<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
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>
4200 AMERICAN 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. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, $.01 par value................................ $550,000,000 $189,656
===========================================================================================================
</TABLE>
(1) The shares of Class A Common Stock are not being registered for the purpose
of sales outside the United States.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
---------------------
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 AUGUST 8, 1996
[SABRE LOGO] SHARES
THE SABRE GROUP HOLDINGS, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the shares of Class A Common Stock offered, shares are
being offered hereby in the United States and 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 % of the economic interest in the Company (approximately %
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 %
of the combined voting power of all classes of voting stock of the Company
(approximately % 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 $ and $ 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 will be 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 $ payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 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
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
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 50 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
Company's information technology solutions business.
MARKET POSITION AND STRATEGY
The Company intends to maintain its leadership positions and to expand its
electronic travel distribution and information technology solutions businesses.
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 each of its
travel distribution and information technology solutions businesses, (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 its business 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 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,
4
<PAGE> 7
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(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 business
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 % of the combined voting power of all classes of voting stock
of the Company (approximately % 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. The Company will
have $ of long-term indebtedness after approximately
5
<PAGE> 8
$ 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 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 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......................... shares
International Offering................ shares
Total......................... shares
Common Stock to be outstanding after the
Offerings(1)
Class A Common Stock.................. shares
Class B Common Stock.................. shares
Total......................... shares
Use of proceeds(2)...................... Approximately 90% of the net proceeds of
the Offerings 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 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........... 220.2 255.3 275.2 311.1 323.4 169.6 180.0
Cash Flow from Operating Activities....... $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $168.3 $143.2
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.
8
<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.......................................... 1,188.7 566.2 635.1
-------- ------ ------
Operating Income............................................ $ 274.6 $170.5 $197.1
Other Income (Expense), net.................................
-------- ------ ------
Income Before Income Taxes.................................. $ $ $
Income Taxes................................................
-------- ------ ------
Net Earnings................................................ $ $ $
======== ====== ======
Pro Forma Earnings Per Share(2)............................. $ $ $
======== ====== ======
</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 $
Total Assets...................................................... 1,049.0
Current Liabilities............................................... 171.7 171.7
Debenture Payable to AMR.......................................... 850.0
Stockholders' Equity (Deficit).................................... (120.9)
</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.................... 18.8% 23.1% 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,
including equivalent shares related to options outstanding under the
Company's 1996 Long-Term Incentive Plan. 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 applicable term. 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 also derives significant revenues by providing 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 have been
held since March 1996. The outcome of these negotiations and the impact on
American, and therefore on the Company, cannot be determined at this time.
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.
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.
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
- ---------------
* Amadeus, System One, Galileo, Apollo and Worldspan are trademarks of their
respective owners and are not trademarks of the Company.
11
<PAGE> 14
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.
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
12
<PAGE> 15
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 % of the combined voting power of all classes of
voting stock of the Company (approximately % 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.
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."
13
<PAGE> 16
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."
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
14
<PAGE> 17
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 substantially in
their current form, the U.S. Regulations are currently scheduled to expire on
December 31, 1997.
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 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
15
<PAGE> 18
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 certain exceptions, not to sell or
otherwise dispose of any shares of Common Stock (other than the shares offered
hereby) 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
16
<PAGE> 19
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 % of the economic interest
in the Company and approximately % of the combined voting power of all
classes of voting stock of the Company (approximately % of the economic
interest and % 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 90% 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 $ from the sale of the
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 90% 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. 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 $ , or $ 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
shares of Class A Common Stock at a price of $ 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 $ , or $ per share. This represents an
immediate dilution in pro forma net tangible book value per share of $
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................ $
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Reorganization... $
------
Increase per share attributable to new investors....... $
------
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Offerings........ $
------
Dilution per share to new investors.................... $
======
</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 shares of Class B Common Stock and (y) the sale
of shares of Class A Common Stock in the Offerings at an assumed initial
public offering price of $ 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
Stockholders' Equity:
Preferred Stock: $.01 par value, shares
authorized; no shares issued............... -- -- --
Common Stock: $.01 par value; 1,000
authorized; 1,000 shares issued and
outstanding................................ -- -- --
Class A Common Stock: $.01 par value;
shares authorized; shares issued and
outstanding, as adjusted................... -- --
Class B Common Stock: $.01 par value;
shares authorized; shares issued and
outstanding, as adjusted................... -- --
Additional Paid-in Capital.................... --
Retained Earnings (Deficit)................... (120,876)
Stockholder's Net Investment.................. 551,187 -- --
--------- ---------- ----------
Total Stockholders' Equity
(Deficit)........................... $ 551,187 $ (120,876) $
-------- --------- ---------
Total Capitalization.................. $ 605,289 $ 729,124 $
======== ========= =========
</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 shares of Class B Common Stock and the
issuance of shares of Class A Common Stock, assuming an offering
price of $ per share, pursuant to the Offerings, resulting in net
proceeds of approximately $ after deducting underwriting
commissions and estimated expenses of the Offerings and to reflect the use
of approximately $ 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.......... 220.2 255.3 275.2 311.1 323.4 169.6 180.0
Cash Flow from Operating Activities...... $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $168.3 $143.2
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.
21
<PAGE> 24
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
The pro forma financial information and other data below assumes 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 39.5 (4) 1,188.7
--------- ------- ---------
Operating Income.............................. $ 380.4 $(105.8) $ 274.6
Other Income (Expense), net................... (10.3) (5)
--------- ------- ---------
Income Before Income Taxes.................... $ 370.1 $ $
Income Taxes.................................. 144.2
--------- ------- ---------
Net Earnings.................................. $ 225.9 $ $
========= ======= =========
Pro Forma Earnings Per Share(2)............... $
=========
OTHER DATA(1):
Operating Income as a Percentage of
Revenue..................................... 24.9% 18.8%
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 18.2 (4) 566.2
------ ------- -------
Operating Income.................................. $219.5 $ (49.0) $ 170.5
Other Income (Expense), net....................... (10.4) (5)
------ ------- -------
Income Before Income Taxes........................ $209.1 $ $
Income Taxes...................................... 82.0
------ ------- -------
Net Earnings...................................... $127.1 $ $
====== ======= =======
Pro Forma Earnings Per Share(2)................... $
=======
OTHER DATA(1):
Operating Income as a Percentage of Revenue....... 28.6% 23.1%
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) (5)
------ ------- -------
Income Before Income Taxes........................ $195.2 $ $
Income Taxes...................................... 76.1
------ ------- -------
Net Earnings...................................... $119.1 $ $
====== ======= =======
Pro Forma Earnings Per Share(2)................... $
=======
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............ 274.9 291.3 295.3 327.2 311.2 323.9
------- ------ ------- ------ ------- ------
Operating Income.............. $ 93.7 $ 76.8 $ 80.5 $ 23.6 $ 109.6 $ 87.5
Other Income (Expense),
net.........................
------- ------ ------- ------ ------- ------
Income Before Income Taxes.... $ $ $ $ $ $
Income Taxes..................
------- ------ ------- ------ ------- ------
Net Earnings.................. $ $ $ $ $ $
======= ====== ======= ====== ======= ======
Pro Forma Earnings Per
Share(2).................... $ $ $ $ $ $
======= ====== ======= ====== ======= ======
OTHER DATA(1):
Operating Income as a
Percentage of Revenue....... 25.4% 20.9% 21.4% 6.7% 26.0% 21.3%
Reservations Booked Using
SABRE....................... 86.0 83.6 81.5 72.2 91.3 88.8
</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 calculations 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, reduction in
rent expense, additional postretirement expense, and additional pension
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, 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. The
compound annual growth rate on 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 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........... 80.2 80.6 80.3 70.0
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........... 86.0 83.6 81.5 72.2
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. 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, primarily due to growth in software development
provided to AMR and growth in software development and software license fees
from non-affiliated customers.
OPERATING EXPENSES. Pro forma operating expenses increased $69 million,
12.2%, from $566 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 $27
million, 15.6%, from $170 million to $197 million. Operating margins increased
from 23.1% to 23.7% due to the increase in revenues of 13.0%, while expenses
increased only 12.2%.
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.
INCOME TAXES. The pro forma provision for income taxes was $65 million and
$52 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.
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NET EARNINGS. Pro forma net earnings increased $21 million, 26.8%, from $80
million to $101 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. 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.
Revenue from information technology solutions provided to 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. 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 within SABRE and an increase in booking volumes primarily
attributable to international expansion in Europe and Latin America.
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 these services provided to AMR
primarily due to a change in the pricing structure implemented in 1995.
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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. 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 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.
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.
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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 separate 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 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.
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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."
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
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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 50
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 targeted to
travel agencies and corporations is performed by the Company's SABRE Travel
Information Network division ("STIN") and marketing targeted to individual
consumers is performed by the Company's SABRE Interactive division.
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
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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 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 and Digital Equipment Corp. and
the Company anticipates that, within the next 30 days, it will be in testing by
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
- ---------------
* Windows is a registered trademark of Microsoft Corp.
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provides efficiencies over other products available today and because only a
small percentage of corporations currently have direct access to a global
distribution system.
INDIVIDUAL CONSUMERS. In order to enhance its electronic travel
distribution business, 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.
Since its launch at the Cyber Cafe in New York City in March 1996, over 1
million views (in which a computer user accesses a page of text) have been made
of the Travelocity web site and over 135,000 new members have subscribed 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 a 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
- ---------------
* 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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targeted. The Company is presently focusing its marketing efforts in Europe and
Latin America and anticipates increasing its marketing efforts in Asia.
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's 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.
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,
TWA and 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.
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
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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
Company's information technology solutions business, and 24.2% of the Company's
revenues was generated by information technology solutions services provided to
American and its affiliates.
SOLUTIONS
Through its SABRE Decision Technologies division ("SDT"), 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 consulting; (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. 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.
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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 Science 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 Science
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.
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, 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.
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- 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 business competes 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.
INTELLECTUAL PROPERTY
In connection with the Reorganization, American transferred to the Company
the software utilized in the operation of the businesses 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 2019, subject to four renewal options, exercisable by
the Company, of five years duration each. The Company also leases office
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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 $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
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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.
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.
</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 or 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 . Mr. Durham's present term as a
director will expire at the Company's annual meeting of stockholders to be held
in . Mr. Arpey's present term as a director will expire at the
Company's annual meeting of stockholders to be held in . Mrs.
McNamara's present term as a director will expire at the Company's annual
meeting of stockholders to be held in .
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, 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
48
<PAGE> 51
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 provides for an annual award of options to purchase
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 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.
The SIP also provides for a one-time award of options to purchase
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 which such New Director is elected to the Board (the
"Election Award"). Options granted as an Election Award 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 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.
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
49
<PAGE> 52
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 $396,792, Mr. Cook will receive $261,466, Mr.
Jones will receive $245,666, Mr. Katz will receive $188,880 and Mr. Kelly will
receive $188,245. Mr. Boston will receive a base salary of $133,125 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.
Initially million shares of Class A Common Stock are authorized to be
issued under the LTIP. The Company anticipates issuing approximately shares
of Class A Common Stock, or rights to receive or purchase Class A Common Stock,
under the LTIP over the next 10 years.
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 Compensation/Nominating
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 is administered by the Compensation/Nominating Committee. The
Compensation/Nominating Committee has 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
50
<PAGE> 53
purchase rights, (6) cash bonuses and/or (7) 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 Compensation/Nominating
Committee shall determine, except that no participant may be granted stock
options in any 12 month period for more than shares. Stock options are
exercisable at such times and subject to such terms and conditions as the
Compensation/Nominating Committee determines and over a term (not in excess of
10 years) determined by the Compensation/Nominating Committee. Except as
otherwise determined by the Compensation/Nominating 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 Compensation/Nominating 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. 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 Compensation/Nominating 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 Compensation/Nominating 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 Compensation/Nominating Committee may determine. The
Compensation/Nominating Committee determines the period during which restricted
stock is subject to forfeiture. At grant, the Compensation/Nominating 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.
4. DEFERRED STOCK. The Compensation/Nominating 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 Compensation/Nominating Committee may
determine. The Compensation/Nominating 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 Compensation/Nominating Committee may specify.
5. STOCK PURCHASE RIGHTS. The Compensation/Nominating 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
Compensation/Nominating 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 Compensation/Nominating
Committee, except that the period may not be greater than 30 days.
51
<PAGE> 54
6. CASH BONUSES. The LTIP permits the Compensation/Nominating 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 Compensation/Nominating Committee with respect to such performance periods
as the Compensation/Nominating 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.
7. OTHER STOCK-BASED AWARDS. The Compensation/Nominating 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 Compensation/Nominating Committee in
its discretion may provide.
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 Compensation 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 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.
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<PAGE> 55
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 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
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<PAGE> 56
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.
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 its own retirement plans. The Company
presently has under consideration the parameters of one or more retirement plans
but, as of the date of this Prospectus, has not yet adopted any such plan.
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, 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).
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<PAGE> 57
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.
EXECUTIVE TERMINATION BENEFITS AGREEMENTS
The Company has 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 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, two
times each of the individual's annual base salary, annual award paid under the
Company's incentive compensation plan and certain other miscellaneous benefits.
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.
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<PAGE> 58
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>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- --------------------------------------
AWARDS
------------------------ PAYOUTS
RESTRICTED SECURITIES ----------
STOCK UNDERLYING LTIP ALL OTHER
NAMES 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:
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.
56
<PAGE> 59
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 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%.
57
<PAGE> 60
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)
----------- ----------- -------- ------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
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
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLANS
PERFORMANCE UNTIL ------------------------------
NAME 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.
58
<PAGE> 61
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 OF
NUMBER CLASS B PERCENT OF PERCENT OF NUMBER CLASS B PERCENT OF PERCENT OF
NAME OF OF COMMON ECONOMIC VOTING OF COMMON ECONOMIC VOTING
BENEFICIAL OWNER SHARES STOCK INTEREST POWER SHARES STOCK INTEREST POWER
- ----------------- ------ ---------- ---------- ---------- ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMR Corporation.. 100% 100% 100% 100% %(1) %(1)
4333 Amon
Carter Blvd.,
Fort Worth,
Texas 76155
All directors and
executive
officers as a
group (9
persons)....... -- -- -- -- -- -- (2) (2)
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment options are exercised in full, AMR
would beneficially own % of the economic interest and % of the
voting power after the Offerings.
(2) 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 is 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)(1).......
</TABLE>
- ---------------
(1) The directors and officers of the Company collectively beneficially own %
of the outstanding common stock of AMR.
59
<PAGE> 62
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. 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, upon 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 % of the combined
voting power of the Company's outstanding Common Stock (approximately % 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.
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
60
<PAGE> 63
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 Technology Services
Agreement, 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
61
<PAGE> 64
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.
The Company may not sell or license specified applications, generally yield
management or capacity planning applications, developed for American to certain
competitors of American without the prior written authorization of the Chief
Executive Officer of AMR.
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.
62
<PAGE> 65
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.
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
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<PAGE> 66
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
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 also has, or expects to enter into,
other agreements with
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<PAGE> 67
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 shares of
Class A Common Stock, shares of Class B Common Stock and
shares of Preferred Stock. None of the Class A Common Stock or Preferred Stock
is outstanding as of the date hereof. Of the shares of Class A Common
Stock authorized, are being offered in the Offerings ( shares
if the Underwriters' over-allotment options are exercised in full),
shares will be reserved for issuance upon conversion of Class B Common Stock
into Class A Common Stock and 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 shares of Class B Common Stock authorized,
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 in its entirety 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 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 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 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
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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.
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
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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 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.
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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.
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
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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.
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.
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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").
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
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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.
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
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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 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.
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Second, a corporate opportunity offered to any other 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 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. 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
73
<PAGE> 76
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.
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
74
<PAGE> 77
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 will be 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 shares of
Class A Common Stock issued and outstanding ( if the Underwriters'
over-allotment options are exercised in full) and 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 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
75
<PAGE> 78
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 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."
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.
76
<PAGE> 79
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...............................................
=========
</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.
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 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, , and .
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 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.
77
<PAGE> 80
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
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
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
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 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 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 will be 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 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.
78
<PAGE> 81
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
79
<PAGE> 82
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.
80
<PAGE> 83
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
and AIRFLITE.
81
<PAGE> 84
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> 85
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> 86
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
UNAUDITED
(IN THOUSANDS)
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 $ (h) $ 187,089
(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 0 449,578
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 $ 0 $1,049,029
========== ========== ========== ========= ==========
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 $ (i) 850,000
STOCKHOLDERS' EQUITY
Preferred Stock: $0.01 par value; 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; shares
authorized; shares issued and
outstanding..................................... -- -- (h)
Class B: $0.01 par value; shares authorized;
shares issued and outstanding............. -- -- (h)
Additional paid-in-capital.......................... -- -- (h)
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 subordinated debenture to AMR......... (764,382)(e)
Retained earnings (deficit)......................... -- (120,876) (120,876)
Issuance of subordinated 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) 0 (120,876)
---------- ---------- ---------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $ 855,821 $ 193,208 $1,049,029 $ 0 $1,049,029
========== ========== ========== ========= ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-3
<PAGE> 87
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
Market 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 1,076,083 1,076,083
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)
Additional pension expense............... 8,800 (q)
Selling, general and administrative........ 107,717 112,666 112,666
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)
Additional pension expense............... 1,200 (q)
---------- ---------- ---------- ----------
Total operating expenses............. 1,149,192 39,557 1,188,749 1,188,749
---------- ---------- ---------- ----------
Operating income............................. 380,424 (105,826) 274,598 274,598
Other income (expense), net.................. (10,349) (56,011)(r) (66,360) $ (t) (66,360)(u)
---------- ---------- ---------- ------- ----------
Income before provision for income taxes..... 370,075 (161,837) 208,238 208,238
Provision for income taxes................... 144,224 (63,116)(s) 81,108 (s) 81,108
---------- ---------- ---------- ------- ----------
Net earnings................................. $ 225,851 $ (98,721) $ 127,130 $ $ 127,130
========== ========== ========== ======= ==========
Pro forma earnings per common share data:
Earnings per common share.................. $ (v) $ (w)
========== ==========
Average common and common equivalent shares
outstanding.............................. (v) (w)
========== ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-4
<PAGE> 88
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
Market 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............................. 499,758 515,788 515,788
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)
Additional pension expense................. 4,400 (q)
Selling, general and administrative.......... 48,323 50,456 50,456
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)
Additional pension expense................. 600 (q)
-------- -------- -------- --------
Total operating expenses............... 548,081 18,163 566,244 566,244
-------- -------- -------- --------
Operating income............................... 219,450 (48,958) 170,492 170,492
Other income (expense), net.................... (10,415) (27,977)(r) (38,392) $ (t) (38,392)(u)
-------- -------- -------- ------- --------
Income before provision for income taxes....... 209,035 (76,935) 132,100 132,100
Provision for income taxes..................... 81,978 (30,005)(s) 51,973 (s) 51,973
-------- -------- -------- ------- --------
Net earnings................................... $127,057 $(46,930) $ 80,127 $ $ 80,127
======== ======== ======== ======= ========
Pro forma earnings per common share data:
Earnings per common share.................... $ (v) $ (w)
======== ========
Average common and common equivalent shares
outstanding................................ (v) (w)
======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-5
<PAGE> 89
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS 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)(r) (30,569) $ (t) (30,569)(u)
-------- -------- -------- -------- --------
Income before provision for income taxes....... 195,190 (28,623) 166,567 166,567
Provision for income taxes..................... 76,140 (11,163)(s) 64,977 (s) 64,977
-------- -------- -------- -------- --------
Net earnings................................... $119,050 $(17,460) $101,590 $ $101,590
======== ======== ======== ======== ========
Pro forma earnings per common share data:
Earnings per common share.................... $ (v) $ (w)
======== ========
Average common and common equivalent shares
outstanding................................ (v) (w)
======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-6
<PAGE> 90
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 AMR. Prior to the issuance of Class A
Common Stock pursuant to 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 an $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 shares of Class A Common Stock of
the Company at an assumed offering price of $ per share pursuant to the
Offerings, resulting in net proceeds of approximately $ 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 market 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.
(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
F-7
<PAGE> 91
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 also 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 certain
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 increase in pension benefit costs as a result
of a spin-off of the portion of the American sponsored plan attributable to
Company employees from the American pension plan to new retirement benefit plans
sponsored by the Company. Such spin-off is expected to occur January 1, 1997.
See Note 11 to the Consolidated Financial Statements.
(r) 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.
(s) To record the estimated tax impact of pre-tax income statement
adjustments at the Company's effective tax rate of 39%.
(t) To record the estimated decrease in interest expense resulting from the
partial repayment of the Debenture with the proceeds of the Offerings.
(u) For each 1/8 of 1% increase in interest rates, the impact would be an
annual change in interest expense of approximately $ million.
(v) The pro forma earnings per common share data is calculated using the
shares of common stock outstanding immediately after the Reorganization and
before the Offerings.
(w) The pro forma earnings per common share data is calculated using the
weighted average shares of common stock outstanding after the Offerings,
including common equivalent shares related to stock awards and options
outstanding under the Company's 1996 Long-Term Incentive Plan.
F-8
<PAGE> 92
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> 93
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
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> 94
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> 95
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED 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> 96
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 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> 97
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
Deferred contract costs......................... Contract life
</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. 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 capitalized 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. Amortization
of these assets charged to operations was approximately $0.7 million and $5
million in 1994 and 1995, respectively. American has agreed to reimburse the
Company for any capitalized costs incurred in connection with the implementation
of such systems remaining unamortized 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 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.
F-14
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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 $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.
F-15
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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,
management services, legal fees and certain other administrative costs. Amounts
charged to the Company for these expenses approximate the cost of the services
provided. Travel service costs are charged to the Company based on rates
negotiated with American. 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 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.
F-16
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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> 101
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> 102
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> 103
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> 104
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 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> 105
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 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 Technology Services Agreement, 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> 106
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> 107
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 market support
payments from American for passenger support, revenues would have been
approximately $10 million greater for the six months ended June 30, 1996.
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.
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
F-24
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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>
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.
F-25
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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 million shares of Class A
Common Stock are authorized to be issued under the LTIP. The Company currently
estimates that approximately shares will be issued over the next 10
years in connection with 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 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 $25 per share
for the shares of Class A Common Stock, a maximum of approximately 800,000
options for the purchase of Class A Common Stock would be issued with a weighted
average price of $19.820 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 $25 per share for Class A Common Stock, a maximum of approximately
293,000 Company Performance Shares would be issued pursuant to the conversion of
the outstanding AMR Performance Shares.
F-26
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
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 $25
for Class A Common Stock, a minimum of approximately 157,000 shares and a
maximum of approximately 312,000 shares of Class A Common Stock will be issued
or be issuable pursuant to the exchange of the AMR Career Equity Shares.
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 shares of the Company's
Class A Common Stock to each non-employee director. The plan also provides for a
one time award of options to purchase 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 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> 111
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> 112
================================================================================
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................................. 59
Relationship with AMR and Certain
Transactions................................ 60
Description of Capital Stock.................. 64
Shares Eligible for Future Sale............... 75
Underwriting.................................. 77
Certain United States Tax Considerations for
Non-United States Holders................... 79
Validity of Class A Common Stock.............. 78
Experts....................................... 80
Additional Information........................ 80
Trademarks.................................... 81
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> 113
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.................................................................. *
NYSE listing fee................................................................. *
Blue Sky fees and expenses....................................................... *
Attorneys' fees and expenses..................................................... *
Accountants' fees and expenses................................................... *
Transfer Agent's and Registrar's fees and expenses............................... *
Printing and engraving expenses.................................................. *
Miscellaneous.................................................................... *
Total.................................................................. *
</TABLE>
- ---------------
* To be included by amendment.
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 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> 114
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> 115
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
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 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.
3.2 -- Form of Restated Bylaws of Registrant.
4.1 -- Form of Registration Rights Agreement between Registrant and AMR
Corporation.(1)
4.2 -- Specimen Certificate representing Common Stock.(1)
5.1 -- Opinion of Debevoise & Plimpton as to the legality of the 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 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)
10.3 -- Management Services Agreement, dated as of July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(2)
10.4 -- Credit Agreement, dated as of July 1, 1996, between Registrant, The
SABRE Group, Inc., AMR Corporation and American Airlines, Inc.
10.5 -- $850,000,000 Subordinated Debenture, dated July 2, 1996, executed by
Registrant and payable to AMR Corporation.
10.6 -- Information Technology Services Agreement, dated July 1, 1996,
between The SABRE Group, Inc. and American Airlines, Inc.(2)
10.7 -- Non-competition Agreement, dated July 1, 1996, among Registrant, The
SABRE Group, Inc., AMR Corporation and American Airlines, Inc.(1)
10.8 -- Marketing Cooperation Agreement, dated as of July 1, 1996, between
The SABRE Group, Inc. and American Airlines, Inc.(1)
10.9 -- Tax Sharing Agreement, dated July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc.(1)
10.10 -- Travel Privileges Agreement, dated as of July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(2)
10.11 -- Corporate Travel Agreement, dated July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)
10.12 -- Restricted Software Marketing Agreement, dated as of July 1, 1996,
among The SABRE Group, Inc., AMR Corporation and American Airlines,
Inc.(1)
</TABLE>
II-3
<PAGE> 116
<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.(1)
10.14 -- Participating Carrier Agreement, dated as of July 1, 1996, between
The SABRE Group, Inc. and American Airlines, Inc.(1)
10.15 -- Investment Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)
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.
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.
10.18 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.
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.
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between
American Airlines, Inc. and the Tulsa Airports Improvement Trust.
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.
10.23 -- Office Lease Agreement, dated January 19, 1996, between American
Airlines, Inc. and Maguire/Thomas Partners -- Westlake/Southlake
Partnership.
10.24 -- Form of Stock Conversion Plan.(1)
10.25 -- Form Long-Term Incentive Plan.(1)
10.26 -- Form of Directors' Stock Incentive Plan.(1)
10.27 -- Form of Split Dollar Life Insurance Plan.(1)
21.1 -- Subsidiaries of Registrant.
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 (included on signature page).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
(1) To be filed by amendment
(2) Item for which confidential treatment is requested.
II-4
<PAGE> 117
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 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> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Fort
Worth, Texas on August 8, 1996.
The SABRE Group Holdings, Inc.
By: /s/ MICHAEL J. DURHAM
-----------------------------------
Name: Michael J. Durham
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Michael J. Durham, Anne H. McNamara and Charles D. Marlett, and each of them,
the true and lawful attorneys-in-fact and agents of the undersigned, with full
power of substitution and resubstitution, for and in the name, place and stead
of the undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, including
any filings pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and hereby
grants to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE (CAPACITY) DATE
- --------------------------------------------- -------------------------- -----------------
<C> <S> <C>
/s/ ROBERT L. CRANDALL Chairman of the Board of August 8, 1996
- --------------------------------------------- Directors
Robert L. Crandall
/s/ MICHAEL J. DURHAM President and Chief August 8, 1996
- --------------------------------------------- Executive Officer and
Michael J. Durham Director (Principal
Executive Officer and
Director)
/s/ T. PATRICK KELLY Senior Vice President, Chief August 8, 1996
- --------------------------------------------- Financial Officer and
T. Patrick Kelly Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ GERARD J. ARPEY Director August 8, 1996
- ---------------------------------------------
Gerard J. Arpey
/s/ ANNE H. McNAMARA Director August 8, 1996
- ---------------------------------------------
Anne H. McNamara
</TABLE>
II-6
<PAGE> 119
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
YEAR ENDED DECEMBER 31, 1994
Allowance for uncollectible
accounts........................ 4,819 4,306 -- (6,083) 3,042
YEAR ENDED DECEMBER 31, 1993
Allowance for uncollectible
accounts........................ 6,097 2,732 -- (4,010) 4,819
</TABLE>
S-1
<PAGE> 120
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.
3.2 -- Form of Restated Bylaws of Registrant.
4.1 -- Form of Registration Rights Agreement between Registrant and AMR
Corporation.(1)
4.2 -- Specimen Certificate representing Common Stock.(1)
5.1 -- Opinion of Debevoise & Plimpton as to the legality of the 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 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.3 -- Management Services Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(2)
10.4 -- Credit Agreement, dated as of July 1, 1996, between Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.
10.5 -- $850,000,000 Subordinated Debenture, dated July 2, 1996, executed by Registrant
and payable to AMR Corporation.
10.6 -- Information Technology Services Agreement, dated July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(2)
10.7 -- Non-competition Agreement, dated July 1, 1996, among Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.(1)
10.8 -- Marketing Cooperation Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)
10.9 -- Tax Sharing Agreement, dated July 1, 1996, between The SABRE Group, Inc. and
American Airlines, Inc.(1)
10.10 -- Travel Privileges Agreement, dated as of July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc.(2)
10.11 -- Corporate Travel Agreement, dated July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.12 -- Restricted Software Marketing Agreement, dated as of July 1, 1996, among The
SABRE Group, Inc., AMR Corporation and American Airlines, Inc.(1)
10.13 -- Canadian Technical Services Subcontract, dated as of July 1, 1996, between The
SABRE Group Inc. and American Airlines, Inc.(1)
10.14 -- Participating Carrier Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)
10.15 -- Investment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
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.
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.
10.18 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.
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.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between American
Airlines, Inc. and the Tulsa Airports Improvement Trust.
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.
10.23 -- Office Lease Agreement, dated January 19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners -- Westlake/Southlake Partnership.
10.24 -- Form of Stock Conversion Plan.(1)
10.25 -- Form Long-Term Incentive Plan.(1)
10.26 -- Form of Directors' Stock Incentive Plan.(1)
10.27 -- Form of Split Dollar Life Insurance Plan.(1)
21.1 -- Subsidiaries of Registrant.
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 (included on signature page).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
(1) To be filed by amendment
(2) Item for which confidential treatment is requested.
<PAGE> 1
EXHIBIT 3.1
FORM OF RESTATED CERTIFICATE OF INCORPORATION
OF
THE SABRE GROUP HOLDINGS, INC.
1. The name of the corporation (which is hereinafter referred to as
the "Corporation") is "The SABRE Group Holdings, Inc.".
2. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on June 25, 1996, under the name
TSG Corporation.
3. This Restated Certificate of Incorporation of the Corporation has
been duly proposed by resolutions adopted and declared advisable by the Board
of Directors of the Corporation, duly adopted by written consent of the sole
stockholder of the Corporation in lieu of a meeting and vote and duly executed
and acknowledged by the officers of the Corporation in accordance with the
provisions of Sections 103, 228, 242 and 245 of the General Corporation Law of
the State of Delaware and, upon filing with the Secretary of State in
accordance with Section 103, shall thenceforth supersede the original
Certificate of Incorporation and shall, as it may thereafter be amended or
supplemented in accordance with its terms and applicable law, be the
Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
The SABRE Group Holdings, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized
1
<PAGE> 2
and incorporated under the General Corporation Law of the State of Delaware
(the "GCL").
ARTICLE IV
(A) Authorized Stock. The total number of shares of stock which
the Corporation shall have authority to issue is ___________, consisting of (i)
_______ Million (________) shares of Class A Common Stock, par value $.01 per
share (hereinafter referred to as "Class A Common Stock"), and _______ Million
(_______)shares of Class B Common Stock, par value $.01 per share (hereinafter
referred to as "Class B Common Stock") (the Class A Common Stock and the Class
B Common Stock being hereinafter collectively referred to as the "Common
Stock"), and (ii)______ Million (_______) shares of Preferred Stock, par value
$.01 per share (hereinafter referred to as "Preferred Stock").
(B) Common Stock. The following is a statement of the relative
powers, preferences and participating, optional or other special rights, and
the qualifications, limitations and restrictions of the Class A Common Stock
and the Class B Common Stock of the Corporation:
(i) Except as otherwise set forth in this Article IV, the
relative powers, preferences and participating, optional or other
special rights, and the qualifications, limitations and restrictions
of the Class A Common Stock and the Class B Common Stock shall be
identical in all respects.
(ii) Subject to the rights of holders of Preferred Stock,
and subject to any other provisions of this Certificate of
Incorporation, holders of Class A Common Stock and Class B Common
Stock shall be entitled to receive such dividends and other
distributions in cash, stock or property of the Corporation as may be
declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor. If any
dividend or other distribution in cash or other property is paid with
respect to Class A Common Stock or with respect to Class B Common
Stock (other than dividends or other distributions payable in shares
of Common Stock), a like dividend or other distribution in cash or
other property shall also be paid with respect to shares of the other
class of Common Stock, in an amount equal per share. In the case of
dividends or other distributions payable in Common Stock, including
without limitation distributions pursuant to stock splits or divisions
of Common Stock of the Corporation, only shares of Class A Common
Stock shall be paid or distributed with respect to Class A Common
Stock and only shares of Class B Common Stock shall be paid or
distributed with respect to Class B Common Stock. The number of
shares of Class A Common Stock and Class B Common Stock so distributed
2
<PAGE> 3
shall be equal in number on a per share basis. Neither the shares of
Class A Common Stock nor the shares of Class B Common Stock may be
reclassified, subdivided or combined unless such reclassification,
subdivision or combination occurs simultaneously and in the same
proportion for each class.
(iii) (a) At each meeting of the stockholders of the
Corporation, each holder of Class A Common Stock shall be
entitled to one vote in person or by proxy for each share of
Class A Common Stock standing in his or her name on the
transfer books of the Corporation, and each holder of Class B
Common Stock shall be entitled to [ten] votes in person or by
proxy for each share of Class B Common Stock standing in his
or her name on the transfer books of the Corporation in
connection with the election of directors and all other
matters submitted to a vote of stockholders; provided,
however, that with respect to any proposed conversion of the
shares of Class B Common Stock into shares of Class A Common
Stock pursuant to paragraph (B)(vi)(b) below, each holder of a
share of Common Stock, irrespective of class, shall have one
vote in person or by proxy for each share of Common Stock
standing in his or her name on the transfer books of the
Corporation. Except as may be otherwise required by law or by
this Article IV, the holders of Class A Common Stock and Class
B Common Stock shall vote together as a single class, subject
to any voting rights which may be granted to holders of
Preferred Stock, on all matters submitted to a vote of
stockholders of the Corporation.
(b) Except as otherwise provided by law, and
subject to any rights of the holders of Preferred Stock, the
provisions of this Certificate of Incorporation shall not be
modified, revised, altered or amended, repealed or rescinded
in whole or in part, without the approval of a majority of the
votes entitled to be cast by the holders of the Class A Common
Stock and the Class B Common Stock, voting together as a
single class; provided, however, that with respect to any
proposed amendment of this Certificate of Incorporation which
would alter or change the powers, preferences or special
rights of the shares of Class A Common Stock or Class B Common
Stock so as to affect them adversely, the approval of a
majority of the votes entitled to be cast by the holders of
the shares affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the
approval of a majority of the votes entitled to be cast by the
holders of the Class A Common Stock and the Class B Common
Stock
3
<PAGE> 4
voting together as a single class as hereinbefore provided. Any
increase in the authorized number of shares of any class or classes of
stock of the Corporation or creation, authorization or issuance of any
securities convertible into, or warrants, options or similar rights to
purchase, acquire or receive, shares of any such class or classes of
stock shall be deemed not to affect adversely the powers, preferences
or special rights of the shares of Class A Common Stock or Class B
Common Stock.
(c) Each reference in this Certificate of
Incorporation to a majority or other proportion of shares of
Common Stock, Class A Common Stock or Class B Common Stock
shall refer to such majority or other proportion of the votes
to which such shares of Common Stock, Class A Common Stock or
Class B Common Stock, as applicable, are entitled.
(iv) In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or
involuntary, after payment in full of the amounts required to be paid
to the holders of Preferred Stock, the remaining assets and funds of
the Corporation shall be distributed pro rata to the holders of Class
A Common Stock and Class B Common Stock (and, for the avoidance of
doubt, such distribution shall be irrespective of the difference in
voting rights between such classes of stock). For purposes of this
paragraph (B)(iv), the voluntary sale, conveyance, lease, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the assets of the
Corporation or a consolidation or merger of the Corporation with one
or more other corporations or other Persons (whether or not the
Corporation is the corporation surviving such consolidation or merger)
shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary.
(vi) (a) Prior to the date on which shares of Class B
Common Stock are transferred to the holders of shares of
common stock, par value $1.00 per share ("AMR Parent Common
Stock"), of AMR Parent (as defined in Article VII), or to
holders of stock of the Class B Transferee (as defined in
paragraph (B)(vi)(b) below) in a Tax-Free Spin-Off (as defined
in paragraph (B)(vi)(b) below), each record holder of shares
of Class B Common Stock may from time to time convert any or
all of such shares into an equal number of shares of Class A
Common Stock by surrendering the certificates for such shares,
accompanied by any required tax transfer stamps and by a
written notice by such record holder to the Corporation
stating that such record holder desires to
4
<PAGE> 5
convert such shares of Class B Common Stock into the same
number of shares of Class A Common Stock and requesting that
the Corporation issue all of such shares of Class A Common
Stock to Persons named therein, setting forth the number of
shares of Class A Common Stock to be issued to each such
Person and the denominations in which the certificates
therefor are to be issued. To the extent permitted by law,
such voluntary conversion shall be deemed to have been
effected at the close of business on the date of such
surrender. Following a Tax-Free Spin-Off, shares of Class B
Common Stock shall no longer be convertible into shares of
Class A Common Stock except as set forth in paragraph
(B)(vi)(b) below.
(b) Prior to a Tax-Free Spin-Off, each share of
Class B Common Stock shall automatically convert into one
share of Class A Common Stock upon the transfer of such share
if, after such transfer, such share is not Beneficially Owned
(as defined in Article XI(B)) by AMR or, as set forth below in
this paragraph (B)(vi)(b), by the Class B Transferee or any
subsidiary of the Class B Transferee. Shares of Class B
Common Stock shall not convert into shares of Class A Common
Stock (1) in any transfer effected in connection with a
distribution of Class B Common Stock as a spin-off, split-up
or split-off to holders of AMR Parent Common Stock or to
holders of stock of the Class B Transferee intended to be on a
tax-free basis under the Internal Revenue Code of 1986, as
amended from time to time (the "Code") (a "Tax-Free Spin-Off")
or (2) except as otherwise set forth below in this paragraph
(B)(vi)(b), in any transfer after a Tax-Free Spin-Off. For
purposes of this paragraph (B)(vi), a Tax-Free Spin-Off shall
be deemed to have occurred at the time shares are first
transferred to holders of AMR Parent Common Stock or to
holders of stock of the Class B Transferee, as the case may
be, following receipt of an affidavit described in clauses (6)
or (7) of the first sentence of paragraph (B)(vi)(d) below.
Prior to a Tax-Free Spin-Off, shares of Class B Common Stock
representing more than a 50 percent equity interest in the
then outstanding shares of Common Stock taken as a whole
transferred by AMR in a single transaction to one Person who
is not an affiliate of AMR (together with its successors, the
"Class B Transferee") or any subsidiary of the Class B
Transferee shall not automatically convert to Class A Common
Stock upon the transfer of such shares. Any shares of Class B
Common Stock retained by AMR 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
5
<PAGE> 6
transfer.
In the event of a Tax-Free Spin-Off, shares of Class
B Common Stock shall automatically convert into shares of
Class A Common Stock on the fifth anniversary of the date on
which shares of Class B Common Stock are first transferred to
holders of AMR Parent Common Stock or of the Class B
Transferee, as the case may be, in a 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 Corporation an
opinion of counsel, reasonably satisfactory to the
Corporation, 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 (the "IRS") that the distribution
would be a Tax-Free Spin-Off under the Code. 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 Corporation an opinion of counsel,
reasonably satisfactory to the Corporation, prior to such
anniversary to the effect that such vote could adversely
affect the status of the Tax-Free Spin-Off (including without
limitation the ability to obtain a favorable ruling from the
IRS); if such opinion is so delivered, such vote shall not be
held. At the meeting of stockholders called for such purpose,
each holder of Common Stock shall be entitled to one vote
(irrespective of the voting rights provided for such shares
under paragraph (B)(iii)(a)) in person or by proxy for each
share of Common Stock standing in his or her name on the
transfer books of the Corporation. Approval of such
conversion shall require the approval of a majority of the
votes, on the per share voting basis provided in the preceding
sentence, entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock present and voting,
voting together as a single class, and the holders of the
Class B Common Stock shall not be entitled to a separate class
vote. Such conversion shall be effective on the date on which
such approval is given at a meeting of stockholders called for
such purpose.
The Corporation will provide notice of any automatic
conversion of all outstanding shares of Class B Common Stock
to all holders of record of the Common Stock as soon as
practicable following such conversion; provided, however, that
the Corporation may satisfy such notice requirement by
providing such notice prior
6
<PAGE> 7
to such conversion. Such notice shall be provided by mailing
notice of such conversion first class postage prepaid, to each
holder of record of the Common Stock at such holder's address
as it appears on the transfer books of the Corporation;
provided, further, that no failure to give such notice nor any
defect therein shall affect the validity of the automatic
conversion of any shares of Class B Common Stock. Each such
notice shall state, as appropriate, the following:
(1) the automatic conversion date;
(2) that all outstanding shares of Class
B Common Stock are automatically converted;
(3) the place or places where
certificates for such shares are to be surrendered
for conversion; and
(4) that no dividends will be declared
on the shares of Class B Common Stock converted after
such conversion date.
Immediately upon such conversion, the rights of the
holders of shares of Class B Common Stock as such shall cease
and such holders shall be treated for all purposes as having
become the record owners of the shares of Class A Common Stock
issuable upon such conversion; provided, however, that such
Persons shall be entitled to receive when paid dividends, if
any, declared on the Class B Common Stock as of a record date
preceding the time of such conversion and unpaid as of the
time of such conversion, subject to paragraph (B)(vi)(f)
below.
(c) Prior to a Tax-Free Spin-Off, holders of
shares of Class B Common Stock may (1) sell or otherwise
dispose of or transfer any or all of such shares held by them,
respectively, only in connection with a transfer which meets
the qualifications of paragraph (B)(vi)(d) below, and under no
other circumstances, or (2) convert any or all of such shares
into shares of Class A Common Stock as provided in paragraph
(B)(vi)(a) above. Prior to a Tax-Free Spin-Off, no one other
than those Persons in whose names shares of Class B Common
Stock become registered on the original stock ledger of the
Corporation by reason of their record ownership of shares of
Common Stock of the Corporation which are reclassified into
shares of Class B Common Stock, or transferees or successive
transferees who receive shares of Class B Common Stock in
connection with a transfer which meets the
7
<PAGE> 8
qualifications set forth in paragraph (B)(vi)(d) below, shall
by virtue of the acquisition of a certificate for shares of
Class B Common Stock have the status of an owner or holder of
shares of Class B Common Stock or be recognized as such by the
Corporation or be otherwise entitled to enjoy for his or her
own benefit the special rights and powers of a holder of
shares of Class B Common Stock.
Holders of shares of Class B Common Stock may at any
and all times transfer to any Person the shares of Class A
Common Stock issuable upon conversion of such shares of Class
B Common Stock.
(d) Prior to a Tax-Free Spin-Off, shares of Class
B Common Stock shall be transferred on the books of the
Corporation and a new certificate therefor issued, upon
presentation at the office of the Secretary of the Corporation
(or at such additional place or places as may from time to
time be designated by the Secretary of the Corporation) of the
certificate for such shares, in proper form for transfer and
accompanied by all requisite stock transfer tax stamps, only
if such certificate when so presented shall also be
accompanied by any one of the following:
(1) an affidavit from AMR stating that
such certificate is being presented to effect a
transfer by AMR of such shares to a Subsidiary of
AMR; or
(2) an affidavit from AMR stating that
such certificate is being presented to effect a
transfer by any Subsidiary of AMR of such shares to
AMR or another Subsidiary of AMR; or
(3) an affidavit from AMR stating that
such certificate is being presented to effect a
transfer by AMR or any of its Subsidiaries of such
shares to the Class B Transferee or a Subsidiary of
the Class B Transferee as contemplated by paragraph
(B)(vi)(b); or
(4) an affidavit from the Class B
Transferee stating that such certificate is being
presented to effect a transfer by the Class B
Transferee of such shares to a Subsidiary of the
Class B Transferee; or
(5) an affidavit from the Class B
Transferee stating that such certificate is being
presented to effect a transfer by any Subsidiary of
the
8
<PAGE> 9
Class B Transferee of such shares to the Class B
Transferee or another Subsidiary of the Class B
Transferee; or
(6) an affidavit from AMR stating that
such certificate is being presented to effect a
transfer by AMR of such shares to the holders of AMR
Parent Common Stock in connection with a Tax-Free
Spin-Off; or
(7) an affidavit from the Class B
Transferee stating that such certificate is being
presented to effect a transfer by the Class B
Transferee of such shares to the stockholders of the
Class B Transferee in connection with a Tax-Free
Spin-Off.
Each affidavit of a record holder furnished pursuant
to this paragraph (B)(vi)(d) shall be verified as of a date
not earlier than five days prior to the date of delivery
thereof, and, where such record holder is a corporation or
partnership, shall be verified by an officer of the
corporation or by a general partner of the partnership, as the
case may be.
If a record holder of shares of Class B Common Stock
shall deliver a certificate for such shares, endorsed by him
or her for transfer or accompanied by an instrument of
transfer signed by him or her, to a Person who receives such
shares in connection with a transfer which does not meet the
qualifications set forth in this paragraph (B)(vi)(d), then
such Person or any successive transferee of such certificate
may treat such endorsement or instrument as authorizing him or
her on behalf of such record holder to convert such shares in
the manner above provided for the purpose of the transfer to
himself or herself of the shares of Class A Common Stock
issuable upon such conversion, and to give on behalf of such
record holder the written notice of conversion above required,
and may convert such shares of Class B Common Stock
accordingly.
If such shares of Class B Common Stock shall
improperly have been registered in the name of such a Person
(or in the name of any successive transferee of such
certificate) and a new certificate therefor issued, such
Person or transferee shall surrender such new certificate for
cancellation, accompanied by the written notice of conversion
above required, in which case (1) such Person or transferee
shall be deemed to have elected to treat the endorsement on
(or instrument of transfer accompanying) the certificate so
delivered by such former record holder as authorizing such
Person
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<PAGE> 10
or transferee on behalf of such former record holder so to
convert such shares and so to give such notice, (2) the shares
of Class B Common Stock registered in the name of such former
record holder shall be deemed to have been surrendered for
conversion for the purpose of the transfer to such Person or
transferee of the shares of Class A Common Stock issuable upon
conversion, and (3) the appropriate entries shall be made on
the books of the Corporation to reflect such action.
In the event that the Board of Directors of the
Corporation (or any committee of the Board of Directors, or
any officer of the Corporation, designated for the purpose by
the Board of Directors) shall determine, upon the basis of
facts not disclosed in any affidavit or other document
accompanying the certificate for shares of Class B Common
Stock when presented for transfer, that such shares of Class B
Common Stock have been registered in violation of the
provisions of paragraph (B)(vi), or shall determine that a
Person is enjoying for his or her own benefit the special
rights and powers of shares of Class B Common Stock in
violation of such provisions, then the Corporation shall take
such action at law or in equity as is appropriate under the
circumstances. Without limiting the generality of the
preceding sentence, an unforeclosed pledge made to secure a
bona fide obligation shall not be deemed to violate such
provisions.
(e) Prior to the occurrence of a Tax-Free
Spin-Off, each certificate for shares of Class B Common Stock
shall bear a legend on the face thereof reading as follows:
"The shares of Class B Common Stock
represented by this certificate may not be
transferred to any person or entity in connection
with a transfer that does not meet the qualifications
set forth in paragraph (B)(vi)(d) of Article IV of
the Certificate of Incorporation of this corporation
and no person who receives such shares in connection
with a transfer which does not meet the
qualifications prescribed by paragraph (B)(vi)(d) of
said Article IV is entitled to own or to be
registered as the record holder of such shares of
Class B Common Stock, but the record holder of this
certificate may at any time convert such shares of
Class B Common Stock into the same number of shares
of Class A Common Stock for purposes of
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<PAGE> 11
effecting the sale or other disposition of such
shares of Class A Common Stock to any person or
entity. Each holder of this certificate, by
accepting the same, accepts and agrees to all of the
foregoing."
Upon and after the transfer of shares in a Tax-Free
Spin-Off, shares of Class B Common Stock shall no longer bear
the legend set forth above in this paragraph (B)(vi)(e).
(f) Upon any conversion of shares of Class B
Common Stock into shares of Class A Common Stock pursuant to
the provisions of this paragraph (B)(vi), any dividend, for
which the record date or payment date shall be subsequent to
such conversion, which may have been declared on the shares of
Class B Common Stock so converted shall be deemed to have been
declared, and shall be payable, with respect to the shares of
Class A Common Stock into or for which such shares of Class B
Common Stock shall have been so converted, and any such
dividend shall be deemed to have been declared, and shall be
payable, in shares of Class A Common Stock.
(g) The Corporation shall not reissue or resell
any shares of Class B Common Stock which shall have been
converted into shares of Class A Common Stock pursuant to or
as permitted by the provisions of this paragraph (B)(vi), or
any shares of Class B Common Stock which shall have been
acquired by the Corporation in any other manner. The
Corporation shall, from time to time, take such appropriate
action as may be necessary to retire such shares and to reduce
the authorized amount of Class B Common Stock accordingly.
The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock,
such number of shares of Class A Common Stock as would become
issuable upon the conversion of all shares of Class B Common
Stock then outstanding.
(h) In connection with any transfer or conversion
of any stock of the Corporation pursuant to or as permitted by
the provisions of this paragraph (B)(vi) or in connection with
the making of any determination referred to in this paragraph
(B)(vi):
(1) the Corporation shall be under no
obligation to make any investigation of facts unless
an officer, employee or agent of the Corporation
responsible for making such transfer or determination
or issuing Class A Common Stock
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pursuant to such conversion has substantial reason to
believe, or unless the Board of Directors (or a
committee of the Board of Directors designated for
the purpose) determines that there is substantial
reason to believe, that any affidavit or other
document is incomplete or incorrect in a material
respect or that an investigation would disclose facts
upon which any determination referred to in paragraph
(B)(vi)(f) above should be made, in either of which
events the Corporation shall make or cause to be made
such investigation as it may deem necessary or
desirable in the circumstances and have a reasonable
time to complete such investigation; and
(2) neither the Corporation nor any
director, officer, employee or agent of the
Corporation shall be liable in any manner for any
action taken or omitted in good faith.
(i) The Corporation will not be required to pay
any documentary, stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of shares of Class
A Common Stock on the conversion of shares of Class B Common
Stock pursuant to this paragraph (B)(vi), and no such issue or
delivery shall be made unless and until the Person requesting
such issue has paid to the Corporation the amount of any such
tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(vii) All rights to vote and all voting power (including,
without limitation thereto, the right to elect directors) shall be
vested exclusively in the holders of Common Stock, voting together as
a single class, except as otherwise expressly provided in this
Certificate of Incorporation, in a Preferred Stock Designation or as
otherwise expressly required by applicable law.
(viii) No stockholder shall be entitled to exercise any
right of cumulative voting.
(ix) Immediately upon the effectiveness of this Restated
Certificate of Incorporation, each share of common stock of the
Corporation, par value $.01 per share, issued and outstanding
immediately prior to such effectiveness shall be changed into and
reclassified as ____________ shares of Class B Common Stock. Promptly
after such effectiveness, each record holder of a certificate that,
immediately prior to such effectiveness, represented common stock of
the Corporation, par value $.01 per share, shall be entitled to
receive in exchange for such certificate, upon
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<PAGE> 13
surrender of such certificate to the Corporation, a certificate for
the number of shares of Class B Common Stock to which such holder is
entitled as a result of the changes in the common stock effected by
the preceding sentence (the "Reclassification"). Until surrendered
and exchanged in accordance herewith, each certificate that,
immediately prior to such effectiveness, represented common stock
shall represent the number of shares of Class B Common Stock to which
the holder is entitled as a result of the Reclassification.
(C) Preferred Stock. The Preferred Stock may be issued from time
to time in one or more series. The Board of Directors is hereby authorized to
provide by resolution or resolutions from time to time for the issuance of
shares of Preferred Stock in one or more series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter, along
with any similar designation relating to any other class or series of stock
which may hereafter be authorized, referred to as a "Preferred Stock
Designation," each of which shall be part of this Certificate of
Incorporation), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
(i) The designation of the series, which may be by
distinguishing number, letter or title.
(ii) The number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise provided in
the Preferred Stock Designation) increase or decrease (but not below
the number of shares thereof then outstanding).
(iii) Whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series.
(iv) The conditions upon which and dates at which dividends,
if any, shall 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 amount of any sinking fund provided for
the purchase or redemption of shares of the series.
(vii) The amounts payable on and the preferences, if
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<PAGE> 14
any, of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation.
(viii) Whether the shares of the series shall be convertible
into shares of any class or series, or any other security, of the
Corporation or any other corporation, and, if so, the specification of
such other class or series of such other security, the conversion
price or prices or rate or rates, any adjustments thereof, the date or
dates at which such shares shall be convertible and all other terms
and conditions upon which such conversion may be made.
(ix) Restrictions on the issuance (or reissuance) of shares of
the same series or of any other class or series.
(x) The voting rights, if any, of the holders of shares of the
series.
(D) Record Holders. The Corporation shall be entitled to treat
the Person (as defined in Article XI) in whose name any share of its stock is
registered as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to, or interest in, such share on the
part of any other Person, whether or not the Corporation shall have notice
thereof, except as expressly provided by applicable law.
(E) No Preemptive Rights. No stockholder of the Corporation shall
have any preemptive or preferential right, nor be entitled as such as a matter
of right, to subscribe for or purchase any part of any new or additional issue
of stock of the Corporation of any class or series, whether now or hereafter
authorized, and whether issued for money or for consideration other than money,
or of any issue of securities convertible into stock of the Corporation.
ARTICLE V
The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities or property, rights entitling the holders thereof to purchase
from the Corporation shares of stock or other securities or property of the
Corporation or any other corporation. The times at which and the terms upon
which such rights are to be issued will 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 shall include,
but not be limited to, determination of the following:
(A) The initial purchase price per share or other unit of the
stock or other securities or property to be purchased upon
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<PAGE> 15
exercise of such rights.
(B) 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 Corporation.
(C) Provisions which adjust the number or exercise price of such
rights or amount or nature of the stock or other securities or property
receivable upon exercise of such rights following the occurrence of specified
events, including without limitation a combination, split or recapitalization
of any stock of the Corporation, a change in ownership of the Corporation's
stock or other securities or a reorganization, merger, consolidation, sale of
assets or other occurrence relating to the Corporation or any stock of the
Corporation, and provisions restricting the ability of the Corporation to enter
into any such transaction absent an assumption by the other party or parties
thereto of the obligations of the Corporation under such rights.
(D) Provisions which deny the holder of a specified percentage of
the outstanding stock or other securities of the Corporation the right to
exercise such rights and cause the rights held by such holder to become void.
(E) Provisions which permit the Corporation to redeem or exchange
such rights.
(F) The appointment of a rights agent with respect to such rights.
ARTICLE VI
(A) In furtherance of, and not in limitation of, the powers
conferred by law, the Board of Directors is expressly authorized and empowered:
(i) to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that the Bylaws adopted by the Board of Directors
under the powers hereby conferred may be amended or repealed by the
Board of Directors or by the stockholders having voting power with
respect thereto; provided, further, that in the case of amendments by
stockholders, 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 in paragraph (B) of
this Article VI) then outstanding (the "Trigger Date"), the
affirmative vote of the holders of at least 80 percent of the voting
power of the then outstanding Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal
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<PAGE> 16
any provision of the Bylaws or adopt any provision of the Bylaws
inconsistent with any other provision of the Bylaws; and
(ii) from time to time to determine whether and to what
extent, and at what times and places, and under what conditions and
regulations, the accounts and books of the Corporation, or any of
them, shall be open to inspection of stockholders; and, except as so
determined, or as expressly provided in this Certificate of
Incorporation or in any Preferred Stock Designation, no stockholder
shall have any right to inspect any account, book or document of the
Corporation other than such rights as may be conferred by applicable
law.
(B) The Corporation may in its Bylaws confer powers upon the Board
of Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
Effective as of the Trigger Date and notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend or
repeal, or adopt any provision inconsistent with, paragraph (A)(i) of this
Article VI. For the purposes of this Certificate of Incorporation, "Voting
Stock" shall mean the outstanding shares of stock of the Corporation entitled to
vote generally in the election of directors.
ARTICLE VII
(A) For purposes of this Certificate of Incorporation, "AMR" shall
mean AMR Corporation, a Delaware corporation ("AMR Parent"), all successors to
AMR Parent by way of merger, consolidation or sale of all or substantially all
its assets, and all corporations, partnerships, joint ventures, associations
and other entities (each a "Subsidiary Entity") in which AMR Parent
Beneficially Owns, directly or indirectly, 50 percent or more of the
outstanding voting stock, voting power or similar voting interests ("Voting
Interest"), which shall include without limitation (as of the date hereof)
American Airlines, Inc., AMR Eagle, Inc., AMR Services Holding Corporation, AMR
Services Corporation and AMR Investment Services, Inc., each of which are
Delaware corporations, but which shall not include the Corporation or any
Subsidiary Entity in which the Corporation Beneficially Owns, directly or
indirectly, 50 percent or more of the outstanding Voting Interest.
(B) In anticipation that:
(i) the Corporation will cease to be a wholly-owned Subsidiary
(as defined in Article XI hereof) of AMR Parent
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<PAGE> 17
but that AMR Parent will remain, for some period of time, a
stockholder of the Corporation;
(ii) the Corporation and AMR may engage in the same or similar
activities or lines of business and may have an interest in the same
or similar areas of corporate opportunities;
(iii) there will be benefits to be derived by the Corporation
through its continued contractual, corporate and business relations
with AMR (including without limitation service of officers of AMR as
directors of the Corporation); and
(iv) there will be benefits in providing guidelines for
directors and officers of AMR and of the Corporation with respect to
the allocation of corporate opportunities and other matters;
the provisions of this Article VII are set forth to regulate, define and guide
the conduct of certain affairs of the Corporation as they may involve AMR and
its officers and directors, and the powers, rights, duties and liabilities of
the Corporation and its officers, directors and stockholders in connection
therewith.
