
of the Affiliate Agreements entered into in connection with the
Reorganization, the financial terms of which were effective as of January 1,
1996.
Total revenues have grown at a compound annual growth rate of 10.3% for
1993 through 1995. Revenues from affiliated customers as a percent of total
revenues have declined as the Company's external business has grown. Revenues
from non-affiliated customers have grown at a compound annual growth rate of
17.4% for the three years ended December 31, 1995, to $982 million in 1995.
Revenues from affiliated customers remained relatively unchanged for the same
time period. The Company expects that the proportion of its revenues represented
by non-affiliated customer revenues will continue to increase. International
revenues have increased as a percent of total revenues. International revenues
have grown at a compound annual growth rate of 18.6% for the three-year period
ended December 31, 1995, to $250 million in 1995, while revenues from the United
States have grown at a compound annual growth rate of 8.8% over the same period,
to $1,279 million in 1995.
The Company's primary expenses from providing electronic travel
distribution services and information technology solutions consist of salaries,
benefits and other employee related costs, depreciation and amortization,
communication costs, equipment maintenance costs and subscriber
25
<PAGE> 28
incentives. Salaries, benefits and other employee related costs, depreciation
and amortization and communication costs represented over 70% of 1995 total
operating expenses. While salaries and benefits have grown at a rate similar to
that for revenues in order to support the Company's growth, depreciation and
amortization costs have grown at a rate slower than that for revenues primarily
due to the benefits of price and performance improvements for Data Center
equipment and subscriber equipment. In addition, communication expense decreased
due to rate reductions.
AFFILIATE AGREEMENTS WITH AMR AND AMERICAN
The Company and AMR and American have entered into the Affiliate
Agreements, which include the Technology Services Agreement for the provision of
information technology services to American by the Company, the Marketing
Cooperation Agreement for the provision by American of marketing support for the
Company's products targeted toward travel agencies and American's support of the
Company's promotion of BTS, Travelocity and easySABRE, an agreement for the
provision of management services by American to the Company (the "Management
Services Agreement") and agreements for the provision of travel services by
American to the Company and its employees (the "Travel Privileges Agreement" and
"Corporate Travel Agreement"). See "Relationship With AMR and Certain
Transactions -- Contractual Arrangements" and Note 11 to the Consolidated
Financial Statements for a description of each agreement.
On a pro forma basis giving effect to the financial impact of the
Technology Services Agreement as of January 1, 1995, information technology
solutions represented approximately 32.6% of the Company's revenues in 1995, of
which approximately 77.5% was from American, other AMR affiliates and Canadian.
The base term of the Technology Services Agreement expires June 30, 2006.
The terms of the services to be provided by the Company to American, however,
vary. For the six months ended June 30, 1996, revenues from services provided
under the Technology Services Agreement with a service term of (i) three years
represented approximately 5.7% of total revenues, (ii) five years represented
approximately 0.5% of total revenues and (iii) 10 years represented
approximately 16.8% of total revenues.
The Affiliate Agreements generally establish pricing and service terms and
certain agreements, including the Technology Services Agreement, provide for
periodic price adjustments that may take into account the market for similar
services. Commencing in 1998, the formulas for annually adjusting certain rates
under the Technology Services Agreement will be adjusted every two years through
negotiations of the parties which are to be guided by benchmarking procedures
set forth in the Technology Services Agreements. The resulting rates may
represent an increase or decrease over the previous rates. The financial terms
of the Affiliate Agreements were applied to the Company's operations commencing
January 1, 1996, and the application thereof resulted in a reduction in revenues
and an increase in expenses for the six months ended June 30, 1996 as compared
to the six months ended June 30, 1995.
The Company has also entered into a Tax-Sharing Agreement with AMR, dated
as of July 1, 1996 (the "Tax-Sharing Agreement"), which in most respects
formalizes the Company's previous arrangements with AMR and which the Company
does not expect to have a material impact on future operating results.
The impacts of the Affiliate Agreements, as well as other impacts resulting
from the Reorganization and Offerings, are presented in the Pro Forma Condensed
Consolidated Balance Sheet for June 30, 1996 and the Pro Forma Condensed
Consolidated Statements of Income for the six months ended June 30, 1995 and
1996 and the year ended December 31, 1995. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
transactions had been consummated as presented in the Pro Forma Condensed
Consolidated Financial Information, nor is it necessarily indicative of future
results of operations.
26
<PAGE> 29
SEASONALITY
The following table sets forth quarterly financial and other data for the
Company:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS, EXCEPT WHERE INDICATED)
<S> <C> <C> <C> <C>
1994
Reservations Booked Using SABRE........... 80.3 80.7 80.4 70.1
Revenues.................................. $ 353.6 $ 349.9 $ 361.4 $ 341.8
Operating Income.......................... 97.9 93.3 108.0 50.9
Net Earnings.............................. 58.4 54.0 59.2 25.5
Operating Income as a Percent of Revenue.. 27.7% 26.7% 29.9% 14.9%
1995
Reservations Booked Using SABRE........... 86.5 84.1 82.1 72.8
Revenues.................................. $ 384.6 $ 383.1 $ 393.3 $ 368.6
Operating Income.......................... 118.1 101.4 108.2 52.8
Net Earnings.............................. 66.9 60.1 66.9 31.9
Operating Income as a Percent of Revenue.. 30.7% 26.5% 27.5% 14.3%
</TABLE>
The travel industry is seasonal in nature. Bookings, and thus fees charged
for bookings through SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to early bookings by customers for travel
during the holiday season and a decline in business travel during the holiday
season. Operating margins also decrease in the fourth quarter as revenues
decrease and expenses remain constant.
RESULTS OF OPERATIONS
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1995
REVENUES. Pro forma revenues for the six months ended June 30, 1996
compared to the six months ended June 30, 1995 increased approximately $95
million, 13.0%, from $737 million to $832 million.
Pro forma electronic travel distribution revenues increased approximately
$74 million, 14.7%, from $501 million to $575 million. The increase was
primarily attributable to growth in booking fees from associates from $460
million to $536 million. This growth was driven by an overall increase in the
price per booking charged to associates and an increase in booking volumes
worldwide.
Pro forma revenues from information technology solutions increased
approximately $22 million, 9.3%, from $235 million to $257 million, primarily
due to growth in solutions services provided to AMR and non-affiliated
customers.
OPERATING EXPENSES. Pro forma operating expenses increased $74 million,
13.2%, from $561 million to $635 million during the six months ended June 30,
1996 as compared to the six months ended June 30, 1995. This increase was
primarily attributable to an increase in salaries and benefits and subscriber
incentive expenses. Salaries and benefits increased primarily due to an overall
increase of 8% in the average number of employees necessary to support the
Company's revenue growth and new product development. Subscriber incentive
expenses increased in order to maintain and expand the Company's travel agency
subscriber base.
OPERATING INCOME. Pro forma operating income from operations increased $22
million, 12.3%, from $175 million to $197 million. Operating margins remained
stable due to the increase in revenues of 13.0%, while expenses increased 13.2%.
OTHER EXPENSES. Pro forma other expenses decreased $8 million primarily due
to a reduction in the losses from joint ventures in which the Company owns an
interest accounted for under the equity method.
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INCOME TAXES. The pro forma provision for income taxes was $70 million and
$59 million for the six months ended June 30, 1996 and 1995, respectively. The
increase in the provision for income taxes corresponds with the increase in net
income before the provision for income taxes.
NET EARNINGS. Pro forma net earnings increased $18 million, 20.2%, from $91
million to $109 million, primarily due to the increase in operating income.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
REVENUES. Revenues for the six months ended June 30, 1996 compared to the
six months ended June 30, 1995 increased approximately $71 million, 9.2%, from
$767 million to $838 million.
Electronic travel distribution revenues increased approximately $63
million, 12.4%, from $512 million to $575 million primarily due to growth in
booking fees from associates from $460 million to $536 million. This growth was
driven by an overall increase in the price per booking charged to associates and
an increase in booking volumes worldwide.
Revenue from information technology solutions increased approximately $7
million, 2.9%, from $256 million to $263 million. Revenues from non-affiliated
customers increased approximately $11 million, offset by a decrease in revenues
from AMR of approximately $7 million for these services primarily due to
application of the financial terms of the Technology Services Agreement.
OPERATING EXPENSES. Operating expenses increased $93 million, 16.9%, from
$548 million to $641 million during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. This increase was primarily
attributable to an increase in salaries and benefits, the Affiliate Agreements
as discussed above and subscriber incentive expenses. Salaries and benefits
increased primarily due to an overall increase of 8% in the average number of
employees necessary to support the Company's revenue growth and new product
development.
The Company and AMR and American agreed to apply the financial terms of the
Marketing Cooperation Agreement, Travel Privileges Agreement and Corporate
Travel Agreement as of January 1, 1996, which resulted in an increase in
operating expenses of approximately $19 million for the six months ended June
30, 1996. Subscriber incentive expenses increased in order to maintain and
expand the Company's travel agency subscriber base.
OPERATING INCOME. Operating income decreased $22 million, 10.0%, from $219
million to $197 million. Operating margins decreased from 28.6% to 23.6%
primarily due to the impact of the Affiliate Agreements.
OTHER EXPENSES. Other expenses decreased $8 million due to a reduction in
the losses from joint ventures in which the Company owns an interest accounted
for under the equity method.
INCOME TAXES. The provision for income taxes was $76 million and $82
million for the six months ended June 30, 1996 and 1995, respectively. The
decrease in the provision for income taxes corresponds with the decrease in net
income before the provision for income taxes.
NET EARNINGS. Net earnings decreased $8 million, 6.3%, from $127 million to
$119 million, primarily due to the decrease in operating income.
1995 COMPARED TO 1994
REVENUES. Revenues for 1995 as compared to 1994 increased approximately
$123 million, 8.7%, from $1,407 million to $1,530 million.
Electronic travel distribution revenues increased approximately $101
million, 11.1%, from $906 million to $1,007 million. The increase was primarily
attributable to growth in booking fees from associates from $810 million to $904
million. This growth was driven by an overall increase in the price per booking
charged to associates, a migration of associates to higher participation levels
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<PAGE> 31
within SABRE and an increase in booking volumes primarily attributable to
international expansion in Europe and Latin America.
Revenues from information technology solutions increased approximately $22
million, 4.4%, from $501 million to $523 million. Revenues from information
technology solutions provided to Canadian under the agreement between AMS
Holdings, Inc., an AMR subsidiary, and Canadian, which began generating revenues
in November 1994, increased $36 million due to the impact of a full year of
services provided under the agreement. These increases were offset by a decrease
in revenues from such services provided to AMR primarily due to a change in the
pricing structure implemented in 1995.
OPERATING EXPENSES. Operating expenses increased $93 million, 8.8%, from
$1,056 million to $1,149 million. The increase was primarily attributable to an
increase in salaries and benefits, travel service costs from American and
subscriber incentive expenses. Salaries and benefits increased due to an overall
increase of 4% in the average number of employees necessary to support the
Company's revenue growth, annual salary increases and an increase in the
provision for incentive compensation. Travel service costs from American
increased due to the increase in the number of employees and an increase in the
negotiated rates with American. See Note 3 to the Consolidated Financial
Statements. Subscriber incentive expenses increased in order to maintain and
expand the Company's travel agency subscriber base.
INTEREST EXPENSE. Interest income or expense was credited or charged to the
Company by AMR based on the balance at the end of each month in cash equivalents
and note payable to AMR. Cash equivalents represented cash held by American for
the Company or advanced from American to the Company. Interest expense decreased
$10 million primarily due to a capital infusion from AMR during 1995. See Note 3
to the Consolidated Financial Statements.
OPERATING INCOME. Operating income increased $30 million, 8.6%, from $350
million to $380 million. Operating margins were at 24.9% for both 1995 and 1994
due to revenues and expenses increasing at substantially the same rate.
OTHER EXPENSES. Other expenses decreased $6 million due to a reduction in
the losses from joint ventures in which the Company owns an interest accounted
for under the equity method.
INCOME TAXES. The provision for income taxes was $144 million and $127
million in 1995 and 1994, respectively. See Note 4 to the Consolidated Financial
Statements for additional information regarding taxes.
NET EARNINGS. Net earnings increased $29 million, 14.6%, from $197 million
to $226 million, primarily due to the increase in operating income.
1994 COMPARED TO 1993
REVENUES. Revenues for 1994 as compared to 1993 increased approximately
$149 million, 11.8%, from $1,258 million to $1,407 million.
Electronic travel distribution revenues increased approximately $121
million, 15.4%, from $785 million to $906 million. The increase was primarily
attributable to growth in booking fees from associates from $676 million to $810
million. This growth was driven by increases in booking volumes and increases in
the price per booking charged to associates. The increase in booking volumes was
related to fare initiatives by domestic air carriers which increased travel and,
thus, reservations made through SABRE.
Revenues from information technology solutions increased $28 million, 5.9%,
from $473 million to $501 million. Revenues from information technology
solutions provided to AMR increased due to a change in the pricing structure
implemented in 1994. Revenues for information technology solutions provided to
Canadian under the agreement between AMS Holdings, Inc., a subsidiary of AMR,
and Canadian, which began producing revenues in November 1994, were $8 million
in 1994.
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OPERATING EXPENSES. Operating expenses increased $52 million, 5.2%, from
$1,004 million to $1,056 million, due to an increase in salaries and benefits,
travel service costs from American, subscriber incentive expenses, legal and
professional fees and management service fees charged to the Company by AMR.
Salaries and benefits increased due to an increase of 6% in the average number
of employees necessary to support the Company's revenue growth, annual salary
increases and an increase in the provision for incentive compensation. Travel
service costs increased due to the increase in the number of employees and an
increase in the negotiated rates with American. See Note 3 to the Consolidated
Financial Statements. Subscriber incentive expenses increased in order to
maintain and expand the Company's travel agency subscriber base. Legal and
professional fees increased due to a nonrecurring restructuring charge recorded
in 1994. Management service fees charged to the Company by AMR increased
primarily due to the increase in the number of employees and growth in legal
services provided to the Company by AMR.
OPERATING INCOME. Operating income increased $96 million, 38.0%, from $254
million to $350 million. Operating margins increased from 20.2% to 24.9% due to
the increase in revenues of 11.8%, while expenses increased only 5.2%.
LOSS ON PARTNERSHIP SETTLEMENT. Loss on the partnership settlement of $71
million in 1993 represented a nonrecurring cost related to the settlement of
litigation regarding a partnership formed to design and develop a computer
reservation system for the auto rental and hotel industries. See Note 5 to the
Consolidated Financial Statements.
INTEREST EXPENSE. Interest expense increased $8 million primarily due to
cash advances from American for the loss on the partnership settlement mentioned
above.
OTHER EXPENSES. Other expenses increased $5 million due to additional
losses incurred by joint ventures in which the Company owns an interest
accounted for under the equity method.
INCOME TAXES. The provision for income taxes was $127 million and $69
million in 1994 and 1993, respectively. See Note 5 to the Consolidated Financial
Statements for additional information regarding taxes.
NET EARNINGS. Net earnings increased $97 million, 97.2%, from $100 million
to $197 million, primarily due to the increase in operating income.
LIQUIDITY AND CAPITAL RESOURCES
The Company had substantial liquidity at June 30, 1996, with $187 million
and $224 million in cash and cash equivalents and working capital, respectively.
At December 31, 1995, cash and cash equivalents and working capital were $95
million and $53 million, respectively. Prior to July 2, 1996, the Company's cash
and cash equivalents were held for the Company by American. Cash equivalents
were immediately charged or credited to the Company upon recording certain
transactions, including transactions with American for airline booking fees and
purchases of goods and services.
Effective with the Reorganization on July 2, 1996, the Company began
maintaining a cash management system and cash and investment accounts separate
from American. Transactions with American no longer result in the recording of
cash equivalents, but are settled through intercompany billings, with payment
due in 30 days. American performs cash management services for the Company under
the Management Services Agreement. The Company invests the cash in short-term
marketable securities, consisting primarily of certificates of deposit, bankers'
acceptances, commercial paper, corporate notes and government notes. For cash
management purposes, the Company and American have entered into the Credit
Agreement.
The Company has financed its operations through cash generated from
operations. The Company's net cash provided by operating activities of $143
million for the six months ended June 30, 1996 was primarily attributable to net
income partially offset by an increase in accounts
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<PAGE> 33
receivable partially due to the seasonality of bookings in the fourth quarter.
The Company's net cash provided by operating activities of $392 million in 1995
was primarily attributable to net income. Net cash provided by operating
activities in 1994 was $225 million, which included expenditures of $158 million
relating to the partnership settlement discussed in "-- Results of
Operations -- 1994 Compared to 1993 -- Loss on Partnership Settlement" and Note
5 to the Consolidated Financial Statements.
Investing activities have primarily been related to purchases of computer
equipment to be provided to subscribers of SABRE and for use in data processing
services, and investments in joint ventures primarily associated with
international expansion in Mexico and Japan. Capital expenditures for the six
months ended June 30, 1996 were $82 million and for the year ended December 31,
1995 were $165 million.
Net property and equipment as shown on the balance sheet as of June 30,
1996 decreased approximately $34 million from December 31, 1995. This decrease
was due to the sale of certain computer network equipment to a third party at a
price of $25 million, which approximates the net book value of the assets.
In 1995, certain of The SABRE Group entities, from which the Company was
formed, distributed $394 million to American, in their capacity as divisions or
subsidiaries of American or AMR. Also during 1995, AMR contributed $245 million
to the Company in order to adequately capitalize certain of The SABRE Group
entities. In addition, a note payable to AMR of $54 million was established
during 1995, which was capitalized in 1996 in connection with the
Reorganization. Proceeds from the contribution and note payable were used to
reduce cash advances from AMR.
The Company expects that the principal use of funds in the foreseeable
future will be for capital expenditures, software product development,
acquisitions and working capital. Capital expenditures will consist of purchases
of equipment for the Data Center, as well as computer equipment, printers,
fileservers and workstations to support (i) updating subscriber equipment
primarily for travel agencies, (ii) expansion of the subscriber base and (iii)
new product capital requirements. The Company has budgeted capital expenditures
of approximately $210 million for 1996. Beyond 1996, the Company expects that
capital expenditures will range from $210 million to $240 million annually. The
Company expects to incur approximately $40 million of nonrecurring capital
expenditures in 1997 for the refurbishment of its facilities and the scheduled
replacement of a major computer processor at the Data Center. The Company
believes available balances of cash and cash equivalents combined with cash
flows from operations are sufficient to meet the Company's capital requirements.
The Company currently intends to retain its earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Any determination as to the payment of
dividends will depend upon the future results of operations, capital
requirements and financial condition of the Company and its subsidiaries and
such other factors as the Board of Directors of the Company may consider,
including any contractual or statutory restrictions on the Company's ability to
pay dividends.
EFFECTS OF THE REORGANIZATION, AFFILIATE AGREEMENTS WITH AMR AND AMERICAN AND
THE OFFERINGS ON LIQUIDITY AND CAPITAL RESOURCES
In connection with the Reorganization, the Company issued the Debenture to
American. The Debenture is a floating rate subordinated debenture due September
30, 2004, with a principal amount of $850 million. American subsequently
transferred the Debenture to AMR. Because the assets and liabilities of the
divisions and subsidiaries of American transferred to the Company are included
in the historical financial statements of the Company, this transaction resulted
in the Company recognizing a deficit in stockholder's equity subsequent to the
Reorganization. See Note 1 and Note 11 to the Consolidated Financial Statements.
A portion of the net proceeds from the Offerings will be used to repay a portion
of the Debenture. See "Use of Proceeds."
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The interest rate on the Debenture will be 7.2% through September 30, 1996,
and thereafter will be based on the sum of the six-month London Interbank
Offered Rate plus a margin determined by the Company's senior unsecured
long-term debt rating or, if such debt rating is not available, upon the
Company's ratio of net debt to total capital. The interest rate will be
determined at the beginning of each six-month period beginning October 1 and
April 1 and accrued interest will be payable each September 30 and March 31. The
Company may prepay the principal balance in whole or in part at any time prior
to December 31, 1996 and thereafter on any interest payment date.
For cash management purposes, the Company, American and AMR entered into
the Credit Agreement which established a line of credit whereby the Company is
required to borrow from American, and American is required to lend to the
Company, any amounts required by the Company to fund its daily cash
requirements. In addition, American may, but is not required to, borrow from the
Company to fund its daily cash requirements and the Company is required to lend
to American if the Company has excess cash available. The maximum available
amount that the Company may borrow under the Credit Agreement at any time is
$300 million and, for American, $100 million, and, in the case of the Company as
lender, is limited to the lender's excess cash available. If the Company's
credit rating is better than "B" on the Standard & Poor's Ratings Service Scale
(or an equivalent thereof) or American has excess cash to lend to the Company,
the interest rate to be charged to the Company will be the sum of (a) the higher
of (i) American's average rate of return on short-term investments for the month
in which borrowings occurred or (ii) the actual rate of interest paid by
American to borrow funds to make the loan to the Company under the Credit
Agreement, plus (b) an additional spread based upon the Company's credit risk.
If the Company's credit rating is "B" or below on the Standard & Poor's Ratings
Service Scale (or an equivalent thereof) and American does not have excess cash
to lend to the Company, the interest rate to be charged to the Company will be
the lower of (a) the sum of (i) the borrowing cost incurred by American to draw
on its revolving credit facility to make the advance plus (ii) an additional
spread based on the Company's credit risk or (b) the sum of(i) the cost at which
the Company could borrow funds from an independent party plus (ii) one half of
the margin American pays to borrow under its revolving credit facility. The
Company believes the interest rate charged under this agreement by American may,
from time to time, be slightly above the rate at which the Company could borrow
externally; however, no standby fees for the line of credit will be required to
be paid by either party.
The net proceeds to the Company from its sale of shares of Class A Common
Stock pursuant to the Offerings will be approximately $ million after
deducting underwriting commissions and estimated expenses payable by the
Company. The net proceeds will be used to repay a portion of the Debenture
discussed above and for general corporate purposes. See "Use Of Proceeds."
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations.
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BUSINESS
The Company is a world leader in the electronic distribution of travel
through its proprietary travel reservation and information system, SABRE, and is
the largest electronic distributor of travel in the United States. In addition,
the Company is a leading provider of solutions to the airline industry and
fulfills substantially all of the data processing, network and distributed
systems needs of American, AMR's other subsidiaries and Canadian.
The Company believes that its competitive strengths give it a leadership
position in its markets and a foundation from which to pursue further growth.
During the last 20 years, the Company has developed core competencies that
include a comprehensive knowledge of the travel industry, the capability to
perform high-volume, high-reliability, real-time transactions processing and
expertise in the application of operations research, information technology and
industrial engineering skills to solve complex operations problems. These core
competencies enable the Company to create an efficient electronic marketplace
for the sale and purchase of travel and to offer a broad and deep array of
technological solutions to the airline industry. In providing its products and
services, the Company operates one of the largest, privately-owned, real-time
transactions processing systems in the world in its underground central computer
facility, which is connected to over 120,000 computer access terminals and
operates 24 hours a day, seven days a week. The SABRE system maintains over 52
million air fares (updated five times per business day), processes an average of
93 million requests for information per day and has processed up to 4,969
requests for information per second (in July 1996).
ELECTRONIC TRAVEL DISTRIBUTION
OVERVIEW
SABRE and other global distribution systems are the principal means of air
travel distribution in the United States and a growing means of air travel
distribution internationally. Through SABRE, travel agencies, corporate travel
departments and individual consumers can access information on and book
reservations with airlines and other providers of travel and travel-related
products and services. As of June 30, 1996, travel agencies with more than
29,000 locations in over 70 countries on six continents subscribed to SABRE, and
more than 2.5 million individuals subscribed to Travelocity and easySABRE, the
Company's consumer-direct products. SABRE subscribers are able to book
reservations with more than 350 airlines and, other than through Travelocity, to
make reservations with more than 55 car rental companies and more than 190 hotel
companies covering approximately 30,000 hotel properties worldwide.
During 1995, more airline bookings in the United States were made through
SABRE than through any other global distribution system. The Company estimates
that in 1995 over 40% of all airline bookings made through travel agencies in
the United States were made through SABRE. In 1995, 65.8% of the Company's
revenues was generated by the electronic distribution of travel, primarily
through booking fees paid by associates.
SABRE
SABRE, like other global distribution systems, creates an electronic market
place where travel providers display information about their products and
warehouse and manage inventory. Subscribers -- principally travel agencies but
also business travel departments and individual consumers -- access information
and purchase travel products and services. In 1995, more than 600 travel
providers displayed information about their products and services through SABRE,
and the Company estimates that $40 billion in travel products and services were
reserved through SABRE.
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The following diagram depicts the purchase and sale of travel products and
services through SABRE:
[CHART]
SABRE, first developed in the 1960's, was one of the world's first
electronic airline reservation systems. SABRE evolved from American's internal
reservation system into a global distribution system when SABRE's content was
expanded to include additional airlines and other travel providers. Computer
reservation terminals were placed in travel agencies beginning in 1976, and
consumer direct access to SABRE became available through computer on-line
services in 1985 and on the Internet in 1996.
In addition to providing information to subscribers about airlines and
other travel providers and their products and services, SABRE reports
transaction information from subscriber-generated sales back to the provider
from which such products and services were purchased. This allows travel
providers to manage inventory and yields. SABRE also allows travel agency
subscribers to print airline tickets, boarding passes and itineraries.
Additionally, SABRE provides subscribers with travel information on matters such
as currency, health and visa requirements, weather and sightseeing.
By accessing the SABRE system, a subscriber can, from a single source,
obtain schedule, availability and pricing information from multiple travel
providers for complex travel itineraries. A typical SABRE
transaction -- consisting of an information request by a subscriber, a search in
SABRE and a response to the subscriber -- averages less than two seconds in
elapsed time. SABRE's "one-stop shopping" capabilities permit a consumer to
locate, price, compare and purchase the travel products and services that best
satisfy the traveler's requirements.
ASSOCIATE PARTICIPATION
The Company derives its electronic travel distribution revenues primarily
from booking fees paid by associates for reservations for their products and
services made through SABRE (unless the
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reservations are later cancelled). In addition to airlines, associates include
car rental companies, hotel companies, railroads, tour operators, ferry
companies and cruise lines, which participate in SABRE through products designed
for such associates, such as CARS Plus(sm), SHAARP Plus(sm), SABRErail(sm),
SABRE TourGuide(R), SABRE Navigator(sm) and SABRE CruiseDirector(R),
respectively. SABRE subscribers can also purchase travel insurance or book
theater tickets or limousines through SABRE. In 1995, 59.1% of the Company's
revenues was generated through booking fees.
Depending upon the level of participation or "functionality" at which they
participate in SABRE, airlines and other associates display, warehouse, manage
and sell their inventory in SABRE. The booking fee per transaction paid by an
associate to the Company depends upon several factors, including the associate's
level of participation in SABRE and the type of products or services provided by
the associate. Airlines are provided with a wide range of participation levels
from which to choose. The lowest level of functionality for airlines -- Basic
Booking Request(SM) -- is aimed at the low-cost "no-frills" carriers and
provides schedules and electronic booking only. Higher levels of functionality
for airlines, such as Direct Connect Availability(SM), provide greater levels of
communication between SABRE and associates, thus enabling SABRE to provide
subscribers with more detailed information and to provide associates with
improved inventory management. For an associate selecting one of the higher
levels of participation, SABRE provides subscribers with a direct connection to
the associate's internal reservation system, allowing SABRE to provide real-time
information and allowing the associate to optimize revenue for each flight.
Car rental companies and hotel operators are provided with similar levels
of participation from which to select. From 1991 to 1995, the number of bookings
for car rental companies and hotels grew at a compound annual rate of 16.9%. The
Company intends to pursue continued growth in such bookings by, among other
things, emphasizing in its marketing the various levels of functionality that
the Company can provide to car rental companies and hotel companies.
The Company also provides associates, upon request, marketing data derived
from SABRE bookings for fees that vary depending on the amount and type of
information provided.
Although most of the world's airlines are SABRE associates, the Company
believes that the market for associate participation in SABRE has room for
growth, both through the addition of non-airline associates and through
upgrading by associates to higher levels of functionality in SABRE. In marketing
to associates, the Company emphasizes SABRE's global distribution capabilities,
the ability of associates to display information at no charge until a booking is
made and SABRE's extensive subscriber network.
SUBSCRIBER ACCESS
The Company provides subscribers with access to SABRE which enables them to
electronically locate, price, compare and purchase travel products and services
provided by associates. The Company tailors the interface and functionality of
SABRE to the needs of its different types of subscribers. Marketing is targeted
to travel agencies, corporations and individual consumers.
TRAVEL AGENTS. The Company provides travel agents with the hardware,
software, technical support and other services that travel agents need to access
SABRE in return for fees that vary based on the number of bookings generated by
the travel agency. Such fees are payable over the term of the travel agent's
agreement with the Company, which term is generally five years in the United
States and Latin America, three years in Canada and one year in Europe. In 1995,
approximately 4.3% of the Company's revenues was generated by fees from travel
agent subscribers.
Because travel agencies have differing needs, based on, among other things,
volume and location, the Company has modified the SABRE interface to meet the
specific needs of different categories of travel agents. Travel agents can
choose SABRE interfaces that range from simple, text-based systems to
feature-laden graphical interfaces. For instance, using its expertise in its
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<PAGE> 38
solutions services business, the Company developed Turbo SABRE, an advanced
point-of-sale interface that allows for screen customization and reservations
sales process structuring and eliminates SABRE-specific commands, thereby
reducing keystrokes and training requirements for high-volume travel agencies
who may need high levels of functionality. Turbo SABRE also provides data
sources other than SABRE, such as back office hosts or LAN databases.
Planet SABRE, which the Company intends to introduce in the fourth quarter
of 1996, is a graphical interface consisting of a suite of Windows* applications
comprised of a graphical launch pad, which allows the user to move to any
function with one or two clicks of a mouse, a customizer feature, which allows
travel agencies to tailor Planet SABRE to meet their own specific needs, a
tutorial, online help, a place to store notes about clients, destinations or
procedures and a suggestion system. Planet SABRE transforms SABRE from a complex
command-oriented system to an all-graphic interface with continued access to the
SABRE host system and its capabilities.
SABRE interfaces are available in English, Spanish, Portuguese, French,
German, Italian and Japanese, with a Chinese version currently in development.
In addition, the Company offers travel agencies back-office accounting systems
and further supports travel agencies by offering a simplified method to develop
and place their own marketing presence on the World Wide Web.
The Company markets SABRE to travel agencies domestically and
internationally principally using a sales force of approximately 480 employees.
Presently, more than 14,500 travel agency locations in the United States use
SABRE and, in 1995, more airline bookings in North America were made using SABRE
than through any other global distribution system. Based upon internal
estimates, the Company believes that, in 1995, more than 40% of all airline
bookings made through travel agencies in the United States were made using
SABRE. The 10 largest travel agencies in the United States subscribe to SABRE,
although they also subscribe to another global distribution system as well. The
Company estimates that, in 1995, of all bookings made by these 10 travel
agencies, more than 55% were made using SABRE. The Company has had long-standing
relationships with most of its travel agency subscribers. For example,
approximately 97% of the travel agency locations that were SABRE subscribers at
the beginning of 1995 were SABRE subscribers at the end of 1995.
CORPORATIONS. The Company provides Commercial SABRE to travel agencies to
supply to corporations with which they work closely. Using Commercial SABRE, a
traveler inputs booking details on a personal computer, which are then
transmitted to the SABRE travel agent who reviews the travel plans, makes the
reservations and issues the travel documents.
The Company also will provide SABRE to corporations through Business Travel
Solutions. BTS, designed for corporate travel managers, is a fully-integrated
suite of personal computer-based planning modules for travel planning,
pre-travel decision-making and back-end travel expense reporting. BTS's various
modules will provide corporations with tools to manage travel costs, to ensure
compliance with corporate travel policies and to provide expense reporting,
information regarding vendor relationships, ease of access for booking and quick
and flexible distribution of tickets.
BTS is presently being tested by Cap Gemini, Digital Equipment Corp., First
Data Corp. and Cisco Systems, Inc. BTS is scheduled for release in the fourth
quarter of 1996. The Company intends to market BTS initially to Fortune 1,000
companies through a distribution network and its direct sales force and
currently expects to be able to install the full product suite of BTS by the end
of 1996. The Company believes that substantial opportunities exist for the
marketing and implementation of BTS because it provides efficiencies over other
products available today and because only a small percentage of corporations
currently have direct access to a global distribution system.
- ---------------
* Windows is a registered trademark of Microsoft Corp.
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INDIVIDUAL CONSUMERS. In order to enhance its array of electronic travel
distribution products and services, the Company formed its SABRE Interactive
division to develop opportunities for consumer-direct travel distribution via
personal computer, cable television and other media. The Company believes that,
because presently only a small percentage of individual consumers in the United
States and worldwide directly purchase travel and travel-related services
electronically, substantial growth opportunities exist in the individual
consumer market.
For over 10 years, the Company has been a leader in providing consumers the
ability to directly purchase travel electronically. Through the Company's
Travelocity and easySABRE products, individual consumers can, for no fee (other
than any normal on-line fees that may be charged by a computer on-line service),
obtain access to destination information, compare prices and select travel
products from their personal computers at their own pace.
Travelocity was developed and is being marketed jointly by the Company and
Worldview Systems Corporation ("Worldview"). The Company has agreed in principle
to acquire Worldview from its owners. See "-- Proposed Acquisition of
Worldview." Travelocity, which is accessible through computer on-line services
and the Internet, provides information on the availability of requested products
and services and booking capabilities through SABRE, as well as destination
information compiled by Worldview. Travelocity presently offers flight
schedules, reservations and purchase capabilities for all airlines available in
SABRE. Hotel and car rental reservation and purchase capabilities are expected
to be available in the fourth quarter of 1996. Over 200,000 Travelocity web
pages provide destination information, including details on thousands of
restaurants, museums, hotels, bed & breakfasts, condominiums, golf courses and
business services. Travelocity users may share their travel experiences and gain
information about travelers' experiences through chat groups, conferences and
postings managed by noted travel writers and correspondents. Travelocity users
may also purchase merchandise such as luggage, travel guides and travel
accessories. The Internet address for Travelocity is http://www.travelocity.com.
From its launch on March 12, 1996 at the Cyber Cafe in New York City until
August 24, 1996, Travelocity had logged more than 2.4 million visits to its web
site, and its users had viewed more than 29 million pages in the site.
Currently, more than 248,000 members subscribe to Travelocity.
The Company introduced easySABRE in 1985 as one of the world's first home
booking systems for travel. easySABRE is available through a number of computer
on-line information systems such as Prodigy, CompuServe and AT&T Easy Link
Services.* With easySABRE, consumers can, for no fee (other than any normal
on-line fees that may be charged by the computer on-line service), view travel
reservation information and make bookings directly in SABRE. easySABRE has a
membership of more than 2.5 million, of which more than 120,000 members are
active users each month.
After reservations are made through either Travelocity or easySABRE, if a
ticket is needed, the consumer may have a travel agent issue the ticket, have
the Company's customer service center issue the ticket and deliver it to the
consumer or call the travel provider directly. The Company receives booking fees
from travel providers for purchases of their travel products and services
pursuant to reservations made through Travelocity and easySABRE.
INTERNATIONAL MARKETING. The Company believes that, because almost all
United States travel agencies currently subscribe to one or more global
distribution systems, the primary areas of growth for SABRE among travel
agencies are outside the United States. As a result, the Company is actively
involved in marketing SABRE internationally either directly or through joint
venture or distributorship arrangements, depending upon the dynamics of the
particular international market targeted. The Company is presently focusing its
marketing efforts in Europe and Latin America and anticipates increasing its
marketing efforts in Asia.
- ---------------
* Prodigy, CompuServe and AT&T Easy Link Services are the trademarks of their
respective owners and are not trademarks of the Company.
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The Company has entered into various distribution agreements and joint
venture arrangements with businesses resident in foreign countries to increase
its international presence. The Company's global marketing partners include
principally foreign airlines that may have influence over the choice of a global
distribution system by travel agents in such airlines' primary markets and
entities that operate smaller global distribution systems or other
travel-related network services. Included among the Company's international
distribution and joint venture arrangements are arrangements covering Japan with
Japan Airlines, China with the Civil Aviation Administration of China, Israel
with El Al, India with Air India and Indian Airlines, Australia with Qantas
Airways, Ansett Airlines and Air New Zealand, Mexico with Aeromexico and
Mexicana de Aviacion and the Middle East with Gulf Air. The Company believes
that continued development of marketing, licensing, joint venture and other
arrangements with non-U.S. airlines and distribution systems will aid in the
expansion of SABRE outside of the United States.
Through its marketing efforts, the Company has placed SABRE in
approximately 16,500 travel agency locations in the United States and Canada,
3,900 locations in Europe, 3,000 locations in Latin America, 2,800 locations in
Asia, 1,700 locations in the South Pacific, 800 locations in the Caribbean, 650
locations in the Middle East and 8 locations in Africa. From 1991 to 1995, the
Company's bookings volumes outside the United States grew at a 28.2% compound
annual rate, excluding Mexico and Japan, where SABRE is marketed, and booking
fees are recognized, by separate legal entities in which the Company is part
owner. The map set forth below illustrates SABRE's current international market
presence.
NUMBER OF TRAVEL AGENCY LOCATIONS
[MAP]
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STRATEGY
The Company has developed a five-part strategy to maintain and expand its
position in the global travel distribution market and to maintain its operating
margins.
- INCREASING PENETRATION IN INTERNATIONAL TRAVEL DISTRIBUTION MARKETS. The
Company believes that the international market for travel and related
products and services presents opportunities for the Company to expand
its business by building on its existing base in Europe and Latin
America and by pursuing opportunities in Asia. The Company will pursue
international opportunities directly and through the formation of
international alliances. The Company's revenues from its travel
distribution business outside the United States have grown at a compound
annual rate of 29.8% during the last five years, to $250 million in
1995.
- EXPANDING AND CUSTOMIZING ASSOCIATE PARTICIPATION. The Company plans to
continue to expand participation in SABRE by associates, such as air
charters, car rental companies, hotels, railroads and tour operators, and
has initiated an effort to increase the value provided to associates by
tailoring available participation options to the needs of different
travel providers.
- ENHANCING THE VALUE OF THE TRAVEL DISTRIBUTION PRODUCT TO TRAVEL AGENTS.
The Company plans to maximize the value of its products to travel agents
by increasing the depth and breadth of information available through
SABRE and the ease of use and reliability of its products. The Company
will also continue to develop products to enhance the competitiveness of
its travel agent subscribers. For example, the Company has developed two
user interface products, Turbo SABRE and Planet SABRE, that provide
travel agencies with greater productivity through data integration and
increased ease of use, respectively.
- PARTICIPATING IN EMERGING DISTRIBUTION CHANNELS. With products such as
BTS, which is scheduled for release in the fourth quarter of 1996, and
Travelocity, the Company intends to continue to compete in emerging
distribution channels, such as corporate direct distribution, the
Internet and computer on-line services.
- PURSUING ALLIANCES WITH LARGE AGENCIES. The Company intends to form
strategic alliances with large travel agency chains where appropriate to
meet its growth objectives.
- ENHANCING TECHNOLOGY AND OPERATING CAPABILITIES. The Company has budgeted
capital expenditures of over $210 million for 1996, which the Company
anticipates funding with operating cash flow. In addition, the Company
has begun a multi-year development effort, for which the Company has
budgeted over $100 million during the next five years, to improve
SABRE's core operating capabilities. The goals of this development
effort are to accelerate new product development, increase flexibility,
power and functionality for subscribers and associates, improve data
management capabilities, raise capacity levels and lower operating
costs.
PROPOSED ACQUISITION OF WORLDVIEW
On July 30, 1996, the Company agreed in principle to acquire Worldview,
which has developed and marketed Travelocity with the Company, from Ameritech
Development Corporation, Fodor's Travel Publications, Inc. and other owners. The
Company believes that the acquisition, which is subject among other things to
negotiation of a definitive acquisition agreement and certain employment and
non-competition agreements, will enhance the Company's ability to continue to
develop and market Travelocity. The Company anticipates that the purchase price
for Worldview will be paid with cash generated by operations.
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COMPETITION
The Company competes in electronic travel distribution primarily against
other large and well-established global distribution systems. SABRE's principal
competitors include Amadeus/System One, Galileo/Apollo and Worldspan.
Amadeus/System One is owned by Air France, Continental Airlines, Iberia and
Lufthansa. Galileo/Apollo is owned by United Airlines, British Airways,
Swissair, KLM Royal Dutch and USAir, among others. The Canadian affiliate of
Galileo/Apollo is owned by Air Canada. Worldspan is owned by Delta, Northwest
and TWA and is affiliated with ABACUS, an Asian global distribution system. Each
of these competitors offers many products and services similar to those of the
Company.
Moreover, although certain barriers exist for any new provider of
electronic commerce -- barriers such as the need for significant capital
investment to acquire or develop the hardware, software and network facilities
necessary to operate effectively a global distribution system -- the Company is
always faced with the potential of new competitors, particularly as new channels
for travel distribution develop.
Competition to attract and retain travel agent subscribers, which continue
to be the primary method of travel distribution, is very intense. Factors
affecting competitive success of global distribution systems include depth and
breadth of information, ease of use, reliability, service and incentives to
travel agents and range of products available to travel providers, travel agents
and consumers. Because SABRE was named the "World's Leading Computer
Reservations System" for the third year in a row at the 1996 World Travel
Awards, the Company believes it competes effectively as to these factors.
Although distribution through travel agents continues to be the primary
method of travel distribution, new channels of distribution are developing
directly to businesses and consumers through computer on-line services, the
Internet and private networks. The Company faces competition in these channels
not only from its principal competitors but also from possible new entrants in
the sale of travel products and from travel providers that distribute their
products directly. For example, in July 1996, American Express Co. and Microsoft
Corp. announced an on-line travel booking service for corporations, which they
have scheduled for release in the first half of 1997. The Company expects that
this on-line travel booking service, while only in the developmental stage, will
eventually directly compete with BTS. In addition, the Internet permits
consumers to have direct access to travel providers, thereby by-passing both
traditional travel agents and global distribution systems such as SABRE. The
Company has positioned its BTS, Travelocity and easySABRE products to compete in
these emerging distribution channels.
With easySABRE, the Company was one of the first companies to introduce
global distribution system access through a computer on-line service. The
Company believes that it continues to be a market leader in providing access
through computer on-line services and that this leadership in the market, as
well as its 10 years of experience marketing easySABRE, provide the Company an
advantage in marketing Travelocity.
In addition, the Company believes that BTS, Travelocity and easySABRE enjoy
an advantage over products distributed directly by travel suppliers because the
Company's display of travel products is not biased in favor of any particular
provider. Also, the breadth and depth of the content of the Company's products
permit one-stop shopping rather than requiring access to several different sites
to compare prices and then book a single trip.
INDUSTRY REGULATION
More than half of the Company's electronic travel distribution business is
generated by travel agencies located in the United States. Airline-Affiliated
Systems have been subject to regulations promulgated by the DOT since November
1984. The current form of the U.S. Regulations was adopted in 1992. The U.S.
Regulations will expire on December 31, 1997, unless they are extended.
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The U.S. Regulations govern the relationships of Airline-Affiliated Systems
with GDS-Affiliated Airlines and travel agencies. Therefore, the U.S.
Regulations would not apply to SABRE if SABRE were not offered or marketed to
travel agencies by American or any other airline or airline affiliate, such as
the Company. Additionally, the U.S. Regulations do not apply with respect to the
use of a global distribution system by consumers and business travel
departments. Accordingly, the U.S. Regulations do not currently apply to BTS,
Travelocity or easySABRE.
One of the principal requirements of the U.S. Regulations is that displays
of airline services by Airline-Affiliated Systems must be nondiscriminatory.
This means that the global distribution system may not use carrier identity in
ordering the display of services or in building connecting flights. Travel
agencies, however, may utilize software to override the neutral displays of an
Airline-Affiliated System.
Airline-Affiliated Systems are required to charge the same fees to all air
carriers for the same level of service and to update information for all air
carriers with the same degree of care and timeliness and to provide, on request,
information on fee arrangements. Any mechanism for the sale of airline products
offered to one or more air carriers must be offered to all other air carriers on
nondiscriminatory terms.
The U.S. Regulations also govern relationships between Airline-Affiliated
Systems and travel agents. The U.S. Regulations mandate, among other things,
that contracts between travel agency subscribers and an Airline-Affiliated
System be for no longer than five years. The rules also forbid an
Airline-Affiliated System from impeding a travel agent's use of another system
by, for example, making it a breach of contract for an agency to fail to make a
designated minimum number of bookings. The rules do allow, however, systems to
provide a credit against monthly fees to travel agents who achieve certain
booking thresholds, with the agency being obligated to pay the system for any
shortfall. The U.S. Regulations also forbid Airline-Affiliated Systems from
entering into contracts with travel agents containing exclusivity clauses or
that require the agency to maintain a certain percentage of computer terminals
or bookings for a particular system, vis-a-vis other systems.
The rules prohibit GDS-Affiliated Airlines from linking the payment of
commissions to travel agents to the travel agent's use of the system with which
the GDS-Affiliated Airline is affiliated. Further, an Airline-Affiliated System
may not ban travel agents from using software provided by third parties in
connection with the system's equipment, unless that software threatens to impair
the integrity of the system.
The U.S. Regulations require any GDS-Affiliated Airline doing business in
the United States to participate in competing Airline-Affiliated Systems at the
same level as it does in its affiliated system and to provide data on its
flights to competing Airline-Affiliated Systems that is as complete, accurate
and timely as the information given to its affiliated system, as long as the
competing system offers terms for participation that are commercially
reasonable.
Although GDS-Affiliated Airlines are required by the U.S. Regulations to
participate in competing Airline-Affiliated Systems at the same level of
functionality, non GDS-Affiliated Airlines are not subject to the same
requirement. Thus many global distribution systems include in their associate
agreements parity clauses, which generally require an airline participating in a
global distribution system to participate in that system at as high a level of
functionality as in any competitive system. On August 14, 1996, the DOT issued a
notice of proposed rulemaking (an "NPRM") proposing a prohibition on the use of
parity clauses by global distribution systems but suggesting that such clauses
could still be enforced as to airlines that own or market a global distribution
system. The NPRM is a result of a Petition for Rulemaking filed by Alaska
Airlines. See "Business -- Legal Proceedings." The Company has filed comments on
the NPRM, in which the Company states that it is opposed to the prohibition on
parity clauses.
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Additionally, the DOT has issued an NPRM that proposes two rules. The first
proposed rule would require each global distribution system to offer a display
that lists flights without giving on-line connections any preference over
interline connections. The second proposed rule would require that any display
offered by a global distribution system be based on criteria rationally related
to consumer preferences. The Company has not yet filed comments with the DOT
with regard to this NPRM.
The Company also has operations in Australia, Canada and the European
Union. The overall approach of the regulations for global distribution systems
in each of these three jurisdictions is similar to that of the United States. In
each of these jurisdictions, rules require nondiscriminatory displays of airline
services and nondiscriminatory booking fees, and forbid airlines affiliated with
global distribution systems from linking travel agency commissions to the use of
a particular system. Further, these rules forbid airlines affiliated with global
distribution systems from discriminating against competing systems with respect
to the data that they furnish.
There are, however, unique aspects of each set of rules. The current
Canadian and European Union rules do apply to Travelocity and easySABRE. The
European rules also dictate the precise order in which flights must be displayed
and permit travel agents to cancel their subscription agreements at the end of
the first year of the contract. The Canadian rules forbid contracts with travel
agencies of more than three years in duration and forbid certain uses of
carriers' sales forces for promoting global distribution systems. The European
rules are presently under review and are expected to be revised within the next
year. The Company does not anticipate that any revision will materially affect
its operations in Europe.
The Company also has operations in the Caribbean, Latin America and Asia.
In jurisdictions in those regions, there is no regulation of global distribution
systems for travel products.
The Company currently does business in more than 70 countries outside the
U.S. The DOT, in conjunction with the U.S. Department of State, is charged with
assuring fair and open access for U.S. air carriers, and U.S. global
distribution systems owned by airlines, to overseas markets. In this regard, the
DOT has provided assistance to the Company in entering several overseas markets.
This assistance by the DOT to SABRE could cease if SABRE were not offered to
travel agencies by American or another airline or an airline affiliate.
The regulations in Australia, Canada and the European Union also contain,
in varying degrees, remedies the Company can use to assist in the eradication of
discriminatory practices that may impede the Company's access to the regulated
market.
INFORMATION TECHNOLOGY SOLUTIONS
OVERVIEW
The Company is a leading provider of solutions to the airline industry. The
Company also employs its airline expertise to offer solutions to other
industries that face similar complex operations issues, including the airport,
railroad, logistics, hospitality and financial services industries. The
solutions offered by the Company include software development and product sales,
transactions processing and consulting. The Company believes that its suite of
airline-related software solutions is the most comprehensive in the world. In
addition, pursuant to the Technology Services Agreement, the Company provides
data processing, network and distributed systems services to American and AMR's
other subsidiaries, fulfilling substantially all of their information technology
requirements. In 1995, 34.2% of the Company's revenues was generated by the
provision of information technology solutions services, and 24.2% of the
Company's revenues was generated by information technology solutions services
provided to American and its affiliates.
SOLUTIONS
The Company offers a comprehensive set of solutions to the airline
industry. These solutions include: (i) consulting, which includes capabilities
ranging from reengineering to functional consult-
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ing; (ii) software development, sales and licensing, which includes individual
sales of specific products as well as custom development and integration; and
(iii) full solutions outsourcing, which includes a full range of solutions. In
providing solutions, the Company depends mainly upon its technical personnel and
senior management. Recruiting and retaining capable personnel, particularly
those with expertise in operations research, information technology and
industrial engineering, is vital to the provision of solutions by the Company.
The Company combines the expertise of its operations research, information
technology and industrial engineering professionals to offer to the airline
industry a wide array of consulting services, including business planning and
analysis, information technology services, flight technical services and
business process design services.
The Company's solutions have helped American become one of the most
technologically advanced airlines in the world. The Company has provided
solutions to over 120 additional airlines or airline associations. These
solutions have many applications for airlines. For instance, (i) with Fare
Action Evaluator(sm), airlines can seek to enhance revenue using statistical and
database sources that estimate the economic implications of fare actions before
they are implemented, (ii) with AIRPRICE(sm), airlines can analyze and manage
fares and react to competitors' changes, (iii) with AIRFLITE(sm), airlines can
determine superior flight schedules and (iv) with AIRCREWS(sm), airlines can
improve crew member scheduling thus reducing staffing costs.
The Company also provides real-time transactions processing services
whereby the Company provides access to its hardware and software to airlines for
reservations, flight operations, departure control and other related services.
Local computer terminals at a customer's location are linked to the Company's
mainframes, and the Company maintains and operates the entire system on a secure
and confidential basis. As of June 30, 1996, under such arrangements, the
Company provides to more than 60 airlines -- including Southwest Airlines, Gulf
Air and Alaska Airlines -- versions of one or more of the Company's systems for
reservations, flight operations, passenger handling and cargo booking and
tracking.
Building on its base of experience established in the development of
solutions for the airline industry, the Company has extended its software
solutions and consulting businesses to other industries, particularly those that
face complex operations issues similar to the airline industry, including the
airport, hospitality, logistics, railroad and financial services industries. For
example, the Company worked closely with SNCF, the French national railroad, to
design, develop and install a passenger railway reservations system, which is
now accessed by more than 25,000 ticketing devices throughout Europe. The
Company and SNCF are now jointly marketing this software to other passenger
railroads. Other clients in industries outside of the airline industry include
the United States Navy, Roadway Express, Air Products and Chemicals, Club Med,
NationsBank, John Alden Insurance, Avis Rent A Car, Ryder Truck and, most
recently, Hyatt Hotels. For Hyatt, all of the hotel management company's
software maintenance and development functions have been outsourced to the
Company, in connection with an alliance with Computer Sciences Corporation,
which has undertaken to provide a broad variety of data processing services to
Hyatt for an initial five-year term. The Company will also commercialize Hyatt's
existing systems, including its computer reservation and property management
systems, and market them to third parties in collaboration with Computer
Sciences Corporation.
The Company distributes its solutions and consulting services through a
sales and marketing organization with offices in eight cities on four continents
(Dallas, Tulsa, Vancouver, London, Paris, Kuwait, Hong Kong and Sydney). The
Company also maintains agency relationships to support sales efforts in key
markets, including India, China and the Middle East. To date, the Company has
provided business solutions to more than 250 clients located in more than 50
countries.
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TECHNOLOGY SERVICES
The Company, through its SABRE Computer Services division ("SCS"), provides
data processing, network and distributed systems services to American and AMR's
other subsidiaries. The Company fulfills substantially all of American's data
processing requirements and manages all voice and data communication services
for American and AMR's other subsidiaries, including data networks, voice
networks and radio services. The Company also provides American with the
services required to design, install, operate and maintain its range of local
area networks, desktop, mobile computing and peripheral devices. This includes
the design, installation, operation and maintenance of American's airport
operations. In 1995, the Company introduced SABRE Wireless(SM), which provides
American's airport personnel the ability to access SABRE from mobile devices.
As part of the Reorganization, the Company entered into the Technology
Services Agreement with American to provide these services for a term of 10
years for most services (three and five years for others). See "Relationship
with AMR and Certain Transactions -- Contractual Arrangements." Although the
Company has no current plans to offer data processing or network services to
other customers, the Company has the capacity to explore future opportunities.
STRATEGY
The Company has developed a three-part strategy to maintain its position as
one of the world's leading providers of solutions to the airline industry and to
expand its core competencies to become one of the leading providers of solutions
to other industries.
- ENHANCING LEADERSHIP IN AIR TRAVEL SOLUTIONS. The Company believes that,
although it already provides its airline customers with a complete line of
products, it can enhance its market leadership by improving the depth and
breadth of its airline-related software product line and by expanding its
airline consulting business through internal development, license
agreements and acquisitions.
- EMPLOYING EXPERTISE INTO OTHER INDUSTRIES. The Company has over 20 years'
experience in applying its operations research, information technology and
industrial engineering skills in the airline industry. The Company intends
to build upon this experience and to leverage its expertise into other
industries, such as oil and gas, logistics, insurance and manufacturing,
with similar complex operations issues. As the Company's suite of
solutions expands, the Company believes that it will also be able to
provide non-airline customers with comprehensive services including
software development and product sales, transactions processing and
consulting.
- PURSUING ADDITIONAL STRATEGIC RELATIONSHIPS. The Company intends to
pursue alliances with leading information systems outsourcers to provide
complete information technology outsourcing, with the Company providing
the solutions outsourcing.
COMPETITION
The Company's information technology solutions products compete both
against full-service providers of technology outsourcing and solutions
companies, some of which have considerably greater financial resources than the
Company, and against smaller companies that offer a limited range of products.
Among the Company's full-service competitors are Electronic Data Systems,
IBM/ISSC, Unisys, Andersen Consulting and Lufthansa Systems. Many of these
competitors have formed strategic alliances with large companies in the travel
industry, and the Company's access to such potential customers is thus limited.
The Company believes that its competitive position in the travel industry is
enhanced by its experience in developing systems for American, by its ability to
offer not only software applications but also systems development, integration
and maintenance and transactions processing services, and because it can offer
to customers what it believes to be the most comprehensive suite of software
solutions for the airline industry.
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INTELLECTUAL PROPERTY
In connection with the Reorganization, American transferred to the Company
the software utilized in the operation of the business of The SABRE Group. This
software, along with other software, proprietary information and intellectual
property rights, are significant assets of the Company. The Company relies on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect these assets. The Company's
software and related documentation, however, are protected principally under
trade secret and copyright laws, which afford only limited protection. In
addition, the laws of some foreign jurisdictions may provide less protection
than the laws of the United States for the Company's proprietary rights.
Unauthorized use of the Company's intellectual property could have a material
adverse effect on the Company, and there can be no assurance that the Company's
legal remedies would adequately compensate it for the damages to its business
caused by such use.
Licenses for a number of software products have been granted to the
Company. Certain of these licenses, individually and in the aggregate, are
material to the business of the Company.
FACILITIES
The Company's principal executive offices are located in Fort Worth, Texas,
primarily in two buildings, one of which is owned by the Company and one of
which is leased from the Dallas/Fort Worth International Airport Board pursuant
to a lease that expires in 2023, subject to four renewal options, exercisable by
the Company, of five years duration each. The Company also leases office
facilities in approximately 70 other locations worldwide. The Company's Data
Center is located in an underground facility in Tulsa, Oklahoma. The land on
which the Data Center is located is leased from the Tulsa Airport Improvements
Trust, a public trust organized under the laws of the State of Oklahoma,
pursuant to a lease that expires in 2038.
SABRE and the Company's data processing services and transactions
processing are dependent on the Company's central computer operations and
information processing facility located in the Data Center, which contains over
120,000 square feet of space and houses fifteen mainframes having 12,639
gigabytes of storage and 3,371 MIPS of processing power. The SABRE system, which
is connected to over 120,000 computer access terminals and operates non-stop
throughout the year, maintains over 52 million air fares (updated five times per
business day), averages 93 million requests for information per day and has
processed up to 4,969 requests for information per second (in July 1996). The
Company also utilizes a computer center located in one of its office buildings
in Fort Worth (the "Fort Worth Center"). At the Fort Worth Center, the Company
operates and manages a wide variety of processors and computer systems as well
as server based and client/server distributed systems.
The Company's travel agency and corporate subscribers connect to SABRE
through leased access circuits. These leased access circuits, in turn, connect
to the domestic and international data networks leased by the Company from SITA,
which connect to the Data Center.
The Company believes that its office facilities will be adequate for its
immediate needs and that additional or substitute space is available if needed
to accommodate expansion. The Company also believes that its Data Center, Fort
Worth Center and network access will be adequate for its immediate and
foreseeable needs. The Company, however, continuously invests in research and
development to upgrade these facilities to meet changing technological needs.
LEGAL PROCEEDINGS
In June 1996, American Trans Air, Inc. filed suit against American in the
U.S. District Court for the Southern District of Indiana, Indianapolis Division
seeking a refund of $400,000 in booking fees it claims were charged for
illegitimate bookings. Prior to the filing by American Trans Air of its lawsuit,
America West Airlines Inc. had used a similar claim of illegitimate bookings to
withhold over
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$1.0 million in booking fees payable to American. American and SABRE Associates,
Inc., an affiliate of the Company, filed suit in the District Court of Tarrant
County, Texas, 153rd Judicial District, to recover the unpaid booking fees from
America West. In connection with the Reorganization, the Company is the
successor in interest to American in both of these cases. The claims of both
American Trans Air, Inc. and America West relate to booking fees charged by the
Company, and commonly charged by other providers in the electronic travel
distribution industry, for "passive bookings," which are bookings initially made
directly with a travel provider (rather than through a travel agent) and
subsequently ticketed through SABRE or another global distribution system. If
both American Trans Air and America West prevail on their claims of illegitimate
booking fees, other associates may also make similar claims. The Company
believes, however, that passive booking fees are properly charged pursuant to
its contracts with associates. The Company intends to vigorously defend its
actions in this regard and believes that the claims of American Trans Air, Inc.
and America West can be successfully defended or resolved without any material
adverse effect on the Company's financial condition or results of operations.
Alaska Airlines has filed a Petition for Rulemaking with the DOT seeking a
rule that would bar a global distribution system from requiring airlines that
are not GDS-Affiliated Airlines to participate in such system at the same level
of functionality as the airline participates in other global distribution
systems. The Company believes that this Petition for Rulemaking is a result of a
breach of contract suit brought by American against Alaska Airlines in 1994 in
the U.S. District Court for the Northern District of Texas. In its complaint,
American alleged that Alaska Airlines breached its participating carrier
agreement by obtaining greater functionality from other global distribution
systems than it obtained from SABRE. American is seeking declaratory relief.
This lawsuit has been stayed for over a year as the parties try to negotiate
settlement. In connection with the Reorganization, the Company is the successor
in interest to American in this litigation. See "-- Electronic Travel
Distribution -- Industry Regulation."
EMPLOYEES
As of June 30, 1996, the Company had approximately 7,900 full-time
employees. A central part of the Company's philosophy is to attract and maintain
a highly capable staff. The Company considers its current employee relations to
be good. None of the Company's employees are represented by a labor union.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their present
positions and their ages with the Company are as follows:
<TABLE>
<S> <C>
Robert L. Crandall........... Mr. Crandall was elected Chairman of the Board of Directors of the
Company in July 1996. He has been Chairman of the Board and Chief
Executive Officer of AMR Corporation since 1985, President of AMR
since its formation in 1982 and Chairman of the Board and Chief
Executive Officer of American since 1985. Mr. Crandall was President
of American from 1980 to 1995. Mr. Crandall is also a director of
Halliburton Company. Age 60.
Michael J. Durham............ Mr. Durham was elected a director, President and Chief Executive
Officer of the Company in July 1996. Mr. Durham was also elected
President and Chief Executive Officer of The SABRE Group, Inc. in
July 1996. Mr. Durham was elected President of The SABRE Group in
1995. Mr. Durham was Senior Vice President and Treasurer of AMR and
Senior Vice President -- Finance and Chief Financial Officer of
American from 1989 to 1995. Age 45.
Gerard J. Arpey.............. Mr. Arpey was elected a director of the Company in July 1996. He has
been Senior Vice President of AMR since 1992 and Chief Financial
Officer of AMR since 1995. Mr. Arpey was Vice President of American
from 1989 to 1995. Age 38.
Anne H. McNamara............. Mrs. McNamara was elected a director of the Company in August 1996.
Mrs. McNamara has been Senior Vice President and General Counsel of
AMR since 1988. Age 48.
Bradford J. Boston........... Mr. Boston was elected Senior Vice President -- SABRE Computer
Services of the Company in July 1996. Mr. Boston was also elected
President -- SABRE Computer Services for The SABRE Group, Inc. in
July 1996. Mr. Boston was President -- SABRE Computer Services, a
division of The SABRE Group, from June 1996 to July 1996. Prior to
that time, Mr. Boston was Senior Vice President for American Express
Travel Related Services from 1994 to 1996, was Senior Vice President
of Visa International's Visanet operations from 1993 to 1994, and
was Vice President of Systems Development for United Airlines/Covia
Partnership from 1991 to 1993. Age 42.
Thomas M. Cook............... Mr. Cook was elected Senior Vice President -- SABRE Decision
Technologies of the Company in July 1996. Mr. Cook was also elected
President -- SABRE Decision Technologies for The SABRE Group, Inc.
in July 1996. Mr. Cook was President -- SABRE Decision Technologies,
a division of The SABRE Group, from its formation in 1994 to 1996.
For American, Mr. Cook was President -- Decision Technologies from
1988 to 1994. Age 56.
Terrell B. Jones............. Mr. Jones was elected Senior Vice President -- SABRE Interactive and
Chief Information Officer of the Company in July 1996. Mr. Jones was
also elected President -- SABRE Interactive and Chief Information
Officer for The SABRE Group, Inc. in July 1996. Mr. Jones served as
President -- SABRE Computer Services, a division of The SABRE Group,
from 1993 to 1996 and as President -- SABRE Interactive, a division
of The SABRE Group, from 1995 to 1996. For American, Mr. Jones
served as Managing Director and Division Vice President -- SCS
Systems Planning & Development from 1991 to 1993, and as Managing
Director & Vice President -- STIN Product Development from 1987 to
1991. Age 48.
</TABLE>
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<TABLE>
<S> <C>
Jeffrey G. Katz.............. Mr. Katz was elected Senior Vice President -- SABRE Travel
Information Network of the Company in July 1996. Mr. Katz was also
elected President -- SABRE Travel Information Network for The SABRE
Group, Inc. in July 1996. Mr. Katz was President -- SABRE Travel
Information Network, a division of The SABRE Group, from 1993 to
July 1996. For American, Mr. Katz served as Division Managing
Director -- Passenger Sales from 1991 to 1993. Age 41.
T. Patrick Kelly............. Mr. Kelly was elected Senior Vice President, Chief Financial Officer
and Treasurer of the Company and of The SABRE Group, Inc. in July
1996. Mr. Kelly was Senior Vice President -- SABRE Group Planning
from 1995 to July 1996. For American, Mr. Kelly served as Vice
President -- Financial Planning & Analysis from 1993 to 1995,
Managing Director -- SABRE Development Services from 1992 to 1993,
and Managing Director -- Financial Planning from 1990 to 1992. Age
39.
Andrew B. Steinberg.......... Mr. Steinberg has agreed to serve as Senior Vice President, General
Counsel and Corporate Secretary of the Company as of the date of the
consummation of the Offerings. Mr. Steinberg has served as an
associate general counsel of American since 1994 and will resign
from that position upon becoming Senior Vice President, General
Counsel and Corporate Secretary of the Company. From 1991 to 1994,
Mr. Steinberg was a senior attorney with American. Age 37.
</TABLE>
Following the consummation of the Offerings, the Company intends to elect
five additional directors, two of whom are directors but not employees or
officers of AMR and three of whom are neither employees or officers of the
Company or AMR nor directors of AMR.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors is divided into three classes of directors, with
each class elected to a three-year term every third year and holding office
until their successors are elected and qualified. Mr. Crandall's present term as
Chairman of the Board will expire at the Company's annual meeting of
stockholders to be held in 1999. Mr. Durham's present term as a director will
expire at the Company's annual meeting of stockholders to be held in 1999. Mr.
Arpey's present term as a director will expire at the Company's annual meeting
of stockholders to be held in 1998. Mrs. McNamara's present term as a director
will expire at the Company's annual meeting of stockholders to be held in 1997.
The Bylaws authorize the Board of Directors to designate three committees,
an Executive Committee, an Audit Committee and a Compensation/Nominating
Committee. The Board of Directors has designated an Executive Committee and
will, upon the consummation of the Offerings, designate an Audit Committee and a
Compensation/Nominating Committee. In addition, the Board of Directors may, from
time to time, designate one or more Special Committees, which shall have such
duties and may exercise such powers as are granted to it by the Board of
Directors.
The Executive Committee will consist of four or more members, including the
Chairman of the Board and the Chief Executive Officer. The Executive Committee
has and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Company, with the exception of
such powers and authority as may be specifically reserved to the Board by law or
by resolution adopted by the Board of Directors.
The Audit Committee, which will be composed entirely of directors who are
not employees or officers of the Company or AMR or directors of AMR, will review
and recommend the selection of independent auditors, the fees to be paid to such
auditors, the adequacy of the audit and accounting procedures of the Company and
such other matters as may be specifically delegated to the Audit Committee by
the Board of Directors. In this connection, the Audit Committee shall, at its
request,
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meet with representatives of the independent auditors and with the financial
officers of the Company separately or jointly.
The Compensation/Nominating Committee, which will be composed entirely of
directors who are neither employees nor officers of the Company, will review and
make recommendations with respect to the management remuneration policies of the
Company including salary rates and fringe benefits of elected officers, other
remuneration plans such as incentive compensation, deferred compensation and
stock option plans, directors' compensation and benefits and such other matters
as may be specifically delegated to the Compensation/Nominating Committee by the
Board of Directors. In addition, the Compensation/Nominating Committee will make
recommendations to the Board of Directors concerning suitable candidates for
election to the Board of Directors, with respect to assignments to committees of
the Board of Directors, and with respect to promotions, changes and succession
among the senior management of the Company. In making recommendations for
suitable candidates for election to the Board of Directors, the
Compensation/Nominating Committee will consider nominees for election
recommended by stockholders.
COMPENSATION OF DIRECTORS
Directors who are not executive officers of the Company or AMR will receive
an annual retainer of $25,000 for Board of Directors and committee service and a
fee of $1,000 for each meeting of the Board of Directors or any committee
thereof attended.
It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, effective on the consummation of the Offerings, a
Directors' Stock Incentive Plan (the "SIP").
The SIP will provide for an annual award of options to purchase 3,000
shares of the Company's Class A Common Stock to each director who is neither an
officer nor an employee of the Company, AMR or any subsidiary thereof (a
"Non-Employee Director") who is in office on the first business day after each
annual meeting of stockholders occurring during the term of the SIP (an "Annual
Award"). The options, which will have an exercise price equal to the fair market
value of the Class A Common Stock on the date of grant, will vest pro rata over
a five-year period, as long as the Non-Employee Director is in office on the
first business day after each annual meeting of stockholders. Notwithstanding
the vesting provisions of the previous sentence, if a Non-Employee Director
ceases to be a director due to death or disability before all options are
vested, the Non-Employee Director's options shall vest immediately upon death or
disability. Each option will expire on the earlier of (i) the date the
Non-Employee Director ceases to be a director of the Company, if for any reason
other than death, disability or retirement or (ii) three years from the date the
Non-Employee Director ceases to be a director of the Company due to death,
disability or retirement; provided, however, that if the Non-Employee Director
dies within the three-year period following disability or retirement, as
applicable, the option will expire no later than 12 months after the
Non-Employee Director's death.
The SIP will also provide for a one-time award of options to purchase
10,000 shares of the Company's Class A Common Stock to a new Non-Employee
Director upon his or her initial election to the Board of Directors (a "New
Director"). This grant will be made on the business day immediately following
the annual meeting at or after which such New Director is elected to the Board
(the "Election Award"). Options granted as an Election Award, which will have an
exercise price equal to the fair market value of the Class A Common Stock on the
date of grant, will vest in the same manner as options granted as an Annual
Award. The Election Award will be in addition to the Annual Award.
A maximum of 350,000 shares may be issued under the SIP, subject to
appropriate adjustments in the event of certain corporate transactions,
including but not limited to reorganizations, stock dividends and splits. The
SIP will be administered, and may be amended, by the Board of Directors.
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<PAGE> 52
No income will be realized by the Non-Employee Director at the time options
are granted. Generally, upon exercise of an option, the Non-Employee Director
will realize ordinary income in an amount equal to the difference between the
price paid for the shares and the fair market value of the shares on the date of
exercise. The Company will be entitled to a tax deduction in the same amount.
Any appreciation (or depreciation) after the date of the exercise will be either
short-term or long-term capital gain or loss, depending on the length of time
that the Non-Employee Director has held the shares.
EXECUTIVE COMPENSATION
Prior to the Reorganization, a majority of the employees of the Company,
including the five most highly compensated executive officers of the Company,
who are named below, were compensated by American. Following the Reorganization,
the executive officers and all other employees of the Company will be
compensated solely by the Company, and the executive officers of the Company
will no longer participate in any of American's compensation plans, except with
regard to certain equity awards granted by AMR as described below and with
regard to American's fixed benefit retirement plan, in which the employees of
the Company will participate until December 31, 1996.
The Company's compensation program will be administered by the
Compensation/Nominating Committee. The Company's executive officers will receive
annual cash compensation in the form of a base salary and will participate in a
formula-based incentive compensation plan that is tied to the Company's
financial performance. In addition, the Company's executive officers and other
key employees will be eligible to participate in the Company's Long-Term
Incentive Plan (the "LTIP"). The Company's executive officers will also
participate in one or more retirement plans, the parameters of which are
presently under consideration by the Company.
For the fiscal year ended December 31, 1995, the five most highly
compensated officers of the Company whose aggregate remuneration exceeded
$100,000 were Michael J. Durham, Thomas M. Cook, Terrell B. Jones, Jeffrey G.
Katz and T. Patrick Kelly (the "named executive officers"). See "-- Compensation
of the Named Executive Officers in 1995." Bradford J. Boston was appointed
Senior Vice President -- SABRE Computer Services on June 1, 1996. As base salary
for 1996, Mr. Durham will receive $393,583, Mr. Cook will receive $259,499, Mr.
Jones will receive $243,700, Mr. Katz will receive $187,243 and Mr. Kelly will
receive $186,883. Mr. Boston will receive a base salary of $132,750 for the
seven months commencing June 1, 1996, the date of commencement of his employment
with the Company.
The Company's incentive compensation plan provides that each of the named
executive officers, along with other key employees, will be eligible to receive
cash bonus awards only if specified financial performance goals are met by the
Company. The target bonus payable to a participant under the incentive
compensation plan is based upon that individual's job classification at the
Company, but the actual amount of the award is based on a subjective evaluation
of such individual's performance. No bonus payment may exceed 100% of the
individual's base salary.
THE COMPANY'S LONG-TERM INCENTIVE PLAN
It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, and AMR, as the Company's sole stockholder, will
approve, effective upon the consummation of the Offerings, the LTIP.
LTIP awards may be made to key employees, including officers of the
Company, its subsidiaries and affiliates but may not be granted to any director
who is not also an employee of the Company, its subsidiaries or affiliates. The
number of employees participating in the LTIP will vary from year to year.
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<PAGE> 53
Initially 7.0 million shares of Class A Common Stock will be authorized to
be issued under the LTIP.
If shares subject to an option under the LTIP cease to be subject to such
option, or if shares awarded under the LTIP are forfeited, or an award otherwise
terminates without a payment being made to the participant in the form of Class
A Common Stock, such shares will again be available for future distribution
under the LTIP. In the event of certain changes in the Company's capital
structure affecting the Class A Common Stock, the LTIP Committee may make
appropriate adjustments in the number of shares that may be awarded and in the
number of shares covered by options and other awards then outstanding under the
LTIP, and, where applicable, the exercise price of awards under the LTIP.
The LTIP will be administered by a committee consisting of no fewer than
two members of the Board of Directors (the "LTIP Committee"). The LTIP Committee
will have the authority to grant the following types of awards under the LTIP:
(1) stock options, (2) stock appreciation rights, (3) restricted stock, (4)
deferred stock, (5) stock purchase rights, (6) other stock-based awards. Each of
these awards may be granted alone or in conjunction with, or in tandem with,
other awards under the LTIP and/or cash awards outside the LTIP.
1. STOCK OPTIONS. Incentive stock options and non-qualified stock options
may be granted for such number of shares as the LTIP Committee shall determine,
except that no participant may be granted stock options in any 12 month period
for more than 400,000 shares. Stock options are exercisable at such times and
subject to such terms and conditions as the LTIP Committee determines and over a
term (not in excess of 10 years) determined by the LTIP Committee. Except as
otherwise determined by the LTIP Committee, the exercise price for any option
may not be less than 100% of the fair market value of the Company's Class A
Common Stock as of the date of grant.
Unless otherwise determined by the LTIP Committee, only options that are
exercisable on a participant's date of termination, death, disability or
retirement may be subsequently exercised. Upon an employee's voluntary
resignation or termination for cause, such employee's stock options generally
will terminate. If the employee is involuntarily terminated without cause, stock
options generally will be exercisable for three months following such
termination. The LTIP provides that stock options generally will be exercisable
for three years following termination of employment due to death, disability or
retirement; provided, however, that if the employee dies within the three-year
period following disability or retirement, as applicable, the option will expire
12 months after the employee's death. In no event, however, will a stock option
remain exercisable past its original term.
2. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") may be
granted in conjunction with all or part of a stock option and will be
exercisable only when the underlying stock option is exercisable. Once an SAR
has been exercised, the portion of the stock option underlying the SAR
terminates. The LTIP Committee may grant SARs that become exercisable only in
the event of a Change in Control or Potential Change in Control of the Company
and may provide that such SARs may be cashed out on the basis of the Change in
Control Price, as such terms are defined in the LTIP.
Upon exercise of an SAR, the LTIP Committee, at its discretion, will pay
the employee in cash, Class A Common Stock or a combination thereof, an amount
equal to the excess of the then fair market value of the stock over the exercise
price, multiplied by the number of SARs being exercised.
3. RESTRICTED STOCK. The vesting of restricted stock may be conditioned
upon such factors as the LTIP Committee may determine. The LTIP Committee
determines the period during which restricted stock is subject to forfeiture. At
grant, the LTIP Committee may provide for other awards, payable either in stock
or cash, to ensure payment of a minimum value at the time the restrictions
lapse.
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4. DEFERRED STOCK. The LTIP Committee determines the periods during which
the deferred stock is subject to forfeiture. The vesting of deferred stock may
be conditioned upon the attainment of specific performance goals or such other
factors as the LTIP Committee may determine. The LTIP Committee may provide for
other awards, payable either in stock or cash, to ensure payment of a minimum
value at the time the deferral limitations lapse, subject to such performance,
service and/or other terms and conditions as the LTIP Committee may specify.
5. STOCK PURCHASE RIGHTS. The LTIP Committee may grant to eligible
individuals rights to purchase the Company's Class A Common Stock at (a) the
fair market value, (b) 50% of the fair market value, (c) book value or (d) par
value, all such values being determined as of the date of grant. The LTIP
Committee may condition such rights, or their exercise, on such terms and
conditions as it sees fit. Rights to purchase stock will be exercisable for a
period to be determined by the LTIP Committee, except that the period may not be
greater than 30 days.
6. OTHER STOCK-BASED AWARDS. The LTIP Committee may also grant other types
of awards that are valued, in whole or in part, by reference to or otherwise
based on the Company's Class A Common Stock. Such awards will be made upon such
terms and conditions as the LTIP Committee in its discretion may provide.
The LTIP will also permit the LTIP Committee to pay cash amounts to any
executive officer (within the meaning of Section 16(a) of the Securities
Exchange Act of 1934, as amended) upon the achievement, in whole or in part, of
performance goals or objectives established in writing by the LTIP Committee
with respect to such performance periods as the LTIP Committee shall determine.
Any such goals or objectives shall be based on one or more of the Performance
Criteria, as defined in the LTIP. The maximum amount of any such cash payment to
any single officer with respect to any 12 month period shall not exceed the
lesser of (i) $1,000,000 or (ii) twice the officer's annual base salary as in
effect on the last day of the preceding fiscal year.
If there is a Change in Control or a Potential Change in Control, all
awards that are not then vested will become vested and any restrictions or
limitations will lapse. Stock options, SARs, limited SARs, restricted stock,
deferred stock, stock purchase rights and other stock-based awards will, unless
otherwise determined by the LTIP Committee in its sole discretion, be cashed out
on the basis of the Change in Control Price.
The following is a brief summary of the federal income tax consequences of
awards made under the LTIP based upon the federal income tax laws in effect on
the date hereof. This summary is not intended to be exhaustive and does not
describe state or local tax consequences.
Incentive Stock Options. No taxable income is realized by the participant
upon the grant or exercise of an incentive stock option (an "ISO"). If a
participant does not sell the stock received upon the exercise of an ISO ("ISO
Shares") for at least two years from the date of grant and within one year from
the date of exercise, when the shares are sold any gain (loss) realized will be
long-term capital gain (loss). In such circumstances, no deduction will be
allowed to the Company for federal income tax purposes.
If ISO Shares are disposed of prior to the expiration of the holding
periods described above, the participant generally will realize ordinary income
at that time equal to the excess, if any, of the fair market value of the shares
at exercise (or, if less, the amount realized on the disposition of the shares)
over the price paid for such ISO Shares. The Company will be entitled to deduct
any such recognized amount. Any further gain or loss realized by the participant
will be taxed as short-term or long-term capital gain or loss. Subject to
certain exceptions for disability or death, if an ISO is exercised more than
three months following the termination of the participant's employment, the
option will generally be taxed as a non-qualified stock option.
Non-Qualified Stock Options. No income is realized by the participant at
the time a non-qualified stock option is granted. Generally upon exercise of a
non-qualified stock option, the participant will realize ordinary income in an
amount equal to the difference between the price paid for the shares
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and the fair market value of the shares on the date of exercise. The Company
will be entitled to a tax deduction in the same amount. Any appreciation (or
depreciation) after the date of the exercise will be either short-term or
long-term capital gain or loss, depending on the length of time that the
participant has held the shares.
Stock Appreciation Rights. No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, the participant
will generally be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash and the fair market value of any
shares received. The Company will be entitled to a deduction at the time and in
the amount included in the participant's income by reason of the exercise. If
the participant receives Class A Common Stock upon exercise of any SAR, the
post-exercise appreciation or depreciation will be treated in the same manner
discussed above under Non-Qualified Stock Options.
Restricted Stock. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
any consideration paid for the stock. The Company will be entitled to a
deduction at the same time and in the same amount. The holding period to
determine whether the participant has long-term or short-term gain or loss on a
subsequent sale generally begins when the stock is no longer subject to
forfeiture, and the participant's tax basis for such shares will generally equal
the fair market value of such shares on such date.
However, a participant may elect, under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), within 30 days of the grant of
the stock, to recognize taxable ordinary income on the date of grant equal to
the excess of the fair market value of the shares of restricted stock
(determined without regard to the restrictions) over the purchase price of the
restricted stock. By reason of such an election, the participant's holding
period will commence on the date of grant, and the participant's tax basis will
be equal to the fair market value of the shares on that date (determined without
regard to restrictions). Likewise, the Company generally will be entitled to a
deduction at that time in the amount that is taxable as ordinary income to the
participant. If shares are forfeited after making such an election, the
participant will be entitled to a deduction or loss for tax purposes only in an
amount equal to the purchase price, if any, of the forfeited shares.
Deferred Stock. A participant receiving deferred stock generally will be
subject to tax at ordinary income rates on the fair market value of the deferred
stock on the date that the stock is distributed to the participant, and the
capital gain or loss holding period for such stock will also commence on that
date. The Company generally will be entitled to a deduction in the amount that
is taxable as ordinary income to the participant.
ANTICIPATED GRANTS TO THE EXECUTIVE OFFICERS FOR 1996
On the date of the consummation of the Offerings, the Company will make
one-time grants to the named executive officers in connection with the Offerings
and annual grants as part of their annual compensation. The grants will be
comprised of (i) options to purchase Class A Common Stock, (ii) restricted stock
and (iii) performance shares, which are shares of Class A Common Stock (and a
type of deferred stock) that will be issued in the first quarter of 1999 based
upon the Company's attainment of pre-determined financial objectives over the
period from 1996 to 1998 ("Performance Shares"). A portion of each of the
one-time grants of options is an acceleration of grants that would otherwise be
made, and will reduce the number of options to be granted, to the named
executive officers and to Mr. Boston in 1997.
The Company anticipates that upon the consummation of the Offerings: (i)
approximately $1,500,000 in options to purchase shares of Class A Common Stock,
calculated using a modified Black-Scholes model, and $338,500 in Performance
Shares, valued based upon the Offering price of the Class A Common Stock, will
be granted to Mr. Durham; (ii) approximately $662,700 in options to purchase
Class A Common Stock, $175,200 in Performance Shares and $55,800 in restricted
stock will be granted to Mr. Cook; (iii) approximately $475,300 in options to
purchase Class A
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Common Stock and $175,300 in Performance Shares will be granted to Mr. Jones;
(iv) approximately $450,000 in options to purchase Class A Common Stock and
$169,700 in Performance Shares will be granted to Mr. Katz; (v) approximately
$450,000 in options to purchase Class A Common Stock and $166,400 in Performance
Shares will be granted to Mr. Kelly; and (vi) approximately $280,000 in options
to purchase Class A Common Stock will be granted to Mr. Boston.
CONVERSION OF AMR EQUITY COMPENSATION TO CLASS A COMMON STOCK
Upon consummation of the Offerings, except as noted below, each employee
will have the opportunity to have all unexercised or unvested stock awards from
AMR held by such employee converted into stock awards of the Company and vest
under the original time schedule applicable with respect to such awards. Each of
the officers of the Company has elected to convert his AMR equity awards into
awards payable in Class A Common Stock.
Performance shares of AMR common stock that will be issued in the first
quarter of 1998 based upon the Company's attainment of pre-determined cash flow
objectives over the period from January 1, 1995 to December 31, 1997 will vest
according to their original performance metric and time frame. However, upon
vesting, payment to employees of the Company will be made using shares of Class
A Common Stock. The number of shares of Class A Common Stock to be issued will
equal the number of shares of AMR common stock to be issued multiplied by the
market price of AMR common stock on the date of the pricing of the Offerings and
divided by the Offering price.
Stock options to purchase AMR common stock will be exchanged on the date of
the consummation of the Offerings for options to purchase Class A Common Stock
of equal in-the-money value.
Career equity, awarded by AMR, is an award of deferred common stock that
vests generally at retirement. Most of the shares of career equity held by
employees of the Company will convert, on the date of consummation of the
Offerings, into some combination of options to purchase Class A Common Stock and
restricted shares of Class A Common Stock.
Two forms of AMR stock awards will not be altered in connection with the
Offerings. Performance shares of AMR common stock relating to the period from
January 1, 1994 through December 31, 1996 (issuable in the first quarter of
1997) will be paid in shares of AMR common stock when and if payment is due. In
addition, each share of AMR restricted stock held by each employee of the
Company, other than Mr. Boston, will complete its vesting according to its
original vesting schedule and will be converted to restricted shares of Class A
Common Stock. Pursuant to his terms of employment, Mr. Boston's AMR restricted
stock will convert into shares of restricted stock of the Company of equal
value.
EMPLOYMENT AGREEMENTS
The Company has entered into an agreement (the "Durham Agreement") with Mr.
Durham, which provides that Mr. Durham will be employed by the Company for a
term of three years from the date of the Offerings. In the event that the
Company terminates Mr. Durham's employment during the term of the Durham
Agreement without cause, Mr. Durham would receive a severance payment equal to
the greater of (i) one year's salary and incentive compensation or (ii) the
total amount of salary remaining for the term of the Durham Agreement, and all
outstanding stock awards would continue vesting through the greater of one year
or the remainder of the term of the Durham Agreement. Mr. Durham and the Company
have also agreed that Mr. Durham will receive travel privileges from American
until June 30, 2008, and thereafter as a retiree if he retires on or prior to
June 30, 2008, subject to limited exceptions.
The Company has assumed the obligations of American under agreements
originally entered into by American with Mr. Cook and Mr. Jones (the "Officer
Agreements"). Mr. Cook's agreement
54
<PAGE> 57
provides that Mr. Cook will be employed by the Company as an officer until
October 31, 2000. Mr. Jones' agreement provides that Mr. Jones will be employed
by the Company as an officer until April 18, 2000, subject to extension by the
Company to no later than April 18, 2004. Pursuant to the Officer Agreements, the
Company reserves the right to remove Mr. Cook or Mr. Jones as an officer and to
retain him as an employee for consulting services during the remainder of the
term of the applicable Officer Agreement. Such officer's base salary as a
consultant would be the rate in effect at the time of his removal as an officer
and such salary would continue for the remainder of the term of the applicable
Officer Agreement. Pursuant to the Officer Agreements, each of Mr. Cook and Mr.
Jones is entitled to receive specified amounts of incentive compensation under
AMR's Long Term Incentive Plan, along with other specified benefits customarily
provided to officers of the Company. Each of Mr. Cook and Mr. Jones has agreed
that the incentive compensation to be awarded under AMR's Long Term Incentive
Plan will instead be granted in awards of Class A Common Stock pursuant to the
LTIP.
RETIREMENT PLANS
Each employee of the Company will continue to participate in American's
fixed benefit retirement plan until December 31, 1996, as described below. After
that time, the Company will implement The SABRE Group Retirement Plan (the
"SGRP") and the Legacy Pension Plan (the "LPP").
Until December 31, 1996, each employee of the Company will participate in
American's fixed benefit retirement plan (the "Fixed Benefit Retirement Plan"),
which complies with the Employee Retirement Income Security Act of 1974
("ERISA") and qualifies for federal exemption under the Internal Revenue Code of
1986 (the "Code"). Until December 31, 1996, the named executive officers of the
Company are eligible for additional retirement benefits under the Supplemental
Executive Retirement Plan (the "SERP"). The SERP provides pension benefits
(calculated upon the basis of final average base salary, incentive compensation
payments and performance returns) to which officers of the Company would be
entitled but for the limit of $120,000 on the maximum annual benefit payable
under ERISA and the Code and the limit on the maximum amount of compensation
that may be taken into account under the Company's basic pension program
($150,000 for 1995).
The following table shows typical annual benefits payable under the Fixed
Benefit Retirement Plan and the SERP, based upon retirement in 1995 at age 65,
to persons in specified remuneration and credited years of service
classifications. Annual retirement benefits set forth below are subject to
reduction for Social Security benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
--------------------------------------------------------
FINAL CREDITED YEARS OF SERVICE
AVERAGE --------------------------------------------------------
SALARY 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$250,000............................. $ 75,000 $100,000 $125,000 $150,000 $175,000
300,000............................. 90,000 120,000 150,000 180,000 210,000
400,000............................. 120,000 160,000 200,000 240,000 280,000
500,000............................. 150,000 200,000 250,000 300,000 350,000
600,000............................. 180,000 240,000 300,000 360,000 420,000
700,000............................. 210,000 280,000 350,000 420,000 490,000
800,000............................. 240,000 320,000 400,000 480,000 560,000
</TABLE>
As of December 31, 1995, the named executive officers had the following
credited years of service: Mr. Durham: 15.5; Mr. Cook: 12.5; Mr. Katz: 14.5; Mr.
Jones: 16.0; Mr. Kelly: 10.5.
Commencing January 1, 1997, employees of the Company who were under the age
of 40 as of November 1, 1996 will participate in the SGRP. Employees who were
over the age of 40 as of
55
<PAGE> 58
November 1, 1996 will have the option of participating in the SGRP or the LPP.
The SGRP is a plan qualified under Section 401(k) of the Code. Pursuant to the
SGRP, the Company will contribute monthly 2.75% of each employee's base pay to
the SGRP. In addition, the Company will match 50 cents of each dollar
contributed by an employee, up to 6% of the employee's base pay. The employee
will vest in the Company contributions after three years of service with the
Company, including service for AMR affiliates. The employee is immediately
vested in his or her own contributions and in the matching contributions of the
Company. The amount that any employee will be entitled to receive upon
retirement will be subject to the amount of that employee's contributions, the
investment selections of the employee and the returns thereon.
The LPP is substantially identical to American's Fixed Benefit Retirement
Plan. All benefits earned by employees of the Company under American's Fixed
Benefit Retirement Plan will be transferred to the LPP effective December 31,
1996. Upon retirement, benefits under the LPP will be calculated based upon base
pay for the five years closest to retirement. For employees who participate in
the SGRP, benefits payable under the LPP will be based upon credited years of
service as of December 31, 1996. However, employees in the SGRP will continue to
earn years of service for purposes of determining vesting and early retirement
benefits under the LLP.
The Company anticipates that, prior to January 1, 1997, it will adopt a
supplemental executive retirement plan for its officers and directors. Although
the form of the supplemental executive retirement plan is under consideration,
the Company anticipates that the benefits payable thereunder will be similar to
those payable under American's SERP. As such, typical annual benefits payable to
officers who participate in the LPP and the SERP will be similar to those
indicated on page 55 for participation in American's plans.
EMPLOYEE STOCK PURCHASE PLAN
It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, and AMR as the sole stockholder will approve, a
Stock Purchase Plan (the "Stock Purchase Plan") for employees of the Company who
are based in the United States and in certain foreign jurisdictions, and who
otherwise meet the requirements specified in Section 423 of the Code. Through
the Stock Purchase Plan, eligible employees will have the opportunity to
purchase shares of Class A Common Stock semi-annually at a 15% discount from the
prevailing market price on the first or last day of the applicable six-month
period, whichever is lower. Pursuant to the Stock Purchase Plan, each employee
will be permitted to acquire annually Class A Common Stock with an aggregate
maximum purchase price equal to 2% of that employee's base pay, subject to
applicable limitations under the Code.
EXECUTIVE TERMINATION BENEFITS AGREEMENTS
The Company will have, effective as of the closing of the Offerings,
executive termination benefits agreements (the "termination benefits
agreements") with seven of its officers, including all of the named executive
officers. The benefits provided by the termination benefits agreements are
triggered by the termination of the individual who is a party to a termination
benefits agreement (i) within three years following a change in control of the
Company, if the individual's employment with the Company is terminated other
than for cause or if the individual terminates his or her employment with "good
reason" or (ii) within one year following a change in control of the Company, if
the individual terminates his or her employment with the Company; provided,
however, that if the individual's employment is terminated for cause or as a
consequence of death or disability, the termination benefits agreement is not
triggered. Under the terms of the termination benefits agreements, a change in
control of the Company is deemed to occur (i) if a third party, other than AMR
or an affiliate, acquires 20% or more of the combined voting power of the
Company's then outstanding securities with respect to the election of directors
of the Company, (ii) upon the occurrence of a transaction that requires
stockholder approval and involves the acquisition of the Company (through the
purchase of assets or by merger or otherwise) by an entity
56
<PAGE> 59
other than the Company, a subsidiary thereof, AMR or an affiliate thereof or
(iii) if during any 24-month period the individuals who, at the beginning of
such period, constitute the Board of Directors of the Company cease for any
reason other than death to constitute at least a majority thereof and the new
directors of the Company were not elected with the approval of the individuals
who, at the beginning of such period, constitute the Board of Directors. A
change in control would not occur in the event that AMR distributes its Class B
Common Stock (or upon conversion of such Class B Common Stock, the resulting
Class A Common Stock) to its stockholders or sells such Common Stock to the
public in an underwritten public offering. The termination benefits agreements
provide that upon such termination, the individual will receive, in a lump sum
payment, the sum of (i) two times the greater of (A) the executive's annual base
salary at the Termination Date or (B) the executive's effective annual base
salary immediately prior to the change in control, plus (ii) two times the
greater of (x) the median annual bonus awarded to the executive under the LTIP
or any other bonus plan or (y) 50% of the highest median target bonus rate
applicable to the executive for any period during such prior three-year period,
multiplied by the annual applicable base salary determined under (i) above, and
certain other miscellaneous benefits. The amount of termination benefits will be
adjusted if the executive is within two years of his 65th birthday as of the
date of termination. In addition, upon a change in control, the vesting and
exercisability of stock awards will be accelerated (for example, deferred and
restricted stock will immediately vest and all stock options will become
immediately exercisable). Finally, the individual will be reimbursed for excise
taxes, if any, paid pursuant to Section 280G of the Code (or its successor
provision) and for federal income tax paid on such excise tax reimbursement.
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS IN 1995
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation for
the fiscal year ended December 31, 1995 paid by American to the individuals who,
as of December 31, 1995, were the five most highly compensated officers of the
Company whose aggregate current remuneration exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
AWARDS
------------------------ PAYOUTS
ANNUAL COMPENSATION RESTRICTED SECURITIES ----------
--------------------- STOCK UNDERLYING LTIP ALL OTHER
NAME SALARY BONUS AWARDS(1) OPTIONS PAYOUTS(2) COMPENSATION(3)
- -------------------- --------- --------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Durham.............. $ 360,417 $ 116,000 0 5,500 $ 60,000 $ 9,443
Cook................ 239,944 90,321 0 13,000 16,200 8,384
Katz................ 166,402 81,426 0 3,000 16,200 3,266
Jones............... 224,583 96,697 0 5,000 16,200 6,078
Kelly............... 167,142 50,000 0 3,000 13,500 2,551
</TABLE>
- ---------------
(1) The following table sets forth certain information concerning outstanding
stock awards:
57
<PAGE> 60
DEFERRED AND RESTRICTED STOCK -- TOTAL SHARES AND VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF AGGREGATE MARKET VALUE OF
DEFERRED AND RESTRICTED DEFERRED AND RESTRICTED
SHARES HELD AT SHARES HELD AT
NAME DECEMBER 31, 1995(A) DECEMBER 31, 1995(B)
---- ----------------------- -------------------------
<S> <C> <C>
Durham................................ 51,000 $ 3,777,213
Cook.................................. 24,900 1,844,169
Katz.................................. 14,000 1,036,882
Jones................................. 21,050 1,559,026
Kelly................................. 14,800 1,096,132
</TABLE>
- ---------------
a) Consists of shares awarded under AMR's restricted stock plan that will
vest in years 1996-1997, shares of deferred common stock issued under
AMR's Long-Term Incentive Plan ("AMR's LTIP") that vest at retirement
and shares of deferred common stock issued under AMR's LTIP that vest
upon AMR's attainment of pre-determined cash flow objectives over a
three year performance period.
b) Based on the average market price of AMR common stock, $74.063, on the
NYSE on December 29, 1995.
(2) Represents performance returns, granted with respect to deferred shares,
that are payable annually in cash, and are based, in part, on AMR's prior
five-year average return on investment.
(3) Represents the full amount of premiums paid under a split-dollar life
insurance arrangement whereby AMR would recover certain premiums paid.
STOCK OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during 1995 by AMR to the named executive officers. The hypothetical present
values of stock options granted in 1995 are calculated under a modified
Black-Scholes model, a mathematical formula used to value options. The actual
amount, if any, realized upon the exercise of stock options will depend upon the
amount by which the market price of AMR's common stock on the date of exercise
exceeds the exercise price. There is no assurance that the hypothetical present
value of stock options reflected in this table will actually be realized.
OPTIONS/SARS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
% OF TOTAL
SECURITIES OPTIONS/SARS HYPOTHETICAL
UNDERLYING GRANTED TO EXERCISE OR PRESENT VALUE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION AT DATE
NAME GRANTED FISCAL YEAR PER SHARE DATE(1) OF GRANT(2)
- ---- ------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Durham....................... 5,500 1.2% $ 74.6875 7/20/05 $ 221,595
Cook......................... 13,000 2.9 65.0625 4/24/05 456,272
Katz......................... 3,000 0.7 74.6875 7/20/05 120,870
Jones........................ 5,000 1.1 65.0625 4/24/05 175,489
Kelly........................ 3,000 0.7 74.6875 7/20/05 120,870
</TABLE>
- ---------------
(1) Options have a term of ten years, have an exercise price equal to the
average market price of AMR's common stock on the date of grant and become
exercisable at the rate of 20% per year over a five-year period.
(2) The modified Black-Scholes model used to calculate the hypothetical values
at date of grant considers a number of factors to estimate the option's
present value, including the stock's historical volatility calculated using
the average daily market price of AMR's common stock
58
<PAGE> 61
over a one-year period prior to the grant date, the exercise period of the
option, interest rates and the stock's expected dividend yield. The
assumptions used in the valuation of the options were: stock price
volatility -- 25.942%, exercise period -- 10 years, interest rate -- 6.28%,
and dividend yield -- 10%.
STOCK OPTION EXERCISES AND
DECEMBER 31, 1995 STOCK OPTION VALUE
The following table sets forth certain information concerning options to
purchase AMR common stock during 1995 exercised by the named executive officers
and the number and value of unexercised in-the-money options at December 31,
1995. The actual amount, if any, realized upon exercise of stock options will
depend upon the amount by which the market price of AMR's common stock on the
date of exercise exceeds the exercise price. There is no assurance that the
values of unexercised in-the-money options (whether exercisable or
unexercisable) reflected in this table will actually be realized.
STOCK OPTION EXERCISES AND
DECEMBER 31, 1995 STOCK OPTION VALUE
<TABLE>
<CAPTION>
NO. OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT IN THE MONEY OPTIONS
NAME EXERCISE REALIZED DECEMBER 31, 1995 AT DECEMBER 31, 1995(1)
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Durham................ 3,000 $ 60,000 31,100/16,900 $398,158/$130,080
Cook.................. 5,600 120,988 5,600/18,400 41,052/ 182,459
Katz.................. 1,600 46,500 6,400/ 8,500 73,716/ 64,378
Jones................. 1,300 27,769 6,400/10,400 79,941/ 108,305
Kelly................. 0 0 6,100/ 8,400 92,266/ 63,303
</TABLE>
- ---------------
(1) Based on the average market price of AMR common stock, $74.063, on the NYSE
on December 29, 1995.
LONG TERM INCENTIVE PLAN AWARDS
Set forth below are the awards granted in 1995 under AMR's LTIP.
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
PERIOD NON-STOCK PRICE-BASED PLANS
NUMBER OF UNTIL ------------------------------
NAME PERFORMANCE SHARES(1) PAYOUT THRESHOLD TARGET MAXIMUM
- ---- --------------------- ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Durham........................ 5,600 12/31/97 0 5,600 16,800
Cook.......................... 2,200 12/31/97 0 2,200 6,600
Katz.......................... 2,000 12/31/97 0 2,000 6,000
Jones......................... 1,900 12/31/97 0 1,900 5,700
Kelly......................... 2,900 12/31/97 0 2,900 8,700
</TABLE>
- ---------------
(1) Performance shares awarded to the named executive officers in 1995 were
granted pursuant to AMR's LTIP under the performance share program
applicable to The SABRE Group.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation information with respect to the named executive officers for
1995 reflects compensation earned prior to the Reorganization. During 1995, the
Company had no Compensation/Nominating Committee.