(C) Except as AMR may otherwise agree in writing, AMR shall have
the right to, and shall have no duty not to, (i) engage in the same or similar
business activities or lines of business as the Corporation, (ii) do business
with any potential or actual customer or supplier of the Corporation, or (iii)
employ or otherwise engage any officer or employee of the Corporation. Neither
AMR nor any officer or director thereof (except as provided in paragraph (D) of
this Article VII) shall be liable to the Corporation or its stockholders for
breach of any fiduciary duty by reason of any such activities (set forth in the
preceding sentence) of AMR or of the participation therein of such Person. In
the event that AMR acquires knowledge of a potential transaction or matter that
may be a corporate opportunity for both AMR and the Corporation, AMR shall have
no duty to communicate or present such corporate opportunity to the Corporation
and shall not be liable to the Corporation or its stockholders for breach of
any fiduciary duty as a stockholder of the Corporation by reason of the fact
that AMR pursues or acquires such corporate opportunity for itself, directs
such corporate opportunity to another Person, or does not present such
corporate opportunity to the Corporation.
(D) In the event that a director or officer of the Corporation 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
Corporation and AMR, such
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<PAGE> 18
director or officer of the Corporation (i) shall have fully satisfied and
fulfilled the fiduciary duties of such director or officer to the Corporation
and its stockholders with respect to such corporate opportunity, (ii) shall not
be liable to the Corporation or its stockholders for breach of any fiduciary
duty by reason of the fact that AMR pursues or acquires such corporate
opportunity for itself or directs such corporate opportunity to another Person
or does not communicate information regarding such corporate opportunity to the
Corporation, (iii) shall be deemed to have acted in good faith and in a manner
such Person reasonably believes to be in and not opposed to the best interests
of the Corporation, and (iv) shall be deemed not to have breached his or her
duty of loyalty to the Corporation or its stockholders and not to have derived
an improper benefit therefrom, if such director or officer acts in a manner
consistent with the following policy:
(x) a corporate opportunity offered to any Person who is
a director but not an officer of the Corporation and who is also an
officer (whether or not a director) of AMR shall belong to AMR, unless
such opportunity is expressly offered to such Person primarily in his
or her capacity as a director of the Corporation, in which case such
opportunity shall belong to the Corporation;
(y) a corporate opportunity offered to any Person who is
an officer (whether or not a director) of the Corporation and who is
also a director but not an officer of AMR shall belong to the
Corporation, unless such opportunity is expressly offered to such
Person primarily in his or her capacity as a director of AMR, in which
case such opportunity shall belong to AMR; and
(z) a corporate opportunity offered to any other Person
who is either an officer of both the Corporation and AMR or a director
of both the Corporation and AMR shall belong to AMR or to the
Corporation, as the case may be, if such opportunity is expressly
offered to such Person primarily in his or her capacity as an officer
or director of AMR or of the Corporation, respectively; otherwise,
such opportunity shall belong to AMR.
(E) Any corporate opportunity that belongs to AMR or to the
Corporation pursuant to the foregoing policy shall not be pursued by the other,
or directed by the other to another Person, unless and until AMR or the
Corporation, as the case may be, determines not to pursue the opportunity.
Notwithstanding the preceding sentence, if the party to whom the corporate
opportunity belongs does not 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 then pursue such opportunity or direct it to
another Person.
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(F) For purposes of this Article VII, "corporate opportunities"
shall consist of business opportunities which (i) the Corporation is
financially able to undertake, (ii) are, from their nature, in the line or
lines of the Corporation's business and are of practical advantage to it, and
(iii) are ones in which the Corporation has an interest or reasonable
expectancy. In addition, "corporate opportunities" shall not include any
transaction in which the Corporation or AMR is permitted to participate
pursuant to (a) any agreement between the Corporation and AMR in effect as of
the time any equity security of the Corporation is held of record by any Person
other than AMR, as may be amended thereafter with the approval of a majority of
Disinterested Directors (as defined in Article XI hereof) or (b) any subsequent
agreement between the Corporation and AMR approved by a majority of
Disinterested Directors, it being acknowledged that the rights of the
Corporation under any such agreement shall be deemed to be contractual rights
and shall not be corporate opportunities of the Corporation for any purpose;
provided, however, that no presumption or implication as to corporate
opportunities relating to any transaction not explicitly covered by such an
agreement shall arise from the existence or absence of any such agreement.
(G) Any Person purchasing or otherwise acquiring any interest in
any shares of stock of the Corporation shall be deemed to have notice of and
consented to the provisions of this Article VII.
(H) For purposes of this Article VII, the "Corporation" shall mean
the Corporation and all corporations, partnerships, joint ventures,
associations and other entities in which the Corporation Beneficially Owns,
directly or indirectly, 50 percent or more of the outstanding voting stock,
voting power or similar voting interests.
(I) If any contract, agreement, arrangement or transaction between
the Corporation and AMR involves a corporate opportunity and is approved in
accordance with the procedures set forth in Article VIII hereof, AMR and its
officers and directors shall also, for the purposes of this Article VII and the
other provisions of this Certificate of Incorporation, be deemed to have fully
satisfied and fulfilled any fiduciary duties they may have to the Corporation
and its stockholders. Any such contract, agreement, arrangement or transaction
involving a corporate opportunity not so approved shall not by reason thereof
result in any such breach of any fiduciary duty, but shall be governed by the
other provisions of this Article VII, this Certificate of Incorporation, the
Bylaws, the GCL and other applicable law.
(J) For purposes of this Article VII, a director of the
Corporation who is Chairman of the Board of Directors of the Corporation or a
committee thereof or the Chief Executive Officer
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of the Corporation shall not be deemed to be an officer of the Corporation by
reason of holding such position (regardless of whether such position is deemed
an office of the Corporation under the Bylaws of the Corporation), unless such
Person is a full-time employee of the Corporation.
(K) Effective as of the Trigger Date, and notwithstanding anything
in this Certificate of Incorporation to the contrary and in addition to any
vote of the Board of Directors required by applicable law or this Certificate
of Incorporation, the affirmative vote of the holders of more than 80 percent
of the voting power of the Voting Stock then outstanding, voting together as a
single class, shall be required to alter, amend or repeal in a manner adverse
to the interests of AMR, or adopt any provision adverse to the interests of AMR
and inconsistent with, any provision of this Article VII. Neither the
alteration, amendment or repeal of this Article VII nor the adoption of any
provision inconsistent with this Article VII shall eliminate or reduce the
effect of this Article VII in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article VII, would accrue or arise,
prior to such alteration, amendment, repeal or adoption.
ARTICLE VIII
(A) In anticipation that:
(i) the Corporation will cease to be a wholly-owned Subsidiary
of AMR Parent but AMR Parent will remain, for some period of time, a
stockholder of the Corporation and have continued contractual,
corporate and business relations with the Corporation;
(ii) the Corporation and AMR or its customers or suppliers may
enter into contracts or otherwise transact business with each other
and the Corporation may derive benefits therefrom; and
(iii) the Corporation may from time to time enter into
contractual, corporate or business relations with one or more of its
directors, or one or more corporations, partnerships, associations or
other organizations in which one or more of its directors have a
financial interest (collectively, "Related Entities");
the provisions of this Article VIII are set forth to regulate and guide certain
contractual relations and other business relations of the Corporation as they
may involve AMR or its customers or suppliers, Related Entities and their
respective officers and directors, and the powers, rights, duties and
liabilities of the Corporation and its officers, directors and stockholders in
connection therewith.
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(B) The provisions of this Article VIII are in addition to, and
not in limitation of, the provisions of the GCL and the other provisions of
this Certificate of Incorporation. Any contract or business relation which
does not comply with procedures set forth in this Article VIII shall not by
reason thereof be deemed void or voidable or result in any breach of any
fiduciary duty to, or duty of loyalty to, or failure to act in good faith or in
the best interests of, the Corporation, or the derivation of any improper
personal benefit, but shall be governed by the remaining provisions of this
Certificate of Incorporation, the Bylaws, the GCL and other applicable law.
(C) No contract, agreement, arrangement or transaction between the
Corporation and AMR or any customer or supplier thereof or any Related Entity
or between the Corporation and one or more of the directors or officers of the
Corporation, AMR or any Related Entity, or any amendment, modification or
termination thereof, shall be void or voidable solely for the reason that AMR
or such customer or supplier, any Related Entity or any one or more of the
officers or directors of the Corporation, 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 such contract, agreement, arrangement, transaction, amendment,
modification or termination (each, a "Transaction") or solely because his or
their votes are counted for such purpose, and AMR, any Related Entity and such
directors and officers (i) shall have fully satisfied and fulfilled any
fiduciary duties they may have to the Corporation and its stockholders with
respect thereto, (ii) shall not be liable to the Corporation or its
stockholders for any breach of any fiduciary duty they may have by reason of
the entering into, performance or consummation of any such Transaction, (iii)
shall be deemed to have acted in good faith and in a manner such Persons
reasonably believed to be in and not opposed to the best interests of the
Corporation, to the extent such standard is applicable to such Persons'
conduct, and (iv) shall be deemed not to have breached any duties of loyalty to
the Corporation or its stockholders they may have and not to have derived an
improper personal benefit therefrom, if:
(w) the material facts as to the Transaction are disclosed or
are 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 authorizes or approves the Transaction by the
affirmative vote of a majority of the Disinterested Directors on the
Board of Directors or such committee (even though the Disinterested
Directors be less than a quorum);
(x) the material facts as to the Transaction are disclosed or
are known to the holders of Voting Stock entitled to vote thereon, and
the Transaction is
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specifically approved in good faith 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, as the case may be;
(y) such Transaction is effected pursuant to, and consistent
with, terms and conditions specified in any arrangements, standards,
protocols or guidelines (collectively, the "Guidelines") which are in
good faith authorized or approved, after disclosure or knowledge of
the material facts related thereto, by the affirmative vote of a
majority of the Disinterested Directors on the Board of Directors or
the applicable committee thereof (even though the Disinterested
Directors be less than a quorum) 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, as the case may be
(such authorization or approval of such Guidelines constituting or
being deemed to constitute authorization or approval of such
Transaction); or
(z) such Transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders of the Corporation.
In addition, each Transaction authorized, approved or effected, and such
Guidelines so authorized or approved, as described in (w), (x), or (y) above,
shall be deemed to be entirely fair to the Corporation and its stockholders;
provided, however, that if such authorization or approval is not obtained, or
such Transaction is not so effected, no presumption shall arise that such
Transaction or such Guidelines are not fair to the Corporation and its
stockholders.
(D) Directors of the Corporation who are also directors or
officers of AMR or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
that authorizes or approves any such Transaction or any such Guidelines.
Voting Stock owned by AMR and any Related Entities may be counted in
determining the presence of a quorum at a meeting of stockholders that
authorizes or approves any such Transaction or any such Guidelines.
(E) AMR shall not be liable to the Corporation or its stockholders
for breach of any fiduciary duty it may have by reason of the fact that AMR
takes any action or exercises any rights or gives or withholds any consent in
connection with any Transaction between AMR and the Corporation. No vote cast
or other action taken by any Person who is an officer, director or other
representative of AMR, which vote is cast or action is taken by such Person in
his capacity as a director of the
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Corporation, shall constitute an action of, or the exercise of a right by, or a
consent of, AMR for the purpose of any such Transaction.
(F) Any Person purchasing or otherwise acquiring any interest in
any shares of stock of the Corporation shall be deemed to have notice of and to
have consented to the provisions of this Article VIII.
(G) For purposes of this Article VIII, any Transaction with any
corporation, partnership, joint venture, association or other entity in which
the Corporation Beneficially Owns, directly or indirectly, 50 percent or more
of the outstanding voting stock, voting power or similar voting interests, or
with any officer or director thereof, shall be deemed to be a Transaction with
the Corporation.
(H) Effective as of the Trigger Date, and notwithstanding anything
in this Certificate of Incorporation to the contrary, and in addition to any
vote of the Board of Directors required by applicable law or this Certificate
of Incorporation, the affirmative vote of the holders of more than 80 percent
of the voting power of the Voting Stock then outstanding, voting together as a
single class, shall be required to alter, amend or repeal in a manner adverse
to the interests of AMR, or adopt any provision adverse to the interests of AMR
and inconsistent with, any provision of this Article VIII. Neither the
alteration, amendment or repeal of this Article VIII nor the adoption of any
provision inconsistent with this Article VIII shall eliminate or reduce the
effect of this Article VIII in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article VIII, would accrue or arise,
prior to such alteration, amendment, repeal or adoption.
ARTICLE IX
Effective as of the Trigger Date, and subject to the rights of the
holders of any series of Preferred Stock or any other series or class of stock
as set forth in this Certificate of Incorporation to elect additional directors
under specified circumstances, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing in lieu of a meeting of such stockholders. Except as
otherwise required by law, and subject to the rights of the holders of any
series of Preferred Stock or any other series or class of stock as set forth in
this Certificate of Incorporation to elect additional directors under specified
circumstances, special meetings of the stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of Directors which the
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Corporation would have if there were no vacancies or by the Chairman of the
Board; provided, that, prior to the Trigger Date, special meetings of the
stockholders of the Corporation shall also be called at the request of the
holders of a majority of the voting power of the then outstanding Voting Stock.
Except as expressly provided in the immediately preceding sentence, any power
of stockholders to call a special meeting is specifically denied. Only such
business as shall have been brought before the special meeting of stockholders
pursuant to the Corporation's notice of meeting shall be conducted at such
meeting. Effective as of the Trigger Date, and notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of at least 80 percent of the voting power of the then outstanding Voting
Stock, voting together as a single class, shall be required to amend or repeal,
or adopt any provision inconsistent with, this Article IX.
ARTICLE X
(A) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in this
Certificate of Incorporation to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be fixed by the
Bylaws of the Corporation and may be increased or decreased from time to time
in such a manner as may be prescribed by the Bylaws.
(B) Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
(C) The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock
as set forth in this Certificate of Incorporation, shall be divided into three
classes, as nearly equal in number as possible. One class of directors shall
be initially elected for a term expiring at the annual meeting of stockholders
to be held in 1997, another class shall be initially elected for a term
expiring at the annual meeting of stockholders to be held in 1998, and another
class shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1999. Members of each class shall hold office until
their successors are elected and qualified. At each annual meeting of the
stockholders of the Corporation, commencing with the 1997 annual meeting, the
successors of the class of directors whose term expires at that meeting shall
be elected by a plurality vote of all votes cast at such meeting to hold office
for a term expiring at the annual meeting of stockholders held in the third
year following the year of their election.
(D) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock, as set
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forth in this Certificate of Incorporation, to elect additional directors under
specified circumstances, any director may be removed from office, at any time,
but only for cause and only by the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class; provided, however, that prior to the Trigger Date
any director or directors may be removed from office, 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 single class.
(E) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, and in addition to any vote of the Board of
Directors required by applicable law or this Certificate of Incorporation,
effective as of the Trigger Date, the affirmative vote of the holders of at
least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class, shall be required to alter, amend or repeal,
or adopt any provision inconsistent with, this Article X.
ARTICLE XI
For purposes of this Certificate of Incorporation:
(A) "Person" shall mean any individual, firm, corporation or
other entity.
(B) "Beneficial Owner," "Beneficially Own," "Beneficially
Owned," "Beneficial Ownership," and words of similar import shall have
the meaning ascribed to such term in Rule 13d-3 of the General Rules
and Regulations of the Securities Exchange Act of 1934, as in effect
on September 15, 1996.
(C) "Disinterested Directors" shall mean the directors of the
Corporation who are not officers of either AMR or the Corporation or
directors of AMR.
(D) "Subsidiary" shall mean any corporation of which a
majority of any series or class of equity security is owned, directly
or indirectly, by a different corporation.
ARTICLE XII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (A) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (B) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (C) under Section 174 of the General Corporation Law
of the State of Delaware, or (D) for any
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transaction from which the director derived an improper personal benefit.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, any alteration, amendment or repeal of, or adoption of any provision
inconsistent with, this Article XII shall not adversely affect any right or
protection of a director of the Corporation existing hereunder in respect of
any act or omission occurring prior to such alteration, amendment, repeal or
adoption.
ARTICLE XIII
Except as may be expressly provided in this Certificate of
Incorporation, the Corporation reserves the right at any time and from time to
time to alter, amend, or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed herein or by applicable law, and all rights, preferences
and privileges of whatsoever nature conferred upon stockholders, directors or
any other Persons whomsoever by and pursuant to this Certificate of
Incorporation (in its present form or as hereafter amended) are granted subject
to the right reserved in this Article XIII.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its President and attested by its
Secretary this _____ day of ___________, 1996.
The SABRE Group Holdings, Inc.
By:
-----------------------------------
President
Attest:
-------------------------
Corporate Secretary
26
<PAGE> 1
EXHIBIT 3.2
FORM OF RESTATED BYLAWS
OF
THE SABRE GROUP HOLDINGS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The registered office of the
Corporation in the State of Delaware shall be located in the City of
Wilmington, County of New Castle, and the name and address of its registered
agent is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept at the Corporation's headquarters in Fort Worth, Texas
or at such other locations outside the State of Delaware as may from time to
time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders
of the Corporation shall be held on the third Wednesday in May of each year, if
not a legal holiday, and if a legal holiday then on the next succeeding
business day, at 10:00 a.m., local time, at the principal executive offices of
the Corporation, or at such other date, place and/or time as may be fixed from
time to time by resolution of the Board of Directors.
SECTION 2.2. SPECIAL MEETING. Except as otherwise required by
applicable law, and subject to the rights of the holders of any series of
preferred stock, par value $0.0l per share (the "Preferred Stock"), or any
other series or class of stock, as set forth in the Certificate of
Incorporation, to elect additional directors under specified circumstances,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of directors which the Corporation would have if
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there were no vacancies (the "Whole Board") or by the Chairman of the Board;
provided, that prior to the Trigger Date (as such term is defined in the
Certificate of Incorporation), special meetings of the stockholders of the
Corporation shall also be called at the request of the holders of a majority of
the voting power of the then outstanding Voting Stock (as defined in Section
2.5 hereof). Except as expressly provided in the immediately preceding
sentence, any power of stockholders of the Corporation to call a special
meeting is specifically denied.
SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate
the place of meeting for any meeting of the stockholders. If no designation is
made by the Board of Directors, the place of meeting shall be the principal
office of the Corporation.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice, stating
the place, day and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be prepared and delivered by the Corporation not
less than ten days nor more than sixty days before the date of the meeting,
either personally, or by mail, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with postage thereon prepaid, addressed to
the stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote are
present, or if notice is waived by those not present. Any previously scheduled
meeting of the stockholders may be postponed by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for
such meeting of stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT. Except as otherwise provided by
law or by the Certificate of Incorporation, the holders of at least one-third
of the voting power of the outstanding shares of the Corporation entitled to
vote generally in the election of directors (the "Voting Stock"), represented
in person or by proxy, shall constitute a quorum at a meeting of stockholders,
except that when specified business is to be voted on by a class or series
voting as a class, the holders of at least one-third of the shares of such
class or series shall constitute a quorum for the transaction of such business.
The chairman of the meeting or a majority of the voting power of the shares of
Voting Stock so represented may adjourn the meeting from time to time, whether
or not there is such a quorum (or in the case of specified business to be voted
on by a class or series, the chairman of the meeting or a majority of the
shares of such class or series so represented may adjourn the meeting with
respect to such specified business). No notice of the time
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and place of adjourned meetings need be given if the time and place thereof are
announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than thirty days or a new record date is fixed for the
adjourned meeting, in which case a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 2.6. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or as otherwise
permitted by law, or by his duly authorized attorney-in-fact. Such proxy must
be filed with the Secretary of the Corporation or his representative at or
before the time of the meeting.
SECTION 2.7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the
Board of Directors or the Chairman of the Board, (c) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complied with the
notice procedures set forth in clauses (2) and (3) of this paragraph (A) and
this Bylaw and who was a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation or (d) prior to the Trigger Date,
by AMR (as such term is defined in the Certificate of Incorporation).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder, pursuant to clause (c) of
paragraph (A)(1) of this Bylaw, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to the Secretary at
the principal executive offices of the Corporation not less than
ninety days nor more than one hundred and twenty days prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the one hundred and
twentieth day prior to such annual meeting and not later than the
close of business on the later of the ninetieth day
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<PAGE> 4
prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made.
For purposes of determining whether a stockholder's notice shall have
been delivered in a timely manner for the annual meeting of
stockholders in 1997, the "first anniversary of the preceding year's
annual meeting" shall be deemed to be __________, 1997. In no event
shall the adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors, or
is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14a-11 thereunder, including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the
Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
Corporation 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 Corporation at least one
hundred days prior to the first anniversary of the preceding year's
initial meeting, a stockholder's notice required by this Bylaw shall
also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth day following the
day on which such public announcement is first made by the
Corporation.
(B) Special Meetings of Stockholders. Only such business as shall
have been brought before the special meeting of
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<PAGE> 5
stockholders pursuant to the Corporation's notice of meeting pursuant to
Section 2.4 of these Bylaws shall be conducted at such meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (1) by or at the direction of the Board of
Directors or (2) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this Bylaw
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation. Nominations by stockholders of persons for
election to the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by paragraph (A)(2) of
this Bylaw shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the one hundred and twentieth day
prior to such special meeting and not later than the close of business on the
later of the ninetieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the adjournment of a special
meeting commence a new time period for the giving of a stockholder's notice as
described above.
(C) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set
forth in this Bylaw. Except as otherwise provided by law, the Restated
Certificate of Incorporation or these Bylaws, the chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in this Bylaw and, if any proposed nomination or business
is not in compliance with this Bylaw, to declare that such defective proposal
or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Bylaw. Nothing in this Bylaw shall be
deemed to
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affect any rights (i) of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act, or (ii) of the holders of any series of
Preferred Stock to elect directors if so provided under an applicable
Preferred Stock Designation (as defined in the Certificate of
Incorporation).
SECTION 2.8. VOTING PROCEDURES. Election of directors at all
meetings of the stockholders at which directors are to be elected shall be by
written ballot. Except as otherwise set forth in the Certificate of
Incorporation with respect to the right of the holders of any series of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, directors shall be elected by a
plurality of the votes cast by the holders of Common Stock, present in person
or by proxy. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, all matters other than the election of directors
properly submitted to the stockholders at any meeting shall be decided by the
affirmative vote of a majority of the voting power of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
matter. The vote upon any matter other than the election of directors shall be
by ballot only if so ordered by the chairman of the meeting.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
(A) The Board of Directors by resolution shall appoint, or shall
authorize an officer of the Corporation to appoint, one or more inspectors,
which inspector or inspectors may include individuals who serve the Corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives of the Corporation, to act at the meeting and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
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SECTION 2.10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Effective as
of the Trigger Date, and subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in the
Certificate of Incorporation to elect additional directors under specified
circumstances, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at an annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these Bylaws required to be exercised or
done by the stockholders.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. Subject to the
rights of the holders of any series of Preferred Stock, or any other series or
class of stock, as set forth in the Certificate of Incorporation, to elect
directors under specified circumstances, the number of directors shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Whole Board, but shall consist of not more than twelve nor less than three
directors. The directors, other than those who may be elected by the holders
of any series of Preferred Stock or any other series or class of stock as set
forth in the Certificate of Incorporation, shall be divided into three classes,
as nearly equal in number as possible. One class of directors shall be
initially elected for a term expiring at the annual meeting of stockholders to
be held in 1997; another class shall be initially elected for a term expiring
at the annual meeting of stockholders to be held in 1998; and another class
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1999. Members of each class shall hold office until
their successors are elected and qualified. At each annual meeting of the
stockholders of the Corporation, commencing with the 1997 annual meeting, the
successors of the class of directors whose term expires at that meeting shall
be elected by a plurality vote of all votes cast at such meeting to hold office
for a term expiring at the annual meeting of stockholders held in the third
year following the year of their election.
SECTION 3.3. REGULAR MEETINGS. A regular annual meeting of
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the Board of Directors shall be held without other notice than this Bylaw on
the same date, and at the same place, as each annual meeting of stockholders or
on such other day, at such other place and at such time as the Board of
Directors may determine. The Board of Directors may from time to time, by
resolution, provide the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Whole Board. The person or persons authorized
to call special meetings of the Board of Directors may fix the place and time
of the meetings.
SECTION 3.5. NOTICE. Notice of any special meeting shall be given to
each director at his or her business or residence in writing or by telegram or
by telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least three days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least twenty-four hours before such meeting. If by
facsimile transmission, such notice shall be transmitted at least twenty-four
hours before such meeting. If by telephone, the notice shall be given at least
twelve hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting, except for
amendments to these Bylaws as provided under Section 8.1 of Article VIII
hereof. A meeting may be held at any time without notice if all the directors
are present or if those not present waive notice of the meeting in writing,
either before or after such meeting. Any director present in person at a
meeting of the Board of Directors shall be deemed to have waived notice of the
time and place of meeting.
SECTION 3.6. ACTION BY CONSENT OF BOARD OF DIRECTORS. Any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
SECTION 3.7. CONFERENCE TELEPHONE MEETINGS. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each
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other, and such participation in a meeting shall constitute presence in person
at such meeting.
SECTION 3.8. QUORUM. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. The directors present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
SECTION 3.9. VACANCIES. Subject to the rights of the holders of any
series of Preferred Stock or any other series or class of stock, as set forth
in the Certificate of Incorporation, to elect additional directors under
specified circumstances, and unless the Board of Directors otherwise
determines, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of
directors, shall be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors, and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of office of the class to which they have
been elected expires and until such director's successor shall have been duly
elected and qualified. No decrease in the number of authorized directors
constituting the Whole Board shall shorten the term of any incumbent director.
SECTION 3.10. REMOVAL. Subject to the rights of the holders of any
series of Preferred Stock or any other series or class of stock, as set forth
in the Certificate of Incorporation, to elect additional directors under
specified circumstances, any director, or the entire Board of Directors, may be
removed from office at any time, but only for cause by the affirmative vote of
the holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class; provided, however, that prior
to the Trigger Date any director or directors may be removed from office,
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
single class.
SECTION 3.11. FEES AND EXPENSES. Directors shall receive such fees
and expenses as the Board of Directors shall from time to time prescribe.
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ARTICLE IV
COMMITTEES
SECTION 4.1. EXECUTIVE COMMITTEE. (A) The Board of Directors may, by
resolution passed by a majority of the Whole Board, designate an Executive
Committee, to consist of four or more members, including the Chairman of the
Board and the Chief Executive Officer. The Chairman of the Board, the Chief
Executive Officer, and one other member of the Executive Committee shall
constitute a quorum.
(B) The Executive Committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, with the exception of such powers and authority as
may be specifically reserved to the Board of Directors by law or by resolution
adopted by the Board of Directors.
SECTION 4.2 AUDIT COMMITTEE. (A) The Board of Directors may, by
resolution passed by a majority of the Whole Board, designate an Audit
Committee, to consist of two or more members, none of the members of which
shall be employees or officers of the Corporation or AMR or directors of AMR.
A majority of the members of the Audit Committee shall constitute a quorum.
(B) The Audit Committee shall from time to time review and make
recommendations to the Board of Directors with respect to the selection of
independent auditors, the fees to be paid such auditors, the adequacy of the
audit and accounting procedures of the Corporation, and such other matters as
may be specifically delegated to the Committee by the Board of Directors. In
this connection the Audit Committee shall, at its request, meet with
representatives of the independent auditors and with the financial officers of
the Corporation separately or jointly.
SECTION 4.3. COMPENSATION/NOMINATING COMMITTEE. (A) The Board of
Directors may, by resolution passed by a majority of the Whole Board, designate
a Compensation/Nominating Committee, to consist of three or more members, none
of the members of which shall be employees or officers of the Corporation. A
majority of the members of the Compensation/Nominating Committee shall
constitute a quorum.
(B) The Compensation/Nominating Committee shall from time to time
review and make recommendations to the Board of Directors with respect to the
management remuneration policies of the Corporation 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
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<PAGE> 11
may be specifically delegated to the Committee by the Board of Directors.
(C) In addition, the Compensation/Nominating Committee shall make
recommendations to the Board of Directors (1) concerning suitable candidates
for election to the Board, (2) with respect to assignments to Board Committees,
and (3) with respect to promotions, changes and succession among the senior
management of the Corporation, and shall perform such other duties as may be
specifically delegated to the Committee by the Board of Directors.
SECTION 4.4. COMMITTEE PROCEDURE, SEAL. (A) The Executive,
Compensation/Nominating, and Audit Committees shall keep regular minutes of
their meetings, which shall be reported to the Board of Directors, and shall
fix their own rules of procedures.
(B) The Executive, Compensation/Nominating, and Audit Committees may
each authorize the seal of the Corporation to be affixed to all papers which
may require it.
(C) In the absence or disqualification of a member of any Committee,
the members of that Committee present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of such
absent or disqualified member.
SECTION 4.5. OTHER COMMITTEES. The Board of Directors, or any
Committee thereof so authorized by the Board of Directors, may, from time to
time, by resolution passed by a majority of the Whole Board or such Committee,
designate one or more other Committees of the Board. Each such Committee shall
have such duties and may exercise such powers as are granted to it in the
resolution designating the members thereof. Each Committee shall fix its own
rules of procedure.
ARTICLE V
OFFICERS
SECTION 5.1. ELECTED OFFICERS. The elected officers of the
Corporation shall be (A) a Chairman of the Board, unless the Board of Directors
specifies that the Chairman of the Board shall not be an officer of the
Corporation, (B) a President, (C) one or more Vice Presidents (including
Executive Vice Presidents and Senior Vice Presidents), (D) a Secretary, (E) a
Treasurer, and (F) such other officers as the Board of Directors from time to
time may deem proper. The Chairman of the Board (whether or not an officer of
the Corporation) shall be chosen from the directors. The other officers of the
Corporation may or may not
11
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be directors. All officers chosen by the Board of Directors shall each have
such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article V. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
SECTION 5.2. ELECTION AND TERM OF OFFICE. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to
Section 5.9 of these Bylaws, the officers shall hold their respective offices
at the pleasure of the Board of Directors and any officer may be removed at any
time, with or without cause, by a vote of the majority of the directors; each
officer shall hold office until his or her successor shall have been duly
elected and shall have qualified or until his death or removal or until he
shall resign.
SECTION 5.3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. He
or she shall make reports to the Board of Directors and the stockholders, and
shall have such other powers and perform such other duties as are required of
him or her from time to time by the Board of Directors. The Board of Directors
may specify in a resolution or resolutions that the Chairman of the Board shall
not be an officer of the Corporation. The offices of Chairman of the Board and
President may be filled by the same individual.
SECTION 5.4. PRESIDENT. Unless otherwise specified by the Board of
Directors, the President shall be the Chief Executive Officer of the
Corporation, shall be responsible for the general management of the affairs of
the Corporation and shall perform all duties incidental to his or her office
which may be required by law, and shall have such other powers and perform such
other duties as are required of him or her from time to time by the Board of
Directors. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of
Directors. The President may sign, alone or with the Secretary, or an
Assistant Secretary, or any other proper officer of the Corporation authorized
by the Board of Directors, certificates, contracts, and other instruments of
the Corporation as authorized by the Board of Directors. He or she shall see
that all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
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SECTION 5.5. VICE PRESIDENTS. Each Vice President (including any
Executive Vice Presidents and Senior Vice Presidents) shall perform such duties
as shall be assigned by the Board of Directors, the Chairman of the Board or
the President.
SECTION 5.6. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors and all other
notices required by law or by these Bylaws, and in case of his or her absence
or refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board or the President, or by the
Board of Directors, upon whose request the meeting is called as provided in
these Bylaws. He or she shall record all the proceedings of the meetings of
the Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him or her by the Board of Directors, the Chairman
of the Board or the President. He or she shall have the custody of the seal of
the Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors, the Chairman of the Board or the
President, and attest to the same. Any or all of the duties of the Secretary
may be delegated to one or more Assistant Secretaries.
SECTION 5.7. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursement in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. The Treasurer shall render to
the Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
the Treasurer shall give the Corporation a bond for the faithful discharge of
his or her duties in such amount and with such surety as the Board of Directors
shall prescribe. Any or all of the duties of the Treasurer may be delegated to
one or more Assistant Treasurers.
SECTION 5.8. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed, from time to time, by the Board of Directors.
SECTION 5.9. VACANCIES. In case any office becomes vacant by death,
resignation, retirement, disqualification, removal from office, or any other
cause, the Board of Directors may abolish the office (except that of President,
Secretary and Treasurer) or
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elect an officer to fill such vacancy.
ARTICLE VI
STOCK CERTIFICATES AND TRANSFERS
SECTION 6.1. STOCK CERTIFICATES AND TRANSFERS. (A) The interest of
each stockholder of the Corporation shall be evidenced by certificates for
shares of stock in such form as the appropriate officers of the Corporation may
from time to time prescribe; provided, however, the Board of Directors may
provide by resolution that some or all of any or all classes or series of the
Corporation's stock shall be uncertificated shares. The shares of the stock of
the Corporation shall be transferred on the books of the Corporation by the
holder thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof
of the authenticity of the signature as the Corporation or its agents may
reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January and end on the thirty-first day of December
of each year.
SECTION 7.2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and its Restated
Certificate of Incorporation.
SECTION 7.3. SEAL. The corporate seal may bear in the center the
emblem of some object, and shall have inscribed thereunder the words "Corporate
Seal" and around the margin thereof the words "The SABRE Group Holdings, Inc.
- - Delaware 199_".
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SECTION 7.4. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders of the Board of
Directors need be specified in any waiver of notice of such meeting.
SECTION 7.5. AUDITS. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors, and
it shall be the duty of the Board of Directors to cause such audit to be made
annually.
SECTION 7.6. RESIGNATIONS. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the President or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President,
or the Secretary, or at such later date as is stated therein. No formal action
shall be required of the Board of Directors or the stockholders to make any
such resignation effective.
SECTION 7.7. INDEMNIFICATION AND INSURANCE.
(A) Generally.
(1) The Corporation shall 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 Corporation as a director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation 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.
(2) The Corporation 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
serve at the request of the Corporation as an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
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<PAGE> 16
Corporation 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.
(3) The indemnification provided by this Subsection (A) shall 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, but shall 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 Corporation and, with respect to any criminal action, suit or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(4) Notwithstanding the foregoing provisions of this Subsection (A),
in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (a) the indemnification provided by this
Subsection (A) shall 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 shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless, and only to the extent that, the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine 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 shall deem proper.
(5) The Board of Directors (by resolution passed by a majority of the
Board of Directors), the Chairman of the Board, the President or the Secretary
shall have the authority to determine whether a person is or was serving or has
agreed to serve at the request of the Corporation (a) as a director or officer
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise, or (b) as an employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise. If the
Board of Directors (by resolution passed by a majority of the Board of
Directors), the Chairman of the Board, the President or the Secretary
determines that a person is not or was not serving or has not agreed to serve
at the request of the Corporation in any capacity described in clause (a) or
(b) of the preceding sentence, then such person shall not (unless otherwise
ordered by a court) be entitled to indemnification under this Section 7.7.
(6) The termination of any action, suit or proceeding by
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judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she 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 reasonable cause to believe that his
or her conduct was unlawful.
(B) Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
Subsection (A) hereof or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
(C) Determination That Indemnification Is Proper. Any
indemnification of a person entitled to indemnity under Subsection (A)(1)
hereof shall (unless otherwise ordered by a court) be made by the Corporation
unless a determination is made that indemnification of such person is not
proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in Subsection (A)(3) hereof. Any indemnification
of a person entitled to indemnity under Subsection (A)(2) hereof may (unless
otherwise ordered by a court) be made by the Corporation upon a determination
that indemnification of such person is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in Subsection
(A)(3) hereof. Any such determination shall be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even if
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(D) Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a director or officer in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation 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 shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation as authorized in this
Section. Such expenses (including attorneys' fees) 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 Board of Directors may authorize the
Corporation's counsel to represent a director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
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(E) Procedure for Indemnification of Required Indemnitees. Any
indemnification of a person the Corporation is required to indemnify under
Subsection (A) hereof, or advance of costs, charges and expenses of a person
the Corporation is required to pay under Subsection (D) hereof, shall be made
promptly, and in any event within 60 days, upon the written request of such
person. If the Corporation fails to respond within 60 days, then the request
for indemnification shall be deemed to be approved. The right to
indemnification or advances as granted by this Section shall be enforceable by
the person the Corporation is required to indemnify under Subsection (A) hereof
in any court of competent jurisdiction if the Corporation denies such request,
in whole or in part. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce
a claim for the advance of costs, charges and expenses under Subsection (D)
hereof where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Subsection (A) hereof, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsection (A) hereof, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
(F) Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in such
capacity at any time while these provisions as well as the relevant provisions
of the General Corporation Law of the State of Delaware are in effect and any
repeal or modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously existing or any
action, suit, or proceeding previously or thereafter brought or threatened
based in whole or in part upon any such state of facts. Such a "contract
right" may not be modified retroactively without the consent of such director,
officer, employee or agent.
The indemnification provided by this Section 7.7 shall not be deemed
exclusive of any other rights to which those
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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, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(G) Insurance. The Corporation shall purchase and maintain insurance
on behalf of any person who is or was or has agreed to serve at the request of
the Corporation as a director or officer of the Corporation, or is or was
serving at the request of the Corporation 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 Corporation would have the power to indemnify him or her against such
liability under the provisions of this Section 7.7; provided, however, that
such insurance is available on acceptable terms, which determination shall be
made by a vote of a majority of the entire Board of Directors.
(H) Savings Clause. If this Section 7.7 or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the full extent permitted by any applicable
portion of this Section 7.7 that shall not have been invalidated and to the
full extent permitted by applicable law.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. AMENDMENTS. These Bylaws may be amended, added to,
rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, so long as notice of the proposed change was given in the notice
of the meeting and, in the case of a meeting of the Board of Directors, in a
notice given no less than twenty-four hours prior to the meeting; provided,
however, that, in the case of amendments by stockholders, notwithstanding any
other provisions of these Bylaws or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of stock
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required by law, the Certificate of Incorporation or these Bylaws, effective as
of the Trigger Date, the affirmative vote of the holders of at least 80 percent
of the voting power of the then outstanding Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal any provision of
these Bylaws.
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EXHIBIT 10.3
MANAGEMENT SERVICES AGREEMENT
BETWEEN
AMERICAN AIRLINES, INC.
AND
THE SABRE GROUP, INC.
<PAGE> 2
MANAGEMENT SERVICES AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 -- DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . 1
ARTICLE 2 -- TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Stated Term . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Renewal . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Transition Assistance . . . . . . . . . . . . . . . . . 2
ARTICLE 3 -- SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Schedules . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Standard of Care . . . . . . . . . . . . . . . . . . . . 2
3.3 Manner and Place of Performance . . . . . . . . . . . . 2
3.4 Recipients of Services . . . . . . . . . . . . . . . . . 3
3.5 Subcontracting Services . . . . . . . . . . . . . . . . 3
3.6 Information Regarding Services . . . . . . . . . . . . . 4
3.7 Legal Services . . . . . . . . . . . . . . . . . . . . . 4
3.8 Warranty Disclaimer . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 -- SERVICE LEVEL . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Continuation of Level . . . . . . . . . . . . . . . . . 4
4.2 Semiannual Changes in Level . . . . . . . . . . . . . . 4
4.3 Procedure for March 1 Level Change . . . . . . . . . . . 5
4.4 Procedure for September 1 Level Change . . . . . . . . . 5
ARTICLE 5 -- DISCONTINUANCE OF OPTIONAL SERVICES . . . . . . . . . . . . 6
5.1 Procedure . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Service Level and Price of Discontinued Services . . . . 6
5.3 Impossible Optional Services . . . . . . . . . . . . . . 6
5.4 Transition Assistance . . . . . . . . . . . . . . . . . 6
5.5 Reinstatement of Discontinued Service . . . . . . . . . 7
ARTICLE 6 -- SERVICES OBTAINED FROM OTHERS . . . . . . . . . . . . . . . 7
6.1 Mandatory Services . . . . . . . . . . . . . . . . . . . 7
6.2 Upon Discontinuance . . . . . . . . . . . . . . . . . . 8
6.3 Before Discontinuance . . . . . . . . . . . . . . . . . 8
ARTICLE 7 -- PRICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.1 Cost Allocation . . . . . . . . . . . . . . . . . . . . . 8
7.2 Annual Pricing . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Disagreement on Mandatory Service Pricing . . . . . . . . 9
7.4 Annual Price Effectiveness . . . . . . . . . . . . . . . . 9
ARTICLE 8 -- PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Invoices . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Method of Payment . . . . . . . . . . . . . . . . . . . . 10
8.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.5 Nonpayment Notice . . . . . . . . . . . . . . . . . . . . 10
8.6 Dispute of Invoice . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 9 -- RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Record Keeping . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Examination . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 10 -- CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . 12
10.1 Confidential Information . . . . . . . . . . . . . . . . . 12
10.2 Excluded Information . . . . . . . . . . . . . . . . . . . 13
10.3 Standard of Care . . . . . . . . . . . . . . . . . . . . . 13
10.4 Permitted Disclosures . . . . . . . . . . . . . . . . . . 13
10.5 Required Disclosures . . . . . . . . . . . . . . . . . . . 13
10.6 Title to Information . . . . . . . . . . . . . . . . . . . 14
10.7 Survival; Return . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 11 -- PARTIES' RELATIONSHIP . . . . . . . . . . . . . . . . . . . . 14
11.1 Independent . . . . . . . . . . . . . . . . . . . . . . . 14
11.2 Employees . . . . . . . . . . . . . . . . . . . . . . . . 14
11.3 Authority and Enforceability . . . . . . . . . . . . . . . 15
11.4 Third-Party Consents . . . . . . . . . . . . . . . . . . . 15
11.5 Third-Party-Related Arrangements . . . . . . . . . . . . . 15
11.6 Further Assurances . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 12 -- PARTIES' REPRESENTATIVES . . . . . . . . . . . . . . . . . . 16
12.1 Representatives' Authority . . . . . . . . . . . . . . . . 16
12.2 Designation . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 13 -- TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 16
13.1 Termination Events . . . . . . . . . . . . . . . . . . . . 16
13.2 Nonexclusive . . . . . . . . . . . . . . . . . . . . . . . 17
13.3 Consequences of Termination . . . . . . . . . . . . . . . 17
13.4 Survival of Rights and Obligations . . . . . . . . . . . . 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 14 -- LIABILITY AND REMEDIES . . . . . . . . . . . . . . . . . . . 19
14.1 Warranties . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 Nonconforming Services . . . . . . . . . . . . . . . . . . 19
14.3 Actual Damages . . . . . . . . . . . . . . . . . . . . . . 20
14.4 Indemnities for Certain Breaches and Other Matters . . . . 20
14.5 Time for Claims . . . . . . . . . . . . . . . . . . . . . 23
14.6 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.7 Equitable Relief . . . . . . . . . . . . . . . . . . . . . 23
14.8 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . 23
14.9 Waiver of Remedies . . . . . . . . . . . . . . . . . . . . 23
14.10 Cumulative Remedies . . . . . . . . . . . . . . . . . . . 23
14.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 15 -- FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . 24
15.1 No Breach or Liability . . . . . . . . . . . . . . . . . . 24
15.2 Notice of Excusable Delay or Failure . . . . . . . . . . . 24
15.3 Efforts to Overcome . . . . . . . . . . . . . . . . . . . 24
15.4 Extended Delay or Failure . . . . . . . . . . . . . . . . 24
ARTICLE 16 -- DISPUTE RESOLUTION MATTERS . . . . . . . . . . . . . . . . . 24
16.1 General Procedure . . . . . . . . . . . . . . . . . . . . 25
16.2 Continued Performance . . . . . . . . . . . . . . . . . . 25
16.3 Parties' Agreement . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 17 -- EXPENSES AND TAXES . . . . . . . . . . . . . . . . . . . . . 25
17.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 18 -- COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 27
18.1 Form . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.2 Addresses . . . . . . . . . . . . . . . . . . . . . . . . 27
18.3 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 19 -- ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 20 -- AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 21 -- INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 22 -- SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE 23 -- SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 24 -- GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 25 -- COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ATTACHMENTS:
DEFINITIONAL APPENDIX
DISPUTE RESOLUTION APPENDIX
SCHEDULES OF SERVICES
iv
<PAGE> 6
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement is between American Airlines, Inc., a
Delaware corporation, and The SABRE Group, Inc., a Delaware corporation,
effective on July 1, 1996.
BACKGROUND
The Parties are wholly owned subsidiaries of AMR, and AA has provided
management services to SG or its subsidiaries or predecessors. Because AMR's
ownership of SG may be reduced, the Parties wish to state formally the terms
on which certain management services will continue to be rendered by AA to SG
and its subsidiaries.
AGREEMENT
The Parties agree as follows:
ARTICLE 1 -- DEFINITIONS AND INTERPRETATION
Various terms used in this Agreement are defined in the Definitional Appendix;
the defined terms used in this Agreement begin with a capital letter. Various
interpretative matters for this Agreement are also set forth in the
Definitional Appendix. The Definitional Appendix is an integral part of this
Agreement.
- --------------------------------------------------------------------------------
ARTICLE 2 -- TERM
2.1 Stated Term. This Agreement commences on the Effective Date and
will continue in effect until 11:59 p.m. on June 30, 1999, unless
terminated earlier by one or both of the Parties in accordance with
Article 13.
2.2 Renewal. The Parties may consent to successive one-year renewal terms
by following this procedure: If SG wishes to renew the term of this
Agreement, it shall Notify AA of that intention by March 31, 1999 and
the same date of each subsequent year. If AA wishes to concur with
that renewal, it shall Notify SG of that concurrence by April 30 of
that year. If no Notice of intent to renew or no concurrence is
given, this Agreement will Expire when the then current term expires.
2.3 Transition Assistance. For up to 180 days after Expiration, AA shall
comply with SG's reasonable requests for assistance in engaging or
training another Person or Persons to
Management Services Agreement
<PAGE> 7
provide, and for records and other information relating to, the
Services rendered by AA immediately preceding that Expiration. SG
shall reimburse and pay AA's Transition Expenses in accordance with
invoices submitted to SG by AA. Articles 8 and 18 shall apply in this
situation as though this Agreement had not Expired. AA may cease
providing transition assistance, immediately upon Notice to SG, if SG
has not paid the amount described in a Nonpayment Notice by the tenth
Business Day after the Nonpayment Notice was given. If the records or
other information provided by AA are Confidential Information, Article
10 shall also apply as though this Agreement had not Expired.
- --------------------------------------------------------------------------------
ARTICLE 3 -- SERVICES
3.1 Schedules. AA shall render, and SG shall pay for, the Mandatory
Services and, to the extent not discontinued in accordance with this
Agreement, the Optional Services during the effectiveness of this
Agreement. The Services are described on the Schedules, which are an
integral part of this Agreement. The Services described on Schedules
I through IV are Mandatory Services; the Services described on the
other Schedules are Optional Services. Neither Party may unilaterally
change any Service or separate any one or more of the Tasks that
constitute a Service.
3.2 Standard of Care. AA shall use the same care in rendering the
Services as it uses in rendering services to AMR itself and the
other subsidiaries of AMR. Further, AA's care in rendering the
Services shall be at least equal to the care that it has used in
providing each Service to SG or any of its subsidiaries or
predecessors before the Effective Date.
3.3 Manner and Place of Performance. AA shall render each Service in
accordance with any terms (including any time period) described on the
corresponding Schedule or any applicable SLA, though AA has full
discretion about how to render each Service as that Service is so
described. AA is not obligated to render any Service or Task in the
same manner (such as using the same personnel or other assets of AA)
as it previously rendered that Service or Task, whether before or
after the Effective Date. Each Service will be performed at AA's
offices or the other place or places it was rendered most recently
before the Effective Date, except as described in the corresponding
Schedule or Subcontracted in accordance with this Agreement. SG and
the SG Companies shall afford access to their respective premises as
necessary or reasonably appropriate to permit a Service or Task to be
rendered.
3.4 Recipients of Services. The Services shall be rendered solely to, or
for the direct benefit of, SG and the SG Companies. Neither SG nor
any SG Company may assign, license, or otherwise transfer or provide,
whether for or without consideration, any right to any Service, in
whole or in part, to any Person other than SG or any SG Company. SG
or any SG Company may, however, provide any other Person (whether for
or without consideration) any product or information of SG or any SG
Company resulting or derived from any Service or Task, to the extent
not prohibited by Article 10.
Management Services Agreement
2
<PAGE> 8
3.5 Subcontracting Services. AA has Subcontracted certain of the
Services, in whole or in part, before the Effective Date; the
Schedules indicate those Services that are Subcontracted and
the corresponding Subcontractors as of the Effective Date. SG
consents to that Subcontracting and those Effective Date
Service Subcontracts and Subcontractors. AA's Subcontracting
after the Effective Date, however, is subject to these terms:
(a) AA may, without any consent or approval of SG,
(i) Subcontract any Service, in whole or in part, to any
Person, including any Affiliate of AA,
(ii) amend any Service Subcontract, or
(iii) cease to Subcontract any Service, in whole or in part.
(b) SG shall have no indemnification obligation under Section
14.4(b) regarding any Service Subcontract, other than an
Effective Date Service Subcontract, entered into by AA without
SG's Reasonable Consent. Also, if AA, without SG's Reasonable
Consent, enters into any amendment to
(i) an Effective Date Service Subcontract, or
(ii) any other Service Subcontract to which SG had given
its Reasonable Consent,
SG shall be liable under Section 14.4(b) only for any Damages
of AA or any of its Indemnified Agents that would have
resulted without that amendment; that is, SG shall not be
liable under Section 14.4(b) for any increase in Damages that
results from an amendment of that kind.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
AA shall remain responsible for the rendering to SG of any Service
that is Subcontracted, in whole or in part. Also, except as described
in Section 14.4(b), AA shall be solely responsible for its obligations
to the Subcontractor (including any applicable Subcontract Termination
Penalty) under each Service Subcontract.
3.6 Information Regarding Services. Each Party shall make available to
the other Party any information required or reasonably requested by
that other Party regarding the performance of any Service and shall be
responsible for timely providing that information and for the accuracy
and completeness of that information. But a Party shall not be liable
for not providing any information that is subject to a confidentiality
obligation owed by it to a Person other than an Affiliate of it or the
other Party. A Party shall not be liable for any impairment of any
Service caused by its not receiving information, either timely or at
all, or by its receiving inaccurate or incomplete information from the
other Party that is required or reasonably requested regarding that
Service.
3.7 Legal Services. The Service described in one of the Schedules as
"legal services" consists of AA's making the Legal Staff available for
engagement by SG and the SG Companies for their legal matters. The
engagement, services, or withdrawal of any of the Legal Staff
Management Services Agreement
3
<PAGE> 9
regarding a particular legal matter for SG or any of the SG Companies,
as well as certain of the Prices for those legal services, are
governed by and subject to the Legal Staff's professional or ethical
obligations and the Legal Rights Agreement.
3.8 Warranty Disclaimer. AA MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, REGARDING ANY SERVICE OR TASK OTHER THAN AS STATED
IN THIS AGREEMENT. AA SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, REGARDING THE SERVICES.
- --------------------------------------------------------------------------------
ARTICLE 4 -- SERVICE LEVEL
4.1 Continuation of Level. AA shall provide substantially the same Level
of each Service, and each Task, as it provided to SG or its
subsidiaries before the Effective Date, except as otherwise agreed in
accordance with this Agreement. The Parties' entering into this
Agreement does not negate or modify any SLA in effect on the Effective
Date.
4.2 Semiannual Changes in Level. The Level of any Service may be changed
semiannually by the Parties' agreement, so long as that agreement
includes a mutually acceptable corresponding Price for the changed
Level of Service. A change in the Level of a Service shall be
effective only on and after
(a) March 1 if the Parties agree, and enter into an SLA for that
Service, by the preceding December 1 in accordance with
Section 4.3, or
(b) September 1 if the Parties agree, and enter into an SLA for
that Service, by the preceding June 1 in accordance with
Section 4.4.
A change in the Level of any one or more Tasks that constitute a
Service shall be deemed a change in the Level of that Service.
Seasonal or other normal fluctuations in a Service or Task shall not
be deemed a change in the Level of that Service.
4.3 Procedure for March 1 Level Change. If the Parties agree by September
1 that there should be a March 1 Level Change, AA shall reflect that
proposed change in its Price Proposal due as of October 1 for that
Service; accordingly, if the Price will differ because of the proposed
March 1 Level Change, that Price Proposal shall include both the Price
for the following January and February and the Price for the following
March through December. Otherwise:
(a) If AA proposes, by Notice to SG by October 1, a March 1 Level
Change, AA shall reflect that proposed change in its
corresponding Price Proposal due as of October 1 for that
Service. Upon SG's request, AA shall also submit to SG by
November 1 a Price Proposal for an unchanged Level of that
Service or for any other March 1 Level Change that has
otherwise been agreed upon by the Parties.
Management Services Agreement
4
<PAGE> 10
(b) If SG proposes, by Notice to AA by October 1, a March 1 Level
Change, AA shall respond in writing by the following November
1. To the extent that AA agrees with the proposed change, its
response shall include a revised Price Proposal for that
Service reflecting a March 1 Level Change to which AA would
agree.
Neither Party is precluded from proposing, and the Parties are not
precluded from discussing and agreeing to, between October 1 and the
following December 1, any change in the Level of any Service and the
corresponding Price. If the Parties do not agree upon a change in
Level and the corresponding Price of a Service by December 1, the
Level of that Service shall continue unchanged at least through the
following August.
4.4 Procedure for September 1 Level Change. If the Parties agree by April
15 that there should be a September 1 Level Change, AA shall submit
to SG a corresponding Price Proposal for that Service by the following
May 7. Otherwise:
(a) If AA proposes, by Notice to SG by April 15, a September 1
Level Change, AA shall concurrently submit to SG a
corresponding Price Proposal for that Service for the
following September through December; SG shall then respond in
writing by the May 7 following the submission of that
proposal.
(b) If SG proposes, by Notice to AA by April 15, a September 1
Level Change, AA shall respond in writing by the following May
7. To the extent that AA agrees with the proposed change, its
response shall include a revised Price Proposal for that
Service, for the following September through December,
reflecting a September 1 Level Change to which AA would agree.
Neither Party is precluded from proposing, and the Parties are not
precluded from discussing and agreeing to, between April 15 and June
1, any change in the Level of any Service and the corresponding Price.
If the Parties do not agree upon a change in Level and the
corresponding Price of a Service by June 1, the Level of that Service
shall continue unchanged at least through the following February.
- --------------------------------------------------------------------------------
ARTICLE 5 -- DISCONTINUANCE OF OPTIONAL SERVICES
5.1 Procedure. Either Party may discontinue or terminate semiannually any
Optional Service by Notice -- three months' Notice if other than a
Significant Optional Service and six months' Notice if a Significant
Optional Service -- to the other Party. A Notice of discontinuance
shall be given by
(a) December 1 to discontinue an Optional Service effective at
midnight on the following March 1 or, if a Significant
Optional Service, effective at midnight on the following June
1, or
Management Services Agreement
5
<PAGE> 11
(b) June 1 to discontinue an Optional Service effective at
midnight on the following September 1 or, if a Significant
Optional Service, effective at midnight on the following
December 1.
A Notice of discontinuance may refer to more than one Optional
Service. Only an entire Optional Service may be discontinued; none of
the Tasks that constitute an Optional Service may be separately
discontinued without the Parties' agreement (which may be stated in
the corresponding Schedule). Any Optional Service that is the subject
of a Notice of discontinuance shall continue to be rendered by AA
until the effective date of the discontinuance (i.e., June 1 or
December 1), and SG shall pay for that Optional Service rendered until
that date. A Party may not unilaterally rescind its Notice of
discontinuance.
5.2 Service Level and Price of Discontinued Services. Until the date of
its discontinuance, an Optional Service that is the subject of a
Notice of discontinuance shall be rendered at the same Level and for
the same Price as in effect immediately preceding the Notice of
discontinuance.
5.3 Impossible Optional Services. If either Party reasonably determines
that the discontinuance of any Optional Service would make it
functionally impossible to continue any other Optional Service, in
whole or in part, that Party shall promptly Notify the other of that
determination. Any Optional Service that so becomes functionally
impossible to render shall be deemed discontinued effective upon the
date of discontinuance of the Optional Service or Optional Services
that caused that impossibility.
5.4 Transition Assistance. For up to 180 days after the effective date of
discontinuance of an Optional Service, AA shall comply with SG's
reasonable requests for assistance in SG's engaging or training
another Person or Persons to provide, and for records and other
information relating to, that discontinued Optional Service. If AA
discontinues that Optional Service, it shall comply with those
requests at its own expense. If SG discontinues that Optional
Service, it shall pay for AA's compliance with those requests by
(a) reimbursing AA all of its resulting reasonable out-of-pocket
expenses, and
(b) paying AA for the resulting time or activities of AA's
personnel as follows:
(i) if the activities of those personnel are or were part
of a Use-based Service, then at the Price then in
effect, or most recently paid (if that Optional
Service has been discontinued), for that Use-based
Service, or
(ii) if the activities of those personnel are or were part
of a Fixed-price Service, then that portion of the
Price then in effect, or most recently paid (if that
Optional Service was discontinued), for that
Fixed-price Service corresponding to the transition
activities' portion of all activities that
constituted that Fixed-price Service for the time
covered by that Price.
Invoicing and payment for transition assistance shall be in accordance
with Article 8. AA may cease providing transition assistance,
immediately upon Notice to SG, if SG has not paid the amount described
in a Nonpayment Notice by the tenth Business Day after the Nonpayment
Notice was given.
Management Services Agreement
6
<PAGE> 12
5.5 Reinstatement of Discontinued Service. Neither Party may unilaterally
reinstate any Optional Service that has been discontinued under this
Agreement.
- --------------------------------------------------------------------------------
ARTICLE 6 -- SERVICES OBTAINED FROM OTHERS
6.1 Mandatory Services. SG may not perform itself or obtain from any
Person other than AA or any Subcontractor any service or services to
supplement or substitute for all or any portion of a Mandatory
Service, except as permitted by the corresponding Schedule. This does
not prohibit SG (or AA), however, from
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(c) performing for itself or obtaining from any other Person all
or any portion of a Mandatory Service to the extent permitted
by Section 15.4.
6.2 Upon Discontinuance. SG need not obtain AA's consent to or approval
of SG's performing itself or obtaining from any other Person, upon and
after the discontinuance of any Optional Service, any service or
services that substitute for the Optional Service that has been
discontinued.
6.3 Before Discontinuance. Before the discontinuance of any Optional
Service:
(a) SG need not obtain AA's consent to or approval of SG's
performing itself or obtaining from any other Person any
service or services to supplement or substitute for all or any
portion of
(i) a Fixed-price Service, so long as SG continues to pay
for the Fixed-price Service in accordance with this
Agreement, including the corresponding Schedule,
(ii) a Use-based Service to the extent that the decrease
in that Service obtained from AA in each month does
not exceed 25% of the average monthly invoiced amount
for that Service for the preceding three months for
which AA has submitted an invoice for that Service
(with the calculation of that average to exclude any
credit given to SG related to any other Service in
any monthly invoice), or
(iii) any Optional Service to the extent permitted by
Section 15.4.
(b) AA's Reasonable Consent shall be required for SG's performing
itself or obtaining from any other Person any service or
services to supplement all or any portion of any
Management Services Agreement
7
<PAGE> 13
Use-based Service in any circumstance other than as described
in Section 6.3(a)(ii).
ARTICLE 7 -- PRICES
7.1 Cost Allocation. In determining Prices, AA's cost allocations to SG
shall be determined on a consistent basis with AA's cost allocations
to AMR's other subsidiaries.
7.2 Annual Pricing. The Price payable by SG for each Service shall be
established annually by this procedure:
(a) AA shall submit to SG by October 1 a Price Proposal for each
Service then in effect, except for any Significant Optional
Service that will be discontinued effective December 1 in
accordance with a Notice of discontinuance given by the
preceding June 1. AA shall propose the Price for each Service
assuming a continuation of the Level of that Service since the
preceding September 1, unless the Parties have agreed to, or
AA is proposing, a March 1 Level Change for that Service in
accordance with Section 4.3.
(b) SG shall respond in writing to the Price Proposal for each
Service by November 1.
(c) To the extent that SG does not accept or agree with a Price
Proposal, the Parties shall negotiate in good faith to reach
agreement on the Price for that Service by December 1. The
Parties' agreement by December 1 on the Price of any Use-based
Service shall also include an estimated annual amount for that
Service.
(d) If by December 1 the Parties do not agree on the Price at
which any Optional Service shall continue to be rendered
(without any change in Level) and neither Party gives a Notice
of discontinuance of that Optional Service, the Price for that
Optional Service shall continue to be the Price then in
effect.
7.3 Disagreement on Mandatory Service Pricing. If the Parties do not
agree by December 1 on the Price at which any Mandatory Service shall
be rendered, the Dispute shall be resolved by the Dispute Resolution
Procedure. Pending resolution of that Dispute, the Price for that
Mandatory Service shall continue to be the Price in effect on November
30. The Price determined by resolution of that Dispute shall be
deemed effective January 1 as though the Parties had agreed to it as
of the preceding December 1. Accordingly:
(a) Any excess amount paid by SG shall be credited (without
interest) to the next invoice or invoices for any Service or
Services payable by SG after the date of resolution, or to the
extent full credit cannot be given to invoiced amounts payable
within 30 days after the date of resolution, paid (without
interest) by AA by wire transfer of immediately available
funds to an account or accounts designated by SG; or
Management Services Agreement
8
<PAGE> 14
(b) any amount due to AA shall be paid (without interest) within
30 days after the date of resolution by wire transfer of
immediately available funds to an account or accounts
designated by AA.
7.4 Annual Price Effectiveness. The Price for each Service agreed or
determined as of December 1 of each year will be effective for that
Service for the succeeding calendar year, unless changed to correspond
to a change in the Level of that Service in accordance with Article 4.
- --------------------------------------------------------------------------------
ARTICLE 8 -- PAYMENT
8.1 Invoices. AA shall submit to SG monthly one or more invoices for the
Services. Each invoice shall indicate for each SG Business Unit:
(a) The amount charged for each Service covered by that invoice;
(b) if the Service is a Use-based Service, the calculation of the
invoiced amount or the basis on which that amount was
determined; and
(c) if that invoice includes any credit or offset for SG, the
amount and purpose of that credit or offset.
Each invoice should also indicate the sales, use, or similar taxes
being collected on each Service, or part of a Service, that AA
believes to be so taxable. An invoice may cover more than one
Service.
8.2 Payment. SG shall pay the amount of each invoice within 30 days after
the date of that invoice. SG shall pay the invoiced amount even if SG
disputes all or a portion of that amount, unless AA has agreed on or
before the due date to accept a different amount.
8.3 Method of Payment. SG shall pay AA by wire transfer of immediately
available funds to an account or accounts designated by AA. All
payments shall be made in United States currency.
8.4 Interest. AA may charge interest on any past due invoiced amount at
the annual rate of 18% (or, if lower, the highest lawful rate) from
the due date until paid in full with accrued interest. Any payment of
interest only is not a cure or AA's sole remedy for nonpayment of any
invoiced amount that is due.
8.5 Nonpayment Notice. If AA does not receive the full payment of any
invoice (and has not agreed to accept a different amount), it may give
SG a Nonpayment Notice. SG shall pay the amount described in the
Nonpayment Notice by the tenth Business Day after that Nonpayment
Notice is given.
Management Services Agreement
9
<PAGE> 15
8.6 Dispute of Invoice. Except as described in the last sentence of this
Section 8.6, SG may dispute the amount of any invoice for up to 90
days after the date of that invoice; if no Notice of that Dispute is
given within those 90 days, the invoiced amount shall be deemed agreed
to by SG. The Notice of a Dispute of any invoice shall describe the
basis for that Dispute and specify the Service and the SG Business
Unit to which that Dispute relates. A Dispute of any invoice (except
as described in the last sentence of this Section 8.6) shall be
resolved by the Dispute Resolution Procedure. If it is determined by
resolution of that Dispute that SG has paid any excess amount in
response to the invoice, that amount shall be credited (without
interest) to the next invoice or invoices payable by SG after the date
of resolution, or to the extent full credit cannot be given to
invoiced amounts payable within 30 days after the date of resolution,
paid (without interest) by AA by wire transfer of immediately
available funds to an account or accounts designated by SG. Under
this Section 8.6, SG may dispute only the invoiced amount and the
particular calculation thereof, and not the previously established
basis for the established Price for any invoiced Service. Any Dispute
regarding the application to any Service (in whole or in part) of any
invoiced sales, use, or similar taxes is subject to Section 17.2(b)
instead of this Section 8.6.
- --------------------------------------------------------------------------------
ARTICLE 9 -- RECORDS
9.1 Record Keeping. Each Party shall create and maintain accurate records
regarding the Services rendered and the amounts charged and paid or
received under this Agreement. AA's records shall include information
regarding the determination of amounts charged or invoiced to SG for
Use-based Services and information regarding the determination of the
cost or the cost allocation for each Service rendered. Each Party's
records regarding
(a) the Services rendered, and at the Level rendered, as of the
Effective Date shall be of substantially the same kinds as
that Party has created and maintained regarding those Services
before the Effective Date, and
(b) the Services, or the Level of Services, as changed after the
Effective Date in accordance with this Agreement shall be of
the kinds that are reasonable, and consistent with the other
business records created and maintained by that Party,
regarding services like those Services at those Levels.
Each Party shall create and maintain those records with the same
degree of completeness and care as it maintains its other similar
business records. Each Party shall maintain those records for the
time or times required by applicable law or regulation, except that a
Party shall, upon request of the other Party, maintain any of those
records for a longer time if the requesting Party pays the additional
expenses incurred in complying with that request.
9.2 Examination. Each Party shall be entitled to examine, through its
authorized representatives or agents and at its own expense, the
records that the other Party is required to maintain under this
Agreement. This examination right may be exercised only by three
Business Days' prior Notice to the other Party, and the examination
may be made only during the other
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Party's normal business hours or at any other reasonable time or times
to which the other Party may consent. An examination shall be
performed in a manner that does not unreasonably disrupt the other
Party's normal business operations. This examination right will
continue:
(a) for two years after Expiration or the termination of this
Agreement; and
(b) thereafter, as long as necessary to enable a Party to respond
to any Third-Party Claim or to a request or order issued by a
court or another Governmental Authority.
The Party conducting an examination may make and take away copies of
any or all of the other Party's records being examined.
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ARTICLE 10 -- CONFIDENTIAL INFORMATION
10.1 Confidential Information. Each Party shall keep confidential the
following information -- which is "Confidential Information" --
whether acquired by it under or in connection with this Agreement or
obtained in connection with the relationship of AA and SG or its
subsidiaries or predecessors regarding management services rendered
before the Effective Date:
(a) Information relating to the other Party's business, financial
condition or performance, or operations that the other Party
treats as confidential or proprietary.
(b) Copies of records and other information obtained from a
Party's examination of the other Party's records under Section
9.2.
(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, that is
marked or clearly identified by the other Party as
confidential or proprietary.
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, under this Agreement. Each SG Company has the same
rights and benefits, and the same duties and obligations, as SG has
(as a "Party") in this Article 10.
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10.2 Excluded Information. A Party has no obligation under this Article 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 Person, violated by that
disclosure.
10.3 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.
10.4 Permitted Disclosures. A Party may disclose Confidential Information
to its officers, directors, agents, or employees as necessary to give
effect to 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 Article 10 and
impose on that Person the obligation to comply with this Article 10
regarding the Confidential Information. Each Party shall be
responsible for any breach of that Party's obligations under this
Article 10 by its officers, directors, agents, or employees.
10.5 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, 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
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.
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 (for
example, to comply with applicable securities laws), as confirmed by
advice of competent and knowledgeable counsel. Further, a Party may
also disclose Confidential Information, without complying with these
conditions, in connection with a tax audit if the disclosure is to
representatives of a taxing authority, or in connection with a tax
contest if that Party uses its Reasonable Efforts to assure that
confidential treatment will be accorded the information disclosed.
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10.6 Title to Information. The Confidential Information of a Party
disclosed by it to the other Party under this Agreement shall remain
the property of the disclosing Party; nothing in this Agreement,
other than in this Article 10, grants or conveys to the other Party
any ownership or other rights in any of that Confidential Information.
10.7 Survival; Return. The obligations under this Article 10 shall
continue on and after Expiration or the termination of this Agreement.
Upon request of the disclosing Party upon or after Expiration or the
termination of this Agreement, the other Party shall return or, if
requested by the disclosing Party, destroy the Confidential
Information of the disclosing Party that it holds. The requested
return or destruction
(a) shall include removal or deletion of Confidential Information
from all data bases and magnetic media of the other Party, and
(b) need not be effected to the extent that it would be
impractical or unduly burdensome to effect.
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ARTICLE 11 -- PARTIES' RELATIONSHIP
11.1 Independent. The Parties are independent; each has sole authority and
control of the manner of, and is responsible for, its performance of
this Agreement. This Agreement 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 Agreement. This Agreement
does not restrict AA from providing or rendering any services,
including services like the Services, to any other Person; nothing in
this Agreement, however, gives AA the right to provide or render any
services in violation of any other agreement entered into by the
Parties.
11.2 Employees. Except as described in Section 14.4(b) or Section 14.4(c)
or in the Legal Rights Agreement, for the purposes of this Agreement:
(a) each Party is solely responsible for its own employees or
agents, including the actions or omissions and the
compensation of those employees and agents, and
(b) neither Party has any authority with respect to any of the
other Party's employees or agents.
11.3 Authority and Enforceability. Each Party warrants to the other Party
that:
(a) it has the requisite corporate authority to enter into and
perform this Agreement;
(b) its execution, delivery, and performance of this Agreement
have been duly authorized by all requisite corporate action on
its behalf;
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(c) this Agreement is enforceable against it; and
(d) it has obtained all consents or approvals of Governmental
Authorities and other Persons that are conditions to its
entering into this Agreement.
11.4 Third-Party Consents. Each Party shall be responsible for obtaining
and maintaining any licenses, permits, consents, or approvals of
Governmental Authorities and other Persons necessary or appropriate
for it to perform its obligations under this Agreement.
11.5 Third-Party-Related Arrangements. The Parties also have certain
arrangements and agreements relating to certain of the Services
provided by an Effective Date Service Subcontract or provided directly
by AA but involving an agreement with a third party. The Parties
currently expect that the matters or issues addressed by those
arrangements or agreements will need to continue to be addressed --
whether in the same or in a different manner -- upon Expiration or the
termination of this Agreement or the discontinuance of certain
Optional Services. Hence, before and upon any of those events, each
Party shall use its Reasonable Efforts to change, renegotiate,
replace, sever, or assign, as the Parties mutually agree, those
arrangements or agreements as necessary to so address those matters or
issues and to equitably allocate to the respective Parties -- in
accordance with their respective assets and businesses -- the benefits
and the obligations of those arrangements or agreements upon and after
the occurrence of any of those events.
11.6 Further Assurances. Each Party shall take such actions, upon request
of the other Party and in addition to the actions specified in this
Agreement, as may be necessary or reasonably appropriate to implement
or give effect to this Agreement.
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ARTICLE 12 -- PARTIES' REPRESENTATIVES
12.1 Representatives' Authority. Each Party has authorized its
Representative to conduct discussions and negotiations, make and
communicate decisions, frame and pose questions or issues, and resolve
Disputes on behalf of that Party relating to this Agreement. Though
one Party's employees or agents other than its Representative may also
take actions of the kinds described in the preceding sentence with the
other Party's employees or agents other than its Representative,
matters that require more formal discussions or negotiations between
Parties shall be addressed through and by the Representatives. Each
Party and its Representative are entitled to rely on the actions and
decisions of the other Party's Representative relating to this
Agreement.
12.2 Designation. AA designates its Managing Director of Financial
Planning as AA's Representative, and SG designates its Managing
Director of SABRE Group Financial Planning as SG's Representative,
upon and after the Effective Date until changed by the designating
Party. A Party may change its Representative by Notice to the other
Party. A
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Party may rely on and deal with the Person who is designated as the
other Party's Representative until any Notice of change is given by
the other Party.
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ARTICLE 13 -- TERMINATION
13.1 Termination Events. This Agreement may be terminated, without
liability to the Party terminating:
(a) By either Party, upon 30 days' Notice to the other, at any
time upon or after the Parties cease to be Affiliates.
(b) By a Party, immediately upon Notice to the other Party, if:
(i) that other Party makes a general assignment of all or
substantially all of its assets for the benefit of
its creditors;
(ii) that other Party applies for, consents to, or
acquiesces in the appointment of a receiver, trustee,
custodian, or liquidator for its business or all or
substantially all of its assets;
(iii) that other Party files, or consents to or acquiesces
in, a petition seeking relief or reorganization under
any bankruptcy or insolvency laws; or
(iv) a petition seeking relief or reorganization under any
bankruptcy or insolvency laws is filed against that
other Party and is not dismissed within 90 days after
it was filed.
(c) By a Party, immediately upon Notice to the other Party, if
that other Party's material breach of this Agreement continues
uncured or uncorrected for 30 days after both the nature of
that breach and the necessary cure or correction has been
agreed upon by the Parties or otherwise determined by the
Dispute Resolution Procedure. But if:
(i) the Parties agree or it is determined by the Dispute
Resolution Procedure that the material breach is not
capable of being cured or corrected, the termination
shall be effective immediately upon Notice, without
any cure period; or
(ii) the breaching Party (A) reasonably requires longer
than 30 days to cure or correct -- such as when the
applicable Service Subcontract permits the
Subcontractor longer than 30 days to cure or correct
-- and (B) Notifies the non-breaching Party of the
circumstances, then the cure period shall be extended
for the reasonable time so required, so long as
during that time the breaching Party diligently acts
to effect that cure or correction.
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A non-breaching Party's exercise of the remedy described in
this Section 13.1(c) shall be conditioned upon its giving a
Breach Notice to the other Party.
(d) By AA, immediately upon Notice to SG, if SG has not paid the
amount described in a Nonpayment Notice by the tenth Business
Day after that Nonpayment Notice was given.
(e) By AA, upon 30 days' Notice to SG, at any time upon or after
termination of the Information Technology Services Agreement
before its expiration date.
A Party may not terminate this Agreement if the event or circumstance
described above in this Section 13.1, upon which that Party would rely
in so terminating, was caused by that Party's breach of this
Agreement.
13.2 Nonexclusive. The termination rights under Sections 13.1(c) and
13.1(d) are not exclusive of any other right or remedy of a
non-breaching Party granted in this Agreement.
13.3 Consequences of Termination. Upon termination of this Agreement:
(a) Under Section 13.1(a) or Section 13.1(e) or by SG under Section
13.1(c):
(i) During the Transition Period AA shall continue to
render, and SG shall pay for, each Service reasonably
requested by SG until terminated by either Party in
accordance with Sections 13.3(a)(ii) and
13.3(a)(iii). Except as stated in Section
13.3(a)(ii), the terms of this Agreement shall
continue to apply during the Transition Period as
though no termination of this Agreement had occurred.
(ii) The Level of each Service rendered, and the Price for
each Service, during the Transition Period shall be
the same as in effect immediately preceding the
Termination Date. Article 5 shall not apply during
the Transition Period. During the Transition Period,
any Service (including a Mandatory Service), but not
any one or more of the Tasks separately, may be
terminated by (A) SG, for any reason, by 60 days'
Notice to AA, or (B) AA, if SG has not paid the
amount described in a Nonpayment Notice by the tenth
Business Day after the Nonpayment Notice was given.
Any Service that is the subject of a Notice of
termination shall continue to be rendered by AA until
the effective date of that termination, and SG shall
pay for that Service rendered through that date.
Neither Party may unilaterally rescind a Notice of
termination.
(iii) If either Party reasonably determines that the
termination of any Service during the Transition
Period would make it functionally impossible to
continue any other Service during the Transition
Period, that Party shall promptly Notify the other
Party of that determination; any Service that so
becomes functionally impossible to render shall be
deemed terminated effective upon the date of
termination of the Service that caused that
impossibility. Neither Party may unilaterally
reinstate any Service that has been terminated as of
the Termination Date or during the Transition Period.
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(b) Under Section 13.1(b), then during the Transition Period, AA
shall comply with SG's reasonable requests for assistance in
SG's engaging or training another Person or Persons to
provide, and for records and other information relating to,
each Service in effect immediately preceding the Termination
Date. If SG terminates this Agreement, AA shall comply with
those requests at its own expense. If AA terminates this
Agreement, SG shall reimburse and pay AA's Transition Expenses
in accordance with invoices submitted to SG by AA. Articles 8
and 18 shall apply in this situation as though this Agreement
had not been terminated. When SG is obligated to reimburse
and pay AA's Transition Expenses, AA may cease providing
transition assistance, immediately upon Notice to SG, if SG
has not paid the amount described in a Nonpayment Notice by
the tenth Business Day after the Nonpayment Notice was given.
If the records or other information provided by AA are
Confidential Information, Article 10 shall also apply as
though this Agreement had not been terminated.
(c) Under Section 13.1(d) or by AA under Section 13.1(c), then AA
shall have no obligation to provide any continued Services or
transition assistance as described above in this Section 13.3.
13.4 Survival of Rights and Obligations. No rights or obligations of
either Party that expressly or impliedly are to remain in effect in
order to give effect to this Agreement shall be impaired by Expiration
or the termination of this Agreement, and those rights and obligations
shall remain in effect.
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ARTICLE 14 -- LIABILITY AND REMEDIES
14.1 Warranties. Each Party's warranties in this Agreement are made solely
to and for the benefit of the other Party and, to the extent described
in this Agreement, the SG Companies. No Person other than a Party may
make a claim based on the other Party's warranties under this
Agreement; any claim by an SG Company shall be made by SG.
14.2 Nonconforming Services. SG shall promptly Notify AA of any Deficiency
in any Service or Task, whether rendered by AA or a Subcontractor. To
the extent AA agrees, or it is otherwise determined by the Dispute
Resolution Procedure, that a Service or Task was or is a Nonconforming
Service, AA shall use its Reasonable Efforts promptly to cure or
correct, or cause its Subcontractor to cure or correct, the Deficiency
to the extent it may then be cured or corrected.
(a) If the Deficiency was, or was the result of, AA's or a
Subcontractor's negligence, AA shall not be responsible or
liable for any resulting Damages of SG.
(b) If the Deficiency was, or was the result of, AA's or a
Subcontractor's gross negligence (including recklessness) or
willful misconduct, AA shall be responsible or liable for SG's
resulting Damages in an amount up to:
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(i) if AA's liability is determined (by the Parties'
agreement or the Dispute Resolution Procedure) after
the calendar year in which the Deficiency occurred,
the aggregate amount received by AA for the
Nonconforming Service for the calendar year in which
the Deficiency occurred;
(ii) if AA's liability is determined during the calendar
year in which the Deficiency occurred and the
Nonconforming Service is a Fixed-price Service, the
annual Price for the Nonconforming Service for that
calendar year; or
(iii) if AA's liability is determined during the calendar
year in which the Deficiency occurred and the
Nonconforming Service is a Use-based Service, the
greater of (A) the estimated annual amount for that
Service for that calendar year and (B) the aggregate
amount received by AA to the date the liability is
determined, annualized for that calendar year.
The annual limit on AA's liability described above in this
Section 14.2(b) is not cumulative from year to year. If there
is more than one Deficiency in a single Service for which AA
is responsible or liable for Damages and AA's liability for
those Deficiencies is determined in the same calendar year,
AA's responsibility or liability for Damages resulting from
all of those Deficiencies shall be subject to the applicable
annual limit on liability described above in this Section
14.2(b).
14.3 Actual Damages. Neither Party shall be liable under or relating in
any manner to this Agreement for any losses or damages other than
Damages, even if a Party has been advised of the possibility of losses
or damages of that kind and regardless of the form of the Proceedings
or the theory of liability, whether based on contract, warranty, tort
(including negligence and strict liability), infringement, or
misappropriation.
14.4 Indemnities for Certain Breaches and Other Matters. The following
shall apply to any breach of, and certain other Damages relating to,
this Agreement, other than a Deficiency for which AA has no liability
for Damages under Section 14.2(a) or a nonpayment by SG of any amount
relating to an invoice:
(a) Subject to the limits on liability described in Section
14.2(b), if that Section is applicable, each Party shall
indemnify the other Party against all Damages of the
Indemnified Party, or any of its Indemnified Agents, resulting
from or relating to:
(i) any breach of this Agreement, including a breach of
any warranty in this Agreement, by the Indemnifying
Party;
(ii) any Proceedings relating to a breach of this
Agreement by the Indemnifying Party; and
(iii) the actions or omissions of the Indemnifying Party's
employees or agents under or in connection with this
Agreement, except as described in Sections 14.4(b)
and 14.4(c).
(b) SG shall also indemnify AA against all Damages of AA or any of
its Indemnified Agents, including any Subcontract Termination
Penalty, under or relating to any Service Subcontract -- other
than as described in Section 3.5(b) -- resulting from:
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(i) any violation by SG of any obligation imposed on it
under that Service Subcontract;
(ii) the actions or omissions of SG's employees or agents
under or in connection with that Service Subcontract;
(iii) SG's discontinuance of any Optional Service that AA
renders, in whole or in part, by that Service
Subcontract, even if permitted by Article 5;
(iv) SG's performing itself or obtaining from any Person
other than AA or its Subcontractor any service or
services to supplement or substitute for any Optional
Service that AA renders, in whole or in part, by that
Service Subcontract, even if permitted by Section
6.3;
(v) Expiration; or
(vi) the termination of this Agreement other than a
termination by SG under Section 13.1(b) or Section
13.1(c).
(c) SG shall also indemnify AA against all Damages of AA or any of
its Indemnified Agents resulting from or relating to:
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(iii) the actions or omissions of any of the Legal Staff
that are directed by SG or any SG Company within the
scope of that lawyer's or paralegal's engagement for
any legal matter of SG or any SG Company; or
(iv) any sales, use, or similar taxes (however described)
applicable to any of the Services, in whole or in
part, that are assessed or levied against or paid by
AA.
(d) The indemnification obligations in Sections 14.4(a), 14.4(b),
and 14.4(c) shall be extinguished to the extent that the
Damages of the other Party, or any of its Indemnified Agents
for whom or which the other Party is seeking indemnification,
were caused by the gross negligence (including recklessness)
or willful misconduct of the Person for whom or which
indemnification is sought. THE INDEMNIFICATION PROVISIONS IN
SECTIONS 14.4(a), 14.4(b), AND 14.4(c) EXPRESS THE PARTIES'
INTENT THAT A PERSON BE INDEMNIFIED AGAINST ITS OWN ORDINARY
NEGLIGENCE, OR THE RESULTS OF THAT ORDINARY NEGLIGENCE, UNDER
THIS AGREEMENT.
(e) If an Indemnification Claim is not based on a Third-Party
Claim, the Indemnified Party shall give an Indemnification
Claim Notice promptly after the event constituting the basis
for the Indemnification Claim; its failure to do so, however,
shall relieve the Indemnifying Party of its indemnification
obligations only to the extent the Indemnifying Party is
actually prejudiced by that failure. If the Indemnified Party
gives an Indemnification Claim Notice regarding an
Indemnification Claim not based on a Third-Party Claim, the
Indemnifying Party shall Notify the Indemnified Party within
the Indemnification Response Period whether the Indemnifying
Party disputes all or any
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portion of the Indemnification Claim. If the Indemnifying
Party does not give that dispute Notice or agrees to accept
liability for all or a portion of the Indemnification Claim,
the Indemnification Claim, or the agreed portion of that
Indemnification Claim, shall be the Indemnifying Party's
liability. Otherwise, the Indemnification Claim shall be
deemed a Dispute to be resolved by the Dispute Resolution
Procedure.
(f) If an Indemnification Claim is based on a Third-Party Claim:
(i) The Indemnified Party shall give an Indemnification
Claim Notice promptly after it receives the
Third-Party Claim. The failure of an Indemnified
Party to timely give an Indemnification Claim Notice
shall relieve the Indemnifying Party of its
indemnification obligations only to the extent the
Indemnifying Party is actually prejudiced by that
failure.
(ii) The Indemnifying Party shall be entitled to defend
the Third-Party Claim, with its chosen counsel and at
its own expense, if (A) the Third-Party Claim seeks
only monetary relief, and not an injunction or other
equitable relief, against the Indemnified Party, and
(B) the Indemnifying Party elects to assume, and
diligently conducts, that defense. The Indemnifying
Party's election to defend shall be given by Notice
to the Indemnified Party within the Indemnification
Response Period. If the Indemnifying Party conducts
the defense, the Indemnified Party may participate in
that defense with its own counsel and at its own
expense.
(iii) If the Indemnifying Party does not elect to defend
the Third-Party Claim by Notice within the
Indemnification Response Period, or if the
Indemnifying Party does not diligently conduct the
defense, the Indemnified Party shall be entitled,
upon further Notice to the Indemnifying Party, to
defend the Third-Party Claim on behalf of, and for
the account and risk of, the Indemnifying Party (if
it is determined that the Indemnifying Party has an
indemnification obligation regarding that
Indemnification Claim). In this circumstance, the
Indemnifying Party may participate in the defense
with its own counsel and at its own expense.
(iv) If there is a conflict of interest that makes it
inappropriate for the same counsel to represent the
Indemnifying Party and the Indemnified Party in
defending the Third-Party Claim, the Indemnifying
Party shall pay for separate counsel for the
Indemnified Party.
(v) The Indemnifying Party defending a Third-Party Claim
may compromise, settle, or resolve that Third-Party
Claim without the Indemnified Party's consent if the
compromise, settlement, or resolution involves only
the payment of money by the Indemnifying Party
(whether on its own behalf or behalf of the
Indemnified Party) and the third-party claimant
provides the Indemnified Party a release from all
liability regarding the Third-Party Claim.
Otherwise, the Indemnifying Party may not compromise,
settle, or resolve the Third-Party Claim without the
Indemnified Party's Reasonable Consent.
(vi) The Indemnifying Party and the Indemnified Party
shall cooperate with all reasonable requests of the
other in defending any Third-Party Claim.
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14.5 Time for Claims. SG may make a claim against AA for the cure or
correction of any Deficiency only within two years after the
Deficiency occurred; any Deficiency shall be deemed to have occurred
when the particular Nonconforming Service was rendered. A Party may
make an Indemnification Claim
(a) not based on a Third-Party Claim, only within two years after
the breach or other event constituting the basis for that
Indemnification Claim occurred, even if not discovered until
after that second anniversary, or
(b) based on a Third-Party Claim, at any time.
14.6 Offset. A Party entitled to any payment due from the other Party
under this Agreement may offset all or any portion of the amount of
that payment against any payment that is due from it to the other
Party under this Agreement.
14.7 Equitable Relief. To the extent that monetary relief is not a
sufficient remedy for any breach of this Agreement, or upon any breach
or impending breach of Article 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 the Dispute
Resolution Procedure, except as permitted by Section B.4(b) of the
Dispute Resolution Appendix.
14.8 Exclusive Remedies. Except for the termination right stated in
Article 13 and the relief described in Sections 15.4 and 17.2(b) and
in the Dispute Resolution Procedure, the remedies described in this
Article 14 are the exclusive rights and remedies of a Party regarding
any breach of this Agreement or any other matter that may be the
subject of an Indemnification Claim.
14.9 Waiver of Remedies. No forbearance, delay, or indulgence by either
Party in enforcing this Agreement -- within the applicable time limits
stated in this Agreement -- shall prejudice the rights or remedies of
that Party. No waiver of a Party's rights or remedies regarding a
particular breach of this Agreement constitutes a waiver of those
rights or remedies, or any other rights or remedies, regarding any
other or any subsequent breach of this Agreement.
14.10 Cumulative Remedies. A Party's election to pursue a right or remedy
granted in this Agreement upon the other Party's breach of this
Agreement shall not preclude the non-breaching Party from pursuing
other rights or remedies granted to that Party in this Agreement that
are applicable to that breach under this Agreement.
14.11 Survival. The rights, remedies, and obligations under this Article 14
shall continue on and after Expiration or the termination of this
Agreement.
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ARTICLE 15 -- FORCE MAJEURE
15.1 No Breach or Liability. No delay or failure of a Party to perform any
of its obligations, other than payment obligations, under this
Agreement due to causes beyond its reasonable control shall constitute
a breach of this Agreement or render that Party liable for that delay
or failure. Causes beyond a Party's reasonable control include:
(a) events or circumstances that the Party, using its Reasonable
Efforts, is unable to prevent or overcome;
(b) as to AA, causes also beyond the reasonable control of the
Person to whom or which AA has Subcontracted the affected
Service or Task in accordance with this Agreement; and
(c) labor disputes, strikes, or other similar disturbances; acts
of God; utilities or communications failures; acts of the
public enemy; and riots, insurrections, sabotage, or
vandalism.
15.2 Notice of Excusable Delay or Failure. If a Party anticipates any
excusable delay or failure under Section 15.1, it shall promptly
Notify the other Party of the anticipated delay or failure, the
anticipated effect of that delay or failure, and any actions that are
being or are to be taken to alleviate or overcome the cause of the
delay or failure.
15.3 Efforts to Overcome. If a Party is claiming an excusable delay or
failure under Section 15.1, it shall use its Reasonable Efforts to
alleviate or overcome the cause of the delay or failure as soon as
practicable.
15.4 Extended Delay or Failure. If an excusable delay or failure continues
for more than 30 consecutive days, the Party entitled to the benefit
of the affected obligation may perform itself or obtain from any other
Person the obligation to which that Party is entitled (and that Party
shall Notify the other Party of this election).
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ARTICLE 16 -- DISPUTE RESOLUTION MATTERS
16.1 General Procedure. Except as otherwise stated in this Agreement, the
Parties shall resolve all Disputes in accordance with the Dispute
Resolution Procedure. Nevertheless, if any Person other than the
Parties, the SG Companies, and their Affiliates
(a) has initiated a lawsuit or other Proceedings against or
involving either or both of the Parties in which a Dispute
will be resolved, or
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(b) is a necessary participant in any Proceedings to resolve a
Dispute and cannot be joined by either or both of the Parties
in an arbitration of that Dispute under Section B.3 of the
Dispute Resolution Appendix,
so that (in either case) the Dispute Resolution Procedure is or will
be ineffective, then the Parties need not use or follow the Dispute
Resolution Procedure to resolve that Dispute -- though the submission
to jurisdiction in Section B.5 of the Dispute Resolution Appendix
shall apply if necessary.
16.2 Continued Performance. The Parties shall continue performing their
respective obligations under this Agreement while a Dispute is being
resolved.
16.3 Parties' Agreement. Nothing in this Article 16 or the Dispute
Resolution Procedure prevents the Parties from resolving any Dispute
by mutual agreement at any time.
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ARTICLE 17 -- EXPENSES AND TAXES
17.1 Expenses. Each Party shall be solely responsible for its costs and
expenses incurred in performing its obligations and exercising its
rights and remedies under this Agreement, except as otherwise provided
in this Agreement.
17.2 Taxes. The Parties shall be responsible for tax payments or
liabilities relating to this Agreement as follows:
(a) Each Party shall be responsible for its income and franchise
taxes and for all other taxes (however described) based on its
own income or earnings.
(b) SG shall be responsible for all sales, use, and similar taxes
(however described) applicable to the Services, in whole or in
part. This obligation includes SG's paying the sales taxes
identified in AA's invoices submitted to SG for the Services.
(i) If SG claims an exemption or exclusion from taxes of
this kind, it shall deliver to AA a certificate or
letter stating SG's good-faith belief that a Service
is not, in whole or in part, subject to those taxes.
Whether or not SG delivers that certificate or
letter, however, it shall indemnify AA, in accordance
with Section 14.4(c)(iv), against any taxes of this
kind assessed or levied against, or paid by, AA and
any other related Damages of AA.
(ii) If AA receives an assessment from a taxing authority
covering taxes for which SG is responsible under this
Section 17.2(b), AA shall Notify SG of the assessment
and, at SG's request, timely contest the assessment.
If payment to the taxing authority is required by law
as a condition to protest, SG shall timely furnish AA
the required amount for that payment.
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(iii) If SG believes it has overpaid taxes to AA for any of
the Services (in whole or in part), SG may require AA
to file a claim for a refund at SG's expense. If
permitted by law, AA may assign any right to a refund
directly to SG instead of filing a refund claim. Any
refund of taxes (including any interest) received by
AA under this Section 17.2(b)(iii) shall be promptly
forwarded to SG.
(iv) Before AA is required to pursue any action requested
by SG under this Section 17.2(b), AA may at any time
require SG to deliver a letter of advice from outside
counsel (selected by SG) stating that SG's tax
position is reasonable.
(v) Except as stated in the next sentence, any Dispute
between the Parties regarding the application of any
taxes of this kind to any Service (in whole or in
part) shall be resolved by the Dispute Resolution
Procedure. Any Dispute as to the amount of tax (if
any) owed to a taxing authority, including a Dispute
between a Party and the taxing authority, need not be
resolved by the Dispute Resolution Procedure, but may
be resolved by any appropriate administrative or
legal procedure available to a Party or the Parties
under this Agreement apart from the Dispute
Resolution Procedure.
(c) Each Party shall be responsible for all real property,
personal property, and other taxes (however described) based
on its owned or leased property, whether real or personal.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(d) Each Party shall be responsible for all employment-related
taxes (however described) regarding its own employees,
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Each Party shall cooperate with any reasonable request of the other
Party to restructure any Service, in whole or in part, or to take any
other reasonable action to avoid or minimize any duplicate taxes that
might be imposed; the requesting Party shall bear the expenses of the
other Party's compliance.
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ARTICLE 18 -- COMMUNICATIONS
18.1 Form. Each notice (including a Nonpayment Notice, an Indemnification
Claim Notice, and a Breach Notice), request, response, demand, claim,
and other communication required or permitted under this Agreement
shall be in writing and shall be transmitted, delivered, or sent by:
(a) personal delivery,
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(b) courier or messenger service, whether overnight or same-day,
(c) prepaid telecopy or facsimile, or
(d) certified United States mail, with postage prepaid and return
receipt requested,
in any case addressed to the other Party at the address or number for
that Party set forth in Section 18.2, or at such other address or
number as the recipient has designated by Notice to the other Party in
accordance with this Article 18.
18.2 Addresses. The Parties shall transmit, deliver, or send
communications as follows:
(a) If to AA: American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5501
Fort Worth, Texas 76155
Telecopier: (817) 967-1184
Attention: Managing Director of Financial
Planning
With a copy to: American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5675
Fort Worth, Texas 76155
Telecopier: (817) 967-2937
Attention: Corporate Secretary
(b) If to SG: The SABRE Group, Inc.
4200 American Way Boulevard
Mail Drop 3534
Fort Worth, Texas 76155
Telecopier: (817) 931-0514
Attention: Managing Director of SABRE
Group Financial Planning
With a copy to: The SABRE Group, Inc.
4255 Amon Carter Boulevard
Mail Drop ________
Fort Worth, Texas 76155
Telecopier: (817) _____-_______
Attention: Corporate Secretary
18.3 Effectiveness. Each communication transmitted, delivered, or sent:
(a) in person, by courier or messenger service, or by certified
United States mail, postage prepaid and return receipt
requested, shall be deemed given, received, and effective on
the date delivered to or refused by the intended recipient
(with the return receipt or the equivalent record of the
courier or messenger being deemed conclusive evidence of
delivery or refusal); or
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25
<PAGE> 31
(b) by telecopy or facsimile transmission shall be deemed given,
received, and effective on the date of actual receipt (with
the confirmation of transmission being deemed conclusive
evidence of such receipt, except where the intended recipient
has promptly notified the other Party that the transmission is
illegible).
Nevertheless, if the date of delivery or transmission is not a
Business Day, or if the delivery or transmission is after 5:00 p.m. on
a Business Day, the communication shall be deemed given, received, and
effective on the next Business Day.
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ARTICLE 19 -- ASSIGNMENT
Neither Party may assign any of its rights or delegate any of its duties or
obligations under this Agreement without the other Party's Consent; this
prohibition of assignment and delegation shall include any assignment and
delegation by operation of law (such as merger or consolidation). Any
attempted assignment or delegation without the other Party's Consent shall be
void and without effect. The two preceding sentences do not, however, preclude
AA from Subcontracting or SG from extending the benefits of the Services to the
SG Companies as permitted by Article 3.
- --------------------------------------------------------------------------------
ARTICLE 20 -- AMENDMENT AND WAIVER
This Agreement may be amended or modified, and any provision of this Agreement
may be discharged or waived, only by a document signed by the Party against
which the amendment, modification, discharge, or waiver is sought to be
enforced.
- --------------------------------------------------------------------------------
ARTICLE 21 -- INTEGRATION
This Agreement constitutes the Parties' entire agreement on this subject; it
replaces and supersedes any prior agreement or understanding of the Parties,
whether written or oral, on this subject not expressed or referred to in this
Agreement.
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ARTICLE 22 -- SEVERABILITY
If any part of this Agreement is for any reason found to be unenforceable, all
other parts of this Agreement nevertheless remain enforceable.
- --------------------------------------------------------------------------------
ARTICLE 23 -- SUCCESSORS
This Agreement binds and inures to the benefit of the Parties and their
respective legal representatives, successors, and permitted assigns.
- --------------------------------------------------------------------------------
ARTICLE 24 -- GOVERNING LAW
This Agreement shall be interpreted or construed under Texas law. Likewise,
the validity and performance of this Agreement shall be enforced, and all
issues relating to this Agreement shall be resolved, under Texas law.
- --------------------------------------------------------------------------------
ARTICLE 25 -- COUNTERPARTS
This Agreement may be signed in any number of counterparts, with the same
effect as if all signatories had signed the same document. All counterparts
shall be construed together to constitute one, and the same, document.
- --------------------------------------------------------------------------------
Management Services Agreement
27
<PAGE> 33
SIGNATURES AMERICAN AIRLINES, INC.
By: /s/ Donald J. Carty
------------------------------------
Donald J. Carty, President
THE SABRE GROUP, INC.
By: /s/ Michael J. Durham
------------------------------------
Michael J. Durham, President
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<PAGE> 34
DEFINITIONAL APPENDIX
TO MANAGEMENT SERVICES AGREEMENT
A. Defined Terms. In the Agreement, the following terms have the
corresponding meanings:
"AA": American Airlines, Inc., a Delaware corporation.
"AA'S REPRESENTATIVE": The individual agent or representative
designated by AA to be AA's formal liaison with or representative to
SG for matters relating to the Agreement, having the (non-exclusive)
authority and responsibility described in the Agreement.
"AA'S TRANSITION EXPENSES": The sum of the following, incurred in or
resulting from AA's compliance with requests for transition assistance
for up to 180 days after Expiration or during the Transition Period
(as the case may be):
1. All of AA's reasonable out-of-pocket expenses, and
2. the time or activities of AA's personnel as follows: (a) if the
activities of those personnel were part of a Use-based Service
before Expiration or the termination of the Agreement, at the Price
most recently paid for that Use-based Service before Expiration or
termination, or (b) if the activities of those personnel were part
of a Fixed-price Service before Expiration or the termination of
the Agreement, an amount equal to that portion of the Price most
recently paid for that Fixed-price Service before Expiration or
termination corresponding to the transition activities' portion of
all activities that constituted that Fixed-price Service, for the
time covered by that Price, before Expiration or termination.
"AMR": AMR Corporation, a Delaware corporation and the corporate
parent of both Parties on the Effective Date.
"AFFILIATE": A Person that directly or indirectly through one or more
intermediaries Controls, is Controlled by, or is under common Control
with another Person.
"AGREEMENT": The Management Services Agreement between AA and SG
(including the Definitional Appendix, the Dispute Resolution Appendix,
and the Schedules), as may be amended or supplemented from time to
time in accordance with its terms.
"ARBITRATION RULES": The Rules for Commercial Arbitration of the
American Arbitration Association in effect at the time of an
arbitration in accordance with the Dispute Resolution Procedure.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUSTED]
"BREACH NOTICE": A Party's Notice to the other Party alleging a
breach of the Agreement (other than SG's nonpayment of any amount
related to an invoice) by the other Party, which describes the alleged
breach, to the extent known by the notifying Party, and any particular
cure or correction requested by the notifying Party.
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<PAGE> 35
"BUSINESS DAY": Any Monday through Friday, excluding any such day on
which banks are authorized to be closed in Texas.
"CONFIDENTIAL INFORMATION": Information subject to a duty of
confidence and a restriction on use imposed on one or both Parties
under Article 10.
"CONTROL": The right to exercise, directly or indirectly, more than
50% of the voting power attributable to the equity interests in an
entity. ("Controlling" and "Controlled" have correlative meanings.)
"CONSENT": The prior written consent of a Party (in any capacity) in
its sole discretion.
"DAMAGES": Losses, claims, obligations, demands, assessments, fines
and penalties (whether civil or criminal), liabilities, expenses and
costs (including reasonable fees and disbursements of legal counsel
and accountants), bodily and other personal injuries, damage to
tangible property, and other damages, of any kind or nature, actually
suffered or incurred by a Person. "Damages":
1. consists only of actual damages;
2. excludes any lost profits, lost income, or lost savings and any
punitive, exemplary, consequential, indirect, special, or
incidental damages (however described), even if the possibility of
those losses or damages was known; and
3. includes (except as may be reduced in accordance with the next
sentence) all fines, penalties, and interest paid or payable to any
Governmental Authority.
If SG has Damages, for which AA is liable, consisting of fines,
penalties, and interest paid or payable to a Governmental Authority
corresponding to any tax not timely paid, then those "Damages" shall
be reduced by an amount equal to interest, at the annual rate of 5%,
accrued on that tax from the due date until that tax is paid; for the
avoidance of doubt, in this situation "Damages" shall not include any
tax for which SG would otherwise be liable to the Governmental
Authority.
"DEFICIENCY": AA's failure in rendering a Service or Task to satisfy
the applicable standard of care stated in the Agreement or to render
it at the applicable Level established under the Agreement.
("Deficient" has the correlative meaning.)
"DEFINITIONAL APPENDIX": This Definitional Appendix to Management
Services Agreement, containing definitions and interpretive matters
for, as an integral part of, the Agreement.
"DISPUTE": 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
nonperformance and any claim regarding bodily or other personal injury
or damage to tangible property.
Management Services Agreement
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"DISPUTE RESOLUTION APPENDIX": The Dispute Resolution Appendix to
Management Services Agreement, containing the Dispute Resolution
Procedure for, as an integral part of, the Agreement.
"DISPUTE RESOLUTION PROCEDURE": The procedure or process by which a
Dispute shall be resolved (except as otherwise stated in the
Agreement) as described in the Dispute Resolution Appendix.
"EFFECTIVE DATE": July 1, 1996, the date on which the Agreement
becomes effective.
"EFFECTIVE DATE SERVICE SUBCONTRACT": A Service Subcontract in effect
on the Effective Date.
"EXPIRATION": The expiration of the term of the Agreement as stated
in, and as may be renewed under, Article 2, without regard to any
period of transition assistance. For the avoidance of doubt,
"Expiration" does not include a termination of the Agreement under
Section 13.1. ("Expire" and "Expired" have correlative meanings.)
"FIXED-PRICE SERVICE": A Service the Price for which is a fixed or
nonvariable amount, other than a fixed rate.
"GOVERNMENTAL AUTHORITY": Any federal, state, local, or foreign
government or governmental, quasi- governmental, administrative, or
regulatory authority, agency, body, or entity, including any court or
other tribunal.
"INDEMNIFICATION CLAIM": A claim or demand of a Party, on its behalf
or on behalf of one or more of its Indemnified Agents, for
indemnification under Section 14.4.
"INDEMNIFICATION CLAIM NOTICE": A Notice from the Indemnified Party
describing an Indemnification Claim and the amount or the estimated
amount of that Indemnification Claim to the extent then feasible
(though that estimate shall not be determinative of the final amount
of that Indemnification Claim).
"INDEMNIFICATION RESPONSE PERIOD": The 30 days after an
Indemnification Claim Notice is given during which the Indemnifying
Party may investigate and determine its responsibility or liability
for an Indemnification Claim and, if relating to a Third-Party Claim,
Notify the Indemnified Party of the Indemnifying Party's election to
defend that Third-Party Claim.
"INDEMNIFIED AGENTS": Collectively, the officers, directors,
employees, and agents of a Party and, as to SG, the SG Companies and
their respective officers, directors, employees, and agents.
"INDEMNIFIED PARTY": A Party entitled to or seeking indemnification,
on its own behalf or on behalf of one or more of its Indemnified
Agents, under Section 14.4.
"INDEMNIFYING PARTY": A Party that has or is alleged to have an
obligation to indemnify the other Party in response to an
Indemnification Claim.
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"INFORMATION TECHNOLOGY SERVICES AGREEMENT": The Information
Technology Services Agreement between AA and SG dated July 1, 1996, as
may be amended or supplemented from time to time in accordance with
its terms.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"LEGAL RIGHTS AGREEMENT": The Legal Rights and Services Agreement
among AMR, AA, and SG dated July 1, 1996, as may be amended or
supplemented from time to time in accordance with its terms.
"LEGAL STAFF": Legal personnel that AA employs or otherwise engages.
"LEVEL": The scope, timeliness, or quantity of a Service or Task or
the location, intensity, or frequency at or with which a Service or
Task is or is to be rendered.
"MANDATORY SERVICE": A Service that shall be rendered and paid for,
and may not be unilaterally discontinued under Article 5 by either
Party, during the effectiveness of the Agreement.
"MARCH 1 LEVEL CHANGE": A change in the Level of a Service to be
effective at midnight on March 1.
"NONCONFORMING SERVICE": A Service or Task that, as agreed by the
Parties or otherwise determined by the Dispute Resolution Procedure,
was or is Deficient.
"NONPAYMENT NOTICE": A Notice from AA to SG that describes an amount
related to an invoice to SG that AA has not received when due, which
shall:
1. constitute a demand for payment of the described amount; and
2. state that either termination of the Agreement or cessation of
transition assistance, whichever is applicable, by AA may result if
the described amount is not paid by the tenth Business Day after
that Notice is given.
"NOTICE": A written communication complying with Article 18.
("Notify" has the correlative meaning.)
"OPTIONAL SERVICE": A Service that may be unilaterally discontinued
by either Party in accordance with the Agreement.
"PARTIES": Collectively, AA and SG. ("Party" means either AA or SG.)
"PERSON": An individual; a corporation, partnership, trust,
association, or entity of any kind or nature; or a Governmental
Authority.
"PRICE": The amount or rate, in either case whether fixed or variable
and however measured, charged to SG for a Service, as agreed by the
Parties.
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"PRICE PROPOSAL": A written proposal or estimate of the Price for a
Service at a particular Level (or, if applicable, at each Level),
together with a description of the basis on which the proposed or
estimated Price was determined or calculated by AA (including, to the
extent applicable, the allocation methodology, allocation drivers, and
margin).
"PROCEEDINGS": Any action, suit, claim, investigation, demand, audit,
or other proceedings by or before any Governmental Authority or any
arbitration proceedings.
"REASONABLE CONSENT": The prior written consent of a Party (in any
capacity), which may not be unreasonably withheld or delayed.
"REASONABLE EFFORTS": The efforts of a Party that are commercially
reasonable under the circumstances, which do not require a Party to
institute or prosecute any Proceedings or to pay any Person other than
that Party's representatives or agents, including (only as to AA)
Subcontractors.
"REPRESENTATIVES": Collectively, AA's Representative and SG's
Representative.
"SG": The SABRE Group, Inc., a Delaware corporation.
"SG BUSINESS UNIT": A segment or part of SG's business that SG
treats, for purposes of its business and not solely for the Agreement,
as a separate unit. On the Effective Date, the SG Business Units are
SABRE Technology Information Network, SABRE Decision Technologies,
SABRE Computer Services, SABRE Interactive, and SABRE Group Staff.
"SG COMPANY": Any entity over which SG has Control.
"SG'S REPRESENTATIVE": The individual agent or representative
designated by SG to be SG's formal liaison with or representative to
AA for matters relating to the Agreement, having the (non-exclusive)
authority and responsibility described in the Agreement.
"SLA": A written agreement or understanding between AA and SG or any
SG Company describing, or otherwise stating terms regarding, the Level
at which a Service, in whole or in part, will be rendered. An SLA
regarding a Service, in whole or in part, may be entered into by or
directly with one or more of AA's departments rendering that Service
or that part of the Service. An SLA entered into on or after
Effective Date
1. may be a separate document or part of another document, such as a
Price Proposal that is accepted by SG,
2. may be a Schedule or part of a Schedule, and
3. shall be signed by AA and SG.
"SABRE SYSTEM": The SABRE Computer Reservations System to which
access is provided, and the related software and hardware licensed or
leased, under the Japanese Subscriber Agreements.
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"SCHEDULE": A Schedule to the Agreement that describes a Service, the
basis of the Price for that Service, the annual Price for that Service
for all of 1996, any Subcontractor preforming all or a portion of that
Service, and the location or locations at which that Service is to be
rendered if not at AA's offices or Subcontracted.
"SEPTEMBER 1 LEVEL CHANGE": A change in the Level of a Service to be
effective at midnight on September 1.
"SERVICE": An individual management service, to be rendered by AA
under the Agreement, that is described as a "Service" in a Schedule.
A Service may also be described in a Schedule by all or a portion of
its constituent Tasks.
"SERVICE SUBCONTRACT": An agreement or arrangement, oral or written,
under which a Subcontractor is to render or perform any Service or
Task on AA's behalf or in AA's stead.
"SIGNIFICANT OPTIONAL SERVICE": An Optional Service the Price for
which exceeds, or the Parties agree will exceed, $1 million in any
calendar year (assuming no discontinuance of that Service).
"SUBCONTRACT": AA's entering into a Service Subcontract.
("Subcontracted" and "Subcontracting" have correlative meanings.)
"SUBCONTRACT TERMINATION PENALTY": An obligation described in, as
part of the terms of, a Service Subcontract to pay the Subcontractor a
charge, fine, penalty, or other amount upon the termination or partial
termination of that Service Subcontract, including any return to the
Subcontractor of any equipment or goods held under that Service
Subcontract.
"SUBCONTRACTOR": A Person, other than an employee of AA, who or which
enters into a Service Subcontract with AA.
"TASK": Any one of the group of processes, procedures, or services
that is described in a Schedule as constituting, or included in, a
Service.
"TERMINATION DATE": The date on which the Agreement is terminated in
accordance with Section 13.1, without regard to any Transition Period.
"THIRD-PARTY CLAIM": A claim of liability asserted against either
Party by a Person other than the other Party or either Party's
Indemnified Agents.
"TRANSITION PERIOD": The maximum 180-day period after the Termination
Date during which AA shall, as SG reasonably requests, render one or
more Services in accordance with Section 13.3(a) or provide transition
assistance in accordance with Section 13.3(b).
"USE-BASED SERVICE": A Service the Price for which is variable; or a
Service the Price for which is a fixed rate, but the amount due for
that Service is determined by or based upon, at least in part, the
extent of the actual use of AA's personnel or other assets.
B. Interpretative Matters. The Agreement is the result of the Parties'
negotiations, and no provision of the Agreement shall be construed for
or against either Party because of the authorship of that provision.
In the interpretation of the Agreement, except where the context
otherwise requires:
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1. "including" or "include" does not denote or apply any limitation;
2. "or" has the inclusive meaning "and/or";
3. "$" refers to United States dollars;
4. the singular includes the plural, and vice versa, and each gender
includes each of the others;
5. captions or headings are only for reference and are not to be
considered in interpreting the Agreement;
6. "Article" and "Section" refer to an Article and Section,
respectively, of the Agreement, unless otherwise stated in the
Agreement;
7. an event to occur, an action to be performed, or a condition to be
satisfied "by" or "as of" a stated date in the Agreement shall
occur or be effective or satisfied no later than 5:00 p.m. on that
date; and
8. each reference to a time of day in the Agreement is to local time
in Fort Worth, Texas, and "midnight" begins a day.
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DISPUTE RESOLUTION APPENDIX
TO MANAGEMENT SERVICES AGREEMENT
A. Defined Terms. Various terms used in this Dispute Resolution
Appendix, which begin with a capital letter, are defined in the
Definitional Appendix to Management Services Agreement. In addition,
the following terms used only in this Dispute Resolution Appendix have
the corresponding meanings:
"COMPLEX DISPUTE LIST": The "Complex Dispute List," 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.
"INITIAL EXECUTIVE REVIEW COMMITTEE": A committee consisting of
the Managing Director of Financial Planning of AA, the Vice
President and Controller of SG, and the Managing Director of
Corporate Development of AMR.
"SECOND EXECUTIVE REVIEW COMMITTEE": A committee consisting of the
Vice President and Controller of AA and the Senior Vice President
and Chief Financial Officer of SG.
"QUALIFICATIONS": Inclusion in the Complex Dispute List or having
extensive knowledge or experience, or both, regarding management
services similar to the Service or Services that are the subject of
the Dispute.
The interpretative matters set forth in the Definitional Appendix 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:
(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 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'
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<PAGE> 42
Presidents, who 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 (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), 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. 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 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, 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.
Management Services Agreement
37
<PAGE> 43
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
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.
Management Services Agreement
38
<PAGE> 44
(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 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 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;
Management Services Agreement
39
<PAGE> 45
(b) seek provisional or temporary injunctive relief, in response
to an actual or impending breach of Article 10 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.