59
<PAGE> 62
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDER
As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding. After completion of the Offerings, the only shares of Class A
Common Stock that will be outstanding are those that will be issued in the
Offerings (including any shares issued if the Underwriters' over-allotment
options are exercised) and those issued under the Company's employee and
director plans. See "Management." The table below sets forth certain information
with respect to the expected beneficial ownership of the Class B Common Stock of
the Company before and after completion of the Offerings by each beneficial
owner of more than 5% of the outstanding shares of Class B Common Stock and by
the Company's directors and executive officers.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BEFORE OFFERINGS BENEFICIAL OWNERSHIP AFTER OFFERINGS
------------------------------------------- -------------------------------------------
PERCENT OF PERCENT PERCENT PERCENT OF PERCENT PERCENT
NUMBER CLASS B OF OF NUMBER CLASS B OF OF
OF COMMON ECONOMIC VOTING OF COMMON ECONOMIC VOTING
NAME OF BENEFICIAL OWNER SHARES STOCK INTEREST POWER SHARES STOCK INTEREST POWER
- ---------------------------- ------ ---------- -------- ------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMR Corporation(1).......... 100% 100% 100% 100% 84.2%(2) 98.2%(2)
4333 Amon Carter Blvd.,
Fort Worth, Texas 76155
All directors and executive
officers as a group (9
persons).................. -- -- -- -- -- -- (3) (3)
</TABLE>
- ---------------
(1) The Board of Directors of AMR exercises sole voting and dispositive power
over the shares of Class B Common Stock held of record by AMR.
(2) If the Underwriters' over-allotment options are exercised in full, AMR would
beneficially own 82.2% of the economic interest and 97.9% of the voting
power after the Offerings.
(3) Directors participating in the SIP and the executive officers will receive
equity awards payable in shares of Class A Common Stock pursuant to the
Company's director and employee plans. The exact number of shares to be
issued in connection therewith, and the resulting percentage ownership,
cannot be calculated until the Offering price and the price of AMR common
stock on the date of pricing of the Offerings are known. For information on
the grants to be made, see "Management."
The following table sets forth certain information with respect to the
beneficial ownership, as of , 1996, of AMR's equity securities by
each of the Company's named executive officers and directors and by all of the
Company's directors and executive officers as a group. The table includes all
shares of AMR's common stock held of record or in street name, plus options
granted but unexercised under AMR's director and employee stock option plans.
The directors and officers of the Company individually beneficially own less
than 1% of any class of equity securities of AMR.
<TABLE>
<CAPTION>
COMMON SHARES
NAME OWNED
--------------------------------------------------------------------- -------------
<S> <C>
Robert L. Crandall................................................... *
Michael J. Durham.................................................... *
Gerard J. Arpey...................................................... *
Anne H. McNamara..................................................... *
Thomas M. Cook....................................................... *
Terrell B. Jones..................................................... *
Jeffrey G. Katz...................................................... *
T. Patrick Kelly..................................................... *
All directors and executive officers as a group (9 persons).......... *
</TABLE>
- ---------------
* Each director and officer and the directors and officers of the Company
collectively beneficially own less than 1% of the outstanding common stock of
AMR.
60
<PAGE> 63
RELATIONSHIP WITH AMR AND CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY; INDEBTEDNESS TO AMR
The Company was formed on June 25, 1996 and became a subsidiary of American
on July 2, 1996 in connection with the Reorganization by AMR of the businesses
of its operating unit known as The SABRE Group. As part of the Reorganization,
all of the businesses of The SABRE Group, including the businesses operated as
divisions or subsidiaries of American or AMR, were combined in subsidiaries of
the Company, and the Company and its subsidiaries were dividended by American to
AMR. Since the dividend, AMR has owned all of the Company's outstanding capital
stock.
In connection with the Reorganization, the Company issued the $850 million
Debenture to American, the amount of which exceeds the historical book value of
the assets contributed by American and AMR to the Company by $120.9 million.
American transferred the Debenture to AMR in exchange for a portion of a note of
American held by AMR. The Debenture, which matures on September 30, 2004, bears
interest, payable semiannually, at a rate based on the sum of the six-month
London Interbank Offered Rate plus a margin determined by the Company's senior
unsecured long-term debt rating or, if such debt rating is not available, by the
Company's ratio of debt to total capital. The Company has the right to prepay
the principal amount of the Debenture in whole or in part at any time prior to
December 31, 1996 and thereafter on interest payment dates, and will use
approximately 90% of the net proceeds of the Offerings to prepay part of the
Debenture. See "Use of Proceeds."
Also in connection with the Reorganization, the Company and American
entered into an Intercompany Agreement (the "Indemnification Agreement")
pursuant to which each party indemnified the other for certain obligations
relating to the Reorganization. Pursuant to the Indemnification Agreement, the
Company indemnified American for liabilities assumed in the Reorganization,
against third party claims asserted against American as a result of American's
prior ownership of assets or operation of businesses contributed to the Company
and for losses arising from or in connection with the Company's lease of
property from American. In exchange, American indemnified the Company for
specified liabilities retained by it in the Reorganization, against third party
claims against the Company relating to American's businesses and asserted
against the Company as a result of the ownership or possession by American prior
to the Reorganization of any asset contributed to the Company in the
Reorganization and for losses arising from or in connection with American's
lease of property from the Company.
COMMON STOCK OWNERSHIP
AMR currently owns all of the outstanding capital stock of the Company.
Upon completion of the Offerings, AMR will own 100% of the Company's outstanding
Class B Common Stock, which will represent approximately 98.2% of the combined
voting power of the Company's outstanding Common Stock (approximately 97.9% if
the Underwriters' over-allotment options are exercised in full). As long as AMR
beneficially owns a majority of the combined voting power, it will have the
ability to elect all of the members of the Board of Directors and thereby
ultimately to control the management and affairs of the Company, including any
determinations with respect to acquisitions, dispositions, borrowings, issuances
of Common Stock or other securities of the Company or the declaration and
payment of any dividends on the Common Stock. In addition, AMR will be able to
determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval and to cause or prevent a change in control.
Although, in negotiating the Affiliate Agreements between the Company and
AMR, American and AMR's other subsidiaries, the parties endeavored to implement
market-based agreements, as a result of AMR's control of the Company, none of
the Affiliate Agreements resulted from "arm's-length" negotiations. There can be
no assurance that the Company would not have received more favorable terms from
an unaffiliated party.
61
<PAGE> 64
Conflicts of interest may arise from time to time between the Company and
AMR in a number of areas relating to their past and ongoing relationships,
including the nature and quality of services provided by the Company to AMR and
its affiliates or by AMR or its affiliates to the Company, potential competitive
business activities, shared marketing functions, tax and employee benefit
matters, indemnity agreements, registration rights, sales or distributions by
AMR of all or any portion of its ownership interest in the Company or AMR's
ability to control the management and affairs of the Company. There can be no
assurance, however, that AMR and the Company will be able to resolve any
potential conflict or that, if resolved, the Company would not receive more
favorable resolution if it were dealing with an unaffiliated party. In addition,
certain of the Affiliate Agreements contain specific procedures for resolving
disputes between the Company and AMR with respect to the subject matter of those
agreements. There can be no assurance that a more favorable result to the
Company would not be obtained under a different procedure.
AMR could decide to sell or otherwise dispose of all or a portion of its
holdings of the Company's Class B Common Stock (or, upon the conversion of the
Class B Common Stock into Class A Common Stock, the resulting Class A Common
Stock) at some future date. Furthermore, there can be no assurance that, in any
transfer by AMR of a controlling interest in the Company, any holders of Class A
Common Stock will be allowed to participate in such transaction or will realize
any premium with respect to their shares of Class A Common Stock.
CONTRACTUAL ARRANGEMENTS
TECHNOLOGY SERVICES AGREEMENT
The Company is a party to the Technology Services Agreement with American
to provide American with certain information technology services. The base term
of the Technology Services Agreement expires June 30, 2006. The term of the
services to be provided by the Company to American, however, varies. The Company
will provide: (i) Data Center services, data network services, application
development and existing application maintenance and enhancement services until
June 30, 2006; (ii) services relating to existing client server operations until
June 30, 2001; and (iii) distributed systems services, radio services and voice
network services until June 30, 1999. The provision of these services is
anticipated to generate approximately $380 million in revenue in 1996.
In addition, AMS Holdings, Inc., a subsidiary of AMR, and Canadian have
entered into an agreement pursuant to which AMR and American supply to Canadian
various services, including technology services. Under the Canadian Subcontract,
the Company, as subcontractor through American, will be a principal provider of
technology services to Canadian.
The Technology Services Agreement provides for annual price adjustments.
For certain prices, adjustments are made according to formulas which, commencing
in 1998, are reset every two years and which may take into account the market
for similar services provided by other companies.
With limited exceptions, under the Technology Services Agreement, the
Company will continue to be the exclusive provider of all information technology
services provided by the Company to American immediately prior to the execution
of the Technology Services Agreement. Any new information technology services,
including most new application development services, required by American can be
outsourced pursuant to competitive bidding by American or performed by American
on its own behalf. With limited exceptions, the Company has the right to bid on
all new services for which American solicits bids. Additionally, American may
continue to perform development and enhancement work currently performed by it
for itself.
All new software developed by the Company pursuant to the Technology
Services Agreement will be jointly owned by the Company and American (the
"Jointly Owned Software"). Except as set forth below, the Company will have the
perpetual, irrevocable and exclusive right to market, display and otherwise
commercially exploit the Jointly Owned Software. However, during the term of the
Technology Services Agreement the Company will, for Jointly Owned Software
solely funded by American and for certain enhancements to existing software,
offset fees otherwise payable by
62
<PAGE> 65
American to the Company by an amount equal to 20% of the license fees or
equivalent compensation that the Company receives. In addition, after the
expiration or termination of the Technology Services Agreement, the Company is
required to pay American a royalty for all Jointly Owned Software that was
funded solely by American. American shall have the right to use the Jointly
Owned Software for itself and its commuter airline affiliates and shall be
entitled to market its right to use such product in marketing its services as
described in the next paragraph.
American has the right to market to third parties airline services that are
supported by the Company's information technology. Generally, such support by
the Company will be billed to American at the rates set forth in the Technology
Services Agreement plus any extraordinary costs of the Company associated with
the provision of such services. However, if a significant portion of the value
of the marketed services is driven by the Company's support, and the service is
not related to airport operations or airline alliances, then the compensation to
the Company will be negotiated by American and the Company.
After July 1, 2000, American may terminate the Technology Services
Agreement for convenience if American determines the agreement is no longer
advantageous for any reason. If it does so, American will be required to pay a
termination fee equal to the sum of all amounts then due under the Technology
Services Agreement, including wind-down costs, book value of dedicated assets
and a significant percentage of estimated lost profits. American may also
terminate the Technology Services Agreement without penalty, in whole or in part
depending upon circumstances, for egregious breach by the Company of its
obligations or for serious failure to perform critical or significant services.
If the Company is acquired by a company other than AMR or American with more
than $1 billion in annual airline transportation revenue, then American may
terminate the Technology Services Agreement without paying any termination fee.
Additionally, if American were to dispose of any portion of its business or any
affiliate accounting for more than 10% of the Company's fees from American, then
American shall either cause such divested business or affiliate to be obligated
to use the Company's services in accordance with the Technology Services
Agreement or pay a proportionate termination fee.
Under certain circumstances, American can also request that the Company
exclude third parties from using a product and pay the Company's cost of
excluding third party customers.
The parties have agreed to apply the financial terms of the Technology
Services Agreement as of January 1, 1996.
MANAGEMENT SERVICES AGREEMENT
The Company and American are parties to the Management Services Agreement,
dated July 1, 1996 pursuant to which American performs various management
services for the Company, including treasury, risk management and tax, and
similar administrative services, that American has historically provided to the
Company. The Company expects to pay American approximately $21 million for such
services in 1996, subject to adjustment based on service levels and negotiated
prices. Amounts charged to the Company under this agreement approximate
American's cost of providing the services plus a margin. The Management Services
Agreement will expire on June 30, 1999 unless terminated earlier by either party
if American and the Company are no longer under common control or by American if
the Technology Services Agreement is terminated. Except for certain services
relating to consolidated operations or corporate policy of AMR, which the
Company is required to purchase during the term of the Management Services
Agreement, the Company or American may terminate any service with prior notice
of either three or six months, depending on the annual price of the service. The
parties have agreed to apply the financial terms of the Management Services
Agreement as of January 1, 1996.
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TAX SHARING AGREEMENT
The Company and AMR have entered into the Tax Sharing Agreement which
provides for the allocation of tax liabilities during the tax periods the
Company is part of consolidated federal, state and local income tax returns
filed by AMR. In addition, the Tax Sharing Agreement sets out certain benefits
and obligations of the Company and AMR for tax matters relating to periods
before the Reorganization and for certain benefits and obligations that would
affect the Company or AMR in the future if the Company ceased to be a member of
AMR's consolidated group for federal income tax purposes. The Tax Sharing
Agreement generally requires the Company to pay to AMR the amount of federal,
state and local income taxes that the Company would have paid had it ceased to
be a member of the AMR consolidated tax group for periods after the
Reorganization. The Company is jointly and severally liable for the federal
income tax of AMR and the other companies included in the consolidated return
for all periods in which the Company is included in the AMR consolidated group.
AMR has agreed, however, to indemnify the Company for any liability for taxes
reported or required to be reported on a consolidated return.
Except for certain items specified in the Tax Sharing Agreement, AMR
generally retains any potential tax benefit carryforwards, and remains obligated
to pay all taxes, attributable to periods before the Reorganization. The Tax
Sharing Agreement also grants the Company certain limited participation rights
in any dispute with tax authorities.
MARKETING COOPERATION AGREEMENT
The Company and American are parties to the Marketing Cooperation
Agreement, dated as of July 1, 1996, pursuant to which American will provide
marketing support for 10 years for the Company's Professional SABRE product
targeted to travel agencies and for five years for BTS, Travelocity and
easySABRE. The Marketing Cooperation Agreement may be terminated by either party
prior to June 30, 2006 if the other party fails to perform its obligations
thereunder.
Under the Marketing Cooperation Agreement, American's marketing efforts
will include ongoing promotional programs to assist in the sale of those SABRE
products, development with the Company of an annual sales plan, sponsorship of
sales/promotional events and the targeting of potential customers. The Company
will pay American for its marketing support for Professional SABRE a fee, the
amount of which may increase or decrease, depending on total SABRE booking
volumes generated by certain Professional SABRE subscribers in the U.S., the
Caribbean and elsewhere and on SABRE's market share of travel agency bookings in
those areas. That fee will range between $20 million and $30 million for 1996
and between $10 million and $30 million thereafter. As payment for American's
support of the Company's promotion of BTS, Travelocity and easySABRE, the
Company will pay American a marketing fee based upon booking volumes through
those products. The amounts payable under the preceding sentence are expected to
range from approximately $1 million in the first year of the Marketing
Cooperation Agreement to approximately $12 million in the fifth year.
Additionally, the Company has guaranteed to American certain cost savings in the
fifth year of the Marketing Cooperation Agreement. If American does not achieve
those savings, the Company will pay American any shortfall, up to a maximum of
$50 million. The parties have agreed to apply the financial terms of the
Marketing Cooperation Agreement as of January 1, 1996.
NON-COMPETITION AGREEMENT
The Company, AMR and American have entered into a Non-Competition
Agreement, dated July 1, 1996 (the "Non-Competition Agreement"), pursuant to
which AMR and American, on behalf of themselves and certain, but not all, of
their subsidiaries, have agreed to limit their competition with the Company's
businesses of (i) electronic travel distribution, (ii) development, maintenance,
marketing and licensing of software for travel agency, travel, transportation
and logistics management, (iii) computer system integration, (iv) development,
maintenance and operation of a data
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processing center providing data processing services to third parties and (v)
travel industry, transportation and logistics consulting services relating
primarily to computer technology and automation. Under the Non-Competition
Agreement, American and AMR may develop, operate, market and provide in
compliance with all applicable laws an American Airlines branded electronic
travel distribution that gives a display preference to American's flights. The
Non-Competition Agreement prohibits American or AMR, however, from providing
such system to any travel agency that generated 25% or more of its bookings
through SABRE during the preceding six calendar months. Additionally, in the
event any airline competing with American engages in an activity in connection
with such airline's transportation business, and if the restrictions imposed by
the Non-Competition Agreement would prevent American from engaging in the same
activity and place American at a disadvantage, then American may engage in such
activity, subject to American and the Company consulting about means to mitigate
the effect on the Company of American's engaging in such activity. American and
AMR may also license to third parties any software that is owned by AMR,
American or other AMR affiliates in response to a request or offer from such
third parties. The Non-Competition Agreement expires on December 31, 2001.
American may terminate the Non-Competition Agreement, however, upon 90 days
notice to the Company if the Technology Services Agreement is terminated by
American as a result of an egregious breach thereof by the Company.
TRAVEL AGREEMENTS
The Company and American are parties to the Travel Privileges Agreement,
dated July 1, 1996, pursuant to which the Company is entitled to purchase
personal travel for its employees and retirees at reduced fares. The Company
estimates that its cost for such services during 1996 will be approximately $15
million. The Travel Privileges Agreement will expire on June 30, 2008. The
Company and American are also parties to the Corporate Travel Agreement, dated
July 1, 1996, pursuant to which the Company receives discounts for certain
flights purchased on American. In exchange, the Company must use American for a
certain percentage of its air travel as compared to all other air carriers
combined. If the Company fails to meet the applicable percentage on an average
basis over any calendar quarter, American may terminate the agreement upon 60
days' notice. The Company estimates that its costs for such services during 1996
will be approximately $32 million. The Corporate Travel Agreement will expire on
June 30, 1998. The parties have agreed to apply the financial terms of the
Travel Privileges Agreement and the Corporate Travel Agreement as of January 1,
1996.
CREDIT AGREEMENT
In order to allow AMR to manage efficiently the cash needs of its
subsidiaries, the Company, AMR and American are parties to the Credit Agreement
pursuant to which the Company is required to borrow from American, and American
is required to lend to the Company, any amount required by the Company to fund
its daily cash requirements. In addition, American may, but is not required to,
borrow from the Company to fund its daily cash requirements, and the Company is
required, with minor exceptions, to lend to American if the Company has excess
cash available. The maximum amount that the Company may borrow at any time from
American under the Credit Agreement is $300 million. The maximum amount that
American may borrow at any time from the Company under the Credit Agreement is
$100 million. If the Company's credit rating is better than "B" on the Standard
& Poor's Ratings Service scale (or an equivalent thereof) or American has excess
cash to lend to the Company, the interest rate to be charged to the Company will
be the sum of (a) the higher of (i) American's average rate of return on
short-term investments for the month in which borrowings occurred or (ii) the
actual rate of interest paid by American to borrow funds to make a loan to the
Company under the Credit Agreement, plus (b) an additional spread based upon the
Company's credit risk. If the Company's credit rating is "B" or below on the
Standard & Poor's Ratings Service scale (or an equivalent thereof) and American
does not have excess cash to lend to the Company, the interest rate to be
charged to the Company will be the lower of (a) the sum of (i) the borrowing
cost incurred by American to draw on its revolving credit facility to make the
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advance plus (ii) an additional spread based on the Company's credit risk or (b)
the sum of (i) the cost at which the Company could borrow funds from an
independent party plus (ii) one half of the margin American pays to borrow under
its revolving credit facility. The Company believes that the interest rate it
will be charged by American could, at times, be slightly above the rate at which
the Company could borrow externally; however, no standby fees for the Credit
Agreement will be required to be paid by either party. The interest rate to be
charged to American will be the Company's average investment rate for the months
in which borrowing occurred plus an additional spread based upon American's
credit risk. On any business day that either party has excess cash available, it
must use that cash to repay any outstanding loans it has under the Credit
Agreement. Loans under the Credit Agreement are not intended as long-term
financing. At the end of each quarter, regardless of whether it has excess cash
available, American must pay all amounts owing under the Credit Agreement to the
Company. The Credit Agreement will terminate on June 30, 1999, unless earlier
terminated at the election of one of the parties upon the occurrence of certain
events, including the termination of the Management Services Agreement or the
cessation of AMR's beneficial ownership of 50% or more of the capital stock of
either the Company or American. The Company has certain rights of offset against
the $850,000,000 Debenture and other debt owed by the Company to American and
AMR if American fails to make quarterly and final payments when due under the
Credit Agreement.
OTHER AGREEMENTS
In addition to the agreements set forth above, the Company and AMR are
parties to a Registration Rights Agreement described under "Shares Eligible for
Future Sale." Additionally, the Company and American are parties to a
Participating Carrier Agreement pursuant to which American participates as an
associate in SABRE. This Participating Carrier Agreement with American is in
substantially the same form as each other Participating Carrier Agreement to
which the Company is a party. The Company and American are also parties to a
Software Marketing Agreement pursuant to which the Company may not sell or
license specified applications to certain competitors of American. The Company
also has, or expects to enter into, other agreements with American or other AMR
affiliates, pursuant to which the Company does not expect to receive or pay
material amounts.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 250,000,000 shares
of Class A Common Stock, 107,374,000 shares of Class B Common Stock and
20,000,000 shares of Preferred Stock. None of the Class A Common Stock or
Preferred Stock is outstanding as of the date hereof. Of the 250,000,000 shares
of Class A Common Stock authorized, 20,200,000 are being offered in the
Offerings (23,230,000 shares if the Underwriters' over-allotment options are
exercised in full), 107,374,000 shares will be reserved for issuance upon
conversion of Class B Common Stock into Class A Common Stock and 3,250,000
shares have been reserved for issuance pursuant to certain employee benefits
plans. See "Management -- Compensation of Directors" and "Management --
Executive Compensation -- The Company's Long-Term Incentive Plan." Of the
107,374,000 shares of Class B Common Stock authorized, 107,374,000 will be
outstanding and held by AMR upon consummation of the Offerings. The following
summary description of the capital stock of the Company is qualified by
reference to the Certificate of Incorporation and Bylaws of the Company, copies
of which are filed as exhibits to the Registration Statement.
COMMON STOCK
VOTING RIGHTS.
The holders of Class A Common Stock and Class B Common Stock generally have
identical rights except that holders of Class A Common Stock are entitled to one
vote per share while holders of Class B Common Stock are entitled to 10 votes
per share on all matters to be voted on by
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stockholders. Holders of shares of Class A Common Stock and Class B Common Stock
are not entitled to cumulate their votes in the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all shares of Class A Common Stock and Class B Common
Stock present in person or represented by proxy, voting together as a single
class, subject to any voting rights granted to holders of any Preferred Stock.
Except as otherwise provided by law, and subject to any voting rights granted to
holders of any outstanding Preferred Stock, amendments to the Company's
Certificate of Incorporation generally must be approved by a majority of the
combined voting power of all Class A Common Stock and Class B Common Stock
voting together as a single class. However, amendments to the Company's
Certificate of Incorporation that would alter or change the powers, preferences
or special rights of the Class A Common Stock or the Class B Common Stock so as
to affect them adversely also must be approved by a majority of the votes
entitled to be cast by the holders of the shares affected by the amendment,
voting as a separate class. Notwithstanding the foregoing, any amendment to the
Company's Certificate of Incorporation to increase the authorized shares of any
class or authorize the creation, authorization or issuance of any securities
convertible into, or warrants or options to acquire, shares of any such class or
classes of stock shall be approved by the affirmative vote of the holders of a
majority of the Common Stock, voting together as a single class.
Effective as of the first time at which AMR shall cease to be the
beneficial owner of an aggregate of at least a majority of the voting power of
the Voting Stock (as defined herein) of the Company then outstanding (the
"Trigger Date"), amendments to certain provisions of the Certificate of
Incorporation will require the approval of 80% of the combined voting power of
all Class A Common Stock and Class B Common Stock, voting together as a single
class.
DIVIDENDS.
Holders of Class A Common Stock and Class B Common Stock will share in an
equal amount per share in any dividend declared by the Board of Directors,
subject to any preferential rights of any outstanding Preferred Stock. Dividends
consisting of shares of Class A Common Stock and Class B Common Stock may be
paid only as follows: (i) shares of Class A Common Stock may be paid only to
holders of Class A Common Stock and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock and (ii) shares shall be paid
proportionally with respect to each outstanding share of Class A Common Stock
and Class B Common Stock.
CONVERSION.
Each share of Class B Common Stock is convertible while held by AMR or any
of its subsidiaries at such holder's option into one share of Class A Common
Stock. Following the occurrence of a Tax-Free Spin-Off (as hereinafter defined),
if any, shares of Class B Common Stock shall not be convertible into shares of
Class A Common Stock at the option of the holder thereof.
Except as provided below, any shares of Class B Common Stock transferred to
a person other than AMR or any of its subsidiaries or the Class B Transferee (as
defined below) shall automatically convert to shares of Class A Common Stock
upon such disposition. Shares of Class B Common Stock representing more than a
50% economic interest in the Company transferred by AMR or any of its
subsidiaries in a single transaction to one unrelated person (the "Class B
Transferee") or any subsidiary of the Class B Transferee shall not automatically
convert to shares of Class A Common Stock upon such disposition. Any shares of
Class B Common Stock retained by AMR or its subsidiaries following any such
transfer of shares of Class B Common Stock to the Class B Transferee shall
automatically convert into shares of Class A Common Stock upon such transfer.
Shares of Class B Common Stock transferred to stockholders of AMR or
stockholders of the Class B Transferee in a transaction intended to be on a
tax-free basis (a "Tax-Free Spin-Off") under the Code shall not convert to
shares of Class A Common Stock upon the occurrence of such Tax-Free Spin-Off.
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Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock, subject to applicable laws; provided,
however, that shares of Class B Common Stock shall automatically convert into
shares of Class A Common Stock on the fifth anniversary of the Tax-Free
Spin-Off, unless prior to such Tax-Free Spin-Off, AMR, or the Class B
Transferee, as the case may be, delivers to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that such conversion could
adversely affect the ability of AMR, or the Class B Transferee, as the case may
be, to obtain a favorable ruling from the Internal Revenue Service that the
transfer would be a Tax-Free Spin-Off. If such an opinion is received, approval
of such conversion shall be submitted to a vote of the holders of the Common
Stock as soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off, unless AMR or the Class B Transferee, as the case may be, delivers to
the Company an opinion of counsel reasonably satisfactory to the Company prior
to such anniversary that such vote could adversely affect the status of the
Tax-Free Spin-Off, including the ability to obtain a favorable ruling from the
Internal Revenue Service; if such opinion is so delivered, such vote shall not
be held. Approval of such conversion will require the affirmative vote of the
holders of a majority of the shares of both Class A Common Stock and Class B
Common Stock present and voting, voting together as a single class, with each
share entitled to one vote for such purpose. No assurance can be given that such
conversion would be consummated. The requirement to submit such conversion to a
vote of the holders of the Common Stock is intended to ensure that tax-free
treatment of the Tax-Free Spin-Off is preserved should the Internal Revenue
Service challenge such automatic conversion as violating the 80% vote
requirement currently required by the Code for a tax-free spin-off.
OTHER RIGHTS.
On liquidation, dissolution or winding up of the Company, after payment in
full of the amounts required to be paid to holders of Preferred Stock, if any,
all holders of Common Stock, regardless of class, are entitled to share ratably
in any assets available for distribution to holders of shares of Common Stock.
No shares of either class of Common Stock are subject to redemption or have
preemptive rights to purchase additional shares of Common Stock.
Upon consummation of the Offerings, all the outstanding shares of Class A
Common Stock and Class B Common Stock will be legally issued, fully paid and
nonassessable.
PREFERRED STOCK
As of the date of this Prospectus, no shares of Preferred Stock are
outstanding. The Board of Directors may authorize the issuance of Preferred
Stock in one or more series and may determine, with respect to any such series,
the designations, powers, preferences and rights of such series, and the
qualifications, limitations and restrictions thereof, including (i) the
designation of the series; (ii) the number of shares of the series, which number
the Board of Directors may thereafter (except where otherwise provided in the
designations for such series) increase or decrease (but not below the number of
shares of such series then outstanding); (iii) whether dividends, if any, will
be cumulative or noncumulative and the dividend rate of the series; (iv) the
conditions upon which and the dates at which dividends, if any, will be payable,
and the relation which such dividends, if any, shall bear to the dividends
payable on any other class or classes of stock; (v) the redemption rights and
price or prices, if any, for shares of the series; (vi) the terms and amounts of
any sinking fund provided for the purchase or redemption of shares of the
series; (vii) the amounts payable on and the preferences, if any, of shares of
the series, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company; (viii) whether the
shares of the series will be convertible into shares of any other class or
series, or any other security, of the Company or any other corporation, and, if
so, the specification of such other class or series or such other security, the
conversion price or prices or rate or rates, any adjustments thereof, the date
or dates as of which such shares shall be convertible and all other terms and
conditions upon which
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such conversion may be made; (ix) restrictions on the issuance of shares of the
same series or of any other class or series; and (x) the voting rights, if any,
of the holders of shares of such series.
The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financings and acquisitions and in meeting other
corporate needs that might arise. The authorized shares of Preferred Stock will
be available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. The NYSE currently requires stockholder approval as a
prerequisite to listing shares in several instances, including where the present
or potential issuance of shares could result in an increase in the number of
shares of common stock outstanding, or in the amount of voting securities
outstanding, of at least 20%.
Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage a potential acquiror from
making, without first negotiating with the Board of Directors, an acquisition
attempt through which such acquiror may be able to change the composition of the
Board of Directors, including a tender offer or other transaction that some, or
a majority, of the Company's stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then current market price of such stock.
BUSINESS COMBINATION STATUTE
As a corporation organized under the laws of the State of Delaware, the
Company will be subject to Section 203 of the DGCL, which restricts certain
business combinations between the Company and an "interested stockholder" (in
general, a stockholder owning 15% or more of the Company's outstanding voting
stock) or its affiliates or associates for a period of three years following the
time that the stockholder becomes an "interested stockholder." The restrictions
do not apply if (i) prior to an interested stockholder becoming such, the Board
of Directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in any person becoming an
interested stockholder, such interested stockholder owns at least 85% of the
voting stock of the Company outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock ownership plans and persons
who are both directors and officers of the Company) or (iii) at or subsequent to
the time an interested stockholder becomes such, the business combination is
both approved by the Board of Directors and authorized at an annual or special
meeting of the Company's stockholders, not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested stockholder. Because AMR became an interested stockholder at a
time when the restrictions did not apply, the restrictions will not apply to any
business combination with AMR.
Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation of the Company
does not exclude the Company from the restrictions imposed under Section 203 of
the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may
encourage companies interested in acquiring the Company to negotiate in advance
with the Board of Directors, since the stockholder approval requirement would be
avoided if a majority of the directors then in office approves, prior to the
date on which a stockholder becomes an interested stockholder, either the
business combination or the transaction which results in the stockholder
becoming an interested stockholder.
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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The summary set forth below describes certain provisions of the Certificate
of Incorporation and Bylaws. The summary is qualified in its entirety by
reference to the provisions of the Certificate of Incorporation and Bylaws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part.
Certain of the provisions of the Certificate of Incorporation and Bylaws
discussed below may have the effect, either alone or in combination with the
provisions of Section 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest or other takeover attempt that is
opposed by the Board of Directors but that a stockholder might consider to be in
such stockholder's best interest. Those provisions include (i) restrictions on
the rights of stockholders to remove directors, (ii) prohibitions against
stockholders calling a special meeting of stockholders or acting by unanimous
written consent in lieu of a meeting and (iii) requirements for advance notice
of actions proposed by stockholders for consideration at meetings of the
stockholders. In addition, the Certificate of Incorporation contains provisions
relating to the allocation of certain corporate opportunities and resolution of
certain potential conflicts of interest. See "-- Corporate Opportunity and
Conflict of Interest Policies."
CLASSIFIED BOARD OF DIRECTORS; REMOVAL; NUMBER OF DIRECTORS; FILLING
VACANCIES
The Certificate of Incorporation and Bylaws of the Company provide that the
Board of Directors -- except for directors who may be elected by the holders of
Preferred Stock or any other series or class of stock -- will be divided into
three classes of directors, with the classes to be as nearly equal in number as
possible. One class is to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1997, another class is to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1998 and another class is to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1999. Each director
is to hold office until his or her successor is duly elected and qualified.
Commencing with the 1997 annual meeting of stockholders, directors elected to
succeed directors whose terms then expire will be elected for a term of office
to expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until such person's successor is
duly elected and qualified.
The Bylaws provide that, subject to any rights of holders of Preferred
Stock or any other series or class of stock to elect directors under specified
circumstances, the number of directors will be fixed from time to time
exclusively pursuant to a resolution adopted by directors constituting a
majority of the total number of directors that the Company would have if there
were no vacancies on the Board of Directors (the "Whole Board"), with the Whole
Board consisting of not more than twelve nor less than three directors. The
Bylaws also provide that, subject to any rights of holders of Preferred Stock or
any other series or class of stock, and unless the Board of Directors otherwise
determines, any vacancies will be filled only by the affirmative vote of a
majority of the remaining directors, even if less than a quorum. Accordingly,
absent an amendment to the Bylaws, the Board of Directors could prevent any
stockholder from enlarging the Board of Directors and filling the new
directorships with such stockholder's own nominees.
The Certificate of Incorporation and Bylaws of the Company provide that,
subject to the rights of holders of Preferred Stock or any other series or class
of stock to elect directors under specified circumstances, effective as of the
Trigger Date, directors may be removed only for cause and only upon the
affirmative vote of holders of at least 80% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class; provided however,
that prior to the Trigger Date, directors may be removed, without cause, with
the affirmative vote of the holders of at least a majority of the voting power
of the then outstanding Voting Stock, voting together as a class.
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The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Board of Directors.
At least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Board of Directors. Such a
delay may help ensure that the Company's directors, if confronted by a holder
attempting to force a proxy contest, a tender or exchange offer, or an
extraordinary corporate transaction, would have sufficient time to review the
proposal as well as any available alternatives to the proposal and to act in
what they believe to be the best interest of the stockholders. The
classification provisions will apply to every election of directors, however,
regardless of whether a change in the composition of the Board of Directors
would be beneficial to the Company and its stockholders and whether or not a
majority of the Company's stockholders believe that such a change would be
desirable.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. The classification of the
Board of Directors could thus increase the likelihood that incumbent directors
will retain their positions. In addition, because the classification provisions
may discourage accumulations of large blocks of the Company's stock by
purchasers whose objective is to take control of the Company and remove a
majority of the Board of Directors, the classification of the Board of Directors
could tend to reduce the likelihood of fluctuations in the market price of the
Common Stock that might result from accumulations of large blocks. Accordingly,
stockholders could be deprived of certain opportunities to sell their shares of
Common Stock at a higher market price than might otherwise be the case.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Certificate of Incorporation and Bylaws of the Company provide that,
effective as of the Trigger Date, and subject to the rights of any holders of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, stockholder action can be taken only at
an annual or special meeting of stockholders and stockholder action may not be
taken by written consent in lieu of a meeting. The Bylaws provide that, subject
to the rights of holders of any series of Preferred Stock to elect additional
directors under specified circumstances, special meetings of stockholders can be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board or the Chairman of the Board; provided that, prior
to the Trigger Date, special meetings can also be called at the request of the
holders of a majority of the voting power of the then outstanding Voting Stock.
Effective as of the Trigger Date, stockholders are not permitted to call a
special meeting or to require that the Board of Directors call a special meeting
of stockholders. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
pursuant to the notice of meeting given by the Company.
The provisions of the Certificate of Incorporation and Bylaws of the
Company prohibiting stockholder action by written consent and permitting special
meetings to be called only by the Chairman or at the request of a majority of
the Whole Board may have the effect, as of the Trigger Date, of delaying
consideration of a stockholder proposal until the next annual meeting. The
provisions would also prevent the holders of a majority of the voting power of
the Voting Stock from unilaterally using the written consent procedure to take
stockholder action. Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the Chairman or a majority of
the Whole Board by calling a special meeting of stockholders prior to the time
such parties believe such consideration to be appropriate.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS
The Company's Bylaws establish an advance notice procedure for stockholders
to make nominations of candidates for election as directors or bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").
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The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Board of Directors, or by a
stockholder who has given timely written notice containing specified information
to the Secretary of the Company prior to the meeting at which directors are to
be elected, will be eligible for election as directors of the Company. The
Stockholder Notice Procedure also provides that at an annual meeting only such
business may be conducted as has been brought before the meeting by, or at the
direction of, the Chairman or the Board of Directors or by a stockholder who has
given timely written notice containing specified information to the Secretary of
the Company of such stockholder's intention to bring such business before such
meeting. Under the Stockholder Notice Procedure, for notice of stockholder
nominations or proposals to be made at an annual meeting to be timely, such
notice must be received by the Company not less than 90 days nor more than 120
days prior to the first anniversary of the previous year's annual meeting (or,
in the event that the date of the annual meeting is advanced by more than 20
days or delayed by more than 70 days from such anniversary date, not earlier
than the 120th day prior to such meeting and not later than the later of (x) the
90th day prior to such meeting and (y) the 10th day after public announcement of
the date of such meeting is first made). Notwithstanding the foregoing, in the
event that the number of directors to be elected is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Company at least 100 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice will be timely, but only with respect to nominees for any
new positions created by such increase, if it is received by the Company not
later than the 10th day after such public announcement is first made by the
Company. Under the Stockholder Notice Procedure, for notice of a stockholder
nomination to be made at a special meeting at which directors are to be elected
to be timely, such notice must be received by the Company not earlier than the
120th day before such meeting and not later than the later of (x) the 90th day
prior to such meeting and (y) the 10th day after public announcement of the date
of such meeting is first made. If the Chairman of the Board or other officer
presiding at a meeting determines at or prior to the meeting that a person was
not nominated or other business was not brought before the meeting in accordance
with the Stockholder Notice Procedure, such person will not be eligible for
election as a director, or such business will not be conducted at such meeting,
as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Board of Directors an opportunity to consider
the qualifications of the proposed nominees and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will also provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Board of Directors, will provide the Board of Directors with
an opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations as
to the Board of Directors' position regarding action to be taken with respect to
such business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.
Although the Bylaws do not give the Board of Directors any power to approve
or disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
The Stockholder Notice Procedure does not apply to AMR and its affiliates
prior to the Trigger Date.
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AMENDMENTS
The Certificate of Incorporation and Bylaws require that, effective as of
the Trigger Date, any amendment to the provisions of the Bylaws or to certain
provisions of the Certificate of Incorporation, including those provisions
discussed above, must be approved by the holders of at least 80% of the Voting
Stock. This requirement, as of the Trigger Date, will prevent a stockholder with
only a majority of the Common Stock from avoiding the requirements of the
provisions discussed above by amending or repealing such provisions. The
Certificate of Incorporation further provides that the Bylaws may be amended by
the Company's Board of Directors.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Certificate of Incorporation provides that a director will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit. Any amendment or
repeal of such provision shall not adversely affect any right or protection of a
director existing under such provision for any act or omission occurring prior
to such amendment or repeal.
The Bylaws provide that the Company will indemnify any person who was or is
a party to any threatened, pending or completed action, suit or proceeding
because he or she is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership or other enterprise. The Bylaws provide that this
indemnification will be from and against expenses, judgments, fines and amounts
paid in settlement by the indemnitee. However, this indemnification will only be
provided if the indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company.
CORPORATE OPPORTUNITY AND CONFLICT OF INTEREST POLICIES
In order to address certain potential conflicts of interest between the
Company and AMR, the Certificate of Incorporation contains provisions concerning
the conduct of certain affairs of the Company as they may involve AMR and its
subsidiaries (other than the Company and its subsidiaries) and their respective
officers and directors, and the powers, rights, duties and liabilities of the
Company and its subsidiaries and their respective officers, directors and
stockholders in connection therewith. In general, these provisions recognize
that the Company and AMR and their respective subsidiaries may engage in the
same or similar business activities and lines of business and have an interest
in the same areas of corporate opportunities and that the Company and AMR and
their subsidiaries will continue to have contractual and business relations with
each other (including service of officers and directors of AMR as directors of
the Company). See "Management -- Directors and Executive Officers."
For purposes of these provisions, the terms "Company" and "AMR" include
their subsidiaries and other entities in which they respectively beneficially
own, directly or indirectly, 50 percent or more of the outstanding voting
securities or interests (except that "AMR" does not include the Company and its
subsidiaries and such other entities), and, in the case of AMR, all successors
to AMR by way of merger, consolidation or sale of all or substantially all its
assets.
The Certificate of Incorporation provides that any person purchasing or
otherwise acquiring any interest in any shares of capital stock of the Company
shall be deemed to have notice of and to have consented to these provisions.
CORPORATE OPPORTUNITY POLICY. The Certificate of Incorporation provides
that, except as AMR may otherwise agree in writing, AMR will have the right (i)
to engage in the same or similar business
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activities or lines of business as the Company, (ii) to do business with any
potential or actual client, customer or supplier of the Company and (iii) to
employ or engage any officer or employee of the Company. Neither AMR nor any
officer or director thereof will be liable to the Company or its stockholders
for breach of any fiduciary duty by reason of these activities.
If AMR acquires knowledge of a potential transaction or matter that may be
a corporate opportunity for both AMR and the Company, AMR will have no duty to
communicate that opportunity to the Company. Furthermore, AMR will not be liable
to the Company or its stockholders because AMR pursues or acquires that
corporate opportunity for itself, directs that corporate opportunity to another
person or entity or does not present that corporate opportunity to the Company.
If a director or officer of the Company who is also a director or officer
of AMR acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for both the Company and AMR, the Certificate of
Incorporation requires that the director or officer of the Company act in good
faith in accordance with the following three-part policy, and a director or
officer so acting is deemed to have acted reasonably and in good faith and fully
to have satisfied his or her duties of loyalty and fiduciary duties to the
Company and its stockholders with respect to such opportunity.
First, a corporate opportunity offered to any person who is a director but
not an officer of the Company and who is also an officer (whether or not a
director) of AMR will belong to AMR, unless the opportunity is expressly offered
to that person primarily in his or her capacity as a director of the Company, in
which case the opportunity will belong to the Company.
Second, a corporate opportunity offered to any person who is an officer
(whether or not a director) of the Company and who is also a director but not an
officer of AMR will belong to the Company, unless the opportunity is expressly
offered to that person primarily in his or her capacity as a director of AMR, in
which case the opportunity will belong to AMR.
Third, a corporate opportunity offered to any other person who is either an
officer of both the Company and AMR or a director of both the Company and AMR
will belong to AMR or to the Company, as the case may be, if the opportunity is
expressly offered to the person primarily in his or her capacity as an officer
or director of AMR or of the Company, respectively. Otherwise, the opportunity
will belong to AMR.
Under the Certificate of Incorporation, any corporate opportunity that
belongs to AMR or to the Company pursuant to the foregoing policy will not be
pursued by the other (or directed by the other to another person or entity)
unless and until AMR or the Company, as the case may be, determines not to
pursue the opportunity. If the party to whom the corporate opportunity belongs
does not, however, within a reasonable period of time, begin to pursue, or
thereafter continue to pursue, such opportunity diligently and in good faith,
the other party may pursue such opportunity (or direct it to another person or
entity).
A director or officer of the Company who acts in accordance with the
foregoing three-part policy: (i) will be deemed fully to have satisfied his or
her fiduciary duties to the Company and its stockholders with respect to such
corporate opportunity; (ii) will not be liable to the Company or its
stockholders for any breach of fiduciary duty by reason of the fact that AMR
pursues or acquires such opportunity for itself or directs such corporate
opportunity to another person or does not communicate information regarding such
opportunity to the Company; (iii) will be deemed to have acted in good faith and
in a manner he or she reasonably believes to be in the best interests of the
Company; and (iv) will be deemed not to have breached his or her duty of loyalty
to the Company or its stockholders and not to have derived an improper benefit
therefrom.
Under the Certificate of Incorporation, "corporate opportunities"
potentially allocable to the Company consist of business opportunities which (i)
the Company is financially able to undertake; (ii) are, from their nature, in
the Company's line or lines of business and are of practical advantage to the
Company; and (iii) are ones in which the Company has an interest or reasonable
expectancy.
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In addition, "corporate opportunities" do not include transactions in which the
Company or AMR is permitted to participate pursuant to any agreement between the
Corporation and AMR that is in effect as of the time any equity security of the
Company is held of record by any person other than AMR or subsequently entered
into with the approval of the Disinterested Directors.
For purposes of these corporate opportunity provisions, a director of the
Company who is chairman of the Board of Directors (or a committee thereof) or
chief executive officer will not be deemed to be an officer of the Company by
reason of holding such position, unless such person is a full-time employee of
the Company.
CONFLICT OF INTERESTS POLICY. The Certificate of Incorporation provides
that no contract, agreement, arrangement or transaction between the Company and
AMR or any customer or supplier or any entity in which a director of the Company
has a financial interest (a "Related Entity"), or between the Company and one or
more of the directors or officers of the Company, AMR or any Related Entity, or
any amendment, modification or termination thereof, will be voidable solely
because AMR or such customer or supplier, any Related Entity, or any one or more
of the officers or directors of the Company, AMR or any Related Entity are
parties thereto, or solely because any such directors or officers are present at
or participate in the meeting of the Board of Directors or committee thereof
which authorizes the contract, agreement, arrangement, transaction, amendment,
modification or termination (each, a "Transaction") or solely because their
votes are counted for such purpose, if a specified standard is satisfied. That
standard will be satisfied, and AMR, the Related Entity and the directors and
officers of the Company, AMR or the Related Entity (as applicable) will be
deemed to have acted reasonably and in good faith (to the extent such standard
is applicable to such person's conduct) and fully to have satisfied any duties
of loyalty and fiduciary duties they may have to the Company and its
stockholders with respect to such transaction if any of the following four
requirements are met:
(i) the material facts as to the Transaction are disclosed or known to
the Board of Directors or the committee thereof that authorizes the
Transaction, and the Board of Directors or such committee in good faith
approves the Transaction by a majority of the Disinterested Directors on
the Board of Directors or such committee, even if the Disinterested
Directors are less than a quorum;
(ii) the material facts as to the Transaction are disclosed or known
to the holders of Voting Stock entitled to vote thereon, and the
Transaction is specifically approved by vote of the holders of a majority
of the then outstanding Voting Stock not owned by AMR or such Related
Entity, voting together as a single class;
(iii) the Transaction is effected pursuant to guidelines which are in
good faith approved by a majority of the Disinterested Directors on the
Board of Directors or the applicable committee thereof or by vote of the
holders of a majority of the then outstanding Voting Stock not owned by AMR
or such Related Entity, voting together as a single class; or
(iv) the Transaction is fair to the Company as of the time it is
approved by the Board of Directors, a committee thereof or the stockholders
of the Company.
The Certificate of Incorporation also provides that any such Transaction
authorized, approved or effected, and each of such guidelines so authorized or
approved, as described in (i), (ii) or (iii) above, shall be deemed to be
entirely fair to the Company and its stockholders; provided that, if such
authorization or approval is not obtained, or such Transaction is not so
effected, no presumption shall arise that such Transaction or guideline is not
fair to the Company and its stockholders. In addition, the Certificate of
Incorporation provides that AMR shall not be liable to the Company or its
stockholders for breach of any fiduciary duty that AMR may have by reason of the
fact that AMR takes any action in connection with any transaction between AMR
and the Company.
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Effective as of the Trigger Date, the affirmative vote of the holders of
more than 80 percent of the outstanding Voting Stock, voting together as a
single class, will be required to alter, amend or repeal any of these conflict
of interest or corporate opportunity provisions in a manner adverse to the
interests of AMR.
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Certificate of Incorporation authorizes the Board of Directors to
create and issue rights entitling the holders thereof to purchase from the
Company shares of capital stock or other securities or property. The times at
which and terms upon which such rights are to be issued would be determined by
the Board of Directors and set forth in the contracts or instruments that
evidence such rights. The authority of the Board of Directors with respect to
such rights includes, but is not limited to, determination of (i) the purchase
price of the capital stock to be purchased upon exercise of such rights; (ii)
provisions relating to the times at which and the circumstances under which such
rights may be exercised or sold or otherwise transferred, either together with
or separately from, any other stock or other securities of the Company; (iii)
provisions which adjust the number or exercise price of such rights or amount or
nature of the stock receivable upon exercise of such rights in the event of a
combination, split or recapitalization of any stock of the Company, a change in
ownership of the Company's stock or other securities or a reorganization,
merger, consolidation, sale of assets or other occurrence relating to the
Company or any stock of the Company, and provisions restricting the ability of
the Company to enter into any such transaction absent an assumption by the other
party or parties thereto of the obligations of the Company under such rights;
(iv) provisions which deny the holder of a specified percentage of the
outstanding securities of the Company the right to exercise such rights and
cause such rights held by such holder to become void; (v) provisions which
permit the Company to redeem or exchange such rights; and (vi) the appointment
of the rights agent with respect to such rights. This provision is intended to
confirm the authority of the Board of Directors to issue such share purchase
rights or other rights to purchase stock or securities of the Company or any
other corporation.
LISTING
Application has been made for listing of the Class A Common Stock on the
New York Stock Exchange under the symbol "TSG."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Chicago
Trust Company of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices.
Upon completion of the Offerings, the Company will have 20,200,000 shares
of Class A Common Stock issued and outstanding (23,230,000 if the Underwriters'
over-allotment options are exercised in full) and 107,374,000 shares of Class B
Common Stock issued and outstanding. All of the shares of Class A Common Stock
to be sold in the Offerings will be freely tradable without restrictions or
further registration under the Securities Act, except that shares purchased by
an "affiliate" of the Company (as that term is defined in Rule 144) will be
subject to the resale limitations of Rule 144. All of the outstanding shares of
Class B Common Stock are owned by AMR and have not been registered under the
Securities Act and may not be sold in the absence of an effective registration
statement under the Securities Act other than in accordance with Rule 144 or
another exemption
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from registration ("Restricted Shares"). Restricted Shares will become eligible
for resale in the public market at various dates in the future.
The Restricted Shares will constitute "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act and will be eligible
for sale in the open market after the Offerings subject to the contractual
lockup provisions and applicable requirements of Rule 144 described below. In
addition, for as long as AMR is able to cause a majority of the Company's Board
of Directors to be elected, it will be able to cause the Company at any time to
register under the Securities Act all or a portion of the Common Stock owned by
it, in which event such shares could be sold publicly upon the effectiveness of
any such registration without restriction. AMR may also, at any time following
the contractual lockup provisions described below, sell any or all of the Class
B Common Stock in a private placement without regard to the Rule 144
restrictions described below.
In general, under Rule 144 as currently in effect, if a period of at least
two years has elapsed between the later of the date on which "restricted shares"
(as that phrase is defined in Rule 144) were acquired from the Company and the
date on which they were acquired from an "affiliate" of the Company (an
"Affiliate", as that term is defined in Rule 144), then the holder of such
restricted shares (including an Affiliate) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of the Common Stock or (ii) the average
weekly reported volume of trading of the Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
requirements pertaining to the manner of such sales, notices of such sales and
the availability of current public information concerning the Company.
Affiliates may sell shares not constituting restricted shares in accordance with
the foregoing volume limitations and other requirements but without regard to
the two-year period. Under Rule 144(k), if a period of at least three years has
elapsed between the later of the date on which restricted shares were acquired
from the Company and the date on which they were acquired from an Affiliate, a
holder of such restricted shares who is not an Affiliate at the time of the sale
and has not been an Affiliate for at least three months prior to the sale would
be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above. The foregoing description of
Rule 144 is not intended to be a complete description thereof.
Sales of significant amounts of the Common Stock, or the perception that
such sales could occur, could have an adverse impact on the market price of the
Class A Common Stock. The Company has agreed that during the period beginning on
the date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, it will not offer, sell, contract to sell or
otherwise dispose of any shares of Class A Common Stock, any securities of the
Company that are substantially similar to the shares of the Class A Common Stock
or that are convertible or exchangeable into Class A Common Stock or securities
that are substantially similar to the shares of the Class A Common Stock (other
than pursuant to employee stock option plans existing, or on conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) without the prior written consent of Goldman, Sachs & Co., on
behalf of the U.S. Underwriters, except for the shares of Class A Common Stock
offered in connection with the Offerings. AMR has agreed that during the period
beginning on the date of this Prospectus and continuing to and including the
date 180 days after the date of this Prospectus, it will not offer, sell,
contract to sell or otherwise dispose of any shares of Class A Common Stock, any
securities of the Company that are substantially similar to the shares of Class
A Common Stock, or that are convertible or exchangeable into Class A Common
Stock or securities that are substantially similar to the shares of Class A
Common Stock without the prior written consent of Goldman, Sachs & Co., on
behalf of the U.S. Underwriters. See "Underwriting."
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The Company and AMR are also parties to the Registration Rights Agreement
pursuant to which AMR may demand registration under the Securities Act of shares
of the Company's capital stock held by it at any time subject to its agreement
not to sell any shares prior to the expiration of 180 days from the date of this
Prospectus. The Company may postpone such a demand under certain circumstances.
In addition, AMR may request the Company to include shares of the Company's
capital stock held by it in any registration proposed by the Company of such
capital stock under the Securities Act.
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<PAGE> 81
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., J.P. Morgan
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon
Brothers Inc are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Class A Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF CLASS A
UNDERWRITER COMMON STOCK
------------------------------------------------------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
J.P. Morgan Securities Inc..................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Salomon Brothers Inc .......................................
---------
Total............................................. 16,160,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Class A Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
At the request of the Company, the Underwriters have reserved up to
approximately % of the shares of the Class A Common Stock offered hereby for
sale at the public offering price to the directors, officers and employees of
the Company, officers and directors of AMR and certain other persons who have
expressed an interest in purchasing shares. The number of shares available to
the general public will be reduced to the extent persons purchase such reserved
shares. Any reserved shares not so purchased will be offered by the Underwriters
to the general public on the same terms as other shares offered by this
Prospectus.
The Company and AMR have entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
international offering (the "International Underwriters") providing for the
concurrent offer and sale of 4,040,000 shares of Class A Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The representatives
acting on behalf of the International Underwriters are Goldman Sachs
International, J.P. Morgan Securities Ltd., Merrill Lynch International and
Salomon Brothers International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Class A Common Stock, directly or indirectly, only in
the United States of America (including the States and District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident
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of the United States or (b) any corporation, partnership or other entity
organized in or under the laws of the United States or any political subdivision
thereof and whose office most directly involved with the purchase is located in
the United States. Each of the International Underwriters has agreed pursuant to
the Agreement Between that, as a part of the distribution of the shares offered
as a part of the international offering, and subject to certain exceptions, it
will (i) not, directly or indirectly, offer, sell or deliver shares of Class A
Common Stock (a) in the United States or to any U.S. persons or (b) to any
person who it believes intends to reoffer, resell or deliver the shares in the
United States or to any U.S. persons, and (ii) cause any dealer to whom it may
sell such shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
2,424,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 20,200,000 shares of Class A Common Stock offered hereby.
The Company has granted the International Underwriters a similar option to
purchase up to an aggregate of 606,000 additional shares of Class A Common
Stock.
The Company has agreed, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities of the Company that are substantially
similar to the shares of Common Stock or that are convertible or exchangeable
into Common Stock or securities that are substantially similar to the shares of
Common Stock (other than pursuant to employee stock option plans which exist on,
or are described herein to be implemented after, the date of this Prospectus, or
on conversion or exchange of convertible or exchangeable securities outstanding,
on the date of this Prospectus) without the prior written consent of Goldman,
Sachs & Co., on behalf of the Underwriters, except for the shares of Class A
Common Stock offered in connection with the Offerings. AMR has agreed, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock, any
securities of the Company that are substantially similar to the shares of Common
Stock or that are convertible or exchangeable into Common Stock or securities
that are substantially similar to the shares of Common Stock without the prior
written consent of Goldman, Sachs & Co., on behalf of the Underwriters.
Goldman, Sachs & Co., on behalf of the Underwriters, have informed the
Company that they do not expect sales to accounts over which the Underwriters
exercise discretionary authority to exceed five percent of the total number of
shares of Class A Common Stock offered by them.
Prior to this Offering, there has been no public market for the shares of
Class A Common Stock. The initial public offering price was negotiated among the
Company and Goldman, Sachs & Co., on behalf of the U.S. Underwriters and the
International Underwriters. Among the factors considered in determining the
initial public offering price of the Class A Common Stock, in addition to
prevailing market conditions, were the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuations of companies in related businesses.
Application has been made for listing of the Class A Common Stock on the
New York Stock Exchange under the symbol "TSG." In order to meet one of the
requirements for listing the Class A
80
<PAGE> 83
Common Stock on the New York Stock Exchange, the Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold in
the International Offering, to persons located in the United States.
The Underwriters perform investment banking and financial advisory and
other financial services for the Company and its affiliates from time to time.
The Company and AMR have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
81
<PAGE> 84
CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a discussion of certain of the anticipated United States
federal income and estate tax consequences of the ownership and disposition of
Class A Common Stock applicable to Non-U.S. Holders. A "Non-U.S. Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a foreign estate or trust. This discussion does not deal with all
aspects of United States federal income and estate taxation that may be relevant
to Non-U.S. Holders in light of their particular circumstances and does not deal
with state, local and non-U.S. tax consequences. Prospective non-U.S. investors
should consult their own tax advisors regarding the United States and other tax
consequences of owning and disposing of Class A Common Stock.
DIVIDENDS
Generally, any dividend paid to a Non-U.S. Holder with respect to Class A
Common Stock will be subject to United States withholding tax at a rate of 30%
of the amount of the dividend, or at a lesser applicable treaty rate. However,
if the dividend is effectively connected with a United States trade or business
of a Non-U.S. Holder, it will be subject to the regular United States federal
income tax, rather than the 30% withholding tax, except as otherwise provided in
an applicable treaty. Under certain circumstances, any such effectively
connected dividends received by a foreign corporation may also be subject to an
additional branch profits tax.
Under current Treasury regulations, dividends paid to an address in a
foreign country are generally presumed to be paid to a resident of such country
for purposes of determining the applicability of a treaty rate. However,
Treasury Regulations proposed to be effective for payments made after December
31, 1997 (the "Proposed Regulations"), which have not finally been adopted,
would require a Non-U.S. Holder to file a form to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends. Such form would contain the holder's name and address and certain
other information.
SALES OF CLASS A COMMON STOCK
Generally, a Non-U.S. Holder will not be subject to United States federal
income or withholding tax on any gain realized upon the sale of Class A Common
Stock unless (i) the gain is effectively connected with a United States trade or
business of the Non-U.S. Holder, or (ii) in the case of a Non-U.S. Holder who is
an individual and holds the Class A Common Stock as a capital asset, such
Non-U.S. Holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the sale and certain
other conditions are satisfied, or (iii) the Company is or has been a "United
States real property holding corporation" for federal income tax purposes (which
the Company does not believe it is or has been) and certain other conditions are
satisfied, and no treaty exception is applicable.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, dividends paid to Non-U.S. Holders with respect to Class A
Common Stock outside the United States that are subject to the 30% withholding
tax or the reduced treaty rate of withholding tax will be exempt from any backup
withholding tax. Otherwise, backup withholding of United States federal income
tax at a rate of 31% may apply to dividends paid with respect to the Class A
Common Stock to holders that are not "exempt recipients" and that fail to
provide certain information (including the holder's taxpayer identification
number) in the manner required by United States law and applicable regulations.
The payment of the proceeds of the disposition of Class A Common Stock by a
Non-U.S. Holder to or through a United States office of a broker will be subject
to information reporting and backup withholding at a rate of 31% unless the
owner certifies, in a suitable form, as to its non-U.S. tax
82
<PAGE> 85
status or otherwise establishes an exemption. The payment of the proceeds of the
disposition to or through a non-U.S. office of a broker will not be subject to
backup withholding, but may be subject to information reporting if the broker is
(i) a U.S. person, (ii) a foreign person that is a controlled foreign
corporation for United States tax purposes, or (iii) a foreign person 50% or
more of whose gross income for a specified 3-year period is effectively
connected with the conduct of a trade or business within the United States.
The Proposed Regulations will, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations provide certain
presumptions under which a Non-U.S. Holder may be subject to backup withholding
in the absence of required certifications.
ESTATE TAX
Class A Common Stock that is beneficially owned by an individual who is
neither a citizen nor a resident of the United States at the time of death will
be included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable treaty provides otherwise.
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Debevoise & Plimpton, New York, New York, and for
the Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1994 and December 31, 1995 and for each of the
three years in the period ended December 31, 1995 appearing in this Prospectus
and the Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Class A Common Stock offered hereby. For the purposes hereof, the term
"Registration Statement" means the original registration statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and such Common Stock,
reference is hereby made to such Registration Statement, including exhibits
thereto, which can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
83
<PAGE> 86
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Class A Common Stock, the Company will
become subject to the reporting requirements of the Exchange Act. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by independent accountants and with quarterly reports
containing interim financial information for each of the first three quarters of
each year.
TRADEMARKS
The following registered and unregistered trademarks used herein are owned
by the Company or one of its subsidiaries: SABRE, Travelocity, easySABRE, Turbo
SABRE, Planet SABRE, Business Travel Solutions, CARS Plus, SHAARP Plus,
SABRErail, SABRE TourGuide, SABRE Navigator, SABRE CruiseDirector, Basic Booking
Request, Direct Connect Availability, Fare Action Evaluator, AIRPRICE, AIRCREWS,
AIRFLITE and SABRE Wireless.
84
<PAGE> 87
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Condensed Consolidated Financial Information............................... F-2
Pro Forma Condensed Consolidated Balance Sheet for June 30, 1996................... F-3
Pro Forma Condensed Consolidated Statement of Income for the year ended December
31, 1995........................................................................ F-4
Pro Forma Condensed Consolidated Statement of Income for the six months ended June
30, 1995........................................................................ F-5
Pro Forma Condensed Consolidated Statement of Income for the six months ended June
30, 1996........................................................................ F-6
Notes to Pro Forma Condensed Consolidated Financial Statements..................... F-7
Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors.................................. F-9
Consolidated Balance Sheets for December 31, 1995 and 1994 and June 30, 1996....... F-10
Consolidated Statements of Income and Stockholder's Net Investment for the years
ended December 31, 1995, 1994 and 1993 and the six months ended June 30, 1996
and 1995........................................................................ F-11
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993 and the six months ended June 30, 1996 and 1995........................ F-12
Notes to Consolidated Financial Statements......................................... F-13
</TABLE>
F-1
<PAGE> 88
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma condensed consolidated financial statements are
based upon the historical financial statements of the Company and assume the
Reorganization and the Affiliate Agreements and the Offerings were consummated
at June 30, 1996, with respect to the unaudited pro forma condensed consolidated
balance sheet and on January 1, 1995 with respect to the unaudited pro forma
condensed consolidated statements of income.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the transactions had been consummated as presented
in the accompanying pro forma condensed consolidated financial statements, nor
is it necessarily indicative of future results of operations.
The pro forma condensed consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
of the Company included elsewhere herein.
F-2
<PAGE> 89
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA AS PRO FORMA
FOR THE ADJUSTED FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................... $ 187,089 $ 187,089 $ 409,064(h) $ 227,996
(368,157)(i)
Accounts receivable, net............................ 209,697 209,697 209,697
Prepaid expenses.................................... 12,075 12,075 12,075
Deferred income taxes............................... 40,717 40,717 40,717
--------- ---------- --------- ----------
TOTAL CURRENT ASSETS.......................... 449,578 449,578 40,907 490,485
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements................ 11,243 $ 281,399(c) 292,642 292,642
Furniture, fixtures and equipment................... 4,460 16,430(c) 20,890 20,890
Service contract equipment.......................... 545,355 545,355 545,355
Computer equipment.................................. 318,928 318,928 318,928
--------- --------- ---------- --------- ----------
879,986 297,829 1,177,815 0 1,177,815
Less accumulated depreciation and amortization...... (533,740) (104,621)(c) (638,361) (638,361)
--------- --------- ---------- --------- ----------
TOTAL PROPERTY AND EQUIPMENT.................. 346,246 193,208 539,454 0 539,454
OTHER ASSETS.......................................... 59,997 59,997 59,997
--------- --------- ---------- --------- ----------
TOTAL ASSETS.................................. $ 855,821 $ 193,208 $1,049,029 $ 40,907 $1,089,936
========= ========= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................... $ 44,853 $ 44,853 $ 44,853
Accrued compensation and related benefits........... 41,972 41,972 41,972
Other accrued liabilities........................... 84,829 84,829 84,829
Note payable to AMR................................. 54,102 $ (54,102)(d) -- --
--------- --------- ---------- ----------
TOTAL CURRENT LIABILITIES..................... 225,756 (54,102) 171,654 171,654
DEFERRED INCOME TAXES................................. 24,876 34,115(c) 36,449 36,449
(19,500)(g)
(3,042)(f)
PENSION BENEFITS...................................... -- 50,000(g) 50,000 50,000
OTHER POSTRETIREMENT BENEFITS......................... 40,627 7,800(f) 48,427 48,427
OTHER LIABILITIES..................................... 13,375 13,375 13,375
DEBENTURE PAYABLE to AMR.............................. -- 850,000(e) 850,000 $(368,157)(i) 481,843
STOCKHOLDERS' EQUITY
Preferred Stock: $0.01 par value; 20,000,000 shares
authorized; no shares issued...................... -- -- --
Common Stock
$0.01 par value; 1,000 shares authorized and
issued and outstanding.......................... -- --(a) -- --(h) --
Class A: $0.01 par value; 250,000,000 shares
authorized; 20,200,000 shares issued and
outstanding..................................... -- -- 202(h) 202
Class B: $0.01 par value; 107,374,000 shares
authorized; 107,374,000 shares issued and
outstanding..................................... -- -- 1,074(h) 1,074
Additional paid-in-capital.......................... -- -- 407,788(h) 407,788
Formation of Company.............................. --(a)
Reclassify AMR's net investment................... 551,187(b)
Contribution of assets by American................ 159,093(c)
Note payable capitalized.......................... 54,102(d)
Issuance of Debenture to AMR...................... (764,382)(e)
Retained earnings (deficit)......................... -- (120,876) (120,876)
Issuance of Debenture to AMR...................... (85,618)(e)
Postretirement flight benefits.................... (4,758)(f)
Net pension liability............................. (30,500)(g)
Stockholder's net investment...................... 551,187 (551,187)(b) -- --
--------- --------- ---------- --------- ----------
TOTAL STOCKHOLDERS' EQUITY.................... 551,187 (672,063) (120,876) 409,064 288,188
--------- --------- ---------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $ 855,821 $ 193,208 $1,049,029 $ 40,907 $1,089,936
========= ========= ========== ========= ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-3
<PAGE> 90
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR THE FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............. $1,006,926 $ 986,057 $ 986,057
Marketing support payments............... $ (20,869)(j)
Information technology solutions........... 522,690 477,290 477,290
Technology Services Agreement............ (45,400)(k)
---------- --------- ---------- ----------
Total revenues....................... 1,529,616 (66,269) 1,463,347 1,463,347
Operating expenses
Cost of revenues........................... 1,041,475 1,067,283 1,067,283
Technology Services Agreement............ (11,750)(k)
Employee travel costs -- American........ 13,159(l)
Employee travel costs -- other
airlines............................... 6,480(m)
Additional marketing support............. 20,000(j)
Additional general expenses.............. 4,230(n)
Reduction in rent expense................ (7,295)(o)
Additional postretirement expense........ 984(p)
Selling, general and administrative........ 107,717 111,466 111,466
Employee travel costs -- American........ 3,492(l)
Employee travel costs -- other
airlines............................... 1,620(m)
Additional general expenses.............. 410(n)
Reduction in rent expense................ (2,019)(o)
Additional postretirement expense........ 246(p)
---------- --------- ---------- ----------
Total operating expenses............. 1,149,192 29,557 1,178,749 1,178,749
---------- --------- ---------- ----------
Operating income............................. 380,424 (95,826) 284,598 284,598
Other income (expense), net.................. (10,349) (56,011)(q) (66,360) $26,599(s) (39,761)(t)
---------- --------- ---------- -------- ----------
Income before provision for income taxes..... 370,075 (151,837) 218,238 26,599 244,837
Provision for income taxes................... 144,224 (59,216)(r) 85,008 10,374(r) 95,382
---------- --------- ---------- -------- ----------
Net earnings................................. $ 225,851 $ (92,621) $ 133,230 $16,225 $ 149,455
========== ========= ========== ======== ==========
Pro forma earnings per common share data:
Earnings per common share.................. $ 1.18(u) $ 1.17(v)
========== ==========
Average common and common equivalent shares
outstanding.............................. 112,996(u) 127,574(v)
========== ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-4
<PAGE> 91
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR THE FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............... $511,739 $501,475 $501,475
Marketing support payments................. $(10,264)(j)
Information technology solutions............. 255,792 235,261 235,261
Technology Services Agreement.............. (20,531)(k)
-------- -------- -------- --------
Total revenues......................... 767,531 (30,795) 736,736 736,736
Operating expenses
Cost of revenues............................. 499,758 511,388 511,388
Technology Services Agreement.............. (5,867)(k)
Employee travel costs -- American.......... 5,297(l)
Employee travel costs -- other airlines.... 3,240(m)
Additional marketing support............... 10,000(j)
Additional general expenses................ 2,115(n)
Reduction in rent expense.................. (3,647)(o)
Additional postretirement expense.......... 492(p)
Selling, general and administrative.......... 48,323 49,856 49,856
Employee travel costs -- American.......... 1,404(l)
Employee travel costs -- other airlines.... 810(m)
Additional general expenses................ 205(n)
Reduction in rent expense.................. (1,009)(o)
Additional postretirement expense.......... 123(p)
-------- -------- -------- --------
Total operating expenses............... 548,081 13,163 561,244 561,244
-------- -------- -------- --------
Operating income............................... 219,450 (43,958) 175,492 175,492
Other income (expense), net.................... (10,415) (27,977)(q) (38,392) $13,300(s) (25,092)(t)
-------- -------- -------- -------- --------
Income before provision for income taxes....... 209,035 (71,935) 137,100 13,300 150,400
Provision for income taxes..................... 81,978 (28,055)(r) 53,923 5,187(r) 59,110
-------- -------- -------- -------- --------
Net earnings................................... $127,057 $(43,880) $ 83,177 $ 8,113 $ 91,290
======== ======== ======== ======== ========
Pro forma earnings per common share data:
Earnings per common share.................... $ .74(u) $ .72(v)
======== ========
Average common and common equivalent shares
outstanding................................ 112,996(u) 127,574(v)
======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-5
<PAGE> 92
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA AS
ADJUSTMENTS ADJUSTED FOR PRO FORMA
FOR THE THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............... $574,982 $574,982 $574,982
Information technology solutions............. 263,307 257,209 257,209
Technology Services Agreement.............. $ (6,098)(k)
-------- -------- -------- --------
Total revenues............................... 838,289 (6,098) 832,191 832,191
Operating expenses
Cost of revenues............................. 576,599 570,909 570,909
Technology Services Agreement.............. $ (6,098)(k)
Employee travel costs -- other airlines.... 3,240(m)
Additional general expenses................ 615(n)
Reduction in rent expense.................. (3,939)(o)
Additional postretirement expense.......... 492(p)
Selling, general and administrative.......... 64,101 64,146 64,146
Employee travel costs -- other airlines.... 810(m)
Additional general expenses................ 205(n)
Reduction in rent expense.................. (1,093)(o)
Additional postretirement
expense.................................. 123(p)
-------- -------- -------- --------
Total operating expenses..................... 640,700 (5,645) 635,055 635,055
-------- -------- -------- --------
Operating income............................... 197,589 (453) 197,136 197,136
Other income (expense), net.................... (2,399) (28,170)(q) (30,569) $13,300(s) (17,269)(t)
-------- -------- -------- -------- --------
Income before provision for income taxes....... 195,190 (28,623) 166,567 13,300 179,867
Provision for income taxes..................... 76,140 (11,163)(r) 64,977 5,187(r) 70,164
-------- -------- -------- -------- --------
Net earnings................................... $119,050 $(17,460) $101,590 $ 8,113 $109,703
======== ======== ======== ======== ========
Pro forma earnings per common share data:
Earnings per common share.................... $ .90(u) $ .86(v)
======== ========
Average common and common equivalent shares
outstanding................................ 112,996(u) 127,574(v)
======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-6
<PAGE> 93
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying pro forma condensed consolidated balance sheet reflects
the following pro forma adjustments for the Reorganization and the Affiliate
Agreements and the Offerings as if such transactions had been consummated on
June 30, 1996.
(a) To record the formation of the Company pursuant to which the Company
issued 1,000 shares of Common Stock to American, which dividended them to AMR.
Prior to the issuance of Class A Common Stock pursuant to the terms of the
Offerings, AMR owned 100% of the outstanding shares of Common Stock. Immediately
prior to the Offerings, Common Stock held by AMR will be converted to Class B
Common Stock.
(b) To reclassify AMR's net investment to additional paid-in-capital in
connection with the legal formation of the Company.
(c) To record the contribution by American to the Company of buildings and
furniture and fixtures with a historical cost to American of approximately $298
million and accumulated depreciation of approximately $104 million and the
related deferred income taxes.
(d) To record the capitalization of a note payable to AMR of approximately
$54 million.
(e) To record the issuance to American of the $850 million floating rate
subordinated Debenture due September 30, 2004. The Debenture was subsequently
distributed to AMR.
(f) To record the estimated liability to be assumed and the related
deferred income taxes for the Company's obligation to provide post-retirement
flight benefits to certain employees of the Company pursuant to the Travel
Privileges Agreement with American effective July 1, 1996.
(g) To record the estimated net pension liability to be assumed, and the
related deferred income taxes, as a result of the spin-off of the portion of the
American sponsored pension plan attributable to the Company's employees from the
American pension plan to a new pension plan to be sponsored by the Company. Such
spin-off is expected to occur effective January 1, 1997.
(h) To record the issuance of 20,250,000 shares of Class A Common Stock of
the Company at an assumed offering price of $21.50 per share pursuant to the
Offerings, resulting in net proceeds of approximately $410 million after
deducting underwriting commissions and estimated expenses of the Offerings and
to record the conversion of Common Stock held by AMR to Class B Common Stock.
(i) To record the use of 90% of the proceeds of the Offerings to repay a
portion of the Debenture.
The accompanying pro forma condensed consolidated statements of income for
the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996
reflect the following pro forma adjustments assuming the Reorganization and the
Affiliate Agreements and the Offerings had been consummated on January 1, 1995.
(j) To record the estimated increase in marketing costs paid to American
and decrease in marketing support payments from American as a result of the
Marketing Cooperation Agreement with American, the financial terms of which the
parties have agreed to apply as of January 1, 1996, regarding marketing support
for the Company's products targeted to travel agencies, and support for the
Company's promotion of Business Travel Solutions, and Travelocity and easySABRE.
The increase in marketing costs is recorded at the minimum of $20 million
required in the agreement. However, this amount may increase to $30 million in
the first year and could range from $10 million to $30 million in the second
year and thereafter depending on whether certain booking thresholds are reached
by American.
F-7
<PAGE> 94
(k) To record the estimated reduction in revenues as a result of the
Technology Services Agreement with American, the financial terms of which the
parties have agreed to apply as of January 1, 1996 and to record the estimated
reduction in revenues from American and associated reduction in communication
expenses due to SITA billing American directly effective July 1, 1996, as
provided for in the Technology Services Agreement. The agreement established
pricing and service terms associated with the Company's information technology
services provided to American. Additional periodic price adjustments are also
defined in the agreement based on the market for similar services provided by
other companies.
(l) To record the estimated increase in travel costs as a result of the
Travel Privileges Agreement and Corporate Travel Agreement with American, the
financial terms of which the parties have agreed to apply as of January 1, 1996.
These agreements allow the Company to purchase personal and business travel for
its employees at reduced fares. The agreements provide pricing and service terms
at a smaller discount than was in effect in 1995.
(m) To record the estimated increase in travel costs on airlines other than
American. The Company is no longer eligible to participate in discounts provided
to American by other airlines effective with the Reorganization. The Company is
attempting to negotiate an agreement with other airlines for discounts similar
to American's.
(n) To record the estimated increase in employee related costs and other
general and administrative costs associated with the Affiliate Agreements with
AMR and American and their administration. Amount includes an increase in
shipping and handling expenses resulting from the Company's inability, effective
with the Reorganization, to receive American's discount rate for these services.
(o) To record the estimated decrease in rent expense paid to American due
to the transfer of ownership of buildings and furniture and fixtures to the
Company. This decrease is partially offset by depreciation expense and property
taxes which will be incurred by the Company as a result of ownership of these
facilities.
(p) To record the estimated increase in post-retirement benefit costs
associated with the Travel Privileges Agreement with American which provides
certain retired employees of the Company flight privileges in exchange for a
fixed fee per retiree.
(q) To record the estimated interest expense associated with the $850
million Debenture, partially offset by a reduction in interest expense from the
forgiveness of a note payable of $54 million by AMR in connection with the
Reorganization, calculated based on the average interest rate the Company would
have incurred during the year.
(r) To record the estimated tax impact of pre-tax income statement
adjustments at the Company's effective tax rate of 39%.
(s) To record the estimated decrease in interest expense resulting from the
partial repayment of the Debenture with the proceeds of the Offerings.
(t) For each 1/8 of 1% increase in interest rates, the impact would be an
annual change in interest expense of approximately $600,000.
(u) The pro forma earnings per common share data is calculated using the
shares of common stock outstanding after the Reorganization, assuming the
conversion of shares of Common Stock held by AMR into approximately 107.4
million shares of Class B Common Stock, adjusted for the number of shares of
Class A Common Stock that would have to be issued to generate sufficient funds
to repay the portion of the Debenture that i) exceeds the book value of assets
contributed to the Company in the Reorganization (approximately $120.9 million)
and ii) will be repaid out of the proceeds from the Offering.
(v) The pro forma earnings per common share data is calculated using the
weighted average shares of common stock outstanding after the Offerings. The
dilutive impact of common equivalent shares related to stock awards and options
outstanding under the Company's 1996 Long-Term Incentive Plan is not significant
for the periods presented.
F-8
<PAGE> 95
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholder
The SABRE Group Holdings, Inc.
We have audited the accompanying consolidated balance sheets of The SABRE
Group Holdings, Inc. (a wholly-owned subsidiary of AMR Corporation) and
subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of income and stockholder's net investment and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The SABRE Group Holdings, Inc. and subsidiaries at December 31, 1994 and 1995,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
January 15, 1996,
except as to Note 1, for which
the date is July 22, 1996
F-9
<PAGE> 96
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995 JUNE 30, 1996
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................... $ 262,956 $ 94,861 $ 187,089
Accounts receivable, less allowance for
uncollectible accounts of $3,042, $4,822 and
$4,307 at December 31, 1994 and 1995 and June
30, 1996, respectively......................... 114,026 138,972 209,697
Prepaid expenses.................................. 2,604 5,851 12,075
Deferred income taxes............................. 24,705 31,539 40,717
--------- --------- ---------
TOTAL CURRENT ASSETS...................... 404,291 271,223 449,578
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements.............. 18,107 12,250 11,243
Furniture, fixtures and equipment................. 6,044 6,049 4,460
Service contract equipment........................ 490,113 529,918 545,355
Computer equipment................................ 453,295 422,050 318,928
--------- --------- ---------
967,559 970,267 879,986
Less accumulated depreciation and amortization.... (566,155) (589,549) (533,740)
--------- --------- ---------
TOTAL PROPERTY AND EQUIPMENT........................ 401,404 380,718 346,246
OTHER ASSETS........................................ 67,810 77,465 59,997
--------- --------- ---------
TOTAL ASSETS.............................. $ 873,505 $ 729,406 $ 855,821
========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 40,365 $ 53,716 $ 44,853
Accrued compensation and related benefits......... 33,514 33,696 41,972
Other accrued liabilities......................... 60,760 77,071 84,829
Payable to AMR.................................... 302,895 -- --
Note payable to AMR............................... 65,663 54,102 54,102
--------- --------- ---------
TOTAL CURRENT LIABILITIES................. 503,197 218,585 225,756
DEFERRED INCOME TAXES............................... 36,494 30,943 24,876
OTHER POSTRETIREMENT BENEFITS....................... 33,180 37,960 40,627
OTHER LIABILITIES................................... 11,170 9,781 13,375
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Stockholder's net investment...................... 289,464 432,137 551,187
--------- --------- ---------
TOTAL STOCKHOLDER'S EQUITY................ 289,464 432,137 551,187
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY.................................. $ 873,505 $ 729,406 $ 855,821
========= ========= =========
</TABLE>
See notes to the consolidated financial statements.
F-10
<PAGE> 97
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND STOCKHOLDER'S NET INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............ $ 785,074 $ 905,908 $1,006,926 $ 511,739 $574,982
Information technology solutions.......... 473,074 500,771 522,690 255,792 263,307
---------- ---------- ---------- --------- --------
Total revenues..................... 1,258,148 1,406,679 1,529,616 767,531 838,289
Operating expenses
Cost of revenues.......................... 919,873 955,120 1,041,475 499,758 576,599
Selling, general and administrative....... 84,600 101,406 107,717 48,323 64,101
---------- ---------- ---------- --------- --------
Total operating expenses........... 1,004,473 1,056,526 1,149,192 548,081 640,700
---------- ---------- ---------- --------- --------
Operating income............................ 253,675 350,153 380,424 219,450 197,589
Other income (expense)
Loss on partnership settlement............ (71,242) -- -- -- --
Interest income (expense), net............ (1,390) (8,913) 1,265 1,114 939
Other, net................................ (12,112) (17,180) (11,614) (11,529) (3,338)
---------- ---------- ---------- --------- --------
Income before provision for income taxes.... 168,931 324,060 370,075 209,035 195,190
Provision for income taxes.................. 68,969 126,899 144,224 81,978 76,140
---------- ---------- ---------- --------- --------
Net earnings................................ 99,962 197,161 225,851 127,057 119,050
Stockholder's net investment at beginning of
the year.................................. 244,704 157,966 289,464 289,464 432,137
Contributions from affiliates............... -- -- 310,329 310,329 --
Distributions to affiliates................. (186,700) (65,663) (393,507) (249,049) --
---------- ---------- ---------- --------- --------
Stockholder's net investment at end of the
year...................................... $ 157,966 $ 289,464 $ 432,137 $ 477,801 $551,187
========= ========= ========= ========= ========
</TABLE>
See notes to the consolidated financial statements.
F-11
<PAGE> 98
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings............................... $ 99,962 $ 197,161 $ 225,851 $ 127,057 $119,050
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization............ 170,698 174,953 171,471 88,155 87,782
Deferred income taxes.................... (12,287) 50,232 (12,385) -- (15,245)
Loss on partnership settlement........... 71,242 -- -- -- --
Other.................................... 12,090 7,534 7,865 6,503 3,474
Changes in operating assets and
liabilities:
Accounts receivable.................... (14,112) (28,685) (24,946) (33,821) (70,725)
Prepaid expenses....................... 2,599 (1,401) (3,247) (5,037) (6,222)
Other assets........................... (8,445) (41,420) (6,002) (5,368) 11,617
Accrued compensation and related
benefits............................. 6,395 14,618 182 (11,872) 8,276
Accounts payable and other accrued
liabilities.......................... 52,668 8,449 29,662 (335) (1,105)
Partnership settlement................. (45,122) (158,400) -- -- --
Postretirement benefits................ 5,654 4,790 4,780 2,810 2,666
Other liabilities...................... (8,911) (2,884) (1,389) 188 3,595
--------- --------- --------- --------- --------
Net cash provided by operating
activities............................... 332,431 224,947 391,842 168,280 143,163
INVESTING ACTIVITIES
Additions to property and equipment........ (176,557) (168,875) (164,580) (104,411) (82,001)
Acquisition of other investments........... (5,020) (21,087) (16,318) (4,631) (513)
Proceeds from sales of equipment........... 9,874 12,663 6,169 3,609 15,891
--------- --------- --------- --------- --------
Net cash used for investing activities..... (171,703) (177,299) (174,729) (105,433) (66,623)
FINANCING ACTIVITIES
Net cash advances from (to) affiliates..... 25,972 215,308 (236,367) (241,985) 15,688
Contributions from affiliates.............. -- -- 244,666 244,666 --
Distributions to affiliates................ (186,700) -- (393,507) (249,049) --
--------- --------- --------- --------- --------
Net cash provided by (used for) financing
activities............................... (160,728) 215,308 (385,208) (246,368) 15,688
--------- --------- --------- --------- --------
Net increase (decrease) in cash
equivalents.............................. -- 262,956 (168,095) (183,521) 92,228
Cash and cash equivalents at beginning of
the period............................... -- -- 262,956 262,956 94,861
--------- --------- --------- --------- --------
Cash and cash equivalents at end of the
period................................... $ -- $ 262,956 $ 94,861 $ 79,435 $187,089
========= ========= ========= ========= ========
Supplemental cash flow information:
Cash payments to affiliates for income
taxes................................ $ 94,336 $ 138,886 $ 148,322 $ 81,978 $ 90,396
========= ========= ========= ========= ========
Interest payments to affiliates........ $ 1,390 $ 8,913 $ -- $ -- $ --
========= ========= ========= ========= ========
</TABLE>
See notes to the consolidated financial statements.
F-12
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. GENERAL INFORMATION
The SABRE Group Holdings, Inc. (the "Company") is a holding company. Its
sole direct subsidiary is The SABRE Group, Inc., which, pursuant to the
Reorganization (defined below), is the successor to the businesses of The SABRE
Group which were previously operated as subsidiaries or divisions of American or
AMR. The SABRE Group was formed by AMR to capitalize on synergies of combining
AMR's information technology businesses under common management.
On July 2, 1996, AMR reorganized the businesses of The SABRE Group (the
"Reorganization"). As part of the Reorganization, the Company was formed as a
subsidiary of American Airlines, Inc. ("American"), the businesses of The SABRE
Group formerly operated as divisions and subsidiaries of American or AMR were
combined under the Company and the Company and its subsidiaries were dividended
by American to AMR. See Note 11 regarding the transactions related to the
implementation of the Reorganization.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The Consolidated Financial Statements have been
prepared using AMR's historical basis in the assets and liabilities of the
Company. The Consolidated Financial Statements reflect the results of
operations, financial condition and cash flows of the Company as a component of
AMR and may not be indicative of actual results of operations and financial
position of the Company under other ownership. Management believes the
consolidated income statements include a reasonable allocation of administrative
costs, which are described in Note 3, incurred by AMR on behalf of the Company.
CONSOLIDATION -- All significant accounts and transactions among the
consolidated entities have been eliminated. For financial reporting purposes,
the equity accounts of the previous divisions of American and subsidiaries of
AMR have been accumulated into a single disclosure caption entitled
Stockholder's Net Investment.
INTERIM FINANCIAL DATA -- The Consolidated Financial Statements for the six
months ended June 30, 1995 and 1996 have been prepared without audit. In the
opinion of management, all adjustments, which include only normal recurring
adjustments, necessary to present fairly the consolidated balance sheet as of
June 30, 1996 and the consolidated statements of income and stockholder's net
investment and cash flows for the six months ended June 30, 1995 and 1996 have
been made. Interim period results are not necessarily indicative of the results
to be achieved for the full year.
CASH AND CASH EQUIVALENTS -- Prior to July 2, 1996, the Company's cash and
cash equivalents were held for the Company by American. Cash equivalents are
immediately charged or credited to the Company upon recording certain
transactions, including airline booking fees and other transactions with
American, and purchases of goods and services. Cash equivalents are carried at
cost plus accrued interest, which approximates fair value. See Note 11 regarding
the Company's cash balances subsequent to June 30, 1996.
F-13
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
DEPRECIATION AND AMORTIZATION -- The Company's depreciation and
amortization policies are as follows:
<TABLE>
<S> <C>
Property and Equipment:
Buildings....................................... 30 years
Service contract equipment...................... 3 to 5 years
Computer equipment.............................. 3 to 5 years
Furniture and fixtures.......................... 5 to 15 years
Leasehold improvements.......................... Lesser of lease term or useful life
Purchased software.............................. 3 to 5 years
Other Assets:
Internally developed software................... 3 to 5 years
</TABLE>
Property and equipment are stated at cost less accumulated depreciation and
amortization, which is calculated on the straight-line basis. Service contract
equipment consists of hardware provided primarily to subscribers of SABRE.
Depreciation of property and equipment totaled approximately $169 million, $168
million and $163 million in 1993, 1994 and 1995, respectively. Other assets are
amortized on the straight-line basis over the periods indicated.
DEFERRED CONTRACT COSTS -- Included in other assets are costs incurred in
connection with an agreement between AMS Holdings, Inc., a subsidiary of AMR
("AMS"), and Canadian Airlines International ("Canadian") to provide a variety
of management, technical and administrative services. The Company incurred and
deferred approximately $41 million and $9 million in costs associated with the
installation and implementation of SABRE and other systems for Canadian during
1994 and 1995, respectively, under the terms of this twenty year service
contract. Pursuant to the terms of the contract, the Company is allowed to
recover these costs plus a margin over the first ten years of the contract. As a
result, these costs are included in cost of revenues over such recovery period.
Approximately $0.7 million and $5 million of these deferred costs were charged
to operations in 1994 and 1995, respectively. American has agreed to reimburse
the Company for any unrecovered costs incurred in connection with the
implementation of such systems in the event of the termination of the provision
of services to Canadian.
REVENUE RECOGNITION -- The Company provides electronic travel distribution
services using SABRE, one of the largest privately owned real-time computer
systems in the world. As compensation for electronic travel distribution
services provided, fees are collected from airline, car rental and hotel vendors
("associates") for reservations booked through SABRE. The fee per booking
charged to an associate is dependent upon the level of functionality within
SABRE at which the associate participates. Revenue for travel reservations is
recognized at the time of the booking of the reservation, net of estimated
future cancellations. At December 31, 1994 and 1995 the Company had recorded
booking fee cancellation reserves of approximately $9 million and $15 million,
respectively. Revenue for car rental and hotel bookings is recognized at the
time the reservation is used by the customer. The Company also enters into
service contracts with subscribers (primarily travel agencies) to provide access
to SABRE, hardware, software, hardware maintenance and other support services.
Fees billed on service contracts are recognized as revenue in the month earned.
The Company provides information technology solutions to AMR and companies
in the travel industry and other industries worldwide. Revenue from data
processing services is recognized in the month earned. Revenue from software
license fees for standard software products is recognized when the software is
delivered, provided no significant future vendor obligations exist and
collection is probable. The Company recognizes revenue on long-term software
development and consulting contracts under the percentage of completion method
of accounting. Losses, if any, on
F-14
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
long-term contracts are recognized when the current estimate of total contract
costs indicates a loss on a contract is probable. Fixed fees for software
maintenance are recognized ratably over the life of the contract.
INCOME TAXES -- The entities comprising the Company are included in the
consolidated federal income tax return of AMR. Prior to July 1, 1996, under the
terms of AMR's tax sharing policy, the Company paid AMR an amount equal to the
income tax payments that it would have been obligated to pay if it had filed
separate income tax returns. See Note 11 regarding the Company's tax sharing
agreement subsequent to June 30, 1996.
The Company computes its provision for deferred income taxes using the
liability method as if it were a separate taxpayer. Under the liability method,
deferred income tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and laws. The measurement of deferred
tax assets is adjusted by a valuation allowance, if necessary, to recognize the
future tax benefits to the extent, based on available evidence, it is more
likely than not they will be recognized.
RESEARCH AND DEVELOPMENT COSTS -- All costs in the software development
process which are classified as research and development costs, which have not
been material, are expensed as incurred until technological feasibility has been
established. Once technological feasibility has been established, such costs are
capitalized until the product is ready for service.
CONCENTRATION OF CREDIT RISK -- The Company's customers are worldwide,
primarily in the United States, Europe and Canada, and are concentrated in the
travel industry. Approximately 43%, 42% and 36% of revenues in 1993, 1994 and
1995, respectively, are related to American and other subsidiaries of AMR. The
Company generally does not require security or collateral from its customers as
a condition of sale. The Company maintains an allowance for losses based upon
the expected collectibility of all accounts receivable. See Note 8.
USE OF ESTIMATES -- The preparation of these financial statements in
conformity with generally accepted accounting principles requires that certain
amounts be recorded based on estimates and assumptions made by management.
Actual results could differ from these estimates and assumptions.
STOCK AWARDS AND OPTIONS -- The Company accounts for stock awards and
options (including awards of AMR stock and stock options) in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." No compensation expense is recognized for stock option grants if the
exercise price of the stock option grants is at or above the fair market value
of the underlying stock on the date of grant. Compensation expense relating to
other stock awards is recognized over the period during which the employee
renders service to the Company necessary to earn the award.
3. RELATED PARTY TRANSACTIONS
Certain of The SABRE Group entities from which the Company was formed
distributed, in their capacity as divisions of American, $394 million in 1995 to
American. Also during 1995, AMR contributed $245 million to the Company and a
note payable to AMR of $66 million was capitalized in order to adequately
capitalize certain of The SABRE Group entities from which the Company was
formed. Proceeds from the contribution were used to reduce cash advances from
AMR.
In conjunction with the capital infusion discussed above, amounts payable
to AMR of approximately $54 million were converted to intercompany notes payable
in 1995, upon which the Company was charged interest expense at an average rate
of 9.9%. The payable to AMR of approximately
F-15
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
$303 million at December 31, 1994 represents an amount due to AMR upon demand.
The carrying amount of the notes payable to AMR is equivalent to the fair market
value.
American allocates interest income or expense monthly to the Company based
on the net balance of cash equivalents and the payable to AMR at the average
rate earned by American's portfolio of short-term marketable securities. The
allocation may not be representative of what the Company would earn or pay if
its cash were held externally. Cash payments for interest are equivalent to net
interest expense.
Revenues from American and other subsidiaries of AMR were $546 million,
$590 million and $548 million in 1993, 1994 and 1995, respectively, and $273
million and $261 million for the six months ended June 30, 1995 and 1996,
respectively.
Operating expenses are charged to the Company by American and other
subsidiaries of AMR to cover certain employee benefits, facilities rental,
marketing services, management services, legal fees and certain other
administrative costs. Amounts charged to the Company for these expenses
approximate the cost of such services provided by third parties. Travel service
costs for travel by the Company's employees for personal and business travel are
charged to the Company based on rates negotiated with American. Personal travel
costs are incurred by the Company only because it is affiliated with American.
If the Company were not affiliated with American, this flight privilege would
most likely not be available to employees. It is estimated that travel costs,
had the Company not been affiliated with American, for 1993, 1994 and 1995 would
have been approximately $26 million, $32 million, and $34 million, respectively,
and for the six months ended June 30, 1995 and June 30, 1996 would have been
approximately $14 million in each period. Expenses charged to the Company by
affiliates are as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Employee benefits........ $ 64,268 $ 64,240 $ 68,743 $34,583 $ 43,492
Facilities rental........ 27,294 30,117 29,385 14,631 16,343
Marketing cooperation.... -- -- -- -- 10,802
Management services...... 10,302 16,431 16,508 7,660 9,698
Other administrative
costs.................. 7,625 10,660 11,377 5,957 4,521
Travel services.......... 9,920 18,056 28,761 11,584 20,653
-------- -------- -------- -------- --------
$119,409 $139,504 $154,774 $74,415 $105,509
======== ======== ======== ======== ========
</TABLE>
See Note 11 regarding contractual agreements entered into with AMR and
American subsequent to December 31, 1995.
Substantially all employees of the Company are eligible to participate in a
tax-qualified pension plan sponsored by American. The defined benefit plan
provides benefits for participating employees based on years of service and
average compensation for a specified period of time before retirement. Costs
associated with employee participation in this plan are determined based upon
employee headcount and are allocated to the Company by American. American's
annual allocation of costs to the Company for such benefits was approximately $9
million, $11 million and $9 million in 1993, 1994 and 1995, respectively. The
Company is jointly and severally liable with AMR and other members of AMR's
consolidated group for applicable funding and termination liabilities of the
plan.
In addition to providing pension benefits, American provides certain health
care and life insurance benefits to retired employees. The amount of health care
benefits is limited to lifetime
F-16
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
maximums as outlined in the plan. Substantially all employees of the Company may
become eligible for these benefits if they satisfy eligibility requirements
during their working lives. Certain employee groups make contributions toward
funding a portion of their retiree health care benefits during their working
lives. American funds benefits as incurred and began, effective January 1993, to
match employee prefunding. American's annual allocation of costs to the Company
for such benefits was approximately $6 million, $9 million and $5 million in
1993, 1994 and 1995, respectively. The Company is jointly and severally liable
with AMR and other members of AMR's consolidated group for funding
postretirement benefit liabilities.
Net other postretirement benefit costs allocated to the Company by AMR for
the year ended December 31, 1995 consisted of the following (in thousands):
<TABLE>
<S> <C>
Service cost -- benefits earned during the period................. $2,620
Interest cost on accumulated other postretirement benefit
obligation...................................................... 2,420
Return on assets.................................................. (160)
Net amortization and deferral..................................... (100)
------
Net other postretirement benefit cost............................. $4,780
======
</TABLE>
The following table summarizes the funded status of the plan, as allocated
to the Company by AMR, reconciled to the accrued other postretirement benefit
liabilities recognized in the Company's balance sheet at December 31, 1995 (in
thousands):
<TABLE>
<S> <C>
Fully eligible active participants............................ $ (7,210)
Other active participants..................................... (34,350)
--------
Accumulated other postretirement benefit obligation........... (41,560)
Plan assets at fair value..................................... 3,650
--------
Accumulated other postretirement benefit obligation in excess
of plan assets.............................................. (37,910)
Unrecognized net loss......................................... 1,680
Unrecognized prior service benefit............................ (1,730)
--------
Accrued other postretirement benefit cost..................... $(37,960)
========
</TABLE>
Plan assets consist primarily of shares of a mutual fund managed by AMR.
Future benefit costs were estimated assuming per capita cost of covered
medical benefits would increase at an eight percent annual rate decreasing
gradually to a four percent annual growth rate in 2000 and thereafter. A one
percent increase in this annual trend rate would have increased the accumulated
other postretirement benefit obligation at December 31, 1995, by approximately
$5 million and 1995 other postretirement benefit cost by approximately $1
million. The weighted average discount rate used in estimating the accumulated
other postretirement benefit obligation was 7.25%.
The Company will provide personal flight privileges to retired employees
through an agreement with American. Because flight privileges do not result in
any significant incremental costs for American, the cost of providing this
privilege to the Company's employees is not included in the liability for
postretirement benefits at December 31, 1995. See Note 11.
See Note 11 regarding the Company's benefits and the agreements for
benefits provided by AMR and American subsequent to the Reorganization.
F-17
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
4. INCOME TAXES
The provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Federal, current.................................. $ 63,202 $ 52,655 $133,575
Federal, deferred................................. (11,121) 50,856 (11,792)
State and local, current.......................... 16,066 20,348 21,936
State and local, deferred......................... (1,166) (624) (593)
Foreign, current.................................. 1,988 3,664 1,098
-------- -------- --------
$ 68,969 $126,899 $144,224
======== ======== ========
</TABLE>
The provision for income taxes differs from amounts computed at the
statutory federal income tax rate as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Statutory income tax provision...................... $59,126 $113,420 $129,526
State income taxes, net of federal benefit.......... 7,845 12,275 13,581
Foreign tax credit.................................. -- (719) --
Valuation allowance................................. 2,831 1,559 449
Other, net.......................................... (833) 364 668
------- -------- --------
$68,969 $126,899 $144,224
======= ======== ========
</TABLE>
The components of the Company's deferred tax assets and liabilities as of
December 31, 1994 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions................. $ 14,092 $ 16,100
Net operating loss carryforwards............................ 10,202 9,979
Equipment obsolescence reserve.............................. 5,380 8,976
Booking fee cancellation reserve............................ 3,763 5,754
Reserve for partnership settlement.......................... 9,517 2,745
Other....................................................... 13,447 15,425
-------- --------
Total deferred tax assets........................... 56,401 58,979
Deferred tax liabilities:
Depreciation and amortization............................... (29,879) (25,254)
Software development costs.................................. (18,525) (21,017)
Other....................................................... (8,863) (740)
-------- --------
Total deferred tax liabilities...................... (57,267) (47,011)
Valuation allowance........................................... (10,923) (11,372)
-------- --------
Net deferred tax asset (liability)............................ $(11,789) $ 596
======== ========
Current deferred income tax asset............................. $ 24,705 $ 31,539
Noncurrent deferred income tax liability...................... (36,494) (30,943)
-------- --------
Net deferred tax asset (liability)............................ $(11,789) $ 596
======== ========
</TABLE>
F-18
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $95 million for state income tax purposes, primarily arising from
the settlement of litigation regarding certain partnership agreements, as more
fully described in Note 5. The litigation and resulting net operating loss
carryforwards occurred in an entity that was formerly a subsidiary of AMR. If
not utilized, these carryforwards will expire beginning in 1996.