Management Services Agreement
40
<PAGE> 46
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
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APPENDIX TO
THE MANAGEMENT SERVICES AGREEMENT
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1
<PAGE> 47
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TABLE OF CONTENTS:
Tax Administration Service (Mandatory) . . . . . . . . . . . . . . . . . 5
Human Resources Government Reporting Service (Mandatory) . . . . . . . . 7
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Tulsa Facilities Maintenance Service (Mandatory) . . . . . . . . . . . . 9
Cash Accounting Service. . . . . . . . . . . . . . . . . . . . . . . . . 11
Receivables Service. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Payroll Production Service . . . . . . . . . . . . . . . . . . . . . . . 13
Payroll Tax Accounting Service . . . . . . . . . . . . . . . . . . . . . 15
Payroll Customer Service . . . . . . . . . . . . . . . . . . . . . . . . 16
Disbursements Production Service . . . . . . . . . . . . . . . . . . . . 17
Human Resources Administration . . . . . . . . . . . . . . . . . . . . . 18
Employee Relations Service . . . . . . . . . . . . . . . . . . . . . . . 19
DOT Drug Testing Service . . . . . . . . . . . . . . . . . . . . . . . . 20
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Banking Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Corporate Finance Service. . . . . . . . . . . . . . . . . . . . . . . . 24
Tax Administration Services (Optional) . . . . . . . . . . . . . . . . . 25
Government Affairs Service . . . . . . . . . . . . . . . . . . . . . . . 27
SABRE Supply Management Service. . . . . . . . . . . . . . . . . . . . . 28
Corporate Security Service . . . . . . . . . . . . . . . . . . . . . . . 29
Safety Administration Service. . . . . . . . . . . . . . . . . . . . . . 30
Business Insurance Administration Service. . . . . . . . . . . . . . . . 31
- --------------------------------------------------------------------------------
2
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TABLE OF CONTENTS CONTINUED:
Pension Fund & 401K Administration Service . . . . . . . . . . . . . . . 32
Corporate Affairs Service. . . . . . . . . . . . . . . . . . . . . . . . 33
MCLA Division Service. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Financial Systems Service. . . . . . . . . . . . . . . . . . . . . . . . 35
AMR China Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Legal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Audit Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Corporate Real Estate Service. . . . . . . . . . . . . . . . . . . . . . 42
Corporate Communications Service . . . . . . . . . . . . . . . . . . . . 44
Other Airline (OA) Personal Travel Administration Service. . . . . . . . 45
Other Airline (OA) Business Travel Administration Service. . . . . . . . 46
International Division Services. . . . . . . . . . . . . . . . . . . . . 48
General Services Department. . . . . . . . . . . . . . . . . . . . . . . 49
General Services' Pass-Through Expenses Service. . . . . . . . . . . . . 50
Corporate Travel Desk Service. . . . . . . . . . . . . . . . . . . . . . 51
Printing Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
- --------------------------------------------------------------------------------
3
<PAGE> 49
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TABLE OF CONTENTS CONTINUED:
Facilities Maintenance - CPIV. . . . . . . . . . . . . . . . . . . . . . 53
Facilities Maintenance - STIN. . . . . . . . . . . . . . . . . . . . . . 54
Facilities Maintenance Pass-Through Expense Service. . . . . . . . . . . 55
Utilities Management Service . . . . . . . . . . . . . . . . . . . . . . 56
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
AA Corporate Apartment Service . . . . . . . . . . . . . . . . . . . . . 58
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- --------------------------------------------------------------------------------
4
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE I
TAX ADMINISTRATION SERVICE (MANDATORY)
DESCRIPTION OF SERVICE: Tax Administration is defined as tax research and
planning and tax return preparation in compliance with tax statutes and
regulations. Tax Administration related to US federal and state income tax
planning and compliance will be a Mandatory Service. All other Tax
Administration Services will be Optional Services and are described on Schedule
XVI. The Tasks to be performed under Tax Administration Service (Mandatory)
include, without limitation:
A) U.S. federal and state income tax compliance
i. tax return preparation and tax payment processing
ii. representation on audits and contests
iii. management of development of tax and accounting systems to
minimize compliance costs
B) U.S. federal and state income tax accounting and reporting
i. income tax account analysis
ii. tax provision accounting
C) U.S. federal and state income tax planning and projects
i. research and planning to assess impact of taxes on operations
and on proposed transactions
ii. legislative and regulatory monitoring
HOURLY RATE DURING 1996: $ See note A
FIXED AMOUNT FOR 1996: $ 16,296
TOTAL ESTIMATED COST FOR 1996: $ 220,716
- --------------------------------------------------------------------------------
5
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TAX ADMINISTRATION SERVICE (MANDATORY)
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Tax department's hourly rate and
the billable hours required to perform the Tasks described above. The Tax
Department may Subcontract when necessary. All costs of Subcontracting will be
"passed-through" at AA cost to the SABRE Group. The Fixed Amount of the Tax
Administration Service is the allocation of unmargined Private Payroll
representing the oversight responsibility of the VP Corporate Development &
Treasury. The Fixed Amount of the Tax Administration Service will be invoiced
in 12 equal installments, and the Fixed Amount will not vary if any one or more
of the use-based Tasks are dropped. The annual cost to provide the service is
the sum of the Fixed Amount and the usage at the hourly rate.
NOTE A: Schedule of Hourly Rates
Level 8 $130 hr
7 $102 hr
6 $ 88 hr
5 $ 77 hr
4 $ 65 hr
3 $ 59 hr
---------------
- --------------------------------------------------------------------------------
6
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE II
HUMAN RESOURCES GOVERNMENT REPORTING SERVICE (MANDATORY)
DESCRIPTION OF SERVICE: Tasks performed to ensure that the SABRE Group is in
compliance with U.S. Federal human-resources-related reporting statutes. The
Tasks to be performed will consist of:
A) Summary Plan Descriptions
S) Pension Annual Reporting and Disclosure, maintaining ERISA
administration requirements, plan documentation, research and
analysis, ADA accommodations, and Affirmative Action / Department of
Labor / EEO administration
FIXED PRICE FOR 1996: $92,849
MONTHLY INVOICED AMOUNT DURING 1996: $ 7,737
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Human Resources' fully-allocated costs. The
fixed price will be invoiced in 12 equal installments during the calendar year.
The annual Price of the Human Resources Service will include an allocation of
unmargined Private Payroll representing the oversight responsibility of the
V.P. Human Resources (equaling $2,143 for 1996), and will not vary with changes
in the Service Level of this Service.
---------------
- --------------------------------------------------------------------------------
7
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
- --------------------------------------------------------------------------------
8
<PAGE> 54
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE IV.
TULSA FACILITIES MAINTENANCE SERVICE (MANDATORY)
DESCRIPTION OF SERVICE: This Service must be rendered or provided at the
Tulsa Office Center and Tulsa Computer Center (the "Tulsa Campus") as it
involves AA's use of its employees who are members of the Transport Workers
Union ("TWU") working at the Tulsa Campus in accordance with these terms:
1.) The SABRE Group may obtain the Service or any of the Tasks from a
Person other than AA, so long as the SABRE Group continues to pay for the TWU
Employees, to the extent that
a) the Service or Task are beyond the scope of normal operations
for the TWU Employees, or
b) the TWU Employees are too few, or do not have the sufficient
equipment or facilities, to perform the Service or Task.
2.) AA's Director of Facilities Maintenance of the TWU Employees shall
a) ensure that adequate qualified manpower is available at the
Tulsa Campus to perform the Tasks as described in this
Schedule;
b) administer appropriate discipline to any TWU Employees who has
violated applicable AA rules and regulations or AA/TWU
contractual requirements;
c) relocate from the Tulsa Campus, as soon as reasonably
practicable (in light of AA's legal obligations) after the
reasonable request of the SG Director (as defined below), any
TWU Employee who has violated any other AA's applicable
employment or workplace regulation, or has been deemed to be
a threat, or to jeopardize, the operational integrity of the
Tulsa Campus or its systems; and
d) delegate to the SABRE Group's Director of Technical Support
("SG Director") the authority to coordinate the daily work
activities performed by the TWU Employees.
3.) [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
- --------------------------------------------------------------------------------
9
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TULSA FACILITIES MAINTENANCE SERVICE (MANDATORY) -CONTINUED:
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED].
The Tasks to be performed by the TWU Employees will consist of:
A) Operate all Heating, Ventilation and Air Conditioning (HVAC) equipment
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B) Operate all Uninterruptible Power Supply (UPS) System
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
C) Install power to mainframe computers and peripheral equipment
D) Accomplish all electrical maintenance and repairs
E) Install chilled water piping to mainframe computer
F) Janitorial Services [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
G) Shipping and Receiving [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be based on the volume of the Tasks performed. The price
is based on the fully-allocated costs of providing the service, including:
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
- --------------------------------------------------------------------------------
10
<PAGE> 56
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE V.
CASH ACCOUNTING SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Corporate
Accounting Department will consist of:
A) Reconciliation of domestic bank accounts
B) Identification and resolution of cash irregularities and cash
reporting issues
C) Primary internal control relative to cash
D) Recognition of foreign currency adjustments
E) Investigation, resolution and subsequent clearing of reconciling items
FIXED PRICE FOR 1996: $143,956
MONTHLY INVOICED AMOUNT DURING 1996: $ 11,996
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Corporate Accounting's fully-allocated costs
plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual Price of the Cash Accounting Service will
include an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. & Controller (equaling $9,115 for 1996), and will
not vary with changes in the Service Level of this Service.
---------------
- --------------------------------------------------------------------------------
11
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE VI.
RECEIVABLES SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Corporate
Receivables Department will consist of:
A) Receivable Billing/Accounting -
i. Bill posting to the receivable sub-ledger system
ii. Cash applications
iii. Coordination of settlement with Airlines Clearing House, or
IATA Clearing House
iv. Account reconciliation, and receivable servicing.
FIXED PRICE FOR 1996: $57,688
MONTHLY INVOICED AMOUNT DURING 1996: $ 4,807
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Corporate Receivables Department's
fully-allocated costs plus a margin. The fixed price will be invoiced in 12
equal installments during the calendar year. The annual Price of the
Receivables and Credit Analysis Service will include an allocation of
unmargined Private Payroll representing the oversight responsibility of the
V.P. & Controller (equaling $3,653 for 1996), and will not vary with changes in
the Service Level of this Service.
---------------
- --------------------------------------------------------------------------------
12
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE VII.
PAYROLL PRODUCTION SERVICE
DESCRIPTION OF SERVICE: Responsible for the calculation and distribution of
payroll checks and incentive compensation checks. The Tasks to be performed
consist of:
A) Regular Checks - Processing of regular paychecks on a weekly,
bi-weekly, and semi-monthly basis
B) Remote Checks - Processing of remote or supplemental paychecks for
adjustments
C) Gross Pay Adjustments to be completed during the next regular pay
period
D) Garnishments
E) Stop Payments for lost or stolen paychecks
F) Bonuses and Special Payments - Processing of special payments that
require development changes
ESTIMATED COST FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
FIXED AMOUNT FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
RATE DURING 1996:
Garnishments [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
Regular Checks [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
Remote Checks [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
Stop Payment [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Payroll Production's rates and
the volume of products used. The Fixed Amount of the Payroll Production
Service is the allocation of unmargined Private Payroll representing the
oversight responsibility of the V.P. & Controller. The Fixed Amount of the
Payroll
- --------------------------------------------------------------------------------
13
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
Production Service will be invoiced in 12 equal installments, and the Fixed
Amount will not vary if any one or more of the use-based Tasks are dropped.
The annual cost to provide the service is the sum of the Fixed Amount and the
usage at the rates specified above.
---------------
- --------------------------------------------------------------------------------
14
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE VIII.
PAYROLL TAX ACCOUNTING SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Payroll Tax
Accounting Department will consist of:
A) Payroll Taxes - Charges for the collection, remittance and accounting
for payroll taxes and other moneys collected from employee paychecks.
The cost is driven by the number of payroll checks that are processed
in one calendar year.
B) Payroll Tax Reporting - Charges for reporting for Federal and State
withholding and unemployment taxes. The costs are driven by the
number of states worked.
C) Unemployment taxes - Services are currently SUBCONTRACTED TO FRICK,
INC. Frick, Inc. is responsible for processing all claims for
unemployment compensation claims, the monitoring the charges to SABRE
GROUP unemployment accounts in each state, and the rates assigned by
the States.
D) Payroll Tax Year End - Charges for the year end production of annual
wage and tax statements. The cost is driven by the number of W-2s
issued in one calendar year, and the number of states worked.
ESTIMATED COST FOR 1996:[INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
FIXED AMOUNT FOR 1996:[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
RATES DURING 1996:
A) Payroll Tax [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B) Payroll Tax Reporting [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
C) Unemployment Tax [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
D) Payroll Tax Year End [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
BASIS FOR PRICE: The Tasks to be performed are use-based. The price is based
on AA Payroll Tax Accounting's fully-allocated costs plus a margin. The Fixed
Amount portion of the Payroll Tax Accounting Service is the allocation of
unmargined Private Payroll representing the oversight responsibility of the
V.P. & Controller. The Fixed Amount of the Payroll Tax Accounting Service will
be invoiced in 12 equal installments, and the Fixed Amount will not vary if any
one or more of the use-based Tasks are dropped. The annual cost to provide the
service is the sum of the Fixed Amount and the usage at the rates specified
above.
----------------
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15
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE IX.
PAYROLL CUSTOMER SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Payroll Customer
Service Department will consist of:
A) Employment Verification - Completion of the wage and employment
information requested by lending institutions. THE $10 FEE
IS PAID BY LENDING INSTITUTIONS.
B) W-2 Reissues - $10 Fee for current year W-2 copy issued 4/15 to 12/31.
$20 fee for past year W-2. Additional $5.00 expedite fee for fax of
Fed Ex delivery. ALL FEES ARE PAID BY SABRE GROUP EMPLOYEES.
C) Employment Receivables - The administration and collection of
balances from employees for advances, uniforms, and salary
overpayments, check distribution special handling.
ESTIMATED COST FOR 1996: $2,534
RATE DURING 1996: $18.84 hour for Task C
FIXED AMOUNT FOR 1996: $ 171
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Payroll Customer Service's hourly
rate and the number of hours to perform the Tasks. The Fixed Amount of the
Payroll Customer Service is the allocation of unmargined Private Payroll
representing the oversight responsibility of the V.P. & Controller. The Fixed
Amount of the Payroll Customer Service will be invoiced in 12 equal
installments, and the Fixed Amount will not vary if any one or more of the
use-based Tasks are dropped. The annual cost to provide the Service is the sum
of the Fixed Amount and the usage at the hourly rate.
----------------
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16
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE X.
DISBURSEMENTS PRODUCTION SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Corporate
Disbursements will consist of:
A) Usage of EDI Mailbox and translator,(1)
B) Other EDI
C) Audit and Processing of contract based payments
ESTIMATED COST FOR 1996:(1)
RATES DURING 1996:
A) EDI Mailbox usage1
B) Other EDI 1
C) Audit and Processing Relocation requests1
FIXED AMOUNT FOR 1996:(1)
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Corporate Disbursement's rates
and the volume of Tasks performed. The Fixed Amount of the Disbursements
Production Service is the allocation of unmargined Private Payroll representing
the oversight responsibility of the V.P. & Controller. The Fixed Amount of
the Disbursement Production Service will be invoiced in 12 equal installments,
and the Fixed Amount will not vary if any one or more of the use-based Tasks
are dropped. The annual cost to provide the Service is the sum of the Fixed
Amount and the usage at the rates specified above.
----------------
- ---------------------------------
(1) [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
- --------------------------------------------------------------------------------
17
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XI.
HUMAN RESOURCES ADMINISTRATION
DESCRIPTION OF SERVICES: AA Human Resources Department is responsible for
performing the following Services (and not merely Tasks) for the SABRE Group.
<TABLE>
<CAPTION>
FIXED
SERVICE DESCRIPTION PRICE
- --------- ----------- -----
<S> <C> <C>
A) Providing and Managing Health and Welfare Benefits $ 452,526
C) Management and Professional Recruitment $ 49,269
D) College Recruitment $ 85,499
E) Support Staff Recruitment 56,617
G) Managing Employee Information and Documentation $ 29,630
H) Managing Employee Performance and Terminations $ 163,539
I) Compensating Employees and Job Leveling $ 3,776
J) Bonus Commission Programs $ 9,901
O) Providing Retirement Benefits $ 110,980
Q) Training Management $ 107,667
S) CEIS $ 45,365
T) Providing and Managing Workers Compensation $ 64,471
U) Supporting International Locations $ 190,318
W) Facilitating Management Career Moves $ 220,236
X) Developing Admin / Interpreting Corporate Policy $ 178,401
Y) Assisting AMR Executives - Executive administration $ 65,426
AA) Admin Travel Policy (Listed for Admin billing purposes only. $ 28,909
No additional charge for this service is imposed in the
Travel Privileges Agreement)
BB) Evaluating Employees and their Performance/Progress $ 65,799
DD) Providing Service Pins $ 13,837
EE) Relocating Employees $ 30,484
FF) Admin and Cost Control $ 103,356
</TABLE>
TOTAL FIXED PRICE FOR 1996: $2,125,052
MONTHLY INVOICED AMOUNT DURING 1996: $ 177,088
BASIS FOR PRICES: Each of the Services described above will be performed on a
fixed-price basis. The price is based on AA Human Resources' fully-allocated
costs plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual price of the Human Resources Service will
include an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. Human Resources (equaling $49,046 for 1996), and
will not vary with the discontinuance of any one or more of the Services
(unless all of the Services in this Schedule are discontinued).
----------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XII.
EMPLOYEE RELATIONS SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Employee
Relations Department will consist of:
A) Negotiation of TWU Contracts
B) Labor Contract Administration
C) Formulate and Implement Labor Policy
D) Administration of Grievance Process
E) Representation of AMR Interests in Arbitration Proceedings
F) Coordination of AMR Policy toward Labor Law Legislation
G) Strategic Communication of Labor Initiatives
FIXED PRICE FOR 1996: $12,487
MONTHLY INVOICED AMOUNT DURING 1996: $ 1,041
BASIS FOR PRICE: The Task described above will be performed on a fixed-price
basis. The price is based on AA Employee Relations' fully-allocated costs plus
a margin. The fixed price will be invoiced in 12 equal installments during the
calendar year.
----------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
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SCHEDULE XIII.
DOT DRUG TESTING SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Medical
Department will consist of:
A) Random Drug and Alcohol Testing - includes Testing administered for
reasonable cause
B) Pre-employment Drug Screen
FIXED PRICE FOR 1996: $374
MONTHLY INVOICED AMOUNT DURING 1996: $ 32
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Medical Department's fully-allocated costs
plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year.
----------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
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SCHEDULE XIV.
MEDICAL SERVICES
DESCRIPTION OF SERVICE: AA Medical Department is responsible for performing
the following Tasks for the SABRE Group.
<TABLE>
<CAPTION>
1996
TASKS DESCRIPTION RATES
- ----- ----------- -----
<S> <C> <C>
A) Breast Cancer Education $211.50 per class
B) Babies and You Education $211.50 per class
C) Blood Borne Pathogen Avoidance Education $44.81 per hour
D) Ergonomics Awareness
i. Back Injury Prevention Training $125.45 per class
ii. Worksite Assessments $47.45 per hour
iii. Cumulative Trauma (Carpal Tunnel Prevention) $84.11 per class
E) Alcoholism Awareness and Training Treatment $72.25 per hour
F) Critical Incident Stress debriefings $86.71 per hour
G) Workers Comp Visits to the Clinic $49.66 per exam
H) Blood Borne Pathogen Follow-up Care $505.46 per case
I) EAP Follow-up and Monitoring $77.29 per hour
J) Top Officer Examinations $688.25 per exam
K) OSHA Required Safety and Respiratory Physicals $38.34 per exam
L) Medical Litigation Research and Testimony $142.63 per hour
M) Regulatory Date Maintenance $154.32 per hour
N) Immunization Alert $167.41 per hour
O) International Health Database $167.41 per hour
P) ADA Accommodation Committee Work $140.10 per hour
Q) Employee Assistance Program New Case Assessment and Referral $93.64 per case
R) Smoking Cessation $95.67 per hour
S) Maintain Mental Health Care PPN Network $86.94 per hour
T) Pre-Employment Medical Histories and Drug Screens $37.80 each
U) Occupational Visits to the Clinic $37.38 per visit
V) Reasonable cause Drug and Alcohol Screens $32.52 per test
</TABLE>
ESTIMATED COST FOR 1996: $265,280
FIXED AMOUNT FOR 1996: $ 21,277
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the rates and the volume of the Tasks
performed. The Fixed Amount of the Medical Service is the allocation of
unmargined Private Payroll representing the oversight responsibility of the Sr.
V.P. Corporate Services. The Fixed Amount of the Medical Service will be
invoiced in 12 equal installments, and the Fixed Amount will not vary if any
one or more of the use-based Tasks are dropped. The annual cost to provide the
Service is the sum of the Fixed Amount and the usage at the rates specified
above.
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
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SCHEDULE XV.
BANKING SERVICE
DESCRIPTION OF SERVICE: The AA Treasury Department shall provide the SABRE
Group and its subsidiaries, and the SABRE Group shall use and shall cause it
subsidiaries to use, centralized cash management services provided by the AA
Treasury Department which are substantially the same as the cash management
services provided by AA to the SABRE Group and its subsidiaries immediately
prior to the Effective Date. The Tasks to be performed by the AA Treasury
Department will consist of:
<TABLE>
<S> <C>
A) Cash Management Strategies
i. optimize the utilization of the daily cash activity
ii. maintain separate bank accounts for the SABRE Group and, in connection therewith, open and close bank
accounts, as required.
iii. design, develop and implement enhanced, practical, cost-efficient cash management processes.
iv. negotiate for new improved bank services
v. review bank services and fees
B) Cash Mobilization (Process Detailed on following page)
i. initiate properly approved wire transfers
ii. collect all available bank account balances
iii. fund all disbursements accounts
iv. coordinate daily with AMR Investment Services for all cash excess/shortfalls
v. generate, as needed, advance to and/or from AA
C) Coordination of Letters of Credit
D) Pass -Through expense of banking service charges
E) Cash Investment - transfer excess cash to AMR Investment Services, which will invest such cash in a manner
consistent with the investment objectives utilized by AMR Investment Services for AMR Corporation and its
subsidiaries as of the date of this Agreement.
</TABLE>
FIXED PRICE FOR 1996: $ 414,677
MONTHLY INVOICED AMOUNT DURING 1996: $ 34,556
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Treasury Department's fully-allocated costs
plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual Price of the Banking Service will include
an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. Corporate Development & Treasury (equaling $15,055
for 1996) and will not vary with changes in the Service Level of this Service.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
---------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
BANKING SERVICE DAILY CASH MOBILIZATION PROCESS (TASK B PREVIOUS PAGE)
8:00 - 8:30A - Retrieve Chase Manhattan's prior day's Balance and
Transaction Report (Infocash) for TSG's main account.
8:30 - 9:00A - Reconcile each cash receipt / disbursement on
Infocash to daily cash worksheet.
9:00 - 10:00A - Retrieve prior day's account balances from depository
banks.
- Access current day's presentments for controlled
disbursement accounts.
- View Chase's Intra-day Infocash report for main account.
10:00 - 10:30A - Prepare the cash worksheet for the day's activity.
- Compute the preliminary net cash position.
- Determine if any advances from / to AA are required.
- Notify AMR Investment Services of the cash status.
10:30 - 11:30A - Input electronic transfers.
- To concentrate receipts from depository banks into Chase
main account.
- To fund corporate payables and other bank accounts from
Chase main account.
- To remit 3rd party disbursements from main account.
11:30A - 12:00P - Review, approve, and release actual transfers (performed
by someone other than the cash mobilizer).
- Access Intra-day Infocash Report for any incremental
activity.
- Update daily cash worksheet.
- Notify AMR Investments of any significant changes.
12:00 - 2:00P - Access Intra-day Infocash Report for any further updates.
- Finalize your cash position with AMR Investment Services.
2:00 - 3:00P - Input electronic transfers for investment activity.
- Review, approve & release investment transfers.
- Close-out daily cash worksheet.
- Inform TSG of the day's net cash flow and ending
portfolio balance.
- --------------------------------------------------------------------------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XVI.
CORPORATE FINANCE SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Treasury
Department will consist of:
A) Coordination of Financing Decisions
B) Risk Assessment and Management
C) Financing Administration
FIXED PRICE FOR 1996: $31,399
MONTHLY INVOICED AMOUNT DURING 1996: $ 2,617
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on the AA Treasury Department's fully-allocated
costs plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual price of the Corporate Finance Service
will include an allocation of unmargined Private Payroll representing the
oversight responsibility of the V.P. Corporate Development & Treasury (equaling
$2,318 in 1996), and will not vary with changes in the Service Level of this
Service.
----------------
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XVII.
TAX ADMINISTRATION SERVICES (OPTIONAL)
DESCRIPTION OF SERVICE: Tax Administration other than Tax Administration
(Mandatory) as described on Schedule I. Tax Administration Services (Optional)
includes the following tax Services:
<TABLE>
<CAPTION>
SERVICES 1996 ESTIMATE
- -------- -------------
<S> <C>
A) Sales /use, excise, property and other transaction taxes $ 90,741
i. Tax return preparation and property tax rendition filing
ii Tax payment processing
iii. Audits and contests
iv. Research and planning
v. Monitor legislation and regulations effecting the business
vi. Tax accounting
B) International $ 71,073
i. Manage tax return preparation and VAT collection
calculations
ii. Foreign audits and contests
iii. Research and planning
iv. Monitor legislation and regulations effecting the business
v. Tax accounting
C) Systems Development $ 5,000
i. Develop design specifications for the new financial and
logistics systems to automate the tax functions
ii. Assisting in the developments of semi-automated accounting
systems
iii. Maintenance and modifications of tax systems
</TABLE>
HOURLY RATE DURING 1996: $ See Note A
ESTIMATED TIPS ALLOCATION FOR 1996: $ 30,000
FIXED AMOUNT FOR 1996: $ 15,184
TOTAL ESTIMATED COST FOR 1996: $ 205,660
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25
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
TAX ADMINISTRATION SERVICE (OPTIONAL)
BASIS FOR PRICE: The Services to be performed are use-based. The monthly
invoiced amount will be the product of the AA Tax Department's hourly rate and
the billable hours required to perform the Tasks described above. In addition,
there will be an allocation of TIPS processing costs. TIPS development costs
related to SG Tax Administration will be charged directly to, or "passed
through" to The SABRE Group. The Tax Department may Subcontract when
necessary. All costs of Subcontracting will be "passed-through" at AA cost to
the SABRE Group. The Fixed Amount of the Tax Administration Service is the
allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. Corporate Development & Treasury. The Fixed Amount
of the Tax Administration Service will be invoiced in 12 equal installments,
and the Fixed Amount will not vary if any one or more of the use-based Services
are dropped. The annual cost to provide each of the services is the sum of the
Fixed Amount, the usage at the hourly rate and the allocable TIPS costs.
NOTE A: Schedule of Hourly Rates
Level 8 $130 hr
7 $102 hr
6 $ 88 hr
5 $ 77 hr
4 $ 65 hr
3 $ 59 hr
----------------
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26
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XVIII.
GOVERNMENT AFFAIRS SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Government Affairs
will consist of:
A) U. S. Federal Government Relations
B) State and Local Government Relations
C) Coordination of AMR Lobbying Efforts at all levels of Government
FIXED PRICE FOR 1996: $268,808
MONTHLY INVOICED AMOUNT DURING 1996: $ 22,401
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Government Affairs' fully-allocated costs plus
a margin. The fixed price will be invoiced in 12 equal installments during the
calendar year. The annual Price of the Government Affairs Service will include
an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. Government Affairs (equaling $51,189 for 1996), and
will not vary with changes in the Service Level of this Service.
----------------
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27
<PAGE> 73
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XIX.
SABRE SUPPLY MANAGEMENT SERVICE
DESCRIPTION OF SERVICE: The SABRE Supply Management Service will be performed
in accordance with a corresponding power of attorney granted to AA Purchasing.
The Tasks to be performed are needs identification, bid proposals, awarding
process, ordering process, delivery process, payment and maintenance process
for:
A) Hardware Purchases including Personal Computers, Telecommunications
Equipment, and Printers
B) Software Purchases and Licensing Agreements
C) Telecom Services and Maintenance Contracts
FIXED PRICE FOR 1996: $2,652,249
MONTHLY INVOICED AMOUNT DURING 1996: $ 221,021
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on Purchasing SABRE Supply Management's
fully-allocated costs plus a margin. The fixed price will be invoiced in 12
equal installments during the calendar year. The annual Price of the SABRE
Supply Management Service will include an allocation of unmargined Private
Payroll representing the oversight responsibility of the V.P. Purchasing
(equaling $51,189 for 1996), and will not vary with changes in the Service
Level of this Service.
----------------
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28
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XX.
CORPORATE SECURITY SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Corporate Security
will consist of:
A) Investigations
B) Consultation & Representation
C) Ticket Loss Prevention
D) Audits & Tests
E) Instruction
F) Administration
FIXED PRICE FOR 1996: $244,456
MONTHLY INVOICED AMOUNT DURING 1996: $ 20,371
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Corporate Security's fully-allocated costs
plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual Price of the Corporate Security Service
will include an allocation of unmargined Private Payroll representing the
oversight responsibility of the Sr. V.P. Corporate Services (equaling $18,151
for 1996), and will not vary with changes in the Service Level of this Service.
----------------
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29
<PAGE> 75
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXI.
SAFETY ADMINISTRATION SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Safety will consist
of:
A) Ground Safety
i. Employee Injury and Illness
ii. Ergonomic Program
iii. Safety Audits
iv. OSHA Administration
v. Industrial Hygiene Program
vi. Safety Training
B) Environmental Safety
i. Environmental Assessments
ii. Environmental Training
iii. Legal & Lobbying
iv. Environmental Regulations
v. Technical Assistance and Support
vi. Program and Professional Development Services
vii. Waste Minimization Programs
viii. Recycling Programs
FIXED PRICE FOR 1996: $16,290
MONTHLY INVOICED AMOUNT DURING 1996: $ 1,358
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Safety's fully-allocated costs plus a margin.
The fixed price will be invoiced in 12 equal installments during the calendar
year.
----------------
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30
<PAGE> 76
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXII.
BUSINESS INSURANCE ADMINISTRATION SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Treasury
Department will consist of:
A) Negotiation of Insurance Policy Terms and Premiums
B) Contract Review and Revisions
C) Claims Handling
D) Calculation for the allocation of insurance premiums to the SABRE Group
SABRE Group may determine, in its discretion, whether to obtain its own
business insurance policies or to participate in one or more business insurance
policies obtained or arranged by AA or AMR. To the extent that SABRE Group
elects (by agreement with AA or AMR) to so participate, SABRE Group shall pay a
portion of the premiums for the insurance policies in which it participates
based on an allocation methodology agree upon by the Parties for those
policies.
FIXED PRICE FOR 1996: $133,336
MONTHLY INVOICED AMOUNT DURING 1996: $ 11,112
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on the AA Treasury Department's fully-allocated
costs plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual Price of the Business Insurance
Administration Service will include an allocation of unmargined Private Payroll
representing the oversight responsibility of the V.P. Corporate Development &
Treasury (equaling $2,336 for 1996), and will not vary with changes in the
Service Level of this Service.
----------------
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31
<PAGE> 77
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXIII.
PENSION FUND & 401K ADMINISTRATION SERVICE
DESCRIPTION OF SERVICE: AMR Investments manages the Pension and 401K plans
for SABRE Group Employees. The fixed price represents the SABRE GROUP portion
of the pension fund Management Fee charged to AA by AMR Investments.
FIXED PRICE FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
BASIS FOR PRICE: The Management Fee is on a fixed-price basis from AMR
Investments. The fixed price will be invoiced in 12 equal installments during
the calendar year.
-----------------
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32
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXIV.
CORPORATE AFFAIRS SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Corporate Affairs
will consist of the coordination of:
A) Community Relations
B) Federal and State Affairs
C) Airport Affairs
D) Administration
E) Coordination with Government Affairs
FIXED PRICE FOR 1996: $54,654
MONTHLY INVOICED AMOUNT DURING 1996: $ 4,555
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Corporate Affairs' fully-allocated costs plus
a margin. The fixed price will be invoiced in 12 equal installments during the
calendar year. The annual Price of the Corporate Affairs Service will include
an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. Corporate Affairs (equaling $51,189 for 1996), and
will not vary with changes in the Service Level of this Service.
-----------------
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33
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXV.
MCLA DIVISION SERVICES
DESCRIPTION OF SERVICE: The Services (and not merely Tasks) to be performed
by AA MCLA Division from its Miami, Florida office will consist of the
following:
<TABLE>
<CAPTION>
SERVICE 1996 PRICE
- ------- ----------
<S> <C> <C>
A) Charge to the SABRE Group all expenses related to Pass-through Expense
SG employees remaining on the AA payroll in Latin
America and the Caribbean, including transferred
employees in Mexico and Peru
B) Accounting Functions performed for The SABRE Group, $206,888
Inc. including its direct and indirect
subsidiaries, SABRE International, in the Caribbean
and Latin America served as of the Effective Date
of this contract which consists of:
i. Invoice distribution
ii. Processing of payments collected
iii. Tax forms prepared by local AMR Accounting
Offices
iv. Statutory Invoicing procedures
C) Serve as Resident Agent for Service of Process and Pass-Through Expense
Attorney-in-Fact on Powers of Attorney in the
following countries:
i. Costa Rica, Jamaica, Panama, Trinidad &
Tobago, Barbados, Grenada, Belize and Bermuda
</TABLE>
FIXED PRICE FOR SERVICE B DURING 1996: $206,888
MONTHLY INVOICED AMOUNT FOR SERVICE B DURING 1996: $ 17,241
BASIS FOR PRICE: The Fixed Price is based on AA MCLA Division's
fully-allocated costs plus a margin. Pass-through expenses, for Services A
and C, represent costs incurred by AA to perform those Services to the SABRE
Group (margin not applied). Pass-through expenses will be invoiced each month
as incurred. The Fixed Price will be invoiced in 12 equal installments during
the calendar year.
----------------
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34
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXVI.
FINANCIAL SYSTEMS SERVICE
DESCRIPTION OF SERVICE: Tasks consist of providing usage of AA's FINPACS and
CLAS systems applications for the following functionality:
A) CLAS: to store salaries, benefits and equivalent headcount at SABR
Group cost center level before transferring data to SABRE Group
SAP. Salary calculations are performed outside CLAS by AA Payroll
Accounting. Benefits and equivalent calculations are performed by
FINPACS.
B) FINPACS: to generate equivalent headcount and Employee benefits at
SABRE Group cost center level before passing that information to
CLAS. The following methodology is used for monthly allocations.
i. Pensions - The actuarial firm of Alexander & Alexander
annually calculates the total external pension expense for
the SABRE Group. The estimated 1996 rates per employee's
salary charged to each cost
center are:
SABRE Group Management (Labor Groups 2,3,4,5) [INFORMATION
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
SABRE Group Non-Management(Labor Groups 1XX, 710, 999)
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
True-ups to the SABRE Group external expense will
occur each month
ii. SABRE Group companies will have [INFORMATION OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] withheld from total
salaries as mandated by the Federal Government. The rate is
charged to each cost center based on actual salaries with
true-ups occurring monthly.
iii. Group Insurance - costs that AA incurs on behalf of each SABRE
Group Company employee. The 1996 per employee estimated rates
charged using actual physical headcount are:
SABRE Group Management (Labor Groups 2,3,4,5)
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
SABRE Group Non-Management(Labor Groups 1XX, 710, 999)
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
True-ups to the SABRE Group external expense will
occur semi-annually
iv. FAS 106 Retirement Benefits - The actuarial firm of Alexander
& Alexander annually calculates the total FAS 106 for SABRE
Group employees. The estimated 1996 rates charged using
actual physical headcount are:
SABRE Group Management (Labor Groups 2,3,4,5) [INFORMATION
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
SABRE Group Non-Management(Labor Groups 1XX, 710, 999)
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
True-ups to the SABRE Group external expense will
occur each month
- --------------------------------------------------------------------------------
35
<PAGE> 81
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
v. Federal and State Unemployment Taxes - The SABRE Group will be
charged an annual [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTed] per employee for federal unemployment
tax, and [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] per employee for state unemployment tax using
actual physical headcount
True-ups to the SABRE Group external expense will
occur each month
- --------------------------------------------------------------------------------
36
<PAGE> 82
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
FINANCIAL SYSTEMS SERVICE CONTINUED
FIXED PRICE FOR 1996 [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Financial System's fully-allocated costs plus
a margin. The fixed price will be invoiced in 12 equal installments during the
calendar year. The annual Price of the Financial Systems Service will include
an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. & Controller [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED], and will not vary with changes in the Service Level of
this Service.
-----------------
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37
<PAGE> 83
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXVII.
AMR CHINA SERVICE
DESCRIPTION OF SERVICE: Tasks consist of supporting the SABRE GROUP
companies' business development in the Peoples Republic of China from both the
AA HDQ office and the Beijing office.
ESTIMATED COST FOR 1996: $564,900
Estimate of Monthly Cost for 1996: $ 47,075
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced price will be 50% of the accumulated expenses authorized by the
President of AMR China and booked by AA Corporate Accounting during the
accounting month to perform the Service described above.
----------------
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38
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXVIII.
LEGAL SERVICES
DESCRIPTION OF SERVICE: Tasks will consist of the rendering professional
legal services for matters in the following areas:
A) Labor and Employment Law
i. Labor Litigation
ii. Equal Employment Opportunity Commission Claims (EEOC)
iii. Department of Human Rights Claims (DHR)
iv. Railway Labor Act Issues and Claims
v. OSHA Issues and Claims
vi. Environmental Issues and Claims
vii. Immigration Filings
viii. Garnishments
ix. ERISA Issues
B) Litigation
i. Commercial Litigation
ii. Antitrust Litigation
iii. EC Regulation
iv. CRS Issues
v. Federal Aviation Administration Issues and Claims (FAA)
vi. Subpoenas
C) Corporate Law
i. Contract Review and Preparation
ii. Mergers and Acquisitions
iii. Corporate Registrations
iv. Corporate and Securities law compliance
v. Real Estate
vi. Bankruptcy
vii. Intellectual Properties
viii. Customs
D) Corporate Finance
i. Public Financing
ii. Private Financing
iii. SEC Regulations
E) Regulatory Matters
i. General Governmental Matters
ii. DOT Route Proceedings
iii. DOT Regulatory Matters
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39
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AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
LEGAL SERVICES CONTINUED
ESTIMATED COST FOR 1996: $2,100,000
HOURLY RATES DURING 1996:
Associate General Counsel $ 123
Sr. Attorney $ 92
Attorney $ 80
Paralegal $ 35
FIXED AMOUNT FOR 1996: $ 51,189
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Legal Department's hourly rate
and the billable hours required to perform the Tasks described above. The AA
Legal Department may Subcontract when necessary. All costs of Subcontracting
will be "passed-through" at AA cost to the SABRE Group. The Fixed Amount of
the Legal Service is the allocation of unmargined Private Payroll representing
the oversight responsibility of the V.P. Corporate Secretary. The Fixed Amount
of the Legal Service will be invoiced in 12 equal installments, and the Fixed
Amount will not vary if any one or more of the use-based Services are dropped.
The annual applicable cost to provide the Service is the sum of the Fixed
Amount and the usage at the hourly rates.
----------------
- --------------------------------------------------------------------------------
40
<PAGE> 86
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXIX.
AUDIT SERVICE
DESCRIPTION OF SERVICE: Conducting internal audits and coordinating external
audit functions.
ESTIMATED COST FOR 1996: $ 605,221
ESTIMATED MONTHLY COST FOR 1996: $ 50,435
HOURLY RATES DURING 1996:
IT Audits $ 84
Corporate Audits $ 64
FIXED AMOUNT FOR 1996: $ 51,189
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Audit's hourly rates and the
billable hours required to perform the Tasks described above. The AA Audit
Department may Subcontract when necessary. All costs of Subcontracting will be
"passed-through" at AA cost to the SABRE Group. The Fixed Amount of the Audit
Service is the allocation of unmargined Private Payroll representing the
oversight responsibility of the Sr. V.P. and General Counsel. The Fixed Amount
of the Audit Service will be invoiced in 12 equal installments, and the Fixed
Amount will not vary if any one or more of the use-based Services are dropped.
The annual cost to provide the Service is the sum of the Fixed Amount and the
usage at the hourly rates.
----------------
- --------------------------------------------------------------------------------
41
<PAGE> 87
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXX.
CORPORATE REAL ESTATE SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Corporate Real Estate
will consist of:
A) Facilities Support
i. Space Programming Studies
ii. Manage Design Professionals
iii. Cost Estimations/Refinement for new Projects
iv. Evaluate Requests for Proposals (RFPs)
v. Value Engineering
vi. Project Feasibility Studies
vii. Bidding and Contract Negotiations
viii. Project Management
ix. Contract Audit Control
x. Project Close Out
xi. HDQ Space Planning
B) Properties Support
i. Rate and Change Evaluation
ii. Tenant and Landlord Liaison
iii. Negotiation of New Leases
iv. Negotiation of Additional Services under Leases
v. Property Management
vi. Real Estate Market Analysis
C) Planning and Technical Support
i. Environmental Engineering
ii. Energy Audits
iii. Automation Environment
iv. Pre-Conditioned Air / Ground Power
v. Material Handling Systems
- --------------------------------------------------------------------------------
42
<PAGE> 88
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
CORPORATE REAL ESTATE SERVICE CONTINUED
ESTIMATED COST FOR 1996: $146,631
HOURLY RATE DURING 1996: $ 78
ESTIMATE OF MONTHLY COST FOR 1996: $ 12,219
FIXED AMOUNT FOR 1996: $ 11,761
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced amount will be the product of the AA Corporate Real Estate's hourly
rate plus a margin and the billable hours required to perform the Tasks
described above. The Fixed Amount of the Corporate Real Estate Service is the
allocation of unmargined Private Payroll representing the oversight
responsibility of the Sr. V.P. Corporate Services. The Fixed Amount of the
Corporate Real Estate Service will be invoiced in 12 equal installments, and
the Fixed Amount will not vary if any one or more of the use-based Services are
dropped. The annual cost to provide the Service is the sum of the Fixed Amount
and the usage at the hourly rate.
----------------
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43
<PAGE> 89
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXI.
CORPORATE COMMUNICATIONS SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA Corporate
Communications will consist of:
A) Strategic Planning & Counseling
B) Media Relations
C) Marketing Communications
D) Issues Management
E) Project Management
F) Executive Support
G) Internal Communications
H) On-Line Communications
I) Financial Reporting Communications
J) Administration and Clerical Duties
K) Community Relations
ESTIMATED COST FOR 1996: $277,463
ESTIMATE OF MONTHLY COST FOR 1996: $ 23,122
HOURLY RATES DURING 1996:
Management Level 6 and above $ 85
Account Executive $ 53
Jr. Account Executive $ 32
Support Staff $ 27
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced price will be the product of the AA Corporate Communication's
applicable hourly rates plus a margin and the billable hours required to
perform the Tasks described above.
----------------
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44
<PAGE> 90
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXII.
OTHER AIRLINE (OA) PERSONAL TRAVEL ADMINISTRATION SERVICE
DESCRIPTION OF SERVICE: AA International Affairs will provide Administrative
support for the SABRE Group's personal travel on Other Airlines (OA). Tasks
include the following:
A) Secure of agreement with Other Airlines
i. Draft cover letters
ii. Revise AA ID agreement to include the SABRE Group
iii. Negotiate new arrangements with each airline
iv. Conclude and execute revised agreements
B) Contract Maintenance
i. Ongoing negotiations
ii. Secure additional carriers
iii. Conflict resolution with OAs
iv. Contract preparation and filing
C) Administrative Support
i. Provide updates to SABRE reference material
ii. Respond to employee inquiries
iii. Prepare PNRs for ticketing
iv. Provide OA with pay-back passes on AA
FIXED PRICE FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1996: [INFORMATION OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA International Affairs' fully-allocated costs
plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The annual price of the OA Personal Travel
Administration Service will include an allocation of unmargined Private Payroll
representing the oversight responsibility of the V.P. International Affairs
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED], and will not vary
with changes in the Service Level of this Service.
----------------
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45
<PAGE> 91
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXIII.
OTHER AIRLINE (OA) BUSINESS TRAVEL ADMINISTRATION SERVICE
DESCRIPTION OF SERVICE: AA International Affairs will provide Administrative
support for the SABRE Group's business travel on Other Airlines (OA). Tasks
include the following:
A) Secure Business Travel on Other Airlines
i. Negotiate arrangements with other airlines
ii. Provide other airlines travel on AA
B) Pass Bureau
i. Process SABRE Group pass requests
ii. Process OA business travel requests
C) Administrative Support
i. Provides updates to the SABRE Group reference material
ii. Respond to employee inquires
iii. Prepare PNRs for ticketing
FIXED PRICE FOR JAN. 1 TO SEPT. 30, 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
FIXED PRICE FOR OCT. TO DEC. 31, 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
INTERLINE TRAVEL EXPENSE FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT JAN. 1 TO SEPT. 30, 1996: [INFORMATION OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The OA Business Travel Administration price is based on AA
International Department's fully-allocated costs plus a margin. The fixed
price will be invoiced in 12 equal installments during the calendar year. The
annual price of the OA Business Travel Administration Service will include an
allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. International Affairs [INFORMATION OMITTED -
CONFIDENTIAL TREATMENT REQUESTED], and will not vary with changes in the
Service Level
- --------------------------------------------------------------------------------
46
<PAGE> 92
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
of this Service. [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
----------------
- --------------------------------------------------------------------------------
47
<PAGE> 93
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXIV.
INTERNATIONAL DIVISION SERVICES
DESCRIPTION OF SERVICE: The Services to be performed by AA International
Division from the London U.K. office will consist of the following for the
existing geographical areas served as of the Effective Date of the Management
Services Agreement:
A) Accounting Functions
i. Disbursements and Refunds
ii. Payroll Tax
iii. C-Tax Claims and VAT
iv. Expat Management Accounting
v. Bank Reconciliations
vi. Credit Cards
vii. SABRE Leasing
B) Personnel
i. Employee Relations
ii. Recruitment
iii. Career Development
iv. Compensation Standards
v. Benefits Administration
vi. Health and Safety Issues
D) EC Affairs
E) Purchasing
F) Pacific Sales
i. Interline Requests
ii. STIN Marketing
iii. STIN Related Issues with OALS
FIXED PRICE FOR 1996: $ 775,764
MONTHLY INVOICED AMOUNT DURING 1996: $ 64,647
BASIS FOR PRICE: The Services described above will be performed on a
fixed-price basis. The price is based on AA International Division's
fully-allocated costs plus a margin. The fixed price will be invoiced in 12
equal installments during the calendar year.
-------------------
- --------------------------------------------------------------------------------
48
<PAGE> 94
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXV.
GENERAL SERVICES DEPARTMENT
DESCRIPTION OF SERVICE: The Services and not merely Tasks to be performed by
AA General Services will consist of:
SERVICES
- --------
A) Archives
B) Library Services
C) Reserved Parking Permits Administration
D) Mail Services Includes mailings by USPS below 1,000 pieces.
E) USPS Postage for orders exceeding 1,000 pieces not covered by Mail
Services
F) HDQ Telephone Directory
i. Maintain AMR Roster
ii. Maintain Corporate Mailing Lists
iii. Maintain Company Regulations
G) Administration of contracts executed between AA and subcontractors
for Services not performed by AA employees
BUILDINGS SERVED: American Airlines is offering General Services to SABRE
GROUP at the following locations.
CPI CPII CPIV CPV Learning Center
STIN SRO Flight Academy / SOC
TOTAL FIXED PRICE FOR 1996: $ 525,214
MONTHLY INVOICED AMOUNT DURING 1996: $ 43,767
BASIS FOR PRICE: The Services described above will be performed on a
fixed-price basis. The price is based on AA General Services' fully-allocated
costs plus a margin. The fixed price will be invoiced in 12 equal installments
during the calendar year. The prices for the Services have been totaled,
instead of separately stated, per agreement by the Parties.
-----------------
- --------------------------------------------------------------------------------
49
<PAGE> 95
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXVI.
GENERAL SERVICES' PASS-THROUGH EXPENSES SERVICE
DESCRIPTION: AA General Services pays AA's Subcontractors for the following
Services (which are not merely Tasks). The list below represents a
pass-through of expenses belonging to the SABRE Group.
<TABLE>
<CAPTION>
SERVICES CURRENTLY SUBCONTRACTED TO:
-------- ---------------------------
<S> <C> <C>
A) Employee Shuttle Service DFW/HDQ/DFW Renzenberger, Inc.
B) Paper Supplier Tri-Plex Industries, Inc.
C) Installation and management of Copiers Xerox Business Services Division
D) Printing and Mailing Services Pitney Bowes Management Services, Inc.
E) Cafeteria and Vending Services ARAMARK
CPIV and STIN
</TABLE>
Price for each Service is a pass-through of expenses of the SABRE Group for
that Service.
BUILDINGS SERVED: American Airlines is offering General Services to SABRE
GROUP at the following locations.
CPI CPII CPIV CPV Learning Center
STIN SRO Flight Academy / SOC
TOTAL PASS-THROUGH EXPENSES FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
BASIS FOR PRICE: The SABRE Group portion of expenses incurred by AA for
General Services-related Subcontracted Services. Each Service is a Fixed Price
Service for the purposes of the Agreement. The prices for the Services have
been totaled, instead of stated separately, per agreement by the Parties. The
total Pass-Through Expense will be invoiced in 12 equal installments.
- --------------------------------------------------------------------------------
50
<PAGE> 96
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXVII.
CORPORATE TRAVEL DESK SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA Flight Department
will consist of:
A) Booking of Hotels for Business Travel at Interline Rates
B) Booking of Rental Vehicles for Business Travel at Interline Rates
FIXED PRICE FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1996: [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Flight Department's fully-allocated costs plus
a margin. The fixed price will be invoiced in 12 equal installments during the
calendar year. The Fixed Amount of the Corporate Travel Desk Service will
include an allocation of unmargined Private Payroll representing the oversight
responsibility of the V.P. International Affairs [INFORMATION OMITTED -
CONFIDENTIAL TREATMENT REQUESTED], and will not vary with changes in the
Service Level of this Service.
------------------
- --------------------------------------------------------------------------------
51
<PAGE> 97
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXVIII.
PRINTING SERVICES
DESCRIPTION OF SERVICE: Printing Services consists of photocopying. The
Service is currently Subcontracted to Pitney Bowes and is performed from the
basement of the STIN Building
RATE FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
ESTIMATED COST FOR 1996: [INFORMATION OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
BASIS FOR PRICE: The Tasks to be performed are use-based. The monthly
invoiced price will be the product of the rate per impression applied to actual
consumption of impressions.
----------------
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52
<PAGE> 98
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XXXIX.
FACILITIES MAINTENANCE - CPIV
DESCRIPTION OF SERVICE: Responsible for the following Tasks to be performed
at CentrePort IV in Fort Worth, Texas:
A) Facilities Maintenance
i. Operation of CPIV Power Plant (Listed for billing purposes
only. This Task is covered by the Central Plant Easement
Agreement)
ii. Shipping and Receiving in CPIV
iii. TWU Maintenance of CPIV Facilities
iv. Facilities Maintenance and Repairs Material in CPIV
1. Supplies
2. Workwear
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]. The price is
based on AA Facilities Maintenance Department's fully-allocated costs. The
fixed price will be invoiced in 12 equal installments during the calendar year.
----------------
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53
<PAGE> 99
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XL.
FACILITIES MAINTENANCE - STIN
DESCRIPTION OF SERVICE: Responsible for the following Tasks to be performed
at the STIN building in Fort Worth, Texas:
A) Facilities Maintenance
i. Operation of STIN Power Plant
ii. Shipping and Receiving in STIN
iii. TWU Maintenance of STIN Facilities
iv. Facilities Maintenance and Repairs Material in STIN
1. Supplies
2. Workwear
FIXED PRICE FOR 1996: $ 2.233 sq. ft, or $ 1,180,463
MARKET RATE ADJUSTMENT $
BASIS FOR PRICE: The Tasks described above will be performed on a fixed-price
basis. The price is based on AA Facilities Maintenance Department's
fully-allocated costs. The fixed price will be invoiced in 12 equal
installments during the calendar year. [INFORMATION OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
----------------
- --------------------------------------------------------------------------------
54
<PAGE> 100
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XLI.
FACILITIES MAINTENANCE PASS-THROUGH EXPENSE SERVICE
DESCRIPTION: AA General Services pays AA's Subcontractors regarding the
Services (and not merely Tasks) described below, for Prices consisting only of
a pass-through of expenses (under the Service Subcontracts) belonging to the
SABRE Group.
<TABLE>
<CAPTION>
Service Currently Subcontracted to:
------- ---------------------------
<S> <C> <C>
A) Janitorial Services Pedus Building Services, Inc.
B) Janitorial Services Member's Building Maintenance Corp.
C) Elevator Maintenance and Repairs Montgomery Elevator
D) Annual Inspections and Certification Fees Honeywell, Inc.
E) Card Keys and CC Television Security Johnson Controls, Inc.
F) Parking Lot Cleaning Pedus Building Services, Inc.
G) Pest Control Various Contractors (to be verified)
H) Fire System Certification and Testing Honeywell, Inc.
I) UPS - Factory Preventative Maintenance Teledyne
J) HVAC Controls Johnson Controls, Inc.
K) Landscape Maintenance Minor's Lawn Care, Inc.
L) Landscape Maintenance Peterman & Associates, Inc.
M) Trash Disposal and Recycling Waste Management, Inc.
N) Interior Plant Care Follage Design Systems
O) Security Services ABM Security Services
P) Electronic Security maintenance Johnson Controls, Inc.
Q) Hazardous Waste Removal Various Contractors
</TABLE>
TOTAL PASS-THROUGH EXPENSES FOR 1996:
CPIV $ 1.855 sq. ft, or $ 1,056,702
STIN $ 1.855 sq. ft, or $ 980,592
BASIS FOR PRICE: The SABRE Group portion of expenses incurred by AA for
General Services-related Subcontracted Services. Each Service is a Fixed Price
Service for the purposes of the Agreement. The pass-through expenses will be
billed in 12 equal monthly installments. The Prices for the Services have been
totaled, instead of separately stated, by agreement of the Parties. The total
Pass-Through Expense will be invoiced in 12 equal installments.
----------------
- --------------------------------------------------------------------------------
55
<PAGE> 101
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XLII.
UTILITIES MANAGEMENT SERVICE
DESCRIPTION: AA General Services will perform the following Tasks:
A) Utilities Management Fee
$0.016 sq. ft STIN
$0.016 sq. ft CPIV
FIXED PRICE FOR 1996: STIN $ 0.016 sq. ft, or $8,633
CPIV $ 0.016 sq. ft, or $9,303
BASIS FOR PRICE: The Utilities Management Fee is a fixed-priced Service. The
Tasks described above will be performed on a fixed-price basis. The price is
based on AA General Services fully-allocated costs. The fixed price will be
invoiced in 12 equal installments during the calendar year.
----------------
- --------------------------------------------------------------------------------
56
<PAGE> 102
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XLIV.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
----------------
- --------------------------------------------------------------------------------
57
<PAGE> 103
AA MANAGEMENT SERVICES AGREEMENT SCHEDULE OF SERVICES
- --------------------------------------------------------------------------------
SCHEDULE XLV.
AA CORPORATE APARTMENT SERVICE
DESCRIPTION OF SERVICE: Lodging provided at the AA Corporate Apartment in New
York City. The service is not covered by the General Services Schedule in the
Management Services Agreement and will consist of:
A) Administration of the Corporate Apartment in New York City
i. Rent
ii. Utilities
iii. Communications
iv. Janitorial
v. Maintenance
FIXED PRICE FOR 1996: $ 32,016
MONTHLY INVOICED AMOUNT DURING 1996: $ 2,668
BASIS FOR PRICE: The price is based on an AA's fully allocated cost of
maintaining the Apartment. Scheduling for use of the Corporate Apartment is
conducted by AA General Services. The SABRE Group's occupancy is historically
32% of the annual use of the Apartment. The fixed price will be invoiced in 12
equal installments during the calendar year.
---------------
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58
<PAGE> 1
EXHIBIT 10.4
CREDIT AGREEMENT
This CREDIT AGREEMENT (the "Agreement") by and between American
Airlines, Inc., a Delaware corporation ("AA"), The SABRE Group, Inc., a
Delaware corporation ("TSG"), The SABRE Group Holdings, Inc., a Delaware
corporation ("Holdings") (which is the parent of TSG), and AMR Corporation, a
Delaware corporation ("AMR") (which is the parent of both AA and Holdings), is
dated as of July 1, 1996.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
(a) "AA Balance" means, with respect to an Interest Period,
the average net daily balance of funds owed by AA to TSG as
set forth in the intercompany account maintained by AA
pursuant to Section 2.03 hereof, which shall equal the
quotient of (i) the sum of the balances of TSG Advances (as
subsequently defined herein) that have not been repaid by the
close of business on each day of the applicable Interest
Period divided by (ii) the number of days in the Interest
Period.
(b) "AA Excess Cash" means the remainder of (i) the aggregate
amount of cash held by AA for itself or its wholly-owned
subsidiaries, or expected to be deposited in its cash accounts
on any Business Day, that is not needed to meet the daily cash
requirements (including any amounts AA's lenders require it to
maintain on deposit) of AA and its wholly-owned subsidiaries
minus (ii) any outstanding AA Advances.
(c) "Advances" means AA Advances (as subsequently defined
herein) and/or TSG Advances, as applicable.
(d) "Business Day" means a day on which banks are not
required or permitted to close in New York City or Dallas,
Texas.
(e) "cash" shall mean, at any date, the sum of (i) cash and
cash equivalents as such cash and cash equivalents are
reflected on the consolidated balance sheet of TSG or AA, as
applicable, plus (ii) any outstanding TSG Advances (in the
case of cash of TSG) or AA Advances (in the case of cash of
AA).
(f) "Equipment Trust Certificate" means equipment pass
through certificates or equipment trust certificates issued by
AA as to which an
1
<PAGE> 2
opinion of counsel shall have been delivered to the effect
that the benefits of Section 1110 of the United States
Bankruptcy Code, as amended, or any successor statute are or
should be available.
(g) "Excess Cash" means AA Excess Cash and/or TSG Excess
Cash, as applicable.
(h) "Guarantee" by any person means any obligation,
contingent or otherwise, of such person directly or indirectly
guaranteeing any indebtedness or other obligation of any other
person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise,
of such person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such indebtedness or
other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the
obligee of such indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
(i) "Interest Period" means each calendar month ending after
the date of this Agreement and prior to the termination of
this Agreement and any portion of a calendar month during
which this Agreement terminates.
(j) "Interest Rate" shall have the meaning ascribed to it in
Section 2.04(c) or (d), as applicable.
(k) "Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this
Agreement, TSG or any of its subsidiaries shall be deemed to
own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
(l) "Management Services Agreement" means the Management
Services Agreement effective July 1, 1996 between AA and TSG,
as it may be amended from time to time. If the Management
Services Agreement is terminated prior to the termination of
this Agreement, any references to the Management Services
Agreement after the termination of the Management Services
Agreement shall mean the version of the Management Services
Agreement in effect immediately prior to the termination of
the Management Services Agreement.
2
<PAGE> 3
(m) "Net Debt" of any person means, at any date, the
remainder of (i) without duplication, the sum of (A) all
obligations of such person for borrowed money, (B) all
obligations of such person evidenced by bonds, debentures,
notes or other similar instruments, (C) all obligations of
such person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the
ordinary course of business, (D) all obligations of such
person as lessee which are capitalized in accordance with
generally accepted accounting principles, (E) all indebtedness
of others secured by a Lien on any asset of such person,
whether or not such indebtedness is assumed by such person and
(F) all indebtedness of others Guaranteed by such person minus
(ii) cash. Net Debt of any person includes the Net Debt of
its consolidated subsidiaries.
(n) "Rating Agencies" means Moody's Investors Services, Inc.
("Moody's") and Standard and Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"), and any
successors thereto that are nationally recognized rating
agencies, and if no such service nor any successor thereto
shall remain in the business of rating corporate debt
obligations, a nationally recognized rating agency in the
United States of America mutually satisfactory to AA and TSG.
(o) "Revolver" means the Credit Agreement dated as of January
5, 1996 among AA, the banks listed therein, the managing
agents listed therein, the co-agents referred to therein,
Citibank, N.A. and Morgan Guaranty Trust Company of New York.
(p) "TSG Balance" means, with respect to an Interest Period,
the average net daily balance of funds owed by TSG to AA as
set forth in the intercompany account maintained by AA
pursuant to Section 2.03 hereof, which shall equal the
quotient of (i) the sum of the balances of AA Advances that
have not been repaid by the close of business on each day of
the applicable Interest Period divided by (ii) the number of
days in the Interest Period.
(q) "Total Capital" of TSG means, at any date, the sum of Net
Debt of TSG (and its consolidated subsidiaries) plus the TSG's
stockholders' equity as such stockholders' equity is reflected
on TSG's consolidated balance sheet dated as of the last day
of the Interest Period for which the TSG Risk Component is
being determined (prepared on a basis and in a manner mutually
satisfactory to AA and TSG).
(r) "TSG Excess Cash" means the remainder of (i) the
aggregate amount of cash held by TSG for itself or its
wholly-owned subsidiaries, or expected to be deposited in its
cash accounts on such Business Day, that is not needed to meet
the
3
<PAGE> 4
daily cash requirements (including any amounts TSG's lenders
require it to maintain on deposit) of TSG and its wholly-owned
subsidiaries minus (ii) outstanding TSG Advances.
ARTICLE II
ADVANCES
SECTION 2.01. Advances from AA to TSG. On each Business Day, as soon
as reasonably practicable, and in any event not later than 12:30 p.m. (New York
City time), TSG shall provide notice to AA of its needs to borrow cash
(including the needs of its wholly-owned subsidiaries) (a "TSG Cash
Requirement"). If on any Business Day, TSG has a TSG Cash Requirement and has
notified AA of such TSG Cash Requirement in accordance with the preceding
sentence, AA will, not later than 1:30 p.m. (New York City time), advance an
amount equal to the TSG Cash Requirement to TSG (each such advance is an "AA
Advance" regardless of whether it is an advance from AA Excess Cash, the
proceeds of an AA short term credit facility or any other source). AA hereby
covenants to TSG that it will maintain the capacity, either through cash, its
own credit facilities or any other mechanism, to make AA Advances up to the
maximum amount set forth in Section 2.07 hereof. Any interest payable by TSG
on an AA Advance (other than interest payable upon or after termination of this
Agreement) shall be treated (effective as of the first day of the following
Interest Period) as a separate AA Advance for the purposes of this Agreement.
Each AA Advance under this Section 2.01 shall be deemed to be made by AA
notwithstanding the fact that such AA Advance may involve cash of one or more
subsidiaries of AA.
SECTION 2.02. Advances from TSG to AA. On each Business Day, as soon
as reasonably practicable, and in any event not later than 12:30 p.m. (New York
City time), (a) TSG shall provide notice to AA of the amount of TSG Excess Cash
and (b) AA shall provide notice to TSG of its needs to borrow cash (including
the needs of its wholly-owned subsidiaries) ("AA Cash Requirement") (provided,
however, if an Offset (as subsequently defined) has occurred, then AA shall
provide notice of its needs to borrow cash to TSG by 12:30 p.m. at least two
business days prior to the day on which it desires to borrow cash from TSG).
If on any Business Day there is TSG Excess Cash, AA has an AA Cash Requirement
and AA has notified TSG of such AA Cash Requirement in accordance with the
preceding sentence, TSG will, not later than 1:30 p.m. (New York City time),
advance TSG Excess Cash up to the amount of the AA Cash Requirement to AA (each
such advance is a "TSG Advance"). Notwithstanding the foregoing, if an Offset
has occurred, TSG shall not be required to make any TSG Advance, but may, in
its sole discretion, make such TSG Advance. Any interest payable by AA on a
TSG Advance (other than interest payable upon or after termination of this
Agreement) shall be treated (effective as of the first day of the following
Interest Period) as a separate TSG Advance for the purposes of this Agreement.
Each TSG Advance under this Section 2.02 shall be deemed to be made by TSG
notwithstanding the fact that such TSG Advance may involve cash of one or more
subsidiaries of TSG.
4
<PAGE> 5
SECTION 2.03. Intercompany Account. AA shall maintain a ledger in
which all AA Advances and TSG Advances and all repayments of Advances shall be
recorded. AA shall give TSG access, during normal business hours, to such
ledger and the other records relating to Advances and payments made with
respect thereto. AA shall have until the 15th day following the end of each
Interest Period to make any calculations required to be made by it under the
provisions of this Agreement.
SECTION 2.04 Interest.
(a) Subject to the other provisions of this Section 2.04,
interest shall accrue at the applicable interest rates set
forth below (each an "Interest Rate"). Interest shall be
calculated on the basis of a 365-day year (or a 366 day year
in a leap year) for the actual number of days elapsed.
Interest payments for Interest Periods ending (i) prior to the
termination of this Agreement shall be treated as Advances
pursuant to Sections 2.01 and 2.02 herein, as applicable, on
the first day of the following Interest Period and (ii) on the
termination of this Agreement shall be payable on the 15th day
following the termination of this Agreement (each an "Interest
Payment"). Any Advances and Interest Payments for the final
Interest Period not repaid when they become due and payable
upon the termination of this Agreement as provided in Section
3.04 shall bear interest from and after the required date of
payment to the date of payment at a rate per annum equal to
the prime rate established by The Chase Manhattan Bank, N.A.
(or its successor) during the period in which such payments
are overdue. It is the intent of the parties hereto that the
Interest Rates set forth in Sections 2.04(c) and (d)
approximate the rate of interest that the parties would be
required to pay to borrow money under a credit facility with a
third party lender, although the parties acknowledge that in
some instances such Interest Rates may be greater or less than
the prevailing interest rate established by the market.
(b) The interest payable by AA under this Agreement shall be
calculated by multiplying the monthly Interest Rate specified
in Section 2.04(c) hereof by the AA Balance for the applicable
Interest Period. The interest payable by TSG under this
Agreement shall be calculated by multiplying the monthly
Interest Rate specified in Section 2.04(d) hereof by the TSG
Balance for the applicable Interest Period. The Interest
Payment required to be made by each party is independent of
the Interest Payment required to be paid by the other party,
and interest may be paid by both AA and TSG for any given
Interest Period. Except for interest payable upon or after
the termination of this Agreement, accrued interest shall not
be paid by either party but shall be treated as an additional
Advance to the party determined to owe such interest, as
provided in Section 2.01 or 2.02 hereof, as applicable. AA
shall calculate the amount of interest payable by both AA and
TSG for each Interest Period and provide notice thereof to TSG
not later than 12:30 p.m. (New York City time) on the 15th day
following the last day of the Interest Period in respect
5
<PAGE> 6
of which such interest accrues. Upon the request of TSG, AA
shall promptly provide TSG with a calculation of any such
Interest Payment, together with reasonable support therefore.
(c) The Interest Rate per annum applicable to AA for any TSG
Advance made during an Interest Period shall equal the sum of
the rates determined in subsections (i) and (ii) below:
(i) An interest component to cover the incremental
credit risk assumed by TSG in loaning money to AA
(the "AA Risk Component") equal to the difference
between the fair market sector curve rates (the
"Market Rates") for securities with three month
maturities as set forth in Bloomberg's Financial
Services (if Bloomberg does not publish a list of
fair market sector curve rates, the fair market
sector curve rates set by the successor to Bloomberg
shall apply; and if no such successor sets fair
market sector curve rates, such rates set by a
nationally recognized entity (mutually satisfactory
to AA and TSG) that sets fair market sector curve
rates in the United States of America shall apply) at
the end of the Interest Period of (a) securities with
an S&P credit rating of "A" and (b) securities with
the credit rating assigned to AA's senior unsecured
long term debt at the end of the Interest Period by
both Rating Agencies (if no such long term debt of AA
is rated by the Rating Agencies, the Rating Agency
credit ratings shall be deemed to be one level below
the credit ratings assigned to the most recent issue
of AA's Equipment Trust Certificates at the end of
the Interest Period by both Rating Agencies). The
calculations required to be made under this
subsection shall be subject to the provisions of
subsections (f) and (g) of this Section 2.04.
(ii) an interest component representing TSG's cost of
funds calculated to equal the average investment
return on funds TSG has invested in the investment
accounts in which it invests TSG Excess Cash and any
funds needed to meet TSG's daily cash requirements
(including amounts that TSG's lenders require it to
maintain on deposit) during the Interest Period.
(d) The Interest Rate per annum applicable to TSG for any AA
Advance made during an Interest Period shall equal:
(i) in the case the actual or Implied Credit Rating
(as defined in subsection (h) of this Section 2.04)
of TSG is above an S&P credit rating of "B" or the
equivalent thereof or if AA has AA Excess Cash from
which it may make AA Advances (regardless of such
rating), then the Interest Rate shall be equal to the
sum of the rates determined in subsections (A) and
(B) below:
6
<PAGE> 7
(A) an interest component to cover the
incremental credit risk assumed by AA in
loaning money to TSG (the "TSG Risk
Component") equal to the difference between
the Market Rates at the end of the Interest
Period of (a) securities with an S&P credit
rating of "A" and (b) securities with the
Implied Credit Rating.
(B) an interest component representing AA's
cost of funds calculated to equal the higher
of (1) any of the actual rates of interest
(including fees and expenses incurred in
obtaining or maintaining any facility
specifically for the purpose of making an AA
Advance, but not including any fees and
expenses incurred in connection with
obtaining or maintaining any facility for
AA's general use) charged to AA on any debt
AA draws on to make an AA Advance during the
Interest Period (the "Debt Rate") and (2) the
average investment return on funds AA has
invested in the investment accounts in which
it invests AA Excess Cash and any funds
needed to meet AA's daily cash requirements
(including amounts that AA's lenders require
it to maintain on deposit) for the Interest
Period (the "Investment Rate"). If AA is
required to borrow funds to make AA Advances
during an Interest Period, the Interest Rate
for that Interest Period shall be calculated
on a pro rata basis between the Debt Rates
(if applicable pursuant to the preceding
sentence) and the Investment Rate based on
the actual amounts and lengths of time
corresponding to AA's borrowings to make the
AA Advances.
(ii) in the case the actual or Implied Credit Rating
(as defined in subsection (h) of this Section 2.04)
of TSG is an S&P credit rating of "B" or the
equivalent thereof (or is actually below an S&P
credit rating of "B" or the equivalent thereof, but
is imputed to be an S&P credit rating of "B" or the
equivalent thereof pursuant subsection (g) of this
Section 2.04) and AA does not have AA Excess Cash
from which to make AA Advances, then the Interest
Rate shall be the lower of the interest rates
determined in subsection (A) or (B) below:
(A) the sum of (1) the borrowing cost that
would be incurred by AA to draw on the
Revolver to make the AA Advance plus (2) the
TSG Risk Component.
(B) the sum of (1) the cost at which TSG
could borrow funds from an unrelated party in
an arm's length transaction plus (2) 1/2 of
the Euro-Dollar Margin (as defined in the
Revolver) that AA is or would be required to
pay on a Euro-Dollar Loan (as defined in the
7
<PAGE> 8
Revolver) drawing at the time of the AA
Advance.
For the purposes of this subsection (ii), if the
Revolver is no longer in effect, the parties hereto
shall make all calculations as if the Revolver were
still in effect.
(e) All calculations shall be performed by AA and shall be
subject to the dispute resolution mechanisms set forth in
Section 3.01.
(f) If in any case the Rating Agency credit ratings are not
the same, then the higher of the two credit ratings will apply
unless there is more than one level of difference between the
credit ratings (one level of difference is a difference equal
to the difference between BBB and BBB- for S&P or Baa1 and
Baa2 for Moody's, for example), in which case the credit
rating will be deemed to be the average of the credit ratings
(rounded down in the event the average falls between two
levels). If only one Rating Agency rates such securities,
then the rating applied by that Rating Agency shall be used.
(g) If in any case the Rating Agency credit rating is below
an S&P credit rating of "B" or the equivalent thereof, the
calculations required to be made under this Agreement shall be
made as if such rating were an S&P credit rating of "B" or the
equivalent thereof.
(h) The "Implied Credit Rating" for TSG shall be as set
forth in the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV
---------------------------------------------------------
<S> <C> <C> <C> <C>
IMPLIED S&P A BBB BB B
CREDIT
RATING
---------------------------------------------------------
</TABLE>
"Level I Status" exists for any Interest Period if
TSG's ratio of Net Debt to Total Capital, as
determined as of the last day of the Interest Period
for which the Level is being determined, is less than
.2 : 1.0.
"Level II Status" exists for any Interest Period if
TSG's ratio of Net Debt to Total Capital, as
determined as of the last day of the Interest Period
for which the Level is being determined, is equal to
or greater than .2 : 1.0 but less than .4 : 1.0.
"Level III Status" exists for any Interest Period if
TSG's ratio of Net Debt
8
<PAGE> 9
to Total Capital, as determined as of the last day of
the Interest Period for which the Level is being
determined, is equal to or greater than .4 : 1.0 but
less than 1.1 : 1.0.
"Level IV Status" exists for any Interest Period if
TSG's ratio of Net Debt to Total Capital, as
determined as of the last day of the Interest Period
for which the Level is being determined, is equal to
or greater than 1.1 : 1.0.
If at any time during the term of this Agreement,
TSG's senior unsecured long term debt or other
similar debt is rated by one or more of the Rating
Agencies, no Implied Credit Rating shall be computed
and all calculations shall be based on the actual
credit rating or ratings determined by the Rating
Agencies, subject to subsections (f) and (g) of this
Section 2.04.
SECTION 2.05. Repayment. If on any Business Day during the term of
this Agreement, a net balance (i.e. the net balance of all Advances, repayments
and deemed Advances of both parties made under this Agreement) is owed by
either party, then the party which owes such net balance shall use any
available Excess Cash it has on such Business Day to repay such net balance on
the first Business Day on which such Excess Cash is available. Any repayment
not made on a day that is a Business Day or made after 1:00 p.m. (New York City
time) on a Business Day shall be deemed to have been made on the next
succeeding Business Day. During the term of this Agreement, all Advances
received by either party under this Agreement shall be offset against and shall
be treated as repaid to the extent of any Advances made by such party to the
other party. Upon termination of this Agreement, any Advances that have not
theretofore been repaid as provided in the two immediately preceding sentences
or otherwise will become immediately due and payable in full. All TSG Advances
must be repaid by AA so that there is no balance (excluding any interest
accrued during the current Interest Period) owing from AA to TSG at the close
of business on any March 31, June 30, September 30 or December 31 (or the close
of business on the Business Day preceding any such date if such date is not a
Business Day) during the term of this Agreement (each a "Quarterly Payment
Date"). If AA fails to repay any advance on a Quarterly Payment Date or within
five Business Days after the termination of this Agreement, TSG may, at its
option, offset (an "Offset") the amount owing to TSG from AA under this
Agreement against an equivalent amount owing from Holdings to AMR under the
Debenture dated July 2, 1996 in the aggregate original principal amount of
$850,000,000 (the "Debenture"). If TSG is entitled to make an Offset as set
forth under the preceding sentence but no amount is owing under the Debenture,
TSG (or Holdings at the direction of TSG) may, at its option, offset (also an
"Offset") the amount owing to TSG from AA under this Agreement against an
equivalent amount of debt owing to AA or AMR from TSG or Holdings. The debt to
be offset pursuant to the preceding sentence shall be mutually agreed upon by
the parties. TSG shall send written notice of its election to take an Offset
to AA and AMR on the day that it elects to take the Offset.
[SECTION 2.06. Intentionally omitted]
SECTION 2.07. Maximum Borrowings. The sum of all AA Advances
outstanding at any
9
<PAGE> 10
time shall not exceed $300,000,000. The sum of all TSG Advances outstanding at
any time shall not exceed $100,000,000. Neither TSG nor AA shall be required
to make any Advances in excess of these maximum amounts. Interest that accrues
pursuant to Section 2.01 or 2.02 after the applicable maximum borrowing amount
set forth in this Section 2.07 has been reached shall be considered an Advance
notwithstanding the limits set forth in this Section.
SECTION 2.08. Requirement to Borrow. TSG shall not borrow any funds
from any person other than AA in order to satisfy its short-term financial
requirements unless such borrowing is either consented to by AA in writing or
AA has not provided the funds it is required to provide under this Agreement
within 2 Business Days after TSG makes an appropriate request hereunder and
complies with all terms provided for herein. If TSG has borrowed any funds
from any person other than AA in accordance with the preceding sentence, (a) it
will borrow funds from AA under this Agreement to repay such borrowings as soon
as AA makes funds available and (b) it will seek to borrow any additional funds
from AA pursuant to the terms of this Agreement before it seeks to obtain funds
from any person other than AA. When both AA and TSG have Cash Requirements,
TSG shall be permitted to borrow funds from a person other than AA,
notwithstanding the foregoing provisions of this Section 2.08 if AMR
determines, in its sole discretion subject to Section 3.01, at the time TSG
requires such borrowing, that it is a better value for AMR to permit TSG to
borrow from such person other than AA than to require TSG to borrow under the
credit facility established by this Agreement.
SECTION 2.09. Usury. All agreements between the parties, whether now
existing or hereafter arising and whether written or oral, are hereby limited
so that in no contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the interest contracted
for, charged or received by either party exceed the maximum amount permissible
under applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to either party in excess of the maximum lawful amount,
the interest payable to such party shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance either party shall
ever receive anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
hereof such excess shall be refunded to the party deemed to have made such
payment. All interest paid or agreed to be paid to either party shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full period until payment in full of the principal
(including the period of any renewal or extension hereof) so that the interest
hereon for such full period shall not exceed the maximum amount permitted by
applicable law. This paragraph shall control all agreements between the
parties. To the extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as
amended, is applicable to this Agreement, the indicated rate ceiling specified
in such article is the applicable ceiling; provided that; if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.
10
<PAGE> 11
ARTICLE III
ADMINISTRATION
SECTION 3.01 Disputes All disputes under this Agreement shall be
handled in the manner provided for in Article 16 of the Management Services
Agreement.
SECTION 3.02. Method of Payment. Any transfer of funds required to
be made pursuant to this Agreement shall be made in U.S. dollars by wire
transfer of immediately available funds to (a) in the case of a transfer to AA,
account no. 910-1-019884 in the name of American Airlines, Inc. at The Chase
Manhattan Bank, N.A. (New York, New York) (ABA no. 021000021) ("Chase") or (b)
in the case of a transfer to TSG, account no. 910-2-763654 in the name of The
SABRE Group, Inc. at Chase, or such other accounts as either party may
designate for itself.
SECTION 3.03. Limitations on Liability. Neither party shall have any
liability under this Agreement (including any liability for its own negligence)
for damages, losses or expenses (including expenses or higher interest rates
incurred in order to obtain alternative financing sources) suffered by the
other party or its subsidiaries as a result of the performance or
non-performance of such party's obligations hereunder, unless such damages,
losses or expenses are caused by or arise out of the wilful misconduct or gross
negligence of such party or a breach by such party. In no event shall either
party have any liability to the other party for indirect, incidental or
consequential damages that such other party or its subsidiaries or any third
party may incur or experience on account of the performance or non-performance
of such party's obligations hereunder. The provisions of this Section 3.03
shall survive any termination of this Agreement.
SECTION 3.04. Term of the Agreement. This Agreement commences on the
date of this Agreement first set forth above and will continue until June 30,
1999. Notwithstanding the foregoing, this Agreement may be sooner terminated,
without liability to the terminating party:
(a) by either party, upon 30 days' notice to the other, if AMR
ceases to beneficially own 50% or more of the stock of either TSG or
AA.
(b) by either party, immediately upon notice to the other, if
(i) that other party makes a general assignment of all or
substantially all of its assets for the benefit of its
creditors;
(ii) that other party applies for, consents to or acquiesces
in the appointment of a receiver, trustee, custodian or
liquidator for its business or all or substantially all of its
assets;
(iii) that other party files, or consents to or acquiesces in
a petition seeking relief
11
<PAGE> 12
or reorganization under any bankruptcy or insolvency laws; or
(iv) a petition seeking relief or reorganization under any
bankruptcy or insolvency laws is filed against that other
party and is not dismissed within 90 days after it was filed.
(c) by either party, immediately upon notice to the other party, if
that other party's material breach of this Agreement continues uncured
or uncorrected for 30 days after both the nature of that breach and
the necessary cure or correction has been agreed upon by the parties
or otherwise determined by the dispute resolution procedure described
in Section 3.04.
(d) by either party, immediately upon notice to the other party, if
the Management Services Agreement has been terminated.
(e) by AA, upon 90 days' notice to TSG, if the Information Technology
Services Agreement, dated July 1, 1996 between AA and TSG, has been
terminated prior to its stated expiration date.
SECTION 3.05. Confidentiality. Confidentiality of matters will be
maintained in the manner set forth in Article 10 of the Management Services
Agreement.
SECTION 3.06. Successors and Assigns. Matters regarding succession
and assignment shall be determined in the manner set forth in Article 19 of the
Management Services Agreement.
SECTION 3.07. No Third-Party Beneficiaries. Nothing expressed or
implied in this Agreement shall be construed to give any person or entity other
than the parties hereto any legal or equitable rights hereunder.
SECTION 3.08. Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof,
except that any administrative matters not addressed herein shall be addressed
in the manner set forth in the Management Services Agreement.
SECTION 3.09. Amendment. This Agreement may not be amended except by
a written instrument signed by the parties hereto.
SECTION 3.10. Waivers. Either party hereto may (a) extend the time
for performance of any of the obligations or other act of the other party or
(b) waive compliance with any of the agreements contained herein. No waiver of
any term shall be construed as a waiver of the same term in any other situation
or a waiver of any other term of this Agreement. The failure of any party to
assert any of its rights hereunder will not constitute a waiver of any such
rights.
12
<PAGE> 13
SECTION 3.11. Severability. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
SECTION 3.12. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 3.13. Notices. All notices required hereunder shall be given
in the manner set forth in the Management Services Agreement.
SECTION 3.13. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the law of the State of Texas, without giving
effect to the principles of conflict of laws of such State.
SECTION 3.14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
13
<PAGE> 14
IN WITNESS WHEREOF, AMR, AA, Holdings and TSG have caused this
Agreement to be executed on the date first above written.
AMR CORPORATION
By: /s/ Charles D. MarLett
-----------------------------------
Its: Corporate Secretary
----------------------------------
AMERICAN AIRLINES, INC.
By: /s/ Jeffery M. Jackson
-----------------------------------
Its: Vice President - Corporate
----------------------------------
Development and Treasurer
--------------------------------------
The SABRE Group Holdings, Inc.
By: /s/ Michael J. Durham
-----------------------------------
Its: President
----------------------------------
THE SABRE GROUP, INC.
By: /s/ Michael J. Durham
-----------------------------------
Its: President
-----------------------------------
14
<PAGE> 1
EXHIBIT 10.5
TSG CORPORATION
SUBORDINATED DEBENTURE
July 2, 1996 $850,000,000 No. 002
TSG Corporation, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to AMR CORPORATION., a Delaware
corporation (the "Lender"), or registered assigns, the principal amount of
Eight Hundred Fifty Million and No/100 Dollars ($850,000,000), as such
principal amount may be decreased from time to time as provided below, on
September 30, 2004, with accrued interest payable semiannually on each
September 30 and March 31 (each, an "Interest Payment Date"), commencing
September 30, 1996, and at maturity, at the rates set forth, or determined as
set forth, below. Payments of principal and interest shall be made in lawful
money of the United States of America to such account as the Lender shall
designate from time to time.
This Debenture may be prepaid at the option of the Company in
whole or in part on (and only on) any Interest Payment Date, together with
accrued and unpaid interest on the principal amount being prepaid to the date
of prepayment. The Lender shall record in its books the amounts of any
principal so prepaid, and, prior to any transfer of this Debenture, the Lender
shall make a notation on Schedule A attached hereto of such prepayments, if
any.
Interest will accrue on the outstanding principal amount of
this Debenture as follows:
(a) for the period from and including the date hereof
through and including September 30, 1996, at a rate per annum of
7.2249%; and
(b) for each six-month period thereafter (each such
period commencing on October 1 or April 1 and ending on and including
the following March 31 or September 30, respectively, and being herein
referred to as an "Interest Period"), at a rate per annum equal to the
sum of the applicable London Interbank Offered Rate for such Interest
Period plus the applicable LIBOR Margin (as such LIBOR Margin may be
adjusted from month to month during such Interest Period as provided
below).
The "London Interbank Offered Rate" applicable to any Interest
Period means the interest rate per annum equal to the average (rounded upward,
if necessary, to the next higher 1/16 of 1%) of the rates per annum at which
deposits in Dollars are offered in the principal London interbank market as
shown on Page LIBO of the Reuters Money Service Monitor System (or such other
page as may replace Reuters page LIBO) or, if such service is not available, as
shown on Page 3750 of the Telerate Systems Incorporated screen service (or such
other page as may replace Telerate Page 3750) or, if neither of such services
is available, as shown on any similar financial services system designated by
Lender, at approximately 11:00 a.m. (London time) on the day (the "Reset Date")
that is two London Business Days prior to the first day of the applicable
Interest Period in an
<PAGE> 2
amount approximately equal to the then outstanding principal amount of this
Debenture for a six-month interest period.
"Dollars" means the lawful currency of the United States of
America.
"London Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banking institutions in New York, New
York or London, England are authorized or required by law, regulation or
executive order to be closed and which is also a day on which dealings in
Dollar deposits are carried out in the London interbank market.
The "LIBOR Margin" means, with respect to each month of any
Interest Period, the amount set forth below corresponding to the "Level" status
that exists for such month:
<TABLE>
<S> <C> <C> <C> <C>
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV
LIBOR Margin 30 basis points 50 basis points 160 basis points 290 basis points
</TABLE>
Subject to the fourth succeeding paragraph, "Level I Status"
exists for any month in which (a) the Company's senior unsecured long-term debt
is not rated by either Moody's or S&P and the Company's ratio of Net Debt to
Total Capital on the last day of the second month preceding the month for which
the LIBOR Margin is being determined (e.g. the LIBOR Margin determined for
March will be based on the Net Debt to Total Capital ratio on January 31) is
less than .2 : 1.0 or (b) the Company's senior unsecured long-term debt is
rated "A" or better by S&P or "A2" or better by Moody's.
Subject to the third succeeding paragraph, "Level II Status"
exists for any month in which (a) the Company's senior unsecured long-term debt
is not rated by either Moody's or S&P and the Company's ratio of Net Debt to
Total Capital on the last day of the second month preceding the month for which
the LIBOR Margin is being determined, is equal to or greater than .2 : 1.0 but
less than .4 : 1.0 or (b) the Company's senior unsecured long-term debt is
rated "BBB" or better (but less than "A") by S&P or "Baa2" or better (but less
than "A2") by Moody's.
Subject to the second succeeding paragraph, "Level III Status"
exists for any month in which (a) the Company's senior unsecured long-term debt
is not rated by either Moody's or S&P and the Company's ratio of Net Debt to
Total Capital on the last day of the second month preceding the month for which
the LIBOR Margin is being determined, is equal to or greater than .4 : 1.0 but
less than 1.1 : 1.0 or (b) the Company's senior unsecured long-term debt is
rated "BB" or better (but less than "BBB") by S&P or "Ba2" or better (but less
than "Baa2") by Moody's.
Subject to the next succeeding paragraph, "Level IV Status"
exists for any month in which (a) the Company's senior unsecured long-term debt
is not rated by either Moody's or S&P and the Company's ratio of Net Debt to
Total Capital on the last day of the second month preceding the month for which
the LIBOR Margin is being determined, is equal to or greater than 1.1 : 1 or
(b) the
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Company's senior unsecured long-term debt is rated lower than "BB" by S&P and
less than "Ba2" by Moody's.
If the Company's senior unsecured long-term debt is rated by
only one of the Rating Agencies, the Company's "Level" status shall be
determined according to the rating assigned by that Rating Agency. If the
rating assigned to the Company's senior unsecured long-term debt by one Rating
Agency would result in a different "Level" status than the rating assigned by
the other Rating Agency, the "Level" status shall be determined based on the
higher of the two ratings (i.e., the lower Level) unless there is more than one
rating notch of difference between the ratings (one rating notch of difference
is a difference equal to the difference between BBB and BBB- for S&P or Baa1
and Baa2 for Moody's, for example), in which case the average of the two
ratings (rounded down in the event the average falls between two notches) will
be used to determine the Company's "Level" status.
"Net Debt" of any person means, at any date, the remainder of
(i) without duplication, the sum of (A) all obligations of such person for
borrowed money, (B) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (C) all obligations of such
person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (D) all
obligations of such person as lessee which are capitalized in accordance with
generally accepted accounting principles, (E) all indebtedness of others
secured by a Lien on any asset of such person, whether or not such indebtedness
is assumed by such person, and (F) all indebtedness of others Guaranteed by
such person minus (ii) cash. Net Debt of any person includes the Net Debt of
its consolidated subsidiaries.
"Total Capital" of the Company means, at any date, the sum of
Net Debt of the Company and its consolidated subsidiaries plus the Company's
stockholders' equity as such stockholders' equity is reflected on the Company's
consolidated balance sheet (prepared on a basis and in a manner reasonably
satisfactory to the Lender).
"cash" means, at any date, the sum of (i) cash and cash
equivalents as such cash and cash equivalents are reflected on the consolidated
balance sheet of the Company plus (ii) any outstanding TSG Advances (as defined
in the Credit Agreement between American Airlines, Inc. and The SABRE Group,
Inc.).
"Guarantee" means any obligation, contingent or otherwise,
directly or indirectly guaranteeing any indebtedness or other obligation of any
other corporation, partnership, individual, trust, association or any other
organization or entity and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
indebtedness or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements
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<PAGE> 4
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Debenture, the Company or any of its
subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto that is a nationally recognized rating agency or, if neither
Moody's Investors Service, Inc. nor any such successor shall remain in the
business of rating corporate debt obligations, a nationally recognized rating
agency in the United States of America selected by the Lender and reasonably
satisfactory to the Company.
"Rating Agencies" means Moody's and S&P.
"S&P" means Standard and Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., a New York corporation, and any successor
thereto that is a nationally recognized rating agency or, if neither Standard &
Poor's Ratings Services nor any such successor shall remain in the business of
rating corporate debt obligations, a nationally recognized rating agency in the
United States of America selected by the Lender and reasonably satisfactory to
the Company.
This Debenture is a registered Debenture and is transferable
only upon surrender of this Debenture for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the Lender or its attorney duly authorized in writing. References in this
Debenture to the "Lender" or to "holder" shall mean the person in whose name
this Debenture is at the time registered on the register kept by the Company,
and the Company may treat such person as the owner of this Debenture for the
purpose of receiving payment and for all other purposes.
This Debenture and the right of the Lender to receive payments
hereunder shall, for all purposes and in all respects, be subordinated to, and
subject in right to the prior payment to the extent set forth herein, of all
indebtedness incurred by the Company after the date hereof for money borrowed
and any deferrals, renewals or extensions of any such indebtedness, or
debentures, notes or other evidences of indebtedness issued in exchange for
such indebtedness (all such indebtedness herein referred to as the "Superior
Indebtedness").
No payments on account of principal or interest on this
Debenture shall be made at any time unless full payment of amounts then due for
principal, premium, if any, sinking funds and interest on Superior Indebtedness
has been made or duly provided for in money or money's worth. No payment on
account of principal or interest on this Debenture shall be made if, at the
time of such payment or immediately after giving effect thereto, there shall
have been given under any Superior Indebtedness or any agreement pursuant to
which any Superior Indebtedness is issued notice to the
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<PAGE> 5
Company of any default or any condition, event or act that, with lapse of time,
would constitute a default.
Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due upon all Superior Indebtedness shall first be
paid in full, or payment thereof provided for in money or money's worth, before
the holders of the indebtedness evidenced by this Debenture shall be entitled
to retain any assets so paid or distributed in respect thereof (for principal
or interest or otherwise); and, upon any such dissolution or winding-up or
liquidation or reorganization, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the holder of this Debenture would be entitled, except for the provisions
of this paragraph, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holder of this Debenture, if received by it, direct to
the holders of Superior Indebtedness (pro rata to each such holder on the basis
of the respective amounts of Superior Indebtedness held by such holder) or
their representatives, to the extent necessary to pay all Superior Indebtedness
in full, in money or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of Superior Indebtedness, before
any payment or distribution is made to the holder of the indebtedness evidenced
by this Debenture.
After all Superior Indebtedness is paid in full and until this
Debenture is paid in full, the holder of this Debenture shall be subrogated to
the rights of holders of Superior Indebtedness to receive distributions of
assets of the Company applicable to Superior Indebtedness; and, for the
purposes of such subrogation, a distribution made under the immediately
preceding paragraph to holders of Superior Indebtedness that otherwise would
have been made to the holder of this Debenture shall not, as between the
Company, its creditors other than the holders of Superior Indebtedness, and the
holder of this Debenture, be considered to be a payment by the Company on
Superior Indebtedness.
The principal amount of this Debenture and all accrued but
unpaid interest thereon shall become immediately due and payable upon the
occurrence of any of the following events:
(a) upon notice from the Lender, if the Company shall
default in the payment of principal or interest on this Debenture when
due and such default shall have continued for five Domestic Business
Days; or
(b) the Company shall admit in writing its inability to
pay its debts generally as such debts become due; or
(c) the Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial
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<PAGE> 6
part of its property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the Federal
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(d) a proceeding or case shall be commenced, without the
application or consent of the Company, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Company or of all or any substantial part of its assets,
or (iii) similar relief in respect of the Company under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, and such proceeding or case
shall continue undismissed for a period of 60 days; or an order for
relief against the Company shall be entered in an involuntary case
under the Federal Bankruptcy Code or under any other similar law.
The books and records of the Lender shall, absent manifest
error, be conclusive as to all amounts and determinations payable or made
hereunder.
If any payment is scheduled to be made on a day that is not a
Domestic Business Day, such payment shall be made on the immediately succeeding
Domestic Business Day with the same effect as if made on the date otherwise
due. "Domestic Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banking institutions are authorized or required
by law, regulation or executive order to be closed in New York, New York or
Dallas, Texas.
All agreements between the Company and the holder
hereof, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of demand for
payment or acceleration of the maturity hereof or otherwise, shall the interest
contracted for, charged or received by the holder hereof exceed the maximum
amount permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the holder hereof in excess of the
maximum lawful amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance the holder hereof shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof such excess shall be
refunded to the Company. All interest paid or agreed to be paid to the holder
hereof shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in
full of the principal (including the period of any renewal or extension hereof)
so that the interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all
agreements between the Company and the holder hereof. To the extent that TEX.
6
<PAGE> 7
REV. CIV. STAT. ANN. art. 5069-1.04, as amended, is applicable to this
Debenture, the indicated rate ceiling specified in such article is the
applicable ceiling; provided that; if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.
This Debenture shall be governed by, and construed in accordance with,
the laws of the State of Texas.
TSG CORPORATION
By: /s/ James K. Lines
----------------------------------------
Name: James K. Lines
Title: Attorney-in-Fact
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<PAGE> 8
SCHEDULE A
<TABLE>
<CAPTION>
Principal Notation
Date Prepayment Balance Maturity Made By
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<S> <C> <C> <C> <C>
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</TABLE>
<PAGE> 1
EXHIBIT 10.6
INFORMATION TECHNOLOGY SERVICES AGREEMENT
This Agreement is between AMERICAN AIRLINES, INC., a Delaware
corporation, acting for itself and the American Related Entities, and THE SABRE
GROUP, INC., a Delaware corporation.
BACKGROUND
AMERICAN intends to engage TSG to perform for the Airline Group, and
TSG intends to perform for the Airline Group, the TSG Services pursuant to this
Agreement at market-based rates which take into account on an aggregate basis,
among other things, the rights and obligations under this Agreement, the
amounts charged by other providers of similar services, the Airline Group's
size as a recipient of similar services, the SLA Standards required of TSG, the
geographic factors involved in providing the TSG Services to the Airline Group,
the exclusivity commitments made by the Airline Group, and the Retained Rights.
AGREEMENT
IN CONSIDERATION OF the terms and conditions of this Agreement,
the receipt and sufficiency of which are hereby acknowledged, AMERICAN and TSG,
intending to be legally bound, hereby agree as follows:
Article I -- Definitions and Interpretation
1.1. DEFINITIONS. All terms beginning with a capital letter in this
Agreement are defined in Exhibit A: Definitions and Interpretations. Exhibit A
also sets forth various interpretive matters for this Agreement.
1.2. EXHIBITS. When this Agreement refers to an Exhibit described in this
Section, such Exhibit is deemed incorporated herein by reference for all
purposes. All Exhibits, as are agreed to after the Effective Date, shall be
deemed incorporated herein upon the Parties Consent.
<TABLE>
<CAPTION>
Exhibit Title
------- -----
<S> <C>
A Definitions and Interpretation
B TSG Services Description
C Rate and Reset Schedule
D Services Subject to SLA
E Agreed SLAs
F New/Out-of-scope Services Procedures
</TABLE>
Information Technology Services Agreement
page 1
<PAGE> 2
<TABLE>
<S> <C>
G Response/Resolution Procedures for SLA Problems
H SITA Relationship
I Key Employees
J Non-disclosure/Confidentiality Agreement
K Termination Liquidated Damages Calculation
L Transition Assistance Service Descriptions
M Dispute Resolution Appendix
N Non-disclosure/Non-competition Agreement
O AG Self-performed Services
P Electronic Travel Distribution System
</TABLE>
Article II -- Term
2.1. TERM OF AGREEMENT. Unless earlier terminated pursuant to Article
XXIV -- Termination or unless extended in accordance with Section "2.3.
EXTENSIONS OF THE TERM," this Agreement shall be effective on the Effective
Date and continue in effect until 11:59 p.m. June 30, 2006, except that this
Agreement shall cease to be effective for:
A. The Three-year Services at 11:59 p.m. June 30, 1999; and
B. The Five-year Services at 11:59 p.m. June 30, 2001.
2.2. TERM FOR AN UNIDENTIFIED SERVICE. If a TSG Service is not identified
as a Three-year Service, Five-year Service, or Ten-year Service, AMERICAN and
TSG shall agree in writing the period of time such service is subject to this
Agreement.
2.3. EXTENSIONS OF THE TERM. The term of this Agreement as applicable to
the Three-year Services, Five-year Services, and Ten-year Services may be
extended in accordance with this Section 2.3.
A. For Three-year Services:
(1) AMERICAN may extend the applicability of this Agreement
to the Three-year Services until September 30, 1999; provided,
AMERICAN gives TSG Notice prior to June 30, 1998.
(2) If AMERICAN fails to give TSG Notice, at least six months
prior to the end of the term then applicable to the Three-year
Services, that AMERICAN will not renew this Agreement for the
Three-year Services, then the Three-year Services shall be
subject to this Agreement for an additional six months beyond
the end of the then current term applicable to the Three-year
Services.
Information Technology Services Agreement
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<PAGE> 3
(3) If AMERICAN fails to give TSG Notice, at least six months
prior to the end of the term then applicable to the Three-year
Services, that AMERICAN will not renew this Agreement for the
Three-year Services, and this Agreement has already been
extended pursuant to Subsection A(2) of this Section 2.3, then
the Three-year Services shall be subject to this Agreement for
an additional three years beyond the end of the then current
term applicable to the Three-year Services.
B. For Five-year Services:
(1) If AMERICAN fails to give TSG Notice, on or before
January 1, 2001, that AMERICAN will not renew this Agreement
for the Five-year Services, then the Five-year Services shall
be subject to this Agreement until 11:59 p.m. June 30, 2002.
(2) If the applicability of this Agreement to the Five-year
Services is extended to June 30, 2002 and AMERICAN fails to
give TSG Notice, on or before January 1, 2002, that AMERICAN
will not renew this Agreement for the Five-year Services, then
the Five-year Services shall be subject to this Agreement
until 11:59 p.m. June 30, 2005.
C. For Ten-year Services:
(1) If AMERICAN fails to give TSG Notice, on or before
January 1, 2006, that AMERICAN will not renew this Agreement
for the Ten-year Services, then this Agreement shall remain in
effect and the Ten-year Services shall be subject to this
Agreement until 11:59 p.m. June 30, 2007.
(2) If the term of this Agreement is extended to June 30,
2007 and AMERICAN fails to give TSG Notice, on or before
January 1, 2007, that AMERICAN will not renew this Agreement
for the Ten-year Services, then this Agreement shall remain in
effect and the Ten-year Services shall be subject to this
Agreement until 11:59 p.m. June 30, 2012.
Article III -- Services and Exclusivity
3.1. SERVICES IN GENERAL. Pursuant to this Agreement, TSG shall perform
the TSG Services for the Airline Group.
Information Technology Services Agreement
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<PAGE> 4
3.2. ACCESS TO AND USE OF FACILITIES. The Airline Group shall provide
such access to the Airline Group's facilities as is necessary to enable TSG to
perform its obligations under this Agreement and to the extent that the Airline
Group may grant TSG such access rights as an agent; provided that all rights of
access granted to TSG at any airport locations are subject to Airport
Regulations and at any Airline Group leased facilities are subject to any
applicable lease restrictions.
A. If a TSG employee is occupying space in an Airline Group facility
at the Airline Group's request and primarily for the Airline Group's
convenience, then the Airline Group will not charge TSG for any
facility rent expense related to such TSG employee, but TSG shall be
responsible for all significant out-of-pocket expenses of the Airline
Group incurred because of the presence of such TSG employee,
including Device Support and Voice Network Services.
(1) Provided, however, if a TSG employee is occupying space
at the System Operations Control Center or at AMERICAN's
Capacity Planning Department, then the Airline Group will
charge TSG the same amount for rent that a TSG employee would
incur if occupying space at the Solana facility and TSG shall
be responsible for all significant out-of-pocket expenses of
the Airline Group incurred because of the presence of such TSG
employee, including Device Support and Voice Network Services.
For as long as the Solana facility is not essentially full,
the Parties consider the cost of occupying space at the Solana
facility to be zero. The cost of occupying space at the
Solana facility in 1996 is zero.
B. If a TSG employee is occupying space in an Airline Group facility
not at the Airline Group's request, the Airline Group will charge TSG
for a pro rata share of facility rent expense related to such TSG
employee, and TSG shall be responsible for all significant
out-of-pocket expenses of the Airline Group incurred because of the
presence of such TSG employee, including Device Support and Voice
Network Services.
C. If an Airline Group employee is occupying space in an TSG
facility at TSG's request and primarily for TSG's convenience, then
TSG will not charge the Airline Group for any facility rent expense
related to such employee of the Airline Group, but the Airline Group
shall be responsible for all significant out-of-pocket expenses of
TSG incurred because of the presence of such Airline Group employee,
including Device Support and Voice Network Services.
D. If an Airline Group employee is occupying space in a TSG facility
not at TSG's request, then TSG will charge the Airline Group for a
pro rata share of facility rent
Information Technology Services Agreement
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<PAGE> 5
expense related to such employee of the Airline Group at the same
rate that the Airline Group charges its departments occupying similar
space, if any. Additionally, the Airline Group shall be responsible
for all significant out-of-pocket expenses of TSG incurred because of
the presence of such Airline Group employee at a TSG facility,
including Device Support and Voice Network Services.
E. Where one Party's employees are occupying space at the other
Party's facilities, both Parties intend that their employees' usage
of the other Party's LAN will be approximately equal. If the Airline
Group's usage of TSG's LAN significantly exceeds TSG's usage of the
Airline Group's LAN or TSG's usage of the Airline Group's LAN
significantly exceeds the Airline Group's usage of TSG's LAN, the
Account Managers shall meet to negotiate what, if any, compensation
or remedial action is appropriate.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
3.3. NEW/OUT-OF-SCOPE SERVICES. When TSG and AMERICAN expressly agree in
writing in accordance with Exhibit F: New/Out-of-scope Services Procedures, TSG
shall perform a New/Out-of-scope Service.
3.4. TSG'S RIGHTS TO MANAGE ITS RESOURCES. Subject to the other
provisions of this Agreement, including Article XVI -- Key Employees and
Related Provisions and Section "4.1. TSG'S CHANGES TO LOCATIONS," TSG shall
have the right, at TSG's cost and expense, so long as there is no Material
Adverse Impact, to manage all resources used in providing the TSG Services as
TSG deems appropriate, including relocating data centers, TSG equipment, TSG
personnel, and other TSG resources. Nevertheless, if any such relocation
effected with the reasonable belief that it would not have any Material Adverse
Impact actually has a Material Adverse Impact, TSG shall reimburse the Airline
Group for any increase in the Fees, any more than a de minimis increase in an
expense incurred by the Airline Group, and any increase in the Taxes payable by
the Airline Group.
3.5. KEEPING TECHNOLOGY CURRENT. TSG agrees to use reasonable efforts,
without an increase in charges to the Airline Group or the costs the Airline
Group would have to bear, to keep the technology used in providing the TSG
Services to the Airline Group current, and at a level at least as high as the
level that TSG uses for its internal operations and at least comparable to the
level of technology generally used in the air transportation industry. Except
as provided in Section "3.8. REFRESH FOR DEVICE SUPPORT," in the event that
technology improvements would cause TSG to incur costs in addition to the costs
TSG would otherwise have incurred in providing the TSG Services or would cause
the Airline Group to incur costs it would not otherwise incur, the Airline
Group and TSG shall meet to discuss whether to implement such improvements. At
the Airline Group's sole option, TSG will (i) implement such improvements and
charge the Airline Group for TSG's increased costs or (ii) not implement such
improvements and continue to use TSG's then- existing technology. For the
avoidance of doubt, nothing in this Section 3.5 shall be construed as relieving
TSG of its
Information Technology Services Agreement
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<PAGE> 6
obligation to provide, at no additional charge to the Airline Group,
installation, support, and upgrades to the software identified in the "SG
Commercial Software Product List" in Exhibit B: TSG Services Description.
3.6. ADDITIONAL TSG COSTS IN A SHARED ENVIRONMENT. Except as otherwise
expressly provided in this Agreement, the Current Rates will not increase if
TSG upgrades the hardware or software it uses to provide the TSG Services. If
such an upgrade causes an increase in the Airline Group's Fees and if the
increase in Fees is not commensurate with the benefits of such upgrade
attainable in the reasonably foreseeable future, the Airline Group shall have
no obligation to pay such increase in Fees.
3.7. EFFICIENCY AND COST EFFECTIVENESS. TSG shall use commercially
reasonable efforts to use efficiently those resources chargeable to the Airline
Group, and in so doing will (i) consider the Airline Group's needs, (ii) make
schedule adjustments consistent with the Airline Group's priorities, (iii)
delay the performance of non-critical functions within established limits, and
(iv) consider the needs of TSG's other contractual commitments.
3.8. REFRESH FOR DEVICE SUPPORT. The Airline Group shall receive, at
TSG's expense (except for the expense of upgrading desktop hardware which is at
the Airline Group's expense), the benefits of upgrades to Off-the-shelf
Software included within Device Support as soon as reasonably practicable, but
in any event within twelve months of such upgrades' becoming commercially
available or when TSG implements such upgrades in production (which does not
include any beta testing) for its own employees, whichever is sooner. The cost
of such upgrades, including installation and license fees, shall be borne
solely by TSG through the software charge included in the monthly Device
Support charge.
A. AMERICAN agrees to provide TSG with at least six months Notice of
non-renewal of Device Support in accordance with Section "2.3.
EXTENSIONS OF THE TERM."
B. AMERICAN's Notice of non-renewal shall not affect the rights of
the Airline Group under this Section 3.8 for the remainder of the
term of the Three-year Services, including Device Support.
C. If the Airline Group declines to permit TSG to install an upgrade
to software necessary to provide Device Support and the Airline Group
is the only Device Support customer of TSG to decline, and such
declining causes TSG increased costs, the Airline Group shall
reimburse TSG for such costs.
3.9. TSG SUPPORT FOR THIRD PARTY PRODUCTS. TSG shall arrange for and
manage Third Party Standard Support for Third Party Supported Products. TSG
and AMERICAN acknowledge that such products require TSG to obtain support
services from
Information Technology Services Agreement
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<PAGE> 7
certain third-party vendors, and that TSG's ability to provide any support to
the Airline Group for such products may be impaired if TSG is unable to obtain
the required support from such third-party vendors.
A. When TSG learns that any Third Party Supported Product is an
Unsupported Product, TSG shall, at TSG's expense:
(1) Immediately give AMERICAN Notice;
(2) Discuss with AMERICAN the options available; and
(3) At AMERICAN's sole option:
a. Use reasonable efforts to obtain a replacement
product for such Unsupported Product within twelve
(12) months of notification to AMERICAN pursuant to
Subsection A(1) of this Section 3.9;
b. Use reasonable efforts to obtain services to
substitute for Third Party Standard Support for such
Unsupported Product, provided that TSG and AMERICAN
negotiate new SLA Standards for such Unsupported
Product, if necessary; or
c. Discontinue attempting to obtain services to
substitute for Third Party Standard Support of such
Unsupported Product after the first anniversary of
the notification to AMERICAN.
B. TSG and the Airline Group shall use reasonable efforts to
minimize any costs required to transfer the Airline Group to a
replacement product.
3.10. EXCLUSIVITY. Subject to Section "2.1. TERM OF AGREEMENT," TSG is
the exclusive provider to the Airline Group of certain services as described in
this Section 3.10.
A. TSG is the exclusive provider of the following services:
(1) Data Center Services, except for the operation of
External Client Server Development;
(2) Data Network Services;
(3) Voice Network Services;
(4) Distributed Systems Services;
Information Technology Services Agreement
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(5) Providing Development, Maintenance, and Enhancement
services for Real Time Applications; and
(6) Providing Maintenance and Enhancement services for
Existing Applications.
B. For any New/Out-of-scope Service or Significant Services that TSG
performs that create software and for any TSG Development, TSG is the
exclusive provider of Maintenance and Enhancement services for such
TSG- created or TSG-developed software until the Expiration Date.
C. Although Client Server Development is not an Exclusive Service,
if the Airline Group selects TSG to perform Client Server
Development, TSG has the exclusive right:
(1) To operate the client server application created by such
Client Server Development until June 30, 2001 or until such
later date as the Five-year Services are subject to this
Agreement pursuant to Section "2.3. EXTENSIONS OF THE TERM,"
if such client server application requires an operator other
than the end user; and
(2) To perform the Maintenance and Enhancement services for
such client server application until the Expiration Date.
D. Although acquiring Off-the-shelf Software to replace existing
client server applications or to provide new client server
applications is not an Exclusive Service, if the Airline Group
acquires Off-the Shelf Software to replace existing client server
applications or to provide new client server applications and such
software requires Significant Services performed by TSG, and if such
client server application requires an operator in addition to the end
user, TSG has the exclusive right to operate such Off-the-shelf
Software until June 30, 2001 or until such later date as the
Five-year Services are subject to this Agreement pursuant to Section
"2.3. EXTENSIONS OF THE TERM."
E. AMERICAN's exercise of the Retained Rights are subject to the
restrictions and limitations under this Agreement during the term of
this Agreement.
3.11. NON-EXCLUSIVE SERVICES. Services that are not Exclusive Services
include the following:
A. Development other than Development of Real Time Applications.
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B. Client Server Development services.
C. New/Out-of-scope Services.
D. AG Self-performed Services.
E. Acquiring and using Off-the-shelf Software other than as
described in Subsection F of this Section 3.11.
F. Acquiring and using Off-the-shelf Software for incorporation into
or integration with TSG Operated Software, if both of the following
conditions are met:
(1) TSG does not offer services with comparable functionality
for fees less than or equal to such Off- the-shelf Software's
license fee; and
(2) TSG performs or approves related incorporation or
integration of the Off-the-shelf Software with the TSG
Operated Software.
G. Acquiring and using Enhancements for Existing Applications
requiring specific intellectual property or specific functions that
TSG does not then possess; provided TSG performs or approves the
related integration of such Enhancements with the Existing
Applications.
H. The Airline Group is not prohibited or restricted from entering
into any agreement to receive, or from receiving, any royalty from
the marketing by a third-party developer of software developed by
that Person for any member of the Airline Group as permitted by this
Section 3.11.
3.12. ENGAGING THIRD PARTIES FOR NON-EXCLUSIVE SERVICES. If the Airline
Group solicits offers from third parties to perform Non-exclusive Services, the
Airline Group shall also solicit an offer from TSG; provided, however, that if
the Airline Group solicits an offer for maintenance or enhancement services
from a third party for Development that such third party performed, the Airline
Group shall have no obligation to solicit an offer from TSG. In such instances
where required to solicit an offer from TSG, if the Airline Group makes such a
solicitation in writing, including by issuing an RFP or an RFQ, the Airline
Group shall promptly provide TSG with a copy.
A. TSG shall have the opportunity to compete with third parties in
any bidding for Non-exclusive Services; provided, however, the
Airline Group is not obligated to accept TSG's offer or grant TSG any
preferential treatment.
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B. The Airline Group may use third parties pursuant to Section
"5.11. AUDITING CODE EFFICIENCY," subject to compliance with Section
"14.8. CONFIDENTIALITY AND THIRD PARTIES."
3.13. EFFECT OF DIVESTITURES, MERGERS, AND ACQUISITIONS. If a member of
the Airline Group creates a Spin-off Company and the Spin-off Company's
declining to use the TSG Services would be likely to result in a decrease of
more than ten percent of the Fees that were payable to TSG for the twelve
months preceding the month in which the Spin-off Company became a Spin-off
Company, then either the Airline Group shall cause such Spin-off Company to be
obligated to use the TSG Services in accordance with this Agreement or the
Airline Group shall pay Termination Liquidated Damages in accordance with
Exhibit K: Termination Liquidated Damages Calculation.
A. If the Airline Group acquires another carrier in the airline
business and merges its airline operations with such other carrier,
then such carrier's information technology operations shall possess
all the rights and benefits and be subject to all of the obligations
of the Airline Group under this Agreement on a date agreed to in
writing by AMERICAN and TSG, and in any event as soon as reasonably
practicable in light of the commercial circumstances, including the
duration of such carrier's existing commitments and the extent of any
termination penalties. If causing such carrier's information
technology operations to be subject to this Agreement is not
reasonably practicable within twelve months after the Airline Group
begins to merge airline operations, then the Airline Group and TSG
shall mutually determine appropriate compensation for TSG.
B. If the Airline Group acquires another carrier in the airline
business and does not merge its airline operations with such other
carrier, then such carrier's information technology operations and
services shall become subject to this Agreement at AMERICAN's sole
discretion.
C. If the Airline Group acquires any entity (including another
carrier), AMERICAN may cause the information technology services of
such entity to become subject to this Agreement upon Notice to TSG;
provided TSG is given a reasonable period of time in which to
transfer such entity's information technology operations and services
to TSG. In such event, TSG shall provide TSG Services to the entity
at the Current Rates; provided that if TSG incurs reasonable,
necessary, and Extraordinary Costs for establishing TSG's ability to
provide TSG Services to such entity and such costs will result in a
lower profit margin to TSG than would have occurred if the additional
volume or services were provided for the Airline Group's own use with
the then current TSG facilities, AMERICAN shall reimburse TSG for
such costs; provided further, however, that TSG has given AMERICAN
Notice in advance of incurring such costs.
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D. If the Airline Group creates an Affiliated Spin-off Entity, such
Affiliated Spin-off Entity shall possess all the rights and benefits
and be subject to all of the obligations of the Airline Group under
this Agreement, including the right to use the Existing Applications
in accordance with this Agreement without payment of any license
fees.
3.14. CHANGES IN DEMAND FOR TSG SERVICES. The Airline Group shall inform
TSG within a reasonable time of material changes in the Airline Group's
requirements for TSG Services to enable TSG to adjust its resources. The
Parties acknowledge that changes in the Airline Group's requirements because of
unforeseen circumstances, such as a labor strike against AMERICAN, may not be
communicated in advance; but AMERICAN or the affected member of the Airline
Group shall inform TSG of such material changes as soon as possible and shall
periodically provide TSG updated information as to such material changes.
3.15. PREFERRED CUSTOMER FOR DEPLOYMENT OF SKILLED PERSONNEL. TSG shall
provide necessary, skilled personnel to staff any and all Airline Group
projects; provided AMERICAN gives TSG Notice of material changes in the Airline
Group's requirements for TSG's personnel.
3.16. SPECIAL PROVISIONS FOR RESERVATIONS 800 SERVICES. TSG shall manage
Reservations 800 Services in accordance with this Section 3.16.
A. TSG shall promptly provide AMERICAN with a copy of all
information from prospective vendors of the Reservations 800
Services, including vendor-related performance and proposal
information.