For financial reporting purposes, a valuation allowance of approximately
$11 million has been recognized which principally relates to the state income
tax net operating loss carryforwards and certain other deferred tax assets which
are subject to limitations as to utilization due to the legal structure of the
entity in which the losses originated.
5. PARTNERSHIP SETTLEMENT
Other expense in 1993 includes a provision of approximately $71 million for
losses associated with a reservation system project and resolution of related
litigation. Settlement agreements entered into included $42 million in travel
credits.
In December 1994, the Company paid American approximately $26 million which
represented the present value of the remaining travel credits. In return,
American agreed to assume the liability of providing the partners all travel
services as set forth by the settlement agreements.
6. COMMITMENTS AND CONTINGENCIES
Certain service contracts with significant subscribers contain booking fee
productivity clauses and other provisions which allow subscribers to receive
various amounts of additional equipment and other services from the Company at
no cost to the subscribers. The Company establishes liabilities for these
commitments as the subscribers satisfy the applicable contractual terms. The
service contracts are priced so that the additional airline and other booking
fees generated over the life of the contract will exceed the cost of the
equipment and other services. Accrued subscriber incentives at December 31, 1994
and 1995 were approximately $15 million and $17 million, respectively.
The Company leases certain facilities and equipment under various operating
leases with third parties. At December 31, 1995, future minimum lease payments
required under these operating leases with terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1996.......................................................... $21,131,000
1997.......................................................... 2,527,000
1998.......................................................... 563,000
1999.......................................................... 209,000
</TABLE>
Rental expense, excluding facilities rented from affiliates, was
approximately $22 million, $27 million and $25 million for the years ended
December 31, 1993, 1994 and 1995, respectively.
The Company is involved in certain disputes arising in the ordinary course
of business. Although the ultimate resolution of these matters cannot be
reasonably estimated at this time, management does not believe that they will
have a material adverse effect on the financial condition or results of
operations of the Company.
F-19
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. STOCK AWARDS
Under AMR's 1988 Long-Term Incentive Plan (the "AMR LTIP"), officers and
key employees of the Company may be granted stock options, stock appreciation
rights, restricted stock, deferred stock, stock purchase rights and/or other
stock based awards in common stock, par value $1 per share, of AMR ("AMR Common
Stock").
Options to purchase shares of AMR Common Stock ("AMR Options") have been
granted to officers and key employees of the Company. Options granted are
exercisable at the market value upon grant, generally becoming exercisable over
one to five years following the date of grant, and expiring ten years from the
date of grant. At December 31, 1995, there were approximately 309,000 AMR
Options outstanding held by officers and key employees of the Company, of which
approximately 209,000 were exercisable. The AMR Options have exercise prices
ranging from $40.9375 to $78.0625 per share of AMR Common Stock, with a total
exercise value of approximately $19 million.
Certain officers and key employees of the Company have been awarded
approximately 217,000 shares of deferred AMR Common Stock ("AMR Career Equity
Shares") at no cost, to be issued upon the individual's retirement from AMR.
In conjunction with AMR's 1988 Long-Term Incentive Plan, certain officers
and key employees of the Company have also been awarded, at no cost,
approximately 140,000 shares of deferred $1 par value AMR Common Stock ("AMR
Performance Shares"). The AMR Performance Shares vest over a three-year
performance period based on performance metrics of AMR and the Company, as
defined in the plan. Awards of AMR Performance Shares will terminate on December
31, 1997.
See Note 11 regarding stock awards and options subsequent to the Offering.
8. GEOGRAPHICAL ANALYSIS
The Company is a global company, deriving revenues from worldwide
operations. Data relating to the Company's operations by geographic area is set
forth below (in thousands).
<TABLE>
<CAPTION>
UNITED
STATES FOREIGN TOTAL
---------- -------- ----------
<S> <C> <C> <C>
1993
Revenues................................... $1,080,190 $177,958 $1,258,148
Operating income........................... 232,870 20,805 253,675
Identifiable assets........................ 498,137 43,055 541,192
1994
Revenues................................... $1,196,291 $210,388 $1,406,679
Operating income........................... 313,636 36,517 350,153
Identifiable assets........................ 533,163 52,923 586,086
1995
Revenues................................... $1,279,471 $250,145 $1,529,616
Operating income........................... 345,262 35,162 380,424
Identifiable assets........................ 534,626 61,080 595,706
</TABLE>
Operating income from operations consists of revenues less operating
expenses, including an allocation for corporate expenses. Operating income
excludes loss on partnership settlement, interest income (expense) net, and
other income (expense) net. Cash equivalents and deferred tax assets are
excluded from identifiable assets.
F-20
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1994 and 1995 (in thousands).
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Revenues.......................... $353,567 $349,943 $361,382 $341,787
Operating income.................. 97,941 93,316 108,011 50,885
Net earnings...................... 58,422 54,018 59,179 25,542
1995
Revenues.......................... $384,466 $383,065 $393,148 $368,937
Operating income.................. 118,091 101,359 108,192 52,782
Net earnings...................... 66,927 60,130 66,855 31,939
</TABLE>
The travel industry is seasonal in nature. Bookings, and thus booking fees
charged for the use of SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to customers booking earlier in the year for
travel during the holiday season and a decline in business travel during the
holiday season.
10. PROPOSED PUBLIC OFFERING OF COMMON STOCK (UNAUDITED)
On August 7, 1996, the Company's Board of Directors authorized management
of the Company to file a Registration Statement with the Securities and Exchange
Commission for an initial public offering of the Company's Class A Common Stock.
On , 1996 the Company's Board of Directors authorized management to
sell up to shares of the Company's Class A Common Stock through an
initial public offering. Concurrently, the Company's Common Stock held by AMR
was converted to Class B Common Stock. The Company contemplates using
approximately 90% of the proceeds from such offering to retire a portion of the
Debenture discussed in Note 11.
11. THE REORGANIZATION AND AFFILIATE AGREEMENTS (UNAUDITED)
The following transactions were consummated in connection with the
Reorganization:
CAPITALIZATION -- The Company was incorporated as a Delaware Corporation
and a direct wholly-owned subsidiary of American, which subsequently dividended
capital stock of the Company to AMR. The Company has 1,000 authorized shares of
Common Stock with a par value of $.01 per share, of which 1,000 shares of Common
Stock were issued to American and dividended to AMR. In conjunction with the
Offerings, the shares of Common Stock held by AMR will be converted to shares of
Class B Common Stock. Common Stock sold under the Offerings will be Class A
Common Stock. The Company also has 20,000,000 authorized shares of preferred
stock with a par value of $.01 per share. No preferred shares have been issued.
LONG-TERM DEBT -- On July 2, 1996, in connection with the Reorganization,
American transferred to the Company certain divisions and subsidiaries of
American through which AMR previously conducted its information technology
businesses, and in return the Company issued to American a floating rate
subordinated debenture due September 30, 2004 with a principal amount of $850
million (the "Debenture") and common stock representing 100% of the equity
ownership interest in the Company. American subsequently exchanged the Debenture
for a portion of a note payable by American to AMR. Because the assets and
liabilities of the divisions and subsidiaries of American
F-21
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
transferred to the Company are included in the historical financial statements
of the Company, this transaction resulted in a reduction of Stockholders'
Equity.
The interest rate on the Debenture will be 7.2% through September 30, 1996
and thereafter will be based on the sum of the six-month London Interbank
Offered Rate (LIBOR rate) plus a margin determined based upon the Company's
senior unsecured long-term debt rating or, if such debt rating is not available,
upon the Company's ratio of net debt to total capital. The interest rate will be
determined at the beginning of each six-month period beginning October 1 and
April 1 and accrued interest will be payable each September 30 and March 31. The
Company may prepay the principal balance in whole or in part at any time prior
to December 31, 1996 and thereafter at any interest payment date.
CASH AND CASH EQUIVALENTS -- Effective with the Reorganization, the Company
began maintaining a separate cash management system and separate cash and
investment accounts from American. Transactions with American no longer result
in immediate charges and credits to the Company's cash equivalents, but are
settled through intercompany billings with payment due in 30 days. American
manages the Company's cash management system under the Management Services
Agreement discussed below. The Company invests excess cash in short-term
marketable securities, consisting primarily of certificates of deposit, bankers'
acceptances, commercial paper, corporate notes and government notes.
NOTE PAYABLE TO AMR -- On July 1, 1996, a note payable to AMR at June 30,
1996 of approximately $54 million was capitalized.
PROPERTY AND EQUIPMENT -- On July 1, 1996, American contributed buildings,
furniture and fixtures in addition to those discussed above to the Company with
a cost value of approximately $298 million and a net book value of $193 million.
TECHNOLOGY SERVICES AGREEMENT -- The Company is a party to the Technology
Services Agreement with American, dated July 1, 1996, to provide American with
certain information technology services. The base term of the Technology
Services Agreement expires June 30, 2006. The terms of the services to be
provided by the Company to American, however, vary. The Company will provide:
(i) Data Center services, data network services, application development and
existing application maintenance and enhancement services until June 30, 2006;
(ii) services relating to existing client server operations until June 30, 2001;
and (iii) device support, distributed systems services, radio services and
reservations and flight information network services until June 30, 1999.
In addition, AMS and Canadian have entered into an agreement pursuant to
which AMR and American supply to Canadian various services, including technology
services. Under the Canadian Subcontract, the Company, as subcontractor through
American, will be a principal provider of technology services to Canadian.
The Technology Services Agreement provides for annual price adjustments.
For certain prices, adjustments are made according to formulas which, commencing
in 1998, are reset every two years and which may take into account the market
for similar services provided by other companies. The resulting rates may
reflect an increase or decrease over the previous rates.
With limited exceptions, under the Technology Services Agreement, the
Company will continue to be the exclusive provider of all information technology
services provided by the Company to American immediately prior to the execution
of the Technology Services Agreement. Any new information technology services,
including most new application development services, requested by American can
be outsourced pursuant to competitive bidding by American or performed by
American on its own behalf. With limited exceptions, the Company has the right
to bid on all new services for which American solicits bids. Additionally,
American may continue to perform development and enhancement work that it is
currently performing on its own behalf.
F-22
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
After July 1, 2000, American may terminate the Technology Services
Agreement for convenience if American determines the agreement is no longer
advantageous for any reason. If it does so, American will be required to pay a
termination fee equal to the sum of all amounts then due under the Technology
Services Agreement, including wind-down costs, book value of dedicated assets
and a significant percentage of estimated lost profits. American may also
terminate the Technology Services Agreement without penalty, in whole or in part
depending upon circumstances, for egregious breach by the Company of its
obligations or for serious failure to perform critical or significant services.
If the Company is acquired by a company other than AMR or American with more
than $1 billion in annual airline transportation revenue, then American may
terminate the Technology Services Agreement without paying any termination fee.
Additionally, if American were to dispose of any portion of its business or any
affiliate accounting for more than 10% of the Company's fees from American, then
American shall either cause such divested business or affiliate to be obligated
to use the Company's services in accordance with the Technology Services
Agreement or pay a proportionate termination fee.
The parties have agreed to apply the financial terms of the Technology
Services Agreement as of January 1, 1996. Absent the agreement, revenues for the
six months ended June 30, 1996 would have been $16 million greater than stated
in the Consolidated Statement of Income.
MANAGEMENT SERVICES AGREEMENT -- The Company and American are parties to a
Management Services Agreement, dated July 1, 1996 (the "Management Services
Agreement"), pursuant to which American performs various management services for
the Company, including treasury, risk management and tax, and similar
administrative services, that American has historically provided to the Company.
The Management Services Agreement will expire on June 30, 1999 unless terminated
earlier if American and the Company are no longer under common control or if the
Technology Services Agreement is terminated early. Amounts charged to the
Company under this agreement approximate American's cost of providing the
services plus a margin. The parties have agreed to apply the financial terms of
the Management Services Agreement as of January 1, 1996. The application of
these terms did not materially impact expenses for the six months ended June 30,
1996.
MARKETING COOPERATION AGREEMENT -- The Company and American are parties to
the Marketing Cooperation Agreement, dated as of July 1, 1996, pursuant to which
American will provide marketing support for 10 years for the Company's
Professional SABRE products targeted to travel agencies and for five years for
BTS, Travelocity and easySABRE. The Marketing Cooperation Agreement may be
terminated by either party prior to June 30, 2006 only if the other party fails
to perform its obligations thereunder.
Under the Marketing Cooperation Agreement, American's marketing efforts
will include ongoing promotional programs to assist in the sale of those SABRE
products, development with the Company of an annual sales plan, sponsorship of
sales/promotional events and the targeting of potential customers. For calendar
year 1996, the Company will pay American for its marketing support for
Professional SABRE a fee, the amount of which may increase or decrease,
depending on total SABRE booking volumes generated by certain Professional SABRE
subscribers in the U.S., the Caribbean and elsewhere and on SABRE's market share
of travel agency bookings in those areas. That fee will range between $20
million and $30 million for 1996 and between $10 million and $30 million
thereafter. As payment for American's support of the Company's promotion of BTS,
Travelocity and easySABRE, the Company will pay American a marketing fee based
upon booking volume. Additionally, the Company has guaranteed to American
certain cost savings in the fifth year of the Marketing Cooperation Agreement.
If American does not achieve those savings, the Company will pay American any
shortfall, up to a maximum of $50 million.
F-23
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The parties have agreed to apply the financial terms of the Marketing
Cooperation Agreement as of January 1, 1996. The application of these terms
resulted in an increase in expenses of approximately $11 million for the six
months ended June 30, 1996. Absent the cancellation of the marketing support
payments from American for passenger support, revenues would have been
approximately $10 million greater for the six months ended June 30, 1996.
NON-COMPETITION AGREEMENT -- The Company, AMR and American have entered
into a Non-Competition Agreement, dated July 1, 1996 (the "Non-Competition
Agreement"), pursuant to which AMR and American, on behalf of themselves and
certain of their subsidiaries, have agreed to limit their competition with the
Company's businesses of (i) electronic travel distribution, (ii) development,
maintenance, marketing and licensing of software for travel agency, travel,
transportation and logistics management, (iii) computer system integration, (iv)
development, maintenance and operation of a data processing center providing
data processing services to third parties and (v) travel industry,
transportation and logistics consulting services relating primarily to computer
technology and automation. Under the Non-Competition Agreement, American and AMR
may develop, operate, market and provide in compliance with all applicable laws
an American Airlines branded electronic travel distribution system that gives a
display preference to American's flights. The Non-Competition Agreement
prohibits American or AMR, however, from providing such system to any travel
agency that generated 25% or more of its bookings through SABRE during the
preceding six calendar months. Additionally, in the event any airline competing
with American engages in an activity in connection with such airline's
transportation business, and if the restrictions imposed by the Non-Competition
Agreement would prevent American from engaging in the same activity and place
American at a disadvantage, then American may engage in such activity, subject
to American and the Company consulting about means to mitigate the effect on the
Company of American's engaging in such activity. American and AMR may also
license to third parties any software that is owned by AMR, American or other
AMR affiliates in response to a request or offer from such third parties. The
Non-Competition Agreement expires on December 31, 2001. American may terminate
the Non-Competition Agreement, however, upon 90 days notice to the Company if
the Technology Services Agreement is terminated by American as a result of an
egregious breach thereof by the Company.
TRAVEL AGREEMENTS -- The Company and American are parties to a Travel
Privileges Agreement, dated July 1, 1996, pursuant to which the Company is
entitled to purchase personal travel for its employees and retirees at reduced
fares. The Travel Privileges Agreement will expire on June 30, 2008. To pay for
the provision of flight privileges to certain of its future retired employees,
the Company will make a lump sum payment to American beginning in 1997 for each
employee retiring in that year. The payment per retiree will be based on the
number of years of service with the Company and AMR over the prior ten years of
service. Service years accrue for the Company beginning on January 1, 1993. AMR
will retain the obligation for the portion of benefits attributable to service
years prior to January 1, 1993. The accumulated benefit obligation for
postretirement travel privileges at July 1, 1996 of approximately $8 million,
net of deferred taxes of approximately $3 million, will be recorded as a
reduction to Stockholders' Equity. The remaining cost of providing this
privilege will be accrued over the estimated service lives of the employees
eligible for the privilege.
The Company and American are also parties to a Corporate Travel Agreement,
dated July 1, 1996 and ending June 30, 1998, pursuant to which the Company
receives discounts for certain flights purchased on American. In exchange, the
Company must fly a certain percentage of its travel on American as compared to
all other air carriers combined. If the Company fails to meet the applicable
percentage on an average basis over any calendar quarter, American may terminate
the agreement upon 60 days' notice.
F-24
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The parties have agreed to apply the financial terms of the Travel
Privileges Agreement and the Corporate Travel Agreement as of January 1, 1996.
The application of the terms of these agreements resulted in an increase in
expenses of approximately $8 million for the six months ended June 30, 1996.
CREDIT AGREEMENT -- On July 1, 1996, the Company and American entered into
a Credit Agreement pursuant to which the Company is required to borrow from
American, and American is required to lend to the Company, amounts required by
the Company to fund its daily cash requirements. In addition, American may, but
is not required to, borrow from the Company to fund its daily cash requirements.
The maximum amount that the Company may borrow at any time from American under
the Credit Agreement is $300 million. The maximum amount that American may
borrow at any time from the Company under the Credit Agreement is $100 million.
Loans under the Credit Agreement are not intended as long-term financing. If the
Company's credit rating is better than "B" on the Standard & Poor's Ratings
Services scale (or an equivalent thereof) or American has excess cash to lend to
the Company, the interest rate to be charged to the Company will be the sum of
(a) the higher of (i) American's average rate of return on short-term
investments for the month in which borrowings occurred or (ii) the actual rate
of interest paid by American to borrow funds to make a loan to the Company under
the Credit Agreement, plus (b) an additional spread based upon the Company's
credit risk. If the Company's credit rating is "B" or below on the Standard &
Poor's Ratings Service Scale (or an equivalent thereof) and American does not
have excess cash to lend to the Company, the interest rate to be charged to the
Company will be the lower of (a) the sum of (i) the borrowing cost incurred by
American to draw on its revolving credit facility to make the advance plus (ii)
an additional spread based on the Company's credit risk or (b) the sum of (i)
the cost at which the Company could borrow Funds from an independent party plus
(ii) one half of the margin American pays to borrow under its revolving credit
facility. The Company believes that the interest rate it will be charged by
American could, at times, be slightly above the rate at which the Company could
borrow externally; however, no standby fees for the line of credit will be
required to be paid by either party. The interest rate to be charged to American
will be the Company's average portfolio rate for the months in which borrowing
occurred plus an additional spread based upon American's credit risk. At the end
of each quarter, American must pay all amounts owing under the Credit Agreement
to the Company.
COMMITMENTS -- On July 1, 1996, the Company entered into an operating lease
agreement with AMR for certain facilities and AMR assigned its rights and
obligations under certain leases to the Company. Also on July 1, 1996 the
Company entered into an operating lease agreement with a third party for the
lease of other facilities. At July 1, 1996, the future minimum lease payments
required under these operating lease agreements along with various other
operating lease agreements with terms in excess of one year for facilities and
equipment were as follows:
<TABLE>
<CAPTION>
AFFILIATES THIRD PARTIES
---------- -------------
<S> <C> <C>
Six months ending
December 31, 1996............................. $ 976,000 $ 17,086,000
Year ending December 31,
1997..................................... 1,540,000 17,493,000
1998..................................... 1,370,000 14,829,000
1999..................................... 1,416,000 13,064,000
2000..................................... 1,173,000 11,489,000
2001..................................... 647,000 12,045,000
Thereafter............................... 7,368,000 63,065,000
</TABLE>
F-25
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
PENSION BENEFITS -- The Company and AMR have entered into an agreement
which permits the employees of the Company to continue to participate in the
benefit plans and programs sponsored by AMR until the Company establishes
separate plans and programs for employees. The current intent of the Company is
to spin off the portion of the AMR sponsored defined benefit pension plan
applicable to the Company's employees from the AMR pension plan to a new pension
plan to be sponsored by the Company on January 1, 1997. At the date of the
spin-off, the unrecognized net obligation attributable to the Company's
employees participating in the plan, estimated to be a liability of
approximately $50 million at December 31, 1995, will be charged to Stockholders'
Equity, net of deferred income taxes of approximately $19 million.
INCOME TAXES -- The Company and AMR have entered into a tax sharing
agreement (the "Tax Sharing Agreement") which provides for the allocation of tax
liabilities during the tax periods the Company is part of consolidated federal,
state and local income tax returns filed by AMR. In addition, the Tax Sharing
Agreement sets out certain benefits and obligations of the Company and AMR for
tax matters relating to periods before the Reorganization and for certain
benefits and obligations that would affect the Company or AMR in the future if
the Company ceased to be a member of AMR's consolidated group for federal income
tax purposes. The Tax Sharing Agreement generally requires the Company to pay to
AMR the amount of federal, state and local income taxes that the Company would
have paid had it ceased to be a member of the AMR consolidated tax group for
periods after the Reorganization. The Company is jointly and severally liable
for the federal income tax of AMR and the other companies included in the
consolidated return for all periods in which the Company is included in the AMR
consolidated group. AMR has agreed, however, to indemnify the Company for any
liability for taxes reported or required to be reported on a consolidated
return.
Except for certain items specified in the Tax Sharing Agreement, AMR
generally retains any potential tax benefit carryforwards, and remains obligated
to pay all taxes, attributable to periods before the Reorganization. The Tax
Sharing Agreement also grants the Company certain limited participation rights
in any dispute with tax authorities.
The Tax Sharing Agreement replaces AMR's policy discussed in Note 2.
STOCK AWARDS AND OPTIONS -- Effective with the Offerings, the Company will
establish the 1996 Long-Term Incentive Plan (the "LTIP"), whereby officers and
other key employees of the Company may be granted stock options, stock
appreciation rights, restricted stock, deferred stock, stock purchase rights
and/or other stock-based awards. Initially 2,900,000 shares of Class A Common
Stock are authorized to be issued under the LTIP. The LTIP will terminate no
later than ten years from the date of its establishment.
Options granted under the LTIP will be exercisable at a price which is not
less than the market value of Class A Common Stock upon grant, except as
otherwise determined by a committee appointed by the Board of Directors, and no
such options will be exercisable more than 10 years after the date of grant.
Stock appreciation rights may be granted in conjunction with all or part of
any stock option granted under the LTIP. All appreciation rights will terminate
upon termination or exercise of the related option and will be exercisable only
during the time that the related option is exercisable. If an appreciation right
is exercised, the related stock option will be deemed to have been exercised.
For other stock-based awards, a committee established by the Board of
Directors will determine the eligible persons to whom awards will be made, the
times at which awards will be made, the
F-26
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
number of shares to be awarded, the price, if any, to be paid by the recipient
and all other terms and conditions of the award under the terms of the LTIP at
the time of grant.
In connection with the Offerings, the AMR Options (Note 7) may be exchanged
for options to purchase shares of Class A Common Stock of the Company. The
exercise prices of the options to purchase Class A Common Stock will be computed
as the initial offering price of Class A Common Stock multiplied by the ratio of
the exercise prices of the AMR Options to the previous day's closing price of
AMR Common Stock at the date of the Offerings. The number of options will be
increased to maintain the option holders' aggregate spread value between the
exercise price of the option and the previous day's closing price of AMR common
stock. These options will continue to vest in equal annual installments over
five years following the original date of grant of the AMR options and expire 10
years from the original date of grant. Based on the closing price of AMR Common
Stock on July 31, 1996 and assuming an initial offering price of $21.50 per
share for the shares of Class A Common Stock, a maximum of approximately 930,000
options for the purchase of Class A Common Stock would be issued with a weighted
average price of approximately $17 per share in exchange for the AMR Options.
In connection with the Offerings, certain AMR Performance Shares (Note 7)
may be converted into deferred Class A Common Stock performance shares ("Company
Performance Shares") based on the initial offering price of shares of Class A
Common Stock and the previous day's closing price of the AMR Common Stock on the
date of the Offerings. The Company Performance Shares will continue to vest over
a three-year period ending December 31, 1997 based on the Company's average
change in business value and free cash flow generated. Based on the closing
price of AMR common stock on July 31, 1996 and assuming an initial offering
price of $21.50 per share for Class A Common Stock, a maximum of approximately
341,000 Company Performance Shares would be issued pursuant to the conversion of
the outstanding AMR Performance Shares.
In connection with the Offerings, the AMR Career Equity Shares (Note 7) may
be exchanged for a combination of restricted shares of Class A Common Stock and
options to purchase shares of Class A Common Stock. The restricted shares will
vest over a three-year period. The stock options, which will have an exercise
price equal to the initial offering price of the Class A Common Stock, will vest
over the five years following the date of grant and will expire ten years from
the date of grant. The actual number of restricted shares and stock options to
be issued is dependent on, among other things, elections by the individuals as
to the mix of restricted shares and stock options to be received, the previous
day's closing price of AMR Common Stock at the date of the Offerings and the
initial offering price of Class A Common Stock. Based on the closing price of
AMR Common Stock on July 31, 1996 and assuming an initial offering price of
$21.50 for Class A Common Stock, the number of shares and options issued
pursuant to the exchange of the AMR Career Equity Shares will range from a
minimum of 182,000 shares to a maximum of 363,000 shares and a minimum of
873,000 options to a maximum of 1,456,000 options.
It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt a Director's Stock Incentive Plan which provides
for an annual award of options to purchase 3,000 shares of the Company's Class A
Common Stock to each non-employee director. The plan will provide for a one time
award of options to purchase 10,000 shares of the Company's Class A Common Stock
to a new Non-Employee Director upon his or her initial election to the Board of
Directors. The options, which will have an exercise price equal to the Class A
Common Stock on the date of grant, will vest pro rata over a five-year period.
Each option will expire on the earlier of (i) the date the Non-Employee Director
ceases to be a director of the Company, if for any reason other than due to
death, disability or retirement or (ii) three years from the date the
Non-Employee Director ceases to be a director of the Company due to death,
disability or retirement.
F-27
<PAGE> 114
Date: 08/06/96 Page: 3
- --------------------------------------------------------------------------------
BACK INSIDE COVER
COPY: The SABRE Group has provided information technology solutions to
more than 250 clients in over 50 countries around the world.
Industries served range from travel and transportation to
hospitality, logistics, and financial services. SABRE offers
solutions ranging from software development and product sales,
to transaction processing and consulting - solutions such as
designing software for scheduling traffic through the English
Channel tunnel and providing information technology solutions to
American Airlines.
<PAGE> 115
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 10
The Company................................... 18
Use of Proceeds............................... 18
Dividend Policy............................... 19
Dilution...................................... 19
Capitalization................................ 20
Selected Historical Consolidated Financial
Information................................. 21
Selected Pro Forma Condensed Consolidated
Financial Information....................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 25
Business...................................... 33
Management.................................... 47
Security Ownership of Management and Principal
Stockholder................................. 60
Relationship with AMR and Certain
Transactions................................ 61
Description of Capital Stock.................. 66
Shares Eligible for Future Sale............... 76
Underwriting.................................. 79
Certain United States Tax Considerations for
Non-United States Holders................... 82
Validity of Class A Common Stock.............. 83
Experts....................................... 83
Additional Information........................ 83
Trademarks.................................... 84
Index to Financial Statements................. F-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
SHARES
THE SABRE GROUP
HOLDINGS, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
(SABRE LOGO)
---------------------
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
================================================================================
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee............................................................. $189,656
NASD filing fee.................................................................. 30,500
NYSE listing fee................................................................. 175,600
Blue Sky fees and expenses....................................................... 26,000
Attorneys' fees and expenses..................................................... 375,000
Accountants' fees and expenses................................................... 250,000
Transfer Agent's and Registrar's fees and expenses............................... 10,000
Printing and engraving expenses.................................................. 270,000
Miscellaneous.................................................................... 23,244
--------
Total.................................................................. 1,350,000
</TABLE>
The amounts set forth above are estimates except for the SEC registration
fee, the NASD filing fee and the NYSE listing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify directors and
officers and certain other individuals against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by any such person in connection with any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right of
the corporation) in which such person is involved because such person is a
director or officer of the corporation, if such person acted in good faith and
in a manner that such person reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. No indemnification shall be made to an officer or director or other
qualified individual if such person shall have been adjudged to be liable to the
corporation unless such person acted in good faith and in a manner that such
person reasonably believed to be in or not opposed to the best interest of the
corporation and only to the extent the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought, determines that
despite the adjudication of liability such person is fairly and reasonably
entitled to such indemnification. If such person is successful on the merits or
otherwise in defense of any action, then Section 145 provides that such person
shall be indemnified against expenses including attorneys' fees actually and
reasonably incurred by that person in connection therewith. Section 102(b)(7) of
the DGCL provides that the liability of a director may not be limited or
eliminated for the breach of such director's duty of loyalty to the corporation
or its stockholders, for such director's intentional acts or omissions not in
good faith, for such director's concurrence in or vote for an unlawful payment
of a dividend or unlawful stock purchase or redemption or for any improper
personal benefit derived by the director from any transaction.
The Company's Bylaws provide that the Company will indemnify any person who
was or is a party (or is threatened to be made a party) to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
or has agreed to serve at the request of the Company as a director or officer of
the Company, or is or was serving or has agreed to serve at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity. The Company's Bylaws further
II-1
<PAGE> 117
provide that the Company may indemnify any person who was or is a party (or is
threatened to be made a party) to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was or has agreed to become an employee
or agent of the Company, or is or was serving or has agreed to serve at the
request of the Company as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity.
The indemnification referred to in the preceding paragraph will be from and
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the indemnitee or on his or
her behalf in connection with such action, suit or proceeding and any appeal
therefrom. However, such indemnification will only be provided if the indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action, suit or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Notwithstanding the preceding two sentences, in the
case of an action or suit by or in the right of the Company to procure a
judgment in its favor (a) the indemnification referred to in this paragraph will
be limited to expenses (including attorneys' fees) actually and reasonably
incurred by such person in the defense or settlement of such action or suit, and
(b) no indemnification will be made in respect of any claim, issue or matter as
to which such person will have been adjudged to be liable to the Company unless,
and only to the extent that, the Delaware Court of Chancery (or the court in
which such action or suit was brought) determines upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery (or such other court) deems proper. To the
extent that a director, officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above or in defense of any claim, issue or matter
therein, he or she will be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
Expenses incurred by a director or officer in defending a civil or criminal
action, suit or proceeding will be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it will
ultimately be determined that he or she is not entitled to be indemnified by the
Company. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
The indemnification described in the preceding two paragraphs will not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, will continue as to a person who has
ceased to be a director, officer, employee or agent and will inure to the
benefit of the heirs, executors and administrators of such a person.
The Company will purchase and maintain insurance on behalf of any person
who is or was or has agreed to serve at the request of the Company as a director
or officer of the Company, or is or was serving at the request of the Company as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against, and incurred by, him
or her or on his or her behalf in any such capacity, or arising out of his or
her status as such, whether or not the Company would have the power to indemnify
him or her against such liability under the provisions of the Bylaws; provided,
however, such insurance must be available on acceptable terms, which
determination shall be made by a vote of a majority of the Board of Directors.
II-2
<PAGE> 118
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its formation on June 25, 1996, and the July 1996
reorganization of The SABRE Group businesses, the Company issued 1,000 shares of
Common Stock and an $850 million Debenture to American in exchange for certain
operating divisions and the capital stock of subsidiaries of American. American
immediately transferred the Debenture to AMR in exchange for a portion of a
debenture of American held by AMR and distributed its shares of the Company's
Common Stock to AMR as a tax-free dividend. Those shares were subsequently
reclassified into 110,563,953 shares of Class B Common Stock. Based on the
relationship between the Company and AMR Corporation and other factors, the
Company believes that these issuances and distributions were exempt from
registration under the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Schedule II, Valuation and Qualifying
Account Page S-1
All other financial statement schedules are omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of U.S. Underwriting Agreement.(1)
1.2 -- Form of International Underwriting Agreement.(1)
3.1 -- Form of Restated Certificate of Incorporation of Registrant.(2)
3.2 -- Form of Restated Bylaws of Registrant.(2)
4.1 -- Form of Registration Rights Agreement between Registrant and AMR
Corporation.(1)
4.2 -- Specimen Certificate representing Class A Common Stock.
5.1 -- Opinion of Debevoise & Plimpton as to the legality of the Class A Common
Stock.(1)
10.1 -- Form of Registration Rights Agreement between Registrant and AMR Corporation
(See Exhibit 4.1).(1)
10.2 -- Intercompany Agreement, dated as of July 2, 1996, among Registrant, The SABRE
Group, Inc. TSGL Holding, Inc., TSGL-SCS, Inc., TSGL, Inc., SABRE
International, Inc., SABRE Services Columbia, LTDA and American Airlines, Inc.
10.3 -- Management Services Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(2)(3)
10.4 -- Credit Agreement, dated as of July 1, 1996, between Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.(2)
10.5 -- $850,000,000 Subordinated Debenture, dated July 2, 1996, executed by Registrant
and payable to AMR Corporation.(2)
10.6 -- Information Technology Services Agreement, dated July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(2)(3)
10.7 -- Non-competition Agreement, dated July 1, 1996, among Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.
10.8 -- Marketing Cooperation Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(3)
10.9 -- Tax Sharing Agreement, dated July 1, 1996, between The SABRE Group, Inc. and
American Airlines, Inc.
10.10 -- Travel Privileges Agreement, dated as of July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc.(2)(3)
10.11 -- Corporate Travel Agreement, dated July 25, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(3)
10.12 -- Software Marketing Agreement, dated September 10, 1996, among Registrant, The
SABRE Group, Inc. and AMR Corporation.(3)
</TABLE>
II-3
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
10.13 -- Canadian Technical Services Subcontract, dated as of July 1, 1996, between The
SABRE Group Inc. and American Airlines, Inc.(3)
10.14 -- Form of Participating Carrier Agreement between The SABRE Group, Inc. and
American Airlines, Inc.
10.15 -- Investment Agreement, dated September 11, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(3)
10.16 -- Assignment and Amendment Agreement, dated as of July 1, 1996, among The SABRE
Group, Inc., American Airlines, Inc. and the Dallas-Fort Worth International
Airport Board.(2)
10.17 -- American Airlines Special Facilities Lease Agreement, dated October 1, 1972,
between American Airlines, Inc. and the Dallas-Fort Worth Regional Airport
Board, as amended by Supplemental Agreements Nos. 1-5.(2)
10.18 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
10.19 -- Sublease, dated June 1, 1958, between American Airlines, Inc. and the Trustees
of the Tulsa Municipal Airport Trust, as amended by Amendments Nos. 1-12.(2)
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between American
Airlines, Inc. and the Tulsa Airports Improvement Trust.(2)
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
10.23 -- Office Lease Agreement, dated January 19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners -- Westlake/Southlake Partnership.(2)
10.24 -- American Airlines, Inc. Supplemental Executive Retirement Plan dated November
16, 1994, incorporated by reference to Exhibit 10(mmm) to AMR Corporation's
report on Form 10-K for the year ended December 31, 1994, file number 1-8400.
10.25 -- Form of Long-Term Incentive Plan.
10.26 -- Form of Directors' Stock Incentive Plan.
10.27 -- Form of Executive Termination Benefits Agreement.
10.28 -- Employment Agreement, dated August 30, 1996, between The SABRE Group, Inc. and
Michael J. Durham.
10.29 -- Employment Agreement, dated September 7, 1995, between American Airlines, Inc.
and Thomas M. Cook.
10.30 -- Employment Agreement, dated May 7, 1996, between American Airlines, Inc. and
Terrell B. Jones.
10.31 -- Letter Agreement, dated July 15, 1996, between Registrant and Thomas M. Cook.
10.32 -- Letter Agreement, dated July 15, 1996, between Registrant and Terrell B. Jones.
21.1 -- Subsidiaries of Registrant.(2)
23.1 -- Consent of Debevoise & Plimpton (included in the opinion set forth in Exhibit
5.1).(1)
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.(2)
27.1 -- Financial Data Schedule.(2)
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Previously filed.
(3) Item for which confidential treatment is requested.
II-4
<PAGE> 120
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the U.S. Underwriting Agreement and the
International Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
II-5
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Amendment No. 1 to the Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Fort Worth, Texas on September 12, 1996.
The SABRE Group Holdings, Inc.
By: /s/ MICHAEL J. DURHAM
-----------------------------------
Name: Michael J. Durham
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE (CAPACITY) DATE
- --------------------------------------------- ---------------------------- -------------------
<C> <S> <C>
* Chairman of the Board of September 12, 1996
- --------------------------------------------- Directors
Robert L. Crandall
/s/ MICHAEL J. DURHAM President and Chief September 12, 1996
- --------------------------------------------- Executive Officer and
Michael J. Durham Director (Principal
Executive Officer and
Director)
* Senior Vice President, Chief September 12, 1996
- --------------------------------------------- Financial Officer and
T. Patrick Kelly Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
* Director September 12, 1996
- ---------------------------------------------
Gerard J. Arpey
* Director September 12, 1996
- ---------------------------------------------
Anne H. McNamara
*By: /s/ MICHAEL J. DURHAM
- ---------------------------------------------
Michael J. Durham
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 122
THE SABRE GROUP HOLDINGS, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------- ------------ -------- -------- ---------- -----------
ADDITIONS
-------------------
CHARGED
TO CHARGED
BALANCE AT COSTS TO
BEGINNING OF AND OTHER BALANCE AT
CLASSIFICATION YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
- ------------------------------------- ------------ -------- -------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Allowance for uncollectible
accounts........................ $3,042 $5,909 $ -- $ (4,129) $ 4,822
Reserve for booking fee
cancellations................... 9,479 4,609 1,228 (502) 14,814
YEAR ENDED DECEMBER 31, 1994
Allowance for uncollectible
accounts........................ 4,819 4,306 -- (6,083) 3,042
Reserve for booking fee
cancellations................... 6,213 3,535 300 (569) 9,479
YEAR ENDED DECEMBER 31, 1993
Allowance for uncollectible
accounts........................ 6,097 2,732 -- (4,010) 4,819
Reserve for booking fee
cancellations................... 5,875 1,044 -- (706) 6,213
</TABLE>
S-1
<PAGE> 123
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of U.S. Underwriting Agreement.(1)
1.2 -- Form of International Underwriting Agreement.(1)
3.1 -- Form of Restated Certificate of Incorporation of Registrant.(2)
3.2 -- Form of Restated Bylaws of Registrant.(2)
4.1 -- Form of Registration Rights Agreement between Registrant and AMR
Corporation.(1)
4.2 -- Specimen Certificate representing Class A Common Stock.
5.1 -- Opinion of Debevoise & Plimpton as to the legality of the Class A Common
Stock.(1)
10.1 -- Form of Registration Rights Agreement between Registrant and AMR Corporation
(See Exhibit 4.1).(1)
10.2 -- Intercompany Agreement, dated as of July 2, 1996, among Registrant, The SABRE
Group, Inc. TSGL Holding, Inc., TSGL-SCS, Inc., TSGL, Inc., SABRE
International, Inc., SABRE Services Columbia, LTDA and American Airlines, Inc.
10.3 -- Management Services Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(2)(3)
10.4 -- Credit Agreement, dated as of July 1, 1996, between Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.(2)
10.5 -- $850,000,000 Subordinated Debenture, dated July 2, 1996, executed by Registrant
and payable to AMR Corporation.(2)
10.6 -- Information Technology Services Agreement, dated July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(2)(3)
10.7 -- Non-competition Agreement, dated July 1, 1996, among Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.
10.8 -- Marketing Cooperation Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(3)
10.9 -- Tax Sharing Agreement, dated July 1, 1996, between The SABRE Group, Inc. and
American Airlines, Inc.
10.10 -- Travel Privileges Agreement, dated as of July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc.(2)(3)
10.11 -- Corporate Travel Agreement, dated July 25, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(3)
10.12 -- Software Marketing Agreement, dated September 10, 1996, among Registrant, The
SABRE Group, Inc. and AMR Corporation.(3)
10.13 -- Canadian Technical Services Subcontract, dated as of July 1, 1996, between The
SABRE Group Inc. and American Airlines, Inc.(3)
10.14 -- Form of Participating Carrier Agreement between The SABRE Group, Inc. and
American Airlines, Inc.
10.15 -- Investment Agreement, dated September 11, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(3)
10.16 -- Assignment and Amendment Agreement, dated as of July 1, 1996, among The SABRE
Group, Inc., American Airlines, Inc. and the Dallas-Fort Worth International
Airport Board.(2)
10.17 -- American Airlines Special Facilities Lease Agreement, dated October 1, 1972,
between American Airlines, Inc. and the Dallas-Fort Worth Regional Airport
Board, as amended by Supplemental Agreements Nos. 1-5.(2)
10.18 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
10.19 -- Sublease, dated June 1, 1958, between American Airlines, Inc. and the Trustees
of the Tulsa Municipal Airport Trust, as amended by Amendments Nos. 1-12.(2)
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between American
Airlines, Inc. and the Tulsa Airports Improvement Trust.(2)
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(2)
10.23 -- Office Lease Agreement, dated January 19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners -- Westlake/Southlake Partnership.(2)
10.24 -- American Airlines, Inc. Supplemental Executive Retirement Plan dated November
16, 1994, incorporated by reference to Exhibit 10(mmm) to AMR Corporation's
report on Form 10-K for the year ended December 31, 1994, file number 1-8400.
10.25 -- Form of Long-Term Incentive Plan.
10.26 -- Form of Directors' Stock Incentive Plan.
10.27 -- Form of Executive Termination Benefits Agreement.
10.28 -- Employment Agreement, dated August 30, 1996, between The SABRE Group, Inc. and
Michael J. Durham.
10.29 -- Employment Agreement, dated September 7, 1995, between American Airlines, Inc.
and Thomas M. Cook.
10.30 -- Employment Agreement, dated May 7, 1996, between American Airlines, Inc. and
Terrell B. Jones.
10.31 -- Letter Agreement, dated July 15, 1996, between Registrant and Thomas M. Cook.
10.32 -- Letter Agreement, dated July 15, 1996, between Registrant and Terrell B. Jones.
21.1 -- Subsidiaries of Registrant.(2)
23.1 -- Consent of Debevoise & Plimpton (included in the opinion set forth in Exhibit
5.1).(1)
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.(2)
27.1 -- Financial Data Schedule.(2)
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Previously filed.
(3) Item for which confidential treatment is requested.
<PAGE> 1
EXHIBIT 4.2
<TABLE>
<S> <C> <C> <C>
[FRONT OF STOCK CERTIFICATE]
CLASS A CLASS A
COMMON STOCK COMMON STOCK
SEE REVERSE SIDE CUSIP 785905 10 0
FOR RIGHTS LEGEND SEE REVERSE FOR CERTAIN DEFINITIONS
NUMBER SHARES
PAR VALUE $.01 PAR VALUE $.01
[STOCK CERTIFICATE SYMBOL]
[SABRE LOGO] [SABRE LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THE SABRE GROUP HOLDINGS, INC.
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK
of The Sabre Group Holdings, Inc. transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation of
the Corporation (copies of which are on file with the Transfer Agent), to all of which the holder by
acceptance hereof assents. This certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
Witness the signatures of the duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
(NEW YORK, N.Y.) TRANSFER AGENT
/s/ Michael J. Durham AND REGISTRAR,
PRESIDENT AND CHIEF EXECUTIVE OFFICER BY
AUTHORIZED SIGNATURE
/s/ Charles D. MarLett
SECRETARY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
THE SABRE GROUP HOLDINGS, INC.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though
they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIFGIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the entireties ------------------- --------------------
JT TEN -- as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gift to Minors
in common Act
-------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, THE DESIGNATIONS, POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTION OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE CORPORATION, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE CORPORATION OR THE
TRANSFER AGENT.
For value received, hereby sell, assign and transfer unto
-------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
-----------------------
Attorney to transfer
- --------------------------------------------------------------------------------------------------------------
the said stock on the books of the within-named Corporation with full power of substitution in the premises.
Dated,
----------------------------
------------------------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond with the name as written
upon the face of the certificate in every particular without alteration or
enlargement or any change whatever. The signature of the person executing this
power must be guaranteed by an Eligible Guarantor Institution such as a Commercial
Bank, Trust Company, Securities Broker/Dealer, Credit Union, or a Savings
Association participating in a Medallion program approved by the Securities
Transfer Association, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.2
================================================================================
INTERCOMPANY AGREEMENT
by and among
AMERICAN AIRLINES, INC.,
TSG CORPORATION,
THE SABRE GROUP, INC.,
TSGL HOLDING, INC.
TSGL-SCS, INC.,
TSGL, INC.,
SABRE INTERNATIONAL, INC.,
and
SABRE SERVICIOS COLOMBIA, LTDA
Dated as of July 2, 1996
================================================================================
Intercompany Agreement
<PAGE> 2
INTERCOMPANY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
Section 1.01. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
ARTICLE II
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------
Section 2.01. Indemnification by American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------------
Section 2.02. Indemnification by TSG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------------
Section 2.03. Limitations on Indemnification Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------------------------------
Section 2.04. Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------------------------
Section 2.05. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------------
Section 2.06. Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------------
ARTICLE III
CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
---------------
Section 3.01. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
---------
Section 3.02. Excluded Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--------------------
Section 3.03. Use of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------------------
Section 3.04. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------
Section 3.05. Permitted Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---------------------
Section 3.06. Required Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--------------------
Section 3.07. Title to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--------------------
Section 3.08. Irreparable Harm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------------
Section 3.09. General Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------
Section 3.10. Other Agreements Providing for Treatment of Confidential Information . . . . . . . . . . . . 19
--------------------------------------------------------------------
ARTICLE IV
DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------
Section 4.01. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------
Section 4.02. Contribution and Transfer Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------------------
ARTICLE V
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------------
Section 5.01. Leased Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------
</TABLE>
i
Intercompany Agreement
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.02. Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------
Section 5.03. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------
Section 5.04. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------------
Section 5.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------
Section 5.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------
Section 5.07. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------
Section 5.08. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------------------------
Section 5.09. Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------------
Section 5.10. Appendices and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------
Section 5.11. Legal Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------------------
Section 5.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------
</TABLE>
SCHEDULES
Schedule 1 - American Premises
Schedule 2 - Contribution and Transfer Agreements
Schedule 3 - Excluded Assets
Schedule 4 - Intercompany Agreements
Schedule 5 - TSG Premises
Appendix A - Dispute Resolution Appendix
ii
Intercompany Agreement
<PAGE> 4
INTERCOMPANY AGREEMENT
INTERCOMPANY AGREEMENT, dated as of July 2, 1996, by and among
AMERICAN AIRLINES, INC., a Delaware corporation, TSG CORPORATION, a Delaware
corporation, THE SABRE GROUP, INC., a Delaware corporation, TSGL HOLDING, INC.,
a Delaware corporation, TSGL-SCS, INC., a Delaware corporation, TSGL, INC., a
Delaware corporation, SABRE INTERNATIONAL, INC., a Delaware corporation, and
SABRE SERVICIOS COLOMBIA, LTDA, a Colombian limited liability company.
WHEREAS, pursuant to the Contribution and Transfer Agreements
(such term and other capitalized terms used herein without definition shall
have the meanings specified in Section 1.01), American has, directly or
indirectly, contributed, conveyed and otherwise transferred the Contributed
Assets to the TSG Entities and the TSG Entities have, directly or by operation
of law, assumed the Assumed Liabilities; and
WHEREAS, prior to and at the Distribution Effective Time, the
Contributed Business was operated on the TSG Premises; and
WHEREAS, subsequent to the Distribution Effective Time and
pursuant to certain Contribution and Transfer Agreements and certain
Intercompany Agreements, the Contributed Business will continue to be operated
on the TSG Premises; and
WHEREAS, the TSG Entities were legally separated from American
at the Distribution Effective Time when American dividended to AMR the capital
stock of TSGH; and
WHEREAS, American and TSG desire to set forth certain
agreements with respect to the Contributed Assets, the Assumed Liabilities and
certain other matters;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
Intercompany Agreement
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.01. General. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"Agreement" shall mean this Intercompany Agreement, dated as
of July 2, 1996.
"American" shall mean American Airlines, Inc., a Delaware
corporation, together with its successors and assigns.
"American Assets" shall mean all assets, properties and rights
owned by American prior to, at or after the Distribution Effective Time. The
American Assets shall not include the Contributed Assets or the Excluded
Assets.
"American Business" shall mean all functions and activities
related to or associated with the American Assets prior to, at or after the
Distribution Effective Time.
"American Entity" shall mean each of American and each
corporation or other entity controlled, directly or indirectly, after the
Distribution Effective Time by American and shall exclude the TSG Entities.
"American Indemnitee" shall have the meaning specified
therefor in Section 2.02.
"American Premises" shall mean those premises listed on
Schedule 1.
"AMR" shall mean AMR Corporation, a Delaware corporation, and
its successors and assigns.
"Assumed Liabilities" shall mean any and all Liabilities
assumed, whether directly or indirectly or by operation of law, or agreed to be
performed by one or more
2
Intercompany Agreement
<PAGE> 6
of the TSG Entities, pursuant to or as a result of any Contribution and
Transfer Agreement.
"Confidential Information" shall mean information subject to a
duty of confidence and a restriction on use on any American Entity or any TSG
Entity under Article III of this Agreement.
"Contributed Assets" shall mean any and all assets, properties
and rights contributed, granted, conveyed or otherwise transferred to any TSG
Entity pursuant to the Contribution and Transfer Agreements.
"Contributed Business" shall mean all functions and activities
of the reservation system, data processing, information technology, and
solutions businesses related to or associated with the Contributed Assets prior
to, at or after the Distribution Effective Time.
"Contribution and Transfer Agreements" shall mean the
agreements listed on Schedule 2.
"Dispute" shall mean any dispute, disagreement, claim, or
controversy arising in connection with or relating to this Agreement or any
Contribution and Transfer Agreement, including any claim for indemnification
and any claim regarding bodily or other personal injury or damage to tangible
property.
"Dispute Resolution Appendix" shall mean Appendix A to this
Agreement, containing the Dispute Resolution Procedure for, and as an integral
part of, the Agreement.
"Dispute Resolution Procedure" shall mean the procedure or
process by which a Dispute must be resolved (except as otherwise stated in the
Agreement) as described in the Dispute Resolution Appendix.
"Distribution Effective Time" shall mean 10:11 a.m. (Central
Daylight Time) on July 2, 1996.
"Entity" shall mean either an American Entity or a TSG Entity.
"Environmental Liabilities" shall mean all Liabilities,
unidentified as of the Distribution Effective Time, relating to, arising out of
or resulting from any law or contract or agreement relating to environmental,
health or safety matters (including without limitation all removal,
3
Intercompany Agreement
<PAGE> 7
remediation or cleanup costs, investigatory costs, governmental response costs,
natural resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability
and indemnity, contribution or similar obligations) and all costs and expenses,
interest, fines, penalties or other monetary sanctions in connection therewith.
Environmental Liabilities shall not include Tulsa Environmental Liabilities.
"Excluded Assets" shall mean those assets listed on Schedule
3.
"Foreign Exchange Rate" shall mean, with respect to any
currency other than United States dollars as of any date of determination, the
average of the opening bid and asked rates on such date at which such currency
may be exchanged for United States dollars as quoted by Chase Manhattan Bank of
New York.
"Indemnifiable Losses" shall mean any and all losses,
Liabilities, claims, damages, payments, costs and expenses, matured or
unmatured, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, known or unknown (including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions), whether or not
resulting from Third Party Claims.
"Indemnifying Party" shall have the meaning specified therefor
in Section 2.03.
"Indemnitee" shall have the meaning specified therefor in
Section 2.03.
"Indemnity Payment" shall have the meaning specified therefor
in Section 2.03.
"Insurance Proceeds" shall mean those monies (a) received by
an insured party from an insurance carrier in respect of a claim or (b) paid by
an insurance carrier on behalf of the insured party in respect of a claim, in
either case net of (i) any applicable amounts that such insured party shall be
obligated to contribute (by means of application of a deductible, payment under
a reimbursement
4
Intercompany Agreement
<PAGE> 8
obligation or otherwise) in respect of such claim, provided that, for purposes
of determining any such amounts to be contributed, the benefits of application
of any maximum premium limits, stop-loss aggregates or other provisions that
would have the effect of aggregating deductibles or self-insured retentions
shall be allocated appropriately to reduce the uninsured retentions of such
insured party, and (ii) any related costs paid by such insured party.
"Intercompany Agreements" shall mean any written agreements
between any American Entity and any TSG Entity including those set forth on
Schedule 4. Intercompany Agreements shall not include this Agreement or the
Contribution and Transfer Agreements.
"Liabilities" shall mean any and all debts, liabilities,
responsibilities and obligations, including, without limitation, those arising
under any law, rule, regulation, Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Parties" shall mean American (on its behalf and on behalf of
the American Entities) and its successors and assigns as permitted by the
Agreement, and TSG (on its behalf and on behalf of the TSG Entities including
without limitation TSGH, TSGL Holding, TSGL-SCS, TSGL, SI, and SABRE Colombia)
and its successors and assigns as permitted by the Agreement.
"Person" shall mean an individual; a corporation, partnership,
trust, association, or entity of any kind or nature; or a governmental
authority.
"Premises" shall mean the American Premises and the TSG
Premises, collectively.
"Retained Liability" shall mean (i) any Liability expressly
excluded from the Assumed Liabilities, and (ii) any Liability expressly
retained by any American Entity under any Contribution and Transfer Agreement,
including without limitation the Tulsa Environmental Liabilities. Retained
Liability shall not mean any Liability arising out of, resulting from, or
relating to any Excluded Asset.
"SABRE Colombia" shall mean SABRE Servicios Colombia LTDA, a
Colombian limited liability company, together with its successors and assigns.
5
Intercompany Agreement
<PAGE> 9
"SI" shall mean SABRE International, Inc., a Delaware
corporation, together with its successors and assigns.
"Tax Sharing Agreement" shall mean that Tax Sharing Agreement,
dated as of July 2, 1996, by and between AMR and TSGH.
"Taxes" shall mean (i) all forms of taxation, whenever created
or imposed, and whether of the United States or elsewhere, and whether imposed
by local, municipal, governmental, state, federal or other body, and without
limiting the generality of the foregoing, shall include income, sales, use ad
valorem, gross receipts, value added, franchise, transfer, recording,
withholding, payroll, employment, excise, occupation, premium or property
taxes, and (ii) any amounts paid by TSGH under a pro forma return prepared
pursuant to the Tax Sharing Agreement.
"Third Party Claim" shall mean any Action commenced or
threatened to be commenced, and any other claim or demand asserted, against an
American Indemnitee or a TSG Indemnitee by a Person other than an American
Entity or TSG Entity, except that Third Party Claims shall not include claims
related to employee or retiree flight privileges on airlines other than
American or American Eagle.
"TSG" shall mean The SABRE Group, Inc., a Delaware
corporation, together with its successors and assigns.
"TSG Entity" shall mean each of TSGH and each corporation or
other entity controlled, directly or indirectly, after the Distribution
Effective Time, by TSGH, including, without limitation, TSG.
"TSG Indemnitee" shall have the meaning specified in Section
2.01.
"TSG Premises" shall mean those premises listed on Schedule 5.
"TSGH" shall mean TSG Corporation, a Delaware corporation, and
its successors and assigns.
"TSGL" shall mean TSGL, Inc., a Delaware corporation, together
with its successors and assigns.
6
Intercompany Agreement
<PAGE> 10
"TSGL Holding" shall mean TSGL Holding, Inc., a Delaware
corporation, together with its successors and assigns.
"TSGL-SCS" shall mean TSGL-SCS, Inc., a Delaware corporation,
together with its successors and assigns.
"Tulsa Environmental Liabilities" shall mean, with regard to
contaminated soil and ground water at the Secured Computer Center, the Tulsa
Office Complex, and/or the Tulsa Computer Center, Liabilities arising from or
relating to (i) any governmentally mandated clean-up or remediation, (ii) any
personal injury action arising from or relating to the contamination of such
soil and ground water, (iii) any property damage arising from or relating to
the contamination of such soil and ground water, (iv) any fines or other
penalties assessed by any governmental entity relating to the contamination of
such soil and ground water, and (v) any other costs associated with the
contamination of such soil and ground water.
ARTICLE II
INDEMNIFICATION
Section 2.01. Indemnification by American. American shall
indemnify, defend and hold harmless each TSG Entity and its respective
directors, officers, employees and agents and each of the heirs, executors,
successors and assigns of any of the foregoing (the "TSG Indemnitees") from and
against:
(a) Indemnifiable Losses resulting from a failure by any
American Entity to pay, perform or otherwise discharge any Retained Liability;
(b) Indemnifiable Losses resulting from any breach,
default or failure to pay, perform or otherwise discharge any Liability on the
part of any American Entity under this Agreement or any Contribution and
Transfer Agreement;
(c) Indemnifiable Losses arising from any Third Party
Claim against a TSG Indemnitee that asserts, explicitly or implicitly, a
Liability on the part of such TSG Indemnitee relating to any American Asset or
American Business as a result of the ownership or possession by American prior
to the Distribution Effective Time of the
7
Intercompany Agreement
<PAGE> 11
Contributed Assets or the operation by American prior to the Distribution
Effective Time of all or any part of the Contributed Business;
(d) Indemnifiable Losses arising from Environmental
Liabilities at any of the Premises, only to the extent that such Environmental
Liabilities are attributable to the American Business;
(e) Indemnifiable Losses arising from or in connection
with a breach, default or failure to pay, perform or otherwise discharge any
Liability on the part of any American Entity under any lease or sublease for
any American Premises;
(f) Indemnifiable Losses arising from any Third Party
Claim against any TSG Indemnitee made by (i) any individual employed in the
American Business at the time the Third Party Claim was made or (ii) any former
employee in, or retiree from, the American Business who was employed in the
American Business at the time the Third Party Claim arose, unless in either
case the Third Party Claim arose primarily from the conduct of any TSG Entity
or any individual employed in any Contributed Business at the time that the
Third Party Claim arose;
(g) Indemnifiable Losses arising from any Third Party
Claim against any TSG Indemnitee made by any current or former employee in, or
retiree from, the Contributed Business who was employed in the Contributed
Business at the time the Third Party Claim arose if the Third Party Claim arose
primarily from conduct by any American Entity or by any individual employed in
any American Business at the time that the Third Party Claim arose; and
(h) Indemnifiable Losses (excluding those arising from
Tulsa Environmental Liabilities or Environmental Liabilities, which are
addressed in subsection (a) and (b), respectively, of this Section 2.01)
arising from any Third Party Claim against a TSG Indemnitee relating to a
personal injury or property damage in or about the Premises, only to the extent
that such Indemnifiable Losses are attributable to the American Business.
Section 2.02. Indemnification by TSG. TSG shall indemnify,
defend and hold harmless each American Entity and its respective directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any
8
Intercompany Agreement
<PAGE> 12
of the foregoing (the "American Indemnitees") from and against:
(a) Indemnifiable Losses resulting from a failure by any
TSG Entity to pay, perform or otherwise discharge any Assumed Liability;
(b) Indemnifiable Losses resulting from any breach,
default or failure to pay, perform or otherwise discharge any Liability on the
part of any TSG Entity under this Agreement or any Contribution and Transfer
Agreement;
(c) Indemnifiable Losses arising from any Third Party
Claim against an American Indemnitee that asserts, explicitly or implicitly, a
Liability on the part of such American Indemnitee relating to any Contributed
Asset or Contributed Business as a result of the ownership or possession by
American prior to the Distribution Effective Time of the Contributed Assets or
the operation by American prior to the Distribution Effective Time of all or
any part of the Contributed Business;
(d) Indemnifiable Losses arising from Environmental
Liabilities at any of the Premises, only to the extent that such Environmental
Liabilities are attributable to the Contributed Business;
(e) Indemnifiable Losses arising from or in connection
with a breach, default or failure to pay, perform or otherwise discharge any
Liability on the part of any TSG Entity under any lease or sublease for any TSG
Premises;
(f) Indemnifiable Losses arising from any Third Party
Claim against any American Indemnitee made by (i) any individual employed in
the Contributed Business at the time the Third Party Claim was made or (ii) any
former employee in, or retiree from, the Contributed Business who was employed
in the Contributed Business at the time the Third Party Claim arose, unless in
either case the Third Party Claim arose primarily from conduct by any American
Entity or by any individual employed in any American Business at the time that
the Third Party Claim arose;
(g) Indemnifiable Losses arising from any Third Party
Claim against any American Indemnitee made by any current or former employee
in, or retiree from, the American Business who was employed in the American
Business at the time the Third Party Claim arose if the Third Party Claim arose
primarily from conduct by any TSG Entity or by any
9
Intercompany Agreement
<PAGE> 13
individual employed in any Contributed Business at the time that the Third
Party Claim arose; and
(h) Indemnifiable Losses (excluding those arising from
Environmental Liabilities, which are addressed in subsection (d) of this
Section 2.02) arising from any Third Party Claim against an American Indemnitee
relating to a personal injury or property damage in or about the Premises, only
to the extent that such Indemnifiable Losses are attributable to the
Contributed Business.
Section 2.03. Limitations on Indemnification Obligations.
(a) Insurance Proceeds. The amount which either American or TSG (an
"Indemnifying Party") is required to pay to any other Person (an "Indemnitee")
pursuant to this Article II shall be reduced (including, without limitation,
retroactively) by any Insurance Proceeds or other amounts actually recovered by
or on behalf of such Indemnitee with respect to the related Indemnifiable Loss.
All amounts required to be paid, as so reduced, are hereafter sometimes called
"Indemnity Payments". If any Indemnitee shall have received an Indemnity
Payment in respect of an Indemnifiable Loss and shall subsequently actually
receive Insurance Proceeds or other amounts in respect of such Indemnifiable
Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to
the lesser of the amount of such Insurance Proceeds or other amounts actually
received or the amount of such Indemnity Payment.
(b) After-Tax Nature of Indemnity Payments. Any
Indemnity Payment required to be made under this Agreement shall include any
amount necessary to hold the Indemnitee harmless on an after-tax basis from all
Taxes required to be paid with respect to the receipt of such Indemnity Payment
(after taking into account any reduction in Taxes realized by the Indemnitee as
a result of the Indemnifiable Loss giving rise to the Indemnity Payment). In
determining the amount necessary to be added to any Indemnity Payment in order
to accomplish the foregoing, American and TSG hereto agree (i) to treat all
Taxes required to be paid by, and all reductions in Tax realized by, any
Indemnitee as if such Indemnitee were subject to tax at the highest marginal
tax rates applicable to such Indemnitee and (ii) to treat any Indemnity
Payments made under this Agreement as an adjustment to the assets transferred
(directly or indirectly) pursuant to the Contribution and Transfer Agreements,
unless the Indemnitee receives a written opinion, reasonably satisfactory in
form and substance to
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the Indemnifying Party, of a law firm of national recognized standing to the
effect that it is not permissible or is not likely to be permissible to treat
such Indemnity Payment in that manner on a federal, state or local income tax
return.
(c) Foreign Currency Adjustments. In the event that an
Indemnity Payment under this Article II shall be denominated in a currency
other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
(i) with respect to an Indemnifiable Loss for which
indemnification is sought under this Article II arising from payment
by a financial institution under a guaranty, comfort letter, letter of
credit, foreign exchange contract or similar instrument, the Foreign
Exchange Rate for such currency shall be determined as of the date on
which such financial institution shall have been reimbursed;
(ii) with respect to an Indemnifiable Loss for which
indemnification is sought under this Article II that is covered by
insurance, the Foreign Exchange Rate for such currency shall not be
calculated as set forth in Article I hereto, but shall be the foreign
exchange rate employed by the insurance company providing such
insurance in settling such Indemnifiable Loss with the Indemnitee; and
(iii) with respect to an Indemnifiable Loss for which
indemnification is sought under this Article II not covered by clause
(i) or (ii) above, the Foreign Exchange Rate for such currency shall
be determined as of the date that notice of the claim with respect to
such Indemnifiable Loss is given by the Indemnitee.
Section 2.04. Procedure for Indemnification. The procedure
for all indemnification sought under this Article II shall be as set forth in
this Section 2.04.
(a) If any Indemnitee shall receive notice of a Third Party
Claim with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Article II, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third Party Claim; provided that the failure of any Indemnitee to give notice
promptly as provided in this Section 2.04 shall not relieve the
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Indemnifying Party of its obligations under this Article II, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice and except that no indemnification may be claimed by an Indemnitee
hereunder unless notice is given not later than two years after such Indemnitee
became aware of any Third Party Claim. Such notice shall describe the Third
Party Claim in reasonable detail and shall indicate the amount (estimated if
necessary and to the extent practicable) of the Indemnifiable Loss that has
been or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek
to settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days of the
receipt of notice from an Indemnitee in accordance with Section 2.04(a) (or
sooner, if the nature of such a Third Party Claim so requires), the
Indemnifying Party shall notify such Indemnitee if the Indemnifying Party
elects to not defend and to not seek to settle or compromise such Third Party
Claim. An election by an Indemnifying Party to not defend or to not seek to
settle or compromise a Third Party Claim may be made only in the event of a
good faith assertion by the Indemnifying Party that a claim was inappropriately
tendered under Section 2.01 or 2.02, as the case may be. If an Indemnifying
Party fails to elect to not defend and to not seek to settle or compromise a
Third Party Claim, such Indemnifying Party shall assume the defense of such
Third Party Claim and shall not be liable to such Indemnitee under this Article
II for any legal fees and expenses subsequently incurred by such Indemnitee in
connection with the defense of such claim; provided that such Indemnitee shall
have the right to employ separate counsel to represent such Indemnitee if, in
such Indemnitee's reasonable judgment, a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim, and in
that event the fees and expenses of such separate counsel shall be paid by such
Indemnifying Party. If an Indemnifying Party elects to not defend or to not
seek to settle or compromise, such Indemnitee may defend or seek to settle or
compromise such Third Party Claim, and in that event the legal fees and
expenses incurred by the Indemnitee shall be paid by such Indemnifying Party.
Notwithstanding the foregoing, neither an Indemnifying Party nor any Indemnitee
may settle or compromise any Third Party Claim over the objection of the other,
provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. The party seeking to settle or compromise any Third
Party Claim shall
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provide notice in writing to the other party of such proposal to settle or
compromise, which notice shall specify that the other party has 30 days from
receipt of such notice (or sooner, if the nature of such proposal to settle or
compromise so requires) to notify the other party of its objection, the failure
to object by the party receiving the notice within such time period
constituting a waiver of such right to object. No Indemnifying Party shall
consent to entry of any judgment or enter into any compromise or settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnitee of a release from all liability in
respect of such claim or litigation.
(c) If any Indemnifying Party chooses to defend or to
seek to settle or compromise any Third Party Claim, the Indemnitee shall make
available to such Indemnifying Party any personnel or any books, records, or
other documents within its control or which it otherwise has the ability to
make available that are necessary or appropriate for such defense, settlement
or compromise and shall otherwise cooperate in the defense, settlement or
compromise of such Third Party Claim.
(d) Notwithstanding anything to the contrary in this
Section 2.04, if any offer to settle or compromise is received by an
Indemnifying Party with respect to a Third Party Claim and such Indemnifying
Party notifies the related Indemnitee in writing of such Indemnifying Party's
willingness to settle or compromise such Third Party Claim on the basis set
forth in such notice and such Indemnitee declines to accept such settlement or
compromise, such Indemnitee may continue to contest such Third Party Claim free
of any participation by such Indemnifying Party, at such Indemnitee's sole
expense. In such event, the obligation of such Indemnifying Party to such
Indemnitee with respect to such Third Party Claim shall be equal to the lesser
of (i) the amount of the offer of settlement or compromise which such
Indemnitee declined to accept plus the legal fees and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee
of the offer to settle or compromise and (ii) the actual out-of-pocket amount
such Indemnitee is obligated to pay as a result of such Indemnitee's continuing
to contest such Third Party Claim. An Indemnifying Party shall be entitled to
recover (by set-off or otherwise) from any Indemnitee any additional legal fees
and expenses incurred by such Indemnifying Party as a result of such
Indemnitee's decision to continue to contest such Third Party Claim.
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(e) Any claim on account of any Indemnifiable Loss for
which indemnification is sought under this Article II which does not result
from a Third Party Claim shall be asserted by written notice by the Indemnitee
to the Indemnifying Party. Such Indemnifying Party shall have a period of 30
days after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period or rejects such a
claim in whole or in part, such Indemnitee shall be free to pursue such
remedies through the Dispute Resolution Procedure.
(f) If the amount of any Indemnifiable Loss for which
indemnification is sought under this Article II shall, at any time subsequent
to payment pursuant to this Article II, be reduced by recovery, settlement or
otherwise (excluding insurance maintained separately by the Indemnitee, the
treatment of which shall be governed by Section 2.03(a)), the amount of such
reduction, less any legal fees and expenses incurred in connection therewith,
shall promptly be repaid by the Indemnitee to the relevant Indemnifying Party.
(g) Upon the written demand of an Indemnitee, an
Indemnifying Party shall reimburse or advance funds to such Indemnitee for all
Indemnifiable Losses reasonably incurred by it in connection with investigating
or defending any Third Party Claim in advance of its final disposition in
accordance with this Article II; provided that, except in connection with a
Third Party Claim described in clause (c) of Section 2.01 or 2.02, as the case
may be, such reimbursement need be made only upon delivery to the Indemnifying
Party of an undertaking by such Indemnitee to repay all amounts so reimbursed
or advanced if it shall ultimately be determined that such Indemnitee is not
entitled to indemnification under this Article II.
(h) In the event of payment by an Indemnifying Party to
or for the benefit of any Indemnitee in connection with an Indemnifiable Loss
resulting from any Third Party Claim, such Indemnifying Party shall, to the
extent of any such Indemnifiable Loss, be subrogated to and shall stand in the
place of such Indemnitee as to any events or circumstances in respect of which
such Indemnitee may have any right or claim relating to any Third Party Claim
against any claimant or plaintiff asserting such Third Party Claim. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such
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Indemnifying Party, in prosecuting any subrogated right or claim.
(i) As a condition precedent to the assertion by any
Indemnitee that is not a party to this Agreement of any claim for
indemnification from an Indemnifying Party under this Article II, such
Indemnitee shall furnish the Indemnifying Party with a written undertaking to
be bound by all of the terms and provisions applicable to an Indemnitee under
this Article II.
Section 2.05. Remedies Cumulative. The remedies provided in
this Article II shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party; provided, however, that all remedies sought or
asserted under this Agreement by an Indemnitee against an Indemnifying Party
with respect to any Indemnifiable Loss for which indemnification is sought
under this Article II shall be (i) limited by and subject to the provisions of
this Article II, and (ii) precluded where such remedy relates to a claim (x)
which also arises under any Intercompany Agreement, or (y) for which
indemnification may be sought under any Intercompany Agreement.
Section 2.06. Survival of Indemnities. The obligations of
American and TSG and their respective Indemnitees under this Article II shall
survive (a) the sale or other transfer by either American or TSG of any assets
or businesses or the assumption by any third party of any Liabilities with
respect to any Indemnifiable Loss related to such assets, businesses or
Liabilities, and (b) any termination of this Agreement.
ARTICLE III
CONFIDENTIALITY
Section 3.01. Generally. (a) Each of American and TSG on
behalf of itself and each of its respective Entities, agrees to hold, and to
cause its respective directors, officers, employees, agents, accountants,
counsel and other advisors and representatives to hold, in strict confidence,
all Confidential Information concerning the other (or its Entities) that is (i)
in its possession immediately after the Distribution Effective Time or (ii) is
furnished by each other, as the case may be, or its respective directors,
officers, employees, agents, accountants, counsel and other advisors or
representatives
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at any time pursuant to this Agreement, any Contribution and Transfer
Agreement, or any ongoing commercial relationship between the Parties
commencing prior to the Distribution Effective Time that is not subject to an
Intercompany Agreement. Each of American and TSG on behalf of itself and each
of its respective Entities agrees that it shall not use any such Confidential
Information other than for such purposes as shall be expressly permitted under
this Agreement, any Contribution and Transfer Agreement, or any ongoing
commercial relationship between the Parties commencing prior to the
Distribution Effective Time that is not subject to an Intercompany Agreement.
(b) In addition, the following information is Confidential
Information, whether acquired either by any American Entity or any TSG Entity
under or in connection with this Agreement, any Contribution and Transfer
Agreement, or any ongoing commercial relationship between the Parties
commencing prior to the Distribution Effective Time not subject to an
Intercompany Agreement:
(i) Information relating to the other Party's
business, customers, financial condition,
performance, or operations that the other
Party treats as confidential or proprietary.
(ii) The terms and conditions of this Agreement,
any Contribution and Transfer Agreement, or
any ongoing commercial relationship between
the Parties commencing prior to the
Distribution Effective Time not subject to an
Intercompany Agreement.
(iii) Information concerning any breach under, or
any Dispute regarding, this Agreement any
Contribution and Transfer Agreement, or any
ongoing commercial relationship between the
Parties commencing prior to the Distribution
Effective Time not subject to an Intercompany
Agreement.
(iv) Information that is the Confidential
Information of a third party and disclosed to
a Party subject to an obligation of
confidentiality.
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(v) Any other information, whether in a tangible
medium or oral and whether proprietary to the
other Party or not, that is marked or clearly
identified by the other Party as confidential
or proprietary.
(vi) The other Party's trade secrets.
(vii) The conduct, decisions, documents, and
negotiations as part of, and the status of,
any proceedings under the Dispute Resolution
Procedure.
Section 3.02. Excluded Information. The following information
is not considered Confidential Information under this Agreement to the extent
that the information:
(a) Is or becomes publicly available or available in
either American's industry or TSG's industry, other than as a result of any
breach of this Agreement or of any other duty of that Party;
(b) Is or becomes available to that Party from a source
that, to that Party's knowledge, is lawfully in possession of that information
and is not subject to a duty of confidentiality, whether to the other Party or
another Person, violated by that disclosure; or
(c) Is independently developed without reference to the
Confidential Information.
Section 3.03. Use of Confidential Information. Except as
expressly permitted by this Agreement, all Confidential Information shall be
held and protected by the recipient in strict confidence, shall be used by the
recipient only in the manner as it was used immediately after the Distribution
Effective Time and only as required to render performance or to exercise rights
and remedies under this Agreement, any Contribution and Transfer Agreement, or
any ongoing commercial relationship between the Parties commencing prior to the
Distribution Effective Time not subject to an Intercompany Agreement, and shall
not be disclosed to any other Person.
Section 3.04. Standard of Care. Each Party shall use at least
the same degree of care in maintaining the confidentiality of the Confidential
Information as that
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Party uses with respect to its own proprietary or Confidential Information, and
in no event less than reasonable care.
Section 3.05. Permitted Disclosures. A Party may disclose
Confidential Information to its officers, directors, employees, legal
representatives, accountants, or tax advisors, on a need-to-know basis, in
order to give effect to this Agreement. Each Party must inform each such
Person to whom any Confidential Information is so communicated of the duty of
confidentiality regarding that information under this Agreement and impose on
that Person the obligation to comply with this Article 3 regarding the
Confidential Information.
Section 3.06. Required Disclosures. Each Party may disclose
Confidential Information in response to a request for disclosure by a court or
another governmental authority, including a subpoena, court order, or
audit-related request by taxing authority; if that Party:
(a) Promptly notifies the other Party of the terms and
the circumstances of that request;
(b) Consults with the other Party, and cooperates with
the other Party's reasonable requests to resist or narrow that request;
(c) Furnishes only information that, according to written
advice (which need not be a legal opinion) of its legal counsel, that the Party
is legally compelled to disclose; and
(d) Uses reasonable efforts at the other Party's expense
to obtain an order or other reliable assurance that confidential treatment will
be accorded the information disclosed.
A Party need not comply with these conditions to disclosure,
however, to the extent that the request or order of the governmental authority
in effect prohibits that compliance. A Party may also disclose Confidential
Information without complying with these conditions to the extent that the
Party is otherwise legally obligated to do so (including for the purposes of
complying with applicable securities laws), as confirmed by advice of competent
and knowledgeable legal counsel. Further, a Party may disclose Confidential
Information, without complying with these conditions, (i) in connection with a
tax audit to representatives of a taxing authority or (ii) in connection
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<PAGE> 22
with a tax contest in which that Party uses reasonable efforts to assure that
confidential treatment will be accorded the information disclosed.
Section 3.07. Title to Information. The Confidential
Information disclosed by one Party to the other Party remains the property of
the disclosing Party, and nothing in this Article 3 grants or confers any
ownership rights in any of that information to the other Party.
Section 3.08. Irreparable Harm. The Parties acknowledge that
any disclosure or misappropriation of Confidential Information in violation of
this Agreement could cause irreparable harm, the amount of which may be
extremely difficult to estimate, thus making any remedy at law or in damages
inadequate. Each Party therefore agrees that the other Party shall have the
right, afforded in Section B.4(B) of Appendix A: Dispute Resolution Appendix,
to apply to any court of competent jurisdiction for a temporary or provisional
order restraining any breach or impending breach of this Article 3. This right
shall be in addition to any other remedy available under this Agreement.
Section 3.09. General Knowledge. Each Party understands that
the other Party may enhance its generalized knowledge and experience while this
Agreement is in effect and that the other Party may already possess or
hereafter obtain concepts, data, discoveries, ideas, information, inventions,
know-how, knowledge, methodologies, processes, products, skills, techniques or
other work product, whether or not patentable, that are generally similar to
Confidential Information it may receive under this Agreement. This Agreement
shall not be interpreted as limiting such other Party's rights to develop,
disclose, display, market, obtain, own publish, provide, release, sell,
transfer, or use, in any manner whatsoever, any such generalized knowledged and
experience or any such concepts; provided, however, that such other Party shall
in all events comply with the preceding Sections of this Article 3.
Section 3.10. Other Agreements Providing for Treatment of
Confidential Information. The rights and obligations under this Article III
are subject to any specific limitations, qualifications or additional
provisions on the confidential treatment or disclosure of information as set
forth in any Intercompany Agreement.
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Intercompany Agreement
<PAGE> 23
ARTICLE IV
DISPUTE RESOLUTION
Section 4.01. Generally. All Disputes under this Agreement
shall be resolved by the Parties under the Dispute Resolution Procedure set
forth in Appendix A attached hereto.
Section 4.02. Contribution and Transfer Agreements. (a)
Generally. American, TSGH, TSG, TSGL Holding, TSGL-SCS, TSGL, SI, and SABRE
Colombia agree that any Dispute under the Contribution and Transfer Agreements,
including as to whether a particular asset has been transferred, shall be
resolved by the Dispute Resolution Procedure and waive any dispute resolution
process provided for under the Contribution and Transfer Agreements.
(b) TSG as Representative. American, TSGH, TSG, TSGL Holding,
TSGL-SCS, TSGL, SI, and SABRE Colombia further agree that, with regard to all
matters arising under this Agreement, TSG shall act on the behalf of TSGH, TSGL
Holding, TSGL-SCS, TSGL, SI, and SABRE Colombia.
(c) Asset Disputes. American, TSGH, TSG, TSGL Holding,
TSGL-SCS, TSGL, SI, and SABRE Colombia agree that American may only dispute
whether an asset appearing on the books of any TSG Entity is a Contributed
Asset if (i) the asset did not appear on a schedule to any of the Contribution
and Transfer Agreements,(ii) the asset was owned by American at the
Distribution Effective Time, and (iii) American gives notice of such claim no
later than the earlier of (x) two years from the Distribution Effective Time
and (y) such time that AMR no longer owns 50% or more of TSG.
ARTICLE V
MISCELLANEOUS
Section 5.01. Leased Premises. (a) American Leased Premises.
AMERICAN SHALL TAKE, OR SHALL CAUSE ANY AMERICAN ENTITY TO TAKE, EACH OF THE
AMERICAN PREMISES IN ITS "AS IS" CONDITION AND WAIVES, AND SHALL CAUSE ALL
AMERICAN ENTITIES TO WAIVE, ANY AND ALL RIGHTS THAT THEY MAY HAVE AGAINST ANY
TSG ENTITY REGARDING ANY WARRANTIES, EXPRESS OR IMPLIED.
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Intercompany Agreement
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(b) TSG Leased Premises. TSG SHALL TAKE, OR SHALL CAUSE ANY
TSG ENTITY TO TAKE, EACH OF THE TSG PREMISES IN ITS "AS IS" CONDITION AND
WAIVES, AND SHALL CAUSE ALL TSG ENTITIES TO WAIVE, ANY AND ALL RIGHTS THAT THEY
MAY HAVE AGAINST ANY AMERICAN ENTITY REGARDING ANY WARRANTIES, EXPRESS OR
IMPLIED.
Section 5.02. Complete Agreement. This Agreement, including
the Schedules and Annexes and other agreements and documents referred to
herein, shall constitute the entire agreement among the parties with respect to
the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter, except as
provided in Section 2.05 and Section 3.10 of this Agreement.
Section 5.03. Expenses. All expenses and other costs incurred
by either Party in connection with the preparation, negotiation, execution and
delivery of this Agreement shall be borne by such Party.
Section 5.04. Further Actions. In case at any time after the
Distribution Effective Time any further action is necessary or reasonably
desirable to carry out the purposes of this Agreement, each Party shall take,
and shall cooperate with the other Party to take, all such necessary or
desirable action.
Section 5.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 5.06. Notices. All notices, requests and other
communications to any Party hereunder shall be given to such Party (i) in
writing, (ii) delivered by hand, by telecopy (with a conforming copy of such
notice to be sent via a nationally recognized express delivery service, charges
prepaid), by a nationally recognized express delivery service, charges prepaid,
or by first-class mail, postage prepaid, and (iii) to its address or telecopy
number set forth below:
if to American or any American Entity:
American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5675
Fort Worth, Texas 76155
Facsimile: (817) 967-2937
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Attention: Corporate Secretary
if to TSG or any TSG Entity:
The SABRE Group, Inc.
4255 Amon Carter Boulevard
Fort Worth, Texas 76155
Facsimile:
Attention: Corporate Secretary
Section 5.07. Amendments. This Agreement may not be modified
or amended except by an agreement in writing signed by American and TSG.
American, TSG, TSGH, TSGL Holding, TSGL-SCS, TSGL, SI, and SABRE Colombia agree
that any written agreement modifying or amending this Agreement signed by
American and TSG only shall be binding as to each of TSGH, TSGL Holding,
TSGL-SCS, TSGL, SI, and SABRE Colombia.
Section 5.08. No Third Party Beneficiaries. This Agreement is
solely for the benefit of the parties and the Indemnitees and should not be
deemed to confer any benefit upon any other person or entity.
Section 5.09. Titles and Headings. The Table of Contents and
titles and headings to Articles and Sections herein are inserted for the
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 5.10. Appendices and Schedules. The Appendices and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth herein.
Section 5.11. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable in any other jurisdiction such provision or remedies
otherwise available to any party hereto. To the extent permitted by applicable
law, each party hereby waives any provision of law that renders any provision
hereof prohibited or unenforceable in any respect. The party shall endeavor in
good faith negotiations to replace any prohibited or unenforceable provisions
with valid provisions, the economic
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Intercompany Agreement
<PAGE> 26
effect of which comes as close as possible to that of the prohibited or
unenforceable provisions.
Section 5.12. Counterparts. This Agreement may be executed by
the parties in separate counterparts, each of which when so executed and
delivered shall be an original, but such counterparts shall together constitute
but one and the same instrument.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK]
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Intercompany Agreement
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IN WITNESS WHEREOF, the parties have caused this Intercompany
Agreement to be executed as of the day and year first above written.
SIGNATURES
<TABLE>
<S> <C>
AMERICAN AIRLINES, INC. TSG CORPORATION
/s/ DONALD J. CARTY /s/ MICHAEL J. DURHAM
----------------------------------------- -----------------------------------
By: Donald J. Carty By: Michael J. Durham
Title: President Title: President & Chief
Executive Officer
THE SABRE GROUP, INC. TSGL HOLDING, INC.
/s/ MICHAEL J. DURHAM /s/ MICHAEL J. DURHAM
----------------------------------------- -----------------------------------
By: Michael J. Durham By: Michael J. Durham
Title: President Title: President
TSGL-SCS, Inc. TSGL, INC.
/s/ MICHAEL J. DURHAM /s/ MICHAEL J. DURHAM
----------------------------------------- -----------------------------------
By: Michael J. Durham By: Michael J. Durham
Title: President Title: President
SABRE INTERNATIONAL, INC. SABRE SERVICIOS COLOMBIA, LTDA
/s/ MICHAEL J. DURHAM /s/ CRISTINA RAMIREZ DE BRAVO
----------------------------------------- -----------------------------------
By: Michael J. Durham By: Cristina Ramirez de Bravo
Title: Executive Vice-President Title:
</TABLE>
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Intercompany Agreement
<PAGE> 28
Schedule 1
AMERICAN PREMISES
1. STIN Headquarters Sublease to American. The premises described in that
certain Agreement of Sublease entered into as of July 1, 1996, by and
between American, as sublessee, and SABRE, as sublessor, relating to
the premises described therein in the multistory building located at
4200 American Boulevard, Fort Worth, Texas 76115, commonly known as
the STIN Building, as more fully described therein.
2. CentrePort IV. The premises described in that certain Lease Agreement
entered into as of July 1, 1996, by and between SABRE, as lessor, and
American, as lessee, relating to the premises currently occupied by
American, located at 4255 Amon Carter Boulevard, Fort Worth, Texas
76155, commonly known as CentrePort IV, as more fully described
therein.
Schedule 1 to Intercompany Agreement
<PAGE> 29
Schedule 2
CONTRIBUTION AND TRANSFER AGREEMENTS
I. Bills of Contribution
1. Bill of Contribution, Assignment and Assumption Agreement, dated June
26, 1996, between American Airlines, Inc. and TSGL Holding, Inc., and
all related assignment documentation prepared for recordation purposes
in the United States Patent and Trademark Office or the equivalent
office in foreign jurisdictions.
2. Bill of Contribution, Assignment and Assumption Agreement, dated June
26, 1996, between American Airlines, Inc. and TSGL-SCS, Inc., and all
related assignment documentation prepared for recordation purposes in
the United States Patent and Trademark Office or the equivalent office
in foreign jurisdictions.
3. Bill of Contribution, Assignment and Assumption Agreement, dated June
28, 1996, between American and TSGL, Inc.
4. Bill of Contribution, Assignment and Assumption Agreement, dated June
28, 1996, between American and SABRE International, Inc.
5. Bill of Contribution, Assignment and Assumption Agreement, dated June
30, 1996, between SABRE International, Inc. and SABRE Servicios
Colombia, LTDA
6. Bill of Contribution, Assignment and Assumption Agreement, dated July
1, 1996, between American and The SABRE Group, Inc.
7. Bill of Contribution, Assignment and Assumption Agreement, dated July
1, 1996, between American and SABRE Properties, Inc.
8. Bill of Contribution, Assignment and Assumption Agreement, dated July
1, 1996, between American and SABRE Transactions, Inc.
1
Schedule 2 to Intercompany Agreement
<PAGE> 30
9. Agreement and Plan of Merger, dated July 1, 1996, between The SABRE
Group, Inc. and SABRE Properties, Inc.
10. Stock Acquisition and Debenture Agreement, dated July 2, 1996, between
American Airlines, Inc. and TSG Corporation.
11. Certificate of Ownership and Merger, effective July 2, 1996, merging
SABRE Transactions, Inc. into The SABRE Group, Inc.
12. Certificate of Ownership and Merger, effective July 2, 1996, merging
SABRE Associates, Inc. into The SABRE Group, Inc.
13. All other documents that transfer assets between American Airlines,
Inc. and SABRE International, Inc. with regard to personal property
and receivables located in the Canadian Provinces
14. Bills of Contribution, Assignment and Assumption Agreements between
American and SABRE International, Inc. with regard to personal
property and receivables located in:
Argentina
Barbados
Belize
Bolivia
Brazil
Chile
Costa Rica
Dominican Republic
Guatemala
Hong Kong
Jamaica
Panama
Paraguay
Peru
Puerto Rico
Trinidad and Tobago
Uruguay
2
Schedule 2 to Intercompany Agreement
<PAGE> 31
U.S.V.I.
Honduras
Nicaragua
II. Bills of Sale
1. Bill of Sale between American and SABRE International, Inc. with
regard to personal property and receivables located in Ecuador
2. Bill of Sale between American and SABRE International, Inc. with
regard to personal property and receivables located in El Salvador
3. Bill of Sale between American and SABRE International, Inc. with
regard to personal property and receivables located in Venezuela
III. Stock Rights Agreement
1. Stock Rights and Transfer Agreement between American Airlines, Inc.
and The SABRE Group, Inc. pertaining to certain shares in Societe
Internationale de Telecommunications Aeronautiques
IV. Real Estate Assignment Documents
1. STIN Headquarters Assignment and Amendment Agreement dated as of July
1, 1996, by and between American Airlines, Inc., a Delaware
corporation, as assignor, The SABRE Group, Inc., a Delaware
corporation, as assignee, and Dallas-Fort Worth International Airport
Board, relating to that certain American Airlines Special Facilities
Lease Agreement dated October 1, 1972, as amended, relating to the
multistory building located at 4200 American Boulevard, Fort Worth,
Texas, 76115 commonly known as the STIN Building, as more fully
described therein.
2. TOC & TCC, Tulsa. Assignment Agreement dated as of July 1, 1996,
between American Airlines, Inc., a Delaware corporation, as assignor,
and The SABRE Group, Inc., a Delaware corporation, as assignee,
relating to that certain
3
Schedule 2 to Intercompany Agreement
<PAGE> 32
Sublease dated August 2, 1957, between American Airlines, Inc., a
Delaware corporation, and The Tulsa Municipal Airport Trust, as
amended, relating to the premises commonly known as the Tulsa Office
Center and the Tulsa Computer Center, as more fully described therein.
3. SCC, Tulsa. Assignment Agreement dated as of July 1, 1996, between
American Airlines, Inc., as assignor, and The SABRE Group, a Delaware
corporation, as assignee, relating to that certain Amended and
Restated Sublease Agreement, between American Airlines, Inc., a
Delaware corporation, and The Tulsa Airport Improvement Trust,
relating to the Co-Located Computer Site commonly known as the Secured
Computer Center, as more fully described therein.
4. Solana. Assignment Agreement dated as of July 1, 1996, by and between
American Airlines, Inc., a Delaware corporation, as assignor, and The
SABRE Group, Inc., a Delaware corporation, as assignee, relating to
the premises located at Southlake Building, 1 East Kirkwood
Boulevard, Southlake, Texas, commonly known as Solana, as more fully
described therein.
5. ATL-6585. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement for Office Facilities dated August 12, 1993, by and between
American Airlines, Inc., as tenant, and Palisades One, a Georgia
general partnership, as landlord, relating to the premises described
therein.
6. BOS-6056. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated March 26, 1990, by and between American Airlines, Inc., as
tenant, and Met Life International Real Estate Partners Limited
Partnership, as landlord, relating to the premises described therein.
7. BTR-6597. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating
4
Schedule 2 to Intercompany Agreement
<PAGE> 33
to that certain Lease Agreement dated October 1, 1993, by and between
American Airlines, Inc., as tenant, and Perry Lawrence Brown 1992
Family Trust, as landlord, relating to the premises described therein.
8. CHI-2389. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated September 30, 1987, by and between American Airlines, Inc., as
tenant, and LaSalle National Bank, as landlord, relating to the
premises described therein.
9. CMH-6656. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Standard
Form Office Lease dated November 11, 1994, by and between American
Airlines, Inc., as tenant, and ZML-Community Corporate Center Limited
Partnership, a Delaware limited partnership, as landlord, relating to
the premises described therein.
10. CVG-2445. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Bartlett
Building Lease dated May 23, 1988, by and between American Airlines,
Inc., as tenant, and Fourth Street Limited Partnership, as landlord,
relating to the premises described therein.
11. DAL-6707. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Building Lease dated effective as of March 1, 1995, by and between
American Airlines, Inc., as tenant, d/b/a SABRE Travel Information
Network, a Delaware corporation, and HD Delaware Properties, Inc., a
Delaware corporation, as landlord, relating to the premises described
therein.
12. DCA-2668. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation,
5
Schedule 2 to Intercompany Agreement
<PAGE> 34
and The SABRE Group, Inc., a Delaware corporation, relating to that
certain Lease dated November 29, 1989, by and between American
Airlines, Inc., as tenant, and Courthouse Plaza Associates Limited
Partnership, as landlord, relating to the premises described therein.
13. DEN-6737. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated September 18, 1995, by and between American Airlines, Inc., as
tenant, and WRC Properties, as landlord, relating to the premises
described therein.
14. EWR-2117. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated November 7, 1985, by and between American Airlines, Inc., as
tenant, and 2840 Morris Avenue Associates, as landlord, relating to
the premises described therein.
15. HNL-6262. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Honfed
Tower Office Lease dated April 3, 1991, by and between American
Airlines, Inc., as tenant, and Shima Properties Co., Ltd., a Hawaii
corporation, predecessor in interest to Kaanapali Kai, Inc., as
landlord, relating to the premises described therein.
16. HOU-6103. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Standard
Office Building Lease dated July 12, 1990, by and between American
Airlines, Inc., as tenant, and Trammell Crow Equity Partners,
predecessor in interest to 520 Partners, Ltd., as landlord, relating
to the premises described therein.
17. MCI-6456. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated June 22, 1992, by and between American Airlines, Inc., as
tenant, and Broadway Center
6
Schedule 2 to Intercompany Agreement
<PAGE> 35
Associates, a Missouri limited partnership, as landlord, relating to
the premises described therein.
18. MKE-6435. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated April 28, 1992, by and between American Airlines, Inc., as
tenant, and Sampson Investments, a Wisconsin general partnership,
predecessor in interest to Don Ripp Properties, as landlord, relating
to the premises described therein.
19. MSP-1948. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated June 12, 1984, by and between American Airlines, Inc.,
as tenant, and Andrews, Inc., as landlord, relating to the premises
described therein.
20. NYC-6470. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Lease dated July, 1992, by and between American Airlines, Inc., as
tenant, and Country Life Realty Company, as landlord, relating to the
premises described therein.
21. PHX-2302. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated February 27, 1987, by and between American Airlines,
Inc., as tenant, and 5060 Associates Limited Partnership, an Arizona
corporation, predecessor in interest to Northbank Properties Limited
Partnership, a Nevada limited partnership, as landlord, relating to
the premises described therein.
22. SAN-6556. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated April 9, 1993, by and between American Airlines, Inc.,
as tenant, and Steven D. Corkin, J. Grant Monahon, and Gregg O.
Dawley, Trustees of AEW #192 Trust, Declaration of Trust dated
December 15,
7
Schedule 2 to Intercompany Agreement
<PAGE> 36
1988, as landlord, relating to the premises described therein.
23. SJC-6175. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Lease dated November 28, 1990, by and between American Airlines, Inc.,
as tenant, and Copperfield Investment and Development Company, as
landlord, relating to the premises described therein.
24. SMF-6538. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Building Lease dated July 7, 1995, by and between American Airlines,
Inc., as tenant, and Arlen Properties, as landlord, relating to the
premises described therein.
25. WCC-6124. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Lease dated August 10, 1990, by and between American Airlines, Inc.,
as tenant, and WDC Milford Associates Limited Partnership, a Delaware
limited partnership, as landlord, relating to the premises described
therein.
26. YUL-6659. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Deed of
Lease dated effective as of November 1, 1994, by and between American
Airlines, Inc., as tenant, and Marzim Investissements, Inc., as
landlord, relating to the premises described therein.
27. YVR-2636. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated December 15, 1989, by and between American Airlines, Inc., as
tenant, and Burrard International Holdings, Inc., as landlord,
relating to the premises described therein.
8
Schedule 2 to Intercompany Agreement
<PAGE> 37
28. YYZ-6537. Assignment Agreement dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated January 29, 1993, by and between American Airlines, Inc., as
tenant, and Hollywood Office Developments, Inc., predecessor in
interest to 5001 Yonge Place Limited, as landlord, relating to the
premises described therein.
V. Real Estate Subleases
1. BNA-2131. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated October 31, 1985, between Highland Ridge Properties
Phase I, predecessor in interest to LaSalle Fund III, a Group Trust,
as landlord, and American Airlines, Inc., as tenant, covering the
premises described therein.
2. BUF-6569. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Sublease
Agreement dated January 22, 1993, between Air Cargo-Buffalo, a New
York general partnership, as landlord, and American Airlines, Inc., as
tenant, covering the premises described therein.
3. CHI-6117. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Space Lease dated July 25, 1990, between American National Bank and
Trust Company of Chicago, predecessor in interest to Columbia Centre
III, as landlord, and American Airlines, Inc., as tenant, covering the
premises described therein.
4. CLE-6612. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Lease dated December 9, 1993, between Summit One, Ltd., an Ohio
limited partnership, as landlord, and American Airlines, Inc., as
tenant, covering the premises described therein.
9
Schedule 2 to Intercompany Agreement
<PAGE> 38
5. CVG-2263. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated December 21, 1995, between Fourth Street Limited
Partnership, as landlord, and American Airlines, Inc., as tenant,
covering the premises described therein.
6. LAX-2554. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Standard
Office Lease dated May 1, 1989, between Pacific Realty Associates,
predecessor in interest to Pacific Corporate Towers, as landlord, and
American Airlines, Inc., as tenant, covering the premises described
therein.
7. MIA-6397. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Lease dated February 17, 1991, between Aetna Life Insurance Company, a
Connecticut corporation, as landlord, and American Airlines, Inc., as
tenant, covering the premises described therein.
8. NYC-1093. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain
Agreement dated November 22, 1991, between Cooke Properties, as
landlord, and American Airlines, Inc., as tenant, covering the
premises described therein.
9. PHL-6626. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated March, 1994, between International Court Three Joint
Venture, as landlord, and American Airlines, Inc., as tenant, covering
the premises described therein.
10. RDU-2682. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated
10
Schedule 2 to Intercompany Agreement
<PAGE> 39
April 19, 1995, between Central Park West Limited Partnership,
predecessor in interest to Sun Life Assurance Company of Canada, as
landlord, and American Airlines, Inc., as tenant, covering the
premises described therein.
11. SAT-6674. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
Agreement dated October 26, 1994, between Southwest Properties, a
California general partnership, as landlord, and American Airlines,
Inc., as tenant, covering the premises described therein.
12. SEA-1807. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated December 7, 1982, between Century One Partnership, as landlord,
and American Airlines, Inc., as tenant, covering the premises
described therein.
13. SFO-6498. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Office
Building Lease dated August 28, 1992, between Homart Development Co.,
a Delaware corporation, predecessor in interest to HMS Office, L.P.,
as landlord, and American Airlines, Inc., as tenant, covering the
premises described therein.
14. SNA-2501. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain Lease
dated November 28, 1988, between Nexus City Square Associates, a
California limited partnership, predecessor in interest to NL-Orange,
L.P., a California limited partnership, as landlord, and American
Airlines, Inc., as tenant, covering the premises described therein.
15. STL-6786/6513. Agreement of Sublease dated as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to that certain
Lambert-St. Louis International Airport Preferential Use Space Permit
dated
11
Schedule 2 to Intercompany Agreement
<PAGE> 40
April 7, 1996, between The City of St. Louis, as landlord, and
American Airlines, Inc., as tenant, covering the premises described
therein.
VI. Real Estate Deeds
1. Special Warranty Deed dated as of July 1, 1996, conveying the land and
improvements related thereto located at 4255 Amon Carter Boulevard,
Fort Worth, Texas 76155, commonly known as CentrePort IV, as more
particularly described therein.
VII. Other
1. Amendment No. 1 to Catering and Vending Services Agreement by and
among American Airlines, Inc., The SABRE Group, Inc. and Aramark
Services, Inc.
2. Purchase Order Supplement to Purchase Order 94274 and Revision 740051
pursuant to which Montgomery Kone, Inc. provides elevator maintenance
services to American Airlines, Inc. and its affiliates.
3. Master Lease Agreement, by and between Automotive Rentals, Inc. and
The SABRE Group, Inc. pertaining to leased vehicles for Messrs.