B. AMERICAN may participate with TSG in all negotiations with such
prospective vendors.
C. AMERICAN, in its sole discretion, shall make all final decisions
concerning the selection of vendors for providing Reservations 800
Services; provided, however, if AMERICAN does not follow TSG's
recommendations concerning Reservations 800 Services, AMERICAN and
TSG agree to amend the SLA Standards applicable to the Reservations
800 Services, if necessary.
D. If AMERICAN, after consultation with TSG, decides that the
Airline Group can perform 800 Decision Tree Support more efficiently
than TSG, such services shall cease to be TSG Services, and the
Airline Group shall perform 800 Decision Tree Support for itself.
AMERICAN's election to perform 800 Decision Tree Support shall not
change the Parties' other rights or obligations under this Section
3.16.
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3.17. SPECIAL PROVISIONS CONCERNING SITA AND SITA SERVICES. The Parties'
arrangement regarding SITA Services and the SITA Agreements is set forth in
this Section 3.17.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B. Although AMERICAN shall remain the contracting party under the
SITA Agreements until they are assigned to TSG, TSG shall have all of
the rights and benefits and all of the obligations and burdens under
the SITA Agreements as if AMERICAN had assigned to TSG, and TSG had
assumed, the SITA Agreements as of July 1, 1996.
(1) Those rights and benefits shall include the right of
TSG to cause AMERICAN to purchase for TSG's own use and for
the use of TSG's customers all services provided by the SITA
Group pursuant to the SITA Agreements. Accordingly, AMERICAN
hereby authorizes TSG to purchase as AMERICAN's agent, on the
Airline Group's behalf and on behalf of TSG and its other
customers, the SITA Services. TSG and AMERICAN agree that
charges for the SITA Services shall be invoiced to AMERICAN
and paid by TSG to AMERICAN and that, with respect to the SITA
SABREnet Services, the special payment and other terms
provided in Exhibit H: SITA Relationship shall apply.
(2) Those obligations and burdens, which TSG hereby
accepts and agrees to perform, shall include the obligation to
meet all of the commitments and obligations, financial and
otherwise, that AMERICAN may incur under the SITA Agreements
(other than obligations related to the SITA Services consumed
by AMERICAN and its Affiliates other than TSG and its
subsidiaries, except for any amount paid by AMERICAN and its
Affiliates to TSG for SITA Services consumed by AMERICAN and
its Affiliates other than TSG and its subsidiaries), including
the obligations of payment (including any fees, penalties, or
interest for late payment or nonpayment), indemnification
obligations, and commitments to meet the financial minimums
under the SITA Agreements.
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(3) As long as AMERICAN remains responsible to SITA as
the contracting party under the SITA Agreements, TSG shall
purchase through AMERICAN at least the minimum volume of
telecommunications services offered by the SITA Group that
AMERICAN is obligated to purchase from the SITA Group pursuant
to the SITA Agreements. The Parties' rights and obligations
stated above in this Section 3.17 shall terminate upon
AMERICAN's assignment to TSG, and TSG's assumption, of the
SITA Agreements.
C. Because AMERICAN will remain, on or after the Effective Date,
the contracting party under the SITA Agreements, and therefore
responsible to the SITA Group thereunder, AMERICAN shall have the
benefit of the indemnification set forth in Section "20.8. SITA
INDEMNIFICATION."
3.18. SPECIAL PROVISIONS CONCERNING CUSTOM SOFTWARE. TSG and the Airline
Group acknowledge that software used and developed under this Agreement is
custom software for specific uses.
3.19. ELECTRONIC TRAVEL DISTRIBUTION SYSTEM. The Parties' agreements
regarding the use of PSS/FPC in connection with any Electronic Travel
Distribution System for the benefit of the Airline Group are set forth in
Exhibit P; Electronic Travel Distribution System.
Article IV -- Locations of Services
4.1. TSG'S CHANGES TO LOCATIONS. Nothing in this Agreement shall prevent
TSG from changing, consolidating, eliminating or adding, after the Effective
Date, its locations at which it provides the TSG Services so long as such
changes, consolidations, eliminations or additions cause no Material Adverse
Impact on the Airline Group and provided that if any TSG Services are performed
on-site at the Airline Group's locations on the Effective Date, TSG may not
change the location of such service without AMERICAN's Consent.
A. TSG shall consult with AMERICAN concerning such changes,
consolidations, eliminations or additions.
B. TSG's application developers are not considered "on-site" unless
expressly assigned as of the Effective Date to share an office area
with the user department.
C. TSG shall not move the TSG Operated Software or hardware for the
Real Time Applications known as Passenger Services Systems (PSS) and
Flight Operating Systems (FOS) located at the Secure Computer Center,
located at 4000 N. Mingo Road, Tulsa, Oklahoma 74116-5020 as of the
Effective Date, without the Airline Group's Consent.
4.2. AIRLINE GROUP'S REQUESTED CHANGES AT ITS LOCATIONS. If the Airline
Group wishes TSG to change, consolidate, eliminate or add any functions that
must be performed at the Airline Group's locations, it shall so notify TSG.
TSG shall promptly
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provide AMERICAN with a good faith estimate of the cost, if any, of making such
change, consolidation, elimination or addition. TSG will make such change,
consolidation, elimination or addition upon AMERICAN's approval of such cost
estimate, which approval will be given at AMERICAN's sole discretion.
Article V -- Service Levels
5.1. SERVICE LEVELS IN GENERAL. For each of the TSG Services or systems
specified in Exhibit D: Services Subject to SLA, AMERICAN and TSG shall
establish an SLA. It is the intention of TSG to provide good service to the
Airline Group, to correct problems with any TSG Services, and to cooperate with
the Airline Group to resolve any reasonable, remediable dissatisfaction with a
TSG Service.
A. The SLAs agreed to by the parties as of the Effective Date are
specified in Exhibit E: Agreed SLAs.
B. For SLAs not agreed to by the parties as of the Effective Date,
TSG and AMERICAN shall use their reasonable best efforts to establish
such SLAs before December 31, 1996 or as soon thereafter as
practicable. Upon the Parties' Consent, an SLA established after the
Effective Date shall be deemed incorporated into Exhibit E: Agreed
SLAs for all purposes.
C. TSG and AMERICAN intend that TSG perform the TSG Services at
levels above the SLA Standards. Both Parties acknowledge that the
actual levels of performance are likely to fluctuate.
D. In general TSG shall strive to improve continually its actual
performance and, subject to Subsections D(1) and D(2), shall not
knowingly act in a manner that will reduce its level of performance.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(2) If TSG identifies cost-saving opportunities for itself
that will reduce its levels of performance, but such reduction
will be de minimis, AMERICAN and
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TSG shall cooperate to enable TSG to take advantage of such
cost-saving opportunities.
E. Prior to engaging a subcontractor in accordance with Article VI
-- Subcontracting, TSG and AMERICAN shall establish an SLA Standard
for the service(s) to be subcontracted.
5.2. SLA REQUIREMENTS. All SLAs shall conform in substance to the
requirements specified in this Section.
A. Each SLA shall specify the SLA Standard for the services subject
to such SLA.
B. Each SLA shall specify one of the following categories in which
the service is designated: "Critical TSG Service," "High Risk TSG
Service," "Medium Risk TSG Service," or "Low Risk TSG Service." If
no such category is specified, such service shall be deemed as
designated "Low Risk TSG Service."
C. Each SLA shall establish its Performance Increases and
Performance Decreases, if any, with the intention that over the
course of a calendar year the Performance Increases and Performance
Decreases shall be equal. Further, in rare circumstances, the
Parties may balance one SLA established to yield Performance
Increases more than Performance Decreases with another SLA
established to yield corresponding Performance Decreases more than
Performance Increases, so that over the course of a calendar year the
intended Performance Increases and Performance Decreases from the two
SLAs shall be equal. Nevertheless, nothing in this Section 5.2 shall
be construed as requiring the actual Performance Increases to equal
the Performance Decreases while this Agreement is in effect.
D. For services designated as Critical TSG Service or High Risk TSG
Service, each SLA may specify Performance Increases for Exceptional
Performance and Performance Decreases for Inadequate Performance;
provided, however, that nothing in this Section 5.2 shall be
construed as requiring both a Performance Increase and a Performance
Decrease be applicable to the same measure of performance.
E. Each SLA may specify one or more SLA Service Termination Events.
5.3. HISTORICAL SLA STANDARDS. For each TSG Service, the SLA Standard
shall be established at the Historical SLA Standard or the New Historical SLA
Standard. If performance level information is unavailable for 1994 and 1995,
the SLA Standard shall be established at the performance levels measured in
1996, excluding data points where performance levels are clearly unacceptable,
and consequently, the 1996 performance levels are the Historical SLA Standard
for such service.
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A. Nothing in this Section 5.3 shall be construed as preventing TSG
and AMERICAN from agreeing to an SLA Standard that differs from the
Historical SLA Standard or the New Historical SLA Standard.
B. While this Agreement is in effect, TSG shall establish and
maintain the SLA Database.
C. TSG shall provide a query and report capability to the SLA
Database as part of the TSG Services.
5.4. MONITORING. TSG shall capture and retain information, for storage in
the SLA Database, and monitor its performance of the TSG Services in accordance
with the SLAs. TSG's adherence to the SLA Standards shall be evaluated every
month.
5.5. [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
5.6. COSTS BORNE EXCLUSIVELY BY TSG. TSG shall bear all expenses and
investments required to achieve performance to meet the Historical SLA
Standards and New Historical SLA Standards. TSG shall bear all its own
expenses of investigating and correcting Inadequate Performance.
5.7. [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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5.8. PERFORMANCE REVIEWS. The Airline Group's Account Manager and TSG's
Account Manager shall meet at least monthly to review TSG's adherence to the
SLA Standards. TSG shall provide AMERICAN, at least ten days in advance of
such meeting, with such performance reports as have been reasonably requested
by AMERICAN.
5.9. CORRECTION OF PERFORMANCE. TSG is obligated to cure or correct its
errors, mistakes, and deficiencies in service; and credit or repay the Airline
Group for any excess Fees resulting from such errors, mistakes, or deficiencies
as follows:
A. TSG shall perform Re-runs subject to Section "7.10. PAYMENT FOR
RE-RUNS."
B. TSG shall cure all instances of Inadequate Performance. To
effectuate such cure, AMERICAN and TSG shall proceed in accordance
with Exhibit G: Response/Resolution Procedures for SLA Problems.
C. For TSG Services for which there is no SLA Standard:
(1) TSG shall cure or correct its errors, mistakes, and
deficiencies in service and, [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
(2) If in AMERICAN's sole discretion, TSG's performance of a
service for which there is no SLA Standard becomes
unacceptable, AMERICAN and TSG shall negotiate an SLA Standard
within 30 days after AMERICAN requests such negotiation.
5.10. EXPIRATION, TERMINATION, AND SLA STANDARDS. TSG shall continue to
have the obligation to meet the SLA Standards during Transition Assistance.
When TSG cannot meet an SLA Standard due to a cause reasonably under the
Airline Group's control or due to a Force Majeure Event:
A. The Airline Group waives any associated Performance Decreases;
and
B. The Airline Group may not terminate this Agreement for Inadequate
Performance pursuant to Section "24.2. TERMINATION FOR INADEQUATE
PERFORMANCE."
5.11. AUDITING CODE EFFICIENCY. Subject to Section "14.8. CONFIDENTIALITY
AND THIRD PARTIES," AMERICAN may evaluate, or engage a third party to evaluate,
the efficiency of software used by TSG to provide the TSG Services or software
developed by TSG and funded by or licensed to the Airline Group. AMERICAN may
require that TSG
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make reasonable changes to such software to improve its efficiency and charge
AMERICAN at Current Rates for making such changes. If TSG fails to make such
changes, the Airline Group may engage a third party to make such changes
subject to Section "14.8. CONFIDENTIALITY AND THIRD PARTIES."
5.12. ANNUAL SURVEY. TSG will annually survey a representative sample of
the Airline Group's personnel who use the TSG Services to evaluate their
satisfaction relating to the TSG Services. TSG and AMERICAN will agree in
writing to the survey's sample group, format, objectives, measures of
satisfaction, and desired levels of satisfaction. If such survey reveals that
satisfaction has fallen significantly below desired levels, TSG shall develop a
plan to improve satisfaction in those areas where satisfaction has fallen below
such levels. TSG shall present the plan to AMERICAN within six weeks following
compilation of the survey results.
Article VI -- Subcontracting
6.1. NO SUBCONTRACTING PRIMARY RESPONSIBILITIES. TSG may not subcontract
any of TSG's Primary Responsibilities without AMERICAN's Consent. Such Consent
is at AMERICAN's sole discretion.
6.2. PERMITTED SUBCONTRACTING. The Airline Group hereby consents to all
subcontracting of the TSG Services by TSG in effect on the Effective Date. TSG
may subcontract TSG Services other than TSG's Primary Responsibilities, except
that to subcontract any service which TSG then currently performs for the
Airline Group and for which the total Fees typically charged to the Airline
Group are in excess of $10,000,000 (ten million dollars) per year, TSG must
obtain AMERICAN's Consent.
A. TSG shall promptly Notify AMERICAN of its intent to enter into
any subcontract. Prior to the time of subcontracting, AMERICAN and
TSG shall document historical service levels in order to establish an
SLA Standard if one does not already exist pursuant to Subsection E
of Section "5.1. SERVICE LEVELS IN GENERAL."
B. TSG is responsible for monitoring and managing the performance of
all subcontractors.
C. TSG shall remain responsible in accordance with this Agreement
for the TSG Services subcontracted. If, as the result of TSG's
subcontracting any TSG Service, the performance of that TSG Service
falls below the level of TSG's previous actual, typical performance,
then TSG shall work with the subcontractor to restore the performance
of that TSG Service to such previous actual, typical performance
level.
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D. Even if an inadequacy in a subcontractor's performance does not
amount to a breach of this Agreement or Inadequate Performance, if
AMERICAN is dissatisfied with the performance of any subcontractor,
AMERICAN shall promptly notify TSG and TSG and AMERICAN shall discuss
means to resolve AMERICAN's dissatisfaction.
E. TSG shall provide in its agreements with subcontractors such
written provisions as are sufficient to enable TSG to comply with the
provisions of this Agreement.
F. TSG shall reimburse the Airline Group for any increase in the
Fees, any more than a de minimis increase in an expense incurred by
the Airline Group, and any increase in the Taxes payable by the
Airline Group due to TSG's subcontracting one or more TSG Services.
Article VII - Fees
7.1. RATE AND RESET SCHEDULE. The Fees charged by TSG to the Airline
Group, and payable by the Airline Group to TSG, for the TSG Services shall be
in accordance with the Rates set forth in the Rate and Reset Schedule
applicable for each calendar year.
A. The Rate and Reset Schedule for each calendar year states the
Current Rates, which are applicable to the TSG Services rendered
during that year, and the Reset Formulas according to which the
Current Rates can be reset for the next year.
B. If the Rate and Reset Schedule does not include a Current Rate
corresponding to any TSG Service, then, unless the next sentence
applies, the charge for that TSG Service shall be deemed included in
other Current Rates. If TSG rendered a service substantially the
same as any TSG Service without charge before the Effective Date,
then it will continue to render that TSG Service without charge after
the Effective Date, unless a Rate for that TSG Service is included in
the Rate and Reset Schedule; provided, however, that this does not
apply to prototypes which TSG provided without charge for the Airline
Group's use before the Effective Date.
C. The Rate and Reset Schedule in effect on the Effective Date
states the Rates applicable during 1996 and the Reset Formulas to set
Rates for 1997.
D. The Rates included in the Rate and Reset Schedule will be
recalculated or re-established by the Parties each calendar year, as
described in Sections "7.2. ESTABLISHING RATES FOR EVEN-NUMBERED
YEARS" and "7.3. ESTABLISHING RATES FOR ODD-NUMBERED YEARS." The
Reset Formulas for the TSG Services Benchmarked in an Odd- numbered
Year will be renegotiated
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and established as described in Subsection A of Section "7.3.
ESTABLISHING RATES FOR ODD-NUMBERED YEARS." The Rate and Reset
Schedule shall be deemed amended in each event described above in
this Subsection D. The Reset Formulas for the TSG Services that are
not Benchmarked will continue without adjustment as stated in the
Rate and Reset Schedule.
7.2. ESTABLISHING RATES FOR EVEN-NUMBERED YEARS. For each Even-numbered
Year, the Rates shall be calculated and established as follows:
A. In the preceding Odd-numbered Year, the Parties shall:
(1) Determine, by May 1 of that Odd-numbered Year, the
Projected Annual Volume for the next Even- numbered Year;
(2) Determine the Projected Annual Reset Fees, in
accordance with Section "7.4. PROJECTED ANNUAL RESET FEES,"
for the next Even-numbered Year;
(3) Conduct the Benchmarking Process in accordance with
Section "7.5. BENCHMARKING" to obtain the Benchmark Results
for the next Even-numbered Year; and
(4) Determine the Projected Negotiated Rates and the
Projected Annual Negotiated Fees, in accordance with Section
"7.6. PROJECTED ANNUAL NEGOTIATED FEES," for the next
Even-numbered Year.
B. The Projected Negotiated Rates corresponding to the Projected
Annual Negotiated Fees shall be the applicable Rates for the TSG
Services rendered during the next Even-numbered Year, unless the
difference (expressed as an absolute value) between the Projected
Annual Negotiated Fees and the Projected Annual Reset Fees is greater
than the Adjustment Amount.
C. If the Projected Annual Reset Fees exceed the Projected Annual
Negotiated Fees by an amount greater than the Adjustment Amount, the
annual Fees projected for the next Even-numbered Year shall be the
result of subtracting the Adjustment Amount from the Projected Annual
Reset Fees.
D. If the Projected Annual Negotiated Fees exceed the Projected
Annual Reset Fees by an amount greater than the Adjustment Amount,
the annual Fees projected for the next Even-numbered Year shall be
the result of adding the Adjustment Amount to the Projected Annual
Reset Fees.
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E. If either Subsection C or Subsection D of this Section 7.2
applies, the Parties shall then negotiate the Rates applicable to the
TSG Services that were Benchmarked so that all of the Rates
(including those for TSG Services not Benchmarked) result, when
applied to the Projected Annual Volume for the next Even-numbered
Year, in the aggregate amount of the projected annual Fees, and those
Rates shall apply to the TSG Services rendered during the next
Even-numbered Year.
7.3. ESTABLISHING RATES FOR ODD-NUMBERED YEARS. The Rates applicable to
the TSG Services rendered during 1997 shall be calculated and established by
applying the Reset Formulas set forth in the Rate and Reset Schedule in effect
on the Effective Date to the Current Rates (in effect during 1996). The Rates
for each subsequent Odd-numbered Year shall be calculated and established as
follows:
A. In each Odd-numbered Year, for the TSG Services Benchmarked in
that year, the Parties shall negotiate and establish, and set forth
in the Rate and Reset Schedule, Reset Formulas for the next
Odd-numbered Year.
B. The Rates calculated and established by applying those new Reset
Formulas, and by applying the continuing Reset Formulas for the TSG
Services not so Benchmarked, to the Current Rates shall be the
applicable Rates for the TSG Services rendered during the next
Odd-numbered Year, unless Subsection C or Subsection D of Section
"7.2. ESTABLISHING RATES FOR EVEN-NUMBERED YEARS" applied to the
preceding Even-numbered Year.
C. If Subsection C or Subsection D of Section "7.2. ESTABLISHING
RATES FOR EVEN-NUMBERED YEARS" applied to the preceding Even-numbered
Year, then the Parties shall determine the Projected Annual Reset
Fees, in accordance with Section "7.4. PROJECTED ANNUAL RESET FEES,"
for the next Odd-numbered Year and adjust the Projected Annual Reset
Fees by:
(1) If Subsection C of Section "7.2. ESTABLISHING RATES FOR
EVEN-NUMBERED YEARS" applied, subtracting the Capped
Adjustment, or
(2) If Subsection D of Section "7.2. ESTABLISHING RATES FOR
EVEN-NUMBERED YEARS" applied, adding the Capped Adjustment.
D. If Subsection C of this Section 7.3 applies, the Parties shall
then negotiate the Rates applicable to the TSG Services that were
most recently Benchmarked so that all of the Rates (including those
for TSG Services not so Benchmarked) result, when applied to the
Projected Annual Volume for the next Odd-numbered Year, in the
aggregate amount of the Projected Annual Reset Fees as adjusted in
accordance with
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Subsection C of this Section 7.3, and those Rates shall apply to the
TSG Services rendered during the next Odd-numbered Year.
7.4. PROJECTED ANNUAL RESET FEES. The Parties shall determine the
Projected Annual Reset Fees for the next calendar year by:
A. Establishing Rates by applying the Reset Formulas to the Current
Rates;
B. Multiplying those reset Rates by the Projected Annual Volume for
the next calendar year; and
C. If the Projected Annual Reset Fees are being determined for an
Even-numbered Year and Subsection C of Section "7.3. ESTABLISHING
RATES FOR ODD-NUMBERED YEARS" applied to the preceding Odd-numbered
Year, then:
(1) If Subsection C(1) of Section "7.3. ESTABLISHING RATES
FOR ODD-NUMBERED YEARS" applied, subtracting any Unapplied
Capped Adjustment from the product described in Subsection B
of this Section 7.4, or
(2) If Subsection C(2) of Section "7.3. ESTABLISHING RATES
FOR ODD-NUMBERED YEARS" applied, adding any Unapplied Capped
Adjustment to the product described in Subsection B of this
Section 7.4.
The Projected Annual Reset Fees for the next calendar year must be determined
by October 1 of the year in which the determination is being made.
7.5. BENCHMARKING. In each Odd-numbered Year, the Parties shall conduct
the Benchmarking Process, with appropriate consideration to, among other
things, the rights and obligations under this Agreement, the Airline Group's
size as a recipient of data processing services, the SLA Standards required of
TSG, the geographic factors involved in providing the TSG Services to the
Airline Group, the exclusivity commitments made by the Airline Group for
services, and the Retained Rights.
A. On or before May 1 of each Odd-numbered Year, the Parties shall
jointly select and engage one or more Benchmark Providers. The
Parties agree that they are to mutually solicit and evaluate the
qualifications and methodologies of prospective Benchmark Providers.
B. The agreement with the Benchmark Provider or Benchmark Providers
shall contain, at a minimum, provisions substantially similar to the
following provisions:
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(1) The Benchmark Provider or Benchmark Providers shall
complete the Benchmarking Process and submit the Benchmark
Report on or before September 1 of the Odd-numbered Year.
(2) The Benchmark Report shall contain sufficient information
to demonstrate that the Benchmark Provider or Benchmark
Providers have compared the TSG Services to those services
offered by a representative group of providers of data
processing services with reasonable consideration of, among
other things, the various factors described in the first
sentence of this Section 7.5.
(3) The Benchmark Report shall state the Benchmark Results
and shall be delivered to both Parties.
(4) Each of the Parties shall pay one-half of the fees and
reimbursable expenses (if any) of each Benchmark Provider.
C. The Benchmark Provider shall evaluate all Current Rates, except
Third-Party Pass-Through Charges, Hourly Labor Rates, and any Rates
for which there is not a market that can serve as a reasonable
comparison.
D. The Parties may, but shall not be obligated to, accept all or any
portion of the Benchmark Report or use in any manner any of the
Benchmark Results. Nevertheless, the Parties intend that the
Benchmark Results be available in each Odd-numbered Year as a
guideline for their negotiations of Rates and Reset Formulas.
7.6. PROJECTED ANNUAL NEGOTIATED FEES. By October 1 of each Odd-numbered
year, the Parties shall determine the Projected Annual Negotiated Fees for the
next Even-numbered Year by multiplying the corresponding Projected Negotiated
Rates by the corresponding Projected Annual Volume (though, if the Parties
agree, this Projected Annual Volume need not be the same as the one submitted
to the Benchmark Provider or Benchmark Providers for the Benchmarking Process).
7.7. LIMITED USE OF PROJECTED FEES. The determination of projected annual
Fees of any kind in accordance with any preceding Section of this Article VII
is solely for the purpose of establishing Rates. None of those projections of
annual Fees is a target for or a limit on any actual annual Fees, and neither
Party shall have any right or remedy because any actual annual Fees do not
conform to or correspond with projected annual Fees.
7.8. RECOURSE TO DISPUTE RESOLUTION. If, because of any Dispute, the
Parties fail to determine any essential component of the establishment of any
Rate by the applicable date specified in a preceding Section of this Article
VII, the Parties shall promptly resolve that
Information Technology Services Agreement
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<PAGE> 24
Dispute, as soon as practicable after the specified date, in accordance with
Article XXIII -- Dispute Resolution.
A. If that Dispute is not resolved by January 1 of the year for
which any Rate is to be effective, the preceding year's Rate for the
corresponding TSG Service shall continue in effect pending
resolution.
B. The Rate determined by resolution of that Dispute shall be deemed
effective January 1 as though the Parties had timely agreed.
Accordingly, either on the due date of the first invoice due after
that Dispute is resolved or the due date of the first invoice
covering any period on or after January 1, whichever is later, either
TSG shall credit the Airline Group any excess Fees received since
January 1 or the Airline Group shall pay TSG any additional Fees due
to TSG since January 1.
7.9. PERFORMANCE ADJUSTMENT OF FEES. The Fees shall increase in the event
of Exceptional Performance and decrease in the event of Inadequate Performance.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B. No later than December 20 of each year at a meeting of the
Airline Group's CIO and the applicable TSG division president,
AMERICAN and TSG shall agree to the net increase or decrease in Fees
resulting from the Performance Increases and Performance Decreases
for the prior twelve-month period ended November 30. The December
invoice submitted to AMERICAN in the succeeding January shall reflect
such agreed net increase or decrease.
C. The final invoice after termination or Expiration of this
Agreement shall reflect the net increase or decrease in Fees
resulting from the Performance Increases and Performance Decreases
for the period commencing on December 1 of the previous year to the
date of termination or Expiration.
7.10. PAYMENT FOR RE-RUNS. [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
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7.11. FEE REDUCTIONS FOR DROPPING CERTAIN MAINTENANCE. Upon Notice to TSG,
for certain specified devices, AMERICAN may elect to terminate the TSG Services
that provide maintenance as part of Device Support, subject to Section "3.10.
EXCLUSIVITY." If AMERICAN so elects, TSG shall reduce Fees by an amount equal
to the maintenance savings and AMERICAN and TSG shall mutually determine what,
if any, modification there will be to the applicable SLA Standard.
7.12. MOST FAVORED CUSTOMER. [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
7.13. PAYMENTS FOR THIRD PARTY SOFTWARE UPON DISAFFILIATION. If AMERICAN
and TSG cease to be Affiliates, TSG shall pay such license fees, and any
applicable or related Taxes, for the Transferred Third Party Software and the
Other Third
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<PAGE> 26
Party Software as are required to enable the Airline Group to continue to
receive the TSG Services.
Article VIII -- Invoices and Payment
8.1. INVOICES. The Airline Group is only required to pay for services
provided by TSG pursuant to the prices and other terms and conditions of this
Agreement or as otherwise expressly agreed in writing by the Parties. TSG
shall use reasonable efforts to submit an invoice to the Airline Group for the
prior month's Fees on or before the eighth Business Day of every month. Such
invoice is due and payable and the Airline Group shall pay such invoice within
thirty days after the Airline Group's receipt of such invoice, except as
otherwise provided in Section "8.2. DISPUTED INVOICES."
8.2. DISPUTED INVOICES. If there is a Disputed Invoice, the Airline Group
may withhold a portion of the amount stated in the Disputed Invoice in
accordance with this Section 8.2.
A. If the Disputed Invoice is greater than or equal to the prior
month's invoice, the Airline Group shall pay TSG all undisputed
amounts, [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] provided
that the Airline Group may withhold the payment of taxes on disputed
amounts without regard to the limitations specified in this
Subsection and amounts calculated herein shall be net tax
calculations.
B. If the Disputed Invoice is less than the prior month's payment,
the Airline Group shall pay TSG all undisputed amounts, [TEXT OMITTED
- CONFIDENTIAL TREATMENT REQUESTED] therefore, in such event
and irrespective of the amount in dispute, the Airline Group may not,
in respect to the Disputed Invoice, withhold payment of any amount in
excess of [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] of the
Disputed Invoice; provided, however, that the Airline Group may
withhold payment of taxes on disputed amounts without regard to the
limitations specified in this Subsection and amounts calculated
herein shall be net tax calculations.
C. In no event shall a Party's adherence to the provisions of this
Section 8.2 be construed as constituting a waiver by either Party of
any claims against the other Party.
8.3. BILLING PROCEDURES. Each invoice submitted to the Airline Group
shall be in accord with this Section 8.3.
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A. Each invoice shall indicate the Fees and, subject to changes made
pursuant to Section "8.4. NEW BILLING SYSTEM" and Section "9.6.
COOPERATION," will include separate sub-totals for taxable and
nontaxable services and property.
B. Along with every invoice TSG shall provide relevant written
information to substantiate the Fees, including supporting
documentation of resource usage, information concerning TSG Software
Income, the offset in Fees pursuant to Section "11.4. OFFSET OF
FEES," and the reduction in Fees pursuant to Section "7.9.
PERFORMANCE ADJUSTMENT OF FEES."
C. TSG shall promptly provide the Airline Group with such
information as AMERICAN reasonably requests to understand or verify
the contents of the invoice. TSG shall bear the cost of any TSG
Services required to fulfill such requests.
D. Without AMERICAN's Consent, TSG shall not make any changes to the
procedures for producing invoices, the billing allocation methodology
for any TSG Service, or to the form or format of invoices or
substantiating information that is routinely provided to the Airline
Group.
8.4. NEW BILLING SYSTEM. At its own expense, TSG shall design, develop,
and implement the New Billing System. TSG and AMERICAN shall mutually develop
specifications for the New Billing System, and upon written acceptance of such
specifications by both AMERICAN and TSG, TSG shall proceed with the development
of the New Billing System.
A. After written acceptance by both Parties, the specifications of
the New Billing System may not change without both Parties' Consent.
B. At a minimum the New Billing System shall possess the capability
to account for and bill such Taxes as are applicable.
C. If AMERICAN requests and agrees to pay for it, TSG shall provide
additional capability to permit AMERICAN to accommodate additional
functionality (e.g., to report the Airline Group's non-TSG
information technology expenditures).
8.5. INTEREST ON OVERDUE AMOUNTS. [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
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Article IX -- Transfer and Property Taxes
9.1. ALLOCATION OF RESPONSIBILITY FOR CERTAIN TAXES. AMERICAN shall be
responsible for (and shall indemnify TSG for) Taxes imposed on, based on, or
measured by any consideration for, any transfer of services or property by TSG
to the Airline Group pursuant to this Agreement; provided, however, that TSG
shall be responsible for (and shall indemnify Airline Group for) all Taxes that
are imposed on, based on or measured by TSG's acquisition, ownership, or use of
property or services, or the provision of property or services to TSG. Neither
Party shall be liable to the other Party for interest included in Taxes in
excess of interest at the rate set forth in Section "8.5. INTEREST ON OVERDUE
AMOUNTS" or penalties and additions to taxes to the extent such interest,
penalties, and additions to taxes result from tax return positions taken by the
other Party that are unrelated to this Agreement or from the willful misconduct
or gross negligence of the other Party.
9.2. CLAIM OF EXEMPTION. The Airline Group shall pay any Taxes for which it
is responsible which are invoiced by TSG to the Airline Group under Article
VIII -- Invoices and Payment unless the Airline Group promptly provides TSG
with an exemption certificate, resale certificate or letter explaining why the
Airline Group believes the Tax is not applicable. Such certificate or letter
does not relieve AMERICAN of ultimate liability under this Article IX to the
extent the taxing authority disagrees with the Airline Group's position that no
such Tax is due; provided, that AMERICAN shall have no liability for Taxes
either not yet due and payable or Taxes being contested (unless payment is a
condition to contest) in accordance with Section "9.4. CONTESTS OF TAX
ASSESSMENTS." TSG may at any time require AMERICAN to deliver a letter of
advice from outside counsel, selected by AMERICAN and reasonably acceptable to
TSG, that AMERICAN's position is reasonable under the tax law. The cost of
such a letter shall be split equally between the Parties. If such a letter is
not delivered within 30 days of the request, AMERICAN must pay the Taxes
invoiced.
9.3. PROPERTY TAXES. Subject to the terms of other leases or agreements,
each of TSG and each member of the Airline Group 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.
9.4. CONTESTS OF TAX ASSESSMENTS. If TSG receives notice from any taxing
authority with respect to an assessment or potential assessment or imposition
of any Tax that AMERICAN would be responsible for paying pursuant to Section
"9.1. ALLOCATION OF RESPONSIBILITY FOR CERTAIN TAXES," TSG shall promptly
send Notice to AMERICAN of such notice, and shall, if AMERICAN requests, timely
contest, or if AMERICAN so elects permit AMERICAN to contest, such proposed
Tax, at AMERICAN's expense and in a forum and with counsel selected by AMERICAN
and reasonably acceptable to TSG, until such assessment has been upheld by the
decision of an appellate court; provided,
Information Technology Services Agreement
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<PAGE> 29
however, that prior to any judicial contest TSG may require (as a condition to
such judicial contest) a letter from counsel selected by AMERICAN and
reasonably acceptable to TSG that there is a reasonable tax basis for such
contest. Any Notice given to a Party under this Section 9.4 shall also be
copied directly to the tax department of that Party, in care of the Director of
Taxes, at the address indicated in Section "28.2. ADDRESSES," and such Notice
must be given no fewer than five Business Days before any statutory deadline
for filing the timely protest of the assessment identified in such Notice. TSG
may compromise, settle, or resolve a Tax contest under this Section 9.4 without
AMERICAN's consent (provided such compromise, settlement, or resolution is
limited only to the Taxes for the tax period involved) if TSG waives its
indemnity rights under this Article IX -- Transfer and Property Taxes with
respect to the Taxes being contested. Otherwise, TSG may not compromise,
settle, or resolve the Tax contest without AMERICAN's Consent.
9.5. REFUNDS. Either Party may, at its expense, require the other to
choose and do one of the following:
A. Apply for and diligently pursue a refund of Taxes otherwise
payable by or subject to indemnification by the requiring Party under
this Article IX,
B. If permitted by law, assign its rights to a refund claim for such
Taxes to the requiring Party,
C. Pay to the requiring Party the amount of Taxes claimed by the
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; provided, however, that before recourse to the
Dispute Resolution Procedure, such other Party shall produce, if
requested by the requiring Party, a letter of advice from outside
counsel selected by such other Party and reasonably acceptable to the
requiring Party (the cost of which letter is to be split equally
between the Parties) that such other Party's refusal to pursue a
refund claim is based on a reasonable tax position that the amounts
are not refundable.
9.6. COOPERATION. Each Party shall provide the other with such
cooperation as is reasonable, at the request of the other Party, to minimize
Taxes incurred in connection with this Agreement. In the case of AMERICAN,
such cooperation shall include providing TSG any applicable resale
certificates; information regarding use of materials, services, or sales; or
other exemption certificates. In the case of TSG, such cooperation shall
include providing AMERICAN applicable information regarding delivery or use of
materials, services, or sales;
Information Technology Services Agreement
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<PAGE> 30
and at the request of AMERICAN, taking additional steps to minimize Taxes.
Such steps shall also include:
A. Providing itemized (or non-itemized) invoices or billing;
B. Separating (or combining) any of the TSG Services;
C. Changing the location at which services or property are
delivered, provided, or used pursuant to this Agreement;
D. Permitting any member or members of the Airline Group to
assign to one of its or their Affiliates all or part of its or
their rights under this Agreement, including the right to take
delivery of services or property;
E. Using reasonable efforts to require any third party to take
steps reasonably available to such third party to minimize
Taxes;
F. Permitting TSG to assign to one of its Affiliates all or part
of TSG's obligations under this Agreement; and
G. Amending this Agreement;
provided, however, that neither Party shall be required to take any step that
would be materially disadvantageous to its business or operations or would
require it to incur material additional costs unless the other Party agrees to
reimburse it for that material disadvantages or those additional costs. In the
case of either Party, such cooperation shall include maintaining records, as
reasonably necessary for tax purposes (and in any event for at least six years
from date of the transactions to which such records relate); making such
records available to the other Party (or permitting the other Party to copy, at
its expense, such records); and making information in its possession and
employees with technical expertise available (at the providing Party's cost) as
reasonably necessary in connection with the preparation of any tax returns or
any audit or tax contest or refund claim. It is not intended that one Party is
necessarily to share in any tax savings realized by the other Party through the
actions or cooperation taken under this Section 9.6.
9.7. TAXES ON THIRD-PARTY PASS-THROUGH CHARGES. Notwithstanding anything
to the contrary in this Agreement, to the extent any Taxes are imposed on or
with respect to any Third-Party Pass-Through Charges, or on any mark-ups or
fees related to the Third-Party Pass-Through Charges, which Taxes exceed the
Taxes that would have applied to a transfer of services or property directly to
any member of the Airline Group from the third-party vendor from which TSG
acquires services or property, TSG shall be responsible for (and shall
indemnify the Airline Group for) such additional Taxes, it being the intent of
the Parties
Information Technology Services Agreement
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<PAGE> 31
that the Airline Group's liability for Taxes imposed on or measured by any
Third-Party Pass-Through Charges, or any mark-ups or fees related to the
Third-Party Pass-Through Charges, shall be no greater than if the Airline Group
had purchased directly from the third-party vendor, instead of through TSG, the
services and/or property to which such Third-Party Pass-Through Charges relate.
TSG may (with any necessary consent of the third-party vendor and with
AMERICAN's Consent) assign to AMERICAN (or, as AMERICAN may direct, one or more
of the American Related Entities) the rights of TSG under that agreement or
those agreements necessary for the Airline Group to obtain such services or
property directly from the third-party vendor or permit AMERICAN to otherwise
obtain such services or property directly from the third-party vendor to
minimize such additional Taxes.
9.8. ADDITIONAL TAX CONTESTS. If AMERICAN receives notice from any taxing
authority with respect to an assessment or potential assessment or imposition
of any Tax that TSG would be responsible for paying pursuant to Section "9.1.
ALLOCATION OF RESPONSIBILITY FOR CERTAIN TAXES," AMERICAN shall promptly send
Notice to TSG of such notice, and shall, if TSG requests, timely contest, or if
TSG so elects permit TSG to contest, such proposed Tax, at TSG's expense and in
a forum and with counsel selected by TSG and reasonably acceptable to AMERICAN,
until such assessment has been upheld by the decision of an appellate court;
provided, however, that prior to any judicial contest AMERICAN may require (as
a condition to such judicial contest) a letter from counsel selected by TSG and
reasonably acceptable to AMERICAN that there is a reasonable tax basis for such
contest. Any Notice given to a Party under this Section 9.8 shall also be
copied directly to the tax department of that Party, in care of the Director of
Taxes, at the address indicated in Section "28.2. ADDRESSES," and such Notice
must be given no fewer than five Business Days before any statutory deadline
for filing the timely protest of the assessment identified in such Notice.
AMERICAN may compromise, settle, or resolve a Tax contest under this Section
9.8 without TSG's consent (provided such compromise, settlement, or resolution
is limited only to the Taxes for the tax period involved) if AMERICAN waives
its indemnity rights under this Article IX -- Transfer and Property Taxes with
respect to the Taxes being contested. Otherwise, AMERICAN may not compromise,
settle, or resolve the Tax contest without TSG's Consent.
9.9. NO OTHER TAX INDEMNITY. This Article IX contains the exclusive
allocations pursuant to this Agreement of responsibilities between, and
indemnification obligations of, the Parties regarding Taxes. For the avoidance
of doubt, the Parties intend that Article XX -- Indemnification does not apply
to Taxes.
9.10. TAXES AND DISPUTE RESOLUTION. Except as specified in Subsection D of
Section "9.5. REFUNDS," Disputes between the Parties concerning this Article IX
are subject to the Dispute Resolution Procedure, except 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
Information Technology Services Agreement
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<PAGE> 32
resolved by any appropriate administrative or legal procedure available to a
Party or the Parties under this Agreement apart from the Dispute Resolution
Procedure.
9.11. AMERICAN'S PARTICIPATION IN THE OKLAHOMA QUALITY JOBS PROGRAM. TSG
acknowledges that AMERICAN may receive significant incentive payments over the
next ten years from the State of Oklahoma in return for participation in the
State's Quality Jobs Program. Under AMERICAN's agreement with the State
(accepted October 26, 1995), AMERICAN must maintain a certain number of
full-time positions in Oklahoma, which number may include any jobs transferred
by AMERICAN to another company (such as TSG). TSG agrees it will cooperate
with requests by AMERICAN to track all positions transferred to it by AMERICAN
and will supply any information requested by AMERICAN for AMERICAN's compliance
obligations under the Quality Jobs Program. TSG will also permit the Oklahoma
Tax Commission and Oklahoma Employment Security Commission to audit TSG records
for purposes of checking compliance under the Program. To the extent not
otherwise covered under this Agreement, TSG assumes no obligation for reduced
or eliminated benefits under the Quality Jobs Program suffered by AMERICAN in
the event TSG's full time positions in Oklahoma are reduced; however, TSG
agrees it will provide AMERICAN Notice of a reduction in TSG's employment in
Oklahoma to a level below 1,500 full-time positions, and TSG will cooperate
with AMERICAN in an effort to avoid any loss in AMERICAN's entitlement to
benefits under the Quality Jobs Program as the result of any such reduction.
If, while AMERICAN is participating in the Quality Jobs Program, a governmental
incentive program is introduced in Oklahoma for which TSG could claim benefits,
but AMERICAN's counting TSG positions to claim benefits under the Quality Jobs
Program prevents TSG from counting those same TSG positions in order to claim
benefits under such new incentive program, then the Parties shall proceed as
follows:
A. The Parties shall determine whether the greatest aggregate
estimated benefits would result from:
(1) The separate participation of both Parties in the new
incentive program (without AMERICAN's counting any TSG
positions),
(2) AMERICAN's continued participation in the Quality
Jobs Program (with AMERICAN's continuing to count the TSG
positions),
(3) Only AMERICAN's participation in the new incentive
program (without its counting any TSG positions), or
(4) Only TSG's participation in the new incentive
program.
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The Parties agree that one or both of them shall pursue the
participation in the program or programs that would result in the
greatest aggregate estimated benefits (without regard to the
allocation of those benefits between the Parties).
B. If the Parties determine that only one of them should
participate, as described in one of Subsections A(2) through A(4) of
this Section 9.11, then the Parties shall share in the benefits of
that participation in the Quality Jobs Program or the new incentive
program as follows:
(1) AMERICAN's share of the benefits shall be in the
ratio of (a) the estimated benefit to AMERICAN of either its
participation in the Quality Jobs Program or its participation
in the new incentive program, whichever is greater, over (b)
the aggregate estimated benefits would result from the sum of
(i) AMERICAN's participation in the Quality Jobs Program or
its participation in the new incentive program, whichever is
greater, and (ii) TSG's participation in the new incentive
program.
(2) TSG's share of the benefits shall be in the ratio of
(a) the estimated benefit to TSG of its participation in the
new incentive program, over (b) the aggregate estimated
benefits would result from the sum of (i) AMERICAN's
participation in the Quality Jobs Program or its participation
in the new incentive program, whichever is greater, and (ii)
TSG's participation in the new incentive program.
The estimated benefit to AMERICAN of its continued participation in
the Quality Jobs Program shall be calculated assuming AMERICAN
continues to count the TSG positions.
Article X - Ownership of Data
10.1. OWNERSHIP OF DATA. The AG Data is the exclusive property of the
Airline Group. AG Customer Data is the exclusive property of an AG Customer
and/or the Airline Group, as determined by such agreements as the Airline Group
may have with such AG Customer and is deemed proprietary. Data about which
there is an ambiguity as to ownership shall be treated as AG Data and subject
to the provisions of this Agreement until its ownership is resolved in
accordance with Article XXIII -- Dispute Resolution. This Agreement does not
purport to address the ownership of any data other than AG Data or AG Customer
Data.
10.2. USE OF DATA. TSG shall use the AG Data and the AG Customer Data only
in providing services pursuant to this Agreement. Except as otherwise
expressly agreed in writing, TSG shall not and shall not attempt to sell,
license, provide, disclose, use, pledge,
Information Technology Services Agreement
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<PAGE> 34
hypothecate, and/or in any other way transfer the AG Data or the AG Customer
Data. All such attempts shall be void and without legal effect. With
AMERICAN's Consent, TSG may use the AG Data or AG Customer Data for such other
purposes and for such compensation as AMERICAN and TSG may agree in writing.
10.3. RISK OF DATA LOSS. When AG Data or AG Customer Data is in TSG's
possession or under TSG's control and an event occurs that prevents or hinders
the access to or reliable use of such data, TSG shall cure and re-create or
restore such data as quickly as the Airline Group needs such data in its
operations.
A. Such re-creation or restoration shall be at [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
B. Where re-creation or restoration of such data is at the Airline
Group's expense, TSG shall obtain the Airline Group's Consent before
performing such re-creation or restoration that will incur Fees
greater than $5,000 (five thousand dollars).
10.4. DATA SECURITY. TSG shall maintain safeguards for protecting against
the loss and disclosure of the AG Data and AG Customer Data no less rigorous
than such safeguards as are in effect on the Effective Date. Such safeguards
include, the safeguards described in TSG's existing reference materials. The
Airline Group shall safeguard all data owned by TSG in the Airline Group's
possession.
10.5. COPIES OF DATA FOR THE AIRLINE GROUP. Upon written request to TSG,
TSG shall provide a copy of all or a portion of AG Data and AG Customer Data,
as requested by AMERICAN, on such media as requested by AMERICAN. TSG's
providing such data is a service within the scope of the TSG Services and is at
the Airline Group's expense. TSG shall never refuse for any reason, including
the Airline Group's material breach of this Agreement, to provide the Airline
Group with copies of the AG Data and AG Customer Data in accordance with this
Section 10.5. TSG hereby expressly agrees that the Airline Group may obtain
injunctive relief (in accordance with the Dispute Resolution Procedure) to
enforce the provisions of this Section 10.5.
10.6. MEDIA CONTAINING DATA. As between the Airline Group and TSG, the
Airline Group is the exclusive owner of all AG Data and all AG Customer Data
recorded on any media irrespective of which party owns the media.
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<PAGE> 35
Article XI -- Software Ownership
11.1. OWNERSHIP OF NEW SOFTWARE. TSG and the Airline Group intend that
their respective contributions to all software developed by means of the TSG
Services or the New/Out-of-scope Services performed by TSG after the Effective
Date be merged into inseparable or interdependent parts of a unitary whole as a
joint work; and consequently, that all such software is Jointly Owned Software.
11.2. RIGHTS IN JOINTLY OWNED SOFTWARE. TSG and the Airline Group agree
that their respective rights in and to the Jointly Owned Software are subject
to the limitations of this Section 11.2. For the avoidance of doubt, unless
otherwise expressly provided in this Agreement, neither Party shall have any
obligation to pay the other Party any royalty, fee, or other compensation for
exercising rights with respect to the Jointly Owned Software.
A. The Airline Group may not license, sublicense, market, disclose,
modify, prepare Derivative Works, transfer, or otherwise commercially
exploit the Jointly Owned Software without TSG's Consent, except as
expressly provided in the following:
(1) While this Agreement is in effect, the Airline Group and
its Affiliates may use and possess the Jointly Owned Software
as follows:
a. Subject to Section "3.10. EXCLUSIVITY," the
Airline Group and its Affiliates may use and possess
the Jointly Owned Software for their own internal
use, including use in their air transportation
business.
b. The Airline Group may use the Jointly Owned
Software in accordance with Article XII -- Marketing
and Related Rights.
c. The Airline Group may disclose, display,
distribute, or license the executable code of Jointly
Owned Software at no charge (other than for shipping,
handling, or investment cost recovery) to customers
and prospective customers of its air transportation
business for the purposes of increasing the Airline
Group's air transportation revenue.
d. The Airline Group may disclose the Jointly Owned
Software to software developers that the Airline
Group is permitted under this Agreement to engage,
subject to Section "14.8. CONFIDENTIALITY AND THIRD
PARTIES."
e. The Airline Group shall obtain TSG's Consent
prior to displaying Jointly Owned Software to a
potential TSG Customer of such software who or which
has expressed an interest in licensing such software.
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(2) Upon the Expiration or termination of this Agreement, the
Airline Group and its Affiliates may use and possess the
Jointly Owned Software as follows:
a. The Airline Group and its Affiliates may use and
possess the Jointly Owned Software for their own
internal use, including use in their air
transportation business.
b. The Airline Group may use and possess the Jointly
Owned Software in accordance with the Section "12.5.
MARKETING RIGHTS AFTER EXPIRATION OR TERMINATION."
c. The Airline Group may disclose, display,
distribute, or license the executable code of Jointly
Owned Software at no charge (other than for shipping,
handling, or investment cost recovery) to customers
and prospective customers of its air transportation
business for the purposes of increasing the Airline
Group's air transportation revenue.
d. The Airline Group and its Affiliates may modify
the Jointly Owned Software and prepare Derivative
Works of Jointly Owned Software for their internal
use, including use in their air transportation
business, and may engage another entity to modify or
prepare Derivative Works on behalf of the Airline
Group and its Affiliates solely for such internal
use.
e. The Airline Group and its Affiliates may engage
another entity to operate the Jointly Owned Software
for the Airline Group's and its Affiliates' internal
use, including use in their air transportation
business.
f. The Airline Group shall obtain TSG's Consent
prior to displaying Jointly Owned Software to a
potential TSG Customer of such software who or which
has expressed an interest in licensing such software.
(3) The Airline Group and its Affiliates possess the same
rights in Derivative Works of Jointly Owned Software, prepared
by the Airline Group or its Affiliates, or on their behalf, as
the Airline Group possesses in the Jointly Owned Software on
which the Derivative Work is based.
B. The rights of TSG in and to the Jointly Owned Software are limited
only as follows:
(1) The Airline Group and its Affiliates may use and possess
the Jointly Owned Software in accordance with Subsection A of
this Section 11.2.
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(2) In accordance with Section "11.4. OFFSET OF FEES," TSG
shall reduce the Fees payable by AMERICAN.
(3) In accordance with Section "11.5. ROYALTY AFTER
EXPIRATION OR TERMINATION," TSG shall pay AMERICAN a royalty.
(4) For such entities that AMERICAN identifies in writing to
TSG, TSG shall license the Jointly Owned Software on terms and
conditions that are substantially similar to such terms and
conditions as TSG licenses other comparable software and for a
commercially reasonable fee.
11.3. PROTECTION OF SOFTWARE RIGHTS AGAINST THIRD PARTIES. If any Party
shall become aware of any infringement or misappropriation by any third party
of the Transferred Software, the Jointly Owned Software, or the TSG Owned
Software, it shall promptly give Notice to the other Party of such infringement
or misappropriation.
A. TSG, may, at its own expense, institute suit against such third
party and the Airline Group shall fully cooperate with TSG to enjoin
such infringement or misappropriation and shall, if requested by TSG,
join with TSG as a party to any action brought by TSG for such purpose.
[The Parties intend that TSG bear all expenses connected with such suit
and that the Airline Group bear such expenses; provided, however, that
if the Airline Group desires to retain its own counsel, it shall do so
at its own cost and expense; and provided, further, that either Party
may, in its sole discretion, upon Notice to the other Party, choose not
to bear any further expense of such suit.]
B. If TSG, does not institute suit against such third party before
the earlier of 120 days after receiving Notice of such infringement or
misappropriation or 30 days prior to the expiration of the statute of
limitations, then AMERICAN may, at its expense, institute suit against
such third party, and TSG shall fully cooperate with AMERICAN to
enjoin such infringement or misappropriation and if reasonably
necessary, shall, if requested, join with AMERICAN as a party to any
action brought by AMERICAN for such purpose. AMERICAN shall bear all
expenses connected with such suit, provided, however, that if TSG
desires to retain its own counsel, it shall do so at its own cost and
expense.
C. Any recovery as a result of any suit pursuant to this Section 11.3
shall belong to a Party in the same percentage as such Party bore the
expense of such suit; excluding, however, a Party's cost and expense
in retaining its own counsel when such Party did not institute such
suit.
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11.4. OFFSET OF FEES. So long as this Agreement is in effect, TSG shall
retain all license fees and other compensation that TSG receives arising out of
the Jointly Owned Software; provided, however, that in accordance with this
Section 11.4, TSG shall offset the Fees otherwise payable to TSG by AMERICAN
until, [for a specific application that is a Derivative Work of Jointly Owned
Software, more than [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] of its
program instructions are original materials funded by one or more entities
other than the Airline Group.]
A. TSG shall use reasonable efforts to establish and obtain license
fees from third parties for the Jointly Owned Software that are
commensurate with the license fees charged by third parties for
comparable software.
B. For all Jointly Owned Software, solely funded by the Airline
Group, and other than Enhancements, TSG shall offset the Fees
otherwise payable by AMERICAN to TSG by an amount equal to twenty
percent of the TSG Software Income; provided, [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
C. In the case of all Enhancements other than Shared Host
Enhancements, TSG shall offset the Fees otherwise payable by AMERICAN
to TSG by an amount equal to twenty percent of the TSG Software
Income; provided, [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
D. Except for Airport Check-in System, if a TSG multi-host customer
(other than the Airline Group) will receive use of a Shared Host
Enhancement/Development, TSG shall offset the Fees by an amount equal
to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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E. If TSG does not offset the Fees charged to AMERICAN by the amount
of [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] described
Subsection D of this Section 11.4, then AMERICAN may pay TSG to Code
Out such other TSG multi-host customer and such customer may not use
such Shared Host Enhancement/Development. If the Airline Group
chooses not to Code Out a TSG customer and if TSG has received
incremental revenue for such customer's use of a Shared Host
Enhancement/Development, then TSG shall offset the Fees otherwise
payable by AMERICAN to TSG by an amount equal to such incremental
revenue up to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] that
would have been due under Subsection D of this Section 11.4.
F. The Fees for TSG's Code Out are within the scope of TSG Services
and AMERICAN shall pay the Fees incurred for such services; provided,
however, if TSG later distributes or uses such Shared Host
Enhancement/Development for TSG Customers for which TSG has not offset
the Fees charged to AMERICAN by the amount of such customer's pro rata
share described in Subsection D above, TSG shall refund the Fees
incurred by AMERICAN to Code Out and TSG shall offset the Fees in
accordance with Subsection D of this Section 11.4.
11.5. ROYALTY AFTER EXPIRATION OR TERMINATION. After the Expiration or
termination of this Agreement, for all Jointly Owned Software that was, at the
time of its writing, funded solely by the Airline Group, and until, for a
specific application that is a Derivative Work of Jointly Owned Software, more
than [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] of its program
instructions are original materials funded by one or more entities other than
the Airline Group, TSG shall pay AMERICAN a royalty equal to [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]of the TSG Software Income; provided, [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
11.6. COPIES OF SOFTWARE FOR AMERICAN. Upon written request to TSG, TSG
shall provide a copy of all or a portion of Jointly Owned Software and
Documentation as requested by AMERICAN, on such media as requested by AMERICAN.
TSG's providing such software is a service within the scope of the TSG Services
and is at AMERICAN's expense. TSG shall never refuse for any reason, including
AMERICAN's material breach of this Agreement, to provide AMERICAN with copies
of such software in accordance with this Section 11.6. TSG hereby expressly
agrees that AMERICAN may obtain injunctive relief (in accordance with the
Dispute Resolution Procedure) to enforce the provisions of this Section 11.6.
11.7. JOINTLY USED AND FUNDED SOFTWARE. For certain software that TSG uses
to provide services to TSG and/or TSG Customers and to AMERICAN, AMERICAN and
TSG shall continue to jointly fund Development and Enhancements as TSG's
predecessor and
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AMERICAN did prior to the Effective Date. The process of allocating AMERICAN's
and TSG's relative share of the cost shall remain as such process existed on
the Effective Date with the intent of reflecting the relative value to each
Party. TSG and AMERICAN shall, prior to the commencement of development,
negotiate an offset to the Fees, if any, for TSG's distribution or use of such
software and a royalty percentage, if any, for such distribution or use of such
software to be payable upon and after the Expiration Date or the Termination
Date provided; however, no such offset or royalty shall be due to the Airline
Group for any application that is a Derivative Work of such software once more
than [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] of its program
instructions are original materials funded by one or more entities other than
the Airline Group.
Article XII -- Marketing and Related Rights
12.1. SERVICES PROVIDED BY THE AIRLINE GROUP TO ITS CUSTOMERS. In
accordance with this Article, the Airline Group may require TSG to perform TSG
Services for the Airline Group to enable the Airline Group to provide services
to AG Customers.
12.2. THE AIRLINE GROUP'S PROVISION OF SERVICES TO AG CUSTOMERS. Unless
otherwise expressly specified in this Section 12.2, the Airline Group may
provide the AG Mixed Services without TSG's consent, and such incremental use
of TSG Services as may be used by the Airline Group and/or AG Customers shall
be charged to the Airline Group at the Current Rates in accordance with the
Rate and Reset Schedule, except as expressly described in this Section 12.2.
A. The Airline Group may provide Operations Mixed Services to AG
Customers.
B. Subject to Section "12.3. FORMER TSG PROSPECTS," the Airline
Group may provide Alliance Mixed Services to AG Customers.
C. If TSG incurs reasonable, necessary, and Extraordinary Costs for
establishing the Airline Group's ability to provide Alliance Mixed
Services to a specific AG Customer and such costs will result in a
lower profit margin to TSG than would have occurred if the additional
volume or services were provided for the Airline Group's own use with
the then current TSG facilities, the Airline Group shall reimburse TSG
for such costs; provided, however, that TSG has given the Airline
Group Notice in advance of incurring such costs.
D. The Airline Group may provide Other Mixed Services to AG Customers
in accordance with the following:
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
a. If TSG and the Airline Group do not agree within
ten Business Days of commencing such negotiations,
TSG and the Airline Group shall each state in writing
its position concerning the AG Other Mixed Services
Costs and proceed in accordance with Article
XXIII--Dispute Resolution; provided, however, that
the sole question for the arbitrator(s) to determine
is which Party's position concerning the AG Other
Mixed Services Costs to accept.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
E. Provided, however, the Airline Group may provide Other Mixed
Services without TSG's consent, as follows:
(1) If the AG Other Mixed Services Costs for such services do
not exceed [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
of the AG Other Mixed Services Fees for such services; and
(2) The AG Other Mixed Services Fees are reasonably
anticipated as not exceeding [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] per year per AG Customer.
12.3. FORMER TSG PROSPECTS. If at any time any member of the Airline Group
agrees in writing to provide Alliance Mixed Services to an entity that has
expressed serious interest in acquiring a software license or services from TSG
and TSG has provided to such entity a written proposal to provide similar
software or services and such entity continues to be a
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realistic opportunity for TSG, as demonstrated by TSG's active marketing
efforts, except that such entity's agreement with AMERICAN obviates its need to
acquire software or services from TSG, AMERICAN and TSG shall negotiate
appropriate compensation, considering the circumstances, that AMERICAN shall
pay to TSG.
12.4. EXISTING ALLIANCES. Nothing in this Agreement is intended to modify
the Parties' pre-existing rights or obligations in existing agreements
concerning services substantially similar to AG Mixed Services, as the Airline
Group may have in effect on the Effective Date.
12.5. MARKETING RIGHTS AFTER EXPIRATION OR TERMINATION. After the
Termination Date or the Expiration Date, subject to Section "11.2. RIGHTS IN
JOINTLY OWNED SOFTWARE," the Airline Group may use TSG Operated Software to
provide services to AG Customers in accordance with this Section 12.5. Except
as expressly provided otherwise in this Section 12.5, the Airline Group may use
the TSG Operated Software to provide AG Mixed Services without payment to TSG
of any compensation, including license fees and royalties.
A. The Airline Group may use the TSG Operated Software, subject to
receiving any necessary consents from the licensors of the Transferred
Third Party Software and the Other Third Party Software.
B. For four years after the Termination Date or Expiration Date, the
provisions of Section "12.3. FORMER TSG PROSPECTS" shall remain in
effect, except if there is Termination For Cause by AMERICAN, in which
event TSG shall be due no compensation pursuant to Section "12.3.
FORMER TSG PROSPECTS."
C. In circumstances where the Airline Group would not have been
permitted to provide AG Mixed Services under Subsection D(2) of
Section "12.2. THE AIRLINE GROUP'S PROVISION OF SERVICES TO AG
CUSTOMERS" before the Termination Date or the Expiration Date, the
Airline Group may use the TSG Operated Software to provide services to
AG Customers and shall pay TSG a license fee for the use of such
software until, for a specific application that is a Derivative Work
of such software, more than [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] of its program instructions are original materials written
by one or more entities other than TSG, as follows:
(1) If this Agreement expired in accordance with its term or
terminated pursuant to Sections "24.3. TERMINATION FOR A
FORCE MAJEURE EVENT," or "24.5. TERMINATION BECAUSE OF
ACQUISITION OF TSG," the Airline Group shall pay TSG [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(2) In the event of Termination For Cause by AMERICAN, and if
a Fair License Fee is [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] of the AG Other Mixed Services Fees or more, the
Airline Group shall pay TSG [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
(3) Until June 30, 2006, if this Agreement was terminated
pursuant to Section "24.4. TERMINATION FOR CONVENIENCE," the
Airline Group and TSG shall mutually agree to [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
(4) After June 30, 2006, if this Agreement was terminated
pursuant to Section "24.4. TERMINATION FOR CONVENIENCE," the
Airline Group shall pay TSG [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
D. To the extent that AMERICAN's use of any of the Transferred
Software or the Transferred Third-Party Software to provide AG Mixed
Services under this Section 12.5 would constitute the exercise of
rights in excess of the Retained Rights, TSG and AMERICAN shall
mutually agree to a [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
incremental use in excess of the Retained Rights for providing such
services to AG Customers.
E. The Airline Group may enter into an agreement with an AG Customer
pursuant to this Section 12.5 prior to the determination of [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Article XIII -- Non-competition
13.1. SEPARATE NON-COMPETITION AGREEMENT. Commencing on the Effective Date
and continuing for specified periods as set forth therein, the members of the
Airline Group must comply with the terms of the Non-competition Agreement among
AMERICAN, AMR, TSG Corporation, and TSG dated as of the Effective Date, which
restricts such members of the Airline Group from providing certain described
services to other Persons. Such restrictions do not, however, prohibit the
Airline Group's exercise of rights under Article XII -- Marketing and Related
Rights.
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Article XIV -- Confidential Information
14.1. CONFIDENTIAL INFORMATION. Except as otherwise provided in this
Agreement, information gathered or compiled by TSG for AMERICAN is proprietary
to AMERICAN and TSG may not sell such information to other Persons. In
addition, the following information is Confidential Information, whether
acquired under or in connection with this Agreement or obtained in connection
with the relationship of the Airline Group and TSG or its subsidiaries or
predecessors before the Effective Date:
A. Information relating to the other Party's business, customers,
financial condition, performance, or operations that the other Party
treats as confidential or proprietary.
B. The terms and conditions of this Agreement and all pricing,
charges, fees, credits, and invoices connected with this Agreement.
C. Information concerning any breach under, or any Dispute regarding,
this Agreement.
D. Information that is the confidential information of a third party
and disclosed to a Party subject to an obligation of confidentiality.
E. 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.
F. The other Party's trade secrets.
G. TSG Highly Confidential Information.
H. The Parties' conduct, decisions, documents, and negotiations as
part of, and the status of, any Dispute resolution proceedings under
the Dispute Resolution Procedure.
Though the Airline Group's Confidential Information includes the Jointly Owned
Software and the Transferred Software, the Airline Group consents to TSG's
disclosure and use of such Jointly Owned Software and Transferred Software,
subject to any such protections or assurances against disclosure for the
benefit of TSG as TSG may use or effect for its own Confidential Information.
Each of the American Related Entities shall have the same rights and benefits,
and the same duties and obligations, as AMERICAN (as a "Party") has in this
Article XIV.
14.2. EXCLUDED INFORMATION. The following information is not considered
Confidential Information to the extent that the information:
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A. Is or becomes publicly available or available in the 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.
14.3. 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 as required
to render performance or to exercise rights and remedies under this Agreement,
and shall not be disclosed to any other Person.
14.4. STANDARD OF CARE. Each Party shall use at least the same degree of
care in maintaining the confidentiality of the Confidential Information as that
Party uses with respect to its own proprietary or confidential information, and
in no event less than reasonable care.
14.5. 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 XIV regarding the Confidential Information.
14.6. 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, 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 Party
is legally compelled to disclose; and
D. Uses reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded the information
disclosed.
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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 with a
tax contest in which that Party uses reasonable efforts to assure that
confidential treatment will be accorded the information disclosed.
14.7. TITLE TO INFORMATION. The Confidential Information disclosed by one
Party to the other Party shall remain the property of the disclosing Party, and
nothing in this Article XIV grants or confers any ownership rights in any of
that information to the other Party.
14.8. CONFIDENTIALITY AND THIRD PARTIES. If AMERICAN selects a third party
to perform software audit services pursuant to Section "5.11. AUDITING CODE
EFFICIENCY," and/or other services, including maintenance services, enhancement
services, or development services, and such third party will obtain access to
TSG Highly Confidential Information, AMERICAN must obtain TSG's Consent.
A. Nevertheless, except as provided in Subsection B of this
Section 14.8, if TSG can demonstrate that such third party is then a
competitor of TSG in the development or marketing of any software
product having functionality substantially similar to the software to
which that third party will obtain access, or is likely to become such
a competitor within two years, then TSG's Consent shall be at its sole
discretion.
B. TSG may not unreasonably withhold its Consent, however:
(1) As to every third party that is capable or competent
to perform and that has bid, or expressed a willingness, to
perform at or near the same price as any third party to which
TSG has withheld its Consent in accordance with Subsection A
of this Section 14.8; or
(2) When such Consent is necessary to enable the Airline
Group to enter into an operating or marketing alliance or any
other marketing relationship that is intended to increase the
Airline Group's passenger or cargo revenue.
C. Third parties, including Successor Providers, to which TSG's
Confidential Information is to be disclosed or with access to TSG's
Confidential Information, other than TSG Highly Confidential
Information, shall first execute a non-disclosure/confidentiality
agreement substantially in the form of Exhibit J: Non-
disclosure/Confidentiality Agreement.
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D. Third parties, including Successor Providers, to which TSG Highly
Confidential Information is to be disclosed or with access to TSG
Highly Confidential Information shall first execute a
non-disclosure/non- competition agreement substantially in the form of
Exhibit N: Non-disclosure/Non-competition Agreement.
14.9. 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 Exhibit M: 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 XIV. This right shall be in
addition to any other remedy available under this Agreement.
14.10. 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 knowledge and experience or
any such concepts; provided, however, that such other Party shall in all events
comply with the preceding Sections of this Article XIV.
14.11. CONFIDENTIALITY AND BENCHMARKING. Nothing in this Article XIV
precludes the Airline Group from disclosing (subject to an appropriate
nondisclosure agreement) their business requirements, including services,
service level requirements, geographic location data, and resource consumption,
to the Benchmark Providers or prospective Benchmark Providers or to any other
Person in connection with an RFP or RFQ permitted by this Agreement. Such
disclosure may not include, however, any code or detailed descriptions of
functionality of any TSG Operated Software or descriptions of the service level
performance of TSG under this Agreement.
14.12. RESEARCH. If any TSG Service creates patentable subject matter other
than software, TSG, at its sole expense, may seek patent protection, and shall
own whatever patents may issue, for such patentable subject matter. Until
Expiration or termination of this Agreement, TSG shall offset the Fees
otherwise payable by AMERICAN to TSG by an amount equal to twenty percent of
revenue TSG receives for the licensing, sale, and third-party use of such
patents for the duration of such patents and any renewals. After Expiration or
termination of this Agreement, TSG shall pay AMERICAN a royalty of twenty
percent of revenue TSG receives for the licensing, sale, or third-party use of
such patents for the duration of such patents and any renewals.
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Article XV -- Security
15.1. SECURITY IN GENERAL. TSG shall provide security for the AG Data and
AG Customer Data in accordance with Section "10.4. DATA SECURITY." TSG shall
provide physical and electronic security for the TSG Services no less rigorous
than such physical and electronic security as are in effect on the Effective
Date.
Article XVI -- Key Employees and Related Provisions
16.1. DESIGNATION OF KEY EMPLOYEES. In accordance with this Section 16.1,
AMERICAN and TSG shall designate the Key Employees.
A. TSG and AMERICAN may designate as Key Employees up to twenty
percent of the total number of full-time TSG employees assigned to
provide services to AMERICAN. The parties anticipate that the maximum
number of Key Employees will be approximately [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] upon the Effective Date.
B. At the commencement of each New/Out-of-scope Services,
Development, and significant Enhancement project to be performed by
TSG, TSG and AMERICAN shall agree as to the personnel who are
designated as Key Employees for the duration of such projects or
phases of such projects.
C. A TSG employee performing Maintenance may be mutually designated
as a Key Employee for a period of twenty- four consecutive months.
Without AMERICAN's consent, TSG may remove a Key Employee who provides
Maintenance and who has been on the Key Employee List for more than
twenty-four consecutive months, but TSG must promptly provide a
replacement TSG employee who has suitable training and skills and who
is designated as a Key Employee.
D. Each year during the budgeting process for determining maintenance
fees, the parties determine the Key Employees for the maintenance of
each Application. No more than [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] of the employees providing maintenance for such Application
may be designated as a Key Employees, except when fewer than 10
employees are providing maintenance for such Application; in which
case there may be up to [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] employees designated as Key Employees.
E. AMERICAN and TSG shall meet quarterly to revise the Key Employee
List. TSG and AMERICAN must mutually agree in writing before a TSG
employee is designated a Key Employee.
F. TSG may request that an employee be removed from the Key Employee
List prior to the end of the twenty-four month period if:
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(1) The removal of the employee from the Key Employee List
would not materially adversely affect the services that the
Key Employee was providing to the Airline Group.
(2) TSG can promptly provide the Airline Group with a
replacement employee to be added to the Key Employee List who
has suitable training and skills.
(3) AMERICAN retains the right of final approval, which shall
not be unreasonably withheld, over all changes to the Key
Employee List pursuant to this Subsection F.
G. If TSG removes a Key Employee pursuant to Subsection F of this
Section 16.1 and such removal directly or indirectly causes any
significant service problems, including project delays, project
overruns, programming errors, or service performance degradation, TSG
shall promptly commence correcting such service problems, including,
if necessary, replacing the new Key Employee.
H. TSG shall use reasonable efforts to promptly replace a Key
Employee who ceases full-time employment at TSG for any reason,
including such employee's resignation, leave of absence, termination,
disability, or death, with another employee who possesses skills
adequate to perform the duties of such Key Employee. At the next
meeting between the Account Managers, the Parties shall mutually agree
whether anyone, and if so who, will be added to the Key Employee List.
16.2. RESTRICTIONS CONCERNING KEY EMPLOYEES. TSG hereby agrees to the
restrictions described in this Section 16.2 for Key Employees.
A. Key Employees must dedicate a minimum of 80% of their billable
time to providing services for AMERICAN's benefit.
B. TSG may not transfer a Key Employee from one project to another
project without AMERICAN's Consent.
C. TSG may not materially change the job description of a Key
Employee without AMERICAN's Consent.
16.3. REMOVAL OF PERSONNEL. In the event that AMERICAN reasonably and in
good faith determines that the continued assignment by TSG of any Account
Manager or any employee to the performance of TSG Services is adversely
affecting the interests of AMERICAN, then the Airline Group's CIO will send
TSG's President (in the case of the Account Manager's performance) or the
Account Manager (in the case of any other employee's performance) written
notice thereof, specifying the reasons therefor and requesting that the Account
Manager or employee be replaced. Promptly after its receipt of such a request
by AMERICAN, TSG shall investigate the matters stated in the request consistent
with TSG's human resources policies. The affected individual will be subject
to an evaluation
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period consistent with TSG's human resources policies for a period of four
months for the Account Manager and three months for other employees, during
which period the individual may correct such problems. During such period TSG
shall use efforts consistent with its personnel policies to improve such
individual's performance; if unsuccessful, TSG shall use reasonable efforts to
replace such employee with a person of suitable ability and qualifications if
such problems are not corrected within such period.
Article XVII -- Non-solicitation of Employees
17.1. NON-SOLICITATION OF EMPLOYEES. Except as stated in this Section 17.1,
while this Agreement is in effect and for a period of two years thereafter,
neither Party may recruit or hire the employees or Independent Contractors
engaged by the other Party, whether as employees or Independent Contractors,
without the Consent of the other Party.
A. AMERICAN may recruit and hire TSG's employees and TSG's Independent
Contractors who previously worked for AMERICAN in a capacity other
than providing services substantially similar to the TSG Services and
other than providing operations research services to AMERICAN;
provided, however, that AMERICAN first gives TSG two months' Notice
when AMERICAN intends to hire a TSG employee designated as a Level 5
employee or below and three months' Notice when AMERICAN intends to
hire a Level 6 employee or above.
B. TSG may recruit and hire AMERICAN's employees and AMERICAN's
Independent Contractors who previously worked for a division of
AMERICAN that became TSG or a predecessor of TSG; provided, however,
that TSG first gives AMERICAN two months' Notice when TSG intends to
hire an AMERICAN employee designated as a Level 5 employee or below
and three months' Notice when TSG intends to hire a Level 6 employee
or above.
C. In the event of Expiration or termination for any reason, except
for termination pursuant to Section "24.4. TERMINATION FOR
CONVENIENCE," AMERICAN may recruit and hire TSG employees and
Independent Contractors assigned by TSG primarily to perform work on
behalf of AMERICAN, and AMERICAN may facilitate and/or assist the
Successor Provider in identifying and hiring such individuals.
D. In the event of termination pursuant to Section "24.4. TERMINATION
FOR CONVENIENCE," and provided AMERICAN obtains TSG's Consent, which
may be withheld in TSG's sole discretion, AMERICAN may recruit and
hire TSG employees and Independent Contractors assigned by TSG
primarily to perform work on behalf of AMERICAN, and AMERICAN may
facilitate and/or assist the Successor Provider in identifying and
hiring such individuals; provided, however, that if TSG does not
consent to the hiring of such employee or Independent Contractor, the
cost for such person shall be excluded from the Wind-down Costs.
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E. If an employee's employment or an Independent Contractor's
engagement with a Party terminates, then without the Consent of such
Party, the other Party may not recruit, hire, or engage such former
employee or Independent Contractor, whether as an employee or
Independent Contractor, for a period of twelve months after the date
of termination of such employee's employment or such Independent
Contractor's engagement.
Article XVIII -- Parties' Relationship
18.1. INDEPENDENT PARTIES. The Parties are independent; each has sole
authority and control of the manner of, and is responsible for, its performance
of this Agreement. This Agreement 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 Agreement. This Agreement does not restrict TSG from
providing or rendering any services, including services like the TSG Services,
to any other Person; nothing in this Agreement, however, gives TSG the right to
provide or render any services in violation of any other agreement entered into
by the Parties.
18.2. ADVERTISING. While this Agreement is in effect, TSG has exclusive
right to advertise both as the "preferred provider" of information technology
services to AMERICAN and as possessing a "strategic relationship" with
AMERICAN; provided, that the TSG Services are more than 50% of all the services
AMERICAN receives that are similar to the TSG Services; and provided further,
that the Airline Group may endorse a third-party provider as the "preferred
provider" of a particular service that is not (and need not be) provided by
TSG. Nothing in this Section shall be construed as permitting TSG to use any
trademark or service mark of AMERICAN without AMERICAN's Consent, which
AMERICAN may give in its sole discretion.
18.3. AUTHORITY OF ACCOUNT MANAGERS AND OTHERS. Except as expressly
authorized in this Section 18.3, only an officer of a Party may bind that
Party.
A. TSG and AMERICAN may change Account Managers upon notice to the
other; provided, however, that TSG's appointment of an Account Manager
is subject to AMERICAN's Consent.
B. AMERICAN and TSG agree that the Account Managers shall serve as
the general points of contact between the parties.
C. The Airline Group's CIO has the following authority:
(1) The Airline Group's CIO may bind AMERICAN to an agreement
with TSG to perform any service for which there is a charge,
and such agreement must be in writing;
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(2) [TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
(3) The Airline Group's CIO shall submit a list of AMERICAN
employees that may bind AMERICAN to an agreement with TSG to
perform any TSG Services or New/Out-of-scope Services; and
until the Airline Group's CIO provides such list to TSG,
AMERICAN shall not claim that an AMERICAN employee lacked the
authority to authorize work.
Article XIX -- Warranties
19.1. MUTUAL WARRANTIES. Each Party warrants and represents to the other
Party as follows:
A. That it has the requisite corporate authority to enter into and
perform this Agreement;
B. That its execution, delivery, and performance of this Agreement
have been duly authorized by all requisite corporate action on its
behalf;
C. That this Agreement is enforceable against it; and
D. That it has obtained all consents or approvals of Governmental
Authorities and other Persons that are conditions to its entering into
this Agreement.
E. Provisions to the contrary notwithstanding, nothing in this
Agreement shall be construed as a warranty by either party concerning
the Transferred Software or the Transferred Third Party Software.
19.2. TSG'S WARRANTIES. TSG hereby warrants and represents as follows:
A. That it has all requisite authority to use any software that it
has obtained after the Effective Date to provide the TSG Services and
the New/Out-of-scope Services;
B. That none of the software that it develops to provide the TSG
Services will wilfully infringe the patent, infringe the copyright, or
misappropriate the trade secrets of another;
C. That a substantial part of the incentive compensation of TSG
employees for whom a significant portion of work consists of
performing TSG Services including, but not limited to, the Key
Employees, will depend upon AMERICAN's satisfaction as determined by
TSG in accordance with Section "5.12. ANNUAL SURVEY."
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19.3. AMERICAN'S WARRANTIES. AMERICAN hereby warrants and represents that
it possesses all requisite rights and authority to provide any software that it
provides to TSG after the Effective Date.
Article XX -- Indemnification
20.1. INJURY AND PROPERTY INDEMNIFICATION BY TSG. TSG shall indemnify,
defend, and hold harmless the Airline Group Indemnitees from and against Tort
Damages resulting from any action or omission of any employee or agent of TSG
(including any of TSG's subcontractors) in connection with this Agreement that
constitutes negligence, gross negligence, or willful misconduct of TSG or its
employees or agents.
20.2. CUSTOMER INDEMNIFICATION BY TSG. TSG shall indemnify, defend, and
hold harmless the Airline Group Indemnitees from and against Indemnifiable
Losses resulting from, arising out of, or relating to any claim by any customer
of TSG, other than any member of the Airline Group or any of its Affiliates,
arising out of TSG's rendering or providing any service similar to any of the
TSG Services to or for the benefit of that claimant.
20.3. INTELLECTUAL PROPERTY INDEMNIFICATION BY TSG. TSG shall indemnify,
defend, and hold harmless the Airline Group Indemnitees from and against
Indemnifiable Losses resulting from, arising out of, or relating to any claim
that any item of intellectual property, including software or software
specifications, provided under this Agreement by TSG, infringes a currently
existing United States copyright, misappropriates a trade secret, or wilfully
infringes a United States patent.
A. TSG shall not indemnify any of the Airline Group's
Indemnitees, however, if the claim of infringement or misappropriation
is caused by:
(1) Such Airline Group Indemnitee's misuse or
modification of such item,
(2) Such Airline Group Indemnitee's failure to use
corrections or enhancements made available by TSG,
(3) Such Airline Group Indemnitee's use of such item in
combination with any product or information not owned,
developed, or provided by TSG, except as authorized by TSG,
(4) Such Airline Group Indemnitee's distribution,
marketing, or use for the benefit of third parties of such
item, except as permitted by this Agreement or otherwise
authorized by TSG, or
(5) Any information, direction, specification, or
materials provided by such Airline Group Indemnitee or any
third party.
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B. If any such item is, or in TSG's opinion is likely to be, held
to constitute an infringing product, TSG shall, at its expense and
option, either:
(1) Procure the right for the Airline Group Indemnitee to
continue using such item,
(2) Replace such item with a non-infringing equivalent
item,
(3) Modify such item to make it non-infringing, or
(4) Accept return of such item and refund to the Airline
Group Indemnitee the Fees paid for such item, less a
reasonable amount for the Airline Group Indemnitee's use of
such item up to the time of return.
C. The rights and remedies stated in this Section 20.3 constitute
the sole and exclusive remedies of the Airline Group Indemnitees, and
TSG's entire liability, with respect to infringement and
misappropriation.
20.4. INJURY AND PROPERTY INDEMNIFICATION BY AMERICAN. AMERICAN shall
indemnify, defend, and hold harmless the TSG Indemnitees from and against Tort
Damages resulting from any action or omission of any employee or agent of the
Airline Group (other than TSG) in connection with this Agreement that
constitutes negligence, gross negligence, or willful misconduct of any member
of the Airline Group or its employees or agents (other than TSG).
20.5. CUSTOMER INDEMNIFICATION BY AMERICAN. AMERICAN shall indemnify,
defend, and hold harmless the TSG Indemnitees from and against Indemnifiable
Losses resulting from, arising out of, or relating to any claim by any AG
Customer or any of the customers of an AG Customer arising out of the Airline
Group's rendering or providing any AG Mixed Services to that AG Customer.
20.6. INTELLECTUAL PROPERTY INDEMNIFICATION BY AMERICAN. American shall
indemnify, defend, and hold harmless the TSG Indemnitees from and against
Indemnifiable Losses resulting from, arising out of, or relating to any claim
that any item of intellectual property, including software or software
specifications, provided under this Agreement by any member of the Airline
Group, infringes a currently existing United States copyright, misappropriates
a trade secret, or wilfully infringes a United States patent.
A. American shall not indemnify any of the TSG Indemnitees,
however, if the claim of infringement or misappropriation is caused
by:
(1) Such TSG Indemnitee's misuse or modification of such
item,
(2) Such TSG Indemnitee's failure to use corrections or
enhancements made available by any member of the Airline
Group,
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(3) Such TSG Indemnitee's use of such item in combination
with any product or information not owned, developed, or
provided by any member of the Airline Group, except as
authorized by a member of the Airline Group,
(4) Such TSG Indemnitee's distribution, marketing, or use
for the benefit of third parties of such item, except as
permitted by this Agreement or otherwise authorized by any
member of the Airline Group, or
(5) Any information, direction, specification, or
materials provided by such TSG Indemnitee or any third party.
B. If any such item is, or in American's opinion is likely to be,
held to constitute an infringing product, American shall, at its
expense and option, either:
(1) Procure the right for the TSG Indemnitee to continue
using such item,
(2) Replace such item with a non-infringing equivalent
item,
(3) Modify such item to make it non-infringing, or
(4) Accept return of such item and refund to the TSG
Indemnitee any amount paid for such item, less a reasonable
amount for the TSG Indemnitee's use of such item up to the
time of return.
C. The rights and remedies stated in this Section 20.6 constitute
the sole and exclusive remedies of the TSG Indemnitees, and American's
entire liability, with respect to infringement and misappropriation.
20.7. AIRLINE INCIDENT INDEMNIFICATION. American shall indemnify, defend,
and hold harmless the TSG Indemnitees from and against Indemnifiable Losses
resulting from, arising out of, or relating to any Airline Incident. The
Parties intend that the TSG Indemnitees be indemnified notwithstanding any
liability that TSG might otherwise have under Section "20.1. INJURY AND
PROPERTY INDEMNIFICATION BY TSG" or Section "20.2. CUSTOMER INDEMNIFICATION BY
TSG" relating to any Airline Incident.
20.8. SITA INDEMNIFICATION. TSG shall indemnify, defend, and hold harmless
the Airline Group Indemnitees from and against Indemnifiable Losses (except as
described below in this Section 20.8) that arise or accrue on or after the
Effective Date resulting from, arising out of, or relating to AMERICAN's
serving as the contracting party under the SITA Agreements. Those
Indemnifiable Losses shall:
A. Include any losses, costs, taxes, claims, liabilities,
damages, or causes of action arising from or related to the
obligations of payment (including any fees, penalties, or interest for
late payment or nonpayment), indemnification obligations, and
obligations resulting from the failure to meet the financial minimums
under the SITA Agreements.
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B. Exclude any losses or damages of the kind described in
Subsection A of this Section 20.8 related to the SITA Services
consumed by AMERICAN and its Affiliates other than TSG and its
subsidiaries (except for any amount paid by AMERICAN and its
Affiliates to TSG for SITA Services consumed by AMERICAN and its
Affiliates other than TSG and its subsidiaries).
20.9. EXPRESS NEGLIGENCE. EACH PARTY EXPRESSLY INTENDS THAT THE OTHER
PARTY'S INDEMNITEES BE INDEMNIFIED AGAINST TORT DAMAGES OR INDEMNIFIABLE LOSSES
RESULTING FROM, ARISING OUT OF, OR RELATING TO THE ORDINARY NEGLIGENCE OF ANY
SUCH INDEMNITEE OR THE JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF SUCH
INDEMNITEES.
20.10. THIRD-PARTY CLAIMS. If an Indemnification Claim is based on a
Third-Party Claim:
A. The Indemnified Party shall give an Indemnification Claim
Notice promptly after it receives the Third- Party Claim. The failure
of an Indemnified Party to give an Indemnification Claim Notice shall
relieve the Indemnifying Party of its indemnification obligations only
to the extent the Indemnifying Party is actually prejudiced by that
failure.
B. The Indemnifying Party shall be entitled to defend the
Third-Party Claim, with its chosen counsel and at its own expense, if
(1) the Third-Party Claim seeks only monetary relief, and not an
injunction or other equitable relief, against the Indemnified Party,
and (2) the Indemnifying Party elects to assume, and diligently
conducts, that defense. The Indemnifying Party's election to defend
must be given by Notice to the Indemnified Party within the
Indemnification Response Period. If the Indemnifying Party conducts
the defense, the Indemnified Party may participate in that defense
with its own counsel and at its own expense.
C. If the Indemnifying Party does not elect to defend the
Third-Party Claim by Notice within the Indemnification Response
Period, or if the Indemnifying Party does not diligently conduct the
defense, the Indemnified Party shall be entitled, upon further Notice
to the Indemnifying Party, to defend the Third-Party Claim on behalf
of, and for the account and risk of, the Indemnifying Party (if it is
determined that the Indemnifying Party has an indemnification
obligation regarding that Indemnification Claim). In this
circumstance, the Indemnifying Party may participate in the defense
with its own counsel and at its own expense.
D. If there is a conflict of interest that makes it inappropriate
for the same counsel to represent the Indemnifying Party and the
Indemnified Party in defending the Third-Party Claim, the Indemnifying
Party must pay for separate counsel for the Indemnified Party.
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E. The Indemnifying Party defending a Third-Party Claim may
compromise, settle, or resolve that Third- Party Claim without the
Indemnified Party's consent if the compromise, settlement, or
resolution involves only the payment of money by the Indemnifying
Party (whether on its own behalf or behalf of the Indemnified Party)
and the third-party claimant provides the Indemnified Party a release
from all liability regarding the Third- Party Claim. Otherwise, the
Indemnifying Party may not compromise, settle, or resolve the
Third-Party Claim without the Indemnified Party's Consent.
F. The Indemnifying Party and the Indemnified Party must
cooperate with all reasonable requests of the other in defending any
Third-Party Claim.
20.11. NON-THIRD-PARTY CLAIMS. A Party's claim, on its behalf or on behalf of
its other Indemnitees, that the other Party is liable for indemnification under
any of the preceding Sections of this Article XX -- Indemnification based on
any event or action other than a Third-Party Claim shall be made by Notice to
that other Party. Any Dispute about that claimed liability shall be resolved
by the Dispute Resolution Procedure.
Article XXI -- Limitations of Liability
21.1. INTENDED ALLOCATION OF RISKS. The allocation of risks between the
Parties, and the limitations on the Parties' liabilities and remedies, set
forth in this Article XXI and elsewhere in this Agreement are specifically
intended by the Parties, as part of their bargain (i.e., part of the
consideration for their other respective benefits and obligations) in this
Agreement. The Parties acknowledge that they have negotiated, with the advice
of legal counsel, such allocation and limitations.
21.2. NEGLIGENCE AND ORDINARY MISTAKES. Except as otherwise expressly
provided in this Agreement, [TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED].
For the avoidance of doubt, nothing in this Section 21.2 affects any liability
of a Party for Tort Damages or Indemnifiable Losses under Article XX --
Indemnification.
21.3. EXTRAORDINARY MISTAKES. TSG's liability for any Extraordinary Mistake
shall be limited to its obligations described in Sections "5.9. CORRECTION OF
PERFORMANCE," "7.9. PERFORMANCE ADJUSTMENT OF FEES" (if an SLA Standard is
applicable), and "10.3 RISK OF DATA LOSS." [TEXT OMITTED-CONFIDENTIAL
TREATMENT REQUESTED]. Any act or omission of TSG that is appropriately
characterized equally as negligent and as an Extraordinary Mistake shall be
deemed an Extraordinary Mistake under this Article XXI. Likewise, any act
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or omission of TSG that is appropriately characterized equally as grossly
negligent and as an Extraordinary Mistake shall be deemed grossly negligent
under this Article XXI.
21.4. [TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
21.5. GROSS NEGLIGENCE AND WILLFUL MISCONDUCT. A Party's liability under or
relating in any manner to this Agreement for General Damages resulting from
that Party's gross negligence or willful misconduct, including any breach of
this Agreement by that Party constituting or caused by its gross negligence or
willful misconduct, shall be limited as follows:
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
For the avoidance of doubt, nothing in this Section 21.5 affects any liability
of a Party for Tort Damages or Indemnifiable Losses under Article XX --
Indemnification.
21.6. LIMITATION ON AMOUNT OF ALL GENERAL DAMAGES. A Party's liability for
General Damages other than Consequential Damages and punitive or exemplary
damages -- i.e., actual damages -- is not limited except to the extent provided
in this Section 21.6. A Party shall have no liability under or relating in any
manner to this Agreement for any General Damages (including Consequential
Damages, but other than or in addition to any Tort Damages or Indemnifiable
Losses under Article XX -- Indemnification or any unpaid Fees) in excess of
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED] per calendar year.
21.7. TIME FOR CLAIMS. A Party may assert or make a claim against the other
Party for any breach of this Agreement, or for that other Party's liability
under this Agreement (including an Indemnification Claim), only within three
years after the breach or other event constituting the basis for that claim
occurred, even if not discovered until after that three-year
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period. Nevertheless, the three-year limit on the time for asserting or making
any claim shall not apply to a claim (including an Indemnification Claim) based
on a Third-Party Claim.
21.8. WARRANTIES. Each Party's warranties in this Agreement are made solely
to and for the benefit of the other Party and, to the extent described in this
Agreement, the American Related Entities. No Person other than a Party may
assert or make a claim based on the other Party's warranties under this
Agreement; any claim by any of the American Related Entities must be made by
AMERICAN.
21.9. OFFSET. A Party entitled to any payment due from the other Party
under this Agreement may offset all or any portion of the amount of that
payment against any payment that is due from it to the other Party under this
Agreement.
21.10. EQUITABLE RELIEF. To the extent that any monetary relief available
under this Agreement is not an adequate remedy for any breach of this
Agreement, or upon any breach or impending breach of Article XIV--Confidential
Information, 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 must be sought through arbitration in accordance with the
Dispute Resolution Procedure, except as permitted by Section B.4(b) of the
Dispute Resolution Appendix.
21.11. EXCLUSIVE REMEDIES. The remedies described in this Agreement are the
exclusive rights and remedies of a Party regarding any breach of this Agreement
or any matter that may be the subject of a claim for liability under or
relating to this Agreement.
21.12. NONCUMULATIVE REMEDIES. If a particular remedy for a breach of, or the
occurrence of any other event described in, this Agreement is specified in this
Agreement, that remedy shall be the exclusive remedy upon such a breach or
event. Nevertheless, if more than one remedy for such a breach or event is
specified in this Agreement, the Party entitled to a remedy must elect or
choose between the available remedies, and may not cumulate or exercise
multiple remedies, upon such a breach or event. Nevertheless, when there is a
deficiency in a service
A. Not subject to an SLA Standard, the Airline Group is not
required to elect or choose between (1) TSG's correcting or curing the
deficiency, (2) requiring that an SLA Standard be established for that
service, and (3) if caused by an Extraordinary Mistake, obtaining a
credit or repayment of the excess Fees charged or collected by TSG; or
B. Subject to an SLA Standard, the Airline Group is not required
to elect or choose between (1) TSG's correcting or curing the
deficiency, (2) obtaining any applicable Performance Decrease, and (3)
if caused by an Extraordinary Mistake, obtaining a credit or repayment
of the excess Fees charged or collected by TSG.
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21.13. WAIVER OF REMEDIES. No forbearance, delay, or indulgence by a Party in
enforcing this Agreement, within the applicable time limits stated in this
Agreement, shall prejudice the rights or remedies of that Party. No waiver of
a Party's rights or remedies regarding a particular breach of, or occurrence of
any other event described in, this Agreement constitutes a waiver of those
rights or remedies, or any other rights or remedies, regarding any other or any
subsequent breach of, or occurrence of any other event described in, this
Agreement.
21.14. WARRANTY DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS
AGREEMENT, NEITHER TSG NOR AMERICAN MAKES ANY OTHER WARRANTIES, EXPRESS OR
IMPLIED; AND EACH OF TSG AND AMERICAN HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
21.15. CLAIMS FOR TAXES. Claims for Taxes are subject to Article IX --
Transfer and Property Taxes and not to this Article XXI, except that Sections
"21.1. INTENDED ALLOCATION OF RISKS," "21.8. WARRANTIES," "21.9 OFFSET,"
"21.10. EQUITABLE RELIEF," "21.11. EXCLUSIVE REMEDIES," and "21.13. WAIVER OF
REMEDIES" and this Section 21.15 shall apply to claims for Taxes.
Article XXII -- Force Majeure and Disaster Recovery
22.1. FORCE MAJEURE. If either Party to this Agreement shall be prevented,
hindered, or delayed in the performance or observance of any of its obligations
hereunder by reason of a Force Majeure Event, 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
reasonable efforts to recommence performance or observance whenever and to
whatever extent possible without delay; provided, however, that to the extent
that the Force Majeure Event impairs the Airline Group's operations, TSG shall
use Extraordinary Efforts. Any party so delayed in its performance shall
immediately notify the other by telephone (to be confirmed in writing within
five days of the inception of such delay) and shall describe at a reasonable
level of detail the circumstances causing such delay. If (i) any of the
above-described circumstances prevent, hinder, or delay performance of TSG's
operational obligations hereunder, and (ii) as a result thereof, AMERICAN is
prevented from conducting a significant portion of AMERICAN's normal business
operations, then TSG, with the cooperation and assistance of AMERICAN, shall
resume performance of such operational obligations or arrange for AMERICAN to
obtain alternative performance of such operational obligations. The cost to
AMERICAN of such alternative performance shall not exceed the amount that would
have been owed to TSG by AMERICAN under this Agreement as if the TSG were
providing the equivalent TSG Services without the prevention, hindrance or
delay of performance of TSG's operational obligations under this Agreement.
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A. Whenever a Force Majeure Event causes TSG to allocate limited
resources among TSG's customers at the affected service locations,
AMERICAN shall receive at least the same priority in respect of such
allocations as (a) the highest priority that AMERICAN or its
affiliates enjoyed prior to the Effective Date and (b) TSG's other
commercial customers. Unless otherwise agreed by the Airline Group's
CIO, in such events TSG shall restore the following systems in the
following order: (1) the Front End Systems, (2) the Flight Operations
Systems, (3) the Passenger Services Systems and Fare Pricing Complex
and (4) the Commercial Systems.
B. If a Force Majeure Event, other than one intentionally caused by
AMERICAN, causes one or more of the TSG Services designated as a
"Critical TSG Service" or "High Risk TSG Service" to be unavailable
for productive use, AMERICAN may terminate this Agreement pursuant to
Section "24.3 TERMINATION FOR A FORCE MAJEURE EVENT," in accordance
with the following:
(1) For each TSG Service designated as a "Critical TSG
Service" other than CargoSABRE, AMERICAN may terminate this
Agreement if TSG either fails to give AMERICAN a Force Majeure
Recovery Plan within [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] after Force Majeure Event Commencement or if the
applicable TSG Service is not restored, in accordance with its
SLA Standard, within [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] after Force Majeure Event Commencement.
(2) For the TSG Service known as CargoSABRE, AMERICAN may
terminate this Agreement if TSG either fails to give AMERICAN
a Force Majeure Recovery Plan within [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] after Force Majeure Event
Commencement or if Cargo SABRE is not restored, in accordance
with its SLA Standard, within [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] after Force Majeure Event Commencement.
(3) When a Force Majeure Event has caused more than [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] of the TSG Services
designated as "High Risk TSG Services" to be unavailable for
the Airline Group's productive use, AMERICAN may terminate
this Agreement if TSG either fails to give AMERICAN a Force
Majeure Recovery Plan within [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] after Force Majeure Event Commencement
or if such TSG Service is not restored, in accordance with
its SLA Standard, within [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] after Force Majeure Event Commencement.
(4) When a Force Majeure Event has caused more than [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] , but fewer than
or equal to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED],
of the TSG Services designated as "High Risk TSG Services" to
be unavailable for the Airline Group's productive use,
AMERICAN may terminate this Agreement if TSG either fails to
give AMERICAN a Force Majeure Recovery Plan within [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] after Force
Majeure Event Commencement or if such TSG Services are not
restored, in accordance with their SLA Standards, within [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] after Force
Majeure Event Commencement.
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(5) When a Force Majeure Event has caused any, but fewer than
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] , of the TSG
Services designated as "High Risk TSG Services" to be
unavailable for the Airline Group's productive use, AMERICAN
may terminate this Agreement if TSG either fails to give
AMERICAN a Force Majeure Recovery Plan within [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] after Force Majeure Event
Commencement or if the applicable TSG Services are not
restored, in accordance with their SLA Standards, within
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] after Force
Majeure Event Commencement.
22.2. DISASTER RECOVERY. TSG Services shall include implementation of a
disaster recovery plan as specified in the document known as Manual No. 175
entitled "AMR Corporate Contingency Plan" with a date of December 31, 1991.
Such disaster recovery plan shall be no less rigorous than that in effect
immediately prior to the Effective Date at the facilities of TSG used to
provide the TSG Services as of the Effective Date. In the event that
additional disaster recovery procedures for the applicable facilities are
reasonably requested by AMERICAN, TSG shall perform such additional disaster
recovery procedures as New/Out-of-scope Services.
Article XXIII -- Dispute Resolution
23.1. DISPUTES IN GENERAL. Except as otherwise stated in this Agreement,
the Parties shall resolve any Dispute in accordance with the Dispute Resolution
Procedure. Nevertheless, if any Person other than the Parties and their
Affiliates
A. Has initiated a lawsuit or other judicial, administrative, or
arbitration proceedings against or involving either or both of the
Parties in which a Dispute will be resolved, or
B. Is a necessary participant in any judicial, administrative, or
arbitration proceedings to resolve a Dispute and cannot be joined by
either or both of the Parties in an arbitration of that Dispute under
Section B.3 of the Dispute Resolution Appendix,
so that (in either case) the Dispute Resolution Procedure is or will be
ineffective, then the Parties need not use or follow the Dispute Resolution
Procedure to resolve that Dispute -- though the submission to jurisdiction in
Section B.5 of the Dispute Resolution Appendix shall apply if necessary.
23.2. INFORMATION FOR RESOLUTION. The Parties shall freely share, and may
disclose to any mediator or arbitrator as part of any Dispute resolution
proceeding, any and all reasonably requested relevant information, including
Confidential Information, needed to facilitate the resolution of any Dispute
and any and all information likely to lead to such relevant information.
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23.3. PAYMENT DISPUTES. With regard to payment Disputes, the Parties will
work to expedite resolution of the Dispute, with the goal of having the Dispute
resolved by the next billing cycle. To such end, all references to ten
Business Days in Sections B.1(b), B.1(c), and B.1(d) of the Dispute Resolution
Appendix shall be deemed to be seven Business Days for a payment Dispute.
23.4. CONTINUITY DURING DISPUTE. In the event of a Dispute, the Parties
shall continue to perform their respective obligations pursuant to this
Agreement.
23.5. PARTIES' AGREEMENT. Nothing in this Article XXIII or the Dispute
Resolution Procedure prevents the Parties from resolving any Dispute by mutual
agreement at any time.
Article XXIV -- Termination
24.1. TERMINATION FOR BREACH. In the event of certain breaches of this
Agreement, TSG or AMERICAN may terminate this Agreement in accordance with this
Section; provided that AMERICAN gives TSG Notice of its intent to terminate
within 180 days after the date such breach occurred.
A. Upon TSG's Egregious Breach of this Agreement, AMERICAN may
terminate this Agreement, provided that AMERICAN gives TSG thirty
days' Notice of its intent to terminate and TSG fails to cure the
breach within such 30 days; and provided, further, that such cure
period will be extended an additional 30 days if TSG delivers to
AMERICAN a written plan to cure the breach. In both instances, unless
TSG cures the material breach, the termination shall be effective as
of the first day following the end of the cure period or extended cure
period as the case may be.
B. Upon AMERICAN's material breach of its obligation to pay TSG in
accordance with this Agreement, TSG may terminate this Agreement as
follows:
(1) If TSG has given Notice to AMERICAN describing the breach
in detail, the monetary amount due, and TSG's intention to
terminate pursuant to this Subsection; and if AMERICAN has not
paid such amount within [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] after receipt of TSG's Notice; provided,
however, that the first time AMERICAN fails to pay within such
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] TSG shall
give a second Notice to AMERICAN, describing the breach in
detail, the monetary amount due, and TSG's intention to
terminate pursuant to this Subsection; and TSG may not
terminate this Agreement unless, AMERICAN has failed to pay
within [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
after receipt of such second Notice.
(2) If TSG has given Notice to AMERICAN of AMERICAN's
material breach of its obligation to pay TSG in accordance
with this Agreement three times, and AMERICAN materially
breaches its obligation to pay TSG in accordance with
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this Agreement, TSG may terminate this Agreement upon Notice
to AMERICAN.
(3) For the avoidance of doubt, AMERICAN's withholding
amounts from Disputed Invoices in accordance with Section
"8.2. DISPUTED INVOICES," are not material breaches of
AMERICAN's obligation to pay.
24.2. TERMINATION FOR INADEQUATE PERFORMANCE. Upon the occurrence of an SLA
Termination Event, AMERICAN may terminate this Agreement upon Notice to TSG
given within 180 days after the date such SLA Termination Event occurred. Upon
the occurrence of an SLA Service Termination Event, AMERICAN may terminate this
Agreement as to such TSG Service upon Notice to TSG.
24.3. TERMINATION FOR A FORCE MAJEURE EVENT. If a Force Majeure Event
occurs and pursuant to Article XXII -- Force Majeure AMERICAN is entitled to
terminate this Agreement, then AMERICAN may terminate this Agreement upon
Notice to TSG.
24.4. TERMINATION FOR CONVENIENCE. At any time after July 1, 2000 and for
any reason whatsoever, AMERICAN may terminate this Agreement upon 180 days'
Notice to TSG and upon payment of all amounts due and the Termination
Liquidated Damages.
A. AMERICAN and TSG agree that if AMERICAN exercises its right to
terminate pursuant to this Section 24.4, the losses, expenses, and
measure of damages suffered by TSG would be uncertain and difficult to
calculate. Therefore, TSG and AMERICAN agree that the Termination
Liquidated Damages are their best estimate of such losses, expenses,
and damages and are not a penalty.
B. AMERICAN shall pay TSG the Termination Liquidated Damages in
accordance with Exhibit K: Termination Liquidated Damages
Calculation.
C. Upon Notice of termination pursuant to this Section 24.4, AMERICAN
may commence use of the Transition Assistance.
24.5. TERMINATION BECAUSE OF ACQUISITION OF TSG. If any entity with annual
airline transportation revenue of one billion dollars or more acquires control
(the power to direct the management or affairs) of TSG, then AMERICAN may, at
its sole option, terminate this Agreement upon 90 days Notice; provided
AMERICAN gives Notice within 180 days of the date on which such entity acquired
TSG.
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Article XXV -- Transition Assistance; Survival
25.1. TRANSITION ASSISTANCE BY TSG. Upon Expiration or termination of this
Agreement for any reason whatsoever, AMERICAN and TSG agree that TSG shall
provide assistance to AMERICAN to obtain services to replace the TSG Services
in accordance with this Section 25.1.
A. During the Transition Period, TSG shall provide to the Airline
Group or the Successor Provider any and all assistance reasonably
requested by AMERICAN to allow the TSG Services to continue without
interruption or adverse effect and to facilitate the orderly transfer
of responsibility for the TSG Services to AMERICAN or the Successor
Provider.
(1) The assistance to be provided to the Airline Group by TSG
shall include the services listed on Exhibit L: Transition
Assistance Service Descriptions.
(2) TSG Services provided during the Transition Period are
at Current Rates.
B. TSG shall provide to AMERICAN the foregoing assistance at no
additional charge other than the Current Rates prior to the Expiration
Date or the Termination Date and for ninety days thereafter, except in
the instance of termination pursuant to Subsection B of Section "24.1.
TERMINATION FOR BREACH" or pursuant to Section "24.4. TERMINATION FOR
CONVENIENCE," TSG may provide the Transition Assistance after the
Expiration Date or the Termination Date, as the case may be, at market
rates. TSG shall use any budgeted personnel time to provide
assistance and the services in Subsection C below, to the extent
reasonably possible. If the assistance requires resources, in
addition to those regularly utilized in the daily performance of TSG
Services, AMERICAN will pay TSG for such assistance on a time and
materials basis at the Current Rates.
C. Upon Expiration of this Agreement or with respect to any
particular AG Data or AG Customer Data, on such earlier date that the
same shall be no longer required by TSG in order to render services
hereunder, such AG Data or AG Customer Data shall be, at AMERICAN's
election and expense, (i) erased from the data files maintained by
TSG, (ii) returned to AMERICAN by TSG in a form reasonably requested
by AMERICAN, or (iii) stored by TSG for such period during the term of
this Agreement as AMERICAN may request and then either returned to
AMERICAN or erased.
D. Prior to providing any of the foregoing assistance to a Successor
Provider, TSG shall be entitled to receive from such Successor
Provider, in form and substance reasonably acceptable to TSG, written
assurances that (i) such Successor Provider will maintain at all times
the confidentiality of any TSG proprietary information, software or
materials disclosed or provided to, or learned by, such Successor
Provider in connection therewith, and (ii) such Successor Provider
will use such information, software or materials exclusively for the
benefit of the Airline Group. If such
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Successor Provider executes an agreement substantially in the form of
Exhibit N: Non-disclosure/Non-competition Agreement, the Successor
Provider shall be deemed to have provided the written assurances
required by this Subsection D.
E. Upon AMERICAN's request, TSG shall provide consultation services
for at least ninety (90) days after expiration of the Transition
Period, to be charged by TSG at market rates for similar services. As
part of such consultation services, TSG will retrieve, manipulate,
convert, transfer AG Data and AG Customer Data as required by the
Successor Provider at Current Rates.
25.2. SURVIVAL. The following provisions of this Agreement shall survive
the termination or Expiration of this Agreement:
A. Article IX -- Transfer and Property Taxes.
B. Section "11.2. RIGHTS IN JOINTLY OWNED SOFTWARE."
C. Section "11.5. ROYALTY AFTER EXPIRATION OR TERMINATION."
D. Section "12.5. MARKETING RIGHTS AFTER EXPIRATION OR TERMINATION."
E. Article XIII -- Non-competition.
F. The confidentiality provisions of Article XIV -- Confidential
Information.
G. Article XVII -- Non-solicitation of Employees.
H. Article XX -- Indemnification.
I. Article XXI -- Limitations of Liability.
J. Article XXIII -- Dispute Resolution.
K. Article XXV -- Transition Assistance; Survival.
L. Article XXVII -- Auditing Rights.
M. Article XXVIII -- Notices and Other Communications.
N. Article XXIX -- Miscellaneous Provisions.
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Article XXVI -- Insurance
26.1. TSG'S INSURANCE IN GENERAL. TSG, at its own expense, shall establish
and maintain general liability, workers compensation, automotive liability and
property damage, and computer fraud protection insurance coverages for all TSG
employees and Independent Contractors involved in providing TSG Services or
New/out-of-scope Services.
26.2. AG BUSINESS INTERRUPTION INSURANCE. If AMERICAN requests in writing
that TSG obtain insurance coverage on behalf of the Airline Group or AMERICAN,
including business interruption coverage, and provided AMERICAN reimburses TSG
for all out-of-pocket costs of obtaining such coverage, then TSG shall obtain
such coverage requested and designate the Airline Group as the named insured.
Article XXVII -- Auditing Rights
27.1. OPERATIONAL AUDIT. The Airline Group and its representatives, at the
Airline Group's expense and upon reasonable notice to TSG, shall have the right
to conduct an audit of TSG's operations (i) on an annual basis and (ii) more
frequently as reasonably requested by the Airline Group to the extent that
such audit will not unreasonably disrupt the operations of TSG, in order to
verify that TSG is exercising reasonable operational procedures in accordance
with customary standards in the data processing industry in its performance of
the TSG Services and to confirm TSG's performance of its obligations hereunder.
TSG will provide the Airline Group and its representatives access to the TSG
facilities at which TSG is performing the TSG Services, to TSG's personnel, to
the Airline Group's existing data and work product and to that being developed
by TSG hereunder at such facilities, and to reasonably related documentation.
To the extent applicable to the TSG Services, such audit may include an audit
of (i) software development practices and procedures, (ii) application and
operating systems, (iii) general controls and security practices and
procedures, (iv) disaster recovery and back-up procedures, (v) invoice
processing, (vi) Service Level compliance, and (vii) resource consumption. TSG
will provide to the Airline Group and its representatives any assistance that
they reasonably require in connection therewith at no additional charge to the
Airline Group, provided, however, that the Airline Group shall pay TSG, at
Current Rates for any technical resources and application development time
utilized by TSG and any other reasonable additional costs of TSG necessary for
the audit and not otherwise provided to the Airline Group hereunder. Airline
Group may, at its discretion, provide to TSG a copy of the audit report, or a
portion thereof, resulting from each such audit upon its completion, provided,
however, that if the Airline Group does not disclose any such report or portion
thereof, such report or portion shall not be the basis of any claim asserted by
Airline Group against TSG. In conducting each operational audit, the Airline
Group shall not be entitled to review any confidential or proprietary
information of any third party and shall not materially interfere with the
ability of TSG to perform the TSG Services or services for any other customer.
For the purposes of this Section 27.1, the Airline Group's representatives
shall be deemed to include any auditors or inspectors designated by any state
or federal agency to audit the Airline Group's business.
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27.2. RECORD-KEEPING AUDITS OF CHARGES. TSG shall maintain complete and
accurate books, records and accounts, in accordance with generally accepted
accounting principles, consistently applied, to support and document all
charges to the Airline Group. TSG shall retain such records for three (3)
years after creation, or for such longer period as required to comply with
government requirements. In addition, TSG shall retain such records for the
duration of any audit conducted pursuant to this Article XXVII and for the
duration of any Dispute. TSG shall permit the Airline Group or its
representatives access to TSG's facilities to perform an audit of TSG's
records to the extent necessary to verify TSG's charges billed to the Airline
Group (i) on an annual basis and (ii) more frequently as reasonably requested
by the Airline Group if and to the extent that such audit will not unreasonably
disrupt the operations of TSG. TSG need not provide the Airline Group with
access to cost data where the cost is not the basis for product service
prices/fees or termination fees. The Airline Group may, at its discretion,
provide to TSG a copy of the audit report, or a portion thereof, resulting from
each such audit upon its completion. As soon as reasonably practicable
thereafter, the parties will review any audit report (or portion thereof)
provided to TSG and work in good faith to agree upon any reimbursement of
charges or additional payments due to either party and any appropriate future
adjustments to TSG's charges and practices. TSG shall promptly forward to the
Airline Group the full amount of all overcharges revealed by such audit. The
Airline Group will offset the audit cost against any amounts due to the TSG.
Any such financial audit shall be conducted at the Airline Group's expense,
provided, however, that if such audit demonstrates that TSG's invoiced charges
for the relevant period, excluding those Third Party Pass Through Charges that
are passed through by TSG to the Airline Group pursuant to the terms of this
Agreement, exceed the correct charges for that period by more than five
percent, TSG shall pay or reimburse the Airline Group for the reasonable costs
of such audit. In conducting any financial audit, the Airline Group shall not
be entitled to review any confidential or proprietary information of any third
party, except that the Airline Group shall be entitled to review any
third-party invoices upon which TSG based any cost-plus or pass- through
charges made to the Airline Group or any invoices necessary to ensure
compliance with Sections "7.12. MOST FAVORED CUSTOMER," "11.4. OFFSET OF FEES,"
or "11.5. ROYALTY AFTER EXPIRATION OR TERMINATION" (subject to any
confidentiality restrictions that may apply to TSG with respect to such
invoices). If confidentiality restrictions apply to any such invoices, an
officer of TSG shall certify in the form of an affidavit, duly notarized, as to
the veracity of information provided by TSG to the Airline Group concerning the
contents of such invoices. The Airline Group, at its expense, may use an
independent accountant, under confidentiality restrictions, to verify the
contents of such invoices.
27.3. TERM OF AUDITS. During the term of this Agreement, the Airline Group
shall have the right to have all of the audits specified in this Article
encompass a period of time equal to the full current year and two years prior
to the current year for a total period of thirty-six months. Upon termination
or Expiration of this Agreement, the Airline Group shall have the right to
conduct an audit pursuant to Section "27.2. RECORD-KEEPING AUDITS OF CHARGES"
within one year after the date of such termination or Expiration, or an audit
at any time after termination or Expiration pursuant to this Article as may
otherwise be required by any state or federal agency.
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Article XXVIII -- Notices and Other Communications
28.1. FORM. Each notice, request, response, demand, claim, and other
communication required or permitted under this Agreement must be in writing and
must be transmitted, delivered, or sent by:
A. Personal delivery,
B. Courier or messenger service, whether overnight or same-day,
C. Prepaid telecopy or facsimile,
D. Certified United States mail, with postage prepaid and return
receipt requested, or
E. If an authorization by American regarding the commencement of
any TSG Service, electronic mail,
in any case addressed to the other Party at the address or number for that
Party set forth in Section 28.2 (or in the case of electronic mail, the
addressee's electronic mail address), or at such other address or number as the
recipient has designated by Notice to the other Party in accordance with this
Article 28.
28.2. ADDRESSES. The Parties shall transmit, deliver, or send
communications as follows:
A. If to AMERICAN: American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5357
Fort Worth, Texas 76155
Telecopier: (817) 931-6944
Attention: Account Manager's name
B. If to AMERICAN and concerning Article XXIV -- Termination or
concerning a Force Majeure Event, then a copy to:
American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5624
Fort Worth, Texas 76155
Telecopier: (817) 967-9220
Attention: President
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C. If to TSG: The SABRE Group, Inc.
4333 Amon Carter Boulevard
Mail Drop 5299
Fort Worth, Texas 76155
Telecopier: (817) 931-6382
Attention: Account Manager's name
D. If to TSG and concerning Article XXIV -- Termination or
concerning a Force Majeure Event, then a copy to:
The SABRE Group, Inc.