Durham (#00181), Jones (#00166), Katz (#00200), Kelly (#00167) and
Cook (#00180).
12
Schedule 2 to Intercompany Agreement
<PAGE> 41
VIII. Patents
1. Patent Assignments governing the following patents and patent
applications:
<TABLE>
<CAPTION>
Serial Number Filing Date Patent Application Title
------------- ----------- ------------------------
<S> <C> <C>
08/070,947 6/4/93 Travel Agency Management Assistance System
08/196,412 2/14/94 Object Oriented Data Access and Analysis System
08/570,236 12/11/95 Method and System for Management of "Cargo Claims"
07/958,962 10/9/92 Method and Apparatus for Developing Scripts that Access
Mainframe Resources that can be Executed on Various
Computer Systems having Different Interface Languages
without Modification
08/502,690 7/14/95 Document Support System
08/316,890 9/30/94 System to Predict Optimum Computer Platform
08/607,860 2/27/96 System to Determine Payroll Processing Requirements
08/323,296 10/14/94 Issue Processor
08/524,381 9/6/95 System for Corporate Travel Planning
08/199,102 2/22/94 Database Interface System for monitoring the Operational
Efficiency of an Information Management System
08/312,538 9/8/94 Airline Flight reservation System Simulator for Optimizing
Revenues
08/275,296 7/14/94 Database Management System and Method
08/598,252 2/8/96 A System and Method for Planning and Managing Group Travel
08/247,271 5/20/94 Method and Apparatus for a Host Computer to Stage a
Plurality of Terminal Addresses
08/120,800 9/15/93 Availability Processor and Method
08/368,339 2/3/95 System and Method of Allocating and Booking Travel
Opportunities
08/172,046 2/22/93 Data Management Method and Architecture
</TABLE>
13
Schedule 2 to Intercompany Agreement
<PAGE> 42
<TABLE>
<CAPTION>
Serial Number Filing Date Patent Application Title
------------- ----------- ------------------------
<S> <C> <C>
TPF Data Propagation (3 patents)
08/560,466 11/17/95 #1 - System for Propagating Transaction Processing Facility
Data to a Relational Processing Platform
08/560,295 11/17/95 #2 - System for Propagating Airline Computerized
Reservation System Transaction Processing Facility Data to
a Relational Database Processing Platform
08/588,463 1/18/96 #3 - System for Propagating, Retrieving and Using
Transaction Processing Facility Airline Computerized
Reservation System on a data Relational Database Processing
Platform
08/490,495 6/13/95 Method and Apparatus for Delivering Information in a Real
Time Mode Over a Non-Dedicated Circuit
</TABLE>
14
Schedule 2 to Intercompany Agreement
<PAGE> 43
IX. Copyrights
1. Copyright Assignments governing the following registered copyrights:
<TABLE>
<CAPTION>
Title Registration # Author
----- -------------- ------
<S> <C> <C>
Accomplishment Message Table TXu 613 955 American Airlines
Accomplishment History TXu 612 971 American Airlines
Aircraft Remarks TXu 612 973 American Airlines
Aircraft TXu 613 954 American Airlines
Alarm.I TXu 570 253 American Airlines, Inc.
Alter Time When Due TXu 613 957 American Airlines
Application Programming Environment (APEA) TXu 480 805 American Airlines, Inc.
Average Time Between Accomplishments TXu 613 944 American Airlines
Backgrnd.I TXu 561 673 American Airlines, Inc.
Bypass.I TXu 561 674 American Airlines, Inc.
Cal_day.I TXu 562 593 American Airlines, Inc.
Calcdate.I TXu 561 675 American Airlines, Inc.
CalMove.I TXu 561 677 American Airlines, Inc.
CheckMon.I TXu 562 592 American Airlines, Inc.
CheckTim.I TXu 562 081 American Airlines, Inc.
CheckUpd.I TXu 562 079 American Airlines, Inc.
ChgColor.I TXu 562 080 American Airlines, Inc.
ChkSABRE.I TXu 570 254 American Airlines, Inc.
City Restriction Codes TXu 614 163 American Airlines
City Table Processing TXu 613 945 American Airlines
ClrWin.I TXu 570 258 American Airlines, Inc.
Colrlnit.I TXu 562 078 American Airlines, Inc.
Computer Reservation System Workshop (CRS) TX 3 424 601 AMR Information Services, Inc.
Conct_FI.I TXu 570 260 American Airlines, Inc.
Conference Network Visioning Executive Needs TXu 495 779 American Airlines, Inc.
(Convene)
</TABLE>
15
Schedule 2 to Intercompany Agreement
<PAGE> 44
<TABLE>
<CAPTION>
Title Registration # Author
----- -------------- ------
<S> <C> <C>
CoreCalc.I TXu 562 077 American Airlines, Inc.
Count Cabin Service Job TXu 613 985 American Airlines
Create Bill of Work TXu 613 998 American Airlines
Data Base Operations Control System TXu 493 230 American Airlines, Inc.
Datatrac Computer Program TXu 518 265 American Airlines, Inc.
Date2JuI.I TXu 570 259 American Airlines, Inc.
DatePlus.I TXu 570 262 American Airlines, Inc.
Deferrals Recap TXu 613 042 American Airlines
Dial AA Flight (Mtg.c) TXu 425 386 American Airlines, Inc.
Dial AA Flight (Hostcomm.c) TXu 425 390 American Airlines, Inc.
Dial AA Flight (Remove.obj) TXu 425 137 American Airlines, Inc.
Dial AA Flight (Addrqst.obj) TXu 425 388 American Airlines, Inc.
Dial AA Flight (Appsupp.h) TXu 425 387 American Airlines, Inc.
DispFiIe.I TXu 561 967 American Airlines, Inc.
Display Bill of Work TXu 613 939 American Airlines
Display Time When Due TXu 612 972 American Airlines
DispView.I TXu 562 085 American Airlines, Inc.
DispWin.I TXu 561 966 American Airlines, Inc.
DlgPaint.I TXu 570 257 American Airlines, Inc.
Error Messages TXu 613 941 American Airlines
Fact Out TXu 613 984 American Airlines
File Maintenance TXu 614 161 American Airlines
Fkeys.I TXu 570 256 American Airlines, Inc.
Fleet Code Table TXu 612 968 American Airlines
Fleet Job TXu 613 043 American Airlines
Fotocomp.EXE TXu 626 008 American Airlines, Inc.
FullScrn.I TXu 570 261 American Airlines, Inc.
Getldent.I TXu 561 837 American Airlines, Inc.
</TABLE>
16
Schedule 2 to Intercompany Agreement
<PAGE> 45
<TABLE>
<CAPTION>
Title Registration # Author
----- -------------- ------
<S> <C> <C>
GifPop.I TXu 570 251 American Airlines, Inc.
H_Border.I TXu 561 841 American Airlines, Inc.
Header.I TXu 561 839 American Airlines, Inc.
HiLight.I TXu 561 838 American Airlines, Inc.
HotProc.I TXu 561 840 American Airlines, Inc.
IMS.I TXu 561 842 American Airlines, Inc.
Insync.I TXu 570 263 American Airlines, Inc.
Inventory Utilization Codes TXu 612 967 American Airlines
Job Accomplishment TXu 613 943 American Airlines
Job Accomplishment History TXu 613 953 American Airlines
Jul2Date.I TXu 562 084 American Airlines, Inc.
KeyPad2.I TXu 561 672 American Airlines, Inc.
LabPaint.I TXu 561 684 American Airlines, Inc.
LoadRem.I TXu 562 555 American Airlines, Inc.
Lost Time TXu 612 969 American Airlines
Maintenance Job Table TXu 613 959 American Airlines
MakeEntry.I TXu 562 554 American Airlines, Inc.
Mandatory Status TXu 614 160 American Airlines
Meeting Maestro User's Guide (The) (MSN) TX 3 426 272 AMR Information Services, Inc.
Mem_Err.I TXu 562 087 American Airlines, Inc.
Minimum Acceptable Percentage TXu 613 938 American Airlines
MoveWin.I TXu 562 553 American Airlines, Inc.
Mutual Exclusion Table TXu 613 960 American Airlines
NewCaI.I TXu 562 308 American Airlines, Inc.
NextKp.I TXu 562 313 American Airlines, Inc.
Overdue Jobs TXu 613 961 American Airlines
Paint.I TXu 562 306 American Airlines, Inc.
PaintAtt.I TXu 562 307 American Airlines, Inc.
</TABLE>
17
Schedule 2 to Intercompany Agreement
<PAGE> 46
<TABLE>
<CAPTION>
Title Registration # Author
----- -------------- ------
<S> <C> <C>
PopUp.I TXu 562 309 American Airlines, Inc.
PRI7002.EXE TXu 626 009 American Airlines, Inc.
PrintSTR.I TXu 562 305 American Airlines, Inc.
PrntMenu.I TXu 562 302 American Airlines, Inc.
Projected Manhours TXu 613 936 American Airlines
Prompt.I TXu 562 303 American Airlines, Inc.
Prospond TXu 615 304 AMR Information Services, Inc.
Quadisp.I TXu 562 304 American Airlines, Inc.
Rainbow2.I TXu 561 682 American Airlines, Inc.
Reminder.I TXu 561 683 American Airlines, Inc.
Request Only Bills-of-Work TXu 613 987 American Airlines
Resinit.I TXu 563 338 American Airlines, Inc.
RISK ASS.BAS TXu 616 285 American Airlines, Inc.
RSK_ASS.FRM TXu 616 292 American Airlines, Inc.
RSK_ASS2.FRM TXu 616 291 American Airlines, Inc.
RSK_ASS3.FRM TXu 616 290 American Airlines, Inc.
RSK_ASS4.FRM TXu 616 289 American Airlines, Inc.
RSK_ASS5.FRM TXu 616 288 American Airlines, Inc.
RSK_GRPH.FRM TXu 616 287 American Airlines, Inc.
RSK_MSG.FRM TXu 616 286 American Airlines, Inc.
S_Border.I TXu 561 626 American Airlines, Inc.
Security Table TXu 614 162 American Airlines
SetClock.I TXu 617 498 American Airlines, Inc.
SlEntry.I TXu 561 968 American Airlines, Inc.
SmaIIWin.I TXu 561 965 American Airlines, Inc.
Srchall.I TXu 570 252 American Airlines, Inc.
SrchLast.I TXu 561 628 American Airlines, Inc.
Station Remarks TXu 612 974 American Airlines
</TABLE>
18
Schedule 2 to Intercompany Agreement
<PAGE> 47
<TABLE>
<CAPTION>
Title Registration # Author
----- -------------- ------
<S> <C> <C>
Station Manhour Update TXu 613 956 American Airlines
Station Parameters TXu 613 952 American Airlines
Station Hours TXu 612 970 American Airlines
System Development Process, Volume II TXu 630 580 American Airlines, Inc.
System Development Process TXu 615 380 American Airlines, Inc.
Time Initiated Bill of Work TXu 613 942 American Airlines
TimePlus.I TXu 561 627 American Airlines, Inc.
Toggle.I TXu 561 622 American Airlines, Inc.
Togllabl.I TXu 562 661 American Airlines, Inc.
TogQuad.I TXu 617 497 American Airlines, Inc.
Translat.I TXu 561 678 American Airlines, Inc.
Updready.I TXu 561 679 American Airlines, Inc.
Utilities TXu 613 937 American Airlines
Utilization Codes TXu 613 940 American Airlines
Utilization Code Priority List TXu 613 041 American Airlines
Vendor Files TXu 613 958 American Airlines
Ver_Num.I TXu 561 680 American Airlines, Inc.
Viewgif.I TXu 561 681 American Airlines, Inc.
Wininit.I TXu 562 594 American Airlines, Inc.
Zoomin.I TXu 561 666 American Airlines, Inc.
</TABLE>
19
Schedule 2 to Intercompany Agreement
<PAGE> 48
Schedule 3
EXCLUDED ASSETS
1. Any subcontract with Airline Management Services Holding, Inc. under
Canadian Services Agreement executed on April 27, 1994, by and between
Canadian Airline International Ltd. and AMR Corporation and assigned
to Airline Management Services Holding, Inc.
2. SITA Services Agreement by and between American Airlines, Inc. and
Societe Internationale De Telecommunications Aeronautiques dated July
1, 1996 (the "SITA Services Agreement")
3. Each of the Agreements listed below by and between American Airlines,
Inc. and Societe Internationale De Telecommunications Aeronautiques,
each as amended by that certain Master Amendment, dated June 20, 1996,
between the parties (collectively with the SITA Services Agreement,
the "SITA Agreements"):
<TABLE>
<CAPTION>
AA CONTRACT # AGREEMENT TITLE DATE
------------- --------------- ----
<S> <C> <C>
SVC-AE926-0051 Agreement for Aircom Service 9/1/88
SVC-AE926-0635 Telecommunications Services Agreement 1/1/93
SVC-AE926-0635A Amendment to Telecommunications Services 4/13/95
Agreement
Agreement for CUTE Service at Frankfurt Airport 3/14/85
Amendment No 1 to the Agreement for CUTE 2/12/86
Service at Frankfurt Airport
** Amendment No 2 to the Agreement for CUTE
Service at Frankfurt Airport
** Amendment No 3 to the Agreement for CUTE
Service at Frankfurt Airport
Amendment No 4 to the Agreement for Cute 6/88
Service at Frankfurt Airport
SVC-AE926-0151 Amendment No 5 to the Service Guarantee
Agreement for CUTE Service at Frankfurt Airport
SVC-AE926-0151 Amendment No 6 to the Service Guarantee 3/12/91
Agreement for CUTE Service at Frankfurt Airport
</TABLE>
1
Schedule 3 to Intercompany Agreement
<PAGE> 49
<TABLE>
<S> <C> <C>
SVC-AE926-0151 Amendment No 7 to the Service Guarantee 5/24/91
Agreement for CUTE Service at Frankfurt Airport
SVC-AE926-0424** Master Service Guarantee Agreement for CUTE2 1/17/92
Service
SVC-AE926-0424 Exhibit 1 - Connection and Configuration Request 1/17/92
Form - PHL Airport
SVC-AE926-0424 Exhibit 1 - Connection and Configuration Request 1/17/92
Form - GRU Airport
SVC-AE926-0424 Exhibit 1 - Connection and Configuration Request 5/13/92
Form - MUC Airport
Exhibit 1 - Connection and Configuration Request 3/26/96
Form - Manchester
Exhibit 1 - Connection and Configuration Request 4/20/96
Form - Dusseldorf Airport
SVC-AE926-0217 Service Guarantee Agreement for CUTE Service at 1/23/90
Stockholm - Arlanda Airport
SVC-AE926-0217-01 Amendment No. 1 to the Service Guarantee 1/17/92
Agreement for CUTE Service at Stockholm - Arlanda
Airport
SVC-AE926-0315 Service Guarantee Agreement for CUTE Service at 3/12/91
Dusseldorf Airport
SVC-AE926-0315-2A Amendment No 2 to the Service Guarantee 2/6/92
Agreement for CUTE Service at Dusseldorf Airport
SVC-AE926-0314 Service Guarantee Agreement for CUTE Service at 3/12/91
Hong Kong Kai Tak Airport
SVC-AE926-0313 Service Guarantee Agreement for CUTE Service at 3/12/91
Los Angeles Bradley Terminal Airport
SVC-AE926-1316 Service Guarantee Agreement for CUTE Service at 3/12/91
Rio de Janeiro International Airport
SVC-AE926-0331 Service Guarantee Agreement for CUTE Service at 6/11/92
Munich Airport
SVC-AE926-0331/1 Amendment No. 1 to the Service Guarantee 5/24/91
</TABLE>
2
Schedule 3 to Intercompany Agreement
<PAGE> 50
<TABLE>
<S> <C> <C>
Agreement for CUTE Service at Munich Airport
SVC-AE926-0373 Service Guarantee Agreement for CUTE Service at 6/11/92
Santiago de Chile Airport
SVC-AE926-0004 Service Guarantee Agreement for CUTE Service at 6/30/92
San Jose Juan Santamaria International Airport
SVC-AE926-0592 Service Guarantee Agreement for CUTE Service at 1/8/93
Berlin-Tegel Airport
Service Guarantee Agreement for CUTE Service at 7/26/93
Bogota El Dorado International Airport
Service Guarantee Agreement for CUTE Service at 7/26/93
El Salvador International Airport
Service Guarantee Agreement for CUTE Service at 7/29/93
Guayaquil - Simon Bolivar Airport
Service Guarantee Agreement for CUTE Service 7/29/93
at Quito - Mariscal Airport
SITA Services Agreement 7/1/96
</TABLE>
4. All SABREnet equipment, software or hardware related to the SITA
Agreements, including but not limited to the SABREnet equipment listed
on Schedule 1A, attached hereto, which is not used exclusively in the
Business
5. SABRE Access and License Agreement, dated 6/8/88, as amended 11/28/93
with JAPAN TRAVEL BUREAU, LTD., related Agreement permitting supplier
to provide its tour packages through SABRE, dated 4/15/88, and SABRE
Subscriber Agreement (undated, unsigned), and related hardware,
fixtures and office equipment and supplies in Japan
6. SABRE Access and License Agreement, dated 5/24/88, as amended 11/1/93,
with NIPPON TRAVEL AGENCY CO., LTD., related SABRE Subscriber
Agreement (undated, unsigned), Agreement permitting NTA to supply
travel services through SABRE, dated 1/22/88, and related hardware,
fixtures and office equipment and supplies in Japan
3
Schedule 3 to Intercompany Agreement
<PAGE> 51
7. All STIN and SCS assets located in, or utilized primarily for the
business operated in, Japan.
4
Schedule 3 to Intercompany Agreement
<PAGE> 52
Schedule 4
INTERCOMPANY AGREEMENTS
1. Information Technology Services Agreement, dated July 1, 1996, between
American Airlines, Inc., and The SABRE Group, Inc.
2. Canadian Technical Services Subcontract, dated as of July 1, 1996,
between American Airlines, Inc. And The SABRE Group, Inc.
3. Management Services Agreement, dated July 1, 1996, between American
Airlines, Inc., and The SABRE Group, Inc.
4. Legal Rights and Services Agreement, dated as of July 1, 1996, by and
among AMR Corporation, American Airlines, Inc., and The SABRE Group,
Inc.
5. Travel Privileges Agreement, dated as of July 1, 1996, between
American Airlines, Inc., and The SABRE Group, Inc.
6. Corporate Travel Agreement, dated as of July 1, 1996, by and between
American Airlines, Inc. and The SABRE Group, Inc.
7. Marketing Cooperation Agreement, dated as of July 1, 1996, between
American Airlines, Inc., and The SABRE Group, Inc.
8. Participating Carrier Agreement, dated as of July 1, 1996, between
American Airlines, Inc. and The SABRE Group, Inc.
9. Tax Sharing Agreement, dated July 1, 1996 between The SABRE Group,
Inc. and American Airlines, Inc.
10. Credit Agreement, dated July 1, 1996, between American Airlines, Inc.
and The SABRE Group, Inc.
11. Reciprocal Easement Agreement entered into as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc., a Delaware corporation, relating to the premises located
at 4200 Amon
1
Schedule 4 to Intercompany Agreement
<PAGE> 53
Carter Boulevard, Fort Worth, Texas 76155, commonly known as
CentrePort II, the premises located at 4255 Amon Carter Boulevard,
Fort Worth, Texas 76155, commonly known as CentrePort IV, and the
premises located at 4333 Amon Carter Boulevard, Fort Worth, Texas
76155, commonly known as CentrePort V, as more fully described
therein.
12. Central Plant Easement Agreement, entered into as of July 1, 1996, by
and between American Airlines, Inc., a Delaware corporation, and The
SABRE Group, Inc., a Delaware Corporation, relating to the premises
located at 4255 Amon Carter Boulevard, Fort Worth, Texas 76155,
commonly known as CentrePort IV and the premises located at 4333 Amon
Carter Boulevard, Fort Worth, Texas 76155, commonly known as
CentrePort V, as more fully described therein.
13. Central Plant Agreement entered into as of July 1, 1996, by and
between American Airlines, Inc., a Delaware corporation, and The SABRE
Group, Inc, a Delaware corporation, relating to the premises located
at Tulsa International Airport, in Tulsa, Oklahoma, commonly known as
the Tulsa Computer Center, the Tulsa Office Center and the Secured
Computer Center.
14. Reciprocal Parking Agreement, entered into as of July 1, 1996, by and
between American Airlines, Inc., and The SABRE Group, Inc.
15. Agreement, entered into as of July 1, 1996, by and between American
Airlines, Inc., and The SABRE Group, Inc., relating to secondary fire
protection water for the premises located at Tulsa International
Airport, in Tulsa, Oklahoma, commonly known as the Tulsa Computer
Center, the Tulsa Office Center and the Secured Computer Center.
16. License Agreement, entered into as of July 1, 1996, by and between The
SABRE Group, Inc. and American Airlines, Inc., relating to the
softball field located at the STIN premises.
17. Lease Agreement, entered into as of July 1, 1996, by and between
American Airlines, Inc., a Delaware corporation, as lessor, and The
SABRE Group, Inc., a Delaware corporation
2
Schedule 4 to Intercompany Agreement
<PAGE> 54
("SABRE"), as lessee, relating to the premises currently occupied by
SABRE or its affiliates, in connection with the Contributed Business,
located at 4200 Buckingham Road, Fort Worth, Texas 76155, commonly
known as CentrePort I, as more fully described therein.
18. Lease Agreement, entered into as of July 1, 1996, by and between
American Airlines, Inc., a Delaware corporation, as lessor, and The
SABRE Group, Inc., a Delaware corporation, as lessee, relating to the
premises currently occupied by SABRE, or its affiliates, in connection
with the Contributed Business, located at 4200 Amon Carter Boulevard,
Fort Worth, Texas 76155, commonly known as CentrePort II, as more
fully described therein.
19. Lease Agreement, entered into as of July 1, 1996, by and between The
SABRE Group, Inc., a Delaware corporation, as lessor, and American
Airlines, Inc, a Delaware corporation, as lessee, relating to CPIV.
20. Lease Agreement, entered into as of July 1, 1996, by and between
American Airlines, Inc., a Delaware corporation, as lessor, and The
SABRE Group, Inc., a Delaware corporation, as lessee, relating to the
premises currently occupied by SABRE, or its affiliates, in connection
with the Contributed Business, located at 4333 Amon Carter Boulevard,
Fort Worth, Texas 76155, commonly known as CentrePort V, as more fully
described therein.
21. Lease Agreement, entered into as of July 1, 1996, by and between The
SABRE Group, Inc., a Delaware corporation, as lessor, and American
Airlines, Inc., a Delaware corporation, as lessee, relating to STIN.
22. Lease Agreement, entered into as of July 1, 1996, by and between
American Airlines, Inc., a Delaware corporation, as lessor, and The
SABRE Group, Inc., a Delaware corporation, as lessee, relating to the
TRIAD II premises at Tulsa.
3
Schedule 4 to Intercompany Agreement
<PAGE> 55
Schedule 5
TSG PREMISES
Assignments:
1. ATL-6585. The premises described in that certain Lease Agreement for
Office Facilities dated August 12, 1993, by and between American
Airlines, Inc., as tenant, and Palisades One, a Georgia general
partnership, as landlord.
2. BOS-6056. The premises described in that certain Lease dated March
26, 1990, by and between American Airlines, Inc., as tenant, and Met
Life International Real Estate Partners Limited Partnership, as
landlord.
3. BTR-6597. The premises described in that certain Lease Agreement
dated October 1, 1993, by and between American Airlines, Inc., as
tenant, and Perry Lawrence Brown 1992 Family Trust, as landlord.
4. CHI-2389. The premises described in that certain Lease dated
September 30, 1987, by and between American Airlines, Inc., as tenant,
and LaSalle National Bank, as landlord.
5. CMH-6656. The premises described in that certain Standard Form Office
Lease dated November 11, 1994, by and between American Airlines, Inc.,
as tenant, and ZML-Community Corporate Center Limited Partnership, a
Delaware limited partnership, as landlord.
6. CVG-2445. The premises described in that certain Bartlett Building
Lease dated May 23, 1988, by and between American Airlines, Inc., as
tenant, and Fourth Street Limited Partnership, as landlord.
1
Schedule 5 to Intercompany Agreement
<PAGE> 56
7. DAL-6707. The premises described in that certain Office Building
Lease dated effective as of March 1, 1995, by and between American
Airlines, Inc., as tenant, d/b/a SABRE Travel Information Network, a
Delaware corporation, and HD Delaware Properties, Inc., a Delaware
corporation, as landlord.
8. DCA-2668. The premises described in that certain Lease dated November
29, 1989, by and between American Airlines, Inc., as tenant, and
Courthouse Plaza Associates Limited Partnership, as landlord.
9. DEN-6737. The premises described in that certain Lease dated
September 18, 1995, by and between American Airlines, Inc., as tenant,
and WRC Properties, as landlord.
10. EWR-2117. The premises described in that certain Lease dated November
7, 1985, by and between American Airlines, Inc., as tenant, and 2840
Morris Avenue Associates, as landlord.
11. HNL-6262. The premises described in that certain Honfed Tower Office
Lease dated April 3, 1991, by and between American Airlines, Inc., as
tenant, and Shima Properties Co., Ltd., a Hawaii corporation,
predecessor in interest to Kaanapali Kai, Inc., as landlord.
12. HOU-6103. The premises described in that certain Standard Office
Building Lease dated July 12, 1990, by and between American Airlines,
Inc., as tenant, and Trammell Crow Equity Partners, predecessor in
interest to 520 Partners, Ltd., as landlord.
13. MCI-6456. The premises described in that certain Lease dated June 22,
1992, by and between American Airlines, Inc., as tenant, and Broadway
Center Associates, a Missouri limited partnership, as landlord.
14. MKE-6435. The premises described in that certain Lease dated April
28, 1992, by and between American Airlines, Inc., as tenant, and
Sampson Investments, a Wisconsin general partnership, predecessor in
interest to Don Ripp Properties, as landlord.
15. MSP-1948. The premises described in that certain Lease Agreement
dated June 12, 1984, by and between American
2
Schedule 5 to Intercompany Agreement
<PAGE> 57
Airlines, Inc., as tenant, and Andrews, Inc., as landlord.
16. NYC-6470. The premises described in that certain Office Lease dated
July, 1992, by and between American Airlines, Inc., as tenant, and
Country Life Realty Company, as landlord.
17. PHX-2302. The premises described in that certain Lease Agreement
dated February 27, 1987, by and between American Airlines, Inc., as
tenant, and 5060 Associates Limited Partnership, an Arizona
corporation, predecessor in interest to Northbank Properties Limited
Partnership, a Nevada limited partnership, as landlord.
18. SAN-6556. The premises described in that certain Lease Agreement
dated April 9, 1993, by and between American Airlines, Inc., as
tenant, and Steven D. Corkin, J. Grant Monahon, and Gregg O. Dawley,
Trustees of AEW #192 Trust, Declaration of Trust dated December 15,
1988, as landlord.
19. SJC-6175. The premises described in that certain Office Lease dated
November 28, 1990, by and between American Airlines, Inc., as tenant,
and Copperfield Investment and Development Company, as landlord.
20. SMF-6538. The premises described in that certain Office Building
Lease dated July 7, 1995, by and between American Airlines, Inc., as
tenant, and Arlen Properties, as landlord.
21. WCC-6124. The premises described in that certain Office Lease dated
August 10, 1990, by and between American Airlines, Inc., as tenant,
and WDC Milford Associates Limited Partnership, a Delaware limited
partnership, as landlord.
22. YUL-6659. The premises described in that certain Deed of Lease dated
effective as of November 1, 1994, by and between American Airlines,
Inc., as tenant, and Marzim Investissements, Inc., as landlord.
23. YVR-2636. The premises described in that certain Lease dated December
15, 1989, by and between American Airlines, Inc., as tenant, and
Burrard International Holdings, Inc., as landlord.
24. YYZ-6537. The premises described in that certain Lease dated January
29, 1993, by and between American Airlines, Inc., as
3
Schedule 5 to Intercompany Agreement
<PAGE> 58
tenant, and Hollywood Office Developments, Inc., predecessor in
interest to 5001 Yonge Place Limited, as landlord.
Subleases.:
1. BNA-2131. The 18% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease
Agreement dated October 31, 1985, between Highland Ridge Properties
Phase I, predecessor in interest to LaSalle Fund III, a Group Trust,
as landlord, and American Airlines, Inc., as tenant.
2. BUF-6569. The 4% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Sublease
Agreement dated January 22, 1993, between Air Cargo-Buffalo, a New
York general partnership, as landlord, and American Airlines, Inc., as
tenant.
3. CHI-6117. The 50% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Office Space
Lease dated July 25, 1990, between American National Bank and Trust
Company of Chicago, predecessor in interest to Columbia Centre III, as
landlord, and American Airlines, Inc., as tenant.
4. CLE-6612. The 31% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Office Lease
dated December 9, 1993, between Summit One, Ltd., an Ohio limited
partnership, as landlord, and American Airlines, Inc., as tenant.
5. CVG-2263. The 19% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease
Agreement dated December 21, 1995, between Fourth Street Limited
Partnership, as landlord, and American Airlines, Inc., as tenant.
4
Schedule 5 to Intercompany Agreement
<PAGE> 59
6. DTW-2483. The 45% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease dated
October 12, 1988, between A-II Limited Partnership, as landlord, and
American Airlines, Inc., as tenant.
7. LAX-2554. The 27% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Standard
Office Lease dated May 1, 1989, between Pacific Realty Associates,
predecessor in interest to Pacific Corporate Towers, as landlord, and
American Airlines, Inc., as tenant.
8. MIA-6397. The 11% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Office Lease
dated February 17, 1991, between Aetna Life Insurance Company, a
Connecticut corporation, as landlord, and American Airlines, Inc., as
tenant.
9. NYC-1093. The 13% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Agreement
dated November 22, 1991, between Cooke Properties, as landlord, and
American Airlines, Inc., as tenant.
10. PHL-6626. The 20% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease
Agreement dated March, 1994, between International Court Three Joint
Venture, as landlord, and American Airlines, Inc., as tenant.
11. RDU-2682. The 50% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease
Agreement dated April 19, 1995, by and between Central Park West
Limited Partnership, predecessor in interest to Sun Life Assurance
Company of Canada, as landlord, and American Airlines, Inc., as
tenant.
12. SAT-6674. The 10% of the premises currently occupied by The
5
Schedule 5 to Intercompany Agreement
<PAGE> 60
SABRE Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease
Agreement dated October 26, 1994, between Southwest Properties, a
California general partnership, as landlord, and American Airlines,
Inc., as tenant.
13. SEA-1807. The 44% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease dated
December 7, 1982, between Century One Partnership, as landlord, and
American Airlines, Inc., as tenant.
14. SFO-6498. The 44% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Office
Building Lease dated August 28, 1992, between Homart Development Co.,
a Delaware corporation, predecessor in interest to HMS Office, L.P.,
as landlord, and American Airlines, Inc., as tenant.
15. SNA-2501. The 44% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lease dated
November 28, 1988, between Nexus City Square Associates, a California
limited partnership, predecessor in interest to NL-Orange, L.P., a
California limited partnership, as landlord, and American Airlines,
Inc., as tenant.
16. STL-6786/6513. The 8% of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, as defined in that certain Lambert-St.
Louis International Airport Preferential Use Space Permit dated April
7, 1996, between The City of St. Louis, as landlord, and American
Airlines, Inc., as tenant.
Other:
1. STIN. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain multistory office
building located at 4200 American Boulevard, Fort Worth, Texas 76155,
commonly known as the STIN Headquarters.
6
Schedule 5 to Intercompany Agreement
<PAGE> 61
2. CPIV. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain multistory office
building located at 4255 Amon Carter Boulevard, Fort Worth, Texas
76155, commonly known as CentrePort IV.
3. CPV. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain multistory office
building located at 4333 Amon Carter Boulevard, Fort Worth, Texas
76155, commonly known as CentrePort V.
4. Solana. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain multistory office
building located at Southlake Building, 1 East Kirkwood Boulevard,
Southlake, Texas, commonly known as Solana Campus.
5. CPI. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain office building located
at 4200 Buckingham Road, Fort Worth, Texas 76155, commonly known as
CentrePort I.
6. CPII. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain office building located
at 4200 Amon Carter Boulevard, Fort Worth, Texas 76155, commonly known
as CentrePort II.
7. TOC Building. The portion of the premises currently occupied by The
SABRE Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain office building located
at Tulsa International Airport, in Tulsa, Oklahoma, commonly known as
Tulsa Office Center.
8. TCC Building. The portion of the premises currently occupied by The
SABRE Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain office building located
at Tulsa International Airport, in Tulsa, Oklahoma, commonly known as
Tulsa Computer
7
Schedule 5 to Intercompany Agreement
<PAGE> 62
Center.
9. SCC Building. The portion of the premises currently occupied by The
SABRE Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain building located at
Tulsa International Airport, in Tulsa, Oklahoma, commonly known as
Secured Computer Center.
10. TRIAD II. The portion of the premises currently occupied by The SABRE
Group, Inc., a Delaware corporation, or affiliates thereof, in
connection with the Business, in that certain building located in
Tulsa, Oklahoma, commonly known as Triad II.
8
Schedule 5 to Intercompany Agreement
<PAGE> 63
APPENDIX A
DISPUTE RESOLUTION APPENDIX
TO INTERCOMPANY AGREEMENT
A. Defined Terms. Various terms used in this Dispute Resolution
Appendix, which begin with a capital letter, are defined in Article I
of the Intercompany Agreement. In addition, the following terms used
only in this Dispute Resolution Appendix have the corresponding
meanings:
"COMPLEX DISPUTE LIST": The "Complex Dispute List,"
maintained by the American Arbitration Association or if that
list is not then maintained by the American Arbitration
Association, another list of individuals having similar
qualifications maintained by the American Arbitration
Association.
"EXECUTIVE REVIEW COMMITTEE": A committee consisting of the
Vice President and Controller of American and the Senior Vice
President and Chief Financial Officer of TSG.
"QUALIFICATIONS": Inclusion in the Complex Dispute List or
having extensive knowledge or experience, or both, regarding
issues that are the subject of the Dispute.
B. Dispute Resolution Procedure.
1. General Procedure. Except as otherwise stated in the
Agreement, the Parties shall resolve all Disputes in
accordance with this procedure:
(a) Any Dispute shall initially be referred by either
Party to the Executive Review Committee for
resolution.
1
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 64
(b) If the Executive Review Committee does not resolve
the Dispute within ten Business Days (or such longer
period as that Committee may agree) after the date of
referral to it, either Party may submit the Dispute
for resolution by the Parties' Presidents, who may
submit the Dispute to non-binding mediation in
accordance with Section B.2 of this Dispute
Resolution Appendix.
(c) If the Dispute is not resolved by the Parties'
Presidents (if submitted to them) and is not
submitted to or resolved by mediation, then either
Party may submit the Dispute to binding arbitration
in accordance with Section B.3 of this Dispute
Resolution Appendix.
A referral under any of Sections B.1(a) and B.1(b) of this Dispute
Resolution Appendix shall be made by written notice to the Persons
designated in the applicable Section or Sections. That notice shall
be in a form described in the Agreement or an electronic mail message
and addressed to each Person at his office address or electronic mail
address; each notice shall be given and effective as described in the
Agreement or, in the case of electronic mail, upon actual receipt.
The date of referral is the last date that notice is given to all of
the Persons to whom the Dispute must have been referred.
2. Mediation. The mediation of an unresolved Dispute shall be
conducted in this manner:
(a) Either Party may submit the Dispute to mediation by
giving notice of mediation to the other Party. The
Parties shall attempt to agree upon and appoint a
sole mediator who has the Qualifications promptly
after that notice is given.
(b) If the Parties are unable to agree upon a mediator
within ten days after the date the Dispute is
submitted to mediation, either Party may request the
Dallas office of the American Arbitration Association
to appoint a mediator who has the Qualifications.
The mediator so appointed shall be
2
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 65
deemed to have the Qualifications and to be accepted
by the Parties.
(c) The mediation shall be conducted in the Dallas-Fort
Worth metropolitan area at a place and a time agreed
by the Parties with the mediator, or if the Parties
cannot agree, as designated by the mediator. The
mediation shall be held within 20 days after the
mediator is appointed.
(d) If either Party has substantial need for information
from the other Party in order to prepare for the
mediation, the Parties shall attempt to agree on
procedures for the formal exchange of information; if
the Parties cannot agree, the mediator's
determination shall be effective.
(e) Each Party shall be represented in the mediation by a
natural Person with authority to settle the Dispute
on behalf of that Party and, if desired by that
Party, by counsel for that Party. The Parties'
representatives in the mediation shall continue with
the mediation as long as the mediator requests.
(f) The mediation shall be subject to Chapter 154 of
Title 7 of the Texas Civil Practice and Remedies
Code.
(g) Unless otherwise agreed by the Parties, each Party
shall pay one-half of the mediator's fees and
expenses and shall bear all of its own expenses in
connection with the mediation. Neither Party may
employ or use the mediator as a witness, consultant,
expert, or counsel regarding the Dispute or any
related matters.
3
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 66
3. Arbitration. The arbitration of an unresolved Dispute shall
be conducted in this manner:
(a) Either Party may begin arbitration by filing a demand
for arbitration in accordance with the Arbitration
Rules. The Parties shall attempt to agree upon and
appoint a panel of three arbitrators promptly after
that demand is filed. Each of those arbitrators must
have the Qualifications, and at least one of those
arbitrators must be included in the Complex Dispute
List (unless no list of that kind is then
maintained).
(b) If the Parties are unable to agree upon any or all of
the arbitrators within ten days after the demand for
arbitration was filed (and do not agree to an
extension of that ten-day period), either Party may
request the Dallas office of the American Arbitration
Association to appoint the arbitrator or arbitrators,
who have the Qualifications (and at least one of whom
must be included in the Complex Dispute List, unless
no list of that kind is then maintained), necessary
to complete the panel in accordance with the
Arbitration Rules. Each arbitrator so appointed
shall be deemed to have the Qualifications and to be
accepted by the Parties as part of the panel.
(c) The arbitration shall be conducted in the Dallas-Fort
Worth metropolitan area at a place and a time agreed
by the Parties with the panel, or if the Parties
cannot agree, as designated by the panel. The panel
may, however, call and conduct hearings and meetings
at such other places as the Parties may agree or as
the panel may, on the motion of one Party, determine
to be necessary to obtain significant testimony or
evidence.
(d) The Parties shall attempt to agree upon the scope and
nature of any discovery for the arbitration. If the
Parties do not agree, the panel may authorize any and
all forms of discovery, including depositions,
interrogatories, and document
4
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 67
production, upon a showing of particularized need
that the requested discovery is likely to lead to
material evidence needed to resolve the Dispute and
is not excessive in scope, timing, or cost.
(e) The arbitration shall be subject to the Federal
Arbitration Act and conducted in accordance with the
Arbitration Rules to the extent they do not conflict
with this Section B.3 of this Dispute Resolution
Appendix. The Parties and the panel may, however,
agree to vary the provisions of this Section B.3 of
this Dispute Resolution Appendix or the matters
otherwise governed by the Arbitration Rules.
(f) The panel has no power to:
(i) rule upon or grant any extension, renewal,
or continuance of the Agreement;
(ii) award remedies or relief either expressly
prohibited by the Agreement or under
circumstances not permitted by the Agreement;
or
(iii) grant provisional or temporary injunctive
relief before rendering the final decision or
award.
(g) Unless the Parties otherwise agree, all Disputes
regarding or related to the same topic or event that
are subject to arbitration at one time shall be
consolidated in a single arbitration proceeding.
(h) A Party or other Person involved in an arbitration
under this Section B.3 may join in that arbitration
any Person other than a Party if
(i) the Person to be joined agrees to resolve the
particular dispute or controversy in
accordance with this Section B.3 and the
other
5
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 68
provisions of this Dispute Resolution
Appendix applicable to arbitration; and
(ii) the panel determines, upon application of the
Person seeking joinder, that the joinder of
that other Person will promote the
efficiency, expedition, and consistency of
the result of the arbitration and will not
unfairly prejudice any other party to the
arbitration.
(i) The arbitration hearing shall be held within 30 days
after the appointment of the panel. Upon request of
either Party, the panel shall arrange for a
transcribed record of the arbitration hearing, to be
made available to both Parties.
(j) The panel's final decision or award shall be made
within 30 days after the hearing. That final
decision or award shall be made by unanimous or
majority vote or consent of the arbitrators
constituting the panel, and shall be deemed issued at
the place of arbitration. The panel shall issue a
reasoned written final decision or award based on the
Agreement and Texas law; the panel may not act
according to equity and conscience or as an amicable
compounder or apply the law merchant.
(k) The panel's final decision or award may include:
(i) recovery of damages to the extent permitted
by the Agreement; or
(ii) injunctive relief in response to any actual
or threatened breach of the Agreement or any
other actual or threatened action or omission
of a Party under or in connection with the
Agreement.
(l) The panel's final decision or award shall be final
and binding upon the Parties, and judgment upon that
decision or award may be entered in any court having
jurisdiction over either or both of the Parties or
their respective assets. The Parties
6
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 69
specifically waive any right they may have to apply
or appeal to any court for relief from the preceding
sentence or from any decision of the panel made, or
any question of law arising, before the final
decision or award. If any decision by the panel is
vacated for any reason, the Parties shall submit that
Dispute to a new arbitration in accordance with this
Section B.3.
(m) Each Party shall pay one-half of the arbitrators'
fees and expenses, and shall bear all of its own
expenses in connection with the arbitration. The
panel has the authority, however, to award recovery
of all costs and fees (including attorneys' fees,
administrative fees and the panel's fees and
expenses) to the prevailing Party in the arbitration.
4. Recourse to Courts. Nothing in the Dispute Resolution
Procedure limits the right of either Party to apply to a court
or other tribunal having jurisdiction to:
(a) enforce the Dispute Resolution Procedure, including
the agreement to arbitrate in this Dispute Resolution
Appendix;
(b) seek provisional or temporary injunctive relief so as
to avoid irreparable damage or maintain the status
quo, until a final arbitration decision or award is
rendered or the Dispute is otherwise resolved; or
(c) challenge or vacate any final arbitration decision or
award that does not comport with Section B.3 of this
Dispute Resolution Appendix.
5. Submission to Jurisdiction. Each Party irrevocably submits to
the jurisdiction of the federal courts of the United States
and the state courts of Texas located in Tarrant County,
Texas. Each Party waives any defense or challenge to that
jurisdiction based on lack of personal jurisdiction, improper
venue, or inconvenience of forum.
7
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 70
6. Confidentiality. The proceedings of all negotiations,
mediations, and arbitrations as part of the Dispute Resolution
Procedure shall be privately conducted. The Parties shall
keep confidential all conduct, negotiations, documents,
decisions, and awards in connection with those proceedings
under the Dispute Resolution Procedure.
8
Dispute Resolution Appendix to Intercompany Agreement
<PAGE> 1
EXHIBIT 10.7
NON-COMPETITION AGREEMENT
Among
AMR CORPORATION
AMERICAN AIRLINES, INC.
TSG CORPORATION
and
THE SABRE GROUP, INC.
Dated: July 1, 1996
Non-competition Agreement
<PAGE> 2
NON-COMPETITION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Termination Due to Acquisition of TSGH or TSG . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Effect of Termination of IT Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 GEOGRAPHIC AREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4 NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5 PERMITTED ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 Permitted Electronic Travel Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.2 Prohibited Use of ETDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.3 Response to Actions by Air Carrier Competitors . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.4 Software Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.5 AMR Services Subsidiaries Excluded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6 THIRD PARTY SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 Endorsement of Third Party Products or Services . . . . . . . . . . . . . . . . . . . . . . . . . 5
7 AIRLINE ALLIANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8 OTHER ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9 EXTENDED DISPOSITION PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10 DISPOSITION OF SUBSIDIARY EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11 PARTICIPATION IN INDUSTRY ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12 REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13 LIMITS OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
14 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
Non-competition Agreement i
<PAGE> 3
<TABLE>
<S> <C> <C>
15 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16.1 Additional Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16.4 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16.5 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.7 Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.8 Invalidity of Provisions/Blue Penciling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.10 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.11 Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
Attachments
APPENDIX A Defined Terms
APPENDIX B Dispute Resolution Procedures
Non-competition Agreement ii
<PAGE> 4
NON-COMPETITION AGREEMENT
This Non-competition Agreement (together with the attachments hereto,
the "Agreement") is made and entered into as of July 1, 1996, by and among AMR
Corporation, a Delaware corporation ("AMR"), American Airlines, Inc., a
Delaware corporation ("American"), TSG Corporation, a Delaware corporation
("TSGH"), and The SABRE Group, Inc., a Delaware corporation ("TSG").
RECITALS
WHEREAS, this Agreement is ancillary to, and represents part of the
consideration under, the IT Services Agreement and the Marketing Cooperation
Agreement, each dated July 1, 1996, between American and TSG; and
WHEREAS, TSG conducts the TSG Business, and AMR and American formerly
conducted the TSG Business, on a world- wide basis; and
WHEREAS, AMR believes that in order to promote and protect the TSG
Business, it is in the best interests of AMR, as the common parent of American
and TSGH, to limit the ability of American and other AMR Subsidiaries to
Compete with the TSG Business; and
WHEREAS, the Parties recognize that TSG and its Affiliates are also
currently subject to the ENCOMPASS Non- Competition Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein and in the IT Services Agreement and the
Marketing Cooperation Agreement, the Parties hereto agree as follows:
1 DEFINED TERMS Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in Appendix A. This
Agreement shall be interpreted in accordance with the rules of interpretation
contained in Appendix A.
2 TERM This Agreement shall be effective as of the Effective Date
and shall continue in effect until December 31, 2001, unless this Agreement is
terminated sooner as provided elsewhere herein.
2.1 Termination Due to Acquisition of TSGH or TSG This
Agreement may be terminated by American and AMR if American gives notice of
termination of the IT Services Agreement under Section 24.5 of that agreement,
subject to the requirement that American provide
Non-competition Agreement 1
<PAGE> 5
ninety (90) days Notice to TSG that it also intends to terminate this Agreement
and provided that this Agreement shall not terminate unless the IT Services
Agreement shall also terminate.
2.2 Effect of Termination of IT Services Agreement If
the IT Services Agreement is terminated by American as a result of an Egregious
Breach or an SLA Termination Event (as those terms are defined in that
agreement) by TSG under that agreement, then this Agreement shall continue in
force but shall cease to apply to, and each of the Restricted Persons may
thereafter engage in, the activities described in clauses b., c., d. and e., of
the definition of TSG Business contained in Appendix A.
3 GEOGRAPHIC AREA The terms and conditions of this Agreement apply to
all of the activities world-wide of each of TSGH, TSG and the Restricted
Persons.
4 NON-COMPETITION Except as permitted under Section 2.2 or Section 5,
after the Effective Date and during the term of the Agreement, unless TSGH or
TSG has given its Consent, each of AMR and American shall not, and shall cause
the Restricted Persons not to, Compete with the TSG Business in any of the
following ways:
4.1 Through a directly-owned business or business unit that
Competes with the TSG Business.
4.2 Through a Subsidiary that Competes with the TSG Business.
4.3 Through active participation in the management of any
Person that derives more than $50 million or 20% of its
total revenues, whichever is less, from business
activities that Compete with the TSG Business.
4.4 Through direct ownership, or indirect ownership through
one or more Persons, of more than 5% in the aggregate of
the equity ownership of a Person that derives more than
$50 million or 20% of its total revenues, whichever is
less, from business activities that Compete with the TSG
Business.
4.5 Through direct ownership, or indirect ownership through
one or more Persons, of more than 5% in the aggregate of
any class of the equity ownership of a Person which class
reflects a participation in the revenues or profits of a
business unit that derives more than $50 million or 20% of
its total revenues, whichever is less, from business
activities that Compete with the TSG Business.
4.6 Through any understanding, commitment, agreement or
contractual arrangement with any Person which is likely to
have the same economic effect as the equity ownership
described in Section 4.4 or Section 4.5.
Non-competition Agreement 2
<PAGE> 6
5 PERMITTED ACTIVITIES Notwithstanding the restrictions in Section
4, and except as provided herein or as the Parties may otherwise agree in
writing, each of the Restricted Persons may engage in the activities permitted
by Section 5.1, Section 5.3, Section 5.4 and Section 5.5, and in any Permitted
Activity that might otherwise Compete with the TSG Business.
5.1 Permitted Electronic Travel Distribution The
Restricted Persons may develop, maintain, manage, market and provide an
Electronic Travel Distribution System as set forth in this Section 5.1.
(a) American Airlines Reservations Systems American may
develop, maintain, manage, market and provide an ETDS for and/or to
third parties, subject to the requirements that any such ETDS: (i)
must be branded using the name "American Airlines" and/or the name of
an airline marketing alliance in which American participates and which
involves an exchange of passenger or cargo traffic; (ii) if provided
directly to Travel Purchasers (i.e., not by an Intermediary), must (A)
apply a minimum 90 minute penalty in its availability displays to Air
Carrier services that Compete with AA Flights and (B) favor AA Flights
in all other displays that include multiple Air Carriers; and (iii) if
provided indirectly to Travel Purchasers (i.e., by an Intermediary),
must (A) apply a minimum 360 minute penalty in its availability
displays to Air Carrier services that Compete with AA Flights, (B)
favor AA Flights in all other displays that include multiple Air
Carriers and (C) be provided to Travel Purchasers without modification
or enhancement of the information or software provided by American to
the Intermediary.
(b) Travel Agents Notwithstanding the foregoing paragraph
(a), the Restricted Persons shall not market or provide any ETDS
described in this Section 5.1 to any Travel Agent if that Travel Agent
has during the preceding six calendar months generated twenty-five
percent (25%) or more of its total bookings through the SABRE system
(for this purpose the SABRE System does not include any ETDS provided
by American). The Restricted Persons may own, manage, control or
participate in the business of a retail travel agency that is not a
CRS or CRS owner and may use in such business any ETDS, whether
provided by TSG or by any third party.
5.2 Prohibited Use of ETDS With regard to any ETDS
described in Section 5.1, the Restricted Persons shall not: (a) permit or
facilitate the use of software that would allow the use of any such ETDS in a
manner contrary to Section 5.1, nor (b) permit or facilitate any Person's use
of any such ETDS or information provided by or through any such ETDS in a
manner contrary to Section 5.1. If TSG or any Restricted Person learns that an
ETDS described in Section 5.1 is being used in a manner not permitted by
Section 5.1, then the Restricted Persons shall cooperate with TSG at the
expense of the Restricted Person providing that ETDS to cause such
impermissible use to be terminated, including, if technologically feasible and
economically practicable, blocking any further such use.
Non-competition Agreement 3
<PAGE> 7
5.3 Response to Actions by Air Carrier Competitors Subject
to the restrictions in Section 7 and Section 8, if any Air Carrier
that Competes with American engages in an activity in connection with such
Air Carrier's Transportation Business, and if the restrictions imposed upon
American under this Agreement would prevent American from engaging in the
same activity and, in American's sole judgment, would be likely to place
American at a disadvantage in Competing against such Air Carrier in the
Transportation Business, then American may engage in such activity subject
to the following requirements: (i) prior to engaging in such activity,
American shall give TSG a Notice containing a description of the nature and
scope of the activity in which American proposes to engage in order to
alleviate such competitive disadvantage; (ii) American shall consult with
TSG within ten (10) days after such Notice concerning measures and/or
compensation that may be appropriate in order to mitigate, to the extent
possible, the adverse impact of such American activity on the economic
expectations of TSG under this Agreement while still alleviating such
competitive disadvantage to American. If American and TSG are unable to
agree upon appropriate measures and/or compensation, then American may
engage in such proposed activity and the issue of what, if any, compensation
to TSG may be appropriate shall constitute a Dispute that shall be resolved
pursuant to the Dispute Resolution Procedures.
5.4 Software Licensing Except as provided in the IT
Services Agreement or the Marketing Cooperation Agreement or as they may
otherwise agree in writing, any Restricted Person may: (i) license to any third
party End User any software that is owned by the Restricted Person in response
to a request or offer from that third party End User, except, however, that the
Restricted Persons shall not in an organized manner market or promote such
software or solicit such offers or requests; and (ii) receive from a third
party a royalty paid with respect to licenses by such third party of software
developed by it for the Restricted Person, except, however, that the Restricted
Person shall not in an organized manner market or promote such software. Any
Restricted Person shall, in response to unsolicited requests from third
parties, be permitted to demonstrate, or answer questions regarding, software
described in this Section 5.4.
5.5 AMR Services Subsidiaries Excluded AMR Services
Holding Corporation and its Subsidiaries shall be entitled to Compete with the
TSG Business, and nothing in this Agreement shall limit the ability of AMR
Services Holding Corporation or its Subsidiaries to Compete with the TSG
Business; except that AMR and American shall not, for the purpose of avoiding
the restrictions imposed on the Restricted Persons under this Agreement, direct
or permit AMR Services Holding Corporation or any of its Subsidiaries to engage
in any activity that Competes with the TSG Business if that activity either (i)
is engaged in principally to benefit one or more of the Restricted Persons
(other than any benefit derived solely as an investor), or (ii) principally
relates to the business or activities of one or more of the Restricted Persons.
6 THIRD PARTY SUPPLIERS Except as the Parties may otherwise agree in
writing, this Agreement does not limit the right or ability of the Restricted
Persons to obtain any products or services from third parties that may Compete
with the TSG Business. Except as prohibited herein, or as the Parties may
otherwise agree in writing, each of the Restricted Persons may market and
distribute their products and services through any Person.
Non-competition Agreement 4
<PAGE> 8
6.1 Endorsement of Third Party Products or Services
Except as the Parties may otherwise agree in writing, each Restricted Person
may authorize any third party to use any of that Restricted Person's logos,
trademarks and trade names in connection with advertising such Restricted
Person's participation in, purchase or use of any product or service offered by
such third party, and may endorse such product or service; except, however,
that such Restricted Person may not endorse any such product or service: (i) if
TSGH or TSG or any of their respective Subsidiaries is the exclusive provider
of a Competing product or service to such Restricted Person; or (ii) as being
preferred over or having qualities superior to any equivalent product or
service that TSGH or TSG or their respective Subsidiaries are then actually
providing to that Restricted Person.
7 AIRLINE ALLIANCES Notwithstanding the restrictions in Section
4.4, Section 4.5, Section 5 and Section 8, but subject to the restrictions of
Section 4.3, the Restricted Persons shall be entitled to acquire and hold,
through direct ownership or indirect ownership through one or more Persons, any
amount of the equity ownership of any Air Carrier, and any Subsidiary of such
an Air Carrier; except, however, that if AMR or American Controls, through
direct ownership or indirect ownership through one or more Persons, such Air
Carrier, and if such Air Carrier or a Subsidiary of such Air Carrier Competes
with the TSG Business, then, except as otherwise permitted by Section 9, the
Restricted Persons shall within 24 months after such acquisition reduce to 5%
or less their collective ownership interest in the Subsidiary that Competes
with the TSG Business or sell the assets which are used to Compete with the TSG
Business. If possible, the Restricted Persons shall provide TSG the
opportunity to bid for such ownership interest or assets.
8 OTHER ACQUISITIONS Notwithstanding the restrictions in Section
4.4, Section 4.5, and Section 5, but subject to the restrictions of Section
4.3, the Restricted Persons shall be entitled to acquire and hold, through
direct ownership or indirect ownership through one or more Persons, any amount
of the equity ownership or assets of any Person that Competes with the TSG
Business if the equity or assets were acquired as a part of a transaction
involving the acquisition of a Person or the assets of a business the primary
business activity of which does not Compete with the TSG Business; except,
however, that if AMR or American Controls, through direct ownership or indirect
ownership through one or more Persons, such a Person that Competes with the TSG
Business, then, except as otherwise permitted by Section 9, the Restricted
Persons shall within 24 months after such acquisition reduce to 5% or less
their collective ownership interest in the Person that Competes with the TSG
Business or sell the assets of such Person which are used to Compete with the
TSG Business. If possible, the Restricted Persons shall provide TSG the
opportunity to bid for such ownership interest or assets.
9 EXTENDED DISPOSITION PERIOD Notwithstanding the requirements of
Section 7 or Section 8 above, if AMR, American and their respective
Subsidiaries diligently attempt during the 24 month period specified in Section
7 or Section 8 above to reduce to 5% or less their collective ownership
interest in the Subsidiary that Competes with the TSG Business or sell the
assets which are used to Compete with the TSG Business, and if AMR, American
and their respective Subsidiaries are unable to do so during such 24 month
period as a result of any applicable legal requirement or
Non-competition Agreement 5
<PAGE> 9
fiduciary obligation, then such 24 month period shall be extended to the
minimum extent necessary to permit satisfaction or waiver of any such
applicable legal requirement or fiduciary obligation.
10 DISPOSITION OF SUBSIDIARY EQUITY Notwithstanding the restrictions
in Section 4.4 and Section 4.5 and Section 5, but subject to the restrictions in
Section 4.3, the Restricted Persons shall be entitled to retain and continue to
own, through direct ownership or indirect ownership through one or more Persons,
more than 5% in the aggregate of the equity ownership of a Person that was
previously Controlled by AMR or American.
11 PARTICIPATION IN INDUSTRY ORGANIZATIONS Notwithstanding the
restrictions in Section 4, each of the Restricted Persons shall be permitted to
participate in the management of, and to own, through direct ownership or
indirect ownership through one or more Persons, an interest in any air
transportation industry cooperative organization or similar Person in which
that ownership interest is determined by the volume of products or services
provided by such Person to the holder of the ownership interest. The following
Persons and their Subsidiaries, without limitation, are described in the
preceding sentence: (i) Airline Reporting Corporation ("ARC"); (ii) Societe
Internationale de Telecommunications Aeronautiques ("SITA"); and (iii)
Aeronautical Radio Inc ("ARINC"). In the event that any Restricted Person
hereafter acquires an interest in an Air Carrier that owns, through direct
ownership or indirect ownership through one or more Persons, an interest in a
Person described the first sentence of this Section 11, then the ownership
interest permitted by that sentence shall be increased by the ownership
interest attributable to the acquired Air Carrier.
12 REPRESENTATIONS Each of AMR and American, on behalf of itself and
its respective Subsidiaries represents, agrees and acknowledges that:
12.1 the enforcement of the non-competition provisions of this
Agreement would not be unduly burdensome to it;
12.2 the non-competition covenants of this Agreement were
negotiated as part of, in consideration of, and were
considered as an essential part of, this Agreement, the
Information Technology Services Agreement, and the
Marketing Cooperation Agreement, and that TSGH and TSG
each relied on those covenants in entering into those
agreements; and
12.3 the restrictions regarding the scope of activities,
duration, and geographic area that are part of this
Agreement are reasonable and do not impose a greater
restraint on it than is necessary to protect the goodwill
and other business interests of TSGH and TSG.
13 LIMITS OF LIABILITY EXCEPT AS PROVIDED BELOW, NO PARTY SHALL BE
LIABLE UNDER ANY CIRCUMSTANCES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, TREBLE,
STATUTORY, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION
LOST PROFITS, REVENUE OR SAVINGS, EVEN IF SUCH PARTY
Non-competition Agreement 6
<PAGE> 10
HAS BEEN ADVISED, KNEW, OR SHOULD HAVE KNOWN OF THE POSSIBILITY THEREOF.
IN THE EVENT THAT ANY OF THE RESTRICTED PERSONS MATERIALLY BREACHES SECTION 4
OR SECTION 5 OF THIS AGREEMENT BY WILFULLY OR INTENTIONALLY FAILING OR REFUSING
TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN TSGH AND TSG SHALL BE ENTITLED TO
RECOVER ACTUAL AND CONSEQUENTIAL DAMAGES IN AN AGGREGATE AMOUNT NOT TO EXCEED
$100,000,000.
14 REMEDIES If monetary damages permitted by Section 13 would not be
an adequate remedy for a breach or violation, or impending breach or violation,
of Section 4 or Section 5, then TSG and TSGH shall be entitled, as a matter or
right, to specific enforcement of this Agreement, issued by any court of
competent jurisdiction or by an arbitration panel under the Dispute Resolution
Procedures, restraining any breach or violation, or further or continued breach
or violation, of Section 4 (such right to be cumulative of, and not in lieu of,
any other rights or remedies to which TSG and TSGH may also then be entitled).
Specific enforcement shall be sought first through arbitration in accordance
with the Dispute Resolution Procedures.
15 NO ASSIGNMENT Except as specifically set forth in this Agreement,
no Party may assign, license, or otherwise transfer or convey this Agreement or
any of the rights or obligations created in this Agreement to any third Person
without the express prior written consent of the other Parties, which may be
withheld in each such other Party's sole discretion. Notwithstanding the
preceding sentence, TSGH and TSG may assign this Agreement, as a whole but not
in part, to any Affiliate or to any Person into which such Party is
amalgamated, merged or consolidated, whether by contract, operation of law or
otherwise. This provision shall not be construed to prohibit any Restricted
Person from merging into, consolidating with, or transferring substantially all
of its assets to, any Person, so long as such Person agrees to be bound by the
terms hereof.
16 MISCELLANEOUS
16.1 Additional Representations and Warranties Each Party
represents and warrants to the other that: (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation and place of principal business; (ii) the performance
of its obligations hereunder has been duly authorized by all necessary
corporate action; (iii) this Agreement is a legal, valid and binding obligation
enforceable against it in accordance with its terms subject to limitations
under bankruptcy, insolvency, reorganization, liquidation and other laws and
equitable principles relating to or affecting the enforcement of creditors'
rights generally; (iv) neither the execution and delivery of this Agreement nor
the performance of any of its obligations hereunder, nor the consummation of
any of the transactions contemplated hereby, will violate any agreement to
which it is a party or any provision of its Certificate of Incorporation,
By-Laws or other document of corporate governance, nor any applicable law,
regulation, rule, judgment, order or decree; and (v) it has duly obtained or
made all consents, approvals or authorizations of, or registrations,
declarations
Non-competition Agreement 7
<PAGE> 11
or filings with, any governmental authority are required as a condition to the
valid execution, delivery and performance of this Agreement on its part.
16.2 Notices Any notice or communication required or
permitted to be given or made to a Party under this Agreement must be typed in
English and personally delivered to the office of the person identified below
or delivered by registered mail with confirmed receipt (postage prepaid) or by
overnight courier or by telecopy (fax) with confirmation copy dispatched
simultaneously by registered mail with confirmed receipt (postage prepaid) to
the following addresses:
<TABLE>
<S> <C>
If to TSGH or TSG: TSG Corporation or The SABRE Group, Inc.
MD 4300
4255 Amon Carter Boulevard
Fort Worth, TX 76155
URGENT ATTENTION: President & Chief Executive Officer
Telecopy: (817) 967-4044
If to AMR or American: AMR Corporation or American Airlines, Inc.
MD 5623
4333 Amon Carter Boulevard
Fort Worth, TX 76155
URGENT ATTENTION: Chief Executive Officer
Telecopy: (817) 967-2752
</TABLE>
Notices delivered in the foregoing manner will be deemed effective on (i) the
day received if delivered personally or sent by courier; (ii) the business day
following the day received if sent by telecopy, or (iii) the third Business Day
following the date of dispatch by registered mail.
16.3 Binding Effect This Agreement shall be binding upon
and inure to the benefit of the Parties and their permitted successors and
assigns.
16.4 Integration This Agreement and the attachments hereto
constitute the entire agreement of the Parties pertaining to subject matter
hereof and supersede all prior agreements and understandings pertaining to that
subject, and this Agreement may not be amended, supplemented, or rescinded,
except in writing and signed by the authorized representatives of each of the
Parties.
16.5 No Third Party Beneficiaries Except as specifically
provided herein, no provision of this Agreement shall be for the benefit of or
be enforceable by or create any right in third persons, including employees,
retirees or creditors of any Party.
Non-competition Agreement 8
<PAGE> 12
16.6 Waiver A waiver of any covenant, duty, agreement, or
condition of this Agreement shall not be asserted against a Party unless it is
in writing signed by such Party. No waiver of a breach or inadequate
performance of any provision of this Agreement by a Party shall constitute a
waiver of any subsequent breach or inadequate performance of the same or any
other provision hereof. Failure by any Party to exercise any right or remedy
upon the breach of, any covenant, duty, agreement, or condition of this
Agreement shall not constitute a waiver of that breach or inadequate
performance or of any other breach or inadequate performance.
16.7 Multiple Originals This Agreement may be executed in
counterparts or multiple originals, all of which together shall constitute one
agreement binding on each Party.
16.8 Invalidity of Provisions/Blue Penciling If any provision of
this Agreement is or becomes wholly or partly invalid, illegal, or
unenforceable the validity, legality, and enforceability of the remaining
provisions shall continue in force unaffected, and the Parties shall meet as
soon as possible and negotiate in good faith upon a replacement provision that
is legally valid and that as nearly as possible achieves the objectives of the
Agreement and produces an equivalent economic effect. A replacement provision
shall apply as of the date that the replaced provision had become invalid,
illegal, or unenforceable. If the Parties cannot reach agreement after good
faith negotiations, a Party may invoke the Dispute Resolution Procedures
hereunder, the arbitrators shall have the authority to determine a replacement
provision that is legally valid and that as nearly as possible achieves the
objectives of the Agreement and produces an equivalent economic effect,
provided however, that such determination may not materially increase the
payment or performance obligations of any Party. If any court or arbitration
panel should determine that any limitation regarding the scope of any activity
restricted herein, or the duration and geographic area of the restrictions
herein, is unenforceable, then this Agreement shall not be invalidated, but
shall be amended to the extent required to render it valid and enforceable.
16.9 Governing Law This Agreement shall be construed and
interpreted, and its validity and enforceability shall be determined, under the
laws of the State of Texas without regard to any conflicts of law rules.
16.10 Dispute Resolution Any Dispute shall be resolved in
accordance with the Dispute Resolution Procedures set forth in Appendix B.
16.11 Choice of Forum For any actions to enforce arbitral awards
issued in accordance with the Dispute Resolution Procedures in Appendix B or
to enforce the Parties' compliance with the Dispute Resolution Procedures
in Appendix B, each Party consents to the exclusive jurisdiction of the
competent courts in Fort Worth, Texas, in connection with any action or
proceeding arising under this Agreement. Each Party irrevocably waives any
objection it may now or hereafter have as to the venue of any such action or
proceeding brought in such a court or that such court is an inconvenient forum.
Each Party hereby waives personal service of process and consents that service
of process upon it may be made by certified or registered mail, return receipt
requested, at its address specified or determined in accordance with Section
16.2.
Non-competition Agreement 9
<PAGE> 13
16.12 Compliance with Laws The Parties hereto shall comply with all
applicable laws and no Party shall perform any act, or fail to perform any act,
or be obligated to perform any act that could either (i) result in any
violation of any applicable law or any governmental or quasi-governmental
directive, policy or guideline or (ii) result in any material fine, penalty or
sanction.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Non-competition Agreement 10
<PAGE> 14
IN WITNESS WHEREOF, the undersigned duly authorized representatives of
the Parties have executed this Non- competition Agreement as of the day and
year first written above.
TSG CORPORATION AMR CORPORATION
/s/ Michael J. Durham /s/ Robert L. Crandall
By: Michael J. Durham By: Robert L. Crandall
Title: President and CEO Title: President and CEO
THE SABRE GROUP, INC. AMERICAN AIRLINES, INC.
/s/ Michael J. Durham /s/ Donald J. Carty
By: Michael J. Durham By: Donald J. Carty
Title: President and CEO Title: President
Non-competition Agreement 11
<PAGE> 15
NON-COMPETITION AGREEMENT
APPENDIX A
DEFINED TERMS
1. Definitions. As used in the Agreement, the following terms
shall have the following meanings:
"AA FLIGHT" refers to a flight segment operated either (i) under the American
Airlines IATA airline code designation or (ii) under an airline marketing
alliance in which American participates and which involves an exchange of
passenger or cargo traffic, whether operated by American or by any other Air
Carrier in such alliance.
"AFFILIATE" means, with respect to any entity at any time, any Person that
Controls such entity, is Controlled by such entity or is under common Control
with such entity
"AGREEMENT" means the Non-competition Agreement dated July 1, 1996, entered
into by and among the Parties, to which this Appendix A is attached and made a
part, and all schedules, appendices and attachments thereto.
"AIR CARRIER" means a Person whose principal business activity is operating a
passenger or cargo airline.
"AMERICAN" means American Airlines, Inc., a Delaware corporation.
"AMR" means AMR Corporation, a Delaware corporation.
"COMPETE" means to carry out, conduct or engage in, or to attempt to carry out,
conduct or engage in, any activity that is actually competitive with or may
potentially be competitive with the designated activity.
"CONSENT" means the written consent of a Party, which may be withheld or
conditioned in its sole discretion unless otherwise specified in the Agreement.
"CONTROL" means the ability to direct the management or operations of a Person
by reason of ownership of greater than 50% of the voting equity interests of
such Person. "Controlled", "Controls" and "Controlling" have corresponding
meanings.
"CRS" means an ETDS that is marketed principally to Travel Agents and that
collects, stores, and processes, and displays and distributes, on a neutral and
unbiased basis, information concerning air
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<PAGE> 16
and ground transportation, lodging and other travel related products
and services offered by system participants.
"DISPUTE" means any dispute, disagreement, claim, or controversy arising in
connection with or relating to the Agreement, or the validity, interpretation,
performance, breach, or termination of the Agreement, including any claim of
breach of representation or warranty or of non-performance.
"DISPUTE RESOLUTION PROCEDURES" means the alternative dispute resolution
procedures attached as Appendix B to the Agreement.
"DOLLARS" or "$" means the lawful currency of the United States of America.
"EFFECTIVE DATE" means July 1, 1996.
"ELECTRONIC TRAVEL DISTRIBUTION SYSTEM" or "ETDS" means a system providing any
of the following products or services using computers and digital electronic
transmission of data, via data network, telephone, wireless or cable
transmission or otherwise:
a. Publication and distribution of consumer
travel-related information from
computerized databases;
b. Processing of passenger travel-related
reservations and related transactions;
c. Marketing and sales of passenger
travel-related products and services and
related electronic transactions; or
d. Publication and distribution of passenger
travel-related documents (e.g., tickets).
"ENCOMPASS NON-COMPETITION AGREEMENT" means that certain Master Licensing,
Non-competition and Confidentiality Agreement dated December 5, 1989 among AMR
Information Services, Inc., (currently known as The SABRE Group, Inc.), AMRS,
Inc. (currently known as ENCOMPASS Holding, Inc., a Delaware corporation and
wholly-owned subsidiary of TSG), CSX LIS, Inc. (a Delaware corporation and a
subsidiary of CSX Corporation), CSXS, Inc. (currently known as ENCOMPASS/IS,
Inc., a Delaware corporation and wholly-owned subsidiary of CSX LIS, Inc.), and
GLV (currently known as ENCOMPASS, a Delaware general partnership between
ENCOMPASS Holding, Inc. and ENCOMPASS/IS, Inc.).
"END USER" means a Person licensed or otherwise authorized to use a system,
software or information solely as a consumer or solely in its internal business
operations, excluding use for remarketing, redistribution or provision of
services to third parties.
"INTERMEDIARY" means a Person licensed or otherwise authorized to use a system,
software or information other than solely as a consumer or solely in its
internal business operations; excluding any Person that merely transmits or
distributes such system, software or information without any modification or
enhancement.
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<PAGE> 17
"IT SERVICES AGREEMENT" means the Information Technology Services Agreement
dated as of July 1, 1996 between American and TSG.
"MARKETING COOPERATION AGREEMENT" means the Marketing Cooperation Agreement
dated as of July 1, 1996 between American and TSG.
"NOTICE" means a communication meeting the requirements of Section 16.2 of the
Agreement.
"PARTY" means each of the signatories to the Agreement. "Parties" means the
signatories to the Agreement, collectively.
"PERMITTED ACTIVITY" means any or all of the following activities:
a. Development, maintenance, marketing and
licensing of software that causes any
airline designator code on-line and code
share and connecting air transportation
services to be displayed by a CRS in a
preferential or highlighted manner;
b. Publication, marketing and distribution
of travel-related information in any
print media;
c. Consulting services; provided, however
that such services shall not primarily
relate to computer technology or
automation; or
d. Business activities conducted by the
following companies (or their
successors), which activities are the
type of activities conducted by it prior
to July 1, 1996, or as to which it had a
binding contract or a letter of intent
prior to July 1, 1996:
i. AMR Investment Services, Inc.;
ii. Airline Management Services Holding, Inc.; or
iii. any Subsidiary of any of the foregoing.
"PERSON" means any individual, corporation, limited liability company,
partnership, firm, joint venture, association, joint-stock company, trust,
estate, unincorporated organization, governmental or regulatory body or other
entity.
"RESTRICTED PERSONS" means AMR, American and their respective Subsidiaries,
excluding AMR Services Holding Corporation and its Subsidiaries. "Restricted
Person" means any of AMR or American, or any Subsidiary of AMR or American,
excluding AMR Services Holding Corporation and its Subsidiaries.
"SUBSIDIARY" any Person that is Controlled, directly or indirectly through one
or more intermediate Persons, by the specified Person; except, however, that as
to AMR the term "Subsidiary" shall exclude TSGH, TSG and their Subsidiaries.
"TRANSPORTATION BUSINESS" means transportation services provided directly by
the designated Person or by any third party in which such Person owns, through
direct ownership or indirect ownership
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A-3
<PAGE> 18
through one or more Persons, a greater than five percent (5%) voting equity
interest, including without limitation air and ground transportation services.
"TRAVEL AGENT" means a Person acting as a travel agency accredited by the
Airline Reporting Corporation or the International Air Transport Association to
issue travel documents on behalf of third parties.
"TRAVEL PURCHASER" means a Person booking travel-related services that are
intended to be used or consumed by that Person or by family members, officers,
directors and employees of such Person.
"TSG" means The SABRE Group, Inc., a Delaware corporation.
"TSG BUSINESS" means activities engaged in that result in earning fees,
royalties, revenues or other compensation or consideration directly or
indirectly in exchange for providing to third parties any of the following
products or services:
a. Electronic Travel Distribution Systems, including without
limitation a CRS;
b. Development, maintenance, marketing and licensing of software
for travel agency, travel, transportation and logistics
management;
c. Computer system integration;
d. Development, maintenance and operation of a data processing
center providing data processing services to third parties; and
e. Travel industry, transportation and logistics consulting
services relating primarily to computer technology and automation.
"TSGH" means TSG Corporation, a Delaware corporation, which AMR intends
presently to rename as The SABRE Group Holdings, Inc.
Rules of Interpretation. The following rules of interpretation apply
to the Agreement:
a. the word "or" is not exclusive and the words "include" and
"including are not limiting;
b. the words "hereby", "herein", "hereof", "hereunder" or other words
of similar meaning refer to the entire Agreement;
c. a reference to any agreement or other contract includes permitted
supplements, amendments and restatements;
d. a reference to a law includes any amendment or modification to
such law and any rules or regulations promulgated thereunder or
any law enacted in substitution or replacement therefor;
Non-competition Agreement - Appendix A - Defined Terms
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A-4
<PAGE> 19
e. a reference to a Person includes its permitted successors and
assigns;
f. a reference to an Article, Section, Annex, Exhibit or Schedule
which does not specify a particular agreement is to the relevant
Article, Section, Annex, Exhibit or Schedule of the Agreement;
g. a reference to an Article includes ll Sections and subsections
contained in such Article, and a reference to a Section or
subsection includes all subsections of such Section or
subsection;
h. all article and section titles or captions in this Agreement
are for convenience only and shall not be deemed part of this
Agreement and in no way define, limit, extend, or describe the
scope or intent of any of its provisions;
i. all terms not otherwise defined herein shall have the meaning
commonly ascribed thereto in the airline industry.
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A-5
<PAGE> 20
NON-COMPETITION AGREEMENT
APPENDIX B
DISPUTE RESOLUTION PROCEDURES
A. Defined Terms. Various capitalized terms not otherwise defined in
this Dispute Resolution Procedures Appendix are defined in Appendix A
to the Non-competition Agreement dated as of July 1, 1996 among AMR
Corporation, American Airlines, Inc., TSG Corporation, and The SABRE
Group, Inc. In addition, the following terms used in this Dispute
Resolution Procedures Appendix have the following meanings:
"ARBITRATION RULES" means the Rules for Commercial Arbitration
of the American Arbitration Association in effect at the time
of an arbitration in accordance with these Dispute Resolution
Procedures.
"COMPLEX DISPUTE LIST" means the Complex Dispute List, or if
that list is not maintained, another list of individuals
having similar qualifications, maintained by the American
Arbitration Association.
"INITIAL EXECUTIVE REVIEW COMMITTEE" means a committee
consisting of the Representative of each Party and the Vice
Presidents of each Party responsible for overseeing their
business planning departments.
"REPRESENTATIVE" means, as to AMR or American, its Managing
Director - Corporate Development and as to The SABRE Group,
its Managing Director - Planning.
"SECOND EXECUTIVE REVIEW COMMITTEE" means a committee
consisting of the Initial Executive Review Committee and the
Senior Vice Presidents (or equivalent officers) of each Party
responsible for overseeing their business planning
departments.
"QUALIFICATIONS" means (i) inclusion in the Complex Dispute
List or (ii) having extensive knowledge or experience about
the airline industry.
The interpretative matters set forth in Appendix A also apply to this
Dispute Resolution Appendix.
B. Dispute Resolution Procedure.
1. General Procedure. Except as otherwise stated in the
Agreement, the Parties shall resolve all Disputes in
accordance with this procedure:
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B-1
<PAGE> 21
(a) Each Party shall instruct its Representative to
promptly negotiate in good faith with the other
Party's Representative to resolve the Dispute.
(b) If the Representatives do not resolve the Dispute
within ten Business Days (or such longer period as
the Representatives may agree) after the date of
referral of the Dispute to them, the Dispute shall be
referred (by either or both of the Representatives)
to the Initial Executive Review Committee for
resolution.
(c) If the Initial Executive Review Committee does not
resolve the Dispute within ten Business Days (or such
longer period as that Committee may agree) from the
date of referral to it, the Dispute shall be referred
(by that Committee or any of its members) to the
Second Executive Review Committee for resolution.
(d) If the Second Executive Review Committee has not
resolve the Dispute within ten Business Days (or such
longer period as that Committee may agree) after the
date of referral to it, the Dispute shall be
submitted for resolution by the Parties' Presidents,
either of whom may submit the Dispute to non-binding
mediation in accordance with Section B.2 of this
Dispute Resolution Appendix.
(e) If the Dispute is not resolved by the Parties'
Presidents, and is not submitted to or resolved by
mediation, then the Dispute may be submitted by
either Party to binding arbitration in accordance
with Section B.3 of this Dispute Resolution Appendix.
A referral under any of Sections B.1(a), B.1(b), and B.1(c) of this
Dispute Resolution Appendix shall be made by written Notice to the
Persons designated in the applicable Section or Sections. The date of
referral is the last date that notice is given to all of the Persons
to whom the Dispute must have been referred.
2. Mediation. The mediation of an unresolved Dispute shall be
conducted in this manner:
(a) Either Party may submit the Dispute to mediation by
giving notice of mediation to the other Party. The
Parties shall attempt to agree upon and appoint a
sole mediator who has the Qualifications promptly
after that notice is given.
(b) If the Parties are unable to agree upon a mediator
within ten days after the date the Dispute is
submitted to mediation, either Party may request the
Dallas office of the American Arbitration Association
to appoint a mediator who has
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<PAGE> 22
the Qualifications. The mediator so appointed shall
be deemed to have the Qualifications and to be
accepted by the Parties.
(c) The mediation shall be conducted in the Dallas-Fort
Worth metropolitan area at a place and a time agreed
by the Parties with the mediator, or if the Parties
cannot agree, as designated by the mediator. The
mediation shall be held within 20 days after the
mediator is appointed.
(d) If either Party has substantial need for information
from the other Party in order to prepare for the
mediation, the Parties shall attempt to agree on
procedures for the formal exchange of information; if
the Parties cannot agree, the mediator's
determination shall be effective.
(e) Each Party shall be represented in the mediation by
at least its Representative or another natural Person
with authority to settle the Dispute on behalf of
that Party and may be represented by counsel for that
Party. The Parties' representatives in the mediation
shall continue with the mediation as long as the
mediator requests.
(f) The mediation shall be subject to Chapter 154 of
Title 7 of the Texas Civil Practice and Remedies
Code.
(g) Unless otherwise agreed by the Parties, each Party
shall pay one-half of the mediator's fees and
expenses and shall bear all of its own expenses in
connection with the mediation. Neither Party may
employ or use the mediator as a witness, consultant,
expert, or counsel regarding the Dispute or any
related matters.
3. Arbitration. The arbitration of an unresolved Dispute shall
be conducted in this manner:
(a) Either Party may begin arbitration by filing a demand
for arbitration in accordance with the Arbitration
Rules. The Parties shall attempt to agree upon and
appoint a panel of three arbitrators who have the
Qualifications promptly after that demand is filed.
(b) If the Parties are unable to agree upon any or all of
the arbitrators within ten days after the demand for
arbitration was filed (and do not agree to an
extension of that ten-day period), either Party may
request the Dallas office of the American Arbitration
Association to appoint the arbitrator or arbitrators,
who have the Qualifications, necessary to complete
the panel in accordance with the Arbitration Rules.
Each arbitrator so appointed shall be
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<PAGE> 23
deemed to have the Qualifications and to be accepted
by the Parties as part of the panel.
(c) The arbitration shall be conducted in the Dallas-Fort
Worth metropolitan area at a place and a time agreed
by the Parties with the panel, or if the Parties
cannot agree, as designated by the panel. The panel
may, however, call and conduct hearings and meetings
at such other places as the Parties may agree or as
the panel may, on the motion of one Party, determine
to be necessary to obtain significant testimony or
evidence.
(d) The Parties shall attempt to agree upon the scope and
nature of any discovery for the arbitration. If the
Parties do not agree, the panel may authorize any and
all forms of discovery, including depositions,
interrogatories, and document production, upon a
showing of particularized need that the requested
discovery is likely to lead to material evidence
needed to resolve the Dispute and is not excessive in
scope, timing, or cost.
(e) The arbitration shall be subject to the Federal
Arbitration Act and conducted in accordance with the
Arbitration Rules to the extent they do not conflict
with this Section B.3 of this Dispute Resolution
Appendix. The Parties and the panel may, however,
agree to vary the provisions of this Section B.3 of
this Dispute Resolution Appendix or the matters
otherwise governed by the Arbitration Rules.
(f) The panel has no power to:
(i) rule upon or grant any extension, renewal,
or continuance of the Agreement; or
(ii) award remedies or relief either expressly
prohibited by the Agreement or under
circumstances not permitted by the
Agreement.
(g) Unless the Parties otherwise agree, all Disputes
regarding or related to the same topic or event that
are subject to arbitration at one time shall be
consolidated in a single arbitration proceeding.
(h) A Party or other Person involved in an arbitration
under this Section B.3 may join in that arbitration
any Person other than a Party if
(i) the Person to be joined agrees to resolve
the particular dispute or controversy in
accordance with this Section B.3 and the
other
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<PAGE> 24
provisions of this Dispute Resolution
Appendix applicable to arbitration; and
(ii) the panel determines, upon application of
the Person seeking joinder, that the
joinder of that other Person will promote
the efficiency, expedition, and
consistency of the result of the
arbitration and will not unfairly
prejudice any other party to the
arbitration.
(i) The arbitration hearing shall be held within 30 days
after the appointment of the panel. Upon request of
either Party, the panel shall arrange for a
transcribed record of the arbitration hearing, to be
made available to both Parties.
(j) The panel's final decision or award shall be made
within 30 days after the hearing. That final
decision or award shall be made by unanimous or
majority vote or consent of the arbitrators
constituting the panel, and shall be deemed issued at
the place of arbitration. The panel shall issue a
reasoned written final decision or award based on the
Agreement and Texas law; the panel may not act
according to equity and conscience or as an amicable
compounder or apply the law merchant.
(k) The panel's final decision or award may include:
(i) recovery of Damages to the extent
permitted by the Agreement; or
(ii) injunctive relief in response to any
actual or threatened breach of the
Agreement or any other actual or
threatened action or omission of a Party
under or in connection with the
Agreement.
(l) The panel's final decision or award shall be final
and binding upon the Parties, and judgment upon that
decision or award may be entered in any court having
jurisdiction over either or both of the Parties or
their respective assets. The Parties specifically
waive any right they may have to apply or appeal to
any court for relief from the preceding sentence or
from any decision of the panel made, or any question
of law arising, before the final decision or award.
If any decision by the panel is vacated for any
reason, the Parties shall submit that Dispute to a
new arbitration in accordance with this Section B.3.
(m) Each Party shall pay one-half of the arbitrators'
fees and expenses, and shall bear all of its own
expenses in connection with the arbitration. The
panel has
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<PAGE> 25
the authority, however, to award recovery of all
costs and fees (including attorneys' fees,
administrative fees and the panel's fees and
expenses) to the prevailing Party in the arbitration.
4. Recourse to Courts. Nothing in the Dispute Resolution
Procedure limits the right of either Party to apply to a court
or other tribunal having jurisdiction to:
(a) enforce the Dispute Resolution Procedure, including
the agreement to arbitrate in this Dispute Resolution
Appendix;
(b) seek provisional or temporary injunctive relief, in
response to an actual or impending breach of the
confidentiality provisions of the Agreement or
otherwise so as to avoid irreparable damage or
maintain the status quo, until a final arbitration
decision or award is rendered or the Dispute is
otherwise resolved; or
(c) challenge or vacate any final arbitration decision or
award that does not comport with Section B.3 of this
Dispute Resolution Appendix.
5. Submission to Jurisdiction. Each Party irrevocably submits to
the jurisdiction of the federal courts of the United States
and the state courts of Texas located in Tarrant County,
Texas. Each Party waives any defense or challenge to that
jurisdiction based on lack of personal jurisdiction, improper
venue, or inconvenience of forum.
6. Confidentiality. The proceedings of all negotiations,
mediations, and arbitrations as part of the Dispute Resolution
Procedure shall be privately conducted. The Parties shall
keep confidential all conduct, negotiations, documents,
decisions, and awards in connection with those proceedings
under the Dispute Resolution Procedure.
Non-competition Agreement - Appendix B - ADR Procedures
DRAFT September 11, 1996 (5:58pm)
B-6
<PAGE> 1
EXHIBIT 10.8
MARKETING COOPERATION AGREEMENT
between
AMERICAN AIRLINES, INC
and
THE SABRE GROUP, INC.
Dated as of July 1, 1996
<PAGE> 2
MARKETING COOPERATION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Extension of Support Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3 Coordination of Marketing Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Marketing Liaison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Informational Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4 Professional SABRE Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Participation in other CRSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Level of Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.3 Annual Sales Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.4 Sales Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.5 Employee Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.6 Strategic Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.7 Initial Goods and Services Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.8 Annual Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.9 Quarterly Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.10 Joint Sponsorship of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5 BTS Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Participation in other Corporate Direct Systems . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Level of Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Marketing and Licensing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4 American Supplied Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.5 AAdvantage Miles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6 SI Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Participation in other Consumer Direct Systems . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 American Supplied Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Promotional Tickets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.4 AAdvantage Miles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.5 Joint Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7 Market Share Information (MIDT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1 Source of MIDT Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 MIDT Information System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.3 American Processing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.1 Professional SABRE Support Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.2 BTS Support Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 SI Products Support Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.4 Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.5 Interest on Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.6 Billing Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Indemnification for Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.3 Contested Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.4 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.6 No Other Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.7 Taxes and Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Use of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Excluded Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.4 Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.5 Permitted Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.6 Required Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.7 Title to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.8 Return of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.1 Right to Approve Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12 Performance Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.1 Termination for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.2 Termination for Nonpayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
14.3 Termination for Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.4 Nonexclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.1 Cross Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.2 Marketing Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.3 Infringement Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
18 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
18.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
18.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18.5 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
18.6 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.9 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.10 Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.11 Third-Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18.12 Approvals and Similar Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
18.13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
18.14 Modification and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
18.15 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Attachments
Schedule A Professional SABRE Support Payments
Exhibit A-1 to Schedule A Example of Calculation of Professional SABRE Support Payments
Exhibit A-2 to Schedule A Current American Accounts
Schedule B BTS Support Payments
Schedule C SI Products Support Payments
Attachment A Defined Terms
Attachment B Dispute Resolution Procedures
</TABLE>
iii
<PAGE> 5
MARKETING COOPERATION AGREEMENT
This Marketing Cooperation Agreement is made and entered into as of July 1,
1996 by and between American Airlines, Inc. and The SABRE Group, Inc.
RECITALS
WHEREAS, STIN is an operating division of TSG that markets
Professional SABRE, BTS and other Travel Distribution Systems principally to
travel agencies, corporations and other businesses; and
WHEREAS, SABRE Interactive is an operating division of TSG that
markets easySABRE and Travelocity and other Travel Distribution Systems
principally to individual consumers; and
WHEREAS, this Agreement is ancillary to a reorganization transaction
on the Effective Date under which, inter alia, the assets of STIN and SABRE
Interactive were indirectly contributed by American to TSG; and
WHEREAS, before the Effective Date, American's Air Transportation
Group, and its STIN and SABRE Interactive operating divisions cooperated in
marketing American's travel services and Travel Distribution Systems; and
WHEREAS, TSG and American believe that there will be mutual benefit in
having American continue to provide support in marketing STIN and SABRE
Interactive Travel Distribution Systems to mutual customers of American and
TSG; and
WHEREAS, American and TSG now desire to describe the support that
American will provide in marketing STIN and SABRE Interactive Travel
Distribution Systems and the compensation that TSG will pay to American in
consideration for such support;
NOW, THEREFORE, in consideration of the mutual covenants set forth
below, American and TSG hereby agree as follows:
1 Definitions Terms used as defined terms in this Agreement will,
unless otherwise indicated, have the meanings ascribed thereto in
Attachment A hereto.
2 Term The term of this Agreement will commence on the Effective Date
and, unless terminated earlier as provided herein, will expire when
the last Support Period expires or terminates.
2.1 Extension of Support Periods Upon any scheduled expiration of
any Support Period, including any Support Period that may have
been previously extended under this Section 2.1, that Support
Period will be automatically extended for twelve (12)
1
<PAGE> 6
months, unless at least sixty (60) days prior to such
scheduled expiration, either Party provides Notice to the
other Party that the notifying Party does not desire to extend
that Support Period.
3 Coordination of Marketing Support
3.1 Marketing Liaison American will appoint an individual from
within its Passenger Sales organization who, during the Term,
will be dedicated to supporting TSG's marketing organization
and coordinating the management of this Agreement on behalf of
American. Such individual will be responsible for: (a)
managing the ongoing relationships and promotional programs
between American's Passenger Sales organization and TSG's
field sales organizations; (b) developing an annual sales
plan, in conjunction with American's Passenger Sales and
Distribution Planning organizations, as it relates to
American's marketing functions for TSG; (c) planning and
executing quarterly executive strategy meetings between the
American and TSG executive sales team; (d) coordinating TSG's
presence and participation in American's annual Executive
Business Council event; (e) identifying, planning and
executing joint promotional opportunities, including employee
recognition plans; (f) coordinating American's implementation
of its sales plan for TSG and American's execution of TSG's
tactical plans related to travel agency, corporate and
consumer distribution.
3.2 Informational Meetings Prior to October 1, 1996, each of TSG
and American will provide its sales organization with an
overview of this Agreement and the processes by which it will
be managed by its sales organization.
4 Professional SABRE Support In support of TSG's marketing of
Professional SABRE, each of American and TSG will provide during the
Professional SABRE Support Period the marketing and promotional
support described in this Section 4 and specified as its obligation.
4.1 Participation in other CRSs American will not provide to any
CRS other than SABRE any of the marketing support described in
Section 4. Nothing in this Agreement will prevent American
from: (i) having its products and services displayed or listed
in any CRS, (ii) authorizing any CRS to use American's
trademarks and tradenames in connection with advertising
American's participation in such CRS; and (iii) endorsing
another CRS, provided, however, that American may not endorse
such CRS as being preferred over SABRE or having qualities
superior to SABRE.
4.2 Level of Support American will provide marketing and
promotional support to Professional SABRE that is at least at
the same level and quality as American's Passenger Sales
organization provided to Professional SABRE during the twelve
months prior to the Effective Date. During June of each
Contract Year, the Representatives of each Party shall meet
and the Parties shall negotiate regarding methods to be
employed during the next Contract Year for incentivizing
Corporate
2
<PAGE> 7
Customers to make their Bookings through SABRE. If the
Parties fail to agree upon such methods, then such failure
shall constitute a Dispute that shall be resolved through the
Dispute Resolution Procedures and, pending such resolution,
the Parties shall continue to employ the methods upon which
they most recently agreed.
4.3 Annual Sales Plan. In June of each Contract Year, American
will prepare and submit to TSG its annual sales plan for the
marketing of Professional SABRE for the following Contract
Year. American and TSG shall thereafter consult on that sales
plan.
4.4 Sales Training In each Contract Year after the initial
Contract Year, American will provide, by itself and/or jointly
with TSG, and will cause each of its Passenger Sales
organization sales personnel to receive, a minimum of eight
hours of training relating to American's obligations to market
Professional SABRE and the TSG products and services related
to Professional SABRE. American may conduct such training in
conjunction with other educational events or may offer such
training through self-study, multi-media or other automated
education and training methodology. Such training will
include updates on new TSG products, services, strategies and
customer incentives.
4.5 Employee Reviews American will tell each of its Passenger
Sales organization sales personnel during his/her performance
reviews that part of his/her job function is to market
Professional SABRE pursuant to this Agreement.
4.6 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
4.6.1 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
4.6.2 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
4.6.3 TSG may purchase from American additional promotional
items of the type that are generally used by American
for promotional purposes. [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
4.6.4 Except as permitted by Section 4.6.2, promotional
goods and services obtained by TSG under this Section
4.6 [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] shall not be used by
TSG's employees or by the Strategic Customers for
TSG's other business purposes, such as attending TSG
training sessions.
3
<PAGE> 8
4.7 Initial Goods and Services Credit On September 30, 1996,
American will provide to TSG a credit usable towards TSG's
purchase from American of marketing and promotional goods and
services [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION] TSG may in any of such Contract Years
apply a greater or lesser amount of such credit.
4.8 Annual Credit At the end of the each Contract Year, American
will issue to TSG a credit [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] which TSG may, not
withstanding paragraph 2(c) of Schedule A, apply in TSG's
discretion against the amounts owed to American under Section
8.1 of this Agreement.
4.9 Quarterly Reporting At the end of each calendar quarter, and
at the end of each calendar year, American will advise TSG of
the Value of the promotional goods and services provided by
American during that period.
4.10 Joint Sponsorship of Events American and TSG will jointly
participate in and sponsor various events, functions and
activities, including, but not limited to: (i) American and
TSG's annual global sales events, (ii) American and TSG's
regional conferences, (iii) promotional events, functions and
activities for American and TSG top accounts (e.g., American's
Executive Business Council, National Accounts functions, TSG's
top account functions, etc.), (iv) various American and TSG
local customer events, functions and activities, (v) special
event tickets for Strategic Customer entertainment (e.g., NCAA
Basketball Final Four, World Cup, etc.), (vi) sponsorship of
recognition or familiarization trips for key customers
(American will provide transportation of key customers and
other items at the discretion of the Managing Director of its
Passenger Sales organization), (vii) TSG sponsorship,
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] of recognition events, functions and activities
for American's top Passenger Sales employees. Joint
participation and sponsorship in such events, functions and
activities includes participation in the events, providing
financial support, training, promotional materials, and other
goods and services as mutually agreed from time to time.
4.10.1 American and TSG will each budget [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] during each Contract Year to fund its
participation and events, functions and activities of
the types described in Section 4.10. American and
TSG will agree as part of their annual budgeting
processes on the types of events, functions and
activities they will jointly sponsor and in which
they will jointly participate, and the level of
funding to be allocated to each events, functions and
activities. If American and TSG are unable to agree
on the events, functions and activities that they
will jointly fund during a Contract Year, then
4
<PAGE> 9
each Party will provide to the other Party
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION] funding for events, functions
and activities chosen by the other Party,
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
5 BTS Support In support of TSG's marketing of BTS, each of American
and TSG will provide during the BTS Support Period the marketing and
promotional support described in this Section 5 and specified as its
obligation.
5.1 Participation in other Corporate Direct Systems American will
not market, endorse or promote any Corporate Direct System
other than BTS. American will not provide to any other
Corporate Direct System any of the marketing support described
in Section 5. Nothing in this Agreement will prevent
American from: (i) having its products and services displayed
or listed in any Corporate Direct System, and (ii) authorizing
any Corporate Direct System to use American's trademarks and
tradenames in connection with advertising American's
participation in such Corporate Direct System.
5.2 Level of Support During November of each Contract Year, the
Representatives of each Party shall meet and the Parties shall
negotiate regarding methods to be employed during the next
Contract Year for incentivizing Corporate Customers to make
their Bookings through SABRE using BTS. If the Parties fail
to agree upon such methods, then such failure shall
constitute a Dispute that shall be resolved through the
Dispute Resolution Procedures and, pending such resolution,
the Parties shall continue to employ the methods upon which
they most recently agreed.
5.3 Marketing and Licensing Agent The Parties will negotiate and
execute a BTS License Agreement under which TSG will designate
American as its non-exclusive marketing and licensing agent
for BTS and will grant to American the non-exclusive,
world-wide right to market and license BTS, at American's
option, either in the name of and on behalf of TSG, or in
American's own name as a sublicensor, to Corporate Customers
pursuant to a form of BTS end user license agreement that is
mutually acceptable to TSG and American. Except as provided
in the BTS License Agreement, American agrees not to sell,
license, distribute or otherwise commercially exploit BTS,
during the BTS Support Period.
5.4 American Supplied Functionality American will grant to TSG
during the BTS Support Period the right to access American
information, inventory and functions for management of
corporate travel, excluding all American information and
applications that provide access to inventory not generally
viewable to and bookable by Travel Agents or the general
public. [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
5
<PAGE> 10
5.5 AAdvantage Miles Subject to American and TSG executing a
mutually agreeable AAdvantage Participation Agreement,
American will sell AAdvantage miles to TSG [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION] TSG
may use those AAdvantage miles under the same terms and
conditions as are then applicable to AAdvantage participants
with similar volumes of AAdvantage miles purchases.
6 SI Support In support of TSG's marketing of the SI Products, each of
American and TSG will provide during the SI Support Period the
marketing and promotional support described in this Section 6 and
specified as its obligation.
6.1 Participation in other Consumer Direct Systems Nothing in
this Agreement will prevent American from: (i) having its
products and services displayed or listed in any Consumer
Direct System, (ii) authorizing any Consumer Direct System to
use American's trademarks and tradenames in connection with
advertising American's participation in such Consumer Direct
System; and (iii) endorsing another Consumer Direct System in
any manner.
6.2 American Supplied Functionality [CONFIDENTIAL PORTION OMITTED
AND FILED SEPARATELY WITH THE COMMISSION] TSG will not
publish, disclose, cache or distribute NetSAAvers Program
fares. American may change or discontinue the NetSAAvers
Program at any time.
6.3 Promotional Tickets [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] Such tickets shall be used by
TSG solely for purposes of promoting the SI Products.
6.4 AAdvantage Miles Subject to American and TSG executing a
mutually agreeable AAdvantage Participation Agreement,
American will sell AAdvantage miles to TSG [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION] TSG
may use these AAdvantage miles solely to promote AA Bookings
by AAdvantage members through SI Products [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION] Any
other TSG promotions targeted to American's AAdvantage members
using these [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION] miles will require prior approval of
American, which American may withhold in its discretion. If
American elects not to support a specific promotion to
AAdvantage members requested by TSG, TSG will have the right
to buy AAdvantage miles [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] subject to the terms of
the AAdvantage Participation Agreement, TSG may use those
AAdvantage miles under the same terms and conditions as are
then applicable to AAdvantage participants with similar
volumes of AAdvantage miles purchases.
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6.5 Joint Development [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] Any development costs related
to requirements unique to one Party will be fully funded by
that Party.
7 Market Share Information (MIDT) TSG will use the MIDT information as
specified in Schedule A in order to measure market share and to
quantify the benefits of American's marketing and promotional support
efforts under this Agreement.
7.1 Source of MIDT Information [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION]
7.1.1 If TSG is not able to obtain such MIDT information,
and if American is able to obtain such MIDT
information [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] and if American is
permitted to disclose the MIDT information to TSG,
then, subject to Section 7.1.2, American will acquire
the MIDT information and will provide the MIDT
information to TSG monthly. [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
7.1.2 If American is unable to share such MIDT information
with TSG in detail, and if American is permitted to
disclose summary MIDT information to TSG, then
American will acquire, process and store the MIDT
information and will provide summary MIDT information
to TSG monthly, according to TSG's specifications and
as necessary [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION]
7.2 MIDT Information System In the event that American provides
MIDT information to TSG as described in Section 7.1.27.1.2,
American or its designee will, at TSG's expense, develop and
operate a system, if necessary, to calculate from such MIDT
summary information the number of all Bookings for each CRS
system included in such MIDT summary information, summed at
the regional and divisional level. American will also
monitor, at TSG's expense, and inform TSG of, changes that may
affect MIDT information so that American can properly maintain
and enhance the booking share measurement system as necessary.
7.3 American Processing Services American will provide to TSG
processing services at a level equivalent to the level of
processing services provided by American to TSG prior to the
Effective Date regarding the MIDT information. [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
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8 Payments For the marketing and promotional support provided by
American under this Agreement, TSG will pay to American the amounts
specified in this Section 8.
8.1 Professional SABRE Support Payments For American's marketing
support of Professional SABRE as described in Section 4, TSG
will pay American the amounts calculated in accordance with
Schedule A to this Agreement.
8.2 BTS Support Payments For American's marketing support of BTS
as described in Section 5, TSG will pay American the amounts
calculated in accordance with Schedule B to this Agreement.
8.3 SI Products Support Payments For American's marketing support
of SI Products as described in Section 6, TSG will pay
American the amounts calculated in accordance with Schedule C
to this Agreement.
8.4 Payment Terms The preparation of statements for, and payment
schedule for, the services provided by American in connection
with (i) the support of Professional SABRE will be as set
forth on Schedule A, (ii) the support of BTS will be as set
forth on Schedule B, (iii) the support of SI Products will be
as set forth on Schedule C.
8.5 Interest on Late Payments Any amounts (excluding Taxes) not
paid when due will thereafter bear interest until paid at an
annual rate that is equal to the lesser of (i) the highest
rate allowed by applicable law and (ii) two percentage points
above the prime rate, as reported in the Wall Street Journal
from time to time.
8.6 Billing Disputes Each Party will have 90 days after the date
each statement was provided in which to verify the accuracy
and completeness of that statement, including the information
provided by each Party that was used to calculate that
statement (including any MIDT information). Any objection to
that statement by either Party must be submitted to the
Dispute Resolution Procedure within 90 days after the date
that statement was provided or any claim based on that
objection shall be waived. Each of TSG and American will have
the right to have an independent third party auditor review
the books and records of the other Party to the extent
reasonably required to verify the accuracy and completeness of
the information provided by the other that was used to
calculate any payments due under this Agreement.
9 Taxes
9.1 Indemnification for Certain Taxes Each of American and TSG
shall be responsible for [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] the Taxes, imposed on,
based on, or measured by any transfer of services (except
transportation and AAdvantage miles) by one Party to the other
pursuant to this Agreement; provided, however, if a government
tax authority
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<PAGE> 13
assesses either Party for any service provided under this
Agreement (or otherwise so notifies either Party in writing of
the taxability of any such service) then starting with
purchases of such services made six months after the date of
such assessment (or such written notice), the Party purchasing
such service shall be responsible for [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] the Taxes on
such future services purchased by it under this Agreement.
The purchasing Party shall be responsible for [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION] the
Taxes, imposed on, based on, or measured by any transfer of
property, transportation, or AAdvantage miles by one Party to
the other pursuant to this Agreement.
9.1.1 Notwithstanding the foregoing, neither Party shall
have any liability to the other for: (a) Taxes
incurred or arising with respect to any transaction
occurring after the termination of this Agreement;
(b) penalties resulting from tax return positions
taken by the Party being indemnified that are
unrelated to this Agreement, or from the willful
misconduct or gross negligence of the Party being
indemnified; (c) Taxes either not yet due and payable
or (unless payment is a condition to contest) being
contested in accordance with Section 9.3; or (d)
taxes based on or measured by the net income,
capital, net worth of the indemnified Party, or
franchise or similar taxes of the indemnified Party.
9.2 Property Taxes Subject to other leases and agreements, each
of TSG and American is responsible for the reporting and
payment of any ad valorem taxes due on property owned by it or
leased by it from a third party.
9.3 Contested Assessments If one Party (the "Tax Indemnitee")
receives notice from any taxing authority with respect to an
assessment or potential assessment or imposition of any Tax
("Tax Notice") that the other Party would be responsible for
indemnifying in whole or in part pursuant to Section 9.1 (the
"Assessed Taxes"), the Tax Indemnitee shall promptly provide
the other Party with a copy of such Tax Notice, and, at the
request of the other Party, shall timely contest the
assessment of the Assessed Taxes and diligently pursue such
contest until such assessment has been upheld by a decision of
an appellate court. If the other Party is liable to indemnify
the Tax Indemnitee for 100% of the Assessed Taxes under this
Agreement, then the cost of contesting that issue shall be
borne 100% by the other Party, who may direct the contest of
that issue. If the other Party is liable to indemnify the Tax
Indemnitee for 50% of the Assessed Taxes under this Agreement,
the cost of contesting that issue shall be borne 50% by the
other Party and in such situations the Tax Indemnitee shall
have the right to control the contest with respect to that
issue. Either Party may, or may require the other Party to,
settle the contest with respect to that issue, or withdraw the
issue from contest provided the Party requesting settlement or
withdrawal agrees to pay 100% of the Assessed Taxes assessed
or settled upon, and
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<PAGE> 14
further provided that any settlement is limited to the
Assessed Taxes and period at issue. Any Tax Notice provided by
either Party to the other Party under this Section 9.3 shall
also be copied directly to the tax department of that other
Party c/o the "Director of Taxes" at the other Party's address
for Notice.
9.4 Tax Refunds Either Party may in good faith require the other
to choose and do one of the following: (a) apply for and
diligently pursue a refund of Taxes otherwise subject to
indemnification by the requiring Party under Section 9.1, (b)
if permitted by law, assign its rights to a refund claim to
the requiring Party, (c) pay to the requiring Party an amount
equal to the Taxes paid by the requiring Party which would
have been subject of a refund claim with interest at the
statutory refund rate, or (d) follow the Dispute Resolution
Procedure and pay to the requiring Party the amount the
arbitrator determines is reflective of the weighted
probability of success of recovery of Taxes (with no reduction
for attorneys' fees) had the claim been pursued at the
judicial level until the result had been determined by the
decision of an appellate court. Except for clause (c) under
this Section 9.4 the Parties shall share in any refund (or
amount rewarded under clause (d) of this Section 9.4) of Taxes
paid under this Agreement in proportion to their share of
payment of such Taxes refunded.
9.5 Cooperation Each Party shall, at the expense of the requiring
Party, unless otherwise stated, provide the other with such
cooperation as such other Party may reasonably request in
contesting any Taxes and in minimizing Taxes incurred in
connection with this Agreement. All actions taken by either
Party pursuant to this Section 99 must be founded on a
reasonable tax position, and, the other Party at its expense,
may require the Party taking such action to either reverse its
actions or produce written advice of counsel (reasonably
acceptable to both Parties) that such action is in good faith
and based upon a position that is reasonable under the tax
laws.
9.6 No Other Tax Indemnity Section 9 contains the exclusive
allocations pursuant to this Agreement of responsibilities
between, and indemnification obligations of, the Parties
regarding Taxes, it being the intent of the Parties that
Section 15 does not apply to Taxes.
9.7 Taxes and Dispute Resolution Disputes between the Parties
concerning Section 9 are subject to the Dispute Resolution
Procedure; provided, however, that Disputes as to the amount
of Tax, if any, owed to a taxing authority (including disputes
between a Party and a taxing authority) may be resolved by any
appropriate administrative or legal procedure available to the
Parties under this Agreement but without regard to any
provisions of the Dispute Resolution Procedure.
9.8 Survival The indemnity obligations under Section 9.1 shall
continue on and after expiration or the termination of this
Agreement.
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10 Confidentiality
10.1 Confidential Information Except as otherwise provided in this
Agreement or agreed to by the Parties, the following
information obtained by a Party from the other Party is
proprietary and confidential information of the disclosing
Party (the "Confidential Information"): (a) Information
relating to the disclosing Party's business, financial
condition or performance, or operations that the disclosing
Party treats as confidential or proprietary; (b) Copies of
records and other information obtained from a Party's
examination of the disclosing Party's records under Section
8.6; (c) The terms and performance of, any breach under, or
any Dispute regarding, this Agreement; (d) The Parties'
conduct, decisions, documents, and negotiations as part of,
and the status of, any Dispute resolution proceedings under
the Dispute Resolution Procedure; (e) Any other information,
whether in a tangible medium or oral and whether proprietary
to the other Party or not, marked or clearly identified by the
disclosing Party as confidential or proprietary. TSG
acknowledges and agrees that the list of Current American
Accounts attached as Exhibit A-2 is the Confidential
Information of American.
10.2 Use of Confidential Information Neither Party may use any of
the other Party's Confidential Information other than as
required to perform its obligations or exercise its rights and
remedies, including as part of the resolution of any Dispute
or of a tax audit or dispute, under this Agreement.
10.3 Excluded Information A Party has no obligation under this
Section 10 regarding any information, including information
that would otherwise be Confidential Information, to the
extent that the information: (a) is or becomes publicly
available or available in the industry other than as a result
of any breach of this Agreement or any other duty of that
Party; or (b) is or becomes available to that Party from a
source that, to that Party's knowledge, is lawfully in
possession of that information and is not subject to a duty of
confidentiality, whether to the other Party or another entity,
violated by that disclosure.
10.4 Standard of Care Each Party shall use the same degree of care
in maintaining the confidentiality and restricting the use of
the other Party's Confidential Information as that Party uses
with respect to its own proprietary or confidential
information, and in no event less than reasonable care.
10.5 Permitted Disclosures A party may disclose Confidential
Information to its officers, directors, agents, or employees
as necessary to perform any obligation or exercise any right
under this Agreement. Each Party shall inform each of those
persons to whom any Confidential Information is communicated
of the obligations regarding that information under this
Section 10 and impose on that person the obligation to keep
the Confidential Information confidential. Each Party shall
be responsible for any breach of that Party's obligations
under this Section 10 by its officers, directors, agents, or
employees.
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<PAGE> 16
10.6 Required Disclosures Each Party may disclose Confidential
Information in response to a request for disclosure by a court
or another governmental authority, including a subpoena, court
order, or audit-related request by a taxing authority,
subject to the requirements that such Party: (a) promptly
notifies the other Party of the terms and the circumstances of
that request; (b) consults with the other Party, and
cooperates with the other Party's reasonable requests, to
resist or narrow that request; (c) furnishes only information
that, according to written advice (which need not be a legal
opinion) of its legal counsel, that Party is legally compelled
to disclose; and (d) uses its reasonable efforts to obtain an
order or other reliable assurance that confidential treatment
will be accorded the information disclosed.
10.6.1 A Party need not comply with the conditions to
disclosure in Section 10.6 to the extent that (a) the
request or order of the governmental authority in
effect prohibits that compliance; or (b) on the
advice of legal counsel, it is otherwise legally
obligated to do so (for example, to comply with
applicable securities laws) or (c) it is necessary to
do so to defend that Party's tax position before, or
respond to any tax audit inquiry from, a governmental
authority.
10.7 Title to Information Confidential Information of a Party
disclosed by it to the other Party under this Agreement shall
remain the property of the disclosing Party. Except as
expressly granted in Section 10.2, nothing in this Agreement
grants or conveys to the other Party any ownership or other
rights in any Confidential Information of the other Party.
10.8 Return of Confidential Information Upon request of the
disclosing Party, the other Party shall return or, if
requested by the disclosing Party, shall destroy Confidential
Information of the disclosing Party in the other Party's
possession. The return or destruction (i) shall include
removal or deletion of Confidential Information from all data
bases and magnetic media of the other Party, and (ii) need not
be effected to the extent that it would be impractical or
unduly burdensome to effect.
10.9 Survival The obligations under Section 10 shall continue on
and after the expiration or termination of this Agreement.
11 Trademarks Each of American and TSG hereby grants to the other Party
during the relevant Support Period a license (or sublicense to the
extent permitted by any head license) to use and publish in
promotional and other similar materials, solely to the extent
reasonably required to perform its obligations under this Agreement,
the logos, tradenames, trademarks and service marks owned by or
licensed to the licensor.
11.1 Right to Approve Use Prior to either Party using the other
Party's proprietary marks on or in connection with any new
material in written or electronic form, the Party desiring to
use the marks will deliver to the other Party a copy of the
new written or electronic
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material for the other Party's review and approval in its sole
discretion. Any failure to approve or disapprove the material
within 10 business days of receipt will be deemed an approval
of that material. Neither Party may alter in any manner the
proprietary marks of the other. All goodwill associated with
any mark will be owned by the Party that is the licensor of
said mark.
12 Performance Review A designated Representative of American and a
designated Representative of TSG will meet as often as shall
reasonably be requested by either Party to review the performance of
the Parties under this Agreement. Each Party will bear its own costs
and expenses incurred in connection with such review.
13 Dispute Resolution Except to the extent provided in Section 9,
American and TSG agree to resolve all Disputes in accordance with the
Dispute Resolution Procedure, and American and TSG shall not exercise
any right of termination under Section 14.1 or Section 14.2 until the
Dispute Resolution Procedure has been followed.
14 Termination
14.1 Termination for Cause In the event that either Party
materially breaches this Agreement (except for a breach of
payment obligations hereunder), which breach is not
substantially cured within sixty (60) days after written
Notice is given to the breaching Party specifying the breach,
then the Party not in breach may, by giving written Notice
thereof to the breaching Party, terminate this Agreement in
whole, or terminate the Support Period that is related to the
area of support that is the subject of the breach, as of a
future date specified in such Notice of termination.
14.2 Termination for Nonpayment In the event that TSG breaches its
obligation to pay to American any amount due to American
hereunder and does not cure such breach within fifteen (15)
days after being given written Notice of such breach, then
American may, by giving written Notice thereof to TSG,
terminate this Agreement in whole, or terminate the Support
Period that is related to the area of support that is the
subject of the breach, as of a future date specified in such
Notice of termination.
14.3 Termination for Insolvency In the event that either Party is
unable to pay its debts generally as they come due or is
declared insolvent or bankrupt, is the subject of any
proceedings relating to its liquidation, insolvency or for the
appointment of a receiver or similar officer for it, makes an
assignment for the benefit of all or substantially all of its
creditors, or enters into an agreement for the composition,
extension, or readjustment of all or substantially all of its
obligations, then the other Party may, by giving written
Notice thereof to such Party, terminate this Agreement as of a
future date specified in such Notice of termination.
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14.4 Nonexclusive Remedy The termination rights under this Section
14 are not exclusive of any other equitable or legal right or
remedy of a non-breaching Party, including any right or remedy
granted in this Agreement.
15 Indemnities
15.1 Cross Indemnity TSG and American each agree to indemnify,
defend and hold harmless the other from any and all Losses
arising out of (i) the death or bodily injury of any agent,
employee, customer, business invitee or business visitor of
the indemnitor, or (ii) the damage, loss or destruction of any
real or tangible personal property of the indemnitor.
15.2 Marketing Indemnity To the extent that a Party incurs Losses
as the result of or in connection with any litigation, civil
or criminal investigation or similar proceeding arising out of
either Party's good faith performance of its marketing
obligations hereunder, and except for Losses described in
Section 15.3, such Losses shall be equitably allocated between
the Parties in accordance with the economic benefits to each
Party under this Agreement and the other Party shall indemnify
the Party suffering such Losses in accordance with such
allocation.
15.3 Infringement Indemnity Each Party agrees to indemnify, defend
and hold harmless the other Party from any and all Losses
arising out of any claims of infringement of any patent, or a
trade secret, or any copyright, trademark, service mark, trade
name or similar proprietary rights conferred by contract or by
common law or by any law of the United States or any state
alleged to have occurred because of systems provided or work
performed by the indemnitor; provided, however, that this
indemnity will not apply to the extent the indemnifying Party
is prejudiced by the Party claiming indemnification failing to
timely notify the other of any matters in respect of which the
foregoing indemnity may apply and of which the notifying Party
has knowledge and gives the other full opportunity to control
the response thereto and the defense thereof, including,
without limitation, any agreement relating to the settlement
thereof.
16 Limitation of Liability In the event that either Party shall be
liable to the other Party on account of the liable Party's performance
or nonperformance of its obligations under this Agreement, whether
arising by negligence, intended conduct, or otherwise, the measure of
damages shall not include any amounts for indirect, consequential or
punitive damages of any Party. Notwithstanding the foregoing, in the
event of the termination by TSG of this Agreement or the Professional
SABRE Support Period or the BTS Support Period pursuant to Section
14.1 hereof, American will be liable to TSG for any consequential
damages incurred by TSG as a result of the willful or intentional
breach of this Agreement by American that gave rise to TSG's right of
termination, [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION]
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<PAGE> 19
17 Equitable Relief To the extent that monetary relief is not a
sufficient remedy for any breach of this Agreement, or upon any
impending breach of Section 10 the non-breaching Party shall be
entitled to injunctive relief as a remedy for that breach or impending
breach by the other Party, in addition to any other remedies granted
to the non-breaching Party in this Agreement. That injunctive relief
shall be sought through arbitration in accordance with Attachment B.
18 Miscellaneous
18.1 Notices All notices, requests, demands, and other
communications to be given or delivered under or by reason of
the provisions of this Agreement shall be in writing and shall
be deemed given (i) on the date sent, when sent by facsimile
or delivered personally against receipt, (ii) on the next
business day when sent by overnight Federal Express, Express
Mail or similar service and (iii) on the third business day
after being mailed when mailed by certified first class mail,
return receipt requested, to each Party at the following
address (or to such other address as that Party may have
specified by notice given to the other pursuant to this
provision):
If to TSG:
The SABRE Group, Inc.
4200 American Way Boulevard
Mail Drop 3430
Fort Worth, Texas 76155
Facsimile Number: 817/931-1652
Attention: President - STIN
with copy (that will not serve as the official
Notice) to: President - SABRE Interactive
If to AA:
American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5276
Fort Worth, Texas 76155
Facsimile Number: 817/967-1651
Attention: Vice-President - Pricing and Yield Management
with copy (that will not serve as the official Notice)
to: Vice-President - Passenger Sales
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<PAGE> 20
18.2 Assignment This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party without
the prior written consent of the other Party, which may not be
unreasonably withheld. As a condition to any assignment, the
surviving entity shall be required to assume and agree to be
bound by the obligations and provisions of this Agreement to
the same extent that it would have been bound had it been an
original Party to this Agreement and at the discretion of the
non-assigning Party may be required to demonstrate to the
reasonable satisfaction of the non-assigning Party that it can
fully perform its obligations under this Agreement.
18.2.1 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
18.3 Severability Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be deemed restated to
reflect the original intentions of the Parties as nearly as
possible in accordance with applicable law, and, if capable of
substantial performance, the remaining provisions of this
Agreement shall be enforced as if this Agreement was entered
into without the invalid provision.
18.4 Compliance with Laws The Parties shall comply with all
applicable laws and no Party shall perform any act, or fail to
perform any act, or be obligated to perform any act that could
either (i) result in any violation of any applicable law or
any governmental or quasi-governmental directive, policy or
guideline, including the finding of a violation on the
grounds that any act, accommodation or payment made by one
Party to the other constitutes an unlawful, discriminatory
preference or payment, or (ii) result in any material fine,
penalty or sanction. If any accommodation previously
provided, or payment previously made, by one Party to the
other Party shall be found to constitute a violation of any
law, directive, policy or guideline, the Party that benefited
from such accommodation or payment shall promptly refund to
the other Party the amount of such accommodation or payment.
18.5 Subsequent Events If any event described in Section 18.5.1,
Section 18.5.2, Section 18.5.3 or Section 18.5.4 occurs, then
the Parties will commence consultation within thirty (30) days
after such event in order to determine what, if any, changes
to this Agreement are necessary or appropriate in order to
preserve the expectations of the Parties as of and from the
Effective Date, including, but not limited to any amendment of
this Agreement, early termination of this Agreement, or the
increase or reduction of any payments hereunder. If the
Parties are unable to agree whether any such changes are
necessary, or to the terms of such changes, and if such
failure to reach agreement shall continue for a period of
thirty (30) days following the commencement of the
consultations provided for
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<PAGE> 21
herein, then the Party adversely affected by the change
described above may submit its proposed amendments for
arbitration in accordance with Attachment B.
18.5.1 Any material change in, or material change in the
interpretation or enforcement of, the statutes,
rules, regulations or orders of the U.S. Department
of Transportation or any other United States or other
government's agency or department of government
having jurisdiction over the regulation of the
marketing of air transportation or CRS services,
which change effects the marketing, provision or
operation of air transportation or CRS services, and
which change will, or is likely to, substantially
increase or impede either Party's performance
obligations hereunder or under any other agreement to
which it is a party, or substantially decrease the
benefit to a Party of the other Party's performance
hereunder or under any other agreement to which it is
a party, or require either Party to extend to any
third party any product or service provided hereunder
on terms no less favorable than those provided
hereunder.
18.5.2 If American, in its sole discretion, determines that
its continued performance of its obligations
hereunder will result in increased risks to American,
then American may cease performance of those
obligations that it has determined, in its sole
discretion, will result in that increased risk.
18.5.3 If TSG, in its sole discretion, determines that
American's continued performance of its obligations
hereunder will result in increased risks to TSG, then
American, at TSG's request, will cease performance of
those obligations that TSG has determined, in its
sole discretion, will result in that increased risk.
18.5.4 If either Party is required to refund to the other
Party any accommodation or payment pursuant to
Section 18.4.
18.6 Attorneys' Fees In the event attorneys' fees or other
out-of-pocket costs are incurred in connection with any
litigation arising out of or relating to this Agreement,
other than in connection with a mediation or an arbitration
contemplated by Attachment B hereto, to secure performance of
any of the obligations herein provided for, or to establish
damages for the breach thereof, or to obtain any other
appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable
attorneys' fees and out-of-pocket costs incurred therein.
18.7 Captions The captions used in this Agreement are for
convenience of reference only and do not constitute a part of
this Agreement and will not be deemed to limit, characterize
or
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<PAGE> 22
in any way affect any provision of this Agreement, and all
provisions of this Agreement will be enforced and construed as
if no caption had been used in this Agreement.
18.8 Counterparts This Agreement may be executed in one or more
counterparts all of which taken together will constitute one
and the same instrument.
18.9 Relationship of Parties Each Party is an independent
contractor working for itself and this Agreement shall not
constitute or be considered to create a partnership, joint
venture, agency, or employee and employer relationship between
the Parties. Neither Party shall have the power or authority
to bind or obligate the other Party, to make any monetary
commitment on behalf of the other Party or to compromise or
settle any dispute involving the other party without the
express prior written consent of the other Party. Neither
Party shall represent itself to be an agent or partner of the
other Party.
18.10 Non-Competition Agreement Each Party agrees that it will be
bound by and comply with its obligations under the
Non-Competition Agreement, dated as of July 1, 1996, among AMR
Corporation, American, TSG Corporation and TSG, which was
negotiated as part of and was considered as an essential part
of this Agreement and that each of American and TSG relied on
the covenants contained therein in entering into this
Agreement.
18.11 Third-Party Consents Each Party shall be responsible for
obtaining and maintaining any licenses, permits, consents, or
approvals of governmental authorities and other third parties
necessary or appropriate for it to perform its obligations
under this Agreement.
18.12 Approvals and Similar Actions Where agreement, approval,
acceptance, consent or similar action by either Party is
required by any provision of this Agreement, such action shall
not be unreasonably delayed or withheld.
18.13 Force Majeure If either Party is prevented, hindered, or
delayed in the performance or observance of any of its
obligations hereunder by reason of any circumstance beyond its
reasonable control, and such delay could not have been
prevented by reasonable precautions, then such Party shall be
excused from any further performance or observance of the
obligation(s) so affected for as long as such circumstances
prevail and such Party continues to use its best efforts to
recommence performance or observance whenever and to whatever
extent possible without delay.
18.14 Modification and Waiver This Agreement may be modified only
by a written instrument duly executed by or on behalf of each
Party. No delay or omission by either Party to exercise any
right or power hereunder shall impair such right or power or
be construed to be a waiver thereof. A waiver by either of
the Parties of any of the other's obligations hereunder or any
breach thereof will not be construed to be a waiver of any
succeeding breach thereof or of any other obligation
hereunder.
18
<PAGE> 23
18.15 Governing Law The laws of the State of Texas (other than the
choice of law rules) will govern all questions concerning the
construction, validity, enforceability and interpretation of
this Agreement and the performance of the obligations imposed
by this Agreement.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
19
<PAGE> 24
IN WITNESS WHEREOF, American and TSG have each caused this Marketing
Cooperation Agreement to be signed and delivered by its duly authorized
representative, all as of the Effective Date.
THE SABRE GROUP, INC. AMERICAN AIRLINES, INC.
By: /s/ Michael J. Durham By: /s/ Donald J. Carty
----------------------- --------------------------
Name: Michael J. Durham Name: Donald J. Carty
Title: President Title: President
20
<PAGE> 25
SCHEDULE A
PROFESSIONAL SABRE SUPPORT PAYMENTS
1 Up-front Professional SABRE Support Payment. In consideration of the
marketing and promotional support services provided during the period
from January 1, 1996 to June 30, 1996 by American to its operating
divisions now contained in TSG, TSG will pay to American a one-time
payment of [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] at the beginning of the first Contract Year.
2 Recurring Professional SABRE Support Payment. The recurring charge
from American to TSG for the support provided in connection with
Professional SABRE will be calculated and paid as follows:
(a) TSG will pay to American a monthly payment during the
Professional SABRE Support Period in accordance with the
following:
(1) On the last day of each month of the initial Contract
Year during the Professional SABRE Support Period,
TSG will pay to American an amount equal to
one-twelfth (1/12) of the Adjusted Base Payment for
that Contract Year.
(2) On the last day of each of the first six months of
each Contract Year (other than the initial Contract
Year) during the Professional SABRE Support Period,
TSG will pay to American an amount equal to
one-twelfth (1/12) of the Adjusted Base Payment for
the prior Contract Year.
(3) On the last day of each of the last six months of
each Contract Year (other than the initial Contract
Year) during the Professional SABRE Support Period,
TSG will pay to American an amount equal to
one-twelfth (1/12) of the Adjusted Base Payment for
that Contract Year.
(b) Prior to August 31 of each Contract Year during the
Professional SABRE Support Period, TSG and American will
jointly calculate the Payment Adjustment. If the Payment
Adjustment is positive, the monthly payment due under Section
2(a) for January 31 of that Contract Year will be increased by
the Payment Adjustment. If the Payment Adjustment is
negative, the monthly payment due under Section 2(a) for
January 31 of that Contract Year will be decreased by the
Payment Adjustment.
(c) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
A - 1
<PAGE> 26
(d) If at the expiration or termination of the Professional SABRE
Support Period, the total amounts paid by TSG to American
pursuant to this Section 2 exceeds the total of the Adjusted
Base Payments and the Payment Adjustments for all Contract
Years during the Professional SABRE Support Period, American
will reimburse TSG the excess amount within 60 days after the
end of the Professional SABRE Support Period. If at the
expiration or termination of the Professional SABRE Support
Period, the total of the Adjusted Base Payments and the
Adjusted Payments for all Contract Years during the
Professional SABRE Support Period exceeds the total amounts
paid by TSG to American pursuant to this Section 2, TSG will
pay American the excess amount within 60 days after the end of
the Professional SABRE Support Period.
Attached as Exhibit A-1 to this Schedule A are examples of the above
calculation.
3 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
4 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
5 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
6 Alternative Payment Calculation Methods. American and TSG acknowledge that
the availability of [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION] data may change from time to time. If any such change
creates a material impact on the calculation of the payments due under this
Schedule, American and TSG agree to negotiate in good faith to find a
mutually agreeable alternative method of calculating the payments so as to
preserve the original intent of the Parties.
A - 2
<PAGE> 27
EXHIBIT A-1 TO SCHEDULE A
EXAMPLE OF
PROFESSIONAL SABRE SUPPORT PAYMENT CALCULATION
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
A-1 - i
<PAGE> 28
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
A-1 - ii
<PAGE> 29
EXHIBIT A-2
CURRENT AMERICAN ACCOUNTS
This Exhibit A-2 contains the list of Current American Accounts as of the
Effective Date
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
A-2 - i
<PAGE> 30
SCHEDULE B
BTS SUPPORT PAYMENTS
1 BTS Support Payment. The fees payable by TSG to American for the
support provided in connection with BTS will be calculated and paid as
follows:
(a) Prior to November 30 of each BTS Contract Year, American and
TSG will jointly determine and prepare a statement for the
Annual BTS Support Payment for the prior BTS Contract Year.
(b) Within thirty days after the statement for the Annual BTS
Support Payment for the initial BTS Contract Year is finalized
and provided to TSG, TSG will pay that amount to American.
(c) On or prior to the last day of each month of each BTS Contract
Year (other than the initial BTS Contract Year) during the BTS
Support Period, TSG will pay to American an amount equal to
one-twelfth (1/12) of the Annual BTS Support Payment for the
prior BTS Contract Year.
(d) If the BTS Payment Adjustment for any BTS Contract Year is
positive, the payment due on or prior to November 30 under
Section 1(c) of this Schedule for that BTS Contract Year will
be increased by that BTS Payment Adjustment. If the BTS
Payment Adjustment for any BTS Contract Year is negative, the
payment due on or prior to November 30 under Section 1(c) of
this Schedule for that BTS Contract Year will be decreased by
that BTS Payment Adjustment.
(e) If at the expiration or termination of the BTS Support Period,
the total amounts paid by TSG to American pursuant to this
Section 1 exceeds the total of the Annual BTS Support Payments
for all BTS Contract Years during the BTS Support Period,
American will reimburse TSG the excess amount within 60 days
after the end of the BTS Support Period. If at the expiration
or termination of the BTS Support Period, the total of the
Annual BTS Support Payments for all BTS Contract Years during
the BTS Support Period exceeds the total amounts paid by TSG
to American pursuant to this Section 1, TSG will pay American
the excess amount within 60 days after the end of the BTS
Support Period.
(f) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
B - 1
<PAGE> 31
SCHEDULE C
SI PRODUCT SUPPORT PAYMENTS
The fees payable by TSG to American for the support provided in connection with
the SI Products will be calculated and paid as follows:
1 Prior to August 31 of each Contract Year, American and TSG will
jointly determine and prepare a statement for the Annual SI Support
Payment for the prior Contract Year.
2 Within thirty days after the statement for the Annual SI Support
Payment for the initial Contract Year is finalized and provided to
TSG, TSG will pay that amount to American.
3 On or prior to the last day of each month of each Contract Year (other
than the initial BTS Contract Year) during the SI Support Period, TSG
will pay to American an amount equal to one-twelfth (1/12) of the
Annual SI Support Payment for the prior Contract Year.
4 If the SI Payment Adjustment for any Contract Year is positive, the
payment due on or prior to September 30 under Section 3 for that
Contract Year will be increased by that SI Payment Adjustment. If the
SI Payment Adjustment for any Contract Year is negative, the payment
due on or prior to September 30 under Section 3 for that Contract Year
will be decreased by that SI Payment Adjustment.
5 If at the expiration or termination of the SI Support Period, the
total amounts paid by TSG to American pursuant to this Schedule
exceeds the total of the Annual SI Support Payments for all Contract
Years during the SI Support Period, American will reimburse TSG the
excess amount within 60 days after the end of the SI Support Period.
If at the expiration or termination of the SI Support Period, the
total of the Annual SI Support Payments for all Contract Years during
the SI Support Period exceeds the total amounts paid by TSG to
American pursuant to this Schedule, TSG will pay American the excess
amount within 60 days after the end of the SI Support Period.
6 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
C - 1
<PAGE> 32
ATTACHMENT A
DEFINED TERMS
As used in this Agreement, including the Annexes, Attachments and Schedules
thereto, the following defined terms shall have the meanings ascribed to them:
"AA BOOKING" means a Booking for a Segment under the IATA-issued designator
code for American Airlines, which is currently "AA", whether operated by
American or by another carrier.
"AA/BTS BOOKING" means an AA Booking (but only on flights operated by American
or American Eagle) made through BTS where the EPR Create City (Home Station) is
a BTS pseudo city code location. The key used to identify these bookings will
be based on assigning a BTS account type (e.g., "BT") for that pseudo city code
location.
"ADJUSTED BASE PAYMENT" means [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION]; and (ii) with respect to each Contract Year
thereafter, the total amounts payable by TSG to American during the prior
Contract Year pursuant to Sections 2(a) and 2(b) of Schedule A.
"ADJUSTED BOOKINGS GROWTH" means, with respect to any given period, an amount
determined by the formula: [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]
"ADJUSTED AMERICAN ACCOUNT BOOKINGS" means, with respect to any given period,
an amount equal to the American Account Bookings for that period of time
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"AMERICAN" means American Airlines, Inc., a Delaware corporation.
"AMERICAN ACCOUNT BOOKINGS" means, with respect to any given period, all
Bookings that are created in or routed through SABRE by Current American
Accounts, plus all Bookings secured to a Current American Account location,
minus any AA/BTS Bookings and any SI Bookings.
A - 1
<PAGE> 33
"ANNUAL BTS SUPPORT PAYMENT" means, with respect to each BTS Contract Year, the
amount indicated below, based on the aggregate number of AA/BTS Bookings during
that BTS Contract Year (excluding AA/BTS Bookings in any jurisdiction where it
is not legally permissible for American to market BTS):
Total BTS Contract Annual BTS
Year AA/BTS Bookings Support Payment
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"ANNUAL SI SUPPORT PAYMENT" means, with respect to each Contract Year, the
amount indicated below, based on the aggregate number of SI Bookings during
that Contract Year:
Total Contract Annual SI
Year SI Bookings Support Payment
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"ARBITRATION RULES" means the Rules for Commercial Arbitration of the American
Arbitration Association in effect at the time of an arbitration in accordance
with Attachment B.
"ARC NUMBER" means an account number issued by the Airline Reporting
Corporation or by the International Air Transport Association to an individual
or entity for the purpose of authorizing such individual or entity to operate
as a travel agency.
"BOOKING" means a Segment reservation in SABRE which obligates a Participant to
pay a Booking Fee, less Segments canceled prior to the Segment Activity Date.
"BOOKING FEE" means the amount per Segment charged by STIN to Participants for
Bookings made through SABRE, as adjusted pursuant to Section 1(f) of Schedule
B.
"BTS" means the corporate travel management software marketed by TSG that is
referred to as Business Travel Solutions, including any versions thereof that
may be marketed under other names, as such software exists as of the Effective
Date and as it may be modified after the Effective Date.
"BTS CONTRACT YEAR" means each twelve month period (or such lesser period, if
the term of this Agreement terminates during the twelve month period)
commencing on October 1 of each year during the BTS Support Period.
"BTS PAYMENT ADJUSTMENT" means, with respect to each BTS Contract Year, the
Annual BTS Support Payment for the immediately preceding BTS Contract Year (the
"Prior BTS Contract Year") minus the Annual BTS Support Payment for the BTS
Contract Year immediately preceding the Prior BTS Contract Year.
A - 2
<PAGE> 34
"BTS REVENUE" means, with respect to the Savings Measurement Period, an amount
equal to the total ticketing revenue from all AA/BTS Bookings during the
Savings Measurement Period.
"BTS SUPPORT PERIOD" means the period of time beginning October 1, 1996 and
expiring on September 30, 2001, unless it is extended or terminated in
accordance with the terms of this Agreement.
"COMPLEX DISPUTE LIST" means the Complex Dispute List then maintained by the
American Arbitration Association or, if not maintained, another list of
individuals having similar qualifications.
"CONFIDENTIAL INFORMATION" will have the meaning ascribed thereto in Section 10
of the Agreement.
"CONTRACT YEAR" means each twelve month period (or such lesser period, if the
term of this Agreement terminates during the twelve month period) commencing on
July 1 of each year during the Term.
"CONSUMER DIRECT SYSTEM" means application software or an Internet or on-line
service (but specifically excluding Corporate Direct Systems) that is
principally marketed to end-users of travel-related services and which
connects such end-users directly to a Travel Distribution System.
"CORPORATE AGREEMENT" means any written and manually signed agreement between
American and any company or business entity contracting for scheduled air
travel on American on behalf of its employees at agreed upon discounts,
excluding military, government, charter, and single event travel agreements.
"CORPORATE CUSTOMER" means a company or entity that has entered into a
Corporate Agreement with American.
"CORPORATE DIRECT BOOKINGS" means (i) all airline Segment Bookings made through
Corporate Direct Systems, or (ii) total AA Bookings through Corporate Direct
Systems if, at the time of measurement, American and TSG are unable to clearly
identify all Bookings made through Corporate Direct Systems.
"CORPORATE DIRECT SYSTEM" means a Travel Distribution System that is integrated
with desktop travel management software selected by a company for use by its
employees (including, for example, travel policy enforcement, expense
management, and management reporting functionality); but excluding a CRS.
"CRS" means a Travel Distribution System that is principally marketed to and
used by Travel Agents and that processes and displays information and
availability of products
A - 3
<PAGE> 35
and services without bias towards any particular supplier of those travel
products or services; but excluding a Corporate Direct System.
"CURRENT AMERICAN ACCOUNTS" means the Travel Agents and other accounts
initially listed on Exhibit A-2 to the Agreement, as it may be modified at the
end of each Contract Year in accordance with Section 4 of Schedule A.
"DISPUTE" means any dispute, disagreement, claim, or controversy arising in
connection with or relating to this Agreement, or the validity, interpretation,
performance, breach, or termination of this Agreement, including any claim of
breach of representation or warranty or of non-performance.
"DISPUTE RESOLUTION PROCEDURE" means the procedure for addressing Disputes as
set forth on Attachment B.
"EFFECTIVE DATE" means July 1, 1996.
"EXECUTIVE REVIEW COMMITTEE" means a committee consisting of TSG's President -
STIN and President - SABRE Interactive, and American's Senior Vice President -
Marketing , Vice President - Passenger Sales, and Vice President - Pricing and
Yield Management.
"LOSSES" means all losses, liabilities, damages and claims (excluding Taxes),
and all costs and expenses related thereto (including any and all reasonable
attorneys fees and costs of investigation, litigation, settlement, judgment,
interest and penalties).
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"NETSAAVERS PROGRAM" means any American marketing program offering
substantially the same features as the American marketing program known as
NetSAAvers, as such program exists as of the Effective Date.
"NOTICE" means a written communication that complies with Section 18.1 of the
Agreement.
"PARTICIPANT" means any air carrier (including scheduled, charter, domestic
and international airlines), car rental company, surface transportation
carrier, hotel or lodging provider, railroad, steamship company, cruise or tour
operator or other vendor of travel related products, information or services
which has an agreement with TSG for the display of information regarding its
products or services in SABRE.
"PARTY" means either of the signatories to the Agreement. "Parties" means all
of the signatories to the Agreement.
A - 4
<PAGE> 36
"PAYMENT ADJUSTMENT" means, with respect to each Contract Year, the arithmetic
total (whether positive or negative) of [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION]
"PROFESSIONAL SABRE" means the SABRE interface application software marketed by
TSG to Travel Agents, as it exists as of the Effective Date and as it may be
modified and enhanced after the Effective Date.
"PROFESSIONAL SABRE SUPPORT PERIOD" means the period of time beginning on the
Effective Date and expiring on June 30, 2006, unless it is extended or
terminated in accordance with the terms of this Agreement.
"QUALIFICATIONS" means being included in the Complex Dispute List, or having
extensive knowledge or experience regarding the Travel Distribution Systems
industry.
"REPRESENTATIVE" means (i) with respect to American, (A) Managing Director -
Sales Planning, if the Dispute involves Professional SABRE Support, and (B)
Managing Director - Distribution Planning, if the Dispute involves BTS Support
or SI Product Support, and (ii) with respect to TSG, (A) Vice President - North
American Sales & Planning and Managing Director - STIN Finance, if the Dispute
involves Professional SABRE Support, (B) Vice President - BTS, if the Dispute
involves BTS Support, and (C) Vice President - SABRE Interactive, if the
Dispute involves SI Product Support.
"SABRE" means the CRS owned, operated and marketed by STIN.
"SAVINGS MEASUREMENT PERIOD" means (i) the fifth BTS Contract Year of the BTS
Support Period, if the term of the BTS Support Period is not terminated prior
to the end of the fifth BTS Contract Year, or (ii) if the term of the BTS
Support Period is terminated by American for a breach of this Agreement by TSG
prior to the end of the fifth BTS Contract Year, the last 12 months of the BTS
Support Period.
"SEGMENT" means (i) for airline bookings, each separate flight segment
reservation identified by a separate flight number in a PNR, multiplied by the
number of passengers booked in that PNR for that flight segment; (ii) for hotel
bookings, each separate reservation that is processed through SABRE regardless
of the number of rooms, suites or other accommodations or the number of persons
or the duration of the stay; (iii) for car rental bookings, each separate
reservation that is processed through SABRE regardless of the number of
vehicles or persons or the duration of the rental, and (iv) for any other
product or service, each separate reservation for such product or service that
is processed through SABRE regardless of the number of products or services or
the number of persons or the duration of the products or services.
"SEGMENT ACTIVITY DATE" means the first date listed in a SABRE PNR for the
relevant Segment.
A - 5
<PAGE> 37
"SI BOOKINGS" means AA Bookings made via an SI Product (i) where the EPR
Create City Code (Home Station) is a pseudo city controlled by TSG or by an
agent of TSG, or (ii) secured to a pseudo city controlled by TSG or by an agent
of TSG.
"SI PAYMENT ADJUSTMENT" means, with respect to each Contract Year, the Annual
SI Support Payment for the immediately preceding Contract Year (the "Prior
Contract Year") minus the Annual SI Support Payment for the Contract Year
immediately preceding the Prior Contract Year.
"SI PRODUCT" means any of the Consumer Direct System software applications
marketed by or on behalf TSG, including without limitation the applications
referred to as Travelocity and easySABRE, as such applications exist as of the
Effective Date and as they may be modified and enhanced after the Effective
Date.
"SI SUPPORT PERIOD" means the period of time beginning on the Effective Date
expiring on June 30, 2001, unless it is extended or terminated in accordance
with the terms of this Agreement.
"STRATEGIC CUSTOMERS" [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION]
"STIN" means the SABRE Travel Information Network operating division of TSG.
"SUPPORT PERIOD" means any of the Professional SABRE Support Period, BTS
Support Period, and SI Support Period.
"TARGET BOOKINGS" means, with respect to any three consecutive calendar months
beginning on or after September 1, 1998, the lesser of (a) [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"TARGET BOOKINGS PERIOD" means any three consecutive calendar months in which
the Target Bookings were achieved.
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
"TAXES" means any foreign, federal, state or local sales, use, excise, value
added or similar transfer taxes (including penalty and interest) imposed on,
based on, or measured by consideration for, any transfer of services or
property pursuant to this Agreement.
"TERM" will have the meaning ascribed thereto in Section 2 of the Agreement.
"TRAVEL AGENT" means an individual or entity that has been assigned an ARC
Number.
A - 6
<PAGE> 38
"TRAVEL DISTRIBUTION SYSTEM" means a electronic distribution system that
provides any or all of the following services, via data network, telephone,
wireless or cable transmission or otherwise: (a) electronic publication and
distribution of travel-related information from computerized databases; (b)
electronic processing of passenger travel-related reservations and related
transactions; (c) electronic marketing and sales of passenger travel-related
products and services and related electronic transactions; (d) electronic
publication and distribution of passenger travel-related documents (e.g.,
tickets).
"TOTAL AVAILABLE MARKET" means, with respect to any given period of time, an
amount equal to (i) the American Account Bookings for that period of time,
divided by (ii) the Market Share for that period of time.
"TSG" means The SABRE Group, Inc., a Delaware corporation.
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
A - 7
<PAGE> 39
ATTACHMENT B
DISPUTE RESOLUTION PROCEDURE
1. General Procedure. Except as otherwise stated in the Agreement, the
Parties shall resolve all Disputes in accordance with this procedure:
(a) Each Party shall instruct its appropriate Representative(s) to
promptly negotiate in good faith with the other Party's
appropriate Representative(s) to resolve the Dispute.
(b) If the Representatives do not resolve the Dispute within ten
business days (or such longer period as the Representatives
may agree) after the date of referral of the Dispute to them,
the Dispute shall be referred (by either or both of the
representatives) to the Executive Review Committee for
resolution.
(c) If the Executive Review Committee does not resolve the Dispute
within ten business days (or such longer period as that
Committee may agree) from the date of referral to it, either
Party may submit the Dispute to the President of each of TSG
and American for resolution, who may submit the Dispute to
non- binding mediation in accordance with Section 2 of this
Dispute Resolution Appendix.
(d) If the Presidents do not resolve the Dispute (if submitted to
them) and it is not submitted to or resolved by mediation,
either Party may submit the Dispute to binding arbitration in
accordance with Section 3(c) of this Attachment.
A referral under any of Sections 1(a), 1(b) or 1(c) of this Attachment shall be
made by written Notice to the persons designated in the applicable Section or
Sections. That Notice shall be in a form described in this Agreement or an
electronic mail message and addressed to each person at his office address or
electronic mail address; each Notice shall be given and effective as described
in this Agreement or, in the case of electronic mail, upon actual receipt. The
date of referral is the last date that Notice is given to all of the persons to
whom the Dispute must have been referred.
2. Mediation. The mediation of an unresolved Dispute shall be conducted
in this manner:
(a) Either Party may submit the Dispute to mediation by giving
Notice of mediation to the other Party. The Parties shall
attempt to agree upon
B - 1
<PAGE> 40
and appoint a sole mediator who has the Qualifications
promptly after that Notice is given.
(b) If the Parties are unable to agree upon a mediator within ten
days after the date the Dispute is submitted to mediation,
either Party may request the Dallas office of the American
Arbitration Association to appoint a mediator who has the
Qualifications. The mediator so appointed shall be deemed to
have the Qualifications and to be accepted by the Parties.
(c) The mediation shall be conducted in the Dallas-Fort Worth
metropolitan area at a place and a time agreed by the Parties
with the mediator, or if the Parties cannot agree, as
designated by the mediator. The mediation shall be held
within 20 days after the mediator is appointed.
(d) If either Party has substantial need for information from the
other Party in order to prepare for the mediation, the Parties
shall attempt to agree on procedures for the formal exchange
of information; if the Parties cannot agree, the mediator's
determination shall be effective.
(e) Each Party shall be represented in the mediation by at least
its appropriate Representative(s) or another natural person
with authority to settle the Dispute on behalf of that Party
and, if desired by that Party, by counsel for that Party. The
Parties' Representatives in the mediation shall continue with
the mediation as long as the mediator requests.
(f) The mediation shall be subject to Chapter 154 of Title 7 of
the Texas Civil Practice and Remedies Code.
(g) Unless otherwise agreed by the Parties, each Party shall pay
one-half of the mediator's fees and expenses and shall bear
all of its own expenses in connection with the mediation.
Neither Party may employ or use the mediator as a witness,
consultant, expert, or counsel regarding the Dispute or any
related matters.
3. Arbitration. The arbitration of an unresolved Dispute shall be
conducted in this manner:
(a) Either Party may begin arbitration by filing a demand for
arbitration in accordance with the Arbitration Rules. The
Parties shall attempt to agree upon and appoint a panel of
three arbitrators promptly after that demand is filed. Each
of those arbitrators must have the Qualifications, and at
least one of those arbitrators must be included in the Complex
Dispute List (unless no list of that kind is then maintained).
B - 2
<PAGE> 41
(b) If the Parties are unable to agree upon any or all of the
arbitrators within ten days after the demand for arbitration
was filed (and do not agree to an extension of that ten-day
period), either Party may request the Dallas office of the
American Arbitration Association to appoint the arbitrator or
arbitrators, who have the Qualifications (and at least one of
whom must be included in the Complex Dispute List, unless no
list of that kind is then maintained), necessary to complete
the panel in accordance with the Arbitration Rules. Each
arbitrator so appointed shall be deemed to have the
Qualifications and to be accepted by the Parties as part of
the panel.
(c) The arbitration shall be conducted in the Dallas-Fort Worth
metropolitan area at a place and a time agreed by the Parties
with the panel, or if the Parties cannot agree, as designated
by the panel. The panel may, however, call and conduct
hearings and meetings at such other places as the Parties may
agree or as the panel may, on the motion of one Party,
determine to be necessary to obtain significant testimony or
evidence.
(d) The Parties shall attempt to agree upon the scope and nature
of any discovery for the arbitration. If the Parties do not
agree, the panel may authorize any and all forms of discovery,
including depositions, interrogatories, and document
production, upon a showing of particularized need that the
requested discovery is likely to lead to material evidence
needed to resolve the Dispute and is not excessive in scope,
timing, or cost.
(e) The arbitration shall be subject to the Federal Arbitration
Act and conducted in accordance with the Arbitration Rules to
the extent they do not conflict with this Section 3(c). The
Parties and the panel may, however, agree to vary the
provisions of this Section 3(c) or the matters otherwise
governed by the Arbitration Rules.
(f) The panel has no power to:
(1) rule upon or grant any extension, renewal, or
continuance of this Agreement;
(2) award remedies or relief either expressly prohibited
by this Agreement or under circumstances not
permitted by this Agreement;
(3) grant provisional or temporary injunctive relief
before rendering the final decision or award; or
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<PAGE> 42
(4) grant any equitable relief or remedy that would
compel American to perform any of its obligations
under the Agreement where either American or TSG has
determined, in its sole discretion, that continued
performance of those obligations may result in
increased risks to it.
(g) Unless the Parties otherwise agree, all Disputes regarding or
related to the same topic or event that are subject to
arbitration at one time shall be consolidated in a single
arbitration proceeding.
(h) A Party or other person involved in an arbitration under this
Section 3(c) may join in that arbitration any person other
than a Party if
(1) the person to be joined agrees to resolve the
particular dispute or controversy in accordance with
this Section 3(c) and the other provisions of this
Attachment applicable to arbitration; and
(2) the panel determines, upon application of the person
seeking joinder, that the joinder of that other
person will promote the efficiency, expedition, and
consistency of the result of the arbitration and will
not unfairly prejudice any other Party to the
arbitration.
(i) The arbitration hearing shall be held within 30 days after the
appointment of the panel. Upon request of either Party, the
panel shall arrange for a transcribed record of the
arbitration hearing, to be made available to both Parties.
(j) The panel's final decision or award shall be made within 30
days after the hearing. That final decision or award shall be
made by unanimous or majority vote or consent of the
arbitrators constituting the panel, and shall be deemed issued
at the place of arbitration. The panel shall issue a reasoned
written final decision or award based on the Agreement and
Texas law; the panel may not act according to equity and
conscience or as an amicable compounder or apply the law
merchant.
(k) The panel's final decision or award may include:
(1) recovery of Damages to the extent permitted by this
Agreement; or
(2) injunctive relief in response to any actual or
threatened breach of this Agreement or any other
actual or threatened action or omission of a Party
under or in connection with this Agreement.
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<PAGE> 43
(l) The panel's final decision or award shall be final and binding
upon the Parties, and judgment upon that decision or award may
be entered in any court having jurisdiction over either or
both of the Parties or their respective assets. The Parties
specifically waive any right they may have to apply or appeal
to any court for relief from the preceding sentence or from
any decision of the panel made, or any question of law
arising, before the final decision or award. If any decision
by the panel is vacated for any reason, the Parties shall
submit that Dispute to a new arbitration in accordance with
this Section 3(c).
(m) Each Party shall pay one-half of the arbitrators' fees and
expenses, and shall bear all of its own expenses in connection
with the arbitration. The panel has the authority, however,
to award recovery of all costs and fees (including attorneys'
fees, administrative fees and the panel's fees and expenses)
to the prevailing Party in the arbitration.
4. Recourse to Courts. Nothing in this Attachment limits the right of
either Party to apply to a court or other tribunal having jurisdiction to:
(a) enforce the provisions of this Attachment;
(b) seek provisional or temporary injunctive relief, in response
to an actual or impending breach of Article V of this
Agreement or otherwise so as to avoid irreparable damage or
maintain the status quo, until a final arbitration decision or
award is rendered or the Dispute is otherwise resolved; or
(c) challenge or vacate any final arbitration decision or award
that does not comport with Section 3 of this Attachment.
5. Submission to Jurisdiction. Each Party irrevocably submits to the
jurisdiction of the federal courts of the United States and the state courts of
Texas located in Tarrant County, Texas. Each Party waives any defense or
challenge to that jurisdiction based on lack of personal jurisdiction, improper
venue, or inconvenience of forum.
6. Confidentiality. The proceedings of all negotiations, mediations, and
arbitrations pursuant to this Attachment shall be privately conducted. The
Parties shall keep confidential all conduct, negotiations, documents,
decisions, and awards in connection with those proceedings under this
Attachment.
B - 5
<PAGE> 1
EXHIBIT 10.9
TAX SHARING AGREEMENT
This Tax Sharing Agreement, dated as of July 2, 1996, is being entered
into by and between AMR Corporation, a Delaware corporation ("AMR"), and TSG
Corporation, a Delaware corporation ("SABRE").
In consideration of the mutual agreements and covenants contained
herein, AMR, on behalf of the AMR Companies (as hereinafter defined) , and
SABRE, on behalf of the SABRE Companies (as hereinafter defined), are entering
into this Agreement to provide for the allocation among the AMR Companies and
the SABRE Companies of all responsibilities, liabilities, and benefits relating
to (i) Taxes (as hereinafter defined) paid or payable by either the AMR
Companies or the SABRE Companies for all taxable periods or portions thereof
beginning on or after the Effective Date (as hereinafter defined) and any Tax
Return (as hereinafter defined) to be filed by them for such taxable periods or
such portions, and (ii) Taxes paid or payable by AMR and its present and former
subsidiaries including the SABRE Companies for all taxable periods or portions
ending before the Effective Date.
I. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to the singular and
the plural forms of the terms defined):
"American" means American Airlines, Inc.
"AMR Affiliated Group" means any affiliated group of corporations
(within the meaning of Section 1504(a) of the Code (or any successor provision
thereto) or, as the context may require, any similar provision of state, local
or Foreign law) of which AMR is the common parent.
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"AMR Companies" means, for each taxable period or portion thereof, the
affiliated group of corporations, within the meaning of Code section 1504(a)
(or any successor provision thereto) or, as the context may require, any
similar provision of state, local, or Foreign law, of which AMR is the common
parent, but excluding the SABRE Companies.
"AMR Consolidated Return" means the Consolidated Return for federal
income taxes of the AMR Affiliated Group.
"AMR Separate Return" means any Tax Return required to be filed by an
AMR Company that does not include any Tax Item of a SABRE Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
"Consolidated Return" means any consolidated, combined, or unitary Tax
Return including Tax Items of at least one AMR Company and at least one SABRE
Company.
"Deconsolidation Date" means the date upon which the SABRE Pro Forma
Affiliated Group ceases to be included in the AMR Affiliated Group.
"Effective Date" means July 1, 1996.
"Final Determination" means the final resolution of liability for any
Tax (i) by IRS Form 870-AD (or any successor form thereto), on the date of
acceptance by or on behalf of the IRS, or by a comparable agreement form under
any state, local or Foreign law, except that a Form 870-AD or comparable form
that reserves the right of the taxpayer to file a claim for refund and/or the
right of the taxing authority to assert a further deficiency shall not
constitute a Final Determination with respect to the item or items so reserved;
(ii) by a decision, judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (iii) by a closing
agreement or offer in compromise under Section 7121 or 7122 of the Code, or
comparable agreements under the any state, local or Foreign law; (iv) by any
allowance of a refund or credit in respect of an overpayment of Tax, including
any related interest or penalties, but only after the expiration of all periods
during which such refund may be recovered (including by way of offset) by the
jurisdiction imposing
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the Tax; (v) by any other final disposition including by reason of the
expiration of the applicable statute of limitations or pursuant to Code
sections 1311 through 1313, or comparable provision of state, local, or Foreign
law, or (vi) by the occurrence of any event which the parties agree in writing
is a Final Determination.
"Foreign" means, with respect to any Tax or Tax Return, any Tax
payable or Tax Return required to be filed under the laws of any government or
taxing authority other than the United States, any state or any political
subdivision of any state and shall include, without limitation, Taxes payable
or Tax Returns required to be filed by the laws of the Commonwealth of Puerto
Rico.
"IRS" means the Internal Revenue Service.
"Post-Consolidation Period" means any taxable period or portion
thereof beginning on or after the Deconsolidation Date.
"Post-Effective Date Period" means any taxable period or portion
thereof beginning on or after the Effective Date.
"Pre-Effective Date Period" means any taxable period or portion
thereof ending before the Effective Date.
"SABRE Companies" means (i) for any taxable period or portion thereof
ending before the Effective Date, The SABRE Group, Inc. and the corporations,
other entities and any of the divisions of American listed on Schedule A and
(ii) for any taxable period or portion thereof beginning on or after the
Effective Date, SABRE and the corporations and other entities listed on
Schedule B and their successors and assigns, and any other corporation, if any
one or more SABRE Companies acquire stock of such corporation which meets the
requirements of section 1504(a)(2) of the Code (or any successor provision
thereto) or, as the context may require, any similar provision of state, local,
or Foreign law with respect to taxable periods or portions thereof beginning on
or after the date of such acquisition.
"SABRE Debenture" means that certain subordinated debenture issued by
SABRE, as maker, in the original principal amount of $850,000,000 and dated
July 2, 1996.
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"SABRE Excess Tax Attributes" means any net operating loss, net
capital loss, or unused Tax credit (including, without limitation, any unused
general business credit, foreign tax credit, or alternative minimum tax credit)
actually available to be carried forward to the first Post-Consolidation Period
of the SABRE Companies to the extent that the amount of such losses and unused
credits exceeds the amount of net operating losses, net capital losses, and
unused Tax credits that would have been available for carryover to the first
Post-Consolidation Period of the SABRE Companies if (i) the SABRE Pro Forma
Affiliated Group actually had been deconsolidated from the AMR Affiliated Group
as of the Effective Date and had filed the SABRE Pro Forma Consolidated Returns
for all Post-Effective Date Periods, and (ii) the assumptions set forth in
Section 3.01 of this Agreement (other than clauses (vi) and (vii) thereof) and
any elections made by SABRE pursuant to clause (v) hereof actually applied.
"SABRE Pro Forma Affiliated Group" means a separate group of
corporations, which but for an AMR Company's ownership of SABRE, would be an
affiliated group of corporations (within the meaning of Section 1504(a) of the
Code (or any successor provision thereto) or, as the context may require, any
similar provision of state, local or Foreign law) consisting of SABRE, as the
common parent thereof, and the eligible SABRE Companies.
"SABRE Pro Forma Consolidated Return" means the pro forma consolidated
return for federal income taxes of the SABRE Pro Forma Consolidated Group.
"SABRE Pro Forma R&E Tax Credit Carryovers" has the meaning set forth in
Section 3.01.
"SABRE Separate Return" means any Tax Return required to be filed by a
SABRE Company that does not include any Tax Item of an AMR Company.
"Spin-off Transaction" means all of the transactions carried out to
effect (i) the transfer to and the assumption by the SABRE companies of the
properties and assets and certain of the liabilities of the former SABRE
divisions of American, (ii) the issuance of the SABRE Debenture by SABRE to
American, (iii) the transfer of the SABRE Debenture by American to AMR in
exchange for a portion of the debenture,
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dated September 30, 1994, and (iv) the distribution by American of SABRE stock
to AMR.
"Tax Benefit" means any item of loss, deduction, or tax credit or any
similar item which generally reduces taxable income or taxes payable.
"Tax Detriment" means any item of income, gain, recapture of credits
or any similar item which generally increases taxable income or taxes payable.
"Tax Item" means any item of income, gain, loss, deduction or tax
credit.
"Tax Return" means any return, filing, questionnaire or other document
required to be filed for any period with any taxing authority (whether domestic
or Foreign) in connection with any Taxes (whether or not a payment is required
to be made with respect to such filing).
"Taxes" means all forms of taxation, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, federation or other body, and without limiting
the generality of the foregoing, shall include income, sales, use, ad valorem,
gross receipts, value added, franchise, transfer, recording, withholding,
payroll, employment, excise, occupation, premium or property taxes, together
with any related interest, penalties and additions to tax, or additional
amounts imposed by any taxing authority (domestic or Foreign) upon the SABRE
Companies, the AMR Companies, or any of their respective divisions or branches.
II. RESPONSIBILITY FOR PREPARATION AND FILING OF TAX RETURNS
2.01. Consolidated Returns. AMR shall prepare and file all
Consolidated Returns which are required or, if AMR so chooses, permitted to be
filed for all periods. AMR will advise SABRE in a timely manner of the SABRE
Companies which will be included in a Consolidated Return to be filed by AMR
pursuant to this Section 2.01, and (if applicable) the states or localities in
which such returns will be filed. AMR will pay all Taxes shown as due on all
Consolidated Returns. AMR shall, at its sole discretion, make all decisions
relating to the preparation and filing of Consolidated Returns. Each
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<PAGE> 6
eligible SABRE Company whose Tax Items are includable in any Consolidated
Return shall execute its consent to be included in such Consolidated Return on
any form as may be prescribed for such consent if such consent is requested.
Each SABRE Company acknowledges that AMR, as the common parent of the AMR
Affiliated Group, may under Treas. Reg. Section 1.1502-77(a) or similar
provision of state, local, or Foreign law act as the agent for the SABRE
Companies for all taxable periods in which they are members of the AMR
Affiliated Group. AMR shall indemnify and hold harmless the SABRE Companies
for any liability (including but not limited to liability under Treas. Reg.
Section 1.1502-6 (or similar provision of state, local, or Foreign law)) for
any and all Taxes reported or required to be reported (whether or not actually
reported) on a Consolidated Return.
2.02. Separate Returns. SABRE shall have sole responsibility for
the preparation and filing of SABRE Separate Returns. SABRE shall, at its sole
discretion, make all decisions relating to the preparation and filing of SABRE
Separate Returns; provided, however, that any such return shall be prepared on
a basis consistent with prior taxable periods unless otherwise consented to by
AMR. SABRE shall pay all Taxes shown to be due on SABRE Separate Returns.
SABRE shall indemnify and hold harmless AMR for all Taxes of the SABRE
Companies not required to be reported on a Consolidated Return (whether or not
actually reported on a SABRE Separate Return), including any reasonable
expenses incurred by an AMR Company in connection therewith. AMR shall have
sole responsibility for the preparation and filing of AMR Separate Returns.
AMR shall, at its sole discretion, make all decisions relating to the
preparation and filing of AMR Separate Returns. AMR shall pay all Taxes shown
to be due on AMR Separate Returns. AMR shall indemnify and hold harmless SABRE
for all Tax liabilities of the AMR Companies not required to be shown on a
Consolidated Return (whether or not actually reported on an AMR Separate
Return), including any reasonable expenses incurred by a SABRE Company in
connection therewith.
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III. PAYMENTS IN RESPECT OF FEDERAL INCOME TAXES
3.01. SABRE Pro Forma Consolidated Return. For each Post-Effective
Date Period for which an AMR Consolidated Return is filed, SABRE shall prepare
a SABRE Pro Forma Consolidated Return. SABRE shall submit the SABRE Pro Forma
Consolidated Return to AMR within 60 days of the close of the applicable
taxable period (or such later time as AMR specifies). The SABRE Pro Forma
Consolidated Return shall be prepared as if the SABRE Companies were
deconsolidated from the AMR Affiliated Group as of the beginning of the
Effective Date and began filing a consolidated federal income tax return as a
separate affiliated group consisting of SABRE, as the common parent thereof,
and the eligible SABRE Companies (the "SABRE Pro Forma Affiliated Group") for
all Post-Effective Date Periods and assuming that neither AMR nor any AMR
Company owns any stock of SABRE, except that (i) the members of the SABRE Pro
Forma Affiliated Group shall not be permitted or required to carryback any Tax
Items to any taxable period or portion thereof ending before the Effective
Date; (ii) no portion of (a) the consolidated minimum tax credit or (b) the
consolidated net operating loss carryovers of the AMR Affiliated Group or any
other Tax Benefit of an AMR Company or a SABRE Company as of the Effective Date
shall be treated as allocable to any SABRE Company as of the Effective Date;
(iii) the amount of any consolidated credit for increasing research activities
(the "R&E Tax Credit") attributable to the activities of any SABRE Company for
the period from January 1, 1985 to December 31, 1995 shall be treated as an R&E
Tax Credit carryover of the SABRE Pro Forma Affiliated Group (the "SABRE Pro
Forma R&E Tax Credit Carryovers") which may be utilized for any Post-Effective
Date Period occurring on or after a Final Determination that such R&D Tax
Credit is available to the AMR Affiliated Group; (iv) the base period research
expenses and gross receipts of the SABRE business units owned by American prior
to the Effective Date shall be treated as incurred or realized by members of
the SABRE Pro Forma Affiliated Group, as provided in section 41(f)(3)(A) of the
Code and applicable Treasury Regulations, for purposes of determining the
amount of R&E Tax Credit attributable to the SABRE Pro
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Forma Affiliated Group for any Post-Effective Date Period, (v) unless SABRE
shall have received the express written consent of AMR to the contrary, the
SABRE Pro Forma Consolidated Return shall be prepared using such methods,
conventions and principles of taxation and making such elections as are
consistent with the methods, conventions, principles, and elections previously
used by AMR in preparing the AMR Consolidated Returns for any Pre-Effective
Date Period (provided, however, that this provision shall not limit SABRE's
discretion in making any Post-Effective Date Tax elections that are permitted
to be made under applicable laws or regulations on an annual basis without the
consent of any taxing authority); (vi) any Tax Items of (a) any SABRE Company
or (b) any AMR Company that transferred a business or assets to a SABRE Company
pursuant to the Spin-off Transaction (but only to the extent that such Tax
Items are attributable to the ownership of such business or assets) that would
be required to be recognized as a result of the deconsolidation of the SABRE
Companies from the AMR Affiliated Group (including, for example, gains or
losses deferred under Treas. Reg. Section 1.1502-13 or -14) shall not be
recognized as of the Effective Date but shall be included in the SABRE Pro
Forma Consolidated Return when and as such Tax Items are required to be
included in the AMR Consolidated Return; and (vii) Tax Items attributable to
transactions occurring between any SABRE Company, on the one hand, and any AMR
Company, on the other, during any Post-Effective Date Period (that is not a
Post-Consolidation Period) shall be treated as if such transactions occurred
between members of the same consolidated group and shall only be included in
the SABRE Pro Forma Consolidated Return when and as they are required in be
included in the AMR Consolidated Return. SABRE shall bear all costs and
expenses of preparation and submission of the SABRE Pro Forma Consolidated
Return, including, without limitation, accountants' and attorneys' fees.
3.02 SABRE Payments. For each taxable period for which a SABRE Pro
Forma Consolidated Return is required to be prepared under Section 3.01, on or
before each date for payment of an installment of estimated federal income
taxes (as determined under Section 6655 of the Code or successor provision then
in effect), SABRE shall pay to AMR an amount equal to the estimated federal
income tax payment
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<PAGE> 9
that the SABRE Pro Forma Affiliated Group would have been required to make if
it actually were filing the SABRE Pro Forma Consolidated Return for such
taxable period. On or before March 15 of the year following the year in
respect of which a SABRE Pro Forma Consolidated Return is prepared, SABRE shall
pay to AMR an amount equal to the excess, if any, of (i) all federal income
taxes shown as due on the SABRE Pro Forma Consolidated Return (plus the amount,
if any, of any interest or penalties that would have been payable by the SABRE
Pro Forma Affiliated Group in respect of underpayments of estimated taxes if it
actually were filing the SABRE Pro Forma Consolidated Return for such taxable
period and made estimated tax payments equal to the payments SABRE made to AMR
in respect of estimated federal income taxes for such taxable period pursuant
to this Section 3.02), over (ii) the total of such estimated tax payments. If,
pursuant to Section 3.01, AMR permits SABRE to submit the SABRE Pro Forma
Consolidated Return after such date, a reasonable estimate of such amount shall
be paid on or before such date and the balance, if any, due on the SABRE Pro
Forma Consolidated Return shall be paid on the date that the SABRE Pro Forma
Consolidated Return is required to be submitted. If (A) the total amount of
all payments of federal income taxes by SABRE to AMR pursuant to this Section
3.02 for the taxable period exceeds (B) the taxes shown as due on the SABRE Pro
Forma Consolidated Return prepared with respect to such taxable period, the
amount of such excess shall (1) be credited to the account of SABRE and shall
reduce the amount of any future payments otherwise payable by SABRE to AMR
pursuant to Section 3.02, or (2) if requested in writing by SABRE, be repaid by
AMR to SABRE either (X) within 15 days after the filing of the AMR Consolidated
Return for the tax period with respect to which such excess was paid or (Y) if,
and to the extent that, the AMR Consolidated Return for such tax period
reflects an overpayment of estimated federal income taxes by the AMR Affiliated
Group, within 15 days after AMR's receipt of a refund of such overpayment.
3.03 Refunds in respect of Carrybacks. If, for any Post-Effective
Date Period, (i) a SABRE Pro Forma Consolidated Return reflects a consolidated
net operating loss, consolidated net capital loss, or consolidated unused tax
credit and (ii) under the Code and regulations promulgated thereunder such
consolidated loss or
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unused credit could have been carried back to a prior Post-Effective Date
Period of the SABRE Pro Forma Affiliated Group, SABRE shall prepare and submit
to AMR an amended SABRE Pro Forma Consolidated Return, prepared as provided in
Section 3.01 of this Agreement, for each Post-Effective Date Period to which
such carryback would be permitted. If the amount by which the aggregate
amounts paid by SABRE to AMR under Section 3.02 of this Agreement in respect of
the federal income tax liability of the SABRE Pro Forma Affiliated Group for
such Post-Effective Date Period exceeds the amount of such liability as
reflected on the amended SABRE Pro Forma Consolidated Return, the amount of
such excess shall be (1) credited to the account of SABRE and shall reduce the
amount of any future payments otherwise payable by SABRE to AMR pursuant to
Section 3.02, or (2) if requested in writing by SABRE, refunded to SABRE by AMR
within 45 days after its receipt of the amended SABRE Pro Forma Consolidated
Return. All calculations of deemed refunds pursuant to this Section 3.03 shall
include interest computed as if SABRE had filed a claim for refund or an
application for a tentative carryback adjustment pursuant to Code Section
6411(a) on the date on which it provides AMR with the amended SABRE Pro Forma
Consolidated Return. Determinations under this Section 3.03 shall be made as
if the SABRE Pro Forma Affiliated Group were not permitted to carryback any
consolidated loss or unused credit from a Post-Effective Date Period to a
taxable period or portion thereof ending before the Effective Date. AMR shall
be entitled to retain, or receive immediate payment from any SABRE Company of,
any refund or credit with respect to federal income tax liability of a SABRE
Company that actually results from such a carryback.
3.04. Liability for Pre-Effective Date Periods and Spin-off
Transaction. AMR shall be liable for, and shall indemnify and hold harmless
the SABRE Companies for, (1) any federal income Taxes imposed on or incurred by
any SABRE Company for any Pre-Effective Date Period, and (2) any federal income
Taxes that are attributable to the Spin-off Transaction.
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3.05. Payments in the Event of Deconsolidation.
(a) Statement of SABRE Excess Tax Attributes. As soon as
practical following the filing by the AMR Affiliated Group of its consolidated
federal income tax return for the year which includes the Deconsolidation Date,
AMR will provide to SABRE its estimate of the amount of any SABRE Excess Tax
Attributes. No warranty as to the existence or availability of such attributes
will be given or implied. AMR will inform SABRE promptly of an adjustment to
such attributes that it determines to be appropriate in connection with the
filing of the AMR Consolidated Group's Tax Returns or which may result from any
audit or other proceeding.
(b) SABRE Payments. SABRE shall make payments to AMR under this
Section 3.05(b) if, for any Post- Consolidation Period, (i) the actual federal
income tax liability of the SABRE Companies is reduced below the federal income
tax liability that would have been imposed on the SABRE Companies if (A) the
SABRE Pro Forma Affiliated Group actually had been deconsolidated from the AMR
Affiliated Group as of the Effective Date and had filed the SABRE Pro Forma
Consolidated Returns for all Post-Effective Date Periods (other than a
Post-Consolidation Period), and (B) the assumptions set forth in Section 3.01
of this Agreement (other than clauses (vi) and (vii) thereof) actually applied,
or (ii) the federal income tax liability of the AMR Affiliated Group is
increased because any SABRE Excess Tax Attribute is not available for use by
the AMR Affiliated Group in that period. The amount of any payment by SABRE
under this Section 3.05(b) shall equal the excess of (X) the sum of (i) the
amount of such reduction or increase, as the case may be, in federal income tax
liability plus (ii) the amount of all prior reductions or increases taken into
account pursuant to this Section 3.05, over (Y) the amount of any payments
previously made by SABRE under this Section 3.05(b) in respect of any SABRE
Excess Tax Attribute, provided, however,_that the aggregate amount paid by
SABRE to AMR pursuant to this Section 3.05(b) shall not exceed the product of
(l) the estimated amount of SABRE Excess Tax Attributes provided by AMR to
SABRE pursuant to Section 3.05(a) above (as adjusted from time to time pursuant
to such section), times (m) the maximum federal income tax
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rate applicable to corporations as in effect from time to time as each payment
has been made pursuant to this Section 3.05(b). SABRE shall make any payment
required to be made under this Section 3.05(b) within 15 days of, as the case
may be, the filing of the applicable return or amended return, or the receipt
of the applicable Final Determination, for the Post-Consolidation Period by
SABRE or AMR (or, in the case of an increase in liability of the AMR Affiliated
Group, any later date on which SABRE receives written notice from AMR).
(c) AMR Payments. AMR shall make a payment to SABRE under this
Section 3.05(c) if, for any Post- Consolidation Period, the actual federal
income tax liability of the SABRE Companies is increased above the federal
income tax liability that would have been imposed on the SABRE Companies if (i)
the SABRE Pro Forma Affiliated Group actually had been deconsolidated from the
AMR Affiliated Group as of the Effective Date and had filed the SABRE Pro Forma
Consolidated Returns for all Post-Effective Date Periods (other than a
Post-Consolidation Period), and (ii) the assumptions set forth in Section 3.01
of this Agreement (other than clauses (vi) and (vii) thereof) actually applied.
The amount of any payment by AMR under this Section 3.05(c) shall equal the
amount of such increase. In addition, AMR shall make a payment to SABRE under
this Section 3.05(c) equal to the amount of any unused SABRE Pro Forma R&E Tax
Credit Carryovers that are not available for use by the SABRE Pro Forma
Affiliated Group in a Post-Consolidation Period. AMR shall make any payment
required to be made under this Section 3.05(c) within 15 days of, as the case
may be, the filing of the applicable return or amended return, or the receipt
of the applicable Final Determination, for the Post- Consolidation Period by
SABRE (or any later date on which AMR receives written notice from SABRE).
IV. PAYMENTS IN RESPECT OF OTHER TAXES
4.01. State or Local Income Taxes Reported on a Consolidated Return.
(a) Pre-Effective Date Periods. AMR shall be liable for, and shall
indemnify and hold harmless the SABRE Companies for, (i) any state or local
Taxes
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on, or measured by, net income that are incurred by, imposed on or attributable
to any SABRE Company for any Pre- Effective Date Period (other than such Taxes
reported or required to be reported (whether or not actually reported) in a
Separate Return filed exclusively for such SABRE Company) and (ii) any state or
local income Taxes on, or measured by, net income that are attributable to the
Spin-off Transaction.
(b) Post-Effective Date Periods. In the case of any state or local
Taxes on, or measured by, net income that are reported on a Consolidated Return
for any Post-Effective Date Period pursuant to Section 2.01 of this Agreement,
the sharing of Tax liability shall be determined under rules equivalent to the
provisions of Article III (including, without limitation, equivalent rules as
to the preparation of pro forma state or local tax returns for the applicable
SABRE Pro Forma Affiliated Group, the making of payments by SABRE with respect
to liability reported thereon, refunds in respect of carrybacks, and
adjustments in the event of Deconsolidation) , whether or not for federal
income tax purposes the applicable SABRE Pro Forma Affiliated Group is included
in the AMR Consolidated Return.
4.02. Foreign Taxes. AMR shall be liable for, and shall indemnify
and hold harmless the SABRE Companies for, (i) any Foreign Taxes which are
creditable under the Code (other than deemed paid Taxes under Code section 902
that have not been taken into account prior to the Spin-off Transaction)
incurred by, imposed on or attributable to any SABRE Company for any
Pre-Effective Date Periods, (ii) any such Foreign Taxes for any Post-Effective
Date Period that are attributable to the Spin-off Transaction, and (iii) all
other Foreign Taxes incurred by, imposed on or attributable to any SABRE
Company for any Pre-Effective Date Periods to the extent such liabilities do
not exceed the amount of any AMR reserves set aside therefor as of the
Effective Date. SABRE shall be liable for, and shall indemnify and hold
harmless the AMR Companies for, all other Foreign Taxes incurred by, imposed on
or attributable to any SABRE Company to the extent such liabilities exceed the
amount of any AMR reserves set aside therefor as of the Effective Date.
4.03. Other Taxes. Except as otherwise expressly provided in this
Agreement, SABRE shall be liable for all other Taxes incurred by, imposed on or
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<PAGE> 14
attributable to (i) any SABRE Company or (ii) any AMR Company with respect to
any business or assets transferred by an AMR Company to any SABRE Company
pursuant to the Spin-off Transaction (including, without limitation, any sales,
use, value-added or other similar transfer Taxes attributable to the transfer
of properties and assets by any AMR Company to any SABRE Company pursuant to
the Spin-off Transaction) and shall indemnify and hold harmless the AMR
Companies for any such liabilities imposed on them to the extent such
liabilities exceed the amount of any AMR reserves set aside therefor as of the
Effective Date; provided, however, that AMR shall be liable for the Taxes
described in this Section 4.03 to the extent of its reserves set aside
therefor.
4.04. Environmental Tax; New Taxes. In the case of the Tax imposed
under section 59A of the Code and any other federal, state, local, or Foreign
tax reported on a Consolidated Return for any Post-Effective Date Period
pursuant to Section 2.01 of this Agreement, the sharing of Tax liability shall
be determined under rules equivalent to the rules of Article III (including,
without limitation, equivalent rules as to the preparation of pro forma returns
for the applicable SABRE Pro Forma Consolidated Group, the making of payments
by SABRE with respect to liability reported thereon, refunds in respect of
carrybacks and adjustments in the event of Deconsolidation), whether or not for
federal income tax purposes the applicable SABRE Pro Forma Affiliated Group is
included in the AMR Consolidated Return.
4.05. Cap and Allocation of Certain Liabilities. The liability of
SABRE or AMR to make indemnity payments under Section 4.02 or 4.03 shall be
modified as follows: (i) with respect to any Tax liabilities (other than any
sales, use, value-added or other similar transfer Taxes attributable to the
transfer of properties and assets by any AMR Company to any SABRE Company
pursuant to the Spin-off Transaction (the "Spin-off Transfer Taxes")) of SABRE
or any SABRE Company for any Pre-Effective Date Period, SABRE's indemnity
obligation to AMR shall be limited to an aggregate amount of $4,000,000 and AMR
shall indemnify and hold harmless the SABRE Companies for any such liability
imposed directly on them by a taxing authority to the extent that the sum of
such liability plus SABRE's previous indemnity payments to
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<PAGE> 15
AMR exceeds $4,000,000, and (ii) with respect to Spin-off Transfer Taxes,
SABRE's indemnity obligation to AMR shall be limited to an aggregate amount of
$2,000,000 and AMR shall indemnify and hold harmless the SABRE Companies to the
extent such liabilities exceed $2,000,000 in the aggregate.
V. SUBSEQUENT ADJUSTMENTS OF TAX LIABILITY
5.01. Post-Effective Date Tax Periods. If any Final Determination
results in an adjustment to any Tax Item of any SABRE Company for any
Post-Effective Date Period or any Tax Item of any AMR Company for any
Post-Consolidation Period, the liability of SABRE to make payments to AMR under
Section 3.02, 3.05, 4.01, or 4.04, or the liability of AMR to make payments to
SABRE under Section 3.03, 3.05, 4.01, or 4.04, for all Post-Effective Date
Periods shall be redetermined to reflect such adjustment. SABRE shall pay to
AMR (i) any excess of the aggregate amount of SABRE's net liability to AMR
under such Sections, as calculated pursuant to such redetermination, over the
net amount previously paid by SABRE in respect of such liability under such
Sections, plus (a) interest with respect to the amount determined in clause
(i), plus (b) the amount of any penalties, additions to tax, or expenses which
are paid by any AMR Company with respect to such adjustment (including, without
limitation, any reasonable out-of-pocket costs incurred by the AMR Companies in
connection with the assessment or collection thereof), reduced by (ii) any
amount paid directly by a SABRE Company to any government or taxing authority
to satisfy the increased tax liability taken into account in computing such
payment. AMR shall pay to SABRE (A) any excess of the net amount previously
paid by SABRE to AMR in respect of SABRE's liability under such Sections over
the aggregate amount of SABRE's net liability under such Sections, calculated
pursuant to such redetermination, plus (B) the amount of any interest received
by an AMR Company from any government or taxing authority with respect to such
adjustment, reduced by (C) the amount of any refund of Tax received directly
from any government or taxing authority by any SABRE Company with respect to
such adjustment. Any amount
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payable pursuant to this Section 5.01 shall be paid within 15 days after the
date of the Final Determination giving rise to such payment.
5.02. Pre-Effective Date Adjustments.
(a) Payment for Increase in Tax Liabilities. If, for any
Pre-Effective Date Period, any Final Determination results in an adjustment to
any Tax Item (i) of any SABRE Company or (ii) relating to any business or
assets transferred by an AMR Company to any SABRE Company pursuant to the
Spin-off Transaction, causing an increase in any Tax for which SABRE is liable
pursuant to Section 2.02, 4.02 or 4.03 hereof, subject to all limitations on
such liability (including, without limitation, Section 4.05), SABRE shall pay
to AMR an amount equal to (A) such increase in Tax liability plus (B) any
expenses which are paid by any AMR Company with respect to such adjustment
(including, without limitation, any reasonable out-of-pocket costs incurred by
the AMR Companies in connection with the assessment or collection thereof),
reduced by (C) any amount paid directly by a SABRE Company to any government or
taxing authority to satisfy such increased Tax liability. SABRE shall make any
such payment within 15 days of AMR's payment of the increase in liability. AMR
shall pay to SABRE an amount equal to any refund of Taxes (including any
interest with respect thereto) for the AMR Affiliated Group or any AMR Company
for any Pre-Effective Date Period or portion thereof that SABRE is responsible
for under the terms of this Agreement and that is received by any AMR Company
on or after the Effective Date and that is attributable to an adjustment of any
Tax Item (i) of any SABRE Company or (ii) relating to any business or assets
transferred by an AMR Company to any SABRE Company pursuant to the Spin-Off
Transaction. AMR shall make any such payment within 15 days of the receipt of
the refund by AMR or another AMR Company.
(b) Payment for Certain Tax Benefits. If the income Tax liability
of any AMR Company, or any SABRE Company with respect to any such income Taxes
AMR is responsible for under the terms of this Agreement, is increased for any
Pre-Effective Date Period and the particular item that produced such increase
results, directly or indirectly, in a Tax Benefit of any SABRE Company for any
Post-Effective Date Period, SABRE shall pay AMR the amount of any actual
reduction in Taxes resulting from
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<PAGE> 17
such Tax Benefit within 15 days after the later of (i) the due date (without
regard to waivers or extensions) of the Tax Return for the taxable period
during which the Tax Benefit was utilized or (ii) the date notice is given by
AMR to SABRE with respect to such payment.
5.03. Carrybacks of Post-Consolidation Period Tax Benefits.
(a) If a SABRE Company incurs a Tax Benefit during any
Post-Consolidation Period which either (i) is required under applicable law to
be carried back to any taxable period ending on or before the Deconsolidation
Date or (ii) SABRE properly elects to carryback to such earlier taxable period,
then AMR will pay to SABRE the amount of any actual reduction in tax liability
resulting from the carryback of such Tax Benefit (to the extent that SABRE or
any SABRE Company does not receive such amount directly from the appropriate
taxing authority). The amount of such reduction shall be equal to the excess
of (A) the amount of any Taxes that would have been payable by the AMR
Affiliated Group in the absence of such carryback, over (B) the amount of such
Taxes actually payable by the AMR Affiliated Group including such carryback.
Such payment shall be made within thirty (30) days of the receipt by AMR or any
AMR Company of the Tax Benefit of any such reduction. At SABRE's request and
expense, AMR shall undertake those actions reasonably necessary to enable SABRE
to carry back a Tax Benefit incurred in a Post-Consolidation Period.
(b) If, subsequent to the payment by AMR to SABRE of any amount
referred to in Section 5.03(a) above, there shall be (i) a Final Determination
under applicable law of a Tax deficiency of the AMR Affiliated Group as a
result of which the AMR Affiliated Group does not get the benefit of the
carryback, or (ii) a Final Determination resulting from an audit of SABRE or
any SABRE Company (or any successor thereto) which results in a reduction of
any Tax Benefit so carried back, SABRE shall repay AMR, within thirty (30) days
of such Final Determination, the amount which would not have been payable to
SABRE pursuant to Section 5.03(a) above had the amount of the payment been
determined by taking into account such event.
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VI. ADMINISTRATIVE PROVISIONS
6.01. Contests. (a) Notice. SABRE shall provide AMR written notice
of any claim, or of the commencement of any audit or proceeding, together with
copies of all correspondence, notices or other documents relating thereto,
which may result in a Final Determination which would adjust any Tax Item of a
SABRE Company reportable on any Consolidated Return. Whenever as a result of
examination or audit by a governmental authority AMR becomes aware of the
existence of a material issue involving a Tax Item of any SABRE Company which
may result in a Final Determination with respect to a Consolidated Return, AMR
shall promptly give notice to SABRE of the existence of such issue.
(b) Control of Consolidated Return Controversies. AMR shall, in
its sole discretion, control and direct the conduct of any audit or inquiry or
any administrative or judicial appeal or other proceeding regarding any
Consolidated Return or the payment of any Tax by the AMR Affiliated Group or
any entity not required to be reported on a SABRE Separate Return. Each SABRE
Company shall provide AMR with powers of attorney or other appropriate
documents which will enable AMR to conduct any such proceeding. AMR may, in
its sole discretion, agree to pay, settle, compromise, or concede any such
claim or issue arising with respect to any proceeding which it controls
pursuant to this Section 6.01(b); provided, however, that SABRE may prevent a
proposed settlement or compromise of any Tax Item of a SABRE Company arising in
a Consolidated Return if (i) it provides AMR with an opinion of tax counsel
reasonably acceptable to AMR that SABRE's position is more likely than not to
prevail in litigation and (ii) it agrees to indemnify AMR for any costs
associated with contesting such issue.
(c) Expenses related to Consolidated Return Controversies. SABRE
shall promptly reimburse AMR for all expenses (including, without limitation,
legal and accounting fees) incurred by AMR in the course of proceedings
described in Section
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6.01(b) of this Agreement to the extent such expenses are reasonably
attributable to Tax Items of any SABRE Company.
6.02. Cooperation and Exchange of Information. (a) In general.
AMR and SABRE will provide, and will cause their affiliates to provide, one
another with such cooperation and information as either of them reasonably may
request of the other in filing any Tax Return, amended return, or claim for
refund; determining a liability for Taxes or a right to refund of Taxes; or in
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include AMR's or SABRE's, as the case may be, (i)
providing to the other party copies of all relevant Tax Returns, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by taxing authorities, and records concerning the
ownership and tax basis of property; and (ii) making its employees available to
the other party on a mutually convenient basis to provide explanations of any
documents or information requested hereunder or other reasonable technical
support (including, without limitation, the provision of interpretation,
analyses, and testimony). Any information obtained under this Section shall be
kept confidential, except as may be otherwise necessary in connection with the
filing of returns or claims for refund or in conducting any audit or other
proceeding.
(b) Preparation of Tax Package by SABRE. So as to enable AMR to
prepare the Consolidated Returns accurately and completely, to forecast and
plan with respect to Taxes effectively, and to provide for accurate financial
reporting in respect of Taxes, for each Post-Effective Date Tax Period, SABRE
shall prepare and submit to AMR (i) a tax return package for Consolidated
Returns, (ii) an estimated tax package for Consolidated Returns, (iii) a tax
provision package, and (iv) a tax projection package (collectively, the "Tax
Package"). SABRE shall prepare and submit to AMR the Tax Package at such times
and in such form, manner, and medium as AMR shall request. To the extent that
AMR requests, the Tax Package will include workpapers and other supporting
documentation. Unless otherwise expressly consented to by AMR in writing, the
Tax Package shall be prepared, with respect to Tax Items includable in a
Consolidated Return, using the methods, elections, and positions that
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AMR previously used in preparing Consolidated Returns or consolidated financial
statements. SABRE shall bear all costs and expenses of preparation and
submission of the Tax Package, including, without limitation, accountants' and
attorneys' fees.
(c) Record Retention. Each party will retain all Tax Returns,
SABRE Pro Forma Consolidated Returns, schedules and work papers, and all
material records or other documents relating thereto, until the expiration of
the statute of limitations (including extensions) of the taxable periods to
which such Tax Returns and other documents relate and, unless such Tax Returns
and other documents are offered to the other party, until the Final
Determination of any payments which may be required in respect of such years
under this Agreement. Before any tax records or documents are destroyed, the
party holding such records shall notify the other party of its intent to
destroy them and shall offer any such records to the other party. If the other
party wishes to receive such records, it shall notify the party holding the
records or documents within 45 days of receipt of notice of the other party's
intent to destroy, and will be liable for any costs related to the transfer of
such records.
(d) Failure to provide Information. If any AMR Company or SABRE
Company, as the case may be, fails to provide any information requested
pursuant to this Agreement by (i) the dates established for such information in
this Agreement or (ii) with respect to information for which a date is not
specified in this Agreement, within a reasonable period, as determined in good
faith by the party requesting information, the requesting party shall have the
right to engage a public accountant of its choice to gather such information.
AMR and SABRE, as the case may be, agree that upon 10 days' notice, in the case
of a failure to provide information on the dates established therefor by this
Agreement, and otherwise upon 30 days' notice after the expiration of such
reasonable period, to permit (for the sole purpose of gathering such
information) any such public accountant full access to all appropriate records
or other information in the possession of any member of any AMR Company or any
SABRE Company, as the case may be, during reasonable business hours, and to
reimburse or pay directly all reasonable costs and expenses in connection with
the engagement of such public accountant.
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VII. MISCELLANEOUS PROVISIONS
7.01. Interest. Interest required to be paid by or to SABRE
pursuant to this Agreement shall, unless otherwise specified, be computed at
the rate and in the manner provided in the Code (or comparable state, local, or
Foreign law) for interest on underpayments and overpayments, respectively, of
federal, state, local or Foreign tax (as the case may be) for the relevant
period. Any payments required pursuant to this Agreement which are not made
within the time period specified in this Agreement shall bear interest at the
rate specified above for underpayments of federal income tax plus 3 percent.
7.02. Resolution of Disputes. Any disputes between the parties
concerning the calculation of amounts, allocation or attribution of costs or of
any Tax or Tax Item, or similar accounting matters shall be resolved in
accordance with AMR's interpretation of this Agreement, unless SABRE shall
provide AMR with an opinion of a nationally recognized public accounting firm
that such interpretation is unreasonable.
7.03. Application to Present and Future Subsidiaries.
(a) AMR agrees that it shall have liability for all Tax
liabilities and indemnity obligations of the AMR Companies as provided for in
this Agreement. Any reference to AMR in this Agreement shall subject AMR to
full, direct and primary liability for any sum owing by AMR or any other AMR
Company. AMR agrees that it shall cause each AMR Company to comply fully with
the terms of this Agreement.
(b) SABRE agrees that it shall have liability for all tax
liabilities and indemnity obligations of the SABRE Companies as provided for in
this Agreement. Any reference to SABRE in this Agreement shall subject SABRE
to full, direct and primary liability for any sum owing by SABRE or any other
SABRE Company. SABRE agrees that it shall cause each SABRE Company to comply
fully with the terms of this Agreement.
(c) AMR and SABRE shall, upon the written request of the other,
cause any of their respective group members formally to execute this Agreement.
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From and after the time that any such group member formally executes the
Agreement, it shall constitute a direct obligation of such corporation, which
shall become jointly and severally liable for all amounts payable by AMR or
SABRE (as the case may be) hereunder. AMR and SABRE hereby guarantee the
performance of all actions, agreements and obligations provided under this
agreement of each AMR Company or each SABRE Company, respectively. This
Agreement shall be binding upon, and shall inure to the benefit of, the
successors, assigns and persons controlling any of the corporations bound
hereby.
7.04. Expenses. Unless otherwise expressly provided in this
Agreement, each party shall bear any and all expenses that arise from their
respective obligations under this Agreement.
7.05. Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing and shall be deemed
given if delivered by hand or sent by telecopy or mailed (registered or
certified mail, postage prepaid, return receipt requested), addressed to the
parties as follows:
If to AMR:
American Airlines, Inc.
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
Attention: Managing Director - Tax
If to SABRE:
The SABRE Group, Inc.
4200 American Boulevard
Fort Worth, Texas 76155
Attention: Chief Financial Officer
7.06. Entire Agreement; Titles and Headings. This Agreement
constitutes the entire agreement of the parties concerning the subject matter
hereof
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and supersedes all other agreements, whether or not written, in respect of any
Tax between or among any of the AMR Companies and any of the SABRE Companies.
In the event of a conflict between this Agreement and a provision in any other
agreement between or among members (or former members) of the AMR Affiliated
Group concerning the allocation or sharing of Taxes on or measured by net
income, this Agreement shall control unless the provision in the other
agreement specifically provides that it shall control; provided, however, that
this Agreement shall not override any provision regarding Taxes contained in
that certain Stock Rights and Transfer Agreement dated July 1, 1996, by and
between American and The SABRE Group, Inc. In the event of a conflict between
this Agreement and a provision in any other agreement between or among members
(or former members) of the AMR Affiliated Group concerning the allocation or
sharing of Taxes (other than taxes on or measured by net income), the provision
in such other agreement shall control. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto. Titles and
headings to sections herein are inserted for the convenience of reference only
and are not intended to be a part or to affect the meaning or interpretation of
this Agreement.
7.07. Term. This Agreement shall commence on the Effective Date and
shall continue in effect until otherwise agreed to in writing by AMR and SABRE,
or their successors.
7.08. Governing Law. This Agreement shall be governed by the laws
of the State of Texas, without regard to the principles of conflicts of law
thereof.
7.9. Severability. If any term, provision or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and restrictions shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions and
restrictions without including any of such term, provision or restriction which
may be hereafter declared invalid, void and unenforceable.
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7.10. Counterparts. This Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AMR CORPORATION
By: /s/ Jeffery M. Jackson
------------------------------------
Jeffery M. Jackson, Treasurer
TSG CORPORATION
By: /s/ Michael J. Durham
------------------------------------
Michael J. Durham, President
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TAX SHARING AGREEMENT
SCHEDULE A
Divisions of American Airlines, Inc.:
- - SABRE Travel Information Network (STIN)
- - SABRE Computer Services (SCS)
- - SABRE Development Services (SDS)
- - SABRE Interactive (SI)
- - SABRE Staff Group
Subsidiaries of American Airlines, Inc.:
- - SABRE International, Inc.
- - SABRE Associates, Inc.
- - SABRE International Holdings, Inc.
- - SST Holdings, Inc.
- - SST Finance, Inc.
- - SCS, Inc.
- - SDS, Inc.
- - STIN, Inc.
- - SABRE Computer Services, Inc.
- - SABRE Development Services, Inc.
- - SABRE Travel Information Network, Inc.
- - SABRE Belgium
- - SABRE Computer-Reservierungssystem GmbH
- - SABRE Danmark ApS
- - SABRE Deutschland Marketing GmbH
- - SABRE Deutschland Services GmbH
- - SABRE Espana Marketing, S.A.
- - SABRE Europe Management Services Ltd.
- - SABRE France SARL
- - SABRE Hellas SA
- - SABRE Ireland Ltd.
- - SABRE Italia S.r.l.
- - SABRE Marketing Nederland BV
- - SABRESABRE Norge AS
- - SABRESABRE Portugal Servicios Colombia LTDA
- - SABRE Suomi Oy
- - SABRE Sverige AB
- - SABRE UK Marketing Ltd.
- - STIN Luxembourg SA
<PAGE> 26
Subsidiaries of The SABRE Group, Inc.:
- - Encompass Holding, Inc.
- - SABRE Decision Technologies International, Inc.
- - SABRE Decision Technologies Licensing, Inc.
- - TSGL, Inc.
- - TSGL Holding, Inc.
- - TSGL-SCS, Inc.
- - SABRE Decision Technologies, Inc.
- - SABRE Decision Technologies (Australia) Pty Ltd.
- - Ticketnet Corporation
- - 148548 Canada, Inc.
The SABRE Group Holdings, Inc. (f/k/a TSG Corporation)
<PAGE> 27
TAX SHARING AGREEMENT
SCHEDULE B
Subsidiaries of The SABRE Group, Inc.:
- - SABRE Enterprises, Inc.
- - Encompass Holding, Inc.
- - SABRE Decision Technologies International, Inc.
- - SABRE Decision Technologies Licensing, Inc.
- - TSGL, Inc.
- - TSGL Holding, Inc.
- - TSGL-SCS, Inc.
- - SABRE International, Inc.
- - SABRE International Holdings, Inc.
- - SST Holdings, Inc.
- - SST Finance, Inc.
- - SCS, Inc.
- - SDS, Inc.
- - STIN, Inc.
- - SABRE Computer Services, Inc.
- - SABRE Development Services, Inc.
- - SABRE Travel Information Network, Inc.
- - SABRE Decision Technologies, Inc.
- - SABRE Belgium
- - SABRE Computer-Reservierungssystem GmbH
- - SABRE Danmark ApS
- - SABRE Deutschland Marketing GmbH
- - SABRE Deutschland Services GmbH
- - SABRE Espana Marketing, S.A.
- - SABRE Europe Management Services Ltd.
- - SABRE France SARL
- - SABRE Hellas SA
- - SABRE Ireland Ltd.
- - SABRE Italia S.r.l.
- - SABRE Marketing Nederland BV
- - SABRESABRE Norge AS
- - SABRESABRE Portugal Servicios Colombia LTDA
- - SABRE Suomi Oy
- - SABRE Sverige AB
- - SABRE UK Marketing Ltd.
- - STIN Luxembourg SA
- - SABRE Decision Technologies (Australia) Pty Ltd.
- - Ticketnet Corporation
- - 148548 Canada, Inc.
The SABRE Group Holdings, Inc. (f/k/a TSG Corporation)
<PAGE> 1
EXHIBIT 10.11
July 25, 1996
Mr. T. Patrick Kelly
Senior Vice President
SABRE Group Planning
P.O. Box 619616
Mail Drop 4202
DFW Airport, TX 75261-9616
Re: Corporate Travel Agreement between SABRE Group ("Customer")
and American Airlines, Inc. ("American")
Dear Mr. Kelly:
This Corporate Travel Agreement (this "Agreement") will confirm the
agreement and understanding between Customer and American regarding travel by
Customer on certain flights of American.
1. Term. This Agreement will be valid from August 5, 1996 through
June 30, 1996, unless earlier terminated in accordance with the terms hereof.
2. Issuance of Customer Numbers. American will provide Customer
with an account number for travel pursuant to this Agreement ("AN#"). American
will also issue to Customer a Customer Identification Number which will
identify Customer for record keeping purposes for travel pursuant to this
Agreement ("CART#").
3. Discount/Rebate. Customer will be entitled to a discount (the
"Discount") or a rebate (the "Rebate") as specified in Appendix A and B hereto.
To ensure that all flight segments are properly recorded and credited, Customer
and each Agency of Record (as defined in Section 4) must utilize the applicable
AN# and CART# set forth in Appendix A and must enter such numbers in all of
Customer's travel reservations pursuant to this Agreement. The Discount will
apply in full at the time of each Permitted Purchase (as defined in Section 4).
The Rebate will be earned on all Qualified Flown American Revenue (as defined
below) and payable as provided in Section 4. The Discount/Rebate will be net of
all base commissions, travel agency overrides, CRS booking fees, and credit
card fees, and Customer agrees that American will not incur agency commissions,
credit card fees, or CRS booking fees for any travel purchased by Customer. The
amount of the Discount or Rebate and the corresponding applicable city pair or
market area Share Commitments (as defined in Section 7), advance purchase
requirement and booking inventory category are set forth in Appendix A and B.
4. Permitted Purchases. The Discount may be used by Customer and
each Agency of Record only toward purchases (the "Permitted Purchases") of
published fares (including also taxes) for the city pairs specified in Appendix
A (to be eligible for the Discount, city pairs must be located within the 48
Contiguous United States, Hawaii, the District of Columbia, and Canada, and
must be served by American on the applicable dates of travel). The Discount is
expressed as a percentage reduction of such fares. The Discount may not be used
with any other promotion, discount or special offer (except that tickets
purchased with the Discount are eligible for credit under American's
AAdvantage(R) program for frequent fliers, in accordance with the rules of such
program). The amount of the Rebate is calculated as a percentage rebate of
Qualified Flown American Revenue for the applicable city pair. Any travel
booked pursuant to this Agreement will be booked with American by Customer
directly or by Customer's designated travel agency of record which is approved
by American (each such agency, an "Agency of Record"). To qualify as an "Agency
of Record," the travel agency must execute a Limited Travel Agency Agreement
with Customer and American. If Customer or an Agency of Record uses the AN# or
CART# to make any purchase other than a Permitted Purchase, American may
(without limiting its rights under this Agreement or the Limited Travel Agency
Agreement), assess Customer a surcharge equal to the difference between the
Discount fare and the appropriate published fare for the non-Permitted
Purchase. Customer will immediately report the fraudulent or unauthorized use
of the AN# or CART# to American. Customer agrees that all Permitted Purchases
will be booked and ticketed by Customer or an Agency of Record through the SABRE
computer reservation system.
5. Rules Governing Tickets. Except for application of the
Discount, Permitted Purchases will be subject to American's Conditions of
Carriage and all rules applicable to the general public for the class or
category of fare selected (including also any charges to Customer for change in
travel arrangements that may be applicable to the class or category of fare
selected). American's obligation to issue Permitted Purchase tickets to
Customer (either directly or through an Agency of Record) is subject to
availability of seats for the specified class of service. American may
discontinue flights or change flight schedules at any time and for any reason
without notice, liability or obligation to Customer. Tickets issued pursuant to
this Agreement are non-endorsable and are valid for business travel on American
only. All travel pursuant to this Agreement must be booked in the proper class
of service as specified in Appendix A, booked and ticketed at an authorized
Customer ticketing location, and paid for directly by the Customer. In
addition, all tickets for such travel must be used for travel prior to the date
of termination or expiration of this Agreement (or any extension hereof).
<PAGE> 2
6. Monthly Statements. Customer will provide American, on or
prior to the fifteenth (15th) business day of each month, a consolidated
written summary for the immediately preceding month setting forth (i) the
number of Customer's Permitted Purchases for each city pair specified in
Appendix A, (ii) the total price of Customer's Permitted Purchases for each
such city pair, (iii) the fulfillment of Share Commitment (as defined in
Section 7) of Customer for each such city pair, and (iv) the number of
Permitted Purchase segments flown on American and the city pairs for each
segment.
7. Share Commitment. For travel between each of the city pairs
listed in Appendix A, Customer agrees to maintain, for each ARC reporting month
during the term of this Agreement, the applicable percentage of travel
(measured by flown segments) on American compared to all other air carriers
(combined) for that city pair (the "Share Commitment"). American will review
Customer's booking and revenue performance for each calendar month during the
term of this Agreement with Customer. If Customer does not maintain, on an
averaged basis over the course of a calendar quarter, the Share Commitment for
any listed city pair, American may terminate this Agreement upon giving
Customer at least sixty (60) days' prior written notice.
8. Termination of Agreement. In addition to any other termination
rights provided in this Agreement, either party hereto may terminate this
Agreement for any reason, with or without cause, upon giving at least sixty
(60) days' prior written notice to the other party. In the event of a breach or
default by a party hereto, the other party may terminate this Agreement upon
giving at least three (3) days' prior written notice to the breaching or
defaulting party. Customer will not be entitled to receive the Discount on any
tickets issued for travel on or after the effective date of termination or
expiration of this Agreement and, as of such date, the AN# will be canceled.
9. Confidentiality. Customer and American will each keep
confidential the existence, terms and conditions of this Agreement and (unless
required by law or judicial process after making reasonable efforts to resist
disclosure) will not disclose any of same to any third party (other than any
Agencies of Record) without obtaining the prior written consent of the other
party hereto. The provisions of this Section 9 will survive the termination or
expiration of this Agreement.
10. Miscellaneous. Neither Customer nor American may assign this
Agreement, in whole or in part, except with the prior written consent of the
other, and any such attempted unauthorized assignment will be void and
unenforceable. This Agreement may not be amended, renewed, extended or
otherwise modified except by a writing signed by both parties. This Agreement
will be governed by and construed in accordance with the laws of the State of
Texas without regard to choice of laws principles. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes any prior agreements or understandings, whether oral or
written between the parties. All remedies provided under this Agreement are
non-exclusive and are in addition to all other available legal and equitable
remedies, except that neither party will hereto be liable to the other for any
consequential, punitive or exemplary damages (including also lost revenues,
lost profits and lost prospective economic advantage) arising from any
performance of this Agreement or any breach or default hereunder, even if such
party knew or should have known of the existence of such damages, and each
party hereby releases and waives any claims against the other party regarding
such damages. Either party to this Agreement may specifically waive any of the
provisions hereof or any default or remedy hereunder, but no such waiver shall
constitute a future waiver of any such provision, default or remedy or a waiver
of any other provision, default or remedy. No delay or omission in the exercise
or enforcement of any right or remedy provided hereunder or by law by either
party shall be construed as a waiver of such right or remedy. If one or more of
the provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
the remaining provisions of this Agreement, and this Agreement shall be
enforced to the fullest extent possible.
Please confirm Customer's agreement to and acceptance of the foregoing
by having an appropriate officer sign and date in the spaces provided below.
This offer is valid through July 31, 1996.
Sincerely,
AMERICAN AIRLINES, INC.
By: /s/ STEVEN A. ROSATO
--------------------------------------
Steven A. Rosato
National Account Manager
Agreement Only Valid When Countersigned
CONFIRMED: APPROVED (as of date first written above):
SABRE Group American Airlines, Inc. Headquarters
By: /s/ T. PATRICK KELLY By: /s/ FRANK MOROGIELLO
------------------------------ --------------------------------------
T. Patrick Kelly Frank Morogiello
Senior Vice President Managing Director, Commercial Sales
Date: 7/26/96
------------------------
<PAGE> 3
APPENDIX A
CORPORATE TRAVEL AGREEMENT INFORMATION
1. CONTACT, NOTICE & MAILING INFORMATION
<TABLE>
<CAPTION>
Customer American
<S> <C> <C> <C>
Mailing address: SABRE Group Mailing address: American Airlines, Inc.
P.O. Box 619616, MD 4202 P.O. Box 619047, MD 1302
DFW Airport, TX 75261-9616 DFW Airport, TX 75261-9047
Attn: Commercial Sales
Contact: Michael A. Stewart Contact: Steven A. Rosato
Title: Manager, Corporate Travel Title: National Account Manager
Phone: (817) 967-2999 Phone: (214) 425-7005
Fax: (817) 967-3456 Fax: (214) 425-6977
</TABLE>
2. DISCOUNT/REBATE INFORMATION
<TABLE>
<CAPTION>
Domestic City Pairs* Fares Inventory Discount Adv. Purch.
- -------------------- ----- --------- -------- -----------
<S> <C> <C> <C> <C>
To/From
U.S. System to U.S. System F26/P26, F/P "CONFIDENTIAL PORTION 0
(Includes U.S. 48, DC, and Hawaii) C26,Y26 C/B OMITTED AND FILED 0
Applic. Applic. SEPARATELY WITH THE COMMISSION" Applicable
U.S. System to/from Canada F26/Y26 F/Y "CONFIDENTIAL PORTION 0
(Includes U.S. 48, DC, and Hawaii) Applic. Applic. OMITTED AND FILED Applicable
SEPARATELY WITH THE COMMISSION"
</TABLE>
<TABLE>
<CAPTION>
International City Pairs** Fares Discount/Rebate Adv. Purch.
- -------------------------- ----- --------------- -----------
<S> <C> <C> <C>
To/From
U.S. System to/from Europe Full F/C/Y/B2 "CONFIDENTIAL PORTION 0
U.S. System to/from Europe Applic. OMITTED AND FILED Applicable
SEPARATELY WITH THE COMMISSION"
U.S. System to/from South/Central America Full F/C/Y/B2 "CONFIDENTIAL PORTION 0
U.S. System to/from South/Central America Applic. OMITTED AND FILED Applicable
U.S. System to/from Mexico All SEPARATELY WITH THE COMMISSION" Applicable
U.S. System to Tokyo Full F "CONFIDENTIAL PORTION 0
U.S. System to Tokyo Full C/Y/B2 OMITTED AND FILED 0
SEPARATELY WITH THE COMMISSION"
</TABLE>
Note: Up-front discount applies on all US point of sale travel to the
international destinations listed above. Back-end barter credits will
be issued for international point of sale travel from the above
international areas to the US (see Appendix B). Each quarter, the
Customer's barter account will be emptied, and the balance issued as a
credit against the Customer's UATP account balance. Once the
"Corporate AAccess powered by SABRE(R) product has the ability to
process corporate discounts for international point of sale
transactions, the Rebate will be replaced by an up-front Discount.
3. ACCOUNT NUMBER AND CUSTOMER IDENTIFICATION NUMBER
AN#: 03X8CC CART#: 507574
<PAGE> 4
APPENDIX A (continued)
4. SHARE COMMITMENTS
<TABLE>
<CAPTION>
Domestic Share International Share
City Pairs* Commitment City Pairs** Commitment
----------- ---------- ------------- ----------
<S> <C> <C> <C>
All City Pairs Where "CONFIDENTIAL PORTION OMITTED All City Pairs Where "CONFIDENTIAL PORTION OMITTED
AA Offers Competitive AND FILED SEPARATELY WITH AA Offers Competitive AND FILED SEPARATELY WITH
Service*** THE COMMISSION" Service*** THE COMMISSION"
</TABLE>
* Domestic City Pairs must be between a point of origin and point of
destination within the U.S. Contiguous 48 States, Hawaii, the District
of Columbia, and Canada.
** International City Pairs must include a point of origin or destination
outside the U.S. Contiguous 48 States, Hawaii, the District of
Columbia, and Canada.
*** Competitive service is defined as those city pairs in which American
Airlines offers regularly scheduled non-stop, direct, or connecting
service.
5. AGENCY OF RECORD INFORMATION
<TABLE>
<CAPTION>
Pseudo City Code
Name ARC# City Dedicated or OA CRS type
- ---- ---- ---- --------- --------------
<S> <C> <C> <C> <C>
(see Attachment A)
</TABLE>
<PAGE> 5
Attachment A
ACCOUNT STRUCTURE
OF
ELIGIBLE LOCATIONS
CUSTOMER: SABRE Group
<TABLE>
<CAPTION>
Agency Of Record City/Location ARC Number Pseudo City Code
---------------- ------------- ---------- ----------------
<S> <C> <C> <C>
Answers Travel San Antonio, TX 45-53726 (non-dedicated) NOV3 (dedicated)
</TABLE>
Contact: Teresa Hardy (Manager - SABRE Interactive Desk, TSR): ICS 731-2002
Pat Brimage (Managing Director - TSR)
Account structure of eligible locations must be verified and signed by both
parties. PLEASE ENSURE THAT ARC NUMBERS ARE CORRECT, AS NO EXCEPTIONS IN
PROCESSING WILL BE MADE RETROACTIVELY. As stated in Paragraph 4 of this
Agreement. ARC locations added during a quarterly period will be included for
payment purposes in the subsequent quarter.
AMERICAN AIRLINES, INC. SABRE Group
/s/ FRANK MOROGIELLO /s/ T. PATRICK KELLY
- ------------------------- -------------------------
Frank Morogiello T. Patrick Kelly
Managing Director, Commercial Sales Senior Vice President
Date: Date: 7/26/96
<PAGE> 6
APPENDIX B
INTERNATIONAL TRAVEL CREDIT
(International Point of Sale ONLY)
Account Number: 507574
COMPANY: SABRE Group
ADDRESS: P.O. Box 619616, MD 4202 TRAVEL AGENCY: TBD
DFW Airport, TX 75261-9616 ARC NO.: TBD
SALES REP: Steven A. Rosato
CARD HOLDER: Michael A. Stewart SALES CITY/ZONE: HDQ
PHONE NO.: (817) 967-2999
<TABLE>
<CAPTION>
MARKET AREA FULL F FULL C FULL Y B2 OTHERS
- ----------- ------ ------ ------ -- ------
<S> <C> <C> <C> <C> <C>
Europe TBD* TBD* TBD* TBD* TBD*
South/Central America TBD* TBD* TBD* TBD* TBD*
Mexico TBD* TBD* TBD* TBD* TBD*
Tokyo TBD* TBD* TBD* TBD* TBD*
</TABLE>
* DISCOUNT STRUCTURE WILL BE SIMILAR TO THAT IN APPENDIX A, BUT WILL
VARY SLIGHTLY BY COUNTRY DUE TO DIFFERENCES IN BASE COMMISSION AND
OVERRIDE RATES.
QUALIFIED FLOWN REVENUE: For purposes of this Agreement, Qualified Flown
Revenue includes any revenue received by American, net of refunds, for full
fare tickets purchased by the Company and issued outside the United States for
travel in the inventory classes and market areas indicated above.
BARTER CREDIT ACCOUNTING: Each quarter, the Customer's barter account will be
emptied, and the balance issued as a credit against the Customer's UATP account
balance. Once the "Corporate AAccess powered by SABRE(TM) product has the
ability to process corporate discounts for international point of sale
transactions, the Rebate will be replaced by an up-front Discount.
PERMITTED REDEMPTIONS: Travel Credits may be redeemed to purchase any travel
or upgrades on American's domestic or international flights at regular,
published fares solely for the Company and its employees traveling on corporate
business.
Use of the Credits to purchase transportation on other carriers is
prohibited. If the Company makes such a prohibited purchase, then an amount
equal to 200% of the entire purchase price of such tickets will be deducted
from the Company's Account balance and American may terminate this Agreement
immediately and without notice.
RULES GOVERNING REDEMPTION: All tickets purchased with the credits issued
under this Agreement are subject to all rules applicable to the general public
for the fare class selected, including penalties for change in travel
arrangements that may be applicable to the fare categories selected. The
Company and its employees and agents will be bound by and will comply with all
of American's rules governing the issuance of passenger tickets and the use of
those tickets. Also, tickets purchased using the Credits will not be included
in Qualified Flown Revenue for the purposes of earning further Credits.
UNUSED TICKETS: If the fare rules applicable to any Permitted Purchase made by
the Company provides that unused tickets can be returned for credit, then such
tickets may be returned to American for credit to the Account only by sending
them to American Airlines, Inc., Passenger Refund Department, P.O. Box 582880,
MD 755, Tulsa, Oklahoma 74158-2880.
<PAGE> 7
ATTACHMENT B
BENEFICIAL SERVICES
1) AAdvantage Platinum membership states for "CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION" key employees.
American and the SABRE Group will work together to determine that
list. These memberships will be valid for one-year and will be
provided in each year of the Agreement.
2) (Text omitted - Confidential Treatment Requested)
Transatlantic/Transpacific Business-to-First Class upgrade
certificates. At the end of each quarter where the SABRE group meets
its share commitment in at least "CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION" of the required
markets (see Appendix A), Customer will receive another "CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION" upgrade
certificates.
<PAGE> 1
EXHIBIT 10.12
SOFTWARE MARKETING AGREEMENT
Between
AMR CORPORATION
THE SABRE GROUP HOLDINGS, INC.
and
THE SABRE GROUP, INC.
Dated as of September 10, 1996
Software Marketing Agreement
<PAGE> 2
SOFTWARE MARKETING AGREEMENT
This Software Marketing Agreement, dated as of September 10, 1996, is
made and entered into by and between AMR CORPORATION, a Delaware corporation,
and The SABRE Group, Inc., a Delaware corporation.
RECITALS
WHEREAS, AMR owns all of the shares of common stock of TSGH and all of
the shares of common stock of American; and
WHEREAS, as part of the reorganization of AMR's information technology
business, American transferred to TSG, directly or indirectly, on July 1, 1996,
certain intellectual property, including the Restricted Software; and
WHEREAS, the Restricted Software gives American a significant
competitive advantage in its air transportation business; and
WHEREAS, TSG desires to have AMR permit TSGH to issue less than twenty
percent of the common stock of TSGH to the public in an initial public
offering; and
WHEREAS, in order to maximize the overall value of its investment in
TSG and AA, AMR wishes to limit the ability of TSG to market the Restricted
Software.
NOW THEREFORE, in consideration of the mutual covenants set forth
below, the parties hereto agree as follows:
1. DEFINITIONS Whenever used in this Agreement, the capitalized terms
listed below shall have the respective meanings specified below:
"Affiliate" means, with respect to any entity at any time, any Person
that, directly or indirectly, Controls such entity, is Controlled by
such entity or is under common Control with such entity.
"Agreement" means this Software Marketing Agreement as it may be
amended and supplemented from time to time.
"American" means American Airlines, Inc., a Delaware corporation.
"AMR" means AMR Corporation, a Delaware corporation.
"Confidential Information" has the meaning ascribed to that term in
the IT Services Agreement.
1
Software Marketing Agreement
<PAGE> 3
"Control" means the ability to direct the management or operations of
a Person by reason of ownership of greater than 50% of the voting
equity interests of such Person. "Controlled" and "Controls" have
corresponding meanings.
"Dispute" means any dispute, disagreement, claim, or controversy
arising in connection with or relating to this Agreement, or the
validity, interpretation, performance, breach, or termination of this
Agreement, including any claim of breach of representation or warranty
or of non-performance.
"IT Services Agreement" means the Information Technology Services
Agreement dated as of July 1, 1996, between American and TSG.
"Key Employee" has the meaning ascribed to that term in the IT
Services Agreement.
"Market Limited Airline Software" means the Software listed under that
heading on Schedule A attached hereto, as that list may be
supplemented or amended by the parties.
"Market Limited Cargo Software" means the Software listed under that
heading on Schedule A attached hereto, as that list may be
supplemented or amended by the parties.
"Market Restricted Software" means the Software listed under that
heading on Schedule A attached hereto, as that list may be
supplemented or amended by the parties.
"Party" means a Person that has executed this Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, firm, joint venture, association, joint-stock company,
trust, estate, unincorporated organization, governmental or regulatory
body or other entity.
"Restricted Software" means any or all of the Market Limited Airline
Software, the Market Limited Cargo Software, and the Market Restricted
Software.
"Software" means all computer programming code, instructions or
statements, whether in a form readable by individuals (source code) or
by machines (object code), and all documentation, materials,
algorithms, formulas, processes, compostitions, designs, data,
specifications, or procedures embodied in the applications, to the
extent that they were developed as part of a project funded in whole
or in substantial part by AMR or American or American Eagle, Inc.
"TSG" means The SABRE Group, Inc., a Delaware corporation.
2
Software Marketing Agreement
<PAGE> 4
"TSGH" means The SABRE Group Holdings, Inc., a Delaware
corporation.
2. TERM This Agreement shall be effective as of the completion
by TSGH of the initial public offering of its common stock and
shall continue in effect until the earliest to occur of (i)
expiration of the IT Services Agreement, and (ii) termination
of TSG's obligation to perform software maintenance,
development and enhancement services with respect to all
Restricted Software under the IT Services Agreement.
3. INITIAL PUBLIC OFFERING Subject to the satisfaction of
applicable governmental requirements, AMR will permit TSGH to
offer and sell to the public TSGH's common stock in an amount
such that, immediately following such initial public offering,
AMR would own not less than eighty percent of TSGH's total
outstanding common stock.
4. MARKETING RESTRICTIONS During the term of this Agreement, and
thereafter until the fifth annual anniversary of the most
recent date on which TSG performed services with respect to
any particular Restricted Software, which services provided a
material functional enhancement or major modification to that
particular Restricted Software, unless TSG has the prior
written approval of the Chief Executive Officer of AMR, TSGH
and TSG will not, and each will not permit any of its
Affiliates to:
a. transfer, assign, license, sublicense,
disclose, use or operate, anywhere in the
world, the Market Limited Airline Software
containing such material functional
enhancement or major modification for the
benefit of any of [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]; and
b. transfer, assign, license, sublicense,
disclose, use or operate, anywhere in the
world, the Market Limited Cargo Software
containing such material functional
enhancement or major modification for the
benefit of any of the following airlines:
[CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION]; and
c. transfer, assign, license, sublicense,
disclose, use or operate, anywhere in the
world, the Market Restricted Software
containing such material functional
enhancement or major modification for the
benefit of any third party whatsoever.
5. TERMS OF THIRD PARTY AGREEMENTS TSGH and TSG will, and each
will ensure that its Affiliates will, include in any agreement
with any Person to which any Restricted Software is
transferred, assigned, licensed, sublicensed, disclosed, or as
3
Software Marketing Agreement
<PAGE> 5
to which any rights to market Restricted Software are granted,
a provision that imposes on such Person the obligations
imposed on TSGH and TSG in Sections 4.a, 4.b and 4.c, as
applicable to that Restricted Software. TSGH and TSG will
each use its best efforts to enforce any such provision.
6. KEY EMPLOYEES Until the one year anniversary of the most
recent date on which any Key Employee performed services with
respect to any particular Restricted Software, which services
provided a material functional enhancement or major
modification to that particular Restricted Software, unless
TSG has the prior written approval of the Chief Executive
Officer of AMR, TSGH and TSG will not, and each will not
permit any of its Affiliates to, assign or use that Key
Employee anywhere in the world to provide:
a. for any Person described in Section 4.a, with
respect to any software that performs
functions similar to the Market Limited
Airline Software, services similar to the
services performed by that Key Employee which
provided a material functional enhancement or
major modification to the Market Limited
Airline Software;
b. for any Person described in Section 4.b, with
respect to any software that performs
functions similar to the Market Limited Cargo
Software, services similar to the services
performed by that Key Employee which provided
a material functional enhancement or major
modification to the Market Limited Cargo
Software; and
c. for any Person described in Section 4.a, with
respect to any software that performs
functions similar to the Market Restricted
Software, services similar to the services
performed by that Key Employee which provided
a material functional enhancement or major
modification to the Market Restricted
Software.
TSGH and TSG will, and will ensure that its Key Employees
will, comply with the terms and conditions of Article XIV --
Confidential Information of the IT Services Agreement.
7. REPRESENTATIONS TSGH and TSG each represents, agrees and
acknowledges that:
a. the enforcement of Sections 4, 5 and 6 of
this Agreement would not be unduly burdensome
to it;
b. the provisions of Sections 4, 5 and 6 of this
Agreement were negotiated as part of, in
consideration of, and were considered as an
essential part of the
4
Software Marketing Agreement
<PAGE> 6
initial public offering of TSGH stock and are
ancillary to the agreements entered into as
part of that initial public offering; and
c. the restrictions in Sections 4, 5 and 6 of
this Agreement regarding the scope of
activities, duration, and geographic area
that are part of this Agreement are
reasonable and do not impose a greater
restraint on it than is necessary to protect
the goodwill and other business interests of
AMR and American.
8. LIMITS OF LIABILITY EXCEPT AS PROVIDED IN THE LAST
PARAGRAPH OF THIS SECTION, NO PARTY SHALL BE LIABLE UNDER ANY
CIRCUMSTANCES FOR ANY EXEMPLARY, PUNITIVE, TREBLE, STATUTORY,
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING
WITHOUT LIMITATION LOST PROFITS, REVENUE OR SAVINGS, EVEN IF
SUCH PARTY HAS BEEN ADVISED, KNEW, OR SHOULD HAVE KNOWN OF THE
POSSIBILITY THEREOF.
IN THE EVENT THAT TSGH OR TSG MATERIALLY BREACHES SECTION 4 OR
SECTION 6 OF THIS AGREEMENT AS A RESULT OF TSGH'S OR TSG'S
INTENTIONAL ACT OR FAILURE TO ACT, OTHER THAN AS PROVIDED IN
THE FOLLOWING TWO PARAGRAPHS, THEN AMR SHALL BE ENTITLED TO
RECOVER FROM TSG, AS LIQUIDATED DAMAGES, AN AMOUNT EQUAL TO
THE PROFITS RECEIVED BY TSGH OR TSG RESULTING FROM SUCH
MATERIAL BREACH.
IN THE EVENT THAT TSGH OR TSG MATERIALLY BREACHES SECTION 6 OF
THIS AGREEMENT AS A RESULT OF TSGH'S OR TSG'S INTENTIONAL ACT
OR FAILURE TO ACT, OTHER THAN AS PROVIDED IN THE FOLLOWING
PARAGRAPH, AND SUCH MATERIAL BREACH DID NOT INVOLVE A
DISCLOSURE OF CONFIDENTIAL INFORMATION BY TSG, THEN AMR SHALL
BE ENTITLED TO RECOVER FROM TSG AN AMOUNT EQUAL TO AMR'S
DIRECT DAMAGES RESULTING FROM SUCH BREACH IN AN AGGREGATE
AMOUNT NOT TO EXCEED THE PROFITS RECEIVED BY TSG FROM THE
PROJECT INVOLVING SUCH MATERIAL BREACH.
IN THE EVENT THAT TSGH OR TSG MATERIALLY BREACHES SECTION 4 OR
SECTION 6 OF THIS AGREEMENT BY TSGH OR TSG KNOWINGLY AND
WILFULLY FAILING OR REFUSING TO PERFORM ITS OBLIGATIONS
HEREUNDER, THEN AMR SHALL BE ENTITLED TO RECOVER FROM TSG BOTH
(A) THE PROFITS RECEIVED BY TSG AS A CONSEQUENCE OF SUCH
MATERIAL BREACH, AND (B) AMR'S DIRECT AND CONSEQUENTIAL
DAMAGES RESULTING FROM SUCH BREACH IN AN AGGREGATE AMOUNT NOT
TO EXCEED $50,000,000.
5
Software Marketing Agreement
<PAGE> 7
9. REMEDIES If monetary damages permitted hereunder would not
be an adequate remedy for a breach or violation, or impending
breach or violation, of Section 4 or Section 6 of this
Agreement, then AMR shall be entitled, as a matter or right,
to specific enforcement of this Agreement under the Dispute
Resolution Procedures set forth in the IT Services Agreement,
restraining any breach or violation, or further or continued
breach or violation, of Section 4 or Section 6 of this
Agreement (such right to be cumulative of, and not in lieu of,
any other rights or remedies to which AMR may also
then be entitled).
10. NO ASSIGNMENT Except as specifically set forth in this
Agreement, no Party may assign, license, or otherwise transfer
or convey this Agreement or any of the rights or obligations
created in this Agreement to any third Person without the
express prior written consent of the other Parties, which may
be withheld in each such other Party's sole discretion.
Notwithstanding the preceding sentence, AMR may assign this
Agreement, as a whole but not in part, to any Affiliate or to
any Person into which AMR is amalgamated, merged or
consolidated, whether by contract, operation of law or
otherwise. This provision shall not be construed to prohibit
TSGH or TSG from merging into, consolidating with, or
transferring substantially all of its assets to, any Person,
so long as such Person agrees to be bound by the terms hereof.
11. ADDITIONAL REPRESENTATIONS AND WARRANTIES Each Party
represents and warrants to the other that: (i) it is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation and
place of principal business; (ii) the performance of its
obligations hereunder has been duly authorized by all
necessary corporate action; (iii) this Agreement is a legal,
valid and binding obligation enforceable against it in
accordance with its terms subject to limitations under
bankruptcy, insolvency, reorganization, liquidation and other
laws and equitable principles relating to or affecting the
enforcement of creditors' rights generally; (iv) neither the
execution and delivery of this Agreement nor the performance
of any of its obligations hereunder, nor the consummation of
any of the transactions contemplated hereby, will violate any
agreement to which it is a party or any provision of its
certificate of incorporation, by-laws or other document of
corporate governance, nor any applicable law, regulation,
rule, judgment, order or decree; and (v) it has duly obtained
or made all consents, approvals or authorizations of, or
registrations, declarations or filings with, any governmental
authority are required as a condition to the valid execution,
delivery and performance of this Agreement on its part.
12. NOTICES Any notice or communication required or permitted to
be given or made to a Party under this Agreement must be typed
in English and personally delivered to the office of the
person identified below or delivered by registered mail with
confirmed receipt (postage prepaid) or by overnight courier or
by telecopy
6
Software Marketing Agreement
<PAGE> 8
(fax) with confirmation copy dispatched simultaneously by
registered mail with confirmed receipt (postage prepaid) to
the following addresses:
if to AMR:
AMR Corporation
4333 Amon Carter Boulevard
Mail Drop 5357
Fort Worth, Texas 76155
Attention: Chief Information Officer
Telecopier: 817-931-6944
if to TSGH or TSG:
The SABRE Group Holdings, Inc. or
The SABRE Group, Inc.
4255 Amon Carter Boulevard
Mail Drop 4462
Fort Worth, Texas 76155
Attention: President SDT
Telecopier: 817-963-2719
Notices delivered in the foregoing manner will be deemed
effective on (i) the day received if delivered personally or
sent by courier; (ii) the business day following the day
received if sent by telecopy, or (iii) the third business day
following the date of dispatch by registered mail.
13. BINDING EFFECT This Agreement shall be binding upon and
inure to the benefit of the Parties and their permitted
successors and assigns.
14. INTEGRATION This Agreement and the attachments hereto
constitute the entire agreement of the Parties pertaining to
subject matter hereof and supersede all prior agreements and
understandings pertaining to that subject, including the IT
Services Agreement to the extent that it is inconsistent with
this Agreement, and this Agreement may not be amended,
supplemented, or rescinded, except in writing and signed by
the authorized representatives of each of the Parties.
15. NO THIRD PARTY BENEFICIARIES No provision of this
Agreement shall be for the benefit of or be enforceable by or
create any right in third persons, including creditors of any
Party.
16. WAIVER A waiver of any covenant, duty, agreement, or
condition of this Agreement shall not be asserted against a
Party unless it is in writing signed by such
7
Software Marketing Agreement
<PAGE> 9
Party. No waiver of a breach or inadequate performance of any
provision of this Agreement by a Party shall constitute a
waiver of any subsequent breach or inadequate performance of
the same or any other provision hereof. Failure by any Party
to exercise any right or remedy upon the breach of, any
covenant, duty, agreement, or condition of this Agreement
shall not constitute a waiver of that breach or inadequate
performance or of any other breach or inadequate performance.
17. MULTIPLE ORIGINALS This Agreement may be executed in
counterparts or multiple originals, all of which together
shall constitute one agreement binding on each Party.
18. INVALIDITY OF PROVISIONS/BLUE PENCILING If any provision of
this Agreement is or becomes wholly or partly invalid,
illegal, or unenforceable the validity, legality, and
enforceability of the remaining provisions shall continue in
force unaffected, and the Parties shall meet as soon as
possible and negotiate in good faith upon a replacement
provision that is legally valid and that as nearly as possible
achieves the objectives of the Agreement and produces an
equivalent economic effect. A replacement provision shall
apply as of the date that the replaced provision had become
invalid, illegal, or unenforceable. If the Parties cannot
reach agreement after good faith negotiations, a Party may
invoke the Dispute Resolution Procedures under the IT Services
Agreement, and the arbitrators shall have the authority to
determine a replacement provision that is legally valid and
that as nearly as possible achieves the objectives of the
Agreement and produces an equivalent economic effect, provided
however, that such determination may not materially increase
the payment or performance obligations of any Party. If any
court or arbitration panel should determine that any
limitation regarding the scope of any activity restricted
herein, or the duration and geographic area of the
restrictions herein, is unenforceable, then this Agreement
shall not be invalidated, but shall be amended to the extent
required to render it valid and enforceable.
19. GOVERNING LAW This Agreement shall be construed and
interpreted, and its validity and enforceability shall be
determined, under the laws of the State of Texas without
regard to any conflicts of law rules.
20. DISPUTE RESOLUTION Any Dispute shall be resolved in
accordance with the Dispute Resolution Procedures set forth in
the IT Services Agreement.
21. CHOICE OF FORUM For any actions to enforce arbitral awards
issued in accordance with the Dispute Resolution Procedures
under the IT Services Agreement or to enforce the Parties'
compliance with those Dispute Resolution Procedures, each
Party consents to the exclusive jurisdiction of the competent
courts in Fort Worth, Texas, in connection with any action or
proceeding arising under this Agreement. Each Party
irrevocably waives any objection it may now or
8
Software Marketing Agreement
<PAGE> 10
hereafter have as to the venue of any such action or
proceeding brought in such a court or that such court is an
inconvenient forum. Each Party hereby waives personal service
of process and consents that service of process upon it may be
made by certified or registered mail, return receipt
requested, at its address specified or determined in
accordance with Section 12.
22. COMPLIANCE WITH LAWS The Parties hereto shall comply with
all applicable laws and no Party shall perform any act, or
fail to perform any act, or be obligated to perform any act
that could either (i) result in any violation of any
applicable law or any governmental or quasi-governmental
directive, policy or guideline or (ii) result in any material
fine, penalty or sanction.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
9
Software Marketing Agreement
<PAGE> 11
IN WITNESS WHEREOF, AMR and TSG, by their duly authorized representatives, have
executed this Software Marketing Agreement as of the date first above written.
AMR Corporation
By:/s/ Robert L. Crandall
-------------------------------------
Name: Robert L. Crandall
Title: President and Chief Executive
Officer
The SABRE Group Holdings, Inc.
By: /s/ Michael J. Durham
-------------------------------------
Name: Michael J. Durham
Title: President and Chief Executive
Officer
The SABRE Group, Inc.
By: /s/ Michael J. Durham
-------------------------------------
Name: Michael J. Durham
Title: President and Chief Executive
Officer
10
Software Marketing Agreement
<PAGE> 12
Software Marketing Agreement
Schedule A
RESTRICTED SOFTWARE
[CONFIDENTIAL PORTION
OMITTED AND FILED
SEPARATELY WITH THE
COMMISSION]
1
Software Marketing Agreement
<PAGE> 1
EXHIBIT 10.13
CANADIAN TECHNICAL SERVICES SUBCONTRACT
THIS CANADIAN TECHNICAL SERVICES SUBCONTRACT ("Subcontract") dated as
of July 1, 1996, is made and entered into by and between American Airlines,
Inc., a Delaware corporation ("American") and The SABRE Group, Inc., a Delaware
corporation ("TSG").
WHEREAS, AMR Corporation, a Delaware corporation ("AMR") agreed to
provide certain services to Canadian Airlines International Ltd. ("Canadian")
pursuant to that certain Services Agreement between AMR and Canadian dated
April 27, 1994 (as it may be amended from time to time as provided herein, the
"Canadian Services Agreement"); and
WHEREAS, as permitted by Section 9.2 of the Canadian Services
Agreement, AMR has assigned the Canadian Services Agreement to Airline
Management Services Holding, Inc., a Nevada corporation wholly owned by AMR
Corporation ("AMSH"), pursuant to that certain Assignment and Assumption
Agreement between AMR and AMSH dated August 14, 1994; and
WHEREAS, as permitted by Section 9.2 of the Canadian Services
Agreement, AMSH has subcontracted the performance of certain Support Services
under the Canadian Services Agreement to American pursuant to that certain
Canadian Services Agreement Subcontract (the "AMSH/AA Subcontract") between
AMSH and American dated as of July 1, 1996; and
WHEREAS, American and TSG have entered into that certain Information
Technology Services Agreement ("IT Agreement") dated July 1, 1996, pursuant to
which TSG has agreed to provide TSG Services (as such term is defined in the IT
Agreement) to American; and
WHEREAS, the parties desire that TSG provide to Canadian substantially
all of the Technical Services under the Canadian Services Agreement pursuant to
the terms and conditions of this Subcontract;
NOW THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt of which is
acknowledged, the parties hereby agree as follows:
1 Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to
such terms in the Canadian Services Agreement.
2 Subcontract. American hereby subcontracts the Technical
Services under the Canadian Services Agreement to TSG and
TSG hereby agrees to perform the Technical Services under the
Canadian Services Agreement.
3 Further Subcontracting. Subject to Section 9.2 of the
Canadian Services Agreement and Article VI of the IT
Agreement, upon 45 days prior written notice, TSG may
subcontract to a third party those portions of the Technical
Services that correspond to TSG Services under the IT
Agreement. Any other subcontracting hereunder shall be
subject to American's prior written consent, which shall not
be unreasonably delayed, conditioned or withheld.
4 Canadian Services Agreement. This Subcontract shall be
subject and subordinate to the terms and conditions of the
Canadian Services Agreement. Except as otherwise
Canadian Technical Services Subcontract
1
<PAGE> 2
expressly stated herein, the Technical Services shall be
performed by TSG in accordance with all of the terms and
conditions of the Canadian Services Agreement that are
applicable to the Technical Services, including without
limitation the following provisions of the Canadian Services
Agreement: Section 2.6 Changes in Base Services; Section 3.1
Calculation and Payment of Services Fee; Section 5.1 Covenants
of Vendor; Vendor's duty to transition Technical Services to
Canadian or a third party under certain circumstances as
provided in Section 6.2 Termination by Vendor and 6.4
Termination by Company; and Annex H to the Canadian Services
Agreement.
5 Fees. In exchange for its performance of the Technical
Services, TSG shall be entitled to receive from Canadian
that portion of the Base Services Fee payable by Canadian for
the Technical Services under the Canadian Services Agreement
as set forth in this Section 5. TSG shall receive no portion
of the Fixed Fee. Subject to the second paragraph of this
Section 5, (a) with respect to the Variable Fee, TSG shall
receive [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION] on all Technical Services other than
Applications Development Services (even though the Canadian
Services Agreement allows AMSH to collect a higher mark-up),
and (b) with respect to the Systems Development Fee, TSG shall
receive 100% of the mark-up on Applications Development
Services allowed under the Canadian Services Agreement. As a
continuation of current practice, TSG shall invoice Canadian
for such portion and shall receive payment of such portion
directly from Canadian.
Each year hereafter, beginning with the year ending December
31, 1997, not later than ninety (90) days after the end of
such year, TSG or American, as applicable, shall pay the
applicable amounts, if any, described below. TSG shall pay
American an amount equal to the remainder (if a positive
number) of (x) the total mark-up actually received by SDT
pursuant to the third sentence of this Section 5 for
applications maintenance and/or development labor performed by
SDT during such year minus (y) an amount, expressed in
dollars, calculated to be an operating margin of SDT on such
labor of [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION] American shall pay TSG an amount equal to
the remainder (if a positive number) of (w) an amount,
expressed in dollars, calculated to be an operating margin of
SDT of [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION] on applications maintenance and/or development
labor performed by SDT during such year minus (z) the total
mark-up, expressed in dollars, actually received by SDT
pursuant to the third sentence of this Section 5 for such
labor. The term "SDT" means SABRE Decision Technologies, a
division of TSG.
At the outset of every Applications Development Services
project to which the pricing methodologies set forth in
Section 1(c)(ii)(1)(A) and (B) of Exhibit 3.1 to the Services
Agreement apply, TSG will use reasonable efforts to perform
and provide American with an analysis of such methodologies
with respect to such project prior to TSG's commencement of
such project. American and TSG shall mutually agree upon the
assumptions used in these methodologies in order to establish
the applicable methodology for calculating the payment due
from Canadian for such project. The choice of which
methodology to use for calculating the payment due from
Canadian shall be made by American in its sole discretion.
6 Travel. Under the subsection entitled "Other Costs" contained
in Section 2 of Schedule 1(b) to Exhibit 3.1 of the Canadian
Services Agreement, any travel charges payable by
Canadian Technical Services Subcontract
2
<PAGE> 3
TSG to American in connection with TSG's provision of
Technical Services may be included in VF Costs in calculating
the Variable Fee portion of the Base Services Fee. Under a
separate agreement, TSG is required to pay American travel
charges for travel on American. Currently, American is not
including any such travel charges in VF Costs and does not
require TSG to pay such travel charges in connection with
TSG's performance of Technical Services. If hereafter
American chooses to impose travel charges for TSG's travel on
American in connection with TSG's performance of Technical
Services, TSG shall be entitled to include such charges in its
costs for the purposes of calculating fees TSG is entitled to
receive pursuant to Section 5 hereof.
7 Guarantee. American hereby guarantees payment to TSG of the
portion of the Base Services Fee owing to TSG under the terms
of the Canadian Services Agreement for all Technical Services
actually performed by TSG, each such payment to be due and
payable by American to TSG not later than forty-five (45) days
after the due date for such payment under the terms of the
Canadian Services Agreement. In addition, if this Subcontract
terminates under Section 11 or 13 hereof, for any reason other
than the occurrence of a TSG Default, then American hereby
guarantees payment to TSG of the unamortized start-up costs
set forth as "Total" on the attached Attachment A under the
year indicated on Attachment A in which falls the effective
date of termination, prorated based upon the month in which
the termination occurs, minus those unamortized start-up
costs, if any, previously paid by Canadian or American in
connection with a partial termination described in the next
sentence. In the case of such termination of this Subcontract
with respect to less than all of the Technical Services,
American and TSG shall confer regarding the appropriate amount
of unamortized start-up costs attributable to such portion of
the Technical Services for which American guarantees payment
hereunder. Any unamortized start-up costs recovered by TSG
from American or Canadian shall thereafter be excluded from
the calculation of fees TSG is entitled to receive pursuant to
Section 5 hereof. In addition to the foregoing, if TSG is
required under generally accepted accounting principles to
write down TSG's unamortized start-up costs for the Technical
Services, then American agrees to pay TSG the amount of such
write down prior to the date TSG is required to take such
write down, without duplication of any amounts paid by
American under the second sentence of this Section 7; provided
however, that any such payment made by American under this
sentence shall be considered to be a payment by American of
TSG's unamortized start-up costs which shall thereafter be
excluded from the calculation of fees TSG is entitled to
receive pursuant to Section 5 hereof.
8 Taxes. TSG shall bear with respect to the Technical Services
provided under this Subcontract any and all taxes that are not
an obligation of Canadian under the Canadian Services
Agreement.
9 Indemnity. TSG shall be entitled to the benefits of the
indemnity by Canadian set forth in Section 8.1 of the Canadian
Services Agreement to the extent that any recoveries by
American from Canadian under such indemnity relate to
indemnifiable Losses that arise out of or relate to
performance by TSG of the Technical Services. TSG shall be
obligated to perform the indemnity of Canadian set forth in
Section 8.2 of the Canadian Services Agreement to the extent
any amounts payable by American or American's Affiliates under
such indemnity relate to indemnifiable Losses that arise out
of or relate to performance by TSG of the Technical Services.
Canadian Technical Services Subcontract
3
<PAGE> 4
10 Performance Standards. TSG agrees to perform the Technical
Services in accordance with the performance standards stated
in Section 2.5 of the Canadian Services Agreement; provided
however, that breach by TSG of this Section 10 shall not
constitute a TSG Default except under the circumstances
described in Section 12(a).
11 Term. This Subcontract shall be effective as of July 1, 1996
and shall continue until the earliest to occur of: (i)
termination or expiration of the Canadian Services Agreement,
(ii) termination or expiration of the IT Agreement, or (iii)
termination hereunder. TSG shall not be required to perform
hereunder beyond the existing twenty-year term of the Canadian
Services Agreement unless TSG has consented in writing to an
extended or renewal term.
12 Event of Default. The term "TSG Default" shall mean (a) TSG's
failure to perform the Technical Services that results in
termination of the Canadian Services Agreement by Canadian as
provided in Section 6.4(a)(i) of the Canadian Services
Agreement and (b) the occurrence of any event (after the
receipt of applicable notices and the expiration of applicable
cure periods) that results in American terminating the IT
Agreement under Section 24.1, 24.2, 24.3 or 24.5 of the IT
Agreement. The term "American Default" shall mean American's
failure to pay when due any amount owing hereunder and such
payment is not made within forty five (45) days after TSG has
given written notice to American specifying the existence of
such payment default.
13 Termination. American may, at its option, terminate this
Subcontract in its entirety immediately upon the occurrence of
any TSG Default. TSG may, at its option, terminate this
Subcontract in its entirety immediately upon the occurrence of
any American Default. In the event of any such termination by
either party, American and TSG shall have no further
obligation hereunder, except any obligations that accrued
prior to such termination.
13.1 Partial Termination. American may, at its
option from time to time, immediately
terminate this Subcontract as to any portion
of the Technical Services that relate to any
TSG Services that American has elected to
discontinue or terminate under the IT
Agreement. In the event of any such partial
termination, American and TSG shall have no
further obligation hereunder as to such
terminated portion of the Technical Services,
except as provided with respect to TSG's
unamortized start-up costs in the second and
third sentence of Section 7 hereof and except
any obligations that accrued prior to such
termination.
14 Enforcement. Upon TSG's request, and at TSG's expense,
American shall use reasonable efforts to enforce against
Canadian the provisions of the Canadian Services Agreement
that directly or indirectly impact or benefit TSG, for
example, Section 5.2 of the Canadian Services Agreement
concerning assistance, confidentiality, protection of
intellectual property, insurance, notice of material events
and taxes and Section 8.2 of the Canadian Services Agreement
concerning indemnity.
15 [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]
Canadian Technical Services Subcontract
4
<PAGE> 5
16 Amendments. Except for changes or modifications instituted
pursuant to Section 2.6 of the Canadian Services Agreement,
TSG shall not be bound by any changes, modifications or
amendments of the Canadian Services Agreement insofar as same
impact the Technical Services unless TSG has consented in
advance in writing to same.
17 Third Party Assignment. Neither party may assign this
Subcontract except under the circumstances that would allow
such party to assign the IT Agreement. This Subcontract and
all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their permitted
successors and assigns.
18 Counterparts. This Subcontract may be executed in one or more
counterparts all of which taken together will constitute one
and the same instrument.
19 Entire Agreement. This Subcontract, together with the
Canadian Services Agreement and the schedules and annexes
attached hereto, constitutes the entire agreement and
understanding among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and
understandings, oral or written, relating to such subject
matter.
20 Amendments. This Subcontract may be amended or modified only
by a written instrument duly executed by or on behalf of each
party hereto. American may amend the Canadian Services
Agreement without the consent of TSG, provided, however, that
no such amendment shall increase any obligation of TSG
hereunder or otherwise adversely affect TSG hereunder without
the written consent of TSG.
21 Governing Law. This Subcontract shall be governed by and
construed and enforced in accordance with the laws of the
State of Texas.
22 Conflict. In the event of any conflict between the provisions
of the Canadian Services Agreement and the provisions of the
IT Agreement with respect to the Technical Services being
performed under this Subcontract, the provisions of the
Canadian Services Agreement shall control. In the event of
any conflict between the provisions of this Subcontract and
the provisions of either the Canadian Services Agreement or IT
Agreement, the provisions of this Subcontract shall control.
23 Independent Parties. The parties are independent; each has
sole authority and control of the manner of, and is
responsible for, its performance of this Subcontract. This
Subcontract does not create or evidence a partnership or joint
venture between the parties. Neither party may create or
incur any liability or obligation for or on behalf of the
other party except as described in this Subcontract. This
Subcontract does not restrict American from providing or
rendering any services, including services like the Technical
Services, to any other Person; nothing in this Agreement,
however, gives American the right to provide or render any
services in violation of any other agreement entered into by
the parties.
24 No Third Party Beneficiaries. All rights, remedies and
obligations of the parties under this Subcontract shall accrue
or apply solely to the parties hereto or their permitted
successors or assigns and there is no intent to benefit any
other Person, including without limitation Canadian.
Canadian Technical Services Subcontract
5
<PAGE> 6
25 Dispute. In the event of a Dispute (as defined in the IT
Agreement) under this Subcontract, the Dispute shall be
resolved in accordance with the Alternative Dispute Resolution
Procedures set forth in the IT Agreement.
26 Receipt of Canadian Services Agreement. TSG acknowledges
that it has received, and has had an opportunity to review
with its legal counsel, a copy of the Canadian Services
Agreement. To the extent relevant to the Technical Services,
the Canadian Services Agreement is hereby incorporated in this
Subcontract by this reference.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Canadian Technical Services Subcontract
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Subcontract to be
duly executed by their authorized representatives as of the date first set
forth above.
<TABLE>
<S> <C>
AMERICAN AIRLINES, INC. THE SABRE GROUP, INC.
By: /s/ Jeffery M. Jackson By: /s/ Michael J. Durham
Name: Jeffery M. Jackson Name: Michael J. Durham
Title: Vice President Corporate Development Title: President and Chief Executive
and Treasurer Officer
</TABLE>
Canadian Technical Services Subcontract
7
<PAGE> 8
EXHIBIT A
[PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
Canadian Technical Services Subcontract
8
<PAGE> 1
EXHIBIT 10.14
SABRE PARTICIPATING CARRIER DISTRIBUTION
AND
SERVICES AGREEMENT
This Agreement is made as of the date set forth below between
SABRE ASSOCIATES, INC., a Delaware corporation having a principal place of
business at 4200 American Boulevard, Fort Worth, Texas 76155 ("SABRE
Associates") and the air carrier identified on the signature page of this
Agreement ("Participating Carrier").
RECITALS
A. SABRE Associates provides, through the SABRE Travel Information
Network ("STIN"), a division of SABRE Associates' affiliate American
Airlines, Inc. ("American"), a computerized reservations service with
related data processing activities.
B. Participating Carrier operates air transportation services.
C. The parties desire to enter into an agreement concerning the booking
of reservations, the sale of the Participating Carrier's air services
through SABRE, and the provision of related optional services.
NOW THEREFORE, in consideration of the mutual covenants set forth
below, the parties agree as follows:
ARTICLE I
RESPONSIBILITIES OF SABRE ASSOCIATES
1.1 SABRE Associates shall maintain and operate SABRE and provide the
services identified in this Agreement. Such services, where
applicable, shall be provided in accordance with the Display
Parameters.
1.2 SABRE Associates shall maintain and operate SABRE in accordance with
applicable GDS Rules.
1.3 SABRE Associates shall process all Bookings created by SABRE
Subscribers, exercise its best efforts in the processing of
transactions on behalf of the Participating Carrier and shall handle
information relating to Participating Carrier with the same care as
information relating to American.
1.4 In any display required by applicable GDS Rules, SABRE will display
Participating Carrier's direct and Connecting Services according to
the same criteria as that applied to the services of American or any
other Participating Carrier. It is expressly agreed, however, that
SABRE Associates may, without waiver of any other right or remedy, and
at its option, suspend its obligations under this Article 1.4 during
any period of time in which a Sponsored GDS fails to provide
non-discriminatory loading, display, and distribution of the direct
and Connecting Services of (i) American, or any air carrier which
obtains an ownership interest in SABRE or (ii) any SABRE Licensee or
any airline which has an ownership interest in any SABRE Licensee.
1.5 SABRE Associates agrees, with respect to its performance under this
Agreement, to ensure that SABRE fully complies with the interline
reservations policies, procedures and message formats set forth in
"Standard Interline Passenger Procedures" (SIPP) and "ATC/IATA
Reservations Interline Message Procedures" (AIRIMP) or amendments
thereto. SABRE Associates will review rejected messages and
investigate the development of new solutions where justified by volume.
1
<PAGE> 2
1.6 Subject to SABRE software, programming and capacity constraints, and
the Display Parameters, SABRE Associates will include, at
Participating Carrier's request, a maximum of ten (10) Connect Points
in each SABRE City Pair Record in which the Participating Carrier
offers service.
1.7 SABRE Associates shall maintain a help desk facility for the purpose
of answering Participating Carrier's questions regarding the operation
of the SABRE system, and data within the SABRE system.
1.8 SABRE Associates shall provide reasonable billing documentation to
Participating Carrier to substantiate billings under this Agreement,
including, but not limited to, a Booking information summary of
Bookings by SABRE Subscriber location for Participating Carrier's
flights. For purposes hereof, all EAASY SABRE Subscribers shall be
deemed to be a single location. In addition, SABRE Associates shall
provide a country-by-country summary of all Bookings made by
Professional SABRE Subscribers.
1.9 Upon receipt of documented evidence from Participating Carrier of a
history of instances of speculative Bookings or other related abusive
practices by a SABRE Subscriber involving the sale of Participating
Carrier's air transportation services, SABRE Associates shall, if
warranted after reasonable investigation, assist Participating Carrier
by initiating appropriate, timely and reasonable remedial measures
against such SABRE Subscriber.
ARTICLE II
RESPONSIBILITIES OF PARTICIPATING CARRIER
2.1 Participating Carrier, at its own cost, shall coordinate its
reservations services with SABRE to provide as advantageous and
uniform reservations services to all SABRE Subscribers as it provides
through any other GDS. In addition, any improvements, enhancements,
or additional functions to Participating Carrier's reservations
services offered to end users of any GDS will be offered by
Participating Carrier to SABRE Subscribers on the same terms and
conditions as are agreed to with such GDS. Such services shall
include, but are not limited to, ticketing capability, passenger
information, interim schedule change data, fare data, fare quotations,
and procedural information. Seat availability on each flight will be
on a segment or first closing basis, and shall be in accordance with
the provisions of Article III of this Agreement.
2.2 Participating Carrier may use the name "SABRE" in any promotional
material, subject to SABRE Associates' prior written approval,
provided that SABRE Associates' or its affiliates, service mark in the
name is fully protected. SABRE Associates' approval shall not be
unreasonably withheld.
2.3 Participating Carrier may use the name "FANTASIA" in any promotional
material aimed at FANTASIA Subscribers, subject to APD's prior written
approval, provided that APD's service mark in the name is fully
protected. APD's approval shall not be unreasonably withheld.
2.4 Participating Carrier will provide SABRE Associates, as rapidly as
possible, with all revisions to its information concerning services
provided to passengers, including interim schedule change data, fare
data and fare quotations, and such other material that may be included
in SABRE. Participating Carrier will not close its flights to SABRE
Subscribers on a less favorable basis than it uses to close flights to
users of any GDS. Participating Carrier will transmit revisions
immediately by AVS messages. Participating Carrier shall not withhold
from SABRE Subscribers in any country any fare inventory class made
available by Participating Carrier to users of any other GDS in that
country.
2
<PAGE> 3
2.5 If Participating Carrier elects to submit Connect Point information to
SABRE Associates, it shall be via magnetic tape and shall conform to
the specifications contained in the custom routing file city pair
information record/tape as defined in the Display Parameters.
2.6 Participating Carrier will establish a special reject queue in its
teletype reject system in which reservations made through SABRE, but
not automatically processed by Participating Carrier's system, will be
handled on a priority basis. Participating Carrier will not treat
SABRE reject messages with any less speed and priority than that given
reject messages from other systems, including, without limitation,
Sponsored GDSs and Third Party Systems.
2.7 Participating Carrier will accept for transportation any passenger
carrying a ticket, which bears an "OK" status and has been issued
through SABRE, even though no record of this reservation may exist in
its own reservations system.
2.8 Participating Carrier will not send unable to sell or confirm (US/UC)
messages on any record residing in Participating Carrier's system for
more than twelve (12) hours.
2.9 Participating Carrier agrees, with respect to performance under this
Agreement, to ensure that its reservations system fully complies with
the interline reservations policies, procedures and message formats
set forth in "Standard Interline Passenger Procedures" (SIPP) and
"ATC/IATA Reservations Interline Message Procedures" (AIRIMP) or
amendments thereto. Participating Carrier will review rejected
messages and investigate the development of new solutions where
justified by volume.
2.10 If Participating Carrier elects to provide pricing assistance on such
routes as it may designate, it will provide such assistance to all
SABRE Subscribers.
2.11 Should Participating Carrier desire SABRE Access, it shall execute the
standard SABRE Access Agreement.
2.12 Unless notified otherwise on thirty (30) days written notice,
Participating Carrier will use ARINC/SITA address, HDQRIAA, in
addressing all AVS messages to SABRE.
2.13 Except as otherwise agreed, Participating Carrier will accept sales
made by SABRE Subscribers up to a maximum of four (4) or seven (7)
seats per transaction (based upon Participating Carrier's previous
designation) until receipt by SABRE of an AVS message closing
flight/class/segment/ date of Participating Carrier.
2.14 For transportation documents (whether used, voided or subsequently
refunded) where Participating Carrier is the validating carrier,
Participating Carrier agrees that SABRE Associates or its affiliates
may act as its agent for purpose of obtaining credit card
authorizations. SABRE Associates shall exercise its best efforts to
obtain such authorizations in accordance with the procedures specified
by Participating Carrier and the credit card issuer (or its agents).
Participating Carrier shall supply SABRE Associates with all data that
SABRE Associates reasonably requires to perform this service,
including, but not limited to, the identity of the cards that it
accepts and the respective floor limits.
2.15 At such time as offered by SABRE, transportation documents validated
on Participating Carrier which are magnetically encoded shall be
subject to an Optional Service fee. If magnetic encoding of
transportation documents is desired by Participating Carrier, it shall
execute an Optional Service Addendum to this Agreement.
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<PAGE> 4
2.16 SABRE Associates shall use reasonable efforts to obtain the fares and
fare rules which apply to Participating Carrier's flights from
industry fare suppliers. If SABRE Associates is unable to obtain such
information after reasonable effort, Participating Carrier shall
promptly supply, upon SABRE Associates' request, the information to
SABRE Associates for loading in SABRE. Participating Carrier agrees to
give SABRE thirty (30) days advance written notice of any changes to
their fare vendor. The information shall be provided on magnetic tape
or other medium mutually agreed upon by the parties. Any changes or
revisions to such fares or fare rules shall thereafter be regularly
submitted on a timely basis to SABRE Associates by Participating
Carrier by way of the same medium. Notwithstanding the foregoing,
Participating Carrier shall submit such fare information on at least
as timely and regular basis as is used for any other GDS. For fares
and rules not submitted to SABRE through an industry fare supplier,
Participating Carrier agrees that it will not issue a debit memo to a
SABRE Subscriber for any SABRE autopriced ticket wherein the debit
memo is a result of a fare change about which Participating Carrier
failed to notify SABRE Associates at least ten (10) days prior to the
effective date of that fare change.
2.17 Participating Carrier hereby grants ticketing authority through SABRE
for its transportation services to all Professional SABRE Subscribers
worldwide who hold plating approval, or who are authorized through
whatever means to issue transportation documents (whether manually or
automatically through any GDS) on its behalf. Participating Carrier
authorizes Professional SABRE Subscribers to automatically plate
tickets on its behalf in each territory where, at any time during the
term of this Agreement, Participating Carrier is or becomes a member
of any neutral ticketing scheme in which SABRE is a System Provider.
Participating Carrier expressly agrees to promptly execute all
agreements or other authorizations which SABRE Associates, at its sole
discretion, shall deem necessary to implement such authority for
SABRE.
2.18 Participating Carrier agrees that it will not discriminate in any
manner, whatsoever, against any SABRE Subscriber on account of that
Subscriber's selection, possession, or use of SABRE.
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<PAGE> 5
ARTICLE III
BASIC LEVEL OF PARTICIPATION
3.1 The following two (2) levels are available to Participating Carrier
for Basic SABRE Participation. For each level described below, SABRE
shall construct and display Participating Carrier's Connecting
Services in accordance with the Display Parameters, as well as display
the Participating Carrier's schedules and fares on a
non-discriminatory basis, subject to Article 1.4:
Please select the desired level of participation and place a check mark next to
the appropriate selection.
<TABLE>
<S> <C>
A. Basic Booking Request
----------- ---------------------
Participating Carrier will exchange reservations messages
with SABRE via teletype as set forth in Article 2.9. The
Basic Booking Request level of participation is inclusive of
only the functionality listed in Attachment 4. Participating
Carrier shall not offer, implement or participate in
processes or functionality for use by SABRE Subscribers in
connection with SABRE that will add to or expand the features
listed in Attachment 4. Participating Carrier shall pay SABRE
Associates the following fees per Booking based on the
country of origin for the booking message:
- United States, Canada and Mexico - USD 1.60
including Puerto Rico and
U.S. Virgin Islands)
- Europe (see Attachment 3) ECU 1.55
- All Other Countries USD 1.95
SABRE Associates will store availability status for
Participating Carrier in accordance with either SIPP
Resolutions 105.195/105.200; or IATA Resolution 766.(23),
IATA Recommended Practice 1771 and AIRIMP 4.
Option 1. Segment availability status changes to be
------- sent for all flights.
Option 2. No segment availability status changes to
------- be sent by Participating Carrier. All booking
requests will be sent as "NN" status code.
B. Full Availability
----------- -----------------
Participating Carrier will provide availability for display
in SABRE. Participating Carrier shall pay SABRE Associates
the following fees per Booking based on the country of origin
for the booking message:
- United States, Canada and Mexico USD 2.58
including Puerto Rico and
U.S. Virgin Islands)
- Europe ( see Attachment 3) ECU 2.52
- All Other Countries USD 2.93
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
SABRE Associates will store availability status for
Participating Carrier in accordance with either SIPP
Resolutions 105.195/105.200: or IATA Resolution 766.(23),
IATA Recommended Practice 1771 and AIRIMP 4.
If Full Availability is selected, please place a check mark
next to the availability exchange option preferred:
Option 1. All segment availability status changes on
------- all flights. (If choosing Option 1, also check here
______ if "L" type AVS codes, which require expanded
storage records, will be sent.)
Option 2. First closing message on all flights.
-------
</TABLE>
Article 3.1.1 (Cancellation Fee)
If Participating Carrier has selected option B (Full
Availability) then, for each Cancellation of a Booking made
prior to the date of departure by a SABRE Subscriber,
Participating Carrier shall pay SABRE Associates a fee for
each such Booking so canceled ("Cancellation Fee") as stated
below:
<TABLE>
<S> <C>
North America (United States including
Puerto Rico and U.S. Virgin Islands,
Canada and Mexico) $0.12
Rest of World (all countries outside
North America and Europe as Europe
is defined in Attachment 3) $0.14
</TABLE>
SABRE Associates shall have the right to assess a Cancellation
Fee not exceeding 0.13 ECU per Cancellation for Cancellations
made by SABRE Subscribers located in Europe upon thirty (30)
days written notice to Participating Carrier.
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<PAGE> 7
ATTACHMENT 4
BASIC BOOKING REQUEST
<TABLE>
<S> <C>
Integrated with other carriers
SCHEDULES No Interline Connections displayed
Schedules for next 180 days
One update per month(1)
Integrated with other carriers
No Interline Connections displayed
AVAILABILITY Inventory not displayed
Up to 6 Inventory Categories in One cabin(1)
Availability for next 180 days
BOOKING Automated
Integrated with other carriers
FARES Fares for next 180 days
One update per day (15 "second" updates per year)(1)
TICKETING Online ticketing only
Automated ticketing in home country only
No interline PNRs
No ticket numbers transmission
No restrictions on name changes within PNRs
SERVICES No FQTV, SSRs(2), OSIs(1)
No Pre-Reserved seats, Boarding Pass
No Seat Maps(1)
No meals and only one aircraft type
No Queue Access "Look Only"
No Extended PNR Data
</TABLE>
(1) Enhanced service available subject to the payment of the prevailing
charges
(2) Operationally required SSRs, such as "Wheel-chair required," supported
at no additional charge
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<PAGE> 8
ATTACHMENT 5
FULL AVAILABILITY
<TABLE>
<S> <C>
Integrated with other carriers
SCHEDULES Interline Connections
Up to 331 days are displayed
Unlimited Schedule updates
Integrated with other carriers
Interline Connections
AVAILABILITY Inventory is displayed
Up to 14 Inventory Categories
Multiple cabins allowed
331 days are displayed
BOOKING Automated
Integrated with other carriers
FARES Unlimited Fare Updates
Future Fares for 331 days
Bargainfinder Plus
TICKETING Online/Interline ticketing
Automated ticketing (global)
Interline PNRs
Can send ticket numbers
FQTV/SSRs/OSIs
SERVICES Pre-Reserved seats/Boarding Pass
Seat Maps
Meals and Multi Aircraft Types Displayed
May upgrade to Total Access
Queue Access
Name Change Restriction capability in PNR
</TABLE>
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<PAGE> 9
3.2 Schedule Supplier Selection:
Please check which supplier of schedule information listed below shall be
considered the primary source of Participating Carrier's schedule information:
ABC APD NONE
----------- ----------- ----------
NOTE 1: There will be a $500 administrative/processing fee for each subsequent
change by Participating Carrier of its primary Schedule Supplier.
3.3 At any time after the effective date hereof, SABRE Associates may
modify, on a country-by-country basis or on a worldwide basis, the
amount payable under Article 3.1 by a percentage not to exceed twelve
percent (12%) in any consecutive twelve (12) month period. SABRE
Associates shall give Participating Carrier thirty (30) days prior
written notice of any increase in the amount payable under Article
3.1. Notwithstanding the foregoing, SABRE Associates may modify, on a
country-by-country basis (excluding the United States and Canada) the
amount payable under Article 3.1 by a percentage which exceeds twelve
percent (12%) in any consecutive twelve (12) month period for
Bookings made by SABRE Subscribers located outside the United States
and Canada, so long as the fee for each such Booking does not exceed
the greater of (i) the fee charged to American for Bookings made in
the particular country by subscribers to a Sponsored GDS; or (ii) the
fee per Booking charged to Participating Carrier by any other GDS in
which Participating Carrier participates in that country. If
Participating Carrier does not agree to pay such revised fee, it may
terminate this Agreement by giving written notice to SABRE Associates
at least five (5) days prior to the effective date of the price
change.
ARTICLE IV
OPTIONAL SERVICES
Participating Carrier may elect at any time to participate in any Optional
Service(s) offered by SABRE Associates. Unless otherwise specified in an
Addendum hereto, all terms and conditions of this Agreement will apply to the
Optional Services selected by Participating Carrier. Fees for Optional Services
are subject to change upon thirty (30) days prior written notice from SABRE
Associates. If Participating Carrier does not agree to pay any such revised
fee, it may terminate the Optional Services Addendum by giving written notice
to SABRE Associates at least five (5) days prior to the effective date of the
price change. SABRE Associates reserves the right to change Optional Service
offerings from time to time.
ARTICLE V
EXTRA SERVICES
5.1 The fees identified in Article III represent the fees charged to
Participating Carrier for the services identified therein.
Participating Carrier understands and agrees that SABRE Associates
reserves the right to charge Participating Carrier for services which
it currently receives free of charge, including, but not limited to:
credit card authorizations for transportation documents where
Participating Carrier is the validating carrier; soliciting
Participating Carrier's direct ticketing outlets (city ticket offices,
airport ticket offices) as ticketing options for EAASY SABRE Bookings
involving Participating Carrier; and generation of transportation
documents. The
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<PAGE> 10
services which Participating Carrier receives free of charge shall be
referred to as "Extra Services." In the event that SABRE Associates
decides, from time to time, to assess a fee for certain Extra
Services, SABRE Associates shall give at least one hundred twenty
(120) days prior written notice to Participating Carrier of its
decision to charge for such services. If Participating Carrier does
not agree to pay for Extra Services, it shall notify SABRE Associates
of its decision at any time before expiration of the notice period and
SABRE Associates shall have no obligation to provide the Extra
Services to Participating Carrier beyond that date.
5.2 The initial fees charged for Extra Services shall not, when combined
with the increase, if any, in the Charges referred to in Article 3.1,
exceed twelve percent (12%) (during any 12 month period) of the then
current Booking fee.
5.3 Any increase in the initial fees charged under 5.2, if any, for Extra
Services shall not (during any 12 month period) exceed in the
aggregate twelve percent (12%) of the then current fees for Extra
Services.
ARTICLE VI
TERM
This Agreement shall commence on the date signed by a duly authorized agent of
SABRE Associates and shall continue in effect thereafter until terminated by
either party upon thirty (30) days prior written notice to the other party,
which notice may be given at any time.
ARTICLE VII
PAYMENT
7.1 SABRE Associates hereby gives notice that it shall, as of the date of
this Agreement, irrevocably and unconditionally assign, transfer, sell
and set over to American all of SABRE Associates' right, title and
interest in and to all charges and amounts due from Participating
Carrier under this Agreement.
7.2 American shall submit an invoice to Participating Carrier by the
fifteenth day of each month, covering all charges incurred during the
previous month. Each invoice, except as otherwise provided herein,
shall be settled through the applicable ACH or IATA Clearing House.
All payments shall be made in U.S. Dollars. Concurrently herewith, the
parties will execute the attached Memorandum of Agreement relative to
such settlement (attached hereto as Attachments 1 and 2 respectively.)
If Participating Carrier is a member of ACH, it must complete
Attachment 1. Otherwise, and if it is a member of the IATA Clearing
House, Participating Carrier must complete Attachment 2. Participating
Carrier reserves the right to reject after invoicing any amount in
dispute which arises out of, or is connected with, a mathematical or
other substantive error in such invoice. Any rejection must be made
within six (6) months of the date of the invoice. Participating
Carrier agrees to explain in writing the circumstances surrounding the
disputed billing and the reasons behind the rejection of the invoice
by sending a teletype message to HDQLDAA. Such rejection will be
processed through the ACH or IATA Clearing House in accordance with
the Manual of Procedure. Unless otherwise negotiated by both parties,
final settlement of disputed amounts will be resolved by prompt
negotiations between SABRE Associates and Participating Carrier, and
resulting payments, if any, will be made outside the Clearing House
within ten (10) days following receipt of a supplemental invoice.
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<PAGE> 11
7.3 If American learns that Participating Carrier is not generally paving
its bills to its creditors as they become due, or has taken steps
leading to the cessation of its operation as an ongoing business, or
if American acquires other reliable information which causes American
to have reasonable grounds for insecurity concerning the prospect of
payment by Participating Carrier of amounts covered by this Agreement,
American may on ten (10) days written notice to Participating Carrier
require Participating Carrier, as a condition for the extension of any
further Credit hereunder, to provide American with a cash deposit, or
with an irrevocable letter of credit or bond issued by a financial
institution or surety acceptable to American, in an amount equivalent
to two months' expected billings.
7.4 Participating Carrier agrees to pay all fees for Bookings and
Cancellations made by SABRE Subscribers for its Codesharing Flights.
Participating Carrier agrees to cause its Codesharing Carriers to
execute the Codesharing Agreement attached hereto.
ARTICLE VII.A (ACCEPTANCE OF FARES)
Participating Carrier shall accept a ticket for transportation at the fare
shown on that ticket provided that the ticket was automatically issued by a
SABRE Subscriber at a fare consistent with the data in SABRE at the time of its
automatic issuance, so long as the Booking related to that ticket has not been
altered after the date of automatic issuance in any material respect affecting
the fare due; provided, however, that the Participating Carrier shall be
relieved of this obligation in cases of documented fraud or other knowing
misconduct by the SABRE Subscriber issuing such ticket. Participating Carrier
acknowledges that SABRE Associates, and any Affiliate thereof, and SABRE
Subscribers shall have no liability to Participating Carrier (and Participating
Carrier hereby waives any rights and remedies against SABRE Associates, such
Affiliates thereof, and SABRE Subscribers) for any inaccuracies in the fares
data showing on such ticket, except that Participating Carrier shall be
entitled to pursue any rights or remedies it may have against any SABRE
Subscriber which has engaged in documented fraud or other knowing misconduct
with respect to the issuance of such ticket.
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<PAGE> 12
ARTICLE VIII
NOTICES
All notices, requests, demands or other communications hereunder shall
be in writing, sent by certified or registered mail, overnight mail, facsimile
or teletype and shall be deemed to have been given when received at the
following addresses:
IF TO SABRE ASSOCIATES: IF TO PARTICIPATING CARRIER:
MD 3125
P.O. Box 619616
DFW Airport, Texas
75261-9616
Please indicate the Participating Carrier's
Teletype: HDQAJAA daily correspondence teletype address: __________
Facsimile: 817-963-4658 Please indicate the Participating Carrier's
reservations teletype address: ______________
Attention: Manager, Airline Industry Distribution
Associate & Strategic Distribution
Any notice given by facsimile or teletype which is received after 1630 local
time of the recipient, shall be deemed given the following business day. Either
of the above addresses may be changed on ten (10) days prior written notice to
the other party.
ARTICLE IX
DEFINITIONS AND ADDITIONAL TERMS
The definitions and additional terms and conditions set forth on
Schedule 1 hereof shall form an integral part of this Agreement and are deemed
a part hereof by this reference.
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<PAGE> 13
ARTICLE X
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and no amendment or modification shall be
effective unless made in writing and duly executed by both parties.
The parties have executed this Agreement as of the day and year written
below.
<TABLE>
<S> <C>
CARRIER: SABRE ASSOCIATES, INC.
-------------------------
BY: BY:
------------------------------ -----------------------------------
Lynn T. Hendler
NAME: Manager, Airline Industry
---------------------------- Distribution
Associate & Strategic
TITLE: Distribution
---------------------------
DATE: DATE:
---------------------------- ---------------------------------
</TABLE>
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<PAGE> 14
SCHEDULE 1
DEFINITIONS AND ADDITIONAL TERMS AND CONDITIONS
I. DEFINITIONS. For the purposes of this Agreement, the following words
shall have the meanings set forth below:
A. ABC shall mean the airline schedules publishing product of
Reed Travel Group.
B. ACH shall mean Airlines Clearing House, Inc.
B.1 "AFFILIATE" shall mean, with respect to any person or entity,
any other person or entity directly or indirectly controlling
or controlled by, or under common control with, such person or
entity. For purposes of this definition, "control" (including,
without limitation, "controlled by" and "under common control
with") shall mean the power, directly or indirectly, to direct
or cause the direction of the management and policies of such
person or entity whether through the ownership of voting
interests or by contract or otherwise.
C. AGREEMENT shall mean this SABRE Participating Carrier
Distribution and Services Agreement.
D. APD shall mean Asia Pacific Distribution, LTD., a SABRE
Licensee authorized to sell and service SABRE in various areas
of IATA Traffic Conference 3.
E. AVS shall mean Availability Status Message.
F. BASIC SABRE PARTICIPATION shall mean one of two levels of
carrier-specified SABRE participation as defined in Article
3.1.
G. BOOKING shall mean an airline passenger segment created by (or
secured to) a SABRE Subscriber during any one calendar month
in the itinerary portion of the customer's Passenger Name
Record (PNR) including, but not limited to, segments created
using action codes or status codes NN, SS, BK, HK and/or GK
for transportation (i) on Participating Carrier's flights or
(ii) Codesharing Flights made by (or secured to) a SABRE
Subscriber (less Cancellations made prior to the date of
departure during the same calendar month by such SABRE
Subscriber). For example, one passenger on a direct flight
shall be counted as one Booking, one passenger on two-segment
connecting flight shall be counted as two Bookings. Multiple
passengers within the same PNR segment constitute multiple
Bookings.
H. CANCELLATION shall mean only those segments canceled by a
SABRE Subscriber through SABRE.
I. CITY PAIR RECORD shall mean a record of flight schedules
between two cities, involving direct or Connecting Service.
City Pairs can be requested for addition to SABRE by
Participating Carrier.
J. CODESHARING shall mean the industry practice whereby one
carrier operates services using the airline designator code of
another carrier.
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<PAGE> 15
K. CODESHARING FLIGHTS shall mean flights made by a carrier
("Codesharing Carrier") using the airline designator code of a
Participating Carrier.
L. COMMERCIAL SABRE shall mean a user-friendly version of the
SABRE System primarily marketed to corporations.
M. CONNECT POINTS shall mean airports nominated by a
Participating Carrier for use by SABRE in constructing
Connecting Services for a specific city pair.
N. CONNECTING SERVICES shall mean air services involving more
than one flight segment. Connecting Services shall be
considered multiple Bookings.
O. CRS RULES shall mean the regulations promulgated by the United
States Department of Transportation, 14 CFR Part 255.
P. DISPLAY PARAMETERS shall mean a document issued by SABRE
Associates containing the procedures and methodology used by
SABRE Associates for loading, maintaining and displaying
schedules, fares, availability, etc., in SABRE as amended by
from time to time.
Q. DIRECT REFERENCE SYSTEM (DRS) shall mean a static display
contained in SABRE which Participating Carrier uses to
communicate information to SABRE Subscribers.
R. EAASY SABRE shall mean a user-friendly version of the SABRE
system primarily marketed to individual travelers through
public data networks.
S. EXTENDED PNR DATA shall mean an Optional Service that
transmits certain additional passenger information to
Participating Carrier regarding itineraries involving
Participating Carrier.
T. FALCON shall mean the name used by Gulf Air, a SABRE Licensee,
to describe the version of SABRE distributed by Gulf Air in
various areas of IATA Traffic Conference 2.
U. FANTASIA shall mean the version of SABRE currently distributed
by APD.
V. GDS shall mean a global distribution system (commonly referred
to as a computerized reservation system) to the extent that it
is used by non-airline personnel. A GDS collects, stores,
processes, displays and distributes information through
computer terminals concerning air and ground transportation,
lodging and other travel related products and services offered
by travel suppliers and which enables subscribers to (i)
reserve or otherwise confirm the use of, or make inquiries or
obtain information in relation to, such products and services
and/or (ii) issue tickets for the acquisition or use of such
products and services.
W. GDS RULES shall mean rules and regulations established by
governmental entities for the operation of GDS' including
those in effect in the United States, Canada and the European
Community.
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<PAGE> 16
X. OPTIONAL SERVICES shall mean any service offered by SABRE
Associates other than the specific services referred to in
Article 3.1 and the Extra Services, as more fully described in
Article V herein. SABRE Associates may make available
additional Optional Services at any time. Participating
Carrier may elect to purchase an Optional Service by executing
an addendum to this Agreement.
Y. PNR shall mean a passenger name record created in SABRE.
AA. PROFESSIONAL SABRE shall mean a version of the SABRE System
primarily marketed to travel agencies.
BB. SABRE shall mean American's GDS which has electronic
facilities able to provide, store, communicate, distribute,
process and document such information as is from time to time
stored in the data base created and maintained for the SABRE
system.
CC. SABRE ACCESS shall mean access to SABRE through Professional
SABRE for the purpose of monitoring data pertaining to
Participating Carrier's services.
DD. SABRE LICENSEE shall mean a person or entity licensed to
market SABRE in a designated area of the world.
EE. SABRE SUBSCRIBER shall mean a person or entity, other than
American or an airline using SABRE as its internal
reservations system, which utilizes SABRE to make
reservations. The term "SABRE Subscriber" shall include any
person or entity making reservations through one of the
versions of SABRE or through a SABRE Licensee, including, but
not limited to, Professional SABRE, Fantasia, Falcon, EAASY
SABRE, Commercial SABRE, SITAR or SST or any other version of
SABRE marketed by a SABRE Licensee.
FF. SCHEDULE SUPPLIER shall mean the designated supplier of
schedule information regarding Participating Carrier's flight
services, including the ABC Guides/Reed Travel Group (ABC) or
Asia Pacific Distribution (APD).
GG. SIPP shall mean Standard Interline Passenger Procedures.
HH. SITAR shall mean the version of SABRE currently distributed by
SABRE Licensees, Air India and Indian Airlines.
II. SPONSORED GDS shall mean a GDS sold or installed or owned in
whole or in part by Participating Carrier or its affiliate
during the term of the Agreement.
JJ. SST shall mean SABRE Sociedad Tecnologica, a SABRE Licensee
that distributes SABRE under the name SABRE de Mexico.
KK. SYSTEM PROVIDER shall mean a GDS that has a capability to
print a transportation document in a prescribed format and,
where applicable, satisfies local technical requirements for
doing so.
LL. THIRD PARTY SYSTEM shall mean any GDS or distribution system
other than SABRE or a Sponsored GDS or a GDS in which
Participating Carrier is hosted.
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MM. TOTAL ACCESS shall mean a group of Optional Services providing
premium connectivity between SABRE and Participating Carrier's
system, including Direct Access, Multi Access and Direct
Connect.
NN. TRAVELOCITY shall mean a user-friendly version of the SABRE
system primarily marketed to individual travelers through
public data networks.
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II. TERMS AND CONDITIONS
A. Taxes - In addition to any other charges set forth in this
Agreement, Participating Carrier shall pay to American all
license fees, sales, use, excise, personal property, or other
taxes and any and all domestic and foreign duties, import and
export fees and licenses, howsoever designated, now or
hereafter imposed by any federal, state or local taxing
authority or any foreign government or agency thereof, arising
in connection with this Agreement, including, but not limited
to, Participating Carrier's use of SABRE at its offices,
except taxes payable or based on American's or SABRE
Associates' net income.
B. Indemnification - Participating Carrier shall defend,
indemnify, and hold SABRE Associates, its affiliates and their
respective officers, directors, employees and agents, harmless
from any and all liabilities, damages and claims (including
litigation costs, expenses, and attorney's fees) which may be
suffered by, accrued against, charged to, or recoverable from
SABRE Associates, its affiliates or their respective officers,
directors, employees, or agents, by reason of or in connection
with Participating Carrier's performance, non-performance, or
improper performance of the provisions of this Agreement.
C. Failure or Delay of Service - NEITHER SABRE ASSOCIATES NOR ANY
OF ITS AFFILIATES SHALL BE LIABLE TO PARTICIPATING CARRIER,
NOR DEEMED TO BE IN DEFAULT OF THIS AGREEMENT ON ACCOUNT OF
ANY DELAYS, ERRORS, MALFUNCTIONS, OR BREAKDOWNS WITH RESPECT
TO THE EQUIPMENT, DATA OR SERVICES PROVIDED HEREUNDER,
REGARDLESS OF ITS NEGLIGENCE.
D. Disclaimer of Warranties - SABRE ASSOCIATES AND ITS AFFILIATES
DISCLAIM AND PARTICIPATING CARRIER HEREBY WAIVES ALL
WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED
TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR INTENDED
USE OF ANY EQUIPMENT, DATA OR SERVICES FURNISHED HEREUNDER, OR
ANY LIABILITY IN NEGLIGENCE, TORT OR STRICT LIABILITY WITH
RESPECT TO THE EQUIPMENT, DATA OR SERVICES FURNISHED
HEREUNDER. PARTICIPATING CARRIER AGREES THAT NEITHER SABRE
ASSOCIATES NOR ANY AFFILIATE OF SABRE ASSOCIATES SHALL BE
LIABLE TO IT FOR CONSEQUENTIAL DAMAGES UNDER ANY CIRCUMSTANCES
(INCLUDING LOSS OF AIR TRANSPORTATION REVENUES).
E. Title - Title and full and complete ownership rights to all
American owned or developed software used in the performance
of this Agreement ("System Software") shall remain with
American. Notwithstanding any other provision of this
Agreement, American shall retain ownership of the System
Software and related confidential information. Participating
Carrier understands and agrees that software owned or
developed by SABRE Associates or its affiliates is a trade
secret and proprietary information, whether or not any portion
thereof is or may be validly copyrighted or patented. Any data
processing documentation supplied by either party to the other
with respect to the operation of its reservation system, in
any form and any and all copies thereof, are for the exclusive
use of the receiving party, and shall not be disclosed or made
available to any other person, firm, corporation, or
governmental entity in any form or manner whatsoever;
provided, however, that after first obtaining written
permission and instructions from the disclosing party, the
receiving party may voluntarily disclose and make available to
consultants and other suppliers of data processing services
the documentation or copies, parts or abstracts thereof, in
accordance with such permission
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and instruction; provided further that in the event
information, materials, or documentation covered by this
Agreement is subpoenaed or otherwise requested or demanded by
any court or governmental authority, the subpoenaed party
shall give the other party prompt notice thereof prior to
complying with the same, and shall exercise its best efforts,
in cooperating with the other party, to quash or limit such
request, demand and/or subpoena.
F. Assignment - Neither party shall assign, transfer, license,
franchise nor otherwise convey this Agreement or any rights or
services hereunder or delegate obligations hereunder to any
third person without the prior written consent of the other
party, which consent shall not be unreasonably conditioned,
delayed or withheld, except that SABRE Associates may, without
the consent of Participating Carrier, from time to time assign
this Agreement and/or delegate the performance of any of its
responsibilities under this Agreement to (i) any Affiliate of
SABRE Associates, and/or (ii) to any third person with which
SABRE Associates is amalgamated, merged or consolidated,
and/or (iii) to any, third person that directly or indirectly
acquires all or substantially all of the business or assets of
SABRE Associates to which this Agreement relates. Any such
third person must have the financial and technical capacity to
perform the obligations being assumed and the assigning party
shall require such assignee or successor to assume in writing
all terms and conditions of this Agreement.
G. Subcontracting of Services by SABRE Associates - SABRE
Associates hereby gives notice that it shall, as of the date
of this Agreement, assign, delegate, subcontract or sublicense
to its affiliate, American, those interests, rights and/or
obligations under this Agreement as are consistent with
American's rights, titles and interests in and to the System
Software and confidential information. To the extent necessary
to effectuate such assignment, delegation, subcontract and/or
sublicense references in the Agreement to SABRE Associates
shall be deemed to refer to American. Furthermore, SABRE
Associates hereby gives notice that it shall, as of the date
of this Agreement, subcontract and delegate to American all
GDS-related duties and responsibilities under this Agreement.
Participating Carrier hereby acknowledges that American, as
subcontractor to SABRE Associates, shall not be liable to
Participating Carrier and SABRE Associates shall be solely and
exclusively liable to Participating Carrier for the full and
timely performance of such subcontracted and delegated duties
and responsibilities.
H. Non-Exclusivity - This is a non-exclusive Agreement and similar
agreements may be entered into by SABRE Associates or by
Participating Carrier with any other party.
I. Termination -
(1) In the event Participating Carrier fails to make any
payment required by this Agreement when due, this
Agreement shall automatically be terminated, if such
payment is not made within five (5) days of receipt
of notice of breach from SABRE Associates.
(2) In the event of any other breach of any of the other
terms and conditions of this Agreement, by either
party, this Agreement shall terminate automatically
if the breaching party fails to correct such breach
within fifteen (15) days of receipt of notice of
breach from the non-breaching party.
19
<PAGE> 20
(3) If either party is granted relief under the United
States Bankruptcy Code, or the insolvency laws of any
state, province or nation, and if this Agreement has
not otherwise terminated, then the non-petitioning
party may suspend all further performance of this
Agreement until the petitioning party assumes or
rejects this Agreement pursuant to Section 365 of the
United States Bankruptcy Code or any similar or
successor provision. Any such suspension of further
performance by the non-petitioning party pending the
petitioning party's assumption or rejection will not
be a breach of this Agreement and will not affect the
non-petitioning party's right to pursue or enforce
any of its rights under this Agreement or otherwise.
J. Independent Contractors - Nothing in this Agreement is intended
or shall be construed to create or establish the relationship
of principal/agent/partners or joint ventures between the
parties hereto.
K. Governing Law - This Agreement and any disputes arising
hereunder shall be governed by the laws of the United States
and the State of Texas without regard to its conflict of laws
rules. Each party hereby consents to the non-exclusive
jurisdiction of the courts of the state of Texas in any
dispute arising out of this Agreement.
L. Force Majeure - Except for Participating Carrier's obligations
to make payments hereunder, neither party will be deemed in
default of the Agreement as a result of a failure to perform
its obligations under this Agreement, if such failure is
caused by acts of God or governmental authority, strikes or
labor disputes, or fires, breach by suppliers of supply
agreements, or any other cause beyond the reasonable control
of that party.
M. Waiver - No waiver of a breach of any provisions of this
Agreement by either party shall constitute a waiver of any
subsequent breach of the same or any other revisions hereof
and no waiver shall be effective unless made in writing.
N. Captions - The captions appearing in this Agreement have been
inserted as a matter of convenience and in no way define,
limit or enlarge the scope of this Agreement or any of the
provisions.
O. Invalidity - In the event that any material provision of this
Agreement is determined to be invalid, unenforceable or
illegal, SABRE Associates shall have the right to terminate
the Agreement upon sixty (60) days written notice to
Participating Carrier.
P. Limitation of Liability - NOT WITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT, NO AFFILIATE OF SABRE ASSOCIATES SHALL HAVE
ANY OBLIGATION OR LIABILITY HEREUNDER; PROVIDED, HOWEVER, THAT
IF AND TO THE EXTENT SABRE ASSOCIATES ASSIGNS, DELEGATES,
SUBCONTRACTS OR SUBLICENSES ANY OR ALL OF ITS OBLIGATIONS
HEREUNDER TO AN AFFILIATE, AND AS A RESULT THEREOF SUCH
AFFILIATE, BY OPERATION OF LAW, BECOMES LIABLE TO CUSTOMER,
THEN ALL DISCLAIMERS WAIVERS, LIMITATIONS OF LIABILITY AND
RIGHTS TO INDEMNIFICATION SET FORTH IN THIS AGREEMENT SHALL
INURE TO THE BENEFIT OF SUCH AFFILIATE.
20
<PAGE> 21
AMENDMENT 1
TO SABRE PARTICIPATING CARRIER
This Amendment No. 1 to that certain SABRE Participating
Carrier Agreement is made and entered into between SABRE Associates,
Inc., ("SABRE Associates") and Participating Carrier.
RECITALS
WHEREAS, SABRE Associates and Participating Carrier entered
into that certain SABRE Participating Carrier Agreement effective ____________
19_, (the "Agreement"); and
WHEREAS, The parties have agreed to modify the Agreement to
allow the Participating Carrier to make payments directly to American to whom
all rights to receive payment have been assigned;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, SABRE Associates and Participating Carrier hereby agree as
follows:
1. Payment. Article 7.2 of the Agreement shall be
deleted in its entirety and replaced with the
following language:
(a) SABRE Associates shall cause American to
submit an invoice to Participating Carrier by
the fifteenth day of the following month,
covering all charges incurred during the
previous month, which invoice shall be paid
directly to American within thirty (30) days
after receipt.
(b) Any payment not received by American when
due, shall accrue interest at the rate of
twelve percent (12%) per annum or the highest
amount permitted by law, whichever is less.
(c) Participating Carrier agrees to pay to
American a deposit in the amount of 250USD,
which American may apply against any charges
due hereunder which Participating Carrier
fails to pay. SABRE Associates shall cause
American to return all or any unused portion
of the deposit to Participating Carrier upon
termination of the Agreement.
2. Full Force and Effect. Except as otherwise provided
herein, all other terms of the Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year written below.
CARRIER: SABRE ASSOCIATES, INC.
----------------------------
By: By:
-------------------------------- --------------------------------------
Lynn T. Hendler
Name: Manager, Airline Industry Distribution
------------------------------- Associate and Strategic Distribution
Title: Date:
----------------------------- ------------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 22
ATTACHMENT 1
NON-TRANSPORTATION TRANSACTION SETTLEMENT PROCEDURE
MEMORANDUM OF AGREEMENT RELATIVE TO
THE SETTLEMENT THROUGH AIRLINES CLEARING HOUSE, INC.
OF NON-TRANSPORTATION TRANSACTIONS
WHEREAS, Section 1(b) of the Agreement Relating to the
Settlement of Interline Accounts Through Airlines Clearing House, Inc., as
amended, provides for the settlement, through the Clearing House, of accounts
payable by one member of the Clearing House to another, arising out of
transactions other than sales of transportation, in every case where both the
debtor and creditor have agreed in writing to settle that type of account
through the Clearing House and the date on which such settlement shall begin,
and have filed a copy of said Agreement with the Clearing House; and
WHEREAS, AMERICAN AIRLINES, INC. and Participating Carrier,
the parties hereto, are both members of Airlines Clearing House, Inc., and both
desire to settle through the Clearing House certain accounts arising out of
transactions other than sales of transportation, and to make it convenient to
add additional transactions of a non-transportation nature to the list of
those which they presently desire to settle through the Clearing House;
NOW, THEREFORE, THIS MEMORANDUM OF AGREEMENT WITNESSETH THAT
in consideration of the mutual covenants and agreements herein contained
AMERICAN AIRLINES, INC. and Participating Carrier agree as follows:
1. With respect to actions arising on and after
____________ 19__, they will settle through the Clearing House accounts arising
out of the following types of transactions: reservations, ticketing and
communications services.
2. The settlement of accounts arising from the
transactions specified in Section 1 hereof, or from such other transactions as
the parties hereto may subsequently agree to settle through the Clearing House,
shall be in accordance with the provisions of Section H of the Manual of
Procedure of Airlines Clearing House, Inc.
3. The parties hereto may, by an exchange of
correspondence, a copy of which shall be furnished to the Clearing House, agree
to settle, through the Clearing House, accounts arising out of nontransport
transactions other than those specified in Section 1 hereof, and the date on
which such settlement shall begin.
4. Either party to this Agreement shall have the right,
upon giving sixty (60) days advance notice in writing to the other party and to
the Clearing House, of terminating this Agreement and thereby discontinuing
settlement through the Clearing House with respect to the type or types of
accounts specified herein or agreed upon under Section 3.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the dates specified below.
CARRIER: AMERICAN AIRLINES, INC.
----------------------------
By: By:
-------------------------------- --------------------------------------
Lynn T. Hendler
Name: Manager, Airline Industry Distribution
------------------------------- Associate and Strategic Distribution
Title: Date:
----------------------------- ------------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 24
ATTACHMENT 2
MEMORANDUM OF AGREEMENT
RELATIVE TO THE SETTLEMENT THROUGH
IATA CLEARING HOUSE
OF NON-TRANSPORTATION TRANSACTIONS
WHEREAS, SABRE Associates, Inc. has irrevocably and
unconditional transferred and assigned to American Airlines, Inc. ("American")
all of its right, title and interest in and to all charges and amounts due from
Participating Carrier under that certain SABRE Participating Carrier
Distribution and Services Agreement between SABRE Associates, Inc. And
Participating Carrier effective __________________, 19__(the "Agreement").
WHEREAS, American and Participating Carrier, the parties
hereto, are both members of IATA and both desire to settle through the IATA
Clearing House certain accounts arising out of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained Participating Carrier and American agree as follows:
1. With respect to transactions arising on or after June
1, 1995 they will settle through the IATA Clearing House, accounts arising out
of the following types of transactions: reservations, ticketing and
communications services under the Agreement.
2. The settlement of accounts arising from the
transactions specified in Section 1 hereof, shall be in accordance with the
provisions of Regulation Eleven (11) of the IATA Clearing House.
IN WITNESS WHEREOF, the parties hereto have executed this
Memorandum of Agreement on the date specified below.
CARRIER: AMERICAN AIRLINES, INC.
----------------------------
By: By:
-------------------------------- --------------------------------------
Lynn T. Hendler
Name: Manager, Airline Industry Distribution
------------------------------- Associate and Strategic Distribution
SABRE Travel Information Network
Title:
----------------------------- Date:
------------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 25
ATTACHMENT 3
For pricing purposes, North America shall include the United States, Canada,
Mexico, Puerto Rico and the U.S. Virgin Islands. Rest of World includes all
other countries not listed in Europe or North America.
The following countries are included under the pricing for Europe as discussed
in Article 3.1 of the SABRE Participating Carrier Distribution and Services
Agreement.
Albania Sweden
Algeria Switzerland
Andorra Tajikistan
Armenia Tunisia
Austria Turkey
Azerbaijan Turkmenistan
Belarus Ukraine
Belgium United Kingdom
Bosnia Herzegovina Uzbekistan
Bulgaria
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Georgia
Germany
Gibraltar
Greece
Hungary
Iceland
Ireland
Italy
Kazakhstan
Kurdistan
Latvia
Lichtenstein
Lithuania
Luxembourg
Macedonia
Malta
Moldova
Monaco
Montenegro
Morocco
Netherlands
Norway
Poland
Portugal (including Azores and Madeira)
Romania
San Marino
Serbia
Slovak Republic
Slovenia
Spain (including Canary Islands)
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 26
AD HOC SCHEDULE CHANGE MESSAGE (ASM) AND
STANDARD SCHEDULE CHANGE MESSAGE (SSM)
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, ("Participating
Carrier") amends that certain SABRE Participating Carrier Distribution and
Services Agreement between SABRE Associates and Participating Carrier
("Agreement").
1. Product Description. Ad Hoc Schedule Change Messages (ASM) and Standard
Schedule Change Message (SSM) are alternative optional methods of
providing SABRE with a carriers' schedules.
2. Responsibilities of SABRE Associates.
a. SABRE Associates agrees to devote resources sufficient to testing the
programming necessary to implement ASM/SSMs' described in paragraphs 4
(a) and (b) of this Addendum.
b. SABRE Associates shall have no further responsibility to obtain or use
any other source for Participating Carriers schedule information
pursuant to Article 3.2 of the Agreement which is hereby deleted.
3. Responsibilities of Participating Carrier.
a. Participating Carrier shall bear the sole responsibility for all costs
related to the choice, installation, maintenance and use of a adequate
connections link to SABRE which shall have sufficient capacity to
support ASM/SSM.
b Participating Carrier shall only send its schedule information via
ASM/SSM messaging and SABRE will not process messages submitted via
any vendor (i.e. ABC), telephone, facsimile or via manual dynamic
updates.
c. All additions to the Generic Equipment Code Table must be provided by
Participating Carrier to SABRE prior to sending any SABRE Associates
ASM/SSM messages containing the additional codes. SABRE will reject
any ASM/SSM messages which contain new equipment codes which have not
been previously provided by Participating Carrier.
e. Participating Carrier shall establish a special reject queue in its
teletype system for ASM/SSM messages to which messages containing any
errors will be returned for corrections and processing by
Participating Carrier.
4. Joint Terms and Conditions
a. All ASM/SSM messages shall be in accordance with and conform to the
standards outlined in the Standard Schedule Information Manual (SIMM)
and sent in Local Time (LT). SABRE will accept only the following
action submessages:
ASM: NEW, CNL, RPL, EQT and TIM
SSM: SKD, NEW, CNL, RPL, EQT and TIM
b. SABRE ASM/SSM will only be offered via Direct Link
(Type B), ARINC or SITA.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 27
c. Implementation of ASM/SSM messages is subject to a mandatory test
period which will be determined solely by SABRE Associates. During the
mandatory test period Participating Carrier must transmit all ASM/SSM
messages directly to the SABRE test system.
d. In the event that either Participating Carrier or SABRE Associates
experiences a technical problem, then either party shall have the
right to inhibit ASM/SSM during the time that the problem exists. In
the event the SABRE system reaches capacity limits, SABRE Associates
may implement an appropriate throttling mechanism which may include
inhibition or delay of ASM/SSM until such time as SABRE Associates
deems that the SABRE system is stabilized.
5. Fees.
a. In addition to the fees due under Article III of the Agreement and
except as provided in paragraph 5 (b) of this Addendum, Participating
Carrier shall pay American an implementation fee of $15,000 plus a
monthly fee based on number of flight numbers the Participating
Carrier submits to SABRE for display as follows:
<TABLE>
<S> <C> <C>
(i) $500.00 1 -500 flight numbers
(ii) $1000.00 501-1000 flight numbers
(iii) $1500.00 1000 + flight numbers
</TABLE>
b. If Participating Carrier has implemented Direct Connect Availability,
Participating Carrier may elect to participate in ASM/SSM at no
additional fee for so long as it remains a Direct Connect Availability
participant.
6. Term.
This Addendum shall commence on the date signed by a duly authorized
agent of SABRE Associates and shall continue in effect for one (1)
year. Thereafter, it shall continue until termination of the
Agreement. In no event shall this Addendum remain in effect beyond the
termination date of the Agreement.
7. Full Force and Effect
Except as otherwise provided herein, all terms and conditions of the
Agreement shall remain in full force and effect.
SABRE Associates and Participating Carrier have executed this Addendum as of
this ______ day of ______________, 19____.
CARRIER: SABRE ASSOCIATES, INC.
----------------------------
By: By:
-------------------------------- ---------------------------------------
Name: Lynn T. Hendler
------------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 28
TOTAL ACCESS
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, ("Participating
Carrier") amends that certain SABRE Participating Carrier Distribution and
Services Agreement between SABRE Associates and Participating Carrier
("Agreement") and supersedes all previous Total Access Optional Services
Addenda to the Agreement.
1. Product Description The SABRE Total Access system is comprised of
several levels of participation (ANSWERBACK, Numeric Availability,
Multi Access, and Direct Access) and offers SABRE Subscribers
functions under which bookings on Participating Carrier may be made as
outlined in the following paragraphs below.
2. Options Available There are four participation options in Total
Access: ANSWERBACK, Numeric Availability ("NAV"), Multi Access, and
Direct Access. A Participating Carrier may select any of the four (4)
levels of participation, provided however, that NAV can only be chosen
if the Participating Carrier is also a participant in one or more
levels of Total Access. Some of the functions presently available
within each level of Total Access are generally described in Schedule
A to this Addendum. Further references to Total Access in this
Addendum mean only those levels of access chosen by Participating
Carrier in paragraph 3.
3. Please check below the desired level(s) of Total Access Participation:
______ A. ANSWERBACK is a Participating Carrier's teletype
booking product which requests Participating
Carrier's record locator after end transaction. Upon
receipt of Participating Carrier's record locator,
SABRE appends the record locator to the appropriate
segment line in the SABRE PNR itinerary field.
______ B. NUMERIC AVAILABILITY ("NAV") provides seat
availability status and allows Participating Carrier
to display a numeric value of 0 to 9 seats of
inventory for a specific flight in the standard SABRE
city-pair availability display.
______ C MULTI ACCESS allows a SABRE Subscriber the option to
access and work directly in Participating Carrier's
internal reservation system on a real-time basis
using common language entries. While functioning in
Multi Access, the SABRE Subscriber can book space and
create a PNR in Participating Carrier's internal
reservation system.
______ D. DIRECT ACCESS allows a SABRE Subscriber to access
certain information within Participating Carrier's
internal reservation system on a message transmittal
basis, for the purpose of verifying last seat
availability, accessing fare information and other
data. Bookings are made within SABRE, based on
information obtained from Participating Carrier's
internal reservation system.
______ D1. CLAIM IT allows a SABRE Subscriber to display
and claim Passenger Name Records from a
Participating Carrier's internal reservation
system and to secure them to their agency.
Bookings claimed by a SABRE Subscriber will
be appended with the Direct Access tag, and
the Participating Carrier will be charged the
additional premium connectivity booking fee.
Participating Carrier must be a Direct Access
participant to implement Claim It.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 29
4. Responsibilities of SABRE Associates.
a. SABRE Associates shall provide Participating Carrier with appropriate
technical/functional documentation for Total Access.
b. SABRE Associates shall maintain and operate Total Access, and shall
cooperate with Participating Carrier in resolving any problems
encountered in the maintenance of the telecommunications lines between
TAS and Participating Carrier's computerized reservation system.
c. SABRE Associates shall provide SABRE Subscribers with Common Language
training on Total Access via SABRE Assisted Instructions (S.A.I.
Lessons). SABRE will provide on-line reference material to instruct
SABRE Subscribers in the use of Total Access.
d. SABRE Associates will review requests for additions to the Common
Language, but implementation of such requests will be at SABRE
Associates' sole discretion. If SABRE Associates implements any
changes to the Common Language requested by other carriers, the cost
of implementation shall be borne equally by all carriers desiring to
use such Common Language commands.
e. SABRE Associates agrees to devote resources sufficient to complete the
programming necessary to implement Total Access. SABRE Associates
shall be responsible for the costs it incurs as a result of this
Addendum.
f. SABRE Associates shall have the right to terminate this Addendum,
without liability, upon thirty (30) days written notice, should
Participating Carrier fail to maintain reliability standard of 95%
specified in Paragraph 5(c) of "Responsibilities of Participating
Carrier" of this Addendum.
5. Responsibilities of Participating Carrier.
a. Participating Carrier shall provide resources to support SABRE
Associates' then current communications protocol.
b. Participating Carrier shall establish and operate its connection to
Total Access as defined in the appropriate technical/functional
documentation.
c. Participating Carrier will provide, at its sole cost and expense, (i)
required telecommunications link(s) (the "Lines") and multi-channel
modems between its computerized reservation system and the hardware
composing the TAS, or (ii) comparable link via SITA. Participating
Carrier will insure that its system, and the Lines linking it to the
Switch are operable at least 95% of the time Total Access is operating
each month.
d. Participating Carrier shall cooperate with SABRE Associates to
implement changes and additions or deletions to the Common Language.
e. If Participating Carrier elects to participate in Direct Access or
Multi Access, Participating Carrier shall make available through Multi
Access and/or Direct Access the schedule and availability display used
by Participating Carrier's reservations personnel.
f. If any future changes in Participating Carrier's internal reservation
system require any change in the Common Language, or in any other
aspect of Total Access, Participating Carrier will advise SABRE
Associates at least sixty (60) days in advance of such change and
cooperate with SABRE Associates in developing any changes necessary
for Participating Carrier's continued participation. All expenses
incurred by SABRE Associates with respect to such changes shall be
charged to Participating Carrier at SABRE Associates' vendor and/or
internally charged rates.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 30
g. For each level of participation selected, the functions of
Participating Carrier's internal reservations system that shall be
made available through Multi Access and/or Direct Access to SABRE
Subscribers shall be those listed in Schedule A of this Addendum.
h. Participating Carrier shall provide reasonable help desk and other
such technical support as SABRE Associates may require to serve SABRE
Subscribers using the Total Access function.
i. All Direct Access booked segments received by Participating Carrier's
reservations system from SABRE (including those appended with the
unique action code "LK") will be automatically accepted and confirmed
and no US/UC message will be generated.
j. All ANSWERBACK booked segments which include the record locator
received directly from the Participating Carrier will be considered
guaranteed bookings, excepting segments containing a waitlist segment
status code.
k. Participating Carrier shall complete the technical/functional
documentation appropriate to the level of Total Access participation
selected and return it to SABRE Associates within thirty (30) days of
the date of this Addendum.
l. Participating Carrier agrees to devote resources sufficient to
complete the programming necessary to implement Total Access.
Participating Carrier shall be responsible for the costs it incurs as
a result of this Addendum.
m. Participating Carrier agrees that each availability status message
sent to SABRE by Participating Carrier shall be sent in accordance with
and conform to all SIPP and AIRIMP standards and criteria.
n. If Participating Carrier elects to participate in Total Access, SABRE
Associates shall provide Carrier Specific Display (CSD). CSD shall be
made available at no charge to Participating Carrier provided,
however, that in the event this Addendum terminates because
Participating Carrier fails to implement ANSWERBACK, Direct Access, or
Multi Access, Participating Carrier shall be obligated to pay, in
addition to the booking fee paid by Participating Carrier under
Article 3.1 of the Agreement, and in addition to all other damages
sustained by SABRE Associates as a result of Participating Carrier's
breach, the sum of USD 0.10 in North America and Rest of the World and
ECU. 08 in Europe for each Booking made after the execution date of
this Addendum.
6. Joint Terms and Conditions
a. In the event that either Participating Carrier or SABRE Associates
experiences a system problem, then either party shall have the right
to inhibit Total Access during the period of time that such system
problem exists. If such a problem is a scheduled system outage, each
party shall be responsible for notifying the other as soon as possible
and each party shall use best efforts to reinstate Total Access
capabilities via the procedures agreed upon by both parties in advance
of the scheduled system outage. In the event of an emergency
situation, each party shall notify the other as soon as possible and
use best efforts to reinstate Total Access capabilities as soon as
possible.
b. In the event that either Participating Carrier's or SABRE Associates'
system reaches capacity limits, Participating Carrier and SABRE
Associates will implement the appropriate throttling mechanisms and/or
fallback procedures necessary to stabilize the system.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 3
<PAGE> 31
7. Fees.
a. In addition to the charges, if any, referred to under
"Responsibilities of Participating Carrier" above, Participating
Carrier shall pay American a one time implementation fee for Multi
Access or Direct Access of:
(i) $10,000 if Participating Carrier uses SABRE as its
internal computer reservation system;
(ii) $17,000 if Participating Carrier uses as its internal
computer reservation system a system of an airline
which is already in Total Access; or
(iii) $20,000 if Participating Carrier does not fall within
(i) or (ii) above. There will be no implementation
fee for the ANSWERBACK and NAV products.
b. For segments booked using the ANSWERBACK, Multi Access, or Direct
Access capability (SABRE will append each with an "AB", "MG", or "TA",
as applicable), Participating Carrier shall pay to American a fee per
Booking as set forth in Schedule B, which is attached and incorporated
in this Addendum, which shall be in addition to fees due under Article
III of the SABRE Participating Carrier Distribution and Services
Agreement.
8. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
one (1) year. Thereafter, it may be canceled on 30 days written notice
and it shall in any event terminate upon termination of the Agreement.
9. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _____________ day of ___________, 19____.
SABRE ASSOCIATES, INC.
- ------------------------------------
By: By:
-------------------------------- ------------------------------------
Name: Lynn T. Hendler
------------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 4
<PAGE> 32
SCHEDULE A
FUNCTIONS AVAILABLE IN TOTAL ACCESS
DIRECT ACCESS
1. Schedule Displays
2. Availability Displays
3. Scrolling
4. Display of Flight Information (FLIFO)
5. Fare Quote
6. VIT (Specific Flight Schedule)
7. DRS Retrieval
8. Fare Rules
9. Display of Seat Maps
10. Last Seat Availability
MULTI-ACCESS
All of the above plus:
1. PNR Retrieval
2. Display of all Portions of a PNR
3. Segment Sell
4. Creation of or Modification of a PNR
5. PNR Pricing
6. Queues/Queue Processing
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 5
<PAGE> 33
SCHEDULE A
FUNCTIONS AVAILABLE IN TOTAL ACCESS
(CONTINUED)
7. Pre-Reserved Seats
8. Availability Displays
9. Record Locator Returned to Segment
ANSWERBACK
1. Record Locator Returned to Segment
2. Record Locator Transmitted for all Subsequent
PNR Modifications
3. Schedule Displays
4. Availability Displays
NUMERIC AVAILABILITY
1. Return numeric seat value between 0 and 9 via
standard AVS messaging
2. Numeric seat value in SABRE primary
availability display
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 6
<PAGE> 34
SCHEDULE B
TOTAL ACCESS FEES
The following is a schedule of SABRE fees per segment booked using the
following Total Access levels:
<TABLE>
<CAPTION>
North America and
Rest of the World Europe
----------------- ------
<S> <C> <C>
ANSWERBACK USD.14 ECU.11
Direct Access USD.36 ECU.27
Multi Access USD.36 ECU.27
ANSWERBACK combined with Direct Access or
Multi Access booked segments USD.36 ECU.27
Claim It USD.36 ECU.27
</TABLE>
The fee for Numeric Availability is USD.17 in North America and Rest of the
World and ECU.13 in Europe per segment. If chosen, Numeric Availability must be
combined with one or more of the other Total Access levels, and the segment
fees for each of the Total Access products will be as follows:
<TABLE>
<CAPTION>
North America and
Rest of the World Europe
----------------- ------
<S> <C> <C>
ANSWERBACK USD.31 (combined fee) ECU.24 (combined fee)
Direct Access USD.17 segment for all NAV ECU.13 segment for all NAV
segments not booked through segments not booked through
Direct Access, or Direct Access, or
USD.36 per segment for all ECU.27 per segment for all
segments booked through segments booked through
Direct Access Direct Access
Multi Access USD.17 per segment for all ECU.13 per segment for all
NAV segments, not booked NAV segments, not booked
through Multi Access, or through Multi Access, or
USD.36 per segment for all ECU.27 per segment for all
segments booked through segments booked through
Multi Access Multi Acess
</TABLE>
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 7
<PAGE> 35
TOTAL ACCESS
DIRECT CONNECT AIR
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
1. PRODUCT DESCRIPTION SABRE Direct Connect Air is the
premium level of connectivity in the Total Access product line. Direct
Connect Air, based on IATA/PADIS-approved EDIFACT standards, provides
for the instantaneous, transparent retrieval of information from the
Participating Carrier's internal reservation system. Direct Connect
Air is comprised of Direct Connect Sell and Direct Connect
Availability.
2. CONDITIONS PRECEDENT Participating Carrier must have
executed a Total Access Optional Services Addendum and participate in
Direct Access before it may participate in either level of Direct
Connect Air and execute this Addendum. Participating Carrier may
participate in Direct Connect Availability only if it is also a
participant in Direct Connect Sell.
3. OPTIONS AVAILABLE Please check below the desired participation of
Direct Connect Air product(s):
_____A. DIRECT CONNECT SELL allows SABRE, using the
IATA/PADIS-approved EDIFACT based standards, to
automatically generate a Booking request and provide
data required to complete a PNR within the
Participating Carrier's internal reservation system.
Direct Connect Sell allows for the automatic
insertion of Participating Carrier's PNR record
locator within the associated PNR created in SABRE,
once the Booking has been confirmed by the
Participating Carrier. If the inventory requested is
available, the Participating Carrier's inventory is
automatically decremented from its reservation
system. If the inventory is unavailable, the
Participating Carrier will immediately generate an
unable to sell message. If Participating Carrier
elects to participate at the Direct Connect Sell
level, upon implementation of Direct Connect Sell,
ANSWERBACK shall be provided to Participating Carrier
at no further charge.
If Participating Carrier elects to participate at the Direct
Connect Sell level, Participating Carrier may also select the
Numeric Availability ("NAV") option for an additional USD 0.17
per Booking in North America and Rest of the World and an
additional ECU 0.13 per Booking in Europe. Please place a
check mark next to the NAV option if desired.
_____ NAV provides seat availability status and allows
Participating Carrier to display a numeric value of 0
to 9 seats of inventory for a specific flight in the
standard SABRE city-pair availability display.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 1
<PAGE> 36
_____ B.DIRECT CONNECT AVAILABILITY allows SABRE, using the
IATA/PADIS-approved EDIFACT based standards to
provide the instantaneous, transparent retrieval of
last-seat, flight specific availability from a
Participating Carrier's internal reservation system,
resulting from a SABRE Subscriber/system request for
flight availability information. Once SABRE receives
a Participating Carrier's availability, SABRE
integrates the Carrier's availability into the
standard SABRE availability display. Participating
Carrier may only elect to participate in Direct
Connect Availability if the carrier is also a Direct
Connect Sell participant. Further references in this
Addendum to Direct Connect Air mean the level(s) of
participation chosen by Participating Carrier. If
Participating Carrier elects to participate at the
Direct Connect Availability level, upon
implementation of Direct Connect Availability, the
NAV option shall be provided to Participating Carrier
at no further charge.
4. Responsibilities of SABRE Associates.
a. SABRE Associates shall provide Participating Carrier with
appropriate technical/functional documentation for the
selected participation of Direct Connect Air product(s).
b. SABRE Associates shall maintain and operate Direct Connect Air
and shall cooperate with Participating Carrier in resolving
any problems encountered in the maintenance of the
telecommunications lines between Direct Connect Air and
Participating Carrier's computerized reservation system.
c. SABRE Associates shall provide SABRE Subscribers with training
on Direct Connect Sell via SABRE Assisted Instructions (S.A.I.
Lessons). SABRE will provide on-line Direct Connect Air
reference material to instruct SABRE Subscribers in the use of
Direct Connect Air.
d. SABRE Associates agrees to devote resources sufficient to
complete the programming necessary to implement Direct Connect
Air. SABRE Associates shall be responsible for the costs it
incurs as a result of this Addendum.
e. All SABRE Direct Connect Availability requests will conform to
the then current IATA/PADIS-approved EDIFACT standards.
f. SABRE Associates will insure that the Lines linking
Participating Carrier's system to SABRE are operable at least
95% of the time Direct Connect Air is operating each month.
g. If Participating Carrier elects to participate at the Direct
Connect Sell level, SABRE Associates shall provide ANSWERBACK
to Participating Carrier at no further charge provided
however, that in the event this Addendum terminates because
Participating Carrier fails to implement Direct Connect Sell,
Participating Carrier shall be obligated to pay, in addition
to the booking fee paid by Participating Carrier under Article
3.1 of the Agreement, and in addition to all other damages
sustained by SABRE Associates as a result of Participating
Carrier's breach, the sum of USD 0.14 in North America and
Rest of the World and ECU .011 in Europe for each ANSWERBACK
Booking made after the execution date of this Addendum.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 2
<PAGE> 37
h. If Participating Carrier elects to participate at the Direct
Connect Availability level, the NAV option, if selected by
Participating Carrier, will be made available by SABRE
Associates at no further charge provided however, that in the
event this Addendum terminates because Participating Carrier
fails to implement Direct Connect Availability, Participating
Carrier shall be obligated to pay, in addition to the booking
fee paid by Participating Carrier under Article 3.1 of the
Agreement, and in addition to all other damages sustained by
SABRE Associates as a result of Participating Carrier's
breach, the sum of USD 0.17 in North America and Rest of the
World and ECU 0.13 in Europe for each non Multi-Access or
Direct Access Booking made after the execution date of this
Addendum.
5. Responsibilities of Participating Carrier
a. Participating Carrier shall provide resources to support SABRE
Associates' then current communications protocol.
b. Participating Carrier shall establish and operate its
connection to Direct Connect Air as defined in the appropriate
technical/functional documentation.
c. The cost of all telecommunications links and multi-channel
modems (the "Lines") between Participating Carrier's internal
reservation system and the Direct Connect Air complex will be
borne by Participating Carrier. If SABRE Associates orders and
pays for such Lines, Participating Carrier will reimburse
SABRE Associates for any such expense. Participating Carrier
will insure that its system, and the Lines linking it to SABRE
are operable at least 95% of the time Direct Connect Air is
operating each month.
d. The functions of Participating Carrier's internal reservation
system that shall be made available through Direct Connect Air
to Subscribers shall be those listed in Schedule A of this
Addendum.
e. Participating Carrier shall make available through Direct
Connect Air the schedule and availability display used by
Participating Carrier's reservations personnel.
f. If any future changes in Participating Carrier's internal
reservation system require any change to Direct Connect Air,
or in any other aspect of Direct Connect Air, Participating
Carrier will advise SABRE Associates at least (60) days in
advance of such change and cooperate with SABRE Associates in
developing any changes necessary for Participating Carrier's
continued participation. All expenses incurred by SABRE
Associates with respect to such changes shall be charged to
Participating Carrier at SABRE Associates' vendor and/or
internally charged rates.
g. Participating Carrier shall provide reasonable customer
service assistance and other such technical support as SABRE
Associates may require to serve SABRE Subscribers regarding
Direct Connect Air.
h. All Direct Connect Air booked segments received by
Participating Carrier's reservations system from SABRE,
(including those appended with the unique action code "DK" or
"LK") will be automatically accepted and confirmed and no
US/UC message will be generated.
i. Participating Carrier shall complete the technical/functional
documentation appropriate
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 3
<PAGE> 38
to the selected participation of Direct Connect Air product(s)
and return it to SABRE Associates within thirty (30) days of
the date of this Agreement.
j. Participating Carrier agrees to devote resources sufficient to
complete the programming necessary to implement Direct Connect
Air. Participating Carrier shall be responsible for the costs
it incurs as a result of this Addendum.
k. All Participating Carrier's Direct Connect Availability
responses will conform to the current IATA/PADIS-approved
EDIFACT standards.
l. Participating Carrier will return only numeric availability to
a SABRE Direct Connect Availability request.
6. Failure Of Either Party to Perform
Each party shall have the right to terminate this Addendum, without
liability, upon thirty (30) days written notice, should either party
fail to maintain reliability standard of 95% specified in Paragraphs
5(c) of "Responsibilities of Participating Carrier" and 4(f) of
"Responsibilities of SABRE Associates", of this Addendum.
7. Joint Terms and Conditions
a. In the event that either Participating Carrier or SABRE
Associates experiences a system problem, then either party
shall have the right to inhibit Direct Connect Air during the
period of time that such system problem exists. If such a
problem is a scheduled system outage, each party shall be
responsible for notifying the other as soon as possible and
each party shall use best efforts to reinstate Direct Connect
Air capabilities via the procedures agreed upon by both
parties in advance of the scheduled system outage. In the
event of an emergency situation, each party shall notify the
other as soon as possible and use best efforts to reinstate
Direct Connect Air capabilities as soon as possible.
b. In the event that either Participating Carrier's or SABRE
Associates' system reaches capacity limits, Participating
Carrier and SABRE Associates will implement the appropriate
throttling mechanisms and/or fallback procedures necessary to
stabilize the system.
c. In the event Participating Carrier is not able to return its
availability within two (2) seconds after request, SABRE will
default to its internally stored availability database. Any
Participating Carrier response to a Direct Connect
Availability request, which SABRE Associates receives before
the maximum time-limit is reached, will be integrated into the
standard SABRE availability display.
8. Fees
a. For segments booked using the Direct Connect Air capability,
(SABRE will append each with an "DC" indicator) Participating
Carrier shall pay to American, on a monthly basis, the
following fees per Booking (which shall be in addition to the
fees due under Article III of the SABRE Participating Carrier
Distribution and Services Agreement):
(i) If Participating Carrier participates only in Direct
Connect Sell, it shall pay USD 0.36 in North America
and the Rest of the World and ECU.0.27 in Europe per
Booking for each Booking to which a "DC" indicator is
appended.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 4
<PAGE> 39
(ii) If Participating Carrier participates only in Direct
Connect Sell and NAV, it shall pay USD 0.17 in North
America and Rest of the World and ECU 0.13 in Europe
per Booking in addition to the amount specified in
subparagraph (i), for each Booking to which a "DC"
indicator is appended and it shall pay USD 0.17 in
North America and Rest of the World and ECU 0.13 in
Europe per Booking for each non Multi-Access or
Direct Access Booking.
(iii) If Participating Carrier participates in both Direct
Connect Sell and Direct Connect Availability, it
shall pay USD 0.21 in North America and Rest of the
World and ECU 0.16 in Europe per Booking in addition
to the amount specified in subparagraph (i), for each
Booking to which a "DC" indicator is appended.
b. At any time after the effective date hereof, SABRE Associates
may modify the amount payable under subparagraphs a (i), (ii)
or (iii) above, upon thirty (30) days written notice, by a
percentage not to exceed fifteen percent (15%) in any
consecutive twelve (12) month period. If Participating Carrier
does not desire to pay such revised fee, it may withdraw from
this Addendum upon written notice to SABRE Associates within
thirty (30) days prior to the effective date of the price
change.
9. Term The Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
one (1) year. Thereafter, it shall continue until termination of the
Agreement, or termination of the Addendum by either party upon thirty
(30) days prior written notice. In no event shall this Addendum remain
in effect beyond the termination date of the Agreement.
10. Full Force and Effect Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _____________________ day of ____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
----------------------------
By: By:
-------------------------------- ---------------------------------------
Name: Lynn T. Hendler
------------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 5
<PAGE> 40
SCHEDULE A
FUNCTIONS AVAILABLE IN DIRECT CONNECT AIR
DIRECT CONNECT AIR
1. Instant Decrement of Inventory
2. Last Seat Availability
3. Segment Sell
4. Record Locator Returned to Segment
5. Sell from Zero
6. Flight Facts
7. Point Of Sale (POS)
8. Numeric Availability (NAV)
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 6
<PAGE> 41
DIRECT REFERENCE SYSTEM (DRS)
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
DRS is an automated reference display in SABRE. This system is
used to provide marketing and service related information to various SABRE
Subscribers. Cost depends on the level of participation.
1. Options Available. There are six (6) DRS options available.
Please select one and place a check mark next to the appropriate
selection.
_____ Level A
- 200 pages with 95 lines of information per page
- Daily System HOT messaging
- Monthly Subscriber usage report
- Participating Carrier creates and updates DRS through its SABRE CRT
Price: $5,000 per month, excluding cost of SABRE access
_____ Level B
- 89 pages with 95 lines of information per page
- Daily System HOT messaging
- Monthly Subscriber usage report
- Participating Carrier creates and updates DRS through its SABRE CRT
Price: $2,500 per month, excluding cost of SABRE access
_____ Level C
- 50 pages with 95 lines of information per page
- Daily System HOT messaging
- Monthly Subscriber usage report
- Participating Carrier creates and updates DRS through its SABRE CRT
Price: $1,500 per month, excluding cost of SABRE access
_____ Level D
- 10 pages with 95 lines of information per page
- 4 System HOT messages per month
- Monthly Subscriber usage report
- Participating Carrier creates and updates DRS through its SABRE CRT
Price: $1,000 per month; $250 per additional page per month
_____ Level E
- 3 pages with 95 lines of information per page
- 4 System Hot messages per month
- Monthly Subscriber usage report
- STIN creates and updates DRS on behalf of
Participating Carrier (maximum of 2 updates per week)
Price: $500 per month; $200 per additional page per month
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 42
______ Level F
-1 page with 95 lines of information per page
-2 System HOT messages per month
-Monthly Subscriber usage report
-STIN creates and updates DRS on behalf of
Participating Carrier (maximum of 1 update per month)
Price: $150 per month
2. Responsibilities of SABRE Associates.
a. SABRE Associates will create and maintain the DRS facility for
use by Participating Carrier.
b. SABRE Associates shall provide Participating Carrier with a
copy of its standards, guidelines, formats, and procedures
("DRS Standardization Procedures"). SABRE Associates shall
have the right to modify its DRS Standardization Procedures
upon Sixty (60) days written notice.
c. SABRE Associates will provide Participating Carrier with DRS
options equal to those offered to any other Participating
Carrier.
d. SABRE Associates reserves the right to monitor the DRS for
compliance with DRS Standardization Procedures.
e. SABRE Associates will provide a monthly usage report to
Participating Carrier.
f. SABRE Associates will input and update Participating Carrier's
DRS if option E or F is selected (Maximum of two updates per
week). SABRE Associates shall assume no liability whatsoever
for the accuracy of the information loaded into SABRE on
Participating Carrier's behalf.
3. Responsibilities of Participating Carrier.
a. Participating Carrier shall comply with SABRE Associates' DRS
Standardization Procedures as may be changed from time to time
on 60 days advance notice by SABRE Associates.
b. Participating Carrier will input and update its DRS if it
selects option A, B, C, or D.
4. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
a minimum of six (6) months. Thereafter, it shall continue until
canceled by either party upon forty (40) days prior written notice. In
no event shall this Addendum remain in effect beyond the termination
date of the Agreement.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 2
<PAGE> 43
5. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________ 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 3
<PAGE> 44
MARKETING INFORMATION DATA TAPES (MIDT)
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
Marketing Information Data Tapes are daily, weekly or monthly data
produced by STIN regarding Professional SABRE and Commercial SABRE Subscriber
Bookings. This data can be transmitted electronically daily or weekly via a
specified vendor. Information provided includes, but is not limited to, pseudo
city code, ARC/IATA number (where applicable), SABRE Subscriber name, airline
code, board/off cities, class of service, flight number, passenger count,
departure date, booking date (month, day and year) agency city, state, country
and zip or postal code and PNR record locator.
1. Options Available. There are four (4) options available. Please
indicate your selection by placing a check mark next to the
appropriate option.
_______ OPTION A UMIDT - U.S. DOMESTIC MDT
contains Domestic Booking data, (data related to
transportation wholly within the U.S.) from all
SABRE Subscribers.
Option A may be purchased by all Participating
Carriers Historical data prior to October, 1994 may
not be provided to any non U.S. Certificated
Carrier.
_______ OPTION B XMIDT - INTERNATIONAL MIDT
contains all Booking Data from Non-U.S. and
Non-Canadian SABRE Subscribers. May be purchased by
all Carriers.
_______ OPTION C GMIDT - GATEWAY MIDT
contains Gateway to Gateway Data from all SABRE
Subscribers.
May be purchased by all U.S. Certificated Carriers
and carriers certificated by one of the Gateway
Countries. (A carrier certificated by one of the
Gateway Countries may only purchase Gateway data
between U.S. and its home country. Option C may
only be purchased after the necessary government
approvals have been obtained.)
_______ OPTION D IMIDT - INTERNATIONAL MIDT
contains International Booking data (data related
to outside the U.S.) from all SABRE Subscribers
May be purchased by all participating carriers
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 1
<PAGE> 45
NOTE:Applicable to Options A, C and D.
The following is an excerpt from the U.S.
Department of Transportation, Computer Reservations
Systems Part 255.10, regarding Marketing and booking
information.
". . . no system may provide such data to a foreign
carrier if the foreign carrier or an affiliate
owns, operates, or controls a system in a foreign
country, unless such carrier or system provides
comparable data to all U.S. carriers on
nondiscriminatory terms.
Please indicate the type of Data desired:
Purged Data Booked (Net) Data
------------- -----------
Electronic Daily: (Includes booking code and cancellation
------- indicator.)
Monthly Tape:
----------- Electronic Weekly:
-----------
Weekly Tape:
-----------------
2. Responsibilities of SABRE Associates.
a. SABRE Associates shall commence supplying the MDT to
Participating Carrier within ninety (90) days of receipt of
this signed Addendum.
b. SABRE Associates shall provide Participating Carrier with the
fixed format record layout with all data elements, element
descriptions, field lengths, displacements, and tape
specifications.
c. Upon ninety (90) days advance notice, SABRE Associates may
modify all or any components or the format of the MIDT.
d. Subject to applicable GDS Rules, SABRE Associates reserves the
right to discontinue the MIDT, it being understood that the
MIDT shall contain only such marketing, booking, and sales
data as SABRE Associates elects to generate from its SABRE
Subscriber System.
3. Responsibilities of Participating Carrier. Participating Carrier
agrees that the data contained on the MIDT may not be published,
duplicated, reproduced in any manner, electronic or otherwise, in
whole or in part, nor utilized by, disclosed or sold to any third
party.
4. Fees. The monthly charge for one option selected shall be $1.00
multiplied by the number of active SABRE Subscriber pseudo city codes
existing as of the first day of each month, which has one or more
applicable Booking segments for the calendar month.
The monthly charge for Option D combined with another MIDT Option
selected shall be $1.50 multiplied by the number of active SABRE
Subscriber pseudo city codes in the combined product existing as of
the first day of each month, which has one or more applicable Booking
segments for the calendar month.
In addition to the above mentioned fees, the following handling
charges for electronic transmission shall apply. A fee of two thousand
($2,000) a month for daily electronic transmission or five hundred
($500) a month for weekly electronic transmission.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 2
<PAGE> 46
5. Term. This Addendum shall commence on the date signed by a
duly authorized agent of SABRE Associates and shall continue
in effect for a minimum of three (3) months. Thereafter, it
shall continue until canceled by either party upon forty (40)
days prior written notice. In no event shall this Addendum
remain in effect beyond the termination date of the Agreement.
6. Full Force and Effect. Except as otherwise provided herein,
all terms and conditions of the Agreement shall remain in full
force and effect, and all capitalized terms shall have the
same meaning as assigned to such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 3
<PAGE> 47
CAPTURE INFORMATION DATA TAPES (CIDT)
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
Capture Information Data Tapes ("CIDT") are daily and/or monthly magnetic data
tapes produced by SABRE Associates or its affiliates regarding Professional
SABRE and Commercial SABRE Subscriber input formats and output responses.
Information provided includes, but is not limited to, pseudo city code,
ARC/IATA number (where applicable), SABRE Subscriber sell entries, availability
requests, flight information, received from information, ticketing, pricing
commands, ignore responses, end transaction and fare quotes.
1. (a.) Options Available. There are two (2) options available. Please
select one and place a check mark next to the appropriate
selection.
- ------- OPTION A - contains U.S. Domestic Transaction Data from all U.S.
SABRE Subscribers.
- ------- OPTION B - contains all Transaction Data from Non-U.S. and
Non-Canadian SABRE Subscribers.
(b.) Please indicate data distribution choice:
MONTHLY DAILY
---------- ----------
2. Responsibilities of SABRE Associates
a. SABRE Associates shall commence supplying the CIDT to
Participating Carrier within ninety (90) days of receipt of
this signed Addendum.
b. SABRE Associates shall provide Participating Carrier with the
record layout which contains all data elements, element
descriptions, field lengths, displacements, and tape
specifications.
c. Upon ninety (90) days advance notice, SABRE Associates may
modify all or any components or the format of the CIDT.
d. Subject to applicable GDS Rules, SABRE Associates reserves the
right to discontinue the CIDT, it being understood that the
CIDT shall contain only such marketing, booking, and sales
data as SABRE Associates elects to generate from its SABRE
Subscriber System.
3. Responsibilities of Participating Carrier.
Participating Carrier agrees that the data contained on the CIDT may
not be published, duplicated, reproduced in any manner, electronic or
otherwise, in whole or in part, nor utilized by, disclosed or sold to
any third Party.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 48
4. Fees. The monthly charge shall be $12,000.00 per option. An additional
$300.00 monthly charge shall be due in the event Participating Carrier
elects daily distribution handling.
5. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for a
minimum of three (3) consecutive months. Thereafter, it shall continue
until canceled by either party upon forty (40) days prior written
notice. In no event shall this Addendum remain in effect beyond the
termination date of the Agreement.
6. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 49
POINT OF SALE
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
1. Product Description. Point Of Sale is an optional data service by
which additional data elements from a SABRE Booking and a Subscriber
request, other than those required by SIPP, are transmitted to the
Participating Carrier's internal reservation system, providing Point
Of Sale information about the SABRE Booking location and SABRE Booking
client. The Point Of Sale data elements provided include, but are not
limited to: (ISO) country code, city code (nearest airport location),
travel agent requester authority code, travel agency pseudo city code,
ARC/IATA number (or the SABRE international identifier for non-IATA
Subscribers), (ISO) currency code and frequent traveler (or
equivalent) plan number.
2. Options Available. There are three levels of connectivity available
for selection in Point Of Sale: standard teletype, Multi-Access and
Direct Access. A Participating Carrier may select any of the three (3)
connectivity's of participation provided however, that Point Of Sale
Multi-Access and Direct Access can only be chosen if the carrier is
also a Multi-Access and/or Direct Access participant.
Please check below the desired level(s) of Point Of Sale connectivity
Participation:
A. Teletype POINT OF SALE is available to all Participating
- ------- Carriers who exchange reservations messages with SABRE via
standard teletype. Point Of Sale information transmitted via
teletype at "End Transaction" will be appended to the Record
Locator element of the teletype message.
B. Multi-Access POINT OF SALE allows Participating Carriers with
- ------- Multi-Access functionality capability to receive information
appended to Subscriber requests as the requests are sent to
Participating Carrier's internal reservation system. A
Participating Carrier who elects to receive Multi-Access Point
Of Sale will be given the option to select any or all of the
data elements provided, as well as the order in which to
receive the data elements, with the exception of the frequent
traveler (or equivalent) plan number which, if selected, will
always appear last in the data sequence. Transactions to which
Point Of Sale data is appended include: entry into host
internal reservation system (sine-in), availability/schedules,
seat maps, Direct Reference System (DRS), fare quote and
bypass entries.
C. Direct Access POINT OF SALE allows Participating Carriers with
- ------- Direct Access functionality capability to receive information
appended to Subscriber requests as the requests are sent to
Participating Carrier's internal reservation system on a
message transmittal basis. A Participating Carrier who elects
to receive Direct Access Point Of Sale will be given the
option to select any or all of the data elements provided as
well as the order in which to receive the data elements, with
the exception of the frequent traveler (or equivalent) plan
number which, if selected, will always appear last in the data
sequence. Transactions to which Point Of Sale is appended will
include: availability/schedules, seat maps, Direct Reference
System (DRS), fare quote and bypass entries.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 1
<PAGE> 50
3. Rights and Responsibilities of SABRE Associates.
a. SABRE Associates will provide Participating Carrier with appropriate
technical/functional documentation for selected level(s) of the Point
Of Sale product.
b. SABRE Associates agrees to devote resources sufficient to complete the
programming to its Point Of Sale product necessary to implement that
Point Of Sale product. SABRE Associates shall be responsible for the
costs it incurs as a result of this Addendum.
c. Upon ninety (90) days advance notice, SABRE Associates may modify any
or all data elements, transactions appended to the data elements or
the format of the Point Of Sale product.
d. At any time, notwithstanding paragraph 8 herein, SABRE Associates may
terminate this Addendum, with or without cause, upon thirty (30) days
written notice to Participating Carrier.
4. Responsibilities of Participating Carrier.
a. Participating Carrier shall provide resources to support SABRE
Associates' then current communication protocol.
b. Participating Carrier shall establish and operate its connection to
Multi-Access and Direct Access as it applies to Point Of Sale data as
defined in the appropriate technical/functional documentation provided
by SABRE Associates.
c. Participating Carrier shall cooperate with SABRE Associates to
implement changes and modifications or deletions to the data elements
and/or the transactions appended to the data elements of Point Of Sale
as SABRE Associates determines, in its sole discretion.
d. If any future changes in Participating Carrier's internal reservation
system require any changes to the Point Of Sale product in either
teletype, Multi-Access or Direct Access, Participating Carrier will
advise SABRE Associates at least sixty (60) days in advance of such
change and cooperate with SABRE Associates in developing any changes
necessary for Participating Carrier's continued participation. All
expenses incurred by SABRE Associates with respect to such change
shall be charged to Participating Carrier at SABRE Associates' vendor
and/or internally charged rates.
5. Joint Terms and Conditions. In the event that either Participating
Carrier or SABRE Associates experiences a system problem, then either
party shall have the right to inhibit Point Of Sale provided through
Multi-Access and/or Direct Access during the period of time that such
system problem exists. If such a problem is a scheduled Participating
Carrier system outage, Participating Carrier shall notify SABRE
Associates in a reasonable amount of time. Participating Carrier shall
use its best efforts to reinstate Point Of Sale capabilities provided
through Multi-Access and/or Direct Access as quickly as possible. If
SABRE Associates experiences a scheduled system outage with
Multi-Access or Direct Access, SABRE Associates will notify
Participating Carrier via normal operating procedures. In the event of
an emergency situation, SABRE Associates will notify the Participating
Carrier in a reasonable amount of time. SABRE Associates shall use
best efforts to reinstate Multi-Access or Direct Access capabilities
as quickly as possible.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 51
6. Fees.
a. In addition to the charges, if any, referred to under
"Responsibilities of Participating Carrier" above, Participating
Carrier shall pay SABRE Associates a premium of USD 0.05 in North
America and Rest of the World and ECU 0.04 in Europe per each
Multi-Access and Direct Access segment booked. There will be no charge
for Point of Sale data transmitted via Multi-Access and/or Direct
Access if Participating Carrier is a current Direct Connect Air
participant.
b. For those segments booked via standard teletype with Point Of Sale
data transmitted at "End Transaction", there will be no charge.
c. At any time after the effective date hereof, SABRE Associates may
modify the amount payable under subparagraph a. above, upon thirty
(30) days written notice by a percentage not to exceed fifteen percent
(15%) in any consecutive twelve (12) month period. If Participating
Carrier does not desire to pay such revised fee, it may withdraw from
this Addendum upon such notice prior to the effective date of the
price change.
7. Term. The Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
one (1) year. Thereafter, it shall continue until termination of the
Agreement; provided however, that after the first year, Participating
Carrier shall have the right to terminate this Addendum without
liability, upon thirty (30) days written notice to SABRE Associates.
In no event shall the term of this Addendum extend beyond the
termination of the Agreement.
8. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 3
<PAGE> 52
EXTENDED PNR DATA
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
Extended PNR Data is a service by which additional elements from a
SABRE Booking, other than those required by SIPP, are transmitted to the
Participating Carrier. Extended PNR Data is transmitted at time of PNR
creation, and updates are sent at time of ticketing, via teletype, to each
carrier participating in this option that also participates in the itinerary at
end transaction. The extended data transmitted includes: PNR record locator,
passenger's complete itinerary, the receiving carrier's frequent flyer (or
equivalent) plan number, travel agent's ARC/IATA number (or the SABRE
international identifier for non-IATA Subscribers), passenger name, phone
contact, ticketing time limits and fare construction (excluding the agent's
commission), ticket number (at time of Booking and if known by SABRE), and PNR
element changes recap (at time of ticketing, if not already transmitted).
1. Data Transmission.
a. SABRE Associates shall transmit the above listed information
at PNR creation. In addition, SABRE Associates shall transmit
updates to Participating Carrier at time of ticketing.
b. Unless otherwise agreed upon, SABRE Associates shall commence
transmission of Extended PNR Data within ninety (90) days of
receipt of this Addendum.
2. Fees.
a. SABRE Associates will charge an implementation fee of $5,000
for participation in the Extended PNR Data option.
b. A fee of $.01 will be assessed for each Extended PNR
transmission.
c. Communications costs shall be the responsibility of
Participating Carrier.
3. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
a minimum of three (3) months. Thereafter, it shall continue until
canceled by either party upon forty (40) days prior written notice. In
no event shall this Addendum remain in effect beyond the termination
date of the Agreement.
4. Eligibility. All U.S. Carriers, and those foreign carriers for which
the necessary governmental approvals have been obtained are eligible
to receive Extended PNR Data under this Addendum.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 53
5. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________ 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 54
TICKET CONTROL NUMBER (TCN) DATA
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement (The
"Agreement").
Ticket Control Number Data is accounting information on magnetic tape
or via electronic transmission and produced by SABRE Associate or its affiliate
daily or weekly, to be used by Participating Carrier in streamlining its
revenue accounting system.
1. Option Available.
"Long Data" includes: all ticketing data such as validating
- --------- carrier account code, validating carrier guarantee code,
initial ticket number or ticket control number (TCN), initial
ticket number digit, or TCN check digit, actual ticket number
check digit, relative ticket in set, automated ticket number
pricing code, agency's number or sales outlet number including
check digit, cash/credit indicator, credit card account number
and check digit, credit card extended payment code and
approval code, date of issue, booking date, fare calculation,
commission rate and amount, tax code and amounts, country
code, total sales amount, equivalent amount paid, currency
code, ticketing carrier accounting code,
domestic/international code, void coupon indicator, passenger
identification/type code (PIC code), passenger name,
ATB/TCN/TAT identification, PNR record locator, tour code,
stopover codes, airport city codes, carrier codes, departure
dates, flight numbers.
Please indicate the type of transmission and the frequency desired:
Tape: Daily Weekly
--------- ----------
Electronic: Daily Weekly
--------- ----------
2. Data Transmission. SABRE Associates shall provide the above listed
information to Participating Carrier on a daily or weekly basis,
according to Participating Carrier's preference. Electronic
transmissions are sent via ATPCO.
3. Fees. A fee of $.07 will be assessed for each ticket count included
on the tape.
4. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
a minimum of three (3) months. Thereafter, it shall continue until
canceled by either party upon forty (40) days prior written notice. In
no event shall this Addendum remain in effect beyond the termination
date of the Agreement.
5. Full Force and Effect. Except as otherwise provided herein, all
terms and conditions of the Agreement shall remain in full force and
effect, and all capitalized terms shall have the same meaning as
assigned to such terms in the Agreement.
6. Responsibilities of Participating Carrier. Participating Carrier
agrees that the data contained on the TCN data tape may not be
published, duplicated, reproduced in any manner, electronic or
otherwise, in whole or in part, nor utilized by, disclosed or sold to
any third party.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
05/29/96 1
<PAGE> 55
NOTE The following is an excerpt from the U.S.Department
of Transportation, Computer Reservations Systems
Part 255.10, regarding Marketing and booking
information.
". . .no system may provide such data to a foreign
carrier if the foreign carrier or an affiliate owns,
operates, or controls a system in a foreign country,
unless such carrier or system provides comparable
data to all U.S. carriers."
If this provision is applicable to your company,
please represent that you are in compliance by
signing below.
Airline
-------------------
Signature
-----------------
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 56
CARRIER SPECIFIC DISPLAY (CSD)
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement.
Carrier Specific Display allows a SABRE Subscriber to request city
pair availability for a designated Participating Carrier. The display includes
that carrier's direct flights, stored on-line and off-line connections and any
dynamically-built connections.
1. Implementation. SABRE Associates shall implement CSD for Participating
Carrier within seven (7) days of the receipt of this Addendum.
2. Fees. A premium of USD 0.10 in North America and Rest of the World and
ECU 0.08 in Europe will be levied on all Participating Carrier SABRE
Bookings for carriers electing CSD as an option.
NOTE: CSD is offered as part of the Total Access Optional Service at
no charge to Participating Carrier.
3. Term. This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall remain in effect for a
minimum of six (6) months. Thereafter, it shall continue until
canceled by either party upon forty (40) days prior written notice. In
no event shall this Addendum remain in effect beyond the termination
date of the Agreement.
4. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 57
NAME CHANGE RESTRICTION
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates ") and the Participating Carrier identified below, amends that
certain SABRE Participating Carrier Distribution and Services Agreement between
SABRE Associates and Participating Carrier (the "Agreement").
1. Product Description Name Change Restriction is an optional tool to
assist in controlling name changes made to passenger name records.
This function is restricted to inventory classes of service that the
carrier provides to SABRE through a service vendor.
A warning message will be issued at the initial time of booking a
restricted class of service advising that a name change is not allowed
to carrier and fare class.
When a subscriber attempts to name change on a previously booked
passenger name record they will receive a warning stating that name
change is not allowed for restricted fare classes for that specific
segment, space will be canceled if a name change is made. If a second
attempt is made the space will be canceled advising the subscriber
that this was due to a name change and an SSR will be sent to the
carrier advising of the cancellation.
2. Participating Carrier Responsibilities Participating Carrier must
provide SABRE within (30) thirty days of signature of this Addendum
written notice of any name change restriction requests.
3. Fees There are presently no fees associated with this product; SABRE
Associates reserves the right to implement a reasonable fee on 90 days
written notice should it become necessary. If Participating Carrier
declines to pay a fee, either party may terminate this addendum with
30 days written notice without penalty.
4. Term This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
one (1) year. Thereafter, it may be canceled on thirty (30) days
written notice and it shall in any event terminate upon termination of
the Agreement.
5. Full Force and Effect Except as provided herein, an terms and
conditions of the Agreement shall remain in full force and effect.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
Date:
---------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 58
BOARDING PASS PROGRAM
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement (the
"Agreement").
SABRE Associates offers to certain SABRE Subscribers, primarily
Professional SABRE Subscribers, a Boarding Pass Program under which such
subscribers may issue advance boarding passes on Participating Carrier.
1. Responsibilities of SABRE Associates
a. SABRE Associates shall provide the facility for issuance of
boarding passes to Boarding Pass Subscribers.
b. The Boarding Pass Program may be limited or discontinued at
SABRE Associates' sole discretion due to technical and
economic feasibility or capacity constraints.
c. SABRE Associates shall initiate and process messages to
Participating Carrier as required to obtain seat information
needed to issue boarding passes.
d. SABRE Associates shall make boarding pass stock available to
SABRE travel agencies.
e. In the event that Participating Carrier does not purchase the
DRS Optional Service, SABRE Associates will provide one page
of DRS for display of Boarding Pass information.
f. The Boarding Pass Program shall not be used internally by
SABRE Associates or its affiliates, to issue boarding passes
on Participating Carrier.
2. Responsibilities of Participating Carrier.
a. Participating Carrier will maintain its pre-reserved seat
selection capability through which a pre-reserved seat may be
selected for a passenger at least thirty (30) days prior to
departure date.
b. Participating Carrier shall take steps to ensure a two-hour
maximum response time for a pre-reserved seat request from a
SABRE Subscriber.
c. By such time as functional testing shall commence,
Participating Carrier will establish in its system a unique
queue into which Special Service Request (SSR) messages
generated from SABRE Subscribers requesting pre-reserved seats
will fall for processing.
d. Participating Carrier shall create, maintain, and update a
Boarding Pass page in its DRS relating to the specific
parameters to which all Subscribers must adhere with regard to
boarding pass issuance on Participating Carrier.
e. Participating Carrier agrees to accept Boarding Passes issued
by SABRE Subscribers as boarding authority for travel on
Participating Carrier.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 59
f. The Boarding Pass Program shall not be used internally by
Participating Carrier personnel to issue boarding passes.
g. Participating Carrier agrees to work with SABRE Associates
during the term of the Addendum to develop an acceptable
method whereby subscribers will be able to generate boarding
passes when a seat assignment is obtained by a SABRE
Subscriber directly from Participating Carrier for a Booking
made through SABRE.
3. FQTV Numbers. Please indicate below if you would like your carrier's
FQTV numbers printed on boarding passes.
YES NO
-------- -------
4. CHANGE OF GAUGE. Please indicate below if you would like to receive
two SSR seat items from SABRE for change of gauge flights.
YES NO
-------- -------
5. PARTIAL SEAT SELECTION. This allows SABRE subscribers to assign a seat
and issue a boarding pass for less than all in a PNR. Please indicate
below if you wish this option.
YES NO
-------- -------
6. SEAT LOCATION CODES. SABRE has added the following seat location
codes, LEFT, RIGHT, FRONT, TAIL, ADJOINING AISLES. Please indicate
below if you will to support these new codes for your services in
SABRE.
YES NO
-------- -------
7. Fees. There is no fee associated with issuing boarding passes under
the Boarding Pass Program.
8. Term. The Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
a minimum of six (6) months. Thereafter, it shall continue until
canceled by either party upon forty (40) days prior written notice. In
no event shall this Addendum remain in effect beyond the termination
date of the Agreement.
9. Full Force and Effect. Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________, 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 60
MISCELLANEOUS
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier, modifies that certain SABRE
Participating Carrier Distribution and Services Agreement (the "Agreement").
SABRE Associates offers a number of additional optional services to
Participating Carriers including, but not limited to:
1. Lists and Labels. SABRE Associates offers Participating Carrier a
complete list of SABRE Subscriber locations for marketing purposes.
This name list is available in two formats: a Printed List for
$225.00, a set of peel and stick labels for $375.00, and magnetic tape
for $500.00.
2. Manual Fare Updates. A Participating Carrier that elects not to submit
its fare information through the accepted vendors such at ATPCO, ABC,
SITA, APD, and British Airways may send its information directly to
SABRE Associates for manual input. Cost is $100.00 annually and $65.00
per hour devoted to manual input (two hour minimum).
3. Batch Fare Updates. A Participating Carrier may elect to submit its
fares directly to SABRE in advance of submitting them to ATPCO. Cost
is $15,000 implementation fee and monthly service fee of $1,500.
4. Schedule Synchronization. In addition to receiving schedules from the
accepted Schedule Suppliers, SABRE Associates provides the following
services for loading schedules on a limited or exceptional basis:
a. Out of Sequence Tape Load: Out of Sequence Tape Load allows
carriers to have their schedule information taken from the
Schedule Supplier and loaded on the following Saturday,
without regard for the next scheduled tape load. The cost for
this service for a Participating Carrier is $300.00 per tape;
for a Non-Participating Carrier, $400.00 per tape.
b. Dynamic Schedule Change: Dynamic Schedule Change allows
carriers to provide specific changes to their flight schedule
information contained in SABRE. Five (5) messages per month
will be provided to each carrier free of charge. Each message
may contain up to ten (10) flight items, with unlimited
changes to each flight item. A $50.00 charge will be assessed
for each message in excess of the five (5) provided.
c. Manual Dynamic Schedule Change: Manual Dynamic Schedule
Change provides the capability to make realtime changes to
your flight schedules in SABRE from any Associate SABRE
terminal. You can change arrival and departure times for
existing flights, add new city pair legs for existing flights,
add new online flights to a city pair with daily or variable
frequency, change meal codes, and booking codes, etc. A
training class is required at the cost of $250 per person plus
travel expenses.
You may also elect to use this product and not submit your
schedules through a service provider to SABRE. You will then
be responsible for the accuracy of your schedules displayed in
SABRE. Please select NONE for schedule supplier in Article
III, section 3.2.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 1
<PAGE> 61
d. Automated Direct Schedules Load: Automated Direct Schedules
Load offers the capability of submitting your schedules
directly to SABRE. This process will require a direct data
link and adherence to SABRE specifications. You will be
responsible for one half of any costs related to the direct
data link and SABRE Associates will bear the other one half.
5. SIGN-IN ADVERTISING. This option is designed to display your marketing
message to SABRE Subscribers automatically upon SABRE sign in. There
are two types of Sign-in Advertising; Global and Regional. Global
Sign-in will be displayed to all SABRE Subscribers regardless of
location. Cost for Global Sign-in is $1300.00 for each weekday
insertion or $300.00 for each Saturday/Sunday insertion. Regional
Sign-in Advertising is available for advertising to specific regions
of the world. There are 18 advertising regions broken down into 52
separate messaging sub-regions. Within each messaging sub-region, you
can advertise in that location's local language. Please contact your
account manager for languages available. Cost is $275.00 per
advertising region selected for weekday insertion or $50.00 per
advertising region selected for weekend insertion. Regional
Advertising has a variable cost schedule calculated on the number of
additional regions selected for a specific day. Please contact your
account manager for exact rate for multiple regions. A separate order
sheet must be submitted for each sign-in message requested.
6. BOOKING INFORMATION DATA TAPES (BIDT). A Participating Carrier may
elect to purchase billing support documentation on magnetic tape. This
documentation will contain fixed data fields such as Passenger Name
Record, status code, booking date, etc. The cost for this service will
be a monthly charge of $275.00.
Fees for Optional Services are subject to change upon thirty (30) days prior
written notice from SABRE Associates.
Any of these optional items may be requested by contacting the Airline
Marketing and Distribution Department by teletype, facsimile or letter. Once
any of these Optional Services are requested, Participating Carrier agrees to
pay the applicable charges listed herein.
SABRE PARTICIPATING CARRIER DISTRIBUTION & SERVICES AGREEMENT
03/29/96 2
<PAGE> 62
CODESHARING AGREEMENT
This Agreement is entered into this ______ day of 19___, between SABRE
Associates, Inc., ("SABRE Associates") and the Codesharing Carrier identified
below.
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. The undersigned Codesharing Carrier understands and agrees that all
Bookings and Cancellations made for transportation on Codesharing
Flights will be billed (pursuant to the terms of the SABRE
Participating Carrier Distribution and Services Agreement between
SABRE Associates and the Participating Carrier identified therein)
directly to the Participating Carrier with whom the Codesharing
Carrier has entered into a Codesharing arrangement. For the purposes
hereof, a Codesharing Flight shall mean a flight made by a carrier
using the airline designator code of a participating carrier.
2. The undersigned Codesharing Carrier unconditionally guarantees to pay
all Booking Fees and Cancellation Fees for all Bookings and
Cancellations on Codesharing flights in the event that the
Participating Carrier with which the Codesharing Carrier has entered
into a Codesharing Agreement fails to make any such payment.
3. All payments shall be made directly to American within thirty (30)
days after receipt of each monthly invoice.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth below.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
Date:
---------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 1
<PAGE> 63
AUTOMATED TOD/PTA
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, amends that
certain SABRE Participating Carrier Distribution and Services Agreement between
SABRE Associates and Participating Carrier (the "Agreement").
1. Product Description Automated Ticket on Departure (TOD) and Prepaid
Ticket Advice (PTA) is an optional data service by which data elements
from a SABRE booking, generated by a Subscriber request, is
transmitted to the Servicing Carrier enabling the carrier issuance of
Ticket on Departure or Prepaid Ticket Advice. This function provides
the Subscriber the capability to arrange TOD/PTA transactions using
one common format for both transactions. This product is offered to
SABRE subscribers located in the geographic areas of Europe, Africa
and the Middle East. Additional markets may be added at a later date.
2. Options Available There are two servicing methods available for
selection in which to receive the Subscriber generated message of a
TOD/PTA: Airline Servicing Terminal (AST) and Enhanced Teletype.
There are two (2) options available. Please indicate below your desired
method(s) of Servicing TOD/PTA by selecting one or both of the options.
________ A. AIRLINE SERVICING TERMINAL (AST) is either a SABRE terminal at
an airline location or a terminal for which access to the
SABRE system is permitted utilizing an airline's own hardware
and appropriate interface. PNRs containing PTA/TOD requests
are placed on queue for AST access and action.
________ B. ENHANCED TELETYPE is a message that will be generated by
SABRE, which includes additional information such as passenger
contact data, complete air itinerary and fare construction to
enable the receiving airline to fully service the request.
3. Responsibilities of SABRE Associates
a. Provide a table in the SABRE Host to be maintained and updated by
SABRE Associates. This table will reflect airlines who have elected to
accept TOD/PTA data via the TTY or AST method of delivery (described
in 2A and 2B above).
b. Maintain a help desk for the purpose of answering Participating
Carriers' questions regarding the transmission of TOD/PTA related
data.
4. Participating Carrier Responsibilities
a. Participating Carrier shall accept transmission of TOD/PTA data via
Teletype or an Airline Service Terminal from a SABRE Subscriber who
has been appointed by that Participating Carrier, and issue a ticket
for travel provided in the TOD/PTA message.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 1
<PAGE> 64
5. Fees No fees associated with this product, however SABRE Associates
reserves the right to implement a reasonable fee on 90 days written
notice should it become necessary. If Participating Carrier declines
to pay a fee, either party may terminate this addendum with 30 days
written notice without penalty.
6. Term This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
a minimum of three (3) months. Thereafter, it shall continue until
canceled by either party upon thirty (30) days prior written notice.
In no event shall this Addendum remain in effect beyond the
termination date of the SABRE Participating Carrier Distribution and
Services Agreement.
7. Full Force and Effect Except as provided herein, all terms and
conditions of the Agreement shall remain in full force and effect.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
Date:
---------------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
03/29/96 2
<PAGE> 65
ELECTRONIC TICKETING
OPTIONAL SERVICES ADDENDUM
This Addendum, by and between SABRE Associates, Inc. ("SABRE
Associates") and the Participating Carrier identified below, modifies that
certain SABRE Participating Carrier Distribution and Services Agreement, (the
"Agreement").
1. PRODUCT DESCRIPTION Interactive Electronic Ticketing is the premium
level of connectivity in the Electronic Ticketing product line.
Interactive Electronic Ticketing, based on IATA/PADIS-approved EDIFACT
standards, provides for the instantaneous, transparent retrieval of
information from the Participating Carrier's internal reservation
system or electronic ticketing database.
2. CONDITIONS PRECEDENT Participating Carrier must participate in Direct
Connect Sell or Direct Connect Availability before it may participate
in Interactive Electronic Ticketing.
3. Responsibilities of SABRE Associates
a. SABRE Associates shall provide Participating Carrier with
appropriate technical/functional documentation for the
Interactive Electronic Ticketing product.
b. SABRE Associates shall maintain and operate Interactive
Electronic Ticketing and shall cooperate with Participating
Carrier in resolving any problems encountered in the
maintenance of the telecommunications lines between
Interactive Electronic Ticketing and Participating Carrier's
computerized reservation system or electronic ticketing
database.
c. SABRE Associates shall provide SABRE Subscribers with training
on Interactive Electronic Ticketing via SABRE Assisted
Instructions (S.A.I. Lessons). SABRE Associates will provide
on-line Interactive Electronic Ticketing reference material to
instruct SABRE Subscribers in the use of Interactive
Electronic Ticketing.
d. SABRE Associates agrees to devote resources sufficient to
complete the programming necessary to implement Interactive
Electronic Ticketing, and shall be responsible for the costs
it incurs as a result.
e. All SABRE Interactive Electronic Ticketing requests will
conform to the then current IATA/PADIS-approved EDIFACT
standards.
f. SABRE Associates will provide that the Lines linking
Participating Carrier's system to SABRE are operable at least
95% of the time Interactive Electronic Ticketing is operating
each month.
4. Responsibilities of Participating Carrier
a. Participating Carrier shall provide the necessary resources to
support SABRE Associates' then current communications
protocol.
b. Participating Carrier shall establish and operate its
connection to Interactive Electronic Ticketing as defined in
the appropriate technical/functional documentation.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
04/01/96 1
<PAGE> 66
c. The cost of all telecommunications links and multi-channel
modems (the "Lines") between Participating Carrier's internal
reservation system or electronic ticketing database and the
Interactive Electronic Ticketing product will be borne by
Participating Carrier. If SABRE Associates orders and pays for
such Lines, Participating Carrier will reimburse SABRE
Associates for any such expense. Participating Carrier will
insure that its system, and the Lines linking it to SABRE are
operable at least 95% of the time Direct Connect Air is
operating each month.
d. The Participating Carrier agrees that the functions of the
electronic ticketing product shall be made available through
Interactive Electronic Ticketing to Subscribers and shall be
those listed in Schedule A of this Addendum.
e. If any future changes in Participating Carrier's electronic
ticketing product require any change to Interactive Electronic
Ticketing, or in any other aspect of Interactive Electronic
Ticketing, Participating Carrier will advise SABRE Associates
at least (60) days in advance of such change and cooperate
with SABRE Associates in developing any changes necessary for
Participating Carrier's continued participation. ALL EXPENSES
INCURRED BY SABRE ASSOCIATES WITH RESPECT TO SUCH CHANGES MAY
BE CHARGED TO PARTICIPATING CARRIER AT SABRE ASSOCIATES'
VENDOR AND/OR INTERNALLY CHARGED RATES.
f. Participating Carrier shall provide reasonable customer
service assistance and other such technical support as SABRE
Associates may require to serve SABRE Subscribers regarding
Interactive Electronic Ticketing.
g. Participating Carrier agrees to devote resources sufficient to
complete the programming necessary to implement Interactive
Electronic Ticketing. Participating Carrier shall be
responsible for the costs it incurs as a result of this
Addendum.
h. All Participating Carrier's Interactive Electronic Ticketing
responses will conform to the current IATA/PADIS-approved
EDIFACT standards.
5. Failure Of Either Party to Perform
Each party shall have the right to terminate this Addendum, without
liability, upon thirty (30) days written notice, should either party
fail to maintain reliability standard of 95% specified in Paragraphs 4
(c) of "Responsibilities of Participating Carrier" and 3 (f) of
"Responsibilities of SABRE Associates", of this Addendum.
6. Joint Terms and Conditions
a. In the event that either Participating Carrier or SABRE
Associates experiences a system problem, then either party
shall have the right to inhibit Interactive Electronic
Ticketing during the period of time that such system problem
exists. If such a problem is a scheduled system outage, each
party shall be responsible for notifying the other as soon as
possible and each party shall use best efforts to reinstate
Interactive Electronic Ticketing capabilities via the
procedures agreed upon by both parties in advance of the
scheduled system outage. In the event of an emergency
situation, each party shall notify the other as soon as
possible and use best efforts to reinstate Interactive
Electronic Ticketing capabilities as soon as possible.
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
04/01/96 2
<PAGE> 67
b. In the event that either Participating Carrier's or SABRE
Associates' system reaches capacity limits, Participating
Carrier and SABRE Associates will implement the appropriate
throttling mechanisms and/or fallback procedures necessary to
stabilize the system.
8. Term This Addendum shall commence on the date signed by a duly
authorized agent of SABRE Associates and shall continue in effect for
one (1) year. Thereafter, it shall continue until termination of the
Agreement, or termination of the Addendum by either party upon thirty
(30) days prior written notice. In no event shall this Addendum remain
in effect beyond the termination date of the Agreement.
9. Full Force and Effect Except as otherwise provided herein, all terms
and conditions of the Agreement shall remain in full force and effect,
and all capitalized terms shall have the same meaning as assigned to
such terms in the Agreement.
SABRE Associates and Participating Carrier have executed this Addendum as of
this _________ day of _____________ 19_____.
CARRIER: SABRE ASSOCIATES, INC.
-----------------------
By: By:
---------------------------- -----------------------------------
Name: Lynn T. Hendler
-------------------------- Manager, Airline Industry Distribution
Title: Associate and Strategic Distribution
-------------------------
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
04/01/96 3
<PAGE> 68
SCHEDULE A
FUNCTIONS AVAILABLE IN INTERACTIVE ELECTRONIC TICKETING
1. Issue Electronic Ticket
2. Display Electronic Ticket
3. Void Electronic Ticket
4. Print Electronic Ticket
5. Electronic Ticket History Display
6. Refund (depended upon introduction of Airline
Reporting Corporation interactive Agent Reporting project)
7. Exchange (depended upon Interactive Agent Reporting
project)
8. Revalidation
9. Electronic Ticketing indicator in sell message
SABRE PARTICIPATING CARRIER DISTRIBUTION SERVICES AGREEMENT
04/01/96 4
<PAGE> 1
EXHIBIT 10.15
September 11, 1996
Michael J. Durham
THE SABRE GROUP
P.O. Box 619616
DFW Airport, TX 75261-9616
Dear Mr. Durham:
AMR Investment Services, Inc. ("AMR") hereby agrees to serve as investment
adviser for the investment account of THE SABRE GROUP ("Client") pursuant to
the following terms and conditions:
1. Appointment of AMR. Client hereby appoints AMR as investment
adviser to manage and supervise such assets as Client shall from
time to time place into Client's investment account ("Account")
with AMR.
2. Acceptance of Appointment. AMR agrees to supervise and direct all
investments for the Account without prior consultation with Client;
provided, however, that all investment decisions by AMR for the
Account shall be subject to the investment objective, restrictions
and guidelines as established by Client and set forth in Investment
Guidelines attached hereto.
3. Notice by Client. Client may modify the Investment Guidelines only
upon written notice to AMR of such modifications. In addition,
client will advise AMR, as appropriate, of any material cash flow
requirements with respect to the Account.
4. Custodian. AMR will not take custody of any Account assets;
rather, all assets which are physically deliverable shall be held
by one or more custodians approved by the Client. All custodian
fees and other transaction-related expenses of the Account shall be
borne by Client.
1
<PAGE> 2
5. Account Information. AMR will furnish Client with monthly written
reports of all Account trading activity.
6. Valuation of Securities. For all applicable purposes, including
the computation of AMR's compensation as provided herein, Account
assets shall be valued in good faith by AMR consistent with
generally accepted valuation practices within the investment
management industry.
7. Execution of Transactions. AMR retains discretion to select
brokers and dealers with whom to enter into transactions on behalf
of the Account.
8. Compensation. Client shall compensate AMR for its services under
this agreement pursuant to the Fee Schedule attached hereto.
9. Service to Other Clients. Client acknowledges that (a) AMR takes
actions on behalf of other advisory clients (including investment
companies) which may differ from actions taken on behalf of the
Account, and (b) AMR is not obligated to initiate transactions for
the Account in any securities or instruments in which AMR or its
principals, affiliates or employees trade for their own accounts or
for other clients.
10. Confidential Relationship. Information furnished by either party
to the other is confidential and shall not be disclosed to third
parties unless required by law.
11. Proxies. Neither AMR nor Client anticipates that Account assets
will be subject to proxy solicitations.
12. AMR Standard of Care. AMR shall discharge its duties under this
agreement with the care, skill and diligence that a prudent man
acting in a like capacity and familiar with investment matters
would employ. Unless AMR's conduct is grossly negligent, reckless
or in willful disregard of its duties hereunder, AMR shall not be
liable to Client or any other party for any act or omission by AMR
or a third party which relates to this agreement.
13. Duration of Agreement. This agreement shall become effective upon
its execution by Client. Either party may terminate this agreement
without penalty upon 30 days prior notice to the other party. No
assignment (as defined by the Investment Advisers Act of 1940) of
this Agreement by AMR shall be effective without the consent of
Client. If this agreement is
2
<PAGE> 3
terminated before the end of a quarter, Client shall immediately
pay AMR a pro-rated fee computed in accordance with the attached
Fee Schedule.
14. Notices. Written notices required by this agreement shall be sent,
as applicable, to William F. Quinn, President, AMR Investment
Services, Inc., P.O. Box 619003, Dallas/Ft. Worth Airport, Texas
75261-9003, and to Michael J. Durham, President, The SABRE Group,
P.O. Box 619616, Dallas/Ft. Worth Airport, Texas 75261- 9616, or
to such other person and address as either party may specify by
written notice. AMR may rely upon any written notice or oral
information received by it from Client which AMR reasonably
believes to be genuine and authorized.
15. Representations. AMR represents that it is registered as an
investment adviser under the Investment Advisers Act of 1940.
Client represents that this Agreement has been duly authorized and
will be binding upon Client in accordance with its terms.
16. Disclosure Statement. Client acknowledges having received and read
AMR's current Form ADV, Part II at least 48 hours prior to the
execution of this Agreement. Client further acknowledges that
solicitation activities with respect to this Agreement were
conducted solely by AMR, or if third party solicitation activities
were conducted by a solicitor engaged by AMR, that Client has
received and read the disclosure statement of such solicitor prior
to the execution of this Agreement. If Client did not receive Form
ADV, Part II at least 48 hours prior to the execution of this
Agreement, then Client will have the right to terminate this
Agreement without penalty, within five days after execution.
17. Amendment of Agreement. This agreement contains the entire
agreement between AMR and Client and can be amended only by the
written agreement of both parties.
18. Applicable Law and Jurisdiction. This agreement shall be governed
by the laws of the State of Texas, without regard to its conflict
of laws provisions, and any dispute arising from this agreement
shall be resolved through arbitration proceedings conducted in
Texas or in such other manner or jurisdiction as shall be mutually
agreed upon by the parties hereto.
19. Assignability. This agreement will automatically and immediately
terminate in the event of its assignment.
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<PAGE> 4
If you concur with the aforementioned terms and conditions, please so indicate
by returning an executed copy of this agreement to me.
Very truly yours,
/s/ William F. Quinn
William F. Quinn
President
Agreed and Accepted this 11th day of September, 1996
THE SABRE GROUP
By: /s/ Michael J. Durham
Michael J. Durham
President
4
<PAGE> 5
FEE SCHEDULE
TO
AGREEMENT DATED SEPTEMBER 11, 1996
BETWEEN
AMR INVESTMENT SERVICES, INC. ("AMR")
AND
THE SABRE GROUP ("CLIENT")
Client shall compensate AMR for services performed by AMR for Client pursuant
to terms of referenced Agreement as follows:
A. SABRE Corporate Cash Portfolio
<TABLE>
<CAPTION>
Average Monthly
Assets Under Management Annualized Rate
----------------------- ---------------
<S> <C>
First $250,000,000 *%
Next $250,000,000 *%
Next $250,000,000 *%
Over $750,000,000 *%
</TABLE>
Fees are payable monthly in arrears based on the average daily market value of
assets under management during the period.
B. SABRE Employee Benefit Plan Assets
<TABLE>
<CAPTION>
Month-End
Assets Under Management Annualized Rate
----------------------- ---------------
<S> <C>
First $2,000,000,000 *%
Next $2,000,000,000 *%
Over $4,000,000,000 *%
</TABLE>
Fees collected by AMR relating to the Client's Employee Benefit Plan Assets
invested in the American AAdvantage Funds will reduce the fees calculated in
accordance with the above fee schedule to arrive at a net fee to be collected
("Net Fee"). The Net Fee will be collected monthly in arrears.
* CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE> 1
EXHIBIT 10.25
1996 LONG-TERM INCENTIVE PLAN
The SABRE Group
June 1996
<PAGE> 2
CONTENTS
- --------------------------------------------------------------------------
PAGE
Section 1. Purpose; Definitions 1
Section 2. Administration 3
Section 3. Stock Subject to Plan 4
Section 4. Eligibility 5
Section 5. Stock Options 5
Section 6. Stock Appreciation Rights 8
Section 7. Restricted Stock 9
Section 8. Deferred Stock 11
Section 9. Stock Purchase Rights 13
Section 10. Other Stock-Based Awards 13
Section 11. Change in Control Provisions 14
Section 12. Amendments and Termination 16
Section 13. Unfunded Status of Plan 17
Section 14. General Provisions 17
Section 15. Effective Date of Plan 18
Section 16. Term of Plan 18
Section 17. Performance Related Awards 18
<PAGE> 3
THE SABRE GROUP
1996 LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of The SABRE Group's 1996 Long-Term Incentive Plan (the "Plan")
is to enable The SABRE Group, Inc. (the "Company") to attract, retain, and
reward key employees of the Company and its Subsidiaries and Affiliates, and
strengthen the mutuality of interests between such key employees and the
Company's shareholders, by offering such key employees performance-based stock
incentives and/or other equity interests or equity-based incentives in the
Company, as well as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(A) "AFFILIATE" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least twenty
percent (20%) of the combined voting power of all classes of stock of such
entity or at least twenty percent (20%) of the ownership interests in such
entity.
(B) "BOARD" means the Board of Directors of the Company.
(C) "BOOK VALUE" means, as of any given date, on a per share basis (a)
the Stockholders' Equity in the Company as of the end of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (b) the number of then outstanding shares of Stock as of such
year-end date (as adjusted by the Committee for subsequent events).
(D) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(E) "COMMITTEE" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(F) "COMPANY" means The SABRE Group, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(G) "DEFERRED STOCK" means an award made pursuant to Section 8 below
of the right to receive Stock at the end of a specified deferral period.
(H) "DISABILITY" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(I) "EARLY RETIREMENT" means retirement, with the express consent for
purposes of the Plan of the Company at or before the time of such retirement,
from active employment
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with the Company and any Subsidiary or Affiliate pursuant to the early
retirement provisions of the applicable pension plan of such entity.
(J) "FAIR MARKET VALUE" means, as of any given date, unless otherwise
determined by the Committee in good faith, the mean between the highest and
lowest quoted selling price, regular way, of the Stock on the New York Stock
Exchange or, if no such sale of Stock occurs on the New York Stock Exchange on
such date, the fair market value of the Stock as determined by the Committee in
good faith.
(K) "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(L) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
(M) "NORMAL RETIREMENT" means retirement from active employment with
the Company and any Subsidiary or Affiliate on or after age 65.
(N) "OTHER STOCK-BASED AWARD" means an award under Section 10 below
that is valued in whole or in part by reference to, or is otherwise based on,
Stock.
(O) "PARENT" means AMR Corporation.
(P) "PLAN" means The SABRE Group's 1996 Long-Term Incentive Plan, as
hereinafter amended from time to time.
(Q) "RESTRICTED STOCK" means an award of shares of Stock that is
subject to restrictions under Section 7 below.
(R) "RETIREMENT" means Normal or Early Retirement.
(S) "STOCK" means the Class A Common Stock, $.01 par value per share,
of the Company.
(T) "STOCK APPRECIATION RIGHT" means the right pursuant to an award
granted under Section 6 below to surrender to the Company all (or a portion) of
a Stock Option in exchange for an amount equal to the difference between (i)
the Fair Market Value, as of the date such Stock Option (or such portion
thereof) is surrendered, of the shares of Stock covered by such Stock Option
(or such portion thereof), subject, where applicable, to the pricing provisions
in Section 6(b)(ii) and (ii) the aggregate exercise price of such Stock Option
(or such portion thereof).
(U) "STOCK OPTION" or "OPTION" means any option to purchase shares of
Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 below.
(V) "STOCK PURCHASE RIGHT" means the right to purchase Stock pursuant
to Section 9.
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<PAGE> 5
(W) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporation in the chain.
In addition, the terms "Change in Control," "Potential Change in Control,"
and "Change in Control Price" shall have the meanings set forth, respectively,
in Sections 11(b), (c) and (d) below and the term "Cause" shall have the
meaning set forth in Section 5(i) below.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a committee of not less than two members
of the Board, who shall be appointed by, and serve at the pleasure of, the
Board. In selecting the members of the Committee, the Board shall take into
account the requirements for the members of the Committee to be treated as
"Outside Directors" within the meaning of Section 162(m) of the Code and
"Non-Employee Directors" for purposes of Rule 16b-3, as promulgated under
Section 16 of the 1934 Act. The functions of the Committee specified in the
Plan shall be exercised by the Board, if and to the extent that no Committee
exists which has the authority to so administer the Plan or to the extent that
the Committee is not comprised solely of Non-Employee Directors for purposes of
Rule 16b-3, as promulgated under Section 16 of the 1934 Act.
The Committee shall have full authority to grant, pursuant to the terms of
the Plan, to officers and other key employees eligible under Section 4: (i)
Stock Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv)
Deferred Stock; (v) Stock Purchase Rights and/or (vi) Other Stock-Based Awards.
In particular the Committee shall have the authority:
(i) To select the officers and other key employees of
the Company and its Subsidiaries and Affiliates to
whom Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Stock Purchase
Rights, and/or Other Stock-Based Awards may from
time to time be granted hereunder;
(ii) To determine whether and to what extent Incentive
Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and/or Other
Stock-Based Awards, or any combination thereof, are
to be granted hereunder to one or more eligible
employees;
(iii) Subject to the provisions of Sections 3, 5 and 17,
to determine the number of shares to be covered by
each such award granted hereunder;
(iv) To determine the terms and conditions, not
inconsistent with the terms of the Plan, of any
award granted hereunder (including, but not limited
to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of
forfeiture restrictions regarding any Stock Option
or other award and/or the shares of Stock relating
thereto, based in each case on such factors as the
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<PAGE> 6
Committee shall determine in its sole discretion).
(v) To determine whether and under what circumstances a
Stock Option may be settled in cash, Restricted
Stock and/or Deferred Stock under Section 5(k) or
(l), as applicable, instead of Stock;
(vi) To determine whether and under what circumstances an
award of Restricted Stock or Deferred Stock may be
settled in cash;
(vii) To determine whether, to what extent and under what
circumstances Option grants and/or other awards
under the Plan and/or other cash awards made by the
Company are to be made, and operate, on a tandem
basis vis-a-vis other awards under the Plan and/or
cash awards made outside of the Plan, or on an
additive basis;
(viii) To determine whether, to what extent and under what
circumstances Stock and other amounts payable with
respect to an award under this Plan shall be
deferred either automatically or at the election of
the participant (including providing for and
determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral
period); and
(ix) To determine the terms and restrictions applicable
to Stock Purchase Rights and the Stock purchased by
exercising such Rights.
The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee's sole discretion and shall be final and binding
on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for distribution
under the Plan shall be ________________ ____ shares.
Subject to Section 6(b)(iv) below, if any shares of Stock that have been
optioned cease to be subject to a Stock Option, or if any such shares of Stock
that are subject to any Restricted Stock or Deferred Stock award, Stock
Purchase Right or Other Stock-Based Award granted hereunder are forfeited or
any such award otherwise terminates without a payment being made to the
participant in the form of Stock, such shares shall again be available for
distribution in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for
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<PAGE> 7
issuance under the Plan, in the number and option price of shares subject to
outstanding Options granted under the Plan, in the number and purchase price of
shares subject to outstanding Stock Purchase Rights under the Plan, and in the
number of shares subject to other outstanding awards granted under the Plan as
may be determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be a whole
number. Such adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right
associated with any Stock Option.
SECTION 4. ELIGIBILITY
Officers and other key employees of the Company and its Subsidiaries and
Affiliates (but excluding members of the Committee and any person who serves
only as a director) who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company and/or its
Subsidiaries and Affiliates are eligible to be granted awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone, in addition to or in tandem with other
awards granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
Stock Options granted under the plan may be of two types: (i) Incentive
Stock Options and (ii) Nonqualified Stock Options.
The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Nonqualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided that, in no
event shall the number of shares of Stock subject to any Stock Options granted
to any key employee during any twelve (12) month period exceed 400,000 shares,
as such number may be adjusted pursuant to Section 3.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(A) OPTION PRICE. The Option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant but shall be not less than one hundred percent (100%) of the Fair
Market Value of the Stock at grant. Provided, in connection with an initial
public offering of Stock, "Fair Market Value" for Stock Options granted
hereunder at the time of the initial public offering shall be priced at the
Stock's offering price.
(B) OPTION TERM. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted.
(C) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject
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to such terms and conditions as shall be determined by the Committee at or
after grant; provided, however, that, except as provided in Section 5(f), (g)
and (h) and Section 11, or unless otherwise determined by the Committee at or
after grant, no Stock Option shall be exercisable prior to the first
anniversary date of the granting of the Option. If the Committee provides, in
its sole discretion, that any Stock Option is exercisable only in installments,
the Committee may waive such installment exercise provisions at any time at or
after grant in whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
(D) METHOD OF EXERCISE. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be exercised in whole or
in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of unrestricted
Stock already owned by the optionee or, in the case of the exercise of a
Nonqualified Stock Option, Restricted Stock, or Deferred Stock subject to an
award hereunder (based, in each case, on the Fair Market Value of the Stock on
the date the Option is exercised, as determined by the Committee).
If payment of the option exercise price of a Nonqualified Stock
Option is made in whole or in part in the form of Restricted Stock or Deferred
Stock, such Restricted Stock or Deferred Stock (and any replacement shares
relating thereto) shall remain (or be) restricted or deferred, as the case may
be, in accordance with the original terms of the Restricted Stock award or
Deferred Stock award in question, and any additional Stock received upon the
exercise shall be subject to the same forfeiture restrictions or deferral
limitations, unless otherwise determined by the Committee, in its sole
discretion, at or after grant.
No shares of Stock shall be issued until full payment therefore
has been made. An optionee shall generally have the rights to dividends or
other rights of a shareholder with respect to the shares subject to the Option
when the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
Section 14(a).
(E) NON-TRANSFERABILITY OF OPTIONS. Except to the extent the
Committee may authorize or permit Nonqualified Stock Options to be transferred
to, or for the benefit of, members of the participant's family, no Stock Option
shall be transferable by the optionee otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during
the optionee's lifetime, only by the optionee.
(F) TERMINATION BY DEATH. Subject to Section 5(j), if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of death, any Stock Option held by such optionee may thereafter be
exercised to the extent such Option was exercisable at the time of death or on
such accelerated basis as the Committee may determine at or after grant (or as
may be determined in accordance with procedures established by the
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<PAGE> 9
Committee), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three (3) years (or
such other period as the Committee may specify at grant) from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(G) TERMINATION BY REASON OF DISABILITY. Subject to Section
5(j), if an optionee's employment by the Company and any Subsidiary terminates
by reason of Disability, any Stock Option held by such optionee may thereafter
be exercised by the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee) for a period of three (3) years (or such other period as the
Committee may specify at grant) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that, if the optionee dies within
such three (3) year period (or such other period as the Committee shall specify
at grant), any unexercised Stock Option held by such optionee shall thereafter
be exercisable, to the extent to which it was exercisable at the time of death,
for a period of twelve (12) months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Nonqualified Stock Option.
(H) TERMINATION BY REASON OF RETIREMENT. Subject to Section
5(j), if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates by reason of Normal or Early Retirement, any Stock Option
held by such optionee may thereafter be exercised by the optionee, to the
extent it was exercisable at the time of such Retirement or on such accelerated
basis as the Committee may determine at or after grant (or as may be determined
in accordance with procedures established by the Committee) for a period of
three (3) years (or such other period as Committee may specify at grant) from
the date of such termination of employment or the expiration of the stated term
of such Stock Option, whichever period is the shorter; provided, however, that
if the optionee dies within such three-year period (or such other period as the
Committee may specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve (12) months from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as Nonqualified
Stock Option.
(I) OTHER TERMINATION. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company or any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate. Notwithstanding
the foregoing sentence, a Stock Option may be exercised, to the extent
otherwise then exercisable, for the lesser of three (3) months or the balance
of such Stock
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Option's term, if the optionee is involuntarily terminated by the Company or
any Subsidiary or Affiliate without Cause. For purposes of this Plan, "Cause"
means a felony conviction of a participant or the failure of a participant to
contest prosecution for a felony, or a participant's willful misconduct or
dishonesty, any of which is directly and materially harmful to the business or
reputation of the Company or any Subsidiary or Affiliate.
(J) INCENTIVE STOCK OPTIONS. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the Plan
under Section 422 of the Code, or, without the consent of the optionee(s)
affected, to disqualify any Incentive Stock Option under such Section 422.
(K) BUYOUT PROVISIONS. The Committee may at any time offer to
buy out for payment in cash, Stock, Deferred Stock or Restricted Stock, an
Option previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the optionee at the time that such offer is
made.
(L) SETTLEMENT PROVISIONS. If the option agreement so provides
at grant or is amended after grant but prior to the exercise to so provide
(with the optionee's consent), the Committee may require that all or part of
the shares to be issued with respect to the spread value of an exercised Option
take the form of Deferred or Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value (as determined by the
Committee) of such Deferred or Restricted Stock determined without regard to
the deferral limitations and/or forfeiture restrictions involved.
SECTION 6. STOCK APPRECIATION RIGHTS
(A) GRANT AND EXERCISE. Stock Appreciation Rights may be granted
in conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Nonqualified Stock Option, such rights may be granted either at
or after the time of the grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of grant of
such Stock Option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee,
subject to Section 6(b), in accordance with the procedures established by the
Committee for such purposes. Upon such exercise, the optionee shall be entitled
to receive an amount determined in the manner prescribed in Section 6(b). Stock
Options relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights have been
exercised.
(B) TERMS AND CONDITIONS. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from
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time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this
Section 6 of the Plan and only within a ten business
day period commencing on the third business day
following the release of quarterly or annual financial
results (the "Window Period").
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in
cash and/or shares of Stock equal in value to the
excess of the Fair Market Value of one share of Stock
over the option price per share specified in the
related Stock Option multiplied by the number of shares
in respect of which the Stock Appreciation Right shall
have been exercised, with the Committee having the
right to determine the form of payment. When payment is
to be made in shares, the number of shares to be paid
shall be calculated on the basis of the Fair Market
Value of the shares on the date of exercise. When
payment is to be made in cash, such amount shall be
calculated on the basis of the average of the Fair
Market Values of a share of Stock on each business day
during the Window Period in which such Stock
Appreciation Right is exercised.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock
Option would be transferable under Section 5(e) of the
Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock
Appreciation Rights is related shall be deemed to have
been exercised for the purpose of the limitation set
forth in Section 3 of the Plan on the number of shares
of Stock to be issued under the Plan, but only to the
extent of the number of shares issued under the Stock
Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant
"Limited" Stock Appreciation Rights under this
Section 6, i.e., Stock Appreciation Rights that become
exercisable only in the event of a Change in Control
and/or a Potential Change in Control, subject to such
terms and conditions as the Committee may specify at
grant. Such Limited Stock Appreciation Rights shall be
settled solely in cash.
(vi) The Committee, in its sole discretion, may also
provide that, in the event of a Change in Control
and/or a Potential Change in Control, the amount to
be paid upon the exercise of a Stock Appreciate
Right or Limited Stock Appreciation Right shall be
based on the Change in Control Price, subject to such
terms and conditions as the Committee may specify at
grant.
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SECTION 7. RESTRICTED STOCK
(A) ADMINISTRATION. Shares of Restricted Stock may be issued
either along, in addition to, or in tandem with, other awards granted under the
Plan and/or cash awards made outside of the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Stock (subject to Section
7(b)), the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with respect
to each recipient.
(B) AWARDS AND CERTIFICATES. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be equal to or less than their par value and
may be zero.
(ii) Awards of Restricted Stock must be accepted within a
period of sixty (60) days (or such shorter period as
the Committee may specify at grant) after the award
date, by executing an award agreement and paying
whatever price (if any) is required under Section
7(b)(i).
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of
such shares of Restricted Stock. Such certificate
shall be registered in the name of such participant,
and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable
to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in
custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition
of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank,
relating to the Stock covered by such award.
(C) RESTRICTIONS AND CONDITIONS. The shares of Restricted
Stock awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee
commencing with the date of such award (the
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"Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares
of Restricted Stock awarded under the Plan. Within
these limits, the Committee, in its sole discretion,
may provide for the lapse of such restrictions in
installments and may accelerate or waive such
restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as
the Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), the participant shall have, with
respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Company,
including the right to vote the shares, and the
right to receive any cash dividends. The Committee,
in its sole discretion, as determined at the time of
award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so
determines, reinvested, subject to Section 14(e), in
additional Restricted Stock to the extent shares are
available under Section 3, or otherwise reinvested.
Pursuant to Section 3 above, Stock dividends issued
with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock that are
subject to the same restrictions and other terms and
conditions that apply to the shares with respect to
which such dividends are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a
participant's employment with the Company and any
Subsidiary or Affiliate for any reason during the
Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in
accordance with the terms and conditions established
by the Committee at or after grant.
If and when the Restriction Period expires without a
(iv) prior forfeiture of the Restricted Stock subject to
such Restriction Period, certificates for an
appropriate number of unrestricted shares shall be
delivered to the participant promptly.
(D) MINIMUM VALUE PROVISIONS. In order to better ensure that
award payments actually reflect the performance of the Company and service of
the participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other award designed to guarantee a minimum value,
payable in cash or Stock to the recipient of a restricted stock award, subject
to such performance, future service, deferral and other terms and conditions as
may be specified by the Committee.
SECTION 8. DEFERRED STOCK
(A) ADMINISTRATION. Deferred Stock may be awarded either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. The Committee shall determine the
eligible persons to whom and the time or times at which Deferred Stock shall be
awarded, the number of shares of Deferred Stock to be awarded to any person,
the duration of the period (the "Deferral Period") during which, and the
conditions under which, receipt of the Stock will be deferred, and the other
terms and conditions of the award in addition to those set forth in Section
8(b).
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The Committee may condition the grant of Deferred Stock upon the attainment
of specified performance goals or such other factors or criteria as the
Committee shall determine, in its sole discretion.
The provisions of Deferred Stock awards need not be the same with respect to
each recipient.
(B) TERMS AND CONDITIONS. The shares of Deferred Stock awarded
pursuant to this Section 8(b) shall be subject to the following terms and
conditions:
(i) Subject to the provision of this Plan and the award
agreement referred to in Section 8(b)(vi) below,
Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the
Deferral Period (or the Elective Deferral Period
referred to in Sections 8(b)(v), where applicable),
share certificates shall be delivered to the
participant, or his legal representative, in a
number equal to the shares covered by the Deferred
Stock award.
(ii) Unless otherwise determined by the Committee at
grant, amounts equal to any dividends declared
during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award
will be paid to the participant currently, or
deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as
determined at or after the time of the award by the
Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and
this Section 8, upon termination of a participant's
employment with the Company and any Subsidiary or
Affiliate for any reason during the Deferral Period
for a given award, the Deferred Stock in question
will vest, or be forfeited, in accordance with the
terms and conditions established by the Committee at
or after grant.
(iv) Based on service, performance, and/or such other
factors or criteria as the Committee may determine,
the Committee may, at or after grant, accelerate the
vesting of all or any part of any Deferred Stock
award and/or waive the deferral limitations for all
or any part of such award.
(v) A participant may elect to further defer receipt of
an award (or an installment of an award) for a
specified period or until a specified event (the
"Elective Deferral Period"), subject in each case to
the Committee's approval and to such terms as are
determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the
Committee, such election must generally be made at
least twelve (12) months prior to completion of the
Deferral Period of such Deferred Stock award (or
such installment).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the
Company and the participant.
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(C) MINIMUM VALUE PROVISIONS. In order to better ensure that
award payments actually reflect the performance of the Company and service of
the participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a Deferred Stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 9. STOCK PURCHASE RIGHTS
(A) AWARDS AND ADMINISTRATION. Subject to Section 3 above, the
Committee may grant eligible participants Stock Purchase Rights which shall
enable such participants to purchase Stock (including Deferred Stock and
Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at fifty (50%) percent of such Fair Market Value on
such date;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such stock on
such date.
The Committee shall also impose such deferral, forfeiture,
and/or other terms and conditions as it shall determine, in its sole
discretion, on such Stock Purchase Rights or the exercise thereof.
The terms of Stock Purchase Rights awards need not be the
same with respect to each participant.
Each Stock Purchase Right award shall be confirmed by, and
be subject to the terms of, a Stock Purchase Rights agreement.
(B) EXERCISABILITY. Stock Purchase Rights shall generally be
exercisable for such period after grant as is determined by the Committee not
to exceed thirty (30) days.
SECTION 10. OTHER STOCK-BASED AWARDS
(A) ADMINISTRATION. Other awards of Stock and other awards that
are valued in whole or in part by reference to, or are otherwise based on,
Stock ("Other Stock-Based Awards"), including, without limitation, stock
purchase rights, performance shares, convertible preferred stock, convertible
debentures, exchangeable securities and Stock awards or options valued by
reference to Book Value or subsidiary performance, may be granted either along
with, or in addition to, or in tandem with, Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, or Stock Purchase Rights granted
under the Plan and/or cash awards made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such awards, and all other conditions
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of the awards. The Committee my also provide for the grant of Stock upon the
completion of a specified performance period.
The provision of Other Stock-Based Awards need not be the same in
respect to each recipient.
(B) TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant
to this Section 10 shall be subject to the following terms and condition:
(i) Subject to the provisions of this Plan and the award
agreement referred to in Section 10(b)(v) below,
shares subject to awards made under this Section 10
may not be sold, assigned, transferred, pledged, or
otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which
any applicable restriction, performance, or deferral
period lapses.
(ii) Subject to the provision of this Plan and the award
agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under
this Section 10 shall be entitled to receive,
currently, or on a deferred basis, interest or
dividends or interest or dividend equivalents with
respect to the number of shares covered by the
award, as determined at the time of the award by the
Committee, in its sole discretion, and the Committee
may provide that such amounts (if any) shall be
deemed to have been reinvested in additional Stock
or otherwise reinvested.
(iii) Any award under Section 10 and any Stock covered by
any such award shall vest or be forfeited to the
extent so provided in the award agreement as
determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability or death, or in cases of special
circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of
the remaining limitations imposed hereunder (if any)
with respect to any or all of an award under this
Section 10.
(v) Each award under this Section 10 shall be confirmed
by, and subject to the terms of, an agreement or
other instrument by the Company and by the
participant.
(vi) Stock (including securities convertible into Stock)
issued on a bonus basis under this Section 10 may be
issued for no cash consideration. Stock (including
securities convertible into Stock) purchased
pursuant to a purchase right awarded under this
Section 10 shall be priced at least fifty percent
(50%) of the Fair Market Value of the Stock on the
date of grant.
SECTION 11. CHANGE IN CONTROL PROVISIONS
(A) IMPACT OF EVENT. In the event of:
(1) a "Change in Control" as defined in Section 11(b), or
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(2) a "Potential Change in Control" as defined in Section 11(c),
but only if and to the extent so determined by the Committee
or the Board at or after grant (subject to any right of
approval expressly reserved by the Committee or the Board at
the time of such determination).
(i) Any Stock Appreciation Rights (including, without
limitation, any Limited Stock Appreciation Rights) and
any Stock Options awarded under the Plan not
previously exercisable and vested shall become fully
exercisable and vested.
(ii) The restrictions or deferral limitations applicable
to any Restricted Stock, Deferred Stock, Stock
Purchase Rights and other Stock-Based Awards, in each
case to the extent not already vested under the Plan,
shall lapse and such shares and awards shall be deemed
fully vested.
(iii) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and Other Stock-Based
Awards, in each case to the extent vested, shall,
unless determined otherwise by the Committee in its
sole discretion at or after grant but prior to any
Change in Control, be cashed out on the basis of the
"Change in Control Price" as defined in Section 11(d)
as of the date such Change in Control or such Potential
Change in Control is determined to have occurred or
such other date as the Committee may determine prior to
the Change in Control.
(B) DEFINITION OF "CHANGE IN CONTROL". For purposes of Section
11(a), a "Change in Control" means the happening of any of
the following:
(i) When any "person" as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and
14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding the
Company and any Subsidiary and any employee benefit
plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of such plan acting
as trustee), directly or indirectly, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, as amended from time to time) of
securities of the company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
(ii) When, during any period of twenty-four (24)
consecutive months during the existence of the
Plan, the individuals who, at the beginning of such
periods, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to
constitute at least a majority thereof, provided,
however, that a director who was not a director at the
beginning of such twenty-four (24) month period shall
be deemed to have satisfied such twenty-four (24) month
requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or
with the approval of, at least two- thirds of the
directors who then qualified as Incumbent Directors
either actually (because they were director at the
beginning of such twenty-four (24) month period) or by
prior operation of this Section 11(b)(ii); or
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(iii) The occurrence of a transaction requiring
stockholder approval for the acquisition of the
Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or
otherwise.
(iv) Notwithstanding anything else contained herein
to the contrary, in no event shall a Change of
Control be deemed to occur solely by reason of (i) a
distribution to the Parent's shareholders, whether as
dividend or otherwise, of all or any portion of the
Stock or any other voting securities of the Company
held, directly or indirectly, by the Parent or (ii) a
sale of all or any portion of the Stock or any other
voting securities of the Company held, directly or
indirectly, by the Parent in an underwritten public
offering.
(C) DEFINITION OF POTENTIAL CHANGE IN CONTROL. For purposes of
Section 11(a), a "Potential Change in Control" means the
happening of any one of the following:
(i) The approval by shareholders of an agreement
by the Company, the consummation of which would
result in a Change in Control of the Company as defined
in Section 11(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than
the Company or a Subsidiary or any Company employee
benefit plan (including any trustee of such plan
acting as such trustee) of securities of the Company
representing five percent (5%) or more of the
combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors
of a resolution to the effect that a Potential Change
in Control of the Company has occurred for purposes of
this Plan.
(D) CHANGE IN CONTROL PRICE. For the purposes of the Section 11,
"Change in Control Price " means the highest price per share
paid in any transaction reported on the New York Stock
Exchange Composite Index, or paid or offered in any bona
fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty (60) day
period immediately preceding the occurrence of the Change in
Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case as
determined by the Committee except that, in the case of
Incentive Stock Options and Stock Appreciation Rights
relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which
the optionee exercises such Stock Appreciation Rights (or
Limited Stock Appreciation Rights) or, where applicable, the
date on which a cashout occurs under Section 11(a)(iii).
SECTION 12. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right (or Limited Stock Appreciation Right), Restricted or Deferred Stock award,
Stock Purchase Right, or Other Stock-Based Award theretofore granted, without
the optionee's or participant's consent.
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The Committee may amend the terms of any Stock Option or other
award theretofore granted, prospectively or retroactively, but subject to
Section 3 above, no such amendment shall impair the rights of any holder without
the holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices.
SECTION 13. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a participant or optionee by the Company, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder; provided, however, that unless the Committee otherwise
determines with the consent of the affected participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
SECTION 14. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to and
agree with the Company in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed, and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate referenced to such restrictions.
(b) Nothing contained this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee
of the Company or any Subsidiary or Affiliate any right to continued employment
with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the
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Committee regarding the payment of any federal, state, or local taxes of any
kind required by law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations may be settled
with Stock, including Stock that is part of the award that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional on such payment of arrangements and the Company and its
Subsidiaries of Affiliates shall, to the extend permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights, and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Texas.
SECTION 15. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of October ___, 1996.
SECTION 16. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock award,
Deferred Stock award, Stock Purchase Right, or Other Stock-Based Award shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
shareholder approval, but awards granted prior to such tenth anniversary may
extend beyond that date.
SECTION 17. PERFORMANCE RELATED AWARDS.
(A) PERFORMANCE OBJECTIVES. Notwithstanding anything else
contained in the Plan the contrary, unless the Committee otherwise determines
at the time of grant, any award of Restricted Stock, Deferred Stock, or Other
Stock-Base Awards to an officer who is subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended, other than an
award which will vest solely on the basis of the passage of time, shall become
vested, if at all, upon the determination by the Committee that performance
objectives established by the Committee have been attained, in whole or in part
(a "Performance Award"). Such performance objectives shall be determined over a
measurement period or periods established by the Committee and related to at
least one of the following criteria, which may be determined solely by
reference to the performance of (i) the Company, (ii) a Subsidiary, (iii) an
Affiliate, (iv) a division or unit of any of the foregoing or based on
comparison performance of any of the foregoing relative to other companies: (A)
return on equity; (B) total shareholder return; (C) revenues, (D) cash flows
and earnings relative to other parameters; (E) operating income; (F) return on
investment and (G) changes in the value of the Corporation's Common Stock (the
"Performance Criteria"). The maximum number of shares of Stock that may be
awarded to any one participant and that may be subject to any such Performance
Award in any twelve (12) month period shall not exceed 100,000 shares, as such
number may be adjusted pursuant to Section 3.
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(B) ANNUAL INCENTIVE COMPENSATION. The Committee may, in
addition to the Performance Awards described above, pay cash amounts under the
Plan to any officer of the Company or any Subsidiary who is subject to the
reporting requirements of Section 16(a) of the Exchange Act upon the
achievement, in whole or in part, of performance goals or objectives established
in writing by the Committee with respect to such performance periods as the
Committee shall determine. Any such goals or objectives shall be based on one or
more of the Performance Criteria. Notwithstanding anything else contained herein
to the contrary, the maximum amount of any such cash payment to any single
officer with respect to any twelve (12) month period shall not exceed the lesser
of (A) $1,000,000 and (B) twice which the officer's annual base salary as in
effect on the last day of the preceding fiscal year.
(C) INTERPRETATION. Notwithstanding anything else in the Plan to
the contrary, to the extent required to so qualify any Performance Award as
other performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code, the Committee shall not be entitled to exercise any discretion
otherwise authorized under the Plan (such as the right to accelerate vesting
without regard to the achievement of the relevant performance objectives) with
respect to such Performance Award if the ability to exercise such discretion
(as opposed to the exercise of such discretion) would cause such award to fail
to qualify as other performance-based compensation.
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EXHIBIT 10.26
THE SABRE GROUP, INC.
1996 DIRECTORS STOCK INCENTIVE PLAN
1. PURPOSES
The purposes of The SABRE Group, Inc. Directors Stock Incentive Plan,
as amended, (the "Plan") are to enable The SABRE Group (the "Company") to
attract, retain and motivate the best qualified directors and to enhance a
long-term mutuality of interest between the directors and stockholders of the
Company by providing the directors with a direct economic interest in the
Common Stock of the Company.
2. DEFINITIONS
Unless the context requires otherwise, the following words as used in
the Plan shall have the meanings ascribed to each below, it being understood
that masculine, feminine and neuter pronouns are used interchangeably, and that
each comprehends the others.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Control" shall mean the occurrence of any of the
following:
(i) When any "person" as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
and as used in Sections 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) of the Exchange Act but excluding the
Company and any subsidiary and any employee benefit plan sponsored or
maintained by the Parent, the Company or any subsidiary (including
any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities; or
(ii) When during any period of 24 consecutive months
during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to constitute at
least a majority thereof, provided, however, that a director who was
not a director at the beginning of such 24-month period shall be
deemed to have satisfied such 24-month requirement (and be an
Incumbent Director) if such director was elected by, or on the
recommendation of, or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually
(because they were directors at the beginning of such 24-month period)
or by prior operation of this paragraph; or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, or by merger,
or otherwise.
(iv) Notwithstanding anything else contained herein to the
contrary, in no event shall a Change of Control be deemed to occur
solely by reason of (i) a distribution to the Parent's
<PAGE> 2
shareholders, whether as dividend or otherwise, of all or any portion
of the Stock or any other voting securities of the Company held,
directly or indirectly, by the Parent or (ii) a sale of all or any
portion of the Stock or any other voting securities of the Company
held, directly or indirectly, by the Parent in an underwritten public
offering.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Common Stock" shall mean the Class A common stock of the
Company, par value $.01, any common stock into which such common stock may be
changed, and any common stock resulting from any reclassification of such
common stock.
(e) "Disability" means disability as determined under procedures
established by the Board for purposes of the Plan.
(f) "Eligible Director" shall mean a director of the Company who
is not an officer or employee of the Parent, Company or any of their
subsidiaries.
(g) "Fair Market Value" as of any given date shall mean the mean
between the highest and lowest quoted selling prices, regular way, of a Share
on the New York Stock Exchange on such date or, if no Shares are sold on such
date, on the last preceding business day on which any such sale was reported.
(h) "New Director" shall mean an Eligible Director who is first
elected to the Board after the effective date of the Plan.
(i) "Parent" shall mean AMR Corporation or any successor in
interest thereto.
(j) "Share" or "Stock" shall mean a share of Common Stock.
(k) "Stock Option" shall mean an option or right to purchase
shares of the Common Stock pursuant to the provisions of the Plan.
3. EFFECTIVE DATE
The effective date of the Plan shall be October ___, 1996.
4. ADMINISTRATION
(a) Powers of the Board. This Plan shall be administered by the
Board. The Board may delegate its powers and functions hereunder to a duly
appointed committee of the Board. The Board shall have full authority to
interpret this Plan; to establish, amend and rescind rules for carrying out
this Plan; to administer this Plan; and to make all other determinations and to
take such steps in connection with this Plan as the Board, in its discretion,
deems necessary or desirable for administering this Plan.
(b) Delegation. The Board may designate the Corporate Secretary
of the Company, other officers or employees of the Company or competent
professional advisors to assist the Board in the administration of this Plan,
and may grant authority to such persons to execute agreements or other
documents on its behalf.
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<PAGE> 3
(c) Agents and Indemnification. The Board may employ such legal
counsel, consultants and agents as it may deem desirable for the administration
of this Plan, and may rely upon any opinion received from any such counsel or
consultant or agent. No member or former member of the Board or any committee
thereof or any person designated pursuant to paragraph (b) above shall be
liable for any action or determination made in good faith with respect to this
Plan. To the maximum extent permitted by applicable law and the Company's
Certificate of Incorporation and Bylaws, each member or former member of the
Board or any committee thereof or any person designated pursuant to (b) above
shall be indemnified and held harmless by the Company against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising from any act,
or omission to act, in connection with this Plan, unless arising from such
person's own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the person may have as a director, officer or
employee or under the Company's Certificate of Incorporation or Bylaws.
Expenses incurred by the Board in the engagement of any such counsel,
consultant or agent shall be paid by the Company.
5. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(a) Shares Available. Shares delivered pursuant to the exercise
of Stock Options awarded under this Plan shall be made available, at the
discretion of the Board, either from authorized but unissued Shares or from
issued Shares reacquired by the Company. During the term of the Plan, Stock
Options may be granted as to a maximum of 350,000 Shares, except as provided in
this Section.
(b) No Limit on Corporate Action. The existence of this Plan and
the Stock Options granted hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of
or affecting Common Stock, the dissolution or liquidation of the Company or any
sale or transfer of all or part of its assets or business, or any other
corporate act or proceeding.
(c) Recapitalization and Similar Events. The Stock Options
awarded under Sections 7 and 8 relate to Shares of Common Stock as presently
constituted, but if and whenever the Company shall effect a subdivision,
reorganization, recapitalization or consolidation of Shares, the number and
kind of Stock Options awarded under Sections 7 and 8 and the aggregate number
and kind of Shares issuable under the Plan shall be proportionately adjusted by
the Board.
(d) No Adjustment If Value Received. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class
of securities convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or other
securities, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
of Stock Options awarded to a Participant pursuant to Sections 7 and 8.
6. STOCK OPTIONS
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board shall deem desirable:
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<PAGE> 4
(a) General. Stock Options granted under the Plan shall be
Nonqualified Stock Options.
(b) Price. The price per share of Stock purchasable under a Stock
Option shall be one hundred percent (100%) of the Fair Market Value of the
Stock at grant.
(c) Term. Unless an Eligible Director's service on the Board is
terminated by reason of death, Disability or retirement at or after age 70, the
term of each Stock Option shall be equal to the period during which the
Eligible Director is serving on the Board.
(d) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined
by the Board at or after grant; provided, however, that, except as contemplated
elsewhere in the Plan or unless otherwise determined by the Board at or after
grant, no Stock Option shall be exercisable prior to the first anniversary date
of the granting of the Option.
(e) Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 6(d), Stock Options may be exercised in whole or
in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price, either by check, note or such other instrument as the Board may accept.
As determined by the Board, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock already owned by the
optionee.
No shares of Stock shall be issued until full payment therefore has
been made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to the Shares subject to the Stock Option
when the optionee has given written notice of exercise and has paid in full
for such Shares.
(f) Termination by Death. If an Eligible Director's service on
the Board terminates by reason of death, any Stock Option held by Eligible
Director may thereafter be exercised to the extent such Stock Option was
exercisable at the time of death by the legal representative of the estate or
by the legatee of the Eligible Director under the will of the Eligible Director
for a period of three (3) years (or such other period as the Board may specify
at grant) from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If an Eligible
Director's service on the Board terminates by reason of Disability, any Stock
Option held by such Eligible Director may thereafter be exercised by the
Eligible Director to the extent it was exercisable at the time of termination
for a period of three (3) years (or such other period as the Board may specify
at grant) from the date of such termination of service or until the expiration
of the stated term of such Stock Option, whichever period is the shorter;
provided, however, that, if the Eligible Director dies within such three (3)
year period (or such other period as the Board shall specify at grant), any
unexercised Stock Option held by such Eligible Director shall thereafter be
exercisable, to the extent to which it was exercisable at the time of death,
for a period of twelve (12) months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(h) Termination by Reason of Retirement. If an Eligible
Director's service on the Board terminates by reason of retirement at or after
age 70, any Stock Option held by such Eligible Director may thereafter be
exercised by the Eligible Director, to the extent it was exercisable at the
time of such retirement for a period of three (3) years (or such other period
as Board may specify at grant) from the date of such
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<PAGE> 5
retirement or the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the Eligible Director dies
within such three-year period (or such other period as the Board may specify at
grant), any unexercised Stock Option held by such Eligible Director shall
thereafter be exercisable, to the extent to which it was exercisable at the
time of death, for a period of twelve (12) months from the date of such death
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(i) Other Termination. Unless otherwise determined by the Board
(or pursuant to procedures established by the Board) at or after grant, if an
Eligible Director's service on the Board terminates for any reason other than
death, Disability or retirement at or after age 70, any Stock Options awarded
to such Eligible Director shall thereupon terminate.
7. STOCK OPTIONS - ANNUAL AWARD
On the first business day after each annual meeting of stockholders of
the Company occurring during the term of the Plan, each Eligible Director shall
receive an award of 3,000 Stock Options.
8. STOCK OPTIONS - NEW DIRECTORS AWARD
On the first business day after the first annual meeting of
stockholders of the Company at or after which a New Director is first elected
to the Board, such New Director shall receive an award of 10,000 Stock
Options, in addition to the annual award provided under Section 7.
9. FORFEITURE; CHANGE IN CONTROL
(a) Forfeiture. If any Stock Options granted under Sections 7 or
8 are forfeited or are otherwise terminated prior to exercise, such Stock
Options shall again be available for distribution in connection with future
awards under the Plan.
(b) Change in Control. Notwithstanding anything else contained in
the Plan to the contrary, in the event of a Change in Control, Eligible
Directors holding Stock Options granted hereunder shall have the same rights
of acceleration and exercise as may be granted officers of the Company under
the Company's Long Term Incentive Plan.
10. NONTRANSFERABILITY OF AWARDS
No Stock Option shall be transferable by the Eligible Director
otherwise than by will or under the applicable laws of descent and
distribution. The Stock Option shall not be sold, assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Upon any
attempt to sell, assign, negotiate, pledge or hypothecate any Stock Option, or
in the event of any levy upon any Stock Option by reason of any attachment or
similar process, in either case contrary to the provisions hereof, such Stock
Option shall immediately become null and void.
11. RIGHTS AS A STOCKHOLDER
An Eligible Director shall have no rights as a stockholder with
respect to any Shares underlying a Stock Option until the Eligible Director
has given written notice of the exercise of such Stock Option and
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has paid in full for such Shares.
12. DETERMINATIONS
Each determination, interpretation or other action made or taken
pursuant to the provisions of this Plan by the Board shall be final and binding
for all purposes and upon all persons, including, without limitation, the
Company, the directors, officers and other employees of the Company, the
Eligible Director and their respective heirs, executors, administrators,
personal representatives and other successors in interest.
13. TERMINATION, AMENDMENT AND MODIFICATION
(a) Termination and Amendment. This Plan shall terminate at the
close of business on October ___, 2006, unless sooner terminated by action of
the stockholders of the Company, or by resolution adopted by the Board, and no
Stock Options shall be granted under this Plan thereafter. The Board at any
time or from time to time may further amend this Plan.
(b) No Effect on Existing Rights. Except as required by law, no
termination, amendment or modification of this Plan may, without the consent of
an Eligible Director or the permitted transferee of Stock Options alter or
impair the rights and obligations arising under any then outstanding Stock
Options.
14. NON-EXCLUSIVITY
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
compensatory arrangements as it may, in its discretion, deem desirable.
15. GENERAL PROVISIONS
(a) No Right to Serve as a Director. This Plan shall not impose
any obligations on the Company to retain any Eligible Director as a director
nor shall it impose any obligation on the part of any Eligible Director to
remain as a director of the Company.
(b) No Right to Particular Assets. Nothing contained in this Plan
and no action taken pursuant to this Plan shall create or be construed to
create a trust of any kind or any fiduciary relationship between the Company
and any Eligible Director, the executor, administrator or other personal
representative or designated beneficiary of such Eligible Director, or any
other persons. Any reserves that may be established by the Company in
connection with this Plan shall continue to be part of the general funds of the
Company, and no individual or entity other than the Company shall have any
interest in such funds until paid to an Eligible Director. To the extent that
any Eligible Director or his executor, administrator, or other personal
representative, as the case may be, acquires a right to receive any payment
from the Company pursuant to this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company.
(c) Notices. Each Eligible Director shall be responsible for
furnishing the Board with the current and proper address for the mailing of
notices and delivery of agreements. Any notices required or permitted to be
given shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and prepaid. If
any item mailed to such address is
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<PAGE> 7
returned as undeliverable to the addressee, the mailing will be suspended until
the Eligible Director furnishes the proper address.
(d) Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or non-enforceability
shall not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provision had not been included.
(e) Incapacity. Any benefit payable to or for the benefit of an
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Board, the Company and other parties with respect
thereto.
(f) Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan, and shall not be employed in the construction of this Plan.
(g) Controlling Law. This Plan shall be construed and enforced
according to the laws of the State of Delaware.
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<PAGE> 1
EXHIBIT 10.27
EXECUTIVE TERMINATION BENEFITS AGREEMENT
THIS AGREEMENT, dated as of the ___th day of __________, 1996
is among The SABRE Group Holdings, Inc., a Delaware corporation, The SABRE
Group, Inc., a Delaware corporation (collectively, the "Company"), and
____________________ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best
interests of the Company and its stockholders that its management be encouraged
to remain with the Company and to continue to devote full attention to the
Company's business in the event an effort is made to obtain control of the
Company through a tender offer or otherwise;
WHEREAS, the Company recognizes that the possibility of a
change in control and the uncertainty and questions which it may raise among
management may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders;
WHEREAS, the Company's Board of Directors (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of
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the Company's management to their assigned duties without distraction in the
face of the potentially disturbing circumstances arising from the possibility
of a change in control of the Company;
WHEREAS, the Executive is a key Executive of the Company;
WHEREAS, the Company believes the Executive has made valuable
contributions to the productivity and profitability of the Company;
WHEREAS, should the Company receive any proposal from a third
person concerning a possible business combination with or acquisition of equity
securities of the Company, the Board believes it imperative that the Company
and the Board be able to rely upon the Executive to continue in his position,
and that the Company be able to receive and rely upon his advice as to the best
interests of the Company and its stockholders without concern that he might be
distracted by the personal uncertainties and risks created by such a proposal;
and
WHEREAS, should the Company receive any such proposals, in
addition to the Executive's regular duties, he may be called upon to assist in
the assessment of such proposals, advise management and the Board as to whether
such proposals would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board might determine to be
appropriate.
NOW, THEREFORE, to assure the Company that it will have the
continued undivided attention and services of the Executive and the
availability of his advice and counsel notwithstanding the possibility, threat
or occurrence of a bid to take over control of
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the Company, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:
1. Services During Certain Events
In the event a third party begins a tender or exchange offer,
circulates a proxy to stockholders, or takes other steps seeking to effect a
Change in Control (as defined in Section 2), the Executive agrees that he will
not voluntarily leave the employ of the Company, and will render the services
contemplated in the recitals to this Agreement, until the third party has
abandoned or terminated its efforts to effect a Change in Control or until
after such a Change in Control has been effected.
2. Change in Control
For purposes of this Agreement, a Change in Control of the
Company shall be deemed to have taken place if: (a) any "person" as defined in
Section 3(a)(9) of the Securities Exchange Act of l934, as amended from time to
time, (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the Exchange Act but
excluding the Company and any subsidiary of the Company and any employee
benefit plan sponsored or maintained by the Company or any subsidiary of the
Company (including any trustee of such plan acting as trustee), directly or
indirectly, becomes the beneficial owner (as defined in Rule 13(d)-3 under the
Exchange Act, as amended from time to time) of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities with respect to the
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election of Directors of the Company; or (b) during any twenty-four consecutive
month period, the individuals who, at the beginning of such period, constitute
the Board (the "Incumbent Directors") cease for any reason other than death to
constitute at least a majority thereof, provided, however, that a director who
was not a director at the beginning of such twenty-four month period shall be
deemed to have satisfied such twenty-four month requirement (and be an
Incumbent Director) if such director was elected by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were directors
at the beginning of such period) or by prior operation of the provisions of
this Section 2(b); or (c) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary of the Company through purchase of assets, or by merger, or
otherwise. Notwithstanding anything else contained herein to the contrary, in
no event shall a Change in Control be deemed to occur solely by reason of (i) a
distribution to the shareholders of AMR Corporation ("AMR"), whether as a
dividend or otherwise, of all or any portion of the Company's stock or any
other voting securities of the Company held, directly or indirectly, by AMR or
(ii) a sale of all or any portion of the Company's stock or any other voting
securities of the Company held, directly or indirectly, by AMR in an unwritten
public offering.
3. Circumstances Triggering Receipt of Severance Benefits
(a) Subject to Section 3(c), the Company will provide the
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<PAGE> 5
Executive with the benefits set forth in Sections 5 and 6 upon any termination
of the Executive's employment:
(i) by the Company at any time within the first 36 months
after a Change in Control;
(ii) by the Executive at any time within the first 12
months after a Change in Control;
(iii) by the Executive for "Good Reason" (as defined in
Section 3(b) below) at any time within the first 36 months after a
Change in Control.
(b) For purposes of Section 3(a)(iii), the Executive shall be
entitled to terminate his employment with the Company and its subsidiaries for
"Good Reason" after a Change in Control if:
(i) without the Executive's written consent, one or more of
the following events occurs at any time during the first thirty-six
(36) months after such Change in Control:
(A) the Executive is not appointed to, or is otherwise
removed from, any office or position with the Company
or its subsidiaries held by the Executive immediately
prior to the Change in Control for any reason other
than for Cause or in connection with the termination
of his employment with the Company or its
subsidiaries;
(B) the Executive's Base Salary rate or his annual
incentive compensation opportunity rate is reduced
below that in effect immediately prior to the Change
in Control for any reason other than for Cause or in
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<PAGE> 6
connection with the termination of his employment
with the Company and its subsidiaries;
(C) the Executive's principal office is moved, without
the Executive's consent, to a location that is more
than 50 miles from its location immediately prior to
the Change in Control;
(D) for any reason other than for Cause or in connection
with the termination of his employment with the
Company and its subsidiaries, the Executive suffers a
significant reduction in the authority, duties or
responsibilities associated with his position with
the Company as in effect immediately prior to the
Change in Control, on the basis of which he makes a
determination in good faith that he can no longer
carry out such position in the manner contemplated by
the Executive and the Company prior to the Change in
Control;
(E) for any reason other than in connection with the
termination of his employment or in connection with a
bona fide restructuring of the Executive's benefits
that does not reduce the overall level of such
benefits, the Company asserts the intention to reduce
or reduces any benefit provided to the Executive
below the level of such benefit provided immediately
prior to the Change in Control other than pursuant to
the terms of any employment
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agreement between the Company or a subsidiary of the
Company and the Executive ("Employment Agreement")
(unless the Company agrees to fully compensate
Executive for any such reduction);
(F) a successor, where applicable, does not assume and
agree to the terms of this Agreement in accordance
with Section 10 below; or
(G) the Company purports to terminate Executive's
employment other than in accordance with the Notice
of Termination procedures set forth in Section 4
below.
(ii) the Executive notifies the Board in writing (care of the
Company) of the occurrence of such event;
(iii) within 30 days following receipt of such written
notice, the Board does not cure such event and deliver to the
Executive a written statement that it has done so; and
(iv) within 60 days following the expiration of the 30-day
period specified in clause (iii) above (without the occurrence of a
cure and written notice thereof as described in clause (iii) above),
the Executive voluntarily terminates his employment with the Company
and its subsidiaries.
(c) Notwithstanding Section 3(a) and (b) above, no benefits
shall be payable by reason of this Agreement in the event of:
(i) Termination of the Executive's employment with the
Company and its subsidiaries by reason of the Executive's death
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<PAGE> 8
or Disability, provided that the Executive has not previously given a
valid "Notice of Termination" pursuant to Section 4. For purposes
hereof, "Disability" shall be defined as the inability of Executive
due to illness, accident or other physical or mental disability to
perform his duties for any period of six consecutive months or for any
period of eight months out of any twelve month period, as determined
by an independent physician selected by the Company and reasonably
acceptable to the Executive (or his legal representative), provided
that the Executive does not return to work on substantially a
full-time basis within 30 days after written notice from the Company
of an intent to terminate the Executive's employment due to
Disability;
(ii) Termination of the Executive's employment with the
Company and its subsidiaries on account of the Executive's retirement
at or after age 65, pursuant to the Company's Retirement Benefit Plan;
or
(iii) Termination of the Executive's employment with the
Company and its subsidiaries for Cause. For the purposes hereof,
Cause shall be defined as gross dishonesty or willful misconduct,
either of which is directly and materially harmful to the business of
the Company provided that any such termination for Cause shall not be
effective unless (A) the Executive shall have received thirty (30)
days' prior written notice from the Board of such alleged gross
dishonesty or willful misconduct, and (B) the Executive, with counsel,
shall
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have had the opportunity to be heard by the Board regarding such
allegations.
This Section 3(c) shall not preclude the payment of any amounts
otherwise payable to the Executive under any of the Company's employee benefit
plans, programs and arrangements and/or under any Employment Agreement.
4. Notice of Termination
Any termination of the Executive's employment with the Company
and its subsidiaries as contemplated by Section 3 shall be communicated by
written "Notice of Termination" to the other party hereto. Any "Notice of
Termination" shall indicate the effective date of termination which shall not
be less than 30 days or more than 60 days after the date the Notice of
Termination is delivered (the "Termination Date"), the specific provision in
this Agreement relied upon, and will set forth in reasonable detail the facts
and circumstances claimed to provide a basis for such termination.
5. Termination Benefits
Subject to the conditions set forth in Section 3 and, at the
option of the Executive, the Payment Cap set forth in Section 7, the following
benefits (subject to any applicable payroll or other taxes required to be
withheld) shall be paid or provided to the Executive:
(a) Compensation
The Company shall pay to the Executive the sum of (i) two
times the greater of (A) the Executive's effective annual base salary at the
Termination Date or (B) the Executive's effective
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annual base salary immediately prior to the Change in Control, plus (ii) two
times the greater of (x) the median annual bonus awarded to the Executive under
the Company's Incentive Compensation Plan or any other bonus plan (whether paid
currently or on a deferred basis) with respect to any l2 consecutive month
period during the last three fiscal years ending prior to the Termination Date
or (y) 50% of the highest median target bonus rate applicable to the Executive
for any period during such prior three-year period, multiplied by the
applicable annual base salary determined under Section 5(a)(i) above; provided,
however, that, if the Executive is within two years of his 65th birthday as of
the Termination Date, such combined amount shall be reduced to an amount
calculated by multiplying such combined amount by a fraction, the numerator of
which is the number of months from the Termination Date until the Executive's
65th birthday and the denominator of which is 24; the resulting amount to be
paid in a lump sum on the first day of the month following the Termination
Date.
(b) Health Insurance Benefits
The Company shall pay to the Executive an amount equal to the
cost at standard independent insurance premium rates as of the Termination Date
(or, if applicable and higher, the cost to the Executive of exercising his
right of continued coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended) of purchasing benefits for the
Executive on an individual basis which are equal to the Executive's
Company-paid participation (including dependent coverage) in the travel
accident, major
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medical, dental and vision care insurance plans, calculated as if such benefits
were continued during the 48-month period following the Termination Date (or
until the Executive's 65th birthday, if sooner), paid in a lump sum on the
first day of the month following the Termination Date; such payment to be in
lieu of (or offset by) any rights to continued coverage under such plans on a
Company-funded basis, subject to the terms of any Employment Agreement between
the Company and the Executive. Notwithstanding the foregoing, if the Executive
notifies the Company that, as of the Termination Date, he was unable to obtain
any aspect of the above-mentioned insurance coverage (including dependent
coverage) that is not provided through continued coverage on a Company-funded
basis at a rate no greater than the annualized amount paid to him pursuant to
this provision, the Company will continue to provide any such coverage to the
Executive.
(c) Retirement Benefits
The Executive shall be deemed to be completely vested in
Executive's currently accrued benefits under the Company's Retirement Benefit
Plan and Supplemental Executive Retirement Plan ("SERP") in effect as of the
date of Change in Control (collectively, the "Plans"), regardless of his actual
vesting service credit thereunder. In addition, the Executive shall be deemed
to earn service credit for benefit calculation purposes thereunder for the
period of 48 months following the Termination Date (or until the Executive's
65th birthday, if sooner). Benefits under the Plans will become payable at any
time designated by the
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Executive following termination of the Executive's employment with the Company
and its subsidiaries after the Executive reaches age 55, subject to the terms
of the Plans regarding the actuarial adjustment of benefit payments commencing
prior to normal retirement age. The benefit to be paid pursuant to the Plans
shall be calculated as though the Executive's compensation rate for each of the
5 years immediately preceding his retirement equaled the sum of (i) the greater
of (A) the Executive's effective annual base salary at the Termination Date or
(B) the Executive's effective annual base salary immediately prior to the
Change in Control, plus (ii) the greater of (A) the highest annual bonus
awarded to the Executive under the Company's Incentive Compensation Plan or any
other bonus plan (whether paid currently or on a deferred basis) with respect
to any l2 consecutive month period during the last three fiscal years ending
prior to the Termination Date or (B) 50% of the highest target bonus rate
applicable to the Executive during such prior three- year period, multiplied by
the applicable annual base salary determined under Section 5(c)(i) above. Any
benefits payable pursuant to this subsection 5(c) that are not payable out of
the Plans for any reason (including but not limited to any applicable benefit
limitations under the Employee Retirement Income Security Act of 1974, as
amended, or any restrictions relating to the qualification of the Company's
Retirement Benefit Plan under Section 401(a) of the Internal Revenue Code of
1986, as amended) shall be paid directly by the Company out of its general
assets.
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(d) Relocation Benefits
If the Executive moves his residence in order to pursue other
business or employment opportunities within 2 years after the Termination Date
and requests in writing that the Company provide relocation services, he will
be reimbursed for any expenses incurred in that initial relocation (including
taxes payable on the reimbursement) which are not reimbursed by another
employer. Benefits under this provision will include assistance in selling the
Executive's home and all other assistance and benefits which were customarily
provided by the Company to transferred executives prior to the Change in
Control.
(e) Executive Outplacement Counseling
At the request of the Executive made in writing within two
years from the Termination Date, the Company shall engage an outplacement
counseling service of national reputation to assist the Executive in obtaining
employment.
(f) Stock Based Compensation Plans
(i) Any issued and outstanding Stock Options and Stock
Appreciation Rights granted in connection with such Stock Options (to the
extent they have not already become exercisable) shall become exercisable in
accordance with the Company's 1996 Long Term Incentive Plan.
(ii) The Company's right to rescind any award of stock to the
Executive under the Company's 1996 Long Term Incentive Plan shall terminate
upon a Change in Control.
(iii) The Executive's rights under any other stock based
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<PAGE> 14
compensation plan shall vest (to the extent they have not already vested) in
accordance with the Company's 1996 Long Term Incentive Plan.
(g) Other Benefits
(i) The Executive shall continue to have provided to him
flight privileges as provided immediately prior to the Change in Control. Such
privileges shall continue until the first to occur of (w) the termination of
the Travel Privileges Agreement between The SABRE Group, Inc. and American
Airlines, Inc. (dated July 1, 1996)(the "Travel Agreement") or (x) until the
Executive reaches age 55, at which time he shall have flight privileges as
provided by the Company to its similarly situated retirees immediately prior to
the Change in Control. Provided, however, that if the Travel Agreement is
terminated prior to its 12 year term by reason of the failure of Company to
abide by the terms and conditions of the Travel Agreement or any other
agreement with American Airlines, Inc., the travel privileges contemplated
under this section (g)(i) will be provided to the Executive until the first to
occur of (y) July 1, 2008 or (z) until the Executive reaches age 55, at which
time he shall have flight privileges as provided by the Company to its
similarly situated retirees immediately prior to the Change in Control
(ii) The Executive, at the Executive's option, shall be
entitled to continue the use of the Executive's Company-provided automobile for
48 months following the Termination Date (or until the Executive's 65th
birthday, if sooner) under the same terms that applied to the automobile
immediately prior to the Change in
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<PAGE> 15
Control, or to purchase the automobile at its book value as of the Termination
Date.
(iii) The Company shall pay to the Executive an amount equal
to the cost to the Company of providing any other perquisites and benefits of
the Company in effect immediately prior to the Change in Control, calculated as
if such benefits were continued during the 48-month period following the
Termination Date (or until the Executive's 65th birthday, if sooner), paid in a
lump sum on the first day of the month following the Termination Date.
(iv) Accrued Amounts
The Company shall pay to the Executive all other amounts
accrued or earned by the Executive through the Termination Date and amounts
otherwise owing under the then existing plans and policies of the Company,
including but not limited to all amounts of compensation previously deferred by
the Executive (together with any accrued interest thereon) and not yet paid by
the Company, and any accrued vacation pay not yet paid by the Company.
6. Payment of Certain Costs of Executive
If a dispute arises regarding a termination of the Executive
or the interpretation or enforcement of this Agreement, subsequent to a Change
in Control, the parties shall submit to the jurisdiction of the American
Arbitration Association to resolve the dispute promptly, and shall commence the
hearing before the Board of Arbitrators in Dallas, Texas, within thirty (30)
business days following service of notice of such dispute by one party on the
other. The Board of Arbitrators shall have no authority to order a
15
<PAGE> 16
modification or amendment of this Agreement. The arbitration shall be governed
by the then current rules of the American Arbitration Association. The parties
agree that the decision of the Board of Arbitrators shall be final and binding
upon the parties thereto. All of the fees and expenses, including, without
limitation, any arbitration or legal expenses, incurred by the Executive in
successfully contesting or disputing any such termination (in whole or in part)
or in successfully obtaining or enforcing any right or benefit provided for in
this Agreement (in whole or in part) or in otherwise successfully pursuing his
claim (in whole or in part) will be paid by the Company, to the extent
permitted by law.
In the event that the Company refuses or otherwise fails to
make a payment when due and it is ultimately decided that the Executive is
entitled to such payment, such payment shall be increased to reflect an
interest factor, compounded annually, equal to the prime rate in effect as of
the date the payment was first due plus two points. For this purpose, the
prime rate shall be based on the rate identified by Chase Manhattan Bank as its
prime rate.
7. Treatment of Excess Parachute Payments
(a) Immediately following any Change in Control, and
again immediately following any Notice of Termination, and as of each such
date, the Company shall notify the Executive of the itemized and aggregate
present value of all termination benefits to which he would be entitled upon
termination under this Agreement or any other plan, program or arrangement
calculated in accordance with this Agreement (or, where applicable, such other
plan, program or
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arrangement) as of a projected Termination Date.
(b) The Company shall pay to the Executive, in addition
to any other benefit payable under this Agreement, the sum of (i) the amount of
any excise taxes payable by the Employee with respect to any payments, other
than those provided for under this Section 7(b), made to Executive, whether
under this Agreement or otherwise, which are "excess parachute payments" as
defined in Section 280G of the Code as then in effect (the "Reimbursable
Payments") and (ii) any Federal, state and local income taxes payable on the
amount described in (i) above. Notwithstanding the foregoing, if the Executive
receives a tax reimbursement payment under any other agreement or arrangement
maintained by the Company or a Subsidiary comparable to that described in the
preceding sentence the amount payable under this Section 7(b) shall be reduced
on a dollar for dollar basis by the amount of such other payment.
If the Executive receives a payment under this Section 7(b)
and it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Agreement, the
aggregate amount of excise taxes actually payable on the Reimbursable Payments
is less than the amount determined in calculating the benefits paid under this
Section 7(b), then an amount equal to the excess of (i) the amount paid to
Executive under this Section 7(b) over (ii) the sum of (A) the amount of excise
taxes actually due on the Reimbursable Payments and (B) the Federal, state and
local income taxes payable on an
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amount equal to the actual excise taxes payable, shall be deemed for all
purposes a loan to the Executive made on the date of receipt of such excess,
which the Executive shall have an obligation to repay to the Company on demand,
together with interest on such amount at the applicable Federal rate (as
defined in Section 1274(d) of the Code) from the date of the Executive's
receipt of such excess until the date of such repayment.
(c) This Agreement shall not amend or modify and shall
not apply to payments under any plan or agreement entered into prior to June
15, 1984 and which is not thereafter amended or renewed in any significant
aspect within the meaning of Section 67(e) (2) of the Tax Reform Act of 1984.
8. Letter of Credit, etc.
In order to better insure the availability of funds to pay all
amounts provided for in Sections 5, 6 and 7, the Chief Financial Officer may on
behalf of the Company establish a "grantor" trust or standby Letter or Letters
of Credit or other suitable arrangements in an amount sufficient to cover such
amounts. The financial facility or arrangement selected by the Chief Financial
Officer shall be irrevocable as of a Change in Control and shall become
available to the Executive upon the Termination Date and upon presentation of
the documents specified in the Letter of Credit or other financial facility or
arrangement. All funds provided by the Company to cover such payment, if any,
shall revert to the Company after payment in full to the Executive, subject to
the applicable terms of the documents implementing such arrangements.
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9. Continuing Obligations
(a) The Executive hereby agrees that all documents, records,
techniques, business secrets and other information which have come into his
possession from time to time during his employment with the Company shall be
deemed to be confidential and proprietary to the Company and, except for
personal documents and records of the Executive, shall be returned to the
Company. The Executive further agrees to retain in confidence any confidential
information known to him concerning the Company and its subsidiaries and their
respective businesses so long as such information is not publicly disclosed,
except that Executive may disclose any such information required to be
disclosed in the normal course of his employment with the Company or pursuant
to any court order or other legal process.
(b) The Executive hereby agrees that, for a period of two
years after the Termination Date, he will not directly or indirectly solicit
any employee of the Company or any of its subsidiaries or affiliated companies
to join the employ of any entity that competes with the Company or any of its
subsidiaries or affiliated companies.
l0. Successors
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be
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required to perform it if no such succession had taken place. Failure of such
successor entity to enter into such agreement prior to the effective date of
any such succession (or, if later, within three business days after first
receiving a written request for such agreement) shall constitute a breach of
this Agreement and shall entitle the Executive to terminate his employment
pursuant to Section 3(a)(ii) or (iii) and to receive the payments and benefits
provided under Sections 5, 6 and 7. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the Agreement provided
for in this Section 10 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive dies while any amounts are payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to his devisee, legatee or other designee or, if there
is no such designee, to his estate.
11. Notices
For the purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested,
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postage prepaid, addressed as follows:
If to the Executive:
--------------------
--------------------
--------------------
If to the Company:
The SABRE Group, Inc.
P. O. Box 6l9615
Mail Drop _____
D/FW Airport, Texas
7526l-96l5
ATTENTION: Secretary
With a copy to:
The SABRE Group, Inc.
General Counsel
P. O. Box 619615
D/FW Airport, Texas
75261-9615
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
l2. Governing Law
THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
l3. Miscellaneous
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this
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Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement (or in any employment
or other written agreement relating to the Executive).
l4. Separability
The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
l5. Non-assignability
This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in Section
l0. Without limiting the foregoing, the Executive's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by
the laws of descent or distribution, and in the event of any attempted
assignment or transfer by Executive contrary to this Section the Company shall
have no liability to pay any amount so attempted to be assigned or transferred
to any person other than the Executive or, in the event of his death, his
designated beneficiary
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or, in the absence of an effective beneficiary designation, the Executive's
estate.
16. Termination
The Company may terminate this Agreement at any time by six
months' written notice of such termination given to the Executive; except that
such termination shall not be made, and if made shall have no effect, (a) as to
any payments or benefits payable hereunder to an Executive whose employment has
terminated pursuant to Section 3(a) or (b), (b) within three years after a
Change in Control or (c) during any period of time when the Company has
knowledge that any third person has taken steps reasonably calculated to effect
a Change in Control until, in the opinion of the Board (as constituted at the
time of the termination of this Agreement), the third person has abandoned or
terminated his efforts to effect a Change Control.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the day and year first above set forth, thereby
mutually and voluntarily agreeing that this Agreement supersedes and replaces
any prior similar agreements for such termination benefits.
THE SABRE GROUP HOLDINGS, INC.
By: ,its
----------------------
-----------------------------
THE SABRE GROUP, INC.
By: ,its
----------------------
-----------------------------
EXECUTIVE
By: , an
----------------------
-----------------------------
Individual
24
<PAGE> 1
EXHIBIT 10.28
August 30, 1996
Michael J. Durham
Dear Michael:
This letter agreement (the "Agreement") will confirm our mutual understanding
of the arrangements in the event of termination of your employment at The SABRE
Group, Inc. (the "Company").(1)
Section One -- Term
This Agreement will be valid for the three year period following the date of an
initial public offering (IPO) of The SABRE Group, if any occurs. If an IPO of
The SABRE Group does not occur, this Agreement shall not be binding. Effective
three years and one day after an IPO of The SABRE Group this Agreement shall
terminate, unless earlier terminated in accordance herewith.
Section Two -- Termination Not for Cause/Cash Payment
You will be expected to perform the duties of President and CEO of The SABRE
Group, as defined by the Chairman of the Board of Directors, during the term of
this Agreement. If your employment with the Company is terminated not for
cause during the term of this Agreement, you will receive a severance payment
equal to the greater of the nominal value of (i) one year's base salary and
target incentive compensation or (ii) the aggregate amount of base salary and
target incentive compensation remaining for the term of this Agreement
(collectively, the "Termination Benefit").(2)
- ------------------------
(1) For purposes of this Agreement, Company refers not only to The SABRE
Group, Inc., but also to any successor in interest.
(2) For purposes of this Agreement, (a) base salary in effect on the day
your employment is terminated and (b) target incentive compensation means the
target incentive compensation award in effect on the day your employment is
terminated.
<PAGE> 2
Section Two -- Termination Not for Cause/Cash Payment, continued
The Company, at its discretion, may pay the Termination Benefit in (y) a lump
sum at nominal value or (z) equal monthly installments at nominal value over
the remaining term of this Agreement. Payment of the Termination Benefit will
be contingent upon the Company and you reaching agreement with respect to a
non-competition agreement. The provisions of any such agreement, which pertain
specifically to employment with a competitor of the Company, shall have a term
equal to the number of months used to calculate the Termination Benefit.
Section Three -- Termination Not for Cause/Stock
If your employment with the Company is terminated not for cause during the term
of this Agreement, any outstanding stock awards would continue vesting during a
term which is the greater of (i) one year or (ii) the remainder of the term of
this Agreement. The distribution of stock underlying such stock awards, or the
exercise of stock options, will be in accordance with the original terms and
conditions of such awards.
Section Four -- Termination Not for Cause/Benefits and Perquisites
If your employment with the Company is terminated not for cause during the term
of this Agreement, benefits and perquisites provided to you as of the day
before the termination of your employment will continue to be provided to you
to the extent such benefits and perquisites are then provided for senior vice
presidents at American Airlines who are terminated not for cause.
Section Five -- Termination/Change-in-Control
If your employment with the Company is terminated as a consequence of a
change-in-control(3), the severance arrangements set forth in your Executive
Termination Benefits Agreement will control and this Agreement will terminate.
Section Six -- Termination for Cause
If your employment with the Company is terminated for cause, this Agreement
will terminate at the same time as your employment.
Section Seven -- Termination/Death, Disability, Resignation or Retirement
If your employment with the Company is terminated by reason of your death,
disability, resignation or retirement, this Agreement will terminate at the
same time as your employment.
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(3) For purposes of this Agreement, change-in-control has the meaning
as set forth in the Long Term Incentive Plan for the Company.
<PAGE> 3
Section Eight -- Definition of "Cause"
For purposes of this Agreement, "cause" means (i) your conviction of a felony,
(ii) your failure to contest a prosecution for a felony or (iii) your willful
misconduct or dishonesty, any of which is directly or materially harmful to the
Company or its business or reputation.
Section Nine -- Transition and Cooperation
Upon termination of your employment with the Company for whatever reason, you
agree to execute any and all documents and to take any and all actions which
the Company may reasonably request to effect the transition of your duties and
responsibilities. You further agree to make yourself available with respect
to, and to cooperate in conjunction with, any litigation or investigation
involving the Company; provided you receive adequate assurances of (i)
indemnity for, and/or (ii) reimbursement of, reasonable expenses with respect
to the foregoing activities.
Section Ten -- Responsibilities
As consideration for the benefits and promises set forth in this Agreement, you
agree as follows:
You will not directly or indirectly induce or encourage any employee of the
Company or its affiliates(4) (whether or not now existing) to terminate such
relationship without the prior written consent of the Company or the affiliate,
as appropriate.
You will not in any way disparage, bring discredit to or otherwise harm (i) the
Company, (ii) its affiliates or (iii) the employees, officers or directors of
each.
You acknowledge the confidentiality of the information concerning, and the
trade secrets of, the Company and/or its affiliates that has or will come into
your possession or knowledge in connection with your employment by the Company
and you agree to hold such information and trade secrets in confidence.
The responsibilities of Section Nine will survive the termination of this
Agreement.
- ------------------------
(4) For purposes of this Agreement, affiliates has the meaning as set
forth in the Long Term Incentive Plan for the Company.
<PAGE> 4
Section Eleven -- Miscellaneous
This Agreement will be governed by the laws of the State of Texas. You and the
Company agree that this Agreement represents the entire understanding with
respect to its subject matter. This Agreement may be modified only by a
writing that has been signed by you and the Company.
Please sign and return one of the originals of this Agreement to indicate your
agreement with the above arrangements.
Sincerely,
/s/ Robert L. Crandall
Concur:/s/ Michael J. Durham Date: 9/8/96
--------------------------------------- --------------------------
<PAGE> 1
EXHIBIT 10.29
September 7, 1995
Mr. T. M. Cook
Dear Tom,
This letter will confirm our mutual understanding relating to your compensation
and benefits arrangements relative to your employment and retirement from
American Airlines, Inc., a subsidiary of AMR Corporation (collectively, "AMR",
"American", the "Company" or the "Corporation").
Assignment
You will be expected to perform the duties of President SABRE Decision
Technologies through October 31, 2000. Effective November 1, 2000, this
agreement will terminate.
AMR, at is discretion, may remove you from your position as President SABRE
Decision Technologies prior to October 31, 2000. In the event of such removal,
you will be retained as an employee, available for consulting services at
management's request, through October 31, 2000. Effective November 1, 200,
this agreement will terminate. While performing the duties of President SABRE
Decision Technologies or serving as a consultant at management's request, you
will be expected to perform your assignment with the same level of dedication
and commitment that you have demonstrated to the present. In return, you will
be provided the compensation and benefits described in this agreement.
This agreement may be terminated by AMR for cause at any time and such
termination shall be effective immediately. For purposes of this agreement,
"cause" shall mean (i) gross dishonesty or wilful misconduct that is directly
and materially harmful to the Corporation or its affiliates, (ii) your
conviction, or failure to defend charges, of a felony or (iii) your material
breach of any of the terms of this agreement. Should a material breech of any
of the terms of this agreement occur, the Corporation shall allow a 15 day
grace period, beginning the date of notification, for the remedy of such
material breech prior to the termination of this agreement for cause.
<PAGE> 2
Cash Compensation
Your base salary will be reviewed on an annual basis, in conjunction with the
Company's overall annual review of the case compensation paid to its officers.
During this term of this agreement, adjustments to your annual base salary, if
any, shall be based upon your individual performance. The amount of such
annual performance-based adjustments, if any, shall be determined utilizing the
same criteria as applied to other officers for the purposes of determining
their, respective, annual performance-based adjustments, if any.
In addition, during the term of this agreement, you shall continue to be
eligible to receive annual Performance Returns payments which are based on a
specified performance bearing percentage of your Career Equity shares.
Incentive Compensation Award
You will continue to participate in the SABRE Group Variable Compensation Plan
during the term of this agreement and be eligible to receive an annual award
(or pro rata award for partial years of service), if any is paid.
Should this agreement be terminated prior to November 1, 2000 by AMR due to
your death or disability, AMR shall have no obligation to continue monthly base
salary payments, annual Performance Returns or annual awards, if any, payable
from the SABRE Group Variable Compensation Plan (excluding a pro rata award
which may be payable for a partial year's service).
Deferred Compensation
Our records indicate that you elected to defer compensation under the
Company's's deferral plan. Your balances as of December 31, 1994 and your
payment elections are reflected below:
<TABLE>
<CAPTION>
Balance Number of Payment Date Payments
Year @ 12/31/94 Payments Frequency Begin
---- ---------- -------- --------- -----
<S> <C> <C> <C> <C>
1983 $29,680 5 Annual Upon Retirement
1986 21,835 180 Monthly Upon Retirement
-------
Total $51,515
</TABLE>
Funds remaining on account with the Company will continue to earn the credited
rate of interest during your employment period.
2
<PAGE> 3
Stock Based Compensation
a) Career Equity Shares
You will be awarded a special retention grant of 6,500 Career Equity
Shares. Your award will be dated April 24, 1995, the third trading
day subsequent to the approval of your award by the AMR Corporation
Board of Directors. The vesting of your award shall be governed by
the terms of the AMR Corporation 1988 Long Term Incentive Plan.
b) Stock Options
You will be awarded a stock option grant of 13,000 shares of AMR
Common Stock under the Corporation's Stock Option Program. Your
option grant will be priced at $65.0625 per share, the average price
of AMR common stock on April 24, 1995 (the third trading day
subsequent to the approval of your award by the AMR Corporation Board
of Directors). Shares shall vest in five equal annual installments
beginning one year after the grant date.
On an annual basis thereafter, during the term of this agreement, you
will be awarded a stock option grant of 13,000 shares of AMR Common
Stock under the Corporation's Stock Option Program as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 13,000
April 24, 1997 13,000
April 24, 1998 13,000
April 24, 1999 13,000
April 24, 2000 13,000
</TABLE>
Shares shall vest in five equal annual installments beginning one year
after the grant date.
Your existing Stock Options will continue to vest during your
employment period. You will continue to be eligible to exercise your
vested options under the rules of the Cashless Exercise Program during
your employment period. All Stock Option awards are governed under
the rules of the AMR Corporation 1988 Long Term Incentive Plan.
3
<PAGE> 4
Stock Based Compensation (cont'd)
c) Restricted Stock
You will be awarded 700 shares of AMR Common Stock under the
Corporation's Restricted Stock Program. Your award will be dated
April 24, 1995, the third trading day subsequent to the approval of
your award by the AMR Corporation Board of Directors. Restrictions on
the 700 shares will be lifted on April 24, 1998.
On an annual basis thereafter, during the term of this agreement, you
will be awarded 700 shares of AMR Common Stock under the Corporation's
Restricted Stock Program as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 700
April 24, 1997 700
April 24, 1998 700
April 24, 1999 700
April 24, 2000 700
</TABLE>
Restrictions on the shares will be lifted three years subsequent to
the date of each respective grant.
Restrictions will be lifted on existing Restricted Stock awards as
follows:
<TABLE>
<CAPTION>
Maturity Date Shares
------------- ------
<S> <C>
July 26, 1995 750
July 26, 1996 500
July 25, 1997 400
</TABLE>
The shares will be valued for tax purposes and delivered to you on the
above dates. All Restricted Stock awards are governed under the rules
of the AMR Corporation 1988 Long Term Incentive Plan.
d) Performance Shares
You will be awarded 2,200 shares of AMR Common Stock under the
Corporation's 1995-97 Performance Share Plan. Shares granted under
the 1995-97 plan will vest on a pro rata basis and will be paid within
90 days following the end of the measurement period (12/31/97),
subject to the Corporation's performance. Your award will be dated
April 24, 1995, the third trading day subsequent to the approval of
your award by the AMR Corporation Board of Directors.
4
<PAGE> 5
Stock Based Compensation (cont'd)
d) Performance Shares
On an annual basis thereafter, during the term of this agreement, you
will be awarded 2,200 shares of AMR Common Stock under the
Corporation's Performance Share Program as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 2,200
April 24, 1997 2,200
April 24, 1998 2,200
April 24, 1999 2,200
April 24, 2000 2,200
</TABLE>
Shares awarded under each grant will vest on a pro rata share basis
and will be paid within 90 days following the end of each respective
three-year measurement period, subject to the Corporation's
performance.
Existing Performance Share awards shall vest as follows:
<TABLE>
<CAPTION>
Maturity Date Shares
------------- ------
<S> <C>
December 31, 1995 1,000
December 31, 1996 1,600
</TABLE>
Existing Performance Share awards shall continue to vest on a pro rata
basis and will be paid within 90 days following each respective
maturity date, subject to the Corporation's performance. All
Performance Share awards are governed under the rules of the AMR
Corporation 1988 Long Term Incentive Plan.
e) General
AMR reserves the right to convert the aforementioned existing and
future stock awards granted under the AMR Corporation 1988 Long Term
Incentive Plan, to awards of equal economic value granted under the
SABRE Group Long Term Incentive Plan.
Should this agreement be terminated a) by AMR for cause or b) due to
your death or disability, vesting of stock based compensation shall be
governed by the terms of the AMR Corporation 1988 Long Term Incentive
Plan.
5
<PAGE> 6
Pension Benefits
Your entry date into the Retirement Benefit Plan (RBP) was July 1, 1983 and you
are 100% vested. During your employment period, you will continue to accrue
credited service and pensionable earnings in the RBP. Your pension benefits
will be payable from two sources - the RBP and the Supplemental Executive
Retirement Program (SERP).
The RBP is based upon final average salary and years of credited service while
the SERP takes into account Incentive Compensation and Performance Returns in
the calculation of your pension benefits. The SERP also pays benefits not
payable out of the RBP due to IRS limitations on pensionable earnings and on
the amount of an annual pension benefit which can be paid out of a
tax-qualified retirement plan.
Super Save 401(k) Plan
You may continue to participate in the Super Saver Plan and move investments
among the available funds under the provisions of the plan during your
employment period.
In accordance with plan provisions, you may commence a distribution upon
reaching age 59 1/2 or retirement, whichever occurs first. Alternatively, you
may elect to leave your funds in your account. As such, you may continue to
transfer your funds among the available investment options on a quarterly basis
by giving notice to Super Saver Plan Headquarters in accordance with plan
procedures. However, you must begin receiving your benefit no later than 70 1/2
or you will incur a substantial tax penalty under the current tax laws.
Insurance Coverages
a) Health Benefits Coverage
You will continue to be covered under the Flexible Benefits program
during your employment period. Your benefit pay will continue and
deductions will be taken each pay period based on the options you
elected. Additionally, you will be able to change your options in
accordance with the plan provisions during each annual enrollment
period.
b) Supplemental Medical Coverage
You may continue the annual Supplemental Medical coverage you have
purchased for yourself under the Flexible Benefits during your
employment period. Additionally, you will be able to change your
options in accordance with the plan provisions during each annual
enrollment period.
6
<PAGE> 7
Insurance Coverages (cont'd)
c) Group Term Life Insurance Coverage
Your Group Term Life Insurance coverage will continue under the
Flexible Benefits program during your employment period under the same
provisions as your health coverage.
d) Long Term Disability Coverage (LTD)
Your Long Term Disability coverage will continue under the Flexible
Benefits program and deductions will continue to be taken from your
pay during your employment period.
e) Accidental Death and Dismemberment Coverage (AD&D)
Your Accidental Death and Dismemberment coverage will continue under
the Flexible Benefits program and deductions will continue to be taken
from your pay during your employment period.
f) Management Personal Accident Insurance Coverage
Company paid Management Personal Accident Insurance coverage of three
times your annual salary (up to $1,000,000) will continue during your
employment period.
g) General
Should you fail to make timely payment for any of the aforementioned
insurance coverage or for your pass travel (explained below) or should
you fail to observe the rules related to pass travel, AMR reserves the
right to terminate such insurance coverages and pass travel, as the
case may be.
Split Dollar Life Insurance Policy
The Company will continue to advance the annual premiums on your policy for the
lesser of your lifetime or your attainment of age 65. Upon reaching age 65,
the Company will recover the amount of premiums previously paid by it and
release the policy to you.
No action is required on your part at this time.
7
<PAGE> 8
Pass Travel
You, your spouse and your dependent children will retain your A-2 travel
privileges during your employment period, to the extent such privileges
continue to be made available to retired officers of the Company.
Credit Union
You may retain your membership in the Credit Union during your employment
period. As such, you may continue to make contributions to your account or
make payroll deducted loan payments, if any, through the end of your employment
period.
Leased Automobile
To the extent such benefits continue to be made available to officers of the
Company, you may continue to use the automobile currently leased by American
Airlines for you during your employment period. After the completion of the
36th month of the lease, on August 1, 1997, you may elect to:
1. Turn in the automobile you currently operate and, to the
extent such benefits continue to be made available to officers
of the Company, select another vehicle under American's
executive automobile program.
2. Purchase the vehicle you currently operate for 90% of the fair
market value on he date of purchase, less your proportionate
share of any gain that American may realize on the sale.
Should you elect to purchase the vehicle that you currently
operate, to the extent such benefits continue to be made
available to officers of the Company, you will be eligible to
select another vehicle under American's executive automobile
program.
3. Continue to operate the vehicle currently leased to you until
the earlier of your retirement or such time that you wish to
pursue options one or two above.
Additionally, in conjunction with a vehicle replacement, you may turn in your
car telephone or purchase it at the fair market value established at the time
of purchase.
Club Memberships
To the extent such benefits continue to be made available to officers of the
Company, you may continue using your Corporate Club Membership (Las Colinas
Sports Club) and honorary Admirals Club membership during your employment
period.
8
<PAGE> 9
Financial and Tax Planning
To the extent such benefits continue to be made available to officers of the
Company, the Company will continue to pay for your financial and tax planning
services, to the extent of our reimbursement policy, through the end of your
employment period.
Company Property
All company property, including but not limited to home computer equipment
laptop computer, home fax machine, A T & T telephone card, Corporate American
Express Card, building entry cards and company identification cards, except
your travel cards, should be returned to American Airlines Executive
Compensation at the end of your employment period.
Transitional Cooperation
You agree to execute any and all documents and to take any and all action which
AMR may reasonably request to effect the transition of your duties and
responsibilities prior to the end of your employment period. You further agree
to make yourself available and to cooperate in connection with any litigation
involving the Corporation, in which you may be requested as a witness.
Reimbursement of out-of-pocket expenses will be provided by the Corporation.
Obligations
As consideration for the compensation and other benefits and privileges
described in this agreement, you agree that you will not, without prior written
approval of AMR, which may be withheld at AMR's sole discretion, provide
services as an executive or consultant:
a) during the term of this agreement and for a period of five years after
the termination of this agreement, to any of the following Computer
Reservation Systems (CRS) or any subsidiary or affiliate of the
following CRS's: Abacus, Amadeus, Gallileo, SystemOne or Worldspan, or
any successor thereof; or during the term of this agreement and for a
period of three years after the termination of this agreement, to any
US-based airline with revenues in excess of $1 billion or any
subsidiary or affiliate of such US-based airline.
9
<PAGE> 10
Obligations (cont'd)
a) Subsidiary or affiliate means, with respect to any entity, any other
entity directly or indirectly controlling, or controlled by, or under
common control with, such entity. For purposes of this definition,
"control" (including "controlled by" and under "common control with")
means the direct or indirect ownership of at least 50% of the equity
or voting rights of an entity or the power to direct, or to cause the
direction of, the management and policies of such an entity whether
through the ownership of voting interests, by contract or otherwise.
The term "entity" shall include a natural person, corporation,
partnership, limited liability company, joint venture, association or
other organization.
Should you be retained as an executive or consultant by any of the
above mentioned CRS's, or a subsidiary or affiliate of any such CRS or
by any U.S.-based airline with revenues in excess of $1 billion, or a
subsidiary or affiliate of such an airline, without the prior written
approval of AMR, this agreement shall terminate and all remaining
cash, stock-based compensation and benefits and privileges provided
for within this agreement shall be forfeited, to the extent permitted
by law.
b) you will not directly or indirectly induce any employee or independent
contractor of AMR, its subsidiaries, any of its affiliates (whether or
not now existing) or any company in which AMR or American has an
ownership interest to terminate such relationship without the prior
written consent of AMR or American.
c) you will not in any way disparage or otherwise harm or bring discredit
to AMR, its subsidiaries or any of its affiliates, agents, current or
former employees, officers or directors, or divulge to any party at
any time any confidential, proprietary or trade secret data of or
relating to AMR, its subsidiaries or any of its affiliates, including
the existence of and or the terms of this agreement.
We agree that AMR, its subsidiaries and its affiliates will not disparage or
otherwise harm or bring discredit to you.
Confidentiality
You acknowledge that all material and information about or the property of AMR,
its affiliates or any of their officers or directors, which has or will come
into your possession or knowledge in connection with this agreement or in
connection with your employment by American or AMR includes certain
confidential and proprietary data and you agree to hold such material and
information in strictest confidence. You agree not to make use of such
confidential material and information other than for the performance of this
agreement and not to release or disclose such data to any other party during
the term of this agreement or at any time thereafter.
10
<PAGE> 11
Indemnification
AMR Corporation will extend its indemnity against liabilities incurred by you
as a result of any legal proceedings in which AMR may become involved, which
you may be a party to and which may pertain to your employment by American or
AMR prior to the date hereof or hereunder.
Additional Understandings
This agreement contains the entire agreement between you and AMR with respect
to your compensation and benefits arrangements relative to your employment with
the Corporation. To the extent there is anything to the contrary contained in
any other agreement between you and the Corporation, this agreement shall
control. This agreement is governed by the laws of the State of Texas. To the
extent any provision of this agreement is deemed unenforceable, the remainder
of the provisions will remain in full force and effect.
Please sign and return one copy of this letter agreement to indicate your
concurrence with the above arrangements, and your release of AMR, its
subsidiaries, affiliates, agents, current and former employees, officers and
directors from any and all claims for relief of any kind with respect to your
employment prior to the date hereof or hereunder, including, but not limited
to, any and all claims of discrimination of any kind, other than claims
relating to death, disability, or health insurance reimbursement. In return,
AMR agrees to release you from any and all claims for relief of any kind with
respect to your AMR employment prior to the date hereof or hereunder.
Very truly yours,
/s/ Michael J. Durham
Accepted and Agreed:
/s/ Thomas M. Cook September 7, 1995
- -------------------------------------- ------------------------------------
Thomas M. Cook Date
11
<PAGE> 1
EXHIBIT 10.30
May 7, 1996
Mr. T.B. Jones
Dear Terry,
This letter will confirm our mutual understanding relating to your compensation
and benefits arrangements relative to your employment and retirement from
American Airlines, Inc., a subsidiary of AMR Corporation (collectively, "AMR",
"American", the "Company" or the "Corporation").
Assignment
You will be expected to perform the duties of President SABRE Computer
Services, or of another SABRE Group officer position as requested by the
Company, for a period of nine year through April 18, 2004. The terms of this
agreement shall remain in effect for a period of five years through April 18,
2000. At AMR's discretion, the terms of this five year agreement may be
renewed on an annual basis over the next four years beginning April 19, 1996
and continuing through April 19, 1999. Should AMR elect not to renew this
agreement, this agreement shall terminate at the conclusion of the applicable
five year agreement period.
AMR, at its discretion, may remove you from your position as President SABRE
Computer Services, or from any subsequent position, prior to the conclusion of
any one of the five year agreement periods. In the event of such removal, you
will be retained as an employee, available for consulting services at
management's request, through the end of the applicable five year agreement
period and this agreement shall terminate. While performing the duties of
President SABRE Computer Services or another SABRE Group officer position, or
serving as a consultant at management's request, you will be expected to
perform your assignment with the same level of dedication and commitment that
you have demonstrated to the present. In return, you will be provided the
compensation and benefits described in this agreement.
<PAGE> 2
Assignment (cont'd)
This agreement may be terminated by AMR for cause at any time and such
termination shall be effective immediately. For purposes of this agreement,
"cause" shall mean (i) gross dishonesty or wilful misconduct that is directly
and materially harmful to the Corporation or its affiliates, (ii) your
conviction of a felony involving moral turpitude or (iii) your material breach
of any of the terms of this agreement. Should a material breach of any of the
terms of this agreement occur, the Corporation shall allow a 15 day grace
period, beginning the date of notification, for the remedy of any such material
breech prior to the termination of this agreement for cause. However, if the
breach is not of such a nature that it may be remedied within 15 days, this
agreement will not be terminated if, within 15 days, you undertake curative
action to remedy the breach and diligently pursue such action until the breach
is remedied.
Cash Compensation
Your base salary will be reviewed on an annual basis, in conjunction with the
Company's overall annual review of the cash compensation paid to its officers.
During the term of this agreement, adjustments to your annual base salary, if
any, shall be based upon your individual performance. The amount of such
annual performance-based adjustments, if any, shall be determined utilizing the
same criteria as applied to other officers for the purposes of determining
their, respective, annual performance-based adjustments, if any.
In addition, during the term of this agreement, you shall continue to be
eligible to receive annual Performance Returns payments which are based on a
specified performance bearing percentage of your Career Equity shares.
Incentive Compensation Award
You will continue to participate in the SABRE Group Variable Compensation Plan
during the term of this agreement and be eligible to receive an annual award
(or pro rata award for partial years of service), if any is paid.
Should this agreement be terminated prior to April 18, 2000 by AMR due to your
death or disability, AMR shall have no obligation to continue monthly base
salary payments, annual Performance Returns or annual awards, if any, payable
from the SABRE Group Variable Compensation Plan (excluding a pro rata award
which may be payable for a partial year's service).
2
<PAGE> 3
Deferred Compensation
Our records indicate that you elected to defer compensation under the Company's
deferral plan. Your balances as of December 31, 1995 and your payment election
is reflected below:
<TABLE>
<CAPTION>
Balance Number of Payment Date Payments
Year @ 12/31/95 Payments Frequency Begin
---- ---------- --------- --------- -------------
<S> <C> <C> <C> <C>
1986 $ 62,666 180 Monthly Upon Retirement
</TABLE>
In accordance with the terms of your election to defer, payments will begin on
March 1 following your retirement. Funds remaining on account with the Company
will continue to earn the credited rate of interest.
Stock Based Compensation
a) Career Equity Shares
You were awarded a special retention grant of 7,000 Career Equity
Shares. Your award was dated April 24, 1995, the third trading day
subsequent to the approval of your award by the AMR Corporation Board
of Directors. Upon normal retirement at age 60 on July 1, 2008, you
shall vest in 100% of your total Career Equity holdings (14,500
shares). Under the rules of the Career Equity Program, accelerated
vesting for early retirement (vesting of 85% to 97% of holdings upon
retirement between the ages of 55 to 59) shall also be available for
you. The stock will be valued for tax purposes and delivered to you
within 30 days following your retirement date.
b) Stock Options
You were awarded a stock option grant of 5,000 shares of AMR Common
Stock under the Corporation's Stock Option Program. This grant was
priced at $65.0625 per share, the average price of AMR common stock on
April 24, 1995 (the third trading day subsequent to the approval of
your award by the AMR Corporation Board of Directors). Shares shall
vest in five equal annual installments beginning one year after the
grant date.
3
<PAGE> 4
Stock Based Compensation (cont'd)
b) Stock Options (cont'd)
On an annual basis thereafter, during the term of this agreement, you
will be awarded a stock option grant of 5,000 shares of AMR Common
Stock under the Corporation's Stock Option Program dated as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 5,000
April 24, 1997 5,000
April 24, 1998 5,000
April 24, 1999 5,000
</TABLE>
Shares shall vest in five equal annual installments beginning one year
after the grant date.
Your existing Stock Options will continue to vest during your
employment period. All Stock Options that have become exercisable by
the date of your retirement must be exercised within 3 years of your
retirement date. You will continue to be eligible to exercise your
vested options under the rules of the Cashless Exercise Program during
your employment period and into retirement. All Stock Option awards
are governed under the rules of the AMR Corporation 1988 Long Term
Incentive Plan.
c) Restricted Stock
You were awarded 750 shares of AMR Common Stock under the
Corporation's Restricted Stock Program. This award was dated April
24, 1995, the third trading day subsequent to the approval of your
award by the AMR Corporation Board of Directors. Restrictions on the
750 shares will be lifted on April 24, 1998.
On an annual basis thereafter, during the term of this agreement, you
will be awarded 750 shares of AMR Common Stock under the Corporation's
Restricted Stock Program dated as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 750
April 24, 1997 750
April 24, 1998 750
April 24, 1999 750
</TABLE>
Restrictions on the shares will be lifted three years subsequent to
the date of each respective grant.
4
<PAGE> 5
Stock Based Compensation (cont'd)
c) Restricted Stock (cont'd)
Restrictions will be lifted on your existing Restricted Stock awards
as follows:
<TABLE>
<CAPTION>
Maturity Date Shares
------------- ------
<S> <C>
July 26, 1996 300
July 25, 1997 600
April 24, 1998 750
</TABLE>
The shares will be valued for tax purposes and delivered to you on the
above dates. All Restricted Stock awards are governed under the rules
of the AMR Corporation 1988 Long Term Incentive Plan.
d) Performance Shares
You were awarded 1,900 shares of AMR Common Stock under the
Corporation's 1995-97 Performance Share Plan. Shares granted under
the 1995-97 plan will vest on a pro rata basis and will be paid within
120 days following the end of the measurement period (12/31/97),
subject to the Corporation's performance. Your award is dated April
24, 1995, the third trading day subsequent to the approval of your
award by the AMR Corporation Board of Directors.
On an annual basis thereafter, during the term of this agreement, you
will be awarded 1,900 shares of AMR Common Stock under the
Corporation's Performance Share Program dated as follows:
<TABLE>
<CAPTION>
Grant Date Shares
---------- ------
<S> <C>
April 24, 1996 1,900
April 24, 1997 1,900
April 24, 1998 1,900
April 24, 1999 1,900
</TABLE>
Shares awarded under each grant will vest on a pro rata share basis
and will be paid within 120 days following the end of each respective
three-year measurement period, subject to the Corporation's
performance.
5
<PAGE> 6
Stock Based Compensation (cont'd)
d) Performance Shares (cont'd)
Existing Performance Share awards shall vest as follows:
<TABLE>
<CAPTION>
Maturity Date Shares
------------- ------
<S> <C>
December 31, 1996 2,300
December 31, 1997 1,900
</TABLE>
Existing Performance Share awards shall continue to vest on a pro rata
basis and will be paid within 120 days following each respective
maturity date, subject to the Corporation's performance. All
Performance Share awards are governed under the rules of the AMR
Corporation 1988 Long Term Incentive Plan.
e) General
AMR reserves the right to convert the aforementioned existing and
future stock awards granted under the AMR Corporation 1988 Long Term
Incentive Plan, to awards of equal economic value granted under the
SABRE Group Long Term Incentive Plan, should such a plan be approved
by the AMR Corporation Board of Directors.
Should this agreement be terminated a) by AMR for cause or b) due to
your death or disability, vesting of stock based compensation shall be
governed by the terms of the AMR Corporation 1988 Long Term Incentive
Plan.
Pension Benefits
Your entry date into the Retirement Benefit Plan (RBP) was January 1, 1979 and
you are 100% vested. During your employment period, you will continue to
accrue credited service and pensionable earnings in the RBP. Your pension
benefits will be payable from two sources - the RBP and the Supplemental
Executive Retirement Program (SERP).
The RBP is based upon final average salary and years of credited service while
the SERP takes into account Incentive Compensation and Performance Returns in
the calculation of your pension benefits. The SERP also pays benefits not
payable out of the RBP due to the IRS limitations on pensionable earnings and
on the amount of an annual pension benefit which can be paid out of a
tax-qualified retirement plan.
6
<PAGE> 7
Pension Benefits (cont'd)
In accordance with Plan regulations, you will be eligible to commence your
pension benefit upon retirement at age 55 on July 1, 2003. Alternatively, you
may defer the commencement of your pension benefit until a later date. The
reduction of a pension benefit commenced before age 62 is 3% per year. All
options available to other officers from the RBP and the Supplemental Executive
Retirement Plan (SERP) on the date of your benefit commencement will be
available to you. The election of any form of payment other than a lifetime
annuity or spouse's 50% joint & survivor annuity requires an election at least
one year in advance of your benefit commencement date or a proof of normal life
expectancy. You will receive a full accounting and explanation of your pension
and other retirement benefits nearer to your retirement date.
Super Saver 401(k) Plan
You may continue to participate in the Super Saver Plan and move investments
among the available funds under the provisions of the plan. However, no
further contributions may be made after you convert to retiree status.
In accordance with plan provisions, you may commence a distribution upon
reaching age 59 1/2 or retirement, whichever occurs first. Alternatively, you
may elect to leave your funds in your account following your retirement. As
such, you may continue to transfer your funds among the available investment
options on a quarterly basis by giving notice to Super Saver Plan Headquarters
in accordance with plan procedures. However, you must begin receiving your
benefit no later than 70 1/2 or you will incur a substantial tax penalty under
the current tax laws.
Insurance Coverages
a) Health Benefits Coverage
You will continue to be covered under the Flexible Benefits program
through the end of your employment period. Your benefit pay will
continue and deductions will be taken each pay period based on the
options you elected. Additionally, you will be able to change your
options in accordance with the plan provisions during each annual
enrollment period.
Upon retirement you will receive retiree health coverage provided you
continue pre-funding for this benefit through the end of your
employment period. Pre-funding contributions will continue to be
deducted from your paychecks. The retiree plan does not provide
dental or vision care coverages.
7
<PAGE> 8
Insurance Coverages (cont'd)
b) Supplemental Medical Coverage
Our records indicate that you have not elected to enroll in annual
Supplemental Medical coverage for yourself and your spouse under the
Flexible Benefits program. However, you will continue to be eligible
to enroll in this annual coverage during your employment period.
You may continue to purchase coverage in the American Airlines
Supplemental Medical Plan for yourself and your spouse (to the extent
such coverage was purchased under the Flexible Benefits program prior
to your retirement) into retirement by sending a check for the balance
of the annual premium in the year of retirement and for the annual
premiums due thereafter to the plan administrator.
c) Group Term Life Insurance Coverage
Your Group Term Life Insurance coverage will continue under the
Flexible Benefits program through the end of your employment period
under the same conditions as your health coverage. To the extent the
conversion privilege continues to be made available to retired
employees of the Company, you will have the right to convert any life
insurance coverage you have been purchasing under the Flexible
Benefits program to an individual policy by contacting your local
Metropolitan Life Insurance office within 30 days following your
retirement.
d) Long Term Disability Coverage (LTD)
Your Long Term Disability coverage will continue under the Flexible
Benefits program and deductions will continue to be taken from your
pay during your employment period. Coverage under this benefit ceases
in conjunction with your retirement.
e) Accidental Death and Dismemberment Coverage (AD&D)
Your Accidental Death and Dismemberment coverage will continue under
the Flexible Benefits program and deductions will continue to be taken
from your pay during your employment period.
Coverage under this benefit ceases in conjunction with your
retirement.
8
<PAGE> 9
Insurance Coverages (cont'd)
f) Management Personal Accident Insurance Coverage
Company paid Management Personal Accident Insurance coverage of three
times your annual salary (up to $1,000,000) will continue during your
employment period and will terminate in conjunction with your
retirement.
g) General
Should you fail to make timely payment for any of the aforementioned
insurance coverage or for your pass travel (explained below) or should
you fail to observe the rules related to pass travel, AMR reserves the
right to terminate such insurance coverages and pass travel, as the
case may be.
Split Dollar Life Insurance Policy
Under the terms of the Split Dollar Life Insurance program, retirement at age
55 and the completion of ten years of service with the Company will require
American Airlines to continue to advance the annual premiums on your policy for
the lesser of your lifetime or your attainment of age 65. Upon reaching age
65, the Company will recover the amount of premiums previously paid by it and
release the policy to you.
No action is required on your part at this time.
Pass Travel
You, your spouse and your dependent children will retain your A-2 travel
privileges during your employment period and into retirement, to the extent
such privileges continue to be available to retired officers of the Company.
Upon retirement, you will receive retiree A-2 travel cards that can be used to
obtain travel at any American Airlines ticketing facility. You will continue
to be eligible for the annual D-3 allowance that may be shared with your
eligible non-dependent relatives and other companions. As a retiree, you have
the option of paying service charges at the time of ticketing or being billed
for these service charges.
Credit Union
You may retain your membership in the Credit Union during your employment
period. As such, you may continue to make contributions to your account or
make payroll-deducted loan payments, if any, through the end of your employment
period. Upon retirement, please contact the Credit Union directly to resolve
any loans you may have, if any.
9
<PAGE> 10
Leased Automobile
To the extent such benefits continue to be made available to officers of the
Company, you may continue to participate in the Executive Automobile Program
through the end of your employment period. The automobile currently leased by
American Airlines for you is eligible for replacement after the completion of
your 36th month of the lease, on August 1, 1996. At that time, you may elect
to:
1. Turn in the automobile you currently operate and, to the
extent such benefits continue to be made available to officers
of the Company, select another vehicle under American's
Executive Automobile Program.
2. Purchase the vehicle you currently operate for 90% of the fair
market value on the date of purchase, less your proportionate
share of any gain that American may realize on the sale.
Should you elect to purchase the vehicle that you currently
operate, to the extent such benefits continue to be made
available to officers of the Company, you will be eligible to
select another vehicle under American's Executive Automobile
Program.
3. Continue to operate the vehicle currently leased to you until
the earlier of your retirement or such time that you wish to
pursue options one or two above.
Additionally, in conjunction with a vehicle replacement, you may turn in your
car telephone or purchase it at the fair market value established at the time
of purchase.
Club Memberships
Our records indicate that you have not selected a Corporate Club Membership.
To the extent such benefits continue to be made available to officers of the
Company, you will continue to be eligible for a Corporate Club Membership
during your employment period. You may continue using your honorary Admirals
Club membership during your employment period.
In conjunction with your retirement and in recognition of your years of service
with the Company, American Airlines will provide you with a lifetime Admirals
Club membership.
Financial and Tax Planning
To the extent such benefits continue to be made available to officers of the
Company, the Company will continue to pay for your financial and tax planning
services, to the extent of our reimbursement policy, through the end of your
employment period.
10
<PAGE> 11
Company Property
All company property, including but not limited to home computer equipment,
laptop computer, home fax machine, A T & T telephone card, Corporate American
Express Card, building entry cards and company identification cards, except
your travel cards, should be returned to American Airlines Executive
Compensation at the end of your employment period.
Transitional Cooperation
You agree to execute any and all documents and to take any and all action which
AMR may reasonably request to effect the transition of your duties and
responsibilities prior to the end of your employment period. You further agree
to make yourself available and to cooperate in connection with any litigation
involving the Corporation, in which you may be requested as a witness.
Reimbursement of out-of-pocket expenses will be provided by the Corporation.
Obligations
As consideration for the compensation and other benefits and privileges
described in this agreement, you agree that you will not, without prior written
approval of AMR, which may be withheld at AMR's sole discretion:
a) provide services as an executive or consultant during the term of this
agreement and for a period of five years after you convert to retiree
status, to any of the following Computer Reservation Systems (CRS) or
any subsidiary or affiliate of the following CRS's: Abacus, Amadeus,
Galileo, SystemOne or Worldspan, or any successor thereof; or during
the term of this agreement and for a period of three years after you
convert to retiree status, to any US-based airline with revenues in
excess of $1 billion or any subsidiary or affiliate of such US-based
airline.
Subsidiary or affiliate means, with respect to any entity, any other
entity directly or indirectly controlling, or controlled by, or under
common control with, such entity. For purposes of this definition,
"control" (including "controlled by" and "under common control with")
means the direct or indirect ownership of at least 50% of the equity
or voting rights of an entity or the power to direct, or to cause the
direction of the management and policies of such an entity whether
through the ownership of voting interests, by contract or otherwise.
The term "entity" shall include a natural person, corporation,
partnership, limited liability company, joint venture, association or
other organization.
11
<PAGE> 12
Obligations (cont'd)
a) Should you be retained as an executive or consultant by any of the
above mentioned CRS's, or a subsidiary or affiliate of any such CRS or
by any U.S.-based airline with revenues in excess of $1 billion, or a
subsidiary or affiliate of such an airline, without the prior written
approval of AMR, this agreement shall terminate and all remaining
cash, stock-based compensation and benefits and privileges provided
for within this agreement shall be forfeited, to the extent permitted
by law.
b) directly or indirectly induce any employee or independent contractor
of AMR, its subsidiaries, any of its affiliates (whether or not now
existing) or any company in which AMR or American has an ownership
interest to terminate such relationship without the prior written
consent of AMR or American.
c) disparage in any way or otherwise harm or bring discredit to AMR, its
subsidiaries or any of its affiliates, agents, current or former
employees, officers or directors, or divulge to any party at any time
any confidential, proprietary or trade secret data of or relating to
AMR, its subsidiaries or any of its affiliates, including the
existence of and or the terms of this agreement.
We agree that AMR, its subsidiaries and its affiliates will not disparage or
otherwise harm or bring discredit to you.
Confidentiality
You acknowledge that all material and information about or the property of AMR,
its affiliates or any of their officers or directors, which has or will come
into your possession or knowledge in connection with this agreement or in
connection with your employment by American or AMR includes certain
confidential and proprietary data and you agree to hold such material and
information in strictest confidence. You agree not to make use of such
confidential material and information other than for the performance of this
agreement and not to release or disclose such data to any other party during
the term of this agreement or at any time thereafter.
Indemnification
AMR Corporation will extend its indemnity against liabilities incurred by you
as a result of any legal proceedings in which AMR may become involved, which
you may be a party to and which may pertain to your employment by American or
AMR prior to the date hereof or hereunder.
12
<PAGE> 13
Additional Understandings
This agreement contains the entire agreement between you and AMR with respect
to your compensation and benefits arrangements relative to your employment and
retirement from the Corporation. To the extent there is anything to the
contrary contained in any other agreement between you and the Corporation, this
agreement shall control. This agreement is governed by the laws of the State
of Texas. To the extent any provision of this agreement is deemed
unenforceable, the remainder of the provisions will remain in full force and
effect.
Please sign and return one copy of this letter agreement to indicate your
concurrence with the above arrangements, and your release of AMR, its
subsidiaries, affiliates, agents, current and former employees, officers and
directors from any and all claims for relief of any kind with respect to your
employment prior to the date hereof or hereunder, including, but not limited
to, any and all claims of discrimination of any kind, other than claims
relating to death, disability, or health insurance reimbursement. In return,
AMR agrees to release you from any and all claims for relief of any kind with
respect to your AMR employment prior to the date hereof or hereunder.
Very truly yours,
Accepted and Agreed:
/s/ Terry B. Jones July 11, 1996 Terry
- ------------------------------ ------------------------------
B. Jones Date
13
<PAGE> 1
EXHIBIT 10.31
July 15, 1996
Tom,
Employment Agreement - Equity Conversion
As you are aware, The SABRE Group (TSG) became a separate legal entity
effective July 2 with plans for an initial public offering (IPO) this fall.
With the formal separation from AMR, The SABRE Group will move towards
compensation and benefit programs that are better aligned with technology
industry prevalent practice and linked to SABRE Group performance. As part of
the SABRE Group long term incentive program, we intend to convert some current
outstanding and all future employee equity awards from AMR shares to TSG
shares.
Your outstanding AMR equity awards will be converted to TSG shares utilizing
standard conversion methodology applicable to all SABRE Group employees. All
conversions are based on the opening price of AMR and TSG stock on the IPO
date.
You have an employment agreement with American Airlines, Inc. that was signed
in 1995 and terminates in 2000. This agreement provides for specified annual
equity grants payable in AMR shares. It also allows for the conversion of AMR
awards to SABRE Group awards.
We are pleased to offer you the opportunity to convert your agreement to SABRE
shares and participate in a special IPO equity grant:
- - Your existing agreement will be converted to SABRE shares preserving the
mix of incentive vehicles and distribution of value across the term
- - An IPO grant of $300,000 in options will be made at the time of IPO: 50% of
value as an additional grant and 50% of value as an acceleration of 1997
grant
In addition to conversion of your employment agreement, you will be asked to
decide on a conversion methodology for your career equity holdings. Some
information is included in the Outstanding Equity Awards section. You will
receive a more detailed explanation and election forms separately. The
deadline for this election will be later than the deadline for your employment
agreement election.
<PAGE> 2
Enclosed you will find the following:
- - Underlying Assumptions
- - New Grant Schedule Description and Schedule
- - Projected vesting of future awards assuming age 60 retirement
- - Outstanding Equity Awards Conversion
You are one of the five most highly compensated employees of the SABRE Group.
As such, material terms of your employment agreement may be disclosed as part
of the registration statement. It will be important for you to agree in
principle to the conversion strategy before July 31.
Please indicate your agreement below and return to me. Once the IPO is
complete and the AMR and TSG stock prices are established, your employment
agreement will be modified to reflect your new grant schedule. In the event
that an IPO does not take place, your current employment agreement will remain
in place.
Sincerely,
/s/ Michael J. Durham
Michael J. Durham
Enclosures
Please indicate your agreement by signing below
Signature /s/ Thomas M. Cook Date 8/13/96
<PAGE> 3
UNDERLYING ASSUMPTIONS
- - Prevailing AMR stock price: $90.00
- - Initial SABRE per share offering price: $25.00
- - The above stock prices are also assumed to be the present value of all
future stock prices
- - For purposes of valuation of future equity grants, we have assumed that
each incentive vehicle has a value on its date of grant equal to the
following percentage of the prevailing stock price:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Vales as a Percent of Stock Price
---------------------------------
Vehicle AMR SABRE
---------------------------------------------------------------------
<S> <C> <C>
Stock Options 31.0% 35.0%
---------------------------------------------------------------------
Restricted Stock 88.5% 88.5%
---------------------------------------------------------------------
Performance Shares 88.5% 88.5%
---------------------------------------------------------------------
</TABLE>
- For example, the present value of a future AMR stock option is assumed
to be worth 31% of $90.00 on its grant date ($27.90); one SABRE stock
option is assumed to be worth 35% of $25.00 on its grant date ($8.75).
- These values do not apply to previously granted awards
- - Stock Option values were developed using a Black-Scholes formula. SABRE's
assumed stock price volatility is based on the average of a group of
publicly traded transaction processing companies; all stock options are
assumed to be granted with an exercise price equal to the prevailing fair
market value
- - Restricted share values include a discount for vesting and likelihood of
receipt of shares
- - Performance share values include a discount for vesting and likelihood of
receipt of shares
- - FINAL GRANT SCHEDULES AND CONVERSION SCHEDULES WILL BE BASED ON THE ACTUAL
OPENING AMR AND SABRE OFFERING PRICES ON THE OFFERING DATE
- Value of SABRE awards are calculated using the same formula and TSG
price and valuation percentages
<PAGE> 4
CONVERTED GRANT SCHEDULE
- - Your new grant schedule was developed by valuing your AMR equity grant
schedule as of the grant dates, and offering grants of equal economic value
through SABRE equity.
- - Descriptions appear on pages 3 and 4; grant schedule details appear on page
5. Vested awards at age 60 are presented on page 6.
CURRENT AGREEMENT
- - Under the terms of your current agreement, you receive annual grants of
13,000 stock options, 700 restricted stock shares and 2,200 performance
shares
- - Using AMR stock price of $90, the annual value of these awards is $593,685
calculated as follows:
<TABLE>
<CAPTION>
# Shares Calculation Value % Mix
-------- ----------- ----- -----
<S> <C> <C> <C> <C>
Stock Options 13,000 # Shares x Stock Price x % Value $362,700 61.1%
(13,000 x $90 x 31%)
Restricted Stock 700 # Shares x Stock Price x % Value 55,755 9.4%
(700 x $90 x 88.5%)
Performance Shares 2,200 # Shares x Stock Price x % Value 175,230 29.5%
(2,200 x $90 x 88.5%) --------
Total $593,685
========
</TABLE>
- Value of SABRE awards are calculated using the same formula and TSG
price and valuation percentages
<PAGE> 5
CONVERTED GRANT SCHEDULE DESCRIPTION
STRAIGHT CONVERSION WITH IPO GRANT
- - Straight conversion changes the underlying equity used in the grant
schedules. It otherwise preserves the mix of incentive vehicles used, and
the distribution of value across the contract term.
- - Based on the stock price assumptions, a straight conversion would yield the
following annual award:
<TABLE>
<CAPTION>
# Shares Value % Mix
-------- ----- -----
<S> <C> <C> <C>
Stock Options 41,451 $362,696 61.1%
Restricted Stock 2,520 55,755 9.4%
Performance Shares 7,920 175,230 29.5%
-------
Total $593,681
========
</TABLE>
- Actual number of shares will be rounded to provide even vesting and
facilitate administration
- - An IPO grant of $300,000 in options will be made at the time of IPO: 50% of
value as an additional grant and 50% of value as an acceleration of 1997
grant
- The total contract term grant value is $150,000 greater than your
current AMR agreement
- This schedule delivers more of your total contract value in earlier
years. You will vest in more value earlier on this basis than under
the AMR schedule.
<PAGE> 6
TOM COOK CONVERTED GRANT SCHEDULE
- --------------------------------------------------------------------------------
Assumptions
<TABLE>
<CAPTION>
- ------------------------------------------------
AMR TSG
- ------------------------------------------------
<S> <C> <C>
Options 31.0% 35.0%
- ------------------------------------------------
Res Stock 88.5% 88.5%
- ------------------------------------------------
Perf Shares 88.5% 88.5%
- ------------------------------------------------
Stock Price $90.00 $25.00
- ------------------------------------------------
Current Agreement
- -----------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------
AMR Options AMR Restricted Stock AMR Performance Shares Total AMR Value
-------------------------------------------------------------------------------------------------------------
# Value # Value # Value Per Year Cumulative
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1996 13,000 $362,700 700 $55,755 2,200 $175,230 $593,685 $593,685
- ----------------------------------------------------------------------------------------------------------------------------
1997 13,000 $362,700 700 $55,755 2,200 $175,230 $593,685 $1,187,370
- ----------------------------------------------------------------------------------------------------------------------------
1998 13,000 $362,700 700 $55,755 2,200 $175,230 $593,685 $1,781,055
- ----------------------------------------------------------------------------------------------------------------------------
1999 13,000 $362,700 700 $55,755 2,200 $175,230 $593,685 $2,374,740
- ----------------------------------------------------------------------------------------------------------------------------
2000 13,000 $362,700 700 $55,755 2,200 $175,230 $593,685 $2,968,425
- ----------------------------------------------------------------------------------------------------------------------------
Total 65,000 $1,813,500 3,500 $278,775 11,000 $876,150 $2,968,425
- ----------------------------------------------------------------------------------------------------------------------------
% Mix 61.1% 9.4% 29.5% 100.0%
- ----------- ---------- -------- ------------------------
Straight Conversion
- -------------------
- - Straight Conversion would provide for the following stock award receipt:
<CAPTION>
-------------------------------------------------------------------------------------------------------------
TSG Options TSG Restricted Stock TSG Performance Shares Total TSG Value
-------------------------------------------------------------------------------------------------------------
# Value # Value # Value Per Year Cumulative
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1996 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $593,681
- ----------------------------------------------------------------------------------------------------------------------------
1997 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $1,187,362
- ----------------------------------------------------------------------------------------------------------------------------
1998 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $1,781,043
- ----------------------------------------------------------------------------------------------------------------------------
1999 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $2,374,724
- ----------------------------------------------------------------------------------------------------------------------------
2000 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $2,968,405
- ----------------------------------------------------------------------------------------------------------------------------
Total 207,255 $1,813,480 12,600 $278,775 39,600 $876,150 $2,968,405
- ----------------------------------------------------------------------------------------------------------------------------
% Mix 61.1% 9.4% 29.5% 100.0%
- ----------- ---------- -------- ------------------------
Straight Conversion with IPO Grant
- ----------------------------------
- - In addition to conversion, you will receive an IPO grant of $300,000 in
options. $150,000 of this award is an additional award and $150,000 is an
acceleration of a portion of your 1997 stock option award.
- - Award receipt will be modified as follows:
<CAPTION>
-------------------------------------------------------------------------------------------------------------
TSG Options TSG Restricted Stock TSG Performance Shares Total TSG Value
-------------------------------------------------------------------------------------------------------------
# Value # Value # Value Per Year Cumulative
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1996 75,737 $662,699 2,520 $55,755 7,920 $175,230 $893,684 $893,684
- ----------------------------------------------------------------------------------------------------------------------------
1997 24,308 $212,695 2,520 $55,755 7,920 $175,230 $443,680 $1,337,364
- ----------------------------------------------------------------------------------------------------------------------------
1998 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $1,931,045
- ----------------------------------------------------------------------------------------------------------------------------
1999 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $2,524,726
- ----------------------------------------------------------------------------------------------------------------------------
2000 41,451 $362,696 2,520 $55,755 7,920 $175,230 $593,681 $3,118,407
- ----------------------------------------------------------------------------------------------------------------------------
Total 224,398 $1,963,482 12,600 $278,775 39,600 $876,150 $3,118,407
- ----------------------------------------------------------------------------------------------------------------------------
% Mix 63.0% 8.9% 28.1% 100.0%
- ----------- ---------- -------- ------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.32
July 15, 1996
Terry,
Employment Agreement - Equity Conversion
As you are aware, The SABRE Group (TSG) became a separate legal entity
effective July 2 with plans for an initial public offering (IPO) this fall.
With the formal separation from AMR, The SABRE Group will move towards
compensation and benefit programs that are better aligned with technology
industry prevalent practice and linked to SABRE Group performance. As part of
the SABRE Group long term incentive program, we intend to convert some current
outstanding and all future employee equity awards from AMR shares to TSG
shares.
Your outstanding AMR equity awards will be converted to TSG shares utilizing
standard conversion methodology applicable to all SABRE Group employees. All
conversions are based on the opening price of AMR and TSG stock on the IPO
date.
You have an employment agreement with American Airlines, Inc. that has not been
fully executed. This agreement has an initial term of five years, terminating
in 1999 and provides for specified annual equity grants payable in AMR shares.
It also allows for the conversion of AMR awards to SABRE Group awards.
We are pleased to offer you a choice of two alternative grant schedules:
- - Straight Conversion that preserves the mix of incentive vehicles and
distribution of value across the term
- - Reallocated Conversion that modifies the mix of incentive vehicles and the
grant schedule while preserving the value of your agreement. This
alternative includes an IPO grant of $300,000: 50% of value as an
additional grant and 50% of value as an acceleration of 1997 grant.
In addition to conversion of your employment agreement, you will be asked to
decide on a conversion methodology for your career equity holdings. Some
information is included in the Outstanding Equity Awards section. You will
receive a more detailed explanation and election forms separately. The
deadline for this election will be later than the deadline for your employment
agreement election.
<PAGE> 2
Enclosed you will find the following:
- - Underlying Assumptions
- - Alternative Grant Schedule Descriptions and Schedules
- - Outstanding Equity Awards Conversion
You are one of the five most highly compensated employees of the SABRE Group.
As such, material terms of your employment agreement may be disclosed as part
of the registration statement. It will be important for you to make a decision
regarding conversion strategies before July 31.
Please indicate your choice of conversion strategies below and return to me.
Once the IPO is complete and the AMR and TSG stock prices are established, your
employment agreement will be modified to reflect your grant schedule decision.
In the event that an IPO does not take place, your current employment
agreement, once executed, will remain in place.
Sincerely,
/s/ Michael J. Durham
Michael J. Durham
Enclosures
Please indicate your choice of alternative grant schedules by checking the
appropriate box:
-----------------------------------------
Straight Conversion
-----------------------------------------
Reallocated Conversion /s/ TBJ
-----------------------------------------
Signature /s/ Terrell B. Jones Date 7/30/96
<PAGE> 3
UNDERLYING ASSUMPTIONS
- - Prevailing AMR stock price: $90.00
- - Initial SABRE per share offering price: $25.00
- - The above stock prices are also assumed to be the present value of all
future stock prices
- - For purposes of valuation of future equity grants, we have assumed that
each incentive vehicle has a value on its date of grant equal to the
following percentage of the prevailing stock price:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Vales as a Percent of Stock Price
-----------------------------------
Vehicle AMR SABRE
<S> <C> <C>
----------------------------------------------------------------------
Stock Options 31.0% 35.0%
----------------------------------------------------------------------
Restricted Stock 88.5% 88.5%
----------------------------------------------------------------------
Performance Shares 88.5% 88.5%
----------------------------------------------------------------------
</TABLE>
- For example, the present value of a future AMR stock option is assumed
to be worth 31% of $90.00 on its grant date ($27.90); one SABRE stock
option is assumed to be worth 35% of $25.00 on its grant date ($8.75).
- These values do not apply to previously granted awards
- - Stock Option values were developed using a Black-Scholes formula. SABRE's
assumed stock price volatility is based on the average of a group of
publicly traded transaction processing companies; all stock options are
assumed to be granted with an exercise price equal to the prevailing fair
market value
- - Restricted share values include a discount for vesting and likelihood of
receipt of shares
- - Performance share values include a discount for vesting and likelihood of
receipt of shares
- - FINAL GRANT SCHEDULES AND CONVERSION SCHEDULES WILL BE BASED ON THE ACTUAL
OPENING AMR AND SABRE OFFERING PRICES ON THE OFFERING DATE
- Actual number of shares will be rounded to provide even vesting and
facilitate administration
<PAGE> 4
ALTERNATIVE GRANTS
- - Your alternative grant schedules were developed by valuing your AMR equity
grant schedule as of the grant dates, and offering grants of equal economic
value through SABRE equity.
- - Descriptions appear on pages 3 and 4; grant schedule details appear on page
5
CURRENT AGREEMENT
- - Under the terms of your current agreement, you receive annual grants of
5,000 stock options, 750 restricted stock shares and 1,900 performance
shares
- - Using AMR stock price of $90, the annual value of these awards is $350,573
calculated as follows:
<TABLE>
<CAPTION>
# Shares Calculation Value % Mix
-------- ----------- ----- -----
<S> <C> <C> <C> <C>
Stock Options 5,000 # Shares x Stock Price x % Value $139,500 39.8%
(5,000 x $90 x 31%)
Restricted Stock 750 # Shares x Stock Price x % Value 59,738 17.0%
(750 x $90 x 88.5%)
Performance Shares 1,900 - Shares x Stock Price x % Value 151,335 43.2%
(1,900 x $90 x 88.5%) --------
Total $350,573
========
</TABLE>
- Value of SABRE awards are calculated using the same formula and TSG
price and valuation percentages
<PAGE> 5
ALTERNATIVE GRANT SCHEDULE DESCRIPTION
STRAIGHT CONVERSION
- - The straight conversion alternative changes only the underlying equity used
in the grant schedules. It otherwise preserves the mix of incentive
vehicles used, and the distribution of value across the contract term.
- - Based on the stock price assumptions, a straight conversion would yield the
following annual award:
<TABLE>
<CAPTION>
- Shares Value % Mix
-------- ----- -----
<S> <C> <C> <C>
Stock Options 15,943 $139,501 39.8%
Restricted Stock 2,700 59,738 17.0%
Performance Shares 6,840 151,335 43.2%
--------
Total $350,574
========
</TABLE>
- Actual number of shares will be rounded to provide even vesting and
facilitate administration
<PAGE> 6
ALTERNATIVE GRANT SCHEDULE DESCRIPTION
REALLOCATED GRANTS
- - The reallocated alternative modifies the grant schedule from your current
AMR agreement to match more closely the grant schedules of other SABRE
officers
- In general, the reallocated alternative delivers 50% of value through
options, 50% through performance shares
- - An IPO grant of $300,000 in options will be made at the time of IPO: 50% of
value as an additional grant and 50% of value as an acceleration of 1997
grant
- The total contract term grant value is $150,000 greater than your
current AMR agreement
- The reallocated schedule delivers more of your total contract value in
earlier years. You will vest in more value earlier on this basis than
under the current or "straight conversion" alternative. No discounts
have been applied to account for this earlier liquidity
- - If you terminate employment or retire at the end of the contract term, you
will vest in a higher percentage of the total grants, and leave with more
value under the restructured alternative than the straight conversion
<PAGE> 7
TERRY JONES ALTERNATIVE GRANT SCHEDULES
- --------------------------------------------------------------------------------
Assumptions
<TABLE>
<CAPTION>
- ------------------------------------------------
AMR TSG
- ------------------------------------------------
<S> <C> <C>
Options 31.0% 35.0%
- ------------------------------------------------
Res Stock 88.5% 88.5%
- ------------------------------------------------
Perf Shares 88.5% 88.5%
- ------------------------------------------------
Stock Price $90.00 $25.00
- ------------------------------------------------
Current Agreement
- -----------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
AMR Options AMR Restricted Stock AMR Performance Shares Total AMR Value
-----------------------------------------------------------------------------------------------------------------
# Value # Value # Value Per Year Cumulative
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 5,000 $139,500 750 $59,738 1,900 $151,335 $350,573 $350,573
- ------------------------------------------------------------------------------------------------------------------------------------
1997 5,000 $139,500 750 $59,738 1,900 $151,335 $350,573 $701,146
- ------------------------------------------------------------------------------------------------------------------------------------
1998 5,000 $139,500 750 $59,738 1,900 $151,335 $350,573 $1,051,719
- ------------------------------------------------------------------------------------------------------------------------------------
1999 5,000 $139,500 750 $59,738 1,900 $151,335 $350,573 $1,402,292
- ------------------------------------------------------------------------------------------------------------------------------------
Total 20,000 $558,000 3,000 $238,952 7,600 $605,340 $1,402,292
- ------------------------------------------------------------------------------------------------------------------------------------
% Mix 39.8% 17.0% 43.2% 100.0%
- ------------ -------- -------- ------------------------
Straight Conversion
- -------------------
<CAPTION>
----------------------------------------------------------------------------------------------------------------
TSG Options TSG Restricted Stock TSG Performance Shares Total TSG Value
----------------------------------------------------------------------------------------------------------------
# Value # Value # Value Per Year Cumulative
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 15,943 $139,501 2,700 $59,738 6,840 $151,335 $350,574 $350,574
- ------------------------------------------------------------------------------------------------------------------------------------
1997 15,943 $139,501 2,700 $59,738 6,840 $151,335 $350,574 $701,147
- ------------------------------------------------------------------------------------------------------------------------------------
1998 15,943 $139,501 2,700 $59,738 6,840 $151,335 $350,574 $1,051,721
- ------------------------------------------------------------------------------------------------------------------------------------
1999 15,943 $139,501 2,700 $59,738 6,840 $151,335 $350,574 $1,402,294
- ------------------------------------------------------------------------------------------------------------------------------------
Total 63,772 $558,004 10,800 $238,950 27,360 $605,340 $1,402,294
- ------------------------------------------------------------------------------------------------------------------------------------
% Mix 39.8% 17.0% 43.2% 100.0%
- ------------ -------- -------- ------------------------
TSG Share Reallocation with IPO Award
- - Reallocated schedule provides for 50% of annual value in stock options and
50% in performance shares
- - In addition to conversion, you will receive an IPO grant of $300,000 in
options. $150,000 of this award is an additional award and $150,000 is an
acceleration of a portion of your 1997 stock option award.
<CAPTION>
-------------------------------------------------------------------------------------
TSG Options TSG Performance Shares Total TSG Value
-------------------------------------------------------------------------------------
# Value # Value Per Year Cumulative
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 54,319 $475,291 7,923 $175,296 $650,588 $650,588
- ---------------------------------------------------------------------------------------------------------
1997 2,890 $25,288 7,923 $175,296 $200,584 $851,172
- ---------------------------------------------------------------------------------------------------------
1998 20,033 $175,289 7,923 $175,296 $350,585 $1,201,757
- ---------------------------------------------------------------------------------------------------------
1999 20,033 $175,289 7,923 $175,296 $350,585 $1,552,342
- ---------------------------------------------------------------------------------------------------------
Total 97,275 $851,156 31,692 $701,186 $1,552,342
- ---------------------------------------------------------------------------------------------------------
% Mix 54.8% 45.2% 100.0%
- ------------ -------- -------- ------------
</TABLE>
<PAGE> 1
EXHIBIT 23.2
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 15, 1996, (except as to Note 1, for which
the date is July 22, 1996) in the Amendment No. 1 to the Registration Statement
on Form S-1 (No. 333-09747) and related Prospectus of The SABRE Group Holdings,
Inc. for the registration of shares of its common stock.
Our audits also included the financial statement schedule of The SABRE
Group Holdings, Inc. listed in Item 16(b). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
Dallas, Texas
September 12, 1996