4333 Amon Carter Boulevard
Mail Drop 5620
Fort Worth, Texas 76155
Telecopier: (817) 967-4044
Attention: President
28.3. EFFECTIVENESS. Each communication transmitted, delivered, or sent:
A. In person, by courier or messenger service, or by certified
United States mail (postage prepaid and return receipt requested)
shall be deemed given, received, and effective on the date delivered
to or refused by the intended recipient (with the return receipt or
the equivalent record of the courier or messenger being deemed
conclusive evidence of delivery or refusal); or
B. By telecopy or facsimile transmission or by electronic mail
shall be deemed given, received, and effective on the date of actual
receipt (with the confirmation of transmission or the electronic
receipt being deemed conclusive evidence of such receipt, except where
the intended recipient has promptly notified the other Party that the
transmission is illegible).
Nevertheless, if the date of delivery or transmission is not a Business Day, or
if the delivery or transmission is after 5:00 p.m., local time in Fort Worth,
Texas, on a Business Day, the communication shall be deemed given, received,
and effective on the next Business Day.
Article XXIX -- Miscellaneous Provisions
29.1. ASSIGNMENT. Except as provided in Section "9.6. COOPERATION" or in
the next two sentences, neither Party may assign any of its rights or delegate
any of its duties or obligations under this Agreement without the other Party's
Consent. AMERICAN may assign its rights and delegate its duties and
obligations under this Agreement as a whole as part of the sale or transfer of
all or substantially all of its assets and business, including by merger or
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consolidation, to a Person (i) that assumes and has the ability to perform
AMERICAN's duties and obligations under this Agreement; and (ii) the core or a
principal part of the business of which is not competitive with the core or a
principal part of the business of TSG. TSG may assign its rights and delegate
its duties and obligations under this Agreement as a whole as part of the sale
or transfer of all or substantially all of its assets and business involved in
any manner in providing TSG Services, including by merger or consolidation, to
a Person (a) that assumes and has the ability to perform TSG's duties and
obligations under this Agreement; and (b) the core or a principal part of the
business of which is not competitive with the core or a principal part of the
business of the Airline Group. Any attempted assignment or delegation of any
rights, duties, or obligations in violation of this Section 29.1 shall be void
and without effect. Nothing in this Section 29.1, however, precludes TSG from
subcontracting the performance of any of the TSG Services as permitted by this
Agreement or precludes AMERICAN from extending the right to receive the TSG
Services to the American Related Entities.
29.2. AMENDMENT AND WAIVER. This Agreement may be amended or modified, and
any provision of this Agreement may be discharged or waived, only by a document
signed by the party against which the amendment, modification, discharge, or
waiver is sought to be enforced.
29.3. INTEGRATION. This Agreement supersedes
A. The Services Agreement between the Air Transportation Group
and the SABRE Group dated as January 1, 1995, and the service level
agreements entered before the Effective Date under that document;
B. Any and all prior or contemporaneous oral agreements or
understandings between the Parties regarding the subject matter of
this Agreement; and
C. Any and all prior written agreements or understandings between
the Parties regarding the subject matter of this Agreement, except for
those (other than the one described in Subsection A of this Section
29.3) entered into by representatives of the Parties or their
predecessors who were at Level 6 or above when such agreements or
understandings were entered into with the knowledge and consent of
such representative's supervising officer (which agreements or
understandings shall remain effective).
29.4. SEVERABILITY. If any part of this Agreement is for any reason found
to be unenforceable, all other parts of this Agreement nevertheless remain
enforceable.
29.5. SUCCESSORS. This Agreement binds and inures to the benefit of the
Parties and their respective legal representatives, successors, and permitted
assigns.
29.6. GOVERNING LAW. This Agreement must be interpreted or construed, and
its validity determined and performance enforced, under Texas law.
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29.7. REASONABLENESS. As concerns every provision of this Agreement, TSG
and AMERICAN agree to act reasonably and in good faith unless a provision
expressly states that AMERICAN or TSG may act in its sole discretion.
29.8. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, with the same effect as if all signatories had signed the same
document. All counterparts must be construed together to constitute one, and
the same, document. 29.9. FURTHER ASSURANCES. Each Party shall take such
actions, upon request of the other Party and in addition to the actions
specified in this Agreement, as may be necessary or reasonably appropriate to
implement or give effect to this Agreement, including cooperating in the
completion of copyright registration documents.
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SIGNATURES
AMERICAN AIRLINES, INC.
By: /s/ Scott D. Nason
-------------------------------------
Scott D. Nason, Vice President-
Information Technology
Services & Chief
Information Officer
THE SABRE GROUP, INC.
By: /s/ Michael J. Durham
-------------------------------------
Michael J. Durham, President
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Exhibit A: Definitions and Interpretation
I. Definitions.
In the Agreement, the following terms have the corresponding meanings:
"800 DECISION TREE SUPPORT": The design and programming of routing telephone
calls, managed as a component of Domestic Reservations Inbound described in
Exhibit B: TSG Services Description.
"AA FLIGHTS": Airline flight segments operated under the airline code issued
to AMERICAN by the International Air Transport Association.
"ACCOUNT MANAGERS": TSG's Account Manager and AMERICAN's Account Manager
collectively.
(1) "TSG's Account Manager": The individual so designated in writing
by TSG from time to time.
(2) "AMERICAN's Account Manager": The individual so designated in
writing by AMERICAN from time to time.
"ADJUSTMENT AMOUNT": [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"AFFILIATE": A Person that directly or indirectly through one or more
intermediaries Controls, is Controlled by, or is under common Control with
another Person.
"AFFILIATED SPIN-OFF ENTITY": An entity that was a member of the Airline
Group, but was divested in part and remains an Affiliate of the Airline Group
or of AMR, or an entity resulting from the partial divestiture of a division or
business unit of a member of the Airline Group that remains an Affiliate of the
Airline Group or of AMR.
"AG CUSTOMER": A customer or prospective customer of the Airline Group to the
extent such customer purchases AG Mixed Services, but not any member of the
Airline Group itself.
"AG CUSTOMER DATA": The following data:
(1) All data provided by an AG Customer or with respect to an AG
Customer in order for TSG to provide the TSG Services to an AG
Customer;
(2) All data that is provided by or on behalf of TSG to the Airline
Group by means of TSG Services intended for an AG Customer; and
Exhibit A to Information Technology Services Agreement page 1
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(3) All data that is produced by means of TSG Services as an
intermediate step in using or producing any of the AG Customer Data.
"AG DATA": The following data, whether provided or produced before, on, or
after the Effective Date:
(1) All data that is provided by or on behalf of the Airline Group to
TSG in order for TSG to provide the TSG Services, including keyed
input and electronic capture of information by the TSG Services;
(2) All data that is provided by or on behalf of TSG to the Airline
Group by means of the TSG Services, including reports, bookings and
tickets, and all other output of the TSG Operated Software;
(3) All data that is produced by means of TSG Services as an
intermediate step in using or producing any of the AG Data, including
databases and files containing AG Data; and
(4) Passenger Name Records (PNR) secured to an AMERICAN pseudo-city
code.
"AG MIXED SERVICES": Certain services provided by the Airline Group to AG
Customers in which the Airline Group uses TSG Services or TSG Operated Software
to provide such services. The AG Mixed Services consist of one or more of the
Operations Mixed Services, Alliance Mixed Services, and Other Mixed Services.
"AG OTHER MIXED SERVICES COSTS": The Fees and other amounts described below
that TSG intends to charge or other amounts that a Successor Provider intends
to charge the Airline Group to provide the Other Mixed Services to an AG
Customer. The AG Other Mixed Services Costs include the following:
(1) The Fees that would be charged to the Airline Group;
(2) License fees for use of TSG software for the benefit of AG
Customers, unless TSG cannot demonstrate with written records that TSG
previously charged such license fees to TSG Customers or unless TSG
cannot demonstrate a fair but conservative market value license fee;
and
(3) Such fees as a third party vendor will require that TSG or a
Successor Provider pay to allow an AG Customer use of such Other Mixed
Services.
"AG OTHER MIXED SERVICES FEES": The fees that the Airline Group intends to
charge an AG Customer for providing Other Mixed Services.
Exhibit A to Information Technology Services Agreement page 2
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"AG SELF-PERFORMED SERVICES": Those services described in Exhibit O: AG
Self-performed Services, to the extent that the Airline Group performed such
services for itself as of the Effective Date.
"AGGREGATE ADJUSTMENT": The difference between the Benchmark Projected Fees
and the Reset Formulas Projected Fees.
"AIRLINE GROUP": AMERICAN and the American Related Entities collectively.
"AIRLINE GROUP'S CIO": The Chief Information Officer of the Airline Group as
identified in writing by AMERICAN from time to time. The Airline Group may
change its CIO upon Notice to TSG.
"AIRLINE GROUP INDEMNITEES": The Airline Group and their respective directors,
officers, employees, and agents, and the heirs, executors, successors, and
assigns of any of those Persons.
"AIRLINE INCIDENT": An occurrence of personal injury, death, or property
damage in connection with the operation of the Airline Group's aircraft.
"AIRPORT REGULATIONS": The following, to the extent applicable to TSG while on
any Airline Group airport locations: (i) All federal, state, county and
municipal statutes and ordinances, (ii) all rules, regulations, orders and
directives of the local, state and federal governments applicable to AMERICAN's
premises or to the Airline Group's or TSG's use or occupancy thereof, and (iii)
all rules, regulations, orders, directives, terms and/or conditions imposed by
the landlord under any applicable lease or otherwise applicable to the airport
within which the airport premises are located to the extent applicable to TSG's
operations within AMERICAN's premises. The Airport Regulations shall include
all applicable federal, state and local laws, executive orders and regulations
issued pursuant thereto, including (to the extent applicable to this Agreement)
Federal Aviation Administration rules and regulations, the provisions contained
within Section 202 of Executive Order 11246 (41 C.F.R. Section 60.1.4), Section
4.2 of the Vietnam Era Veterans Readjustment Act (41 C.F.R. Section 60-205.4),
Section 503 of the Rehabilitation Act (41 C.F.R. Section 60-741-4), the
Americans with Disabilities Act of 1990, 42 U.S.C. Section 121.01 et seq., as
well as all airport and air carrier security measures (contained, in part, in
14 C.F.R. Sections 107 and 108) contained within such provisions of AMERICAN's
document known as the "Approved Security Programs Manual" as are pertinent to
TSG's operations and supplied by AMERICAN to TSG. AMERICAN may from time to
time (but without any obligation to do so) supply TSG with Notice of any
subsequently enacted security requirements arising out of changes to law,
executive order or regulation applicable to TSG's operations under this
Agreement, and such requirements shall thereafter be an obligation of TSG under
this Agreement.
Exhibit A to Information Technology Services Agreement page 3
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"ALLIANCE MIXED SERVICES": Services provided by the Airline Group to AG
Customers that are required to effect the core or principal purposes, aspects,
or elements of operating or marketing alliances that the Airline Group has
formed or any other marketing relationships that are intended to increase the
Airline Group's passenger or cargo revenue, including FlyAAway Vacations,
Ticket Delivery Services, AAdvantage services to cooperative partners,
third-party airline cargo services, Code share operations, Interline
Agreements, and AA reservations services to travel agencies, corporate travel
offices, on-line networks, and general sales agents.
"AMERICAN": American Airlines, Inc., a Delaware corporation.
"AMERICAN RELATED ENTITIES": AMERICAN's wholly owned subsidiaries and AMR
Eagle Inc. and its wholly owned subsidiaries.
"AMR": AMR Corporation, a Delaware corporation and the corporate parent of
both Parties on the Effective Date.
"ANNUAL RE-RUN CAP": [TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED] during a
period commencing on December 1 and ending on the subsequent November 30,
subject to monthly proration for shorter periods at the beginning or end of the
term of this Agreement.
"ARBITRATION RULES": The Rules for Commercial Arbitration of the American
Arbitration Association in effect at the time of an arbitration in accordance
with the Dispute Resolution Procedure.
"BASELINE MONITORING": The measures used to monitor and to report performance
levels of such TSG Services as existed on the Effective Date.
"BASELINE MONITORING COSTS": The expenses incurred by TSG and investments made
by TSG in the period July 1, 1995 through June 30, 1996 to perform Baseline
Monitoring and to achieve Historical SLA Standards.
"BENCHMARKING PROCESS": The process of the Parties' engaging one or more
Benchmark Providers and that Benchmark Provider's or those Benchmark Providers'
preparing and delivering the Benchmark Report.
"BENCHMARK PROJECTED FEES": The projected total Fees for the TSG Services if
the Current Rates were modified by Benchmark Results and applied to the
Projected Annual Volume.
"BENCHMARK PROVIDER": A Person, other than a Party or any Affiliate of a
Party, engaged to determine the anticipated market price for the next calendar
year (which shall be an Even-numbered Year) for services similar to the TSG
Services.
Exhibit A to Information Technology Services Agreement page 4
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"BENCHMARK REPORT": The written report or reports of the Benchmark Results
prepared by the Benchmark Provider or Benchmark Providers for the Parties.
"BENCHMARK RESULTS": The Benchmark Provider's or Benchmark Providers'
determination of the amounts at which the Rates should be set, and the
corresponding Fees, for the next calendar year (which shall be an Even-numbered
Year) in order to constitute or correspond to anticipated market prices for
that year for services substantially the same as TSG Services.
"BUSINESS DAY": A day other than Saturday, Sunday, national holidays in the
United States, December 30 through January 3, and AMR holidays.
"CAPPED ADJUSTMENT": The Unrealized Aggregate Adjustment, subject to a limit
or cap of the greater of:
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
"CLIENT SERVER DEVELOPMENT": Development services for client server
applications.
"CODE OUT": TSG's making such software changes are necessary to exclude TSG's
Customers other than the Airline Group from using certain software.
"CONFIDENTIAL INFORMATION": The information described in Section "14.1
CONFIDENTIAL INFORMATION."
"CONNECTIVITY SYSTEMS": VAX Services and Host Communications Complex (HCC)
described in Exhibit B: TSG Services Description.
"CONSENT": Prior, express, and written consent (which may not be unreasonably
withheld or delayed unless stated to be at a Party's sole discretion).
"CONSEQUENTIAL DAMAGES": Damages consisting of lost profits, lost income, or
lost savings or consequential, indirect, special, or incidental damages
(however described). "Consequential Damages" does not include any punitive or
exemplary damages.
"CONTROL": The right to exercise, directly or indirectly, more than fifty
percent of the voting power attributable to the equity interests in an entity.
("Controlling" and "Controlled" have correlative meanings.)
"CRITICAL TSG SERVICE": A TSG Service or system expressly designated as
"Critical" in an SLA.
Exhibit A to Information Technology Services Agreement page 5
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"CRS": An Electronic Travel Distribution System that is marketed principally to
Travel Distributors and that collects, stores, and processes, and displays and
distributes, on a neutral and unbiased basis, information concerning air and
ground transportation, lodging and other travel-related products and services
offered by system participants.
"CURRENT DP SERVICES": The following services:
(1) Providing Development, Maintenance, and Enhancements for Real
Time Applications; and
(2) Providing Maintenance and Enhancements for Existing Applications.
"CURRENT RATE": A Rate that is then in effect.
"DATA CENTER SERVICES": The following services:
(1) Real Time Services:
a. PSS/FPC;
b. Flight Operating System (FOS) described in Exhibit B: TSG
Services Description; and
c. Virtual Machine Test System (VM Test) described in Exhibit
B: TSG Services Description.
(2) Commercial Services:
a. Commercial CPU described in Exhibit B: TSG Services
Description;
b. Commercial DASD described in Exhibit B: TSG Services
Description;
c. Commercial Tape described in Exhibit B: TSG Services
Description;
d. Commercial Print described in Exhibit B: TSG Services
Description;
e. Commercial Microfiche described in Exhibit B: TSG
Services Description;
f. Commercial IMS described in Exhibit B: TSG Services
Description; and
g. Decision Enabling described in Exhibit B: TSG Services
Description.
(3) VAX Services:
a. VAX1 described in Exhibit B: TSG Services Description;
Exhibit A to Information Technology Services Agreement page 6
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b. VAX2 described in Exhibit B: TSG Services Description; and
c. VAX5 described in Exhibit B: TSG Services Description.
(4) Host Communications Complex (HCC) as described in Exhibit B: TSG
Services Description.
(5) Mail Distribution services described in Exhibit B: TSG Services
Description.
(6) Client Server Services.
"DATA NETWORK SERVICES": The following services:
(1) SABREnet described in Exhibit B: TSG Services Description;
(2) International Managed Network Services (IMNS) described in
Exhibit B: TSG Services Description; and
(3) Custom Data Networks described in Exhibit B: TSG Services
Description.
"DATA PROCESSING SERVICES": The Data Center Services described in Exhibit B:
TSG Services Description and such services as the Parties agree in writing are
Data Processing Services.
"DEPOSITORY CERTIFICATES": Depository certificates in Stichting "The SITA
Foundation," a Netherlands Foundation.
"DERIVATIVE WORK": A derivative work as defined in Title 17 U.S.C. Section
101, as amended (which on the Effective Date states: "A 'derivative work' is a
work based on one or more preexisting works, such as a translation, musical
arrangement, dramatization, fictionalization, motion picture version, sound
recording, art reproduction, abridgement, condensation, or any other form in
which a work may be recast, transformed, or adapted. A work consisting of
editorial revisions, annotations, elaborations, or other modifications, which,
as a whole, represent an original work of authorship, is a 'derivative
work'.").
"DEVELOPMENT": The creation of a new software system. For the avoidance of
doubt, Development includes writing software to replace an old system with a
new system.
"DEVICE SUPPORT": Services that are defined in Exhibit B: TSG Services
Description.
"DISPUTE": Any dispute, disagreement, claim, or controversy arising in
connection with or relating to the Agreement, or the validity, interpretation,
performance, breach, or termination
Exhibit A to Information Technology Services Agreement page 7
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of the Agreement, including any claim of breach of representation or warranty
or of non-performance and any claim regarding bodily or other personal injury
or damage to tangible property.
"DISPUTE RESOLUTION APPENDIX": Exhibit M: Dispute Resolution Appendix,
containing the Dispute Resolution Procedure for, as an integral part of, the
Agreement.
"DISPUTE RESOLUTION PROCEDURE": The procedure or process by which a Dispute
must be resolved (except as otherwise stated or modified in the Agreement) as
described in the Dispute Resolution Appendix.
"DISPUTED INVOICE": An invoice for services rendered or performed by TSG under
this Agreement of which the Airline Group disputes the accuracy.
"DISTRIBUTED SYSTEMS SERVICES": The following services:
(1) Device Support described in Exhibit B: TSG Services Description;
(2) Moves/Installs (MCDUI) described in Exhibit B: TSG Services
Description;
(3) Integration Services described in Exhibit B: TSG Services
Description;
(4) Campus Telephone System described in Exhibit B: TSG Services
Description;
(5) Electronic Mail (e-mail) described in Exhibit B: TSG Services
Description;
(6) Domestic Reservations Support described in Exhibit B: TSG
Services Description;
(7) Information Display Systems Support described in Exhibit B: TSG
Services Description;
(8) Internet Access Services described in Exhibit B: TSG Services
Description; and
(9) X.400 described in Exhibit B: TSG Services Description.
"DOCUMENTATION": Instructions and related information for the use by end users
of software including user manuals, and instructions and related information
for the operation of software including run instructions, job control
instructions, balancing procedures, and input dependencies.
"EFFECTIVE DATE": July 1, 1996.
Exhibit A to Information Technology Services Agreement page 8
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"EGREGIOUS BREACH": A material breach that constitutes an intentional,
unequivocal refusal to perform a material obligation of this Agreement that
frustrates one or more bases of the bargain between AMERICAN and TSG to the
extent that a (non-breaching) reasonable business person would not have entered
into the Agreement or would not continue performing under the Agreement.
"ELECTRONIC TRAVEL DISTRIBUTION SYSTEM": A system providing any of the
following products or services, using computers and digital electronic
transmission, via data network, telephone, wireless, or cable transmission
or otherwise:
(1) Publication and distribution of consumer travel-related
information from computerized databases.
(2) Processing of passenger travel-related reservations and related
transactions.
(3) Marketing and sales of passenger travel-related products and
services and related electronic transactions.
(4) Publication and distribution of passenger travel-related
documents (e.g., tickets).
"E-MAIL": Electronic Mail as defined in Exhibit B: TSG Services Description.
"END USER": A Person who or which becomes licensed or otherwise authorized by
AMERICAN or TSG to use software or information that is intended for use by that
Person as a consumer or in its internal business operations, and not to
provide services to third parties.
"ENHANCED DATA PROCESSING SERVICES": Services required to modify and/or
supplement the Data Processing Services and which include the following
services:
(1) Maintenance,
(2) Enhancement, and
(3) Development.
"ENHANCEMENT": One or more of the following modifications to the TSG Operated
Software:
(1) A modification to the TSG Operated Software to add a new function
or feature not contained in the TSG Operated Software's
specifications;
(2) A modification to the TSG Operated Software to add an interface
to the TSG Operated Software to Third Party Software; or
(3) Any other modification to the TSG Operated Software that is not
an Error Correction, Work-around, or Update.
"ERROR CORRECTION": A modification to the TSG Operated Software to correct a
Malfunction.
"EVEN-NUMBERED YEAR": 1998 and every second year thereafter.
"EXCEPTIONAL PERFORMANCE": TSG's exceeding certain performance criteria in any
SLA in accordance with such SLA that results in a Performance Increase.
"EXCLUSIVE SERVICES": The services described in Section "3.10. EXCLUSIVITY."
"EXISTING APPLICATIONS": All software applications or portions thereof written
by TSG or its predecessors and funded by the Airline Group.
"EXISTING CLIENT SERVER OPERATIONS": Client Server Services described in
Exhibit B: TSG Services Description, in existence as of the Effective Date.
Exhibit A to Information Technology Services Agreement page 9
<PAGE> 83
"EXPIRATION": The expiration of the term of the Agreement as stated in, or as
may be extended under, Article II -- Term, without regard to the duration of
the Transition Period. For the avoidance of doubt, "Expiration" does not
include a termination of the Agreement under Article XXIV -- Termination.
("Expire," "Expires," and "Expired" have correlative meanings.)
"EXPIRATION DATE": The date on which this Agreement Expires.
"EXTERNAL CLIENT SERVER DEVELOPMENT": Development services for client server
applications performed by the Airline Group after the Effective Date and
Development services for client server applications that are performed by a
third party.
"EXTRAORDINARY COSTS": Costs that would not have occurred if the increase in
volume arose because of the Airline Group's internal growth using TSG's then
existing facilities.
"EXTRAORDINARY EFFORTS": The same level of efforts that a party affected by a
Force Majeure Event could reasonably be expected to use on its own behalf to
remedy the consequences of such event.
"EXTRAORDINARY MISTAKE": Any action or omission of TSG in connection with
rendering or providing TSG Services under the Agreement, other than an Ordinary
Mistake, constituting a violation of TSG's written or otherwise clearly
established procedures for rendering or providing a service included in the TSG
Services, including any violation of written or otherwise clearly established
data security safeguards regarding AG Data or AG Customer Data.
"FAIR LICENSE FEE": The typical license fee that TSG or any of its
predecessors previously received for the software or a conservative estimate of
a fair market value license fee.
"FAIR TRANSACTION VALUE": The fair market value of the rights granted by TSG
to the TSG Customer in the transaction relating to the Enhancement.
"FEES": The amounts charged by TSG to the Airline Group for the TSG Services.
"FIVE-YEAR SERVICES": Those categories of the TSG Services that TSG shall
provide to the Airline Group for a period of five years commencing upon the
Effective Date. The Five-year Services consist of the Existing Client Server
Operations.
"FORCE MAJEURE EVENT": Any circumstance beyond the reasonable control of a
Party or its employees or agents, and such delay could not have been prevented
by reasonable precautions and cannot reasonably be circumvented by any of those
Persons through the use of alternative sources, work-around plans, or other
means. "Force Majeure Events" shall include acts of
Exhibit A to Information Technology Services Agreement page 10
<PAGE> 84
civil or military authority, national emergencies, fire, flood or catastrophe,
acts of God, insurrection, war or riots, but shall not include labor
difficulties or strikes. "Force Majeure Event" also shall include the failure
by AMERICAN to provide utilities to TSG's operations at CentrePort IV as
required by the Central Plant Easement Agreement between AMERICAN and TSG dated
July 1, 1996.
"FORCE MAJEURE EVENT COMMENCEMENT": The date and time that a Force Majeure
Event commences.
"FORCE MAJEURE RECOVERY PLAN": A written plan for restoring a TSG Service
affected by a Force Majeure Event or for circumventing the consequences of a
Force Majeure Event on a TSG Service.
"GENERAL DAMAGES": Losses, claims, obligations, demands, assessments, fines
and penalties (whether civil or criminal), liabilities, expenses and costs
(including reasonable fees and disbursements of legal counsel and accountants),
bodily and other personal injuries, damage to tangible property, and other
damages, of any kind or nature, suffered or incurred by a Person. For the
avoidance of doubt, "General Damages" includes not only actual damages, but
also punitive and exemplary damages and Consequential Damages.
"GOVERNMENTAL AUTHORITY": Any federal, state, local, or foreign government or
governmental, quasi-governmental, administrative, or regulatory authority,
agency, body, or entity, including any court or other tribunal.
"HIGH RISK TSG SERVICE": A TSG Service or system designated as "High Risk" in
an SLA.
"HISTORICAL SLA STANDARD": The minimum performance level of a service
commensurate with the performance levels typical of such service during the
years 1994, 1995, and 1996, except for such periods of time when the
performance levels were clearly unacceptable.
"HOURLY LABOR RATES": The hourly rates charged by the SABRE Decision
Technologies division of TSG for applicable development, maintenance,
enhancement, and consulting services.
"INADEQUATE PERFORMANCE": TSG's failure to meet the applicable SLA Standard for
a specific service that results in a Performance Decrease.
"INDEMNIFIABLE LOSSES": Losses, claims, obligations, demands, assessments,
fines and penalties (whether civil or criminal), liabilities, expenses and
costs (including reasonable fees and disbursements of legal counsel and
accountants), bodily and other personal injuries, damage to tangible property,
and other damages, of any kind or nature, actually suffered or
Exhibit A to Information Technology Services Agreement page 11
<PAGE> 85
incurred by a Person. "Indemnifiable Losses" consists only of actual damages,
and excludes any Consequential Damages and any punitive or exemplary damages
(however described).
"INDEMNIFICATION CLAIM": A claim or demand of a Party, on its behalf or on
behalf of one or more of its other Indemnitees, based on a Third-Party Claim,
for indemnification under Article XX -- Indemnification.
"INDEMNIFICATION CLAIM NOTICE": A notice from the Indemnified Party describing
an Indemnification Claim and the amount or the estimated amount of that
Indemnification Claim to the extent then feasible (though that estimate shall
not be determinative of the final amount of that Indemnification Claim).
"INDEMNIFICATION RESPONSE PERIOD": The 30 days after an Indemnification Claim
Notice is given during which the Indemnifying Party may investigate and
determine its responsibility or liability for an Indemnification Claim and
Notify the Indemnified Party of the Indemnifying Party's election to defend a
Third-Party Claim.
"INDEMNIFIED PARTY": A Party entitled to or seeking indemnification, on its
own behalf or on behalf of one or more of its other Indemnitees, under Article
XX -- Indemnification.
"INDEMNIFYING PARTY": A Party that has or is alleged to have an obligation to
indemnify the other Party's Indemnitees under XX -- Indemnification in response
to an Indemnification Claim.
"INDEMNITEES": The Airline Group Indemnitees or the TSG Indemnitees, or both.
"INDEPENDENT CONTRACTOR": An individual who is an independent contractor and
not an employee.
"INFORMATION SERVICES": Services that are based on TSG's providing to the
Airline Group information that is proprietary to a member of the Airline Group.
"JOINTLY OWNED SOFTWARE": Software developed after the Effective Date in which
the Airline Group and TSG possess an undivided one-half interest as tenants in
common without any obligation of accounting or contribution, except as
expressly provided for in the Agreement.
"KEY EMPLOYEE": A full-time employee of TSG designated by the Airline Group to
be subject to certain restrictions and conditions described in Article XVI --
Key Employees and Related Provisions.
"KEY EMPLOYEE LIST": The group who are Key Employees. The TSG employees named
in Exhibit I: Key Employees are deemed to be Key Employees.
Exhibit A to Information Technology Services Agreement page 12
<PAGE> 86
"LEVEL 5": A Party's employee-pay-grade Level 5 as of the Effective Date or,
after the Effective Date, an employee level having substantially the same level
of authority or responsibility.
"LEVEL 6": A Party's employee-pay-grade Level 6 as of the Effective Date or,
after the Effective Date, an employee level having substantially the same level
of authority or responsibility.
"MAINTENANCE": Providing Error Corrections, Work-arounds, Updates, and
services known as "SDT help desk services."
"MALFUNCTION": Any way in which the TSG Operated Software fails to perform in
accordance with the TSG Operated Software's specifications.
"MATERIAL ADVERSE IMPACT": The occurrence of one or more of the following:
A. An increase in the Fees;
B. A more than de minimis increase in an expense incurred by the
Airline Group;
C. A material adverse effect on TSG's performance in accordance with
TSG's actual, typical performance of the TSG Services; or
D. An increase in the Taxes payable by the Airline Group.
"MESSAGE": A processor instruction in a Real Time Application.
"MULTIHOSTING SERVICES": Providing one or more Real Time Applications to
another carrier in a separate software partition.
"NEW BILLING SYSTEM": The billing system that TSG is to design, develop, and
implement to replace the billing system in place upon the Effective Date.
"NEW HISTORICAL SLA STANDARD": The actual performance level of a TSG Service
after the Effective Date, except for such periods of time when the performance
levels may be reasonably construed as unacceptable.
"NEW/OUT-OF-SCOPE SERVICE": One or more of the services defined in the
following Subparagraphs:
(1) Services that are not described in Exhibit B: TSG Services
Description and do not have a price specified in Exhibit C: Rate and
Reset Schedule.
Exhibit A to Information Technology Services Agreement page 13
<PAGE> 87
(2) Services that are not within the scope of the TSG Services; and
(3) New/Out-of-scope Services include, but are not limited to,
services related to smart cards and intelligent voice response
systems.
"NON-EXCLUSIVE SERVICES": Any services other than those specified in Section
"3.10. EXCLUSIVITY." The Non-exclusive Services include those services
described in Section "3.11 NON-EXCLUSIVE SERVICES."
"NOTICE": Prior, written notice or other communication complying with Article
XXVIII -- Notices and Other Communications. Whenever a period of time is
stated for Notice, such period of time is the minimum period and nothing in
this Agreement shall be construed as prohibiting a greater period of time.
("Notify" has the correlative meaning.)
"ODD-NUMBERED YEAR": 1997 and every second year thereafter.
"OFF-THE-SHELF SOFTWARE": Software that can be implemented in production
without any, or with only minimal, customization or modification.
"OPERATIONS MIXED SERVICES": Services provided by the Airline Group to AG
Customers at or around airports and include ramp handling, passenger handling,
training services, fueling, weight and balance determinations, weather
forecasting, baggage handling, Admirals Club related services, ground handling,
maintenance operations, and in-flight magazines.
"ORDINARY MISTAKE": Any action or omission of TSG, in the ordinary course of
its business and in connection with rendering or providing TSG Services under
the Agreement, constituting a mistake or error of a kind that is not uncommon,
unusual, or atypical in the information technology business, such as a routine
programming or operator error.
"OTHER MIXED SERVICES": All services provided by the Airline Group to AG
Customers that include TSG Operated Software and/or TSG Services, other than
Operations Mixed Services and Alliance Mixed Services.
"OTHER SERVICES": The following TSG Services:
(1) Data Network Services; and
(2) Voice Network Services.
"OTHER THIRD PARTY SOFTWARE": Software used by TSG to provide TSG Services
that is not the property of TSG and not the Transferred Third Party Software.
Exhibit A to Information Technology Services Agreement page 14
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"OUTAGE": When a TSG Service is unavailable for productive use.
"PARTY": Each of the signatories to the Agreement, and their successors and
assigns as permitted by the Agreement. ("Parties" has the correlative
meaning.)
"PERFORMANCE DECREASE": A decrease of the Fees in the event of Inadequate
Performance.
"PERFORMANCE INCREASE": An increase of the Fees in the event of Exceptional
Performance.
"PERSON": An individual; a corporation, partnership, trust, association, or
entity of any kind or nature; or a Governmental Authority.
"PROJECTED ANNUAL NEGOTIATED FEES": The Fees projected to apply to the TSG
Services for the next Even-numbered Year, as negotiated and agreed upon by the
Parties corresponding to the Projected Negotiated Rates.
"PROJECTED ANNUAL RESET FEES": The Fees projected to apply to the TSG Services
for the next calendar year, calculated using the Reset Formulas then in effect,
as described in Section "7.4. PROJECTED ANNUAL RESET FEES."
"PROJECTED ANNUAL VOLUME": The volume, scope, or extent of the TSG Services
anticipated to be used or received by the Airline Group in the next calendar
year, as agreed upon by the Parties.
"PROJECTED NEGOTIATED RATES": Those Rates anticipated to apply to the TSG
Services for the next Even-numbered Year, as negotiated and agreed upon by the
Parties in an Odd-numbered Year, for use in the Parties' determining the Rates
that will actually apply for the next Even-numbered Year.
"PSS/FPC": The Real Time Services consisting of Passenger Services System
(PSS), including OCP and Fare Pricing Complex (FPC), as described in Exhibit B:
TSG Services Description.
"RADIO SERVICES": Radio Services as described in Exhibit B: TSG Services
Description.
"RATE": A rate charged to the Airline Group for any TSG Service, or for a unit
of service or another increment of use or receipt of any TSG Service, as
specified in the Rate and Reset Schedule.
"RATE AND RESET SCHEDULE": Exhibit C: Rate and Reset Schedule.
"REAL TIME APPLICATION": One of the following software applications described
in Exhibit B: TSG Services Description:
(1) PSS/FPC;
Exhibit A to Information Technology Services Agreement page 15
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(2) Flight Operating System (FOS) described in Exhibit B: TSG
Services Description; and
(3) Virtual Machine Test System (VM Test) described in Exhibit B:
TSG Services Description.
"RED TOLERANCE LEVEL": An unacceptable level of performance for a TSG Service
that is specified in Exhibit E: Agreed SLAs that results in a Performance
Decrease.
"RE-RUN": TSG Services used in the re-performing and/or correcting of
previously performed Data Center Services by TSG for the Airline Group.
"RESERVATIONS 800 SERVICES": Domestic Reservations Inbound Services (including
800 Decision Tree Support) as described in Exhibit B: TSG Services
Description.
"RESET FORMULA": A formula agreed by the Parties by which a Current Rate may
be adjusted or reset for use in the next calendar year.
"RETAINED RIGHTS": Defined in the Bill of Contribution, Assignment and
Assumption Agreement between AMERICAN and SABRE Properties, Inc. dated July 1,
1996.
"RFP": Request for proposal.
"RFQ": Request for quotation.
"SHARED HOST ENHANCEMENT/DEVELOPMENT": Enhancement of or Development for a
Real Time Application.
"SIGNIFICANT SERVICES": Design, programming, and related services for
customization and systems integration greater than twenty-five percent of the
total fees incurred by the Airline Group in the acquisition of such software.
"SITA": Societe Internationale de Telecommunications Aeronautiques, a Belgian
cooperative corporation.
"SITA AGREEMENTS": Agreements between AMERICAN and one or more members of the
SITA Group as described in Exhibit H: SITA Relationship.
"SITA GROUP": SITA and/or its affiliates or subsidiaries.
"SITA SABRENET SERVICES": Those SITA Services that are provided by SITA under
the SABREnet Services Agreement dated as of July 1, 1996.
Exhibit A to Information Technology Services Agreement page 16
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"SITA SERVICES": Services provided by the SITA Group that AMERICAN may
purchase under the SITA Agreements.
"SLA": Each of the written statements of performance levels for services
specified in Exhibit D: Services Subject to SLA.
"SLA DATABASE": A database containing the information from which the
Historical SLA Standards were derived and to which TSG shall add the actual
performance data used to compare the performance of services to the SLA
Standards.
"SLA SERVICE TERMINATION EVENT": An event described in an SLA that gives the
Airline Group the right to terminate a specific TSG Service.
"SLA STANDARD": For a specific service, the acceptable level of performance
for such service specified in the applicable SLA.
"SLA TERMINATION EVENT": The occurrence of one or more of the following
events:
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
Exhibit A to Information Technology Services Agreement page 17
<PAGE> 91
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
"SPIN-OFF COMPANY": An entity that was a member of the Airline Group, but was
divested to the extent that less than 50% of the voting power attributable to
the equity interests in such entity is owned by the Airline Group or its
Affiliates, or an entity resulting from the divestiture of a business unit or
division of a member of the Airline Group of which less than 50% of the voting
power attributable to the equity interests in such entity is owned by the
Airline Group or its Affiliates.
"STOCK AGREEMENT": Stock Transfer and Rights Agreement by and between AMERICAN
and TSG dated as of July 1, 1996, regarding inter alia, the Depository
Certificates.
"SUCCESSOR PROVIDER": The Airline Group's designee to provide services similar
to the TSG Services.
"TAXES": Foreign, federal, state and local sales, use, excise, value added, or
similar transfer taxes (including any related penalties, additions to tax, and
interest), however designated or imposed, which are in the nature of a
transaction tax.
"TEN-YEAR SERVICES": Those categories of the TSG Services that TSG shall
provide to the Airline Group for a period of ten years commencing upon the
Effective Date. The Ten-year Services consist of the following TSG Services:
Exhibit A to Information Technology Services Agreement page 18
<PAGE> 92
(1) Data Center Services, except for the operation of External Client
Server Development;
(2) Data Network Services;
(3) TSG Development;
(4) Existing Application Maintenance; and
(5) Existing Application Enhancement.
"TERMINATION DATE": The date on which termination of this Agreement is
effective without regard to the duration of the Transition Period.
"TERMINATION FOR CAUSE": Termination of this Agreement pursuant to Section
"24.1. TERMINATION FOR BREACH" or "24.2. TERMINATION FOR INADEQUATE
PERFORMANCE."
"TERMINATION LIQUIDATED DAMAGES": The amount calculated in accordance with
Exhibit K: Termination Liquidated Damages Calculation.
"THIRD-PARTY CLAIM": A claim of liability asserted against a Party by a Person
other than the other Party or either Party's Affiliates.
"THIRD-PARTY PASS-THROUGH CHARGES": Charges to TSG for certain services or
products that it acquires from third party vendors to enable it (in part) to
provide TSG Services, which charges TSG passes through as Fees charged to the
Airline Group for the following TSG Services:
(1) Reservation 800 Services;
(2) Corporate Inbound;
(3) ICS Services;
(4) Radio Services;
(5) telecommunications services under the telecommunications
agreements that were assigned by AMERICAN to TSG on the Effective
Date, as part of the Procurement Agreements, under the Bill of
Contribution, Assignment and Assumption Agreement dated as of the
Effective Date between AMERICAN and SABRE Properties, Inc. (a
predecessor by merger to TSG); and
(6) SITA Services.
"THIRD PARTY STANDARD SUPPORT": For hardware, Third Party Standard Support is
the preventive and remedial maintenance that the third party vendor of such
hardware offers its
Exhibit A to Information Technology Services Agreement page 19
<PAGE> 93
customers on a fixed fee basis. For software, Third Party Standard Support is
such combination of Telephone Support, Error Corrections, Updates, and
Enhancements that the third party vendor of such software offers its customers
on a fixed fee basis.
"THIRD PARTY SUPPORTED PRODUCT": Any hardware or software provided by a third
party vendor and used by TSG to provide the TSG Services except for hardware
and software that comprise the Commercial Systems, Real Time Applications, and
Connectivity Systems.
"THREE-YEAR SERVICES": Those categories of the TSG Services that TSG shall
provide to the Airline Group for a period of three years commencing upon the
Effective Date. The Three-year Services consist of the following TSG Services:
(1) Distributed Systems Service;
(2) Voice Network Services; and
(3) Radio Services.
"TORT DAMAGES": Bodily or personal injury or death or damage to real or
tangible personal property.
"TRANSFERRED SOFTWARE": Defined in the Bill of Contribution, Assignment and
Assumption Agreement by and between American Airlines, Inc. and SABRE
Properties, Inc. dated July 1, 1996.
"TRANSFERRED THIRD PARTY SOFTWARE": Defined in the Bill of Contribution,
Assignment and Assumption Agreement by and between American Airlines, Inc. and
SABRE Properties, Inc. dated July 1, 1996.
"TRANSITION ASSISTANCE": The services provided by TSG to the Airline Group, in
addition to the TSG Services and in accordance with Article XXIV -- Transition
Assistance; Survival, to enable the Airline Group to obtain services to replace
the TSG Services.
"TRANSITION PERIOD": The following periods of time during which TSG shall
provide Transition Assistance to the Airline Group:
A. The period commencing upon the date of AMERICAN's Notice of
termination of this Agreement and continuing up to 90 days after the
Termination Date;
B. For Three-year Services, Five-year Services, and Ten-year
Services, the period commencing upon the date of AMERICAN's Notice of
non-renewal and continuing for
Exhibit A to Information Technology Services Agreement page 20
<PAGE> 94
up to 90 days after the Expiration of this Agreement for the
Three-year Services, Five-year Services, or Ten- year Services, as the
case may be; or
C. For Three-year Services, Five-year Services, and Ten-year Services
and when AMERICAN has not given Notice of non-renewal, the period
commencing upon the respective dates of expiration of those Services
or the Expiration Date, as described in Section "2.3. EXTENSIONS OF
THE TERM," for the Three-year Services, Five-year Services, or
Ten-year Services or the Agreement, as the case may be, and continuing
up to 90 days thereafter.
"TRAVEL DISTRIBUTOR": A Person acting as a travel agency (i.e., accredited by
the Airline Reporting Corporation or the International Air Transport
Association to issue travel documents on behalf of third parties), or similar
neutral remarketer of travel or transportation services.
"TSG": The SABRE Group, Inc., a Delaware corporation.
"TSG CUSTOMER": Any customer of TSG, other than the Airline Group, for
services similar to TSG Services.
"TSG DEVELOPMENT": Development performed by TSG.
"TSG HIGHLY CONFIDENTIAL INFORMATION": Source code and technical documentation
(to the extent they constitute trade secrets or information not containing
trade secrets, but from which TSG's trade secrets can be derived), trade
secrets, and other information not containing TSG's trade secrets, but from
which TSG's trade secrets can be derived. For the avoidance of doubt, TSG and
the Airline Group agree that user manuals are generally not TSG Highly
Confidential Information and that file formats for input and/or output are not
TSG Highly Confidential Information. For the avoidance of doubt, decision
support source code and technical documentation are deemed to be TSG Highly
Confidential Information.
"TSG INDEMNITEES": TSG and its directors, officers, employees, and agents and
the heirs, executors, successors, and permitted assigns of any of those
Persons.
"TSG OPERATED SOFTWARE": All software used by TSG to provide the TSG Services,
including TSG Owned Software, Transferred Software, and Transferred Third Party
Software, and Other Third Party Software.
"TSG OWNED SOFTWARE": Software owned by TSG and used by TSG to provide the TSG
Services other than the Transferred Software and the Jointly Owned Software.
"TSG'S PRIMARY RESPONSIBILITIES": Any such responsibilities to which the
Airline Group and TSG agree in writing are TSG's Primary Responsibilities and
the following TSG Services:
A. Management of Reservations 800 Services;
B. Device Support provided in the System Operations Control Center;
Exhibit A to Information Technology Services Agreement page 21
<PAGE> 95
C. Commercial Services;
D. Real Time Services; and
E. Integration Services as defined in Exhibit B: TSG Services
Description.
"TSG SERVICES": Services consisting of the Data Processing Services, the
Enhanced Data Processing Services, and the Other Services and described in
Exhibit B: TSG Services Description or in this Agreement.
"TSG SOFTWARE INCOME": The license fees or equivalent compensation that TSG
receives for granting the right to use the Jointly Owned Software and the
license fees or equivalent compensation that TSG receives for operating the
Jointly Owned Software for the benefit of a TSG Customer.
(1) For the avoidance of doubt, TSG Software Income does not include
the following:
a. Income to TSG for providing maintenance;
b. Income to TSG for modifying software to meet TSG Customer
specifications;
c. Taxes; and
d. Implementation fees, training fees, and consulting fees.
(2) For the avoidance of doubt, TSG Software Income includes the
following:
a. Compensation TSG receives in kind as some or all of
license fees; and
b. The present value of license fees to be paid in
installments.
"UNAPPLIED CAPPED ADJUSTMENT": The excess of the Unrealized Aggregate
Adjustment over the Capped Adjustment.
"UNREALIZED AGGREGATE ADJUSTMENT": The excess of the difference (expressed as
an absolute value) between the Projected Annual Reset Fees and the Projected
Annual Negotiated Fees over the Adjustment Amount.
"UNSUPPORTED PRODUCT": A Third Party Supported Product that is no longer
supported by a third party vendor.
Exhibit A to Information Technology Services Agreement page 22
<PAGE> 96
"UNUSUAL RE-RUN": A Re-run in all the following circumstances:
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
"UPDATE": Any modification to the TSG Operated Software for one or more of the
following reasons:
(1) A modification of the TSG Operated Software because of a change
made to the operating system environment in which the TSG Operated
Software executes;
(2) Periodic installation of a collection of such Error Corrections
that have been provided to any user or licensee of the TSG Operated
Software since the last Update;
(3) A modification of the TSG Operated Software because of a change
in the law or regulations applicable to the TSG Operated Software;
(4) A modification to Third Party Software that TSG chooses to
install;
(5) A modification of the TSG Operated Software to remove a
Work-around and install an Error Correction; and
(6) A modification of the TSG Operated Software because of a change
to the hardware environment in which the TSG Operated Software
executes.
"VOICE MAIL": Voice Mail as described in Exhibit B: TSG Services Description.
"VOICE NETWORK SERVICES": The following services:
(1) Reservation 800 Services;
(2) Corporate Inbound described in Exhibit B: TSG Services
Description;
(3) ICS (Inter City System) described in Exhibit B: TSG Services
Description;
(4) Domestic/International Telephone Support described in Exhibit B:
TSG Services Description;
Exhibit A to Information Technology Services Agreement page 23
<PAGE> 97
(5) Voice Mail described in Exhibit B: TSG Services Description; and
(6) Video Conferencing described in Exhibit B: TSG Services
Description.
"WAIVED RE-RUN FEES": Any Fees not charged to the Airline Group pursuant to
Section "7.10. PAYMENT FOR RE-RUNS."
"WIND-DOWN COSTS": Costs that TSG would be forced to absorb and be unable to
efficiently reallocate to another customer or service as a result of AMERICAN's
termination of this Agreement pursuant to Sections "24.4. TERMINATION FOR
CONVENIENCE" OR "3.13 EFFECT OF DIVESTITURES, MERGERS, AND ACQUISITIONS," if
applicable. [TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
"WORK-AROUND": A modification to the TSG Operated Software to disable a
function in the TSG Operated Software in order to bypass a Malfunction
temporarily.
II. Interpretive Matters.
The Agreement is the result of the Parties' negotiations, and no provision of
this Agreement shall be construed for or against either Party because of the
authorship of that provision. In the interpretation of the Agreement, except
where the context otherwise requires:
1. "including" or "include" does not denote or apply any
limitation;
2. "or" has the inclusive meaning "and/or";
3. "and/or" means "or" and is used for emphasis only;
4. "$" refers to United States dollars;
5. the singular includes the plural, and vice versa, and each
gender includes each of the others;
6. captions or headings are only for reference and are not to be
considered in interpreting the Agreement;
7. "Article," "Section," and "Subsection" refer to an Article,
Section and Subsection, respectively, of the Agreement, unless
otherwise stated in the Agreement;
Exhibit A to Information Technology Services Agreement page 24
<PAGE> 98
8. if an ambiguity arises in a Subsection's, Section's, or
Article's cross-reference to another Section or Article, the
cross-referenced heading controls over the cross-referenced
Section or Article number.
Exhibit A to Information Technology Services Agreement page 25
<PAGE> 99
Exhibit H: SITA Relationship
SITA AGREEMENTS
The "SITA Agreements" consist of the following:
1. SABREnet Services Agreement between SITA and AMERICAN dated July 1,
1996.
2. Each of the Agreements listed below between SITA and AMERICAN, each as
amended by that certain Master Amendment, dated June 20, 1996, between
those two parties:
<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
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
</TABLE>
<PAGE> 100
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 101
<TABLE>
<CAPTION>
AA CONTRACT # AGREEMENT TITLE DATE
------------- --------------- ----
<S> <C> <C>
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
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
</TABLE>
<PAGE> 102
<TABLE>
<S> <C> <C>
** 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
</TABLE>
<PAGE> 103
SITA SABRENET SERVICES FLOW CHART
In order to provide the orderly administration of the SITA SABREnet Services,
the following arrangements shall be effective regarding the provisioning of
SITA SABREnet Services:
Sales of SITA SABREnet
Services
<TABLE>
<CAPTION>
AMERICAN AMERICAN
(For the Airline Group's (For Sale to TSG)
Consumption)
<S> <C>
Tax-paid invoice from SITA on the
Airline Group's consumption of
SITA SABREnet Services used in TSG
operations
Tax-free invoicing by SITA to AMERICAN
for resale, without margin, to TSG.
SITA provides tax calculations to ease
administrative burden on resale of
nonmargin sales to TSG.
TSG charges a management fee to AMERICAN
for network management of SITA SABREnet
Services that AMERICAN purchases for the
Airline Group as described below.
</TABLE>
<PAGE> 104
<TABLE>
<S> <C>
Structure permits TSG to provide resale
exemption certificates to AMERICAN to
exclude sales tax from SITA SABREnet
Services to be resold by TSG to third
parties without pyramiding sales tax on
its SITA SABREnet Services costs.
</TABLE>
INVOICING REQUIREMENTS
The Airline Group will pay its own taxable usage of SITA SABREnet Services as
specified in the SABREnet Services Agreement plus any applicable sales or
similar taxes thereon. TSG will separately calculate and invoice a management
fee on a per port basis for the SITA SABREnet Services purchased by the Airline
Group. The management fee shall be equal to the excess of (a) the per port
charge for SITA SABREnet Services from TSG to the Airline Group set forth in
the Rate and Reset Schedule over (b) the per port charge (including the related
SITA tax) for the same SITA SABREnet Services from SITA to AMERICAN under the
SABREnet Services Agreement. The per port charge for SITA SABREnet Services
from TSG to the Airline Group may not exceed the amount thereof set forth in
the Rate and Reset Schedule.
<PAGE> 105
Exhibit K: Termination Liquidated Damages Calculation
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
Exhibit K to Information Technology Services Agreement page 1
<PAGE> 106
[TEXT OMITTED-CONFIDENTIAL TREATMENT REQUESTED]
Exhibit K to Information Technology Services Agreement page 2
<PAGE> 107
Exhibit L: Transition Assistance Service Descriptions
Part I: General Assistance to Successor Provider.
A. The Transition Assistance Services will include the following:
1. Continuing to perform during the Transition Period any or all of the
TSG Services then being performed by TSG.
2. Providing to Successor Provider the specific services described in
Part II: Specific Assistance to Successor Provider.
3. Assisting Successor Provider in developing a plan for the transition
of all requested operations from TSG. TSG is not responsible for the
creation of the plan.
4. Providing to appropriate personnel of Successor Provider, during a
mutually defined time period, training in the performance of the
specific TSG Services that are to be transferred.
5. Providing Successor Provider with other information regarding TSG
Services that are required to implement the transition plan, and
providing such information regarding TSG Services as is reasonably
prudent or necessary in order for the Successor Provider to assume
responsibility for, and continue the performance of, TSG Services in
an orderly manner, so as to minimize, as much as possible, disruption
in the operations of the Airline Group.
6. With respect to all TSG Operated Software as of the commencement of
the Transition Period, TSG shall provide to Successor Provider source
code (subject to third party consents as necessary), master file and
field descriptions and record layouts, run documentation and job
control listings and other similar information necessary for Successor
Provider to run all TSG Operated Software.
7. Airline Group and TSG agree to negotiate in good faith, a purchase
price for assets that Airline Group wants and TSG will no longer
require.
8. Subject to Section "17.1. NON-SOLICITATION OF EMPLOYEES," TSG will
allow Successor Provider to make employment offers to all TSG
employees (other than key managers) assigned primarily to perform TSG
services. To the extent any TSG employee covered by the preceding
sentence has signed an employment agreement or other arrangement with
TSG precluding or hindering such employee's ability to be recruited or
hired by Successor Provider, TSG agrees that such restriction is null
and void and will not seek to enforce such restriction or to otherwise
preclude or hinder
Exhibit L to Information Technology Services Agreement page 1
<PAGE> 108
such employee from being recruited or hired by Successor Provider.
TSG shall provide Successor Provider reasonable access to such
employees for the purposes of interviews, evaluations, and
recruitment. Upon the written request of the Successor Provider, TSG
will provide Successor Provider with the names, job titles and work
locations of the applicable employees.
9. TSG will make available to Successor Provider any equipment owned or
leased by TSG that is then solely dedicated to the performance of the
TSG services. The Successor Provider may purchase the equipment at
the TSG's then current book value and/or assume TSG's rights and
obligations with respect to any such equipment leased by the TSG.
10. TSG will make available to Successor Provider any third party services
being utilized by TSG in the performance of the TSG Services. Subject
to any necessary consents from third party vendors, TSG will also be
entitled to retain the right to continue utilizing any third party
services as required in connection with the performance of services
for any other TSG customer.
B Access to Systems Information.
In providing the Transition Assistance Services, TSG shall prior to the
Expiration Date or the Termination Date, provide the Successor Provider
reasonable access to information concerning the use of equipment, TSG Operated
Software, personnel, third parties and other resources then being used by TSG.
TSG's obligations in this paragraph are in all cases subject to any prohibition
or restrictions on the use or disclosure of Transferred Third-Party Software
and Other Third-Party Software contained in the license agreements for such
software, provided however that TSG and Successor Provider shall use reasonable
efforts to obtain a waiver of any such prohibition or restriction.
1. Provided there is no charge to TSG, TSG shall use reasonable efforts
to cause third party licensors to assign or grant a license for Other
Third Party Software to the Airline Group with permission for the
Successor Provider to operate and use such software for the benefit of
the Airline Group at no charge and pursuant to terms and conditions
acceptable to the Airline Group for the following Other Third party
Software:
A. Any Other Third Party Software including application and
TPF operating software (including all updates, enhancements,
improvements and modifications).
B. All other operating software that is necessary to operate
application software and to which the Successor Provider
cannot obtain rights on a commercially reasonable basis, along
with the related documentation, data base management
Exhibit L to Information Technology Services Agreement page 2
<PAGE> 109
systems, data and technical information.
2. Before the end of the Transition Period, TSG shall grant the Airline
Group a non-exclusive, royalty-free, irrevocable, non-transferable
license to use, possess, copy, modify, and prepare Derivative Works of
the TSG Owned Software for the Airline Group's and its Affiliates'
internal business purposes, to permit another to exercise these rights
on the Airline Group's behalf for such internal business purposes, and
for the Airline Group's use as authorized by Section "12.5.
MARKETING RIGHTS AFTER EXPIRATION OR TERMINATION."
Before a third party is allowed access to such software or any other
Confidential Information of TSG, the third party must provide
sufficient written assurance to TSG that the third party will maintain
the confidentiality of the software and will not use the software for
any purposes other than for processing the internal work of the
Airline Group and its Affiliates. A third party that has executed an
Agreement substantially in the form of Exhibit N:
Non-disclosure/Non-competition Agreement shall be deemed to have
provided sufficient written assurances to TSG.
3. At the Airline Group's sole option, TSG shall provide Maintenance for
TSG Owned Software at mutually agreed upon terms and conditions and
TSG will offer new releases of TSG Owned Software at reasonable fees.
Exhibit L to Information Technology Services Agreement page 3
<PAGE> 110
Part II - Specific Responsibilities
I. TSG Responsibilities.
A. Provide to Successor Provider copies of documentation used by TSG in
performing the TSG Services.
B. Provide to the Successor Provider copies of other information
regarding the TSG Services that are required to implement the
transition plan, including but not limited to the following:
1. A list of all program and relevant procedure libraries
required by the Airline Group.
2. Copies of all security tables and rules used in the provision
of TSG Services to the Airline Group.
3. Copies of all terminal definition tables.
4. Copies of all relevant system information and other required
documentation.
5. System modifications created on behalf of the Airline Group,
including relevant documentation, run sheets, and job
scheduling.
6. Network access documentation.
7. Premise documentation.
8. Help Desk documentation.
C. Identify, record and provide control release levels of Other Third
Party Software.
D. Review and explain the data center, network and premise documentation
to the Successor Provider operations staff. Data center, network and
premise documentation describes operational and security procedures.
E. Freeze all non-critical software changes, other than modifications
necessary to address processing problems or to implement regulatory
changes upon the Airline Group's Notice to TSG.
F. Notify all outside vendors whose participation is relevant to the
transition of procedures to be followed during the Transition Period.
Exhibit L to Information Technology Services Agreement page 4
<PAGE> 111
G. Review all software libraries (test and production) with Successor
Provider operations staff.
H. Assist the Successor Provider in establishing naming conventions.
I. Assist the Successor Provider in its analysis of the DASD space
required for the databases and software libraries.
J. Provide machine readable current version of the source code, if
available, for TSG Owned Software (or in which the Airline Group holds
Retained Rights) in a form reasonably requested by the Airline Group.
K. Deliver all Documentation for the TSG Owned Software.
L. Provide Successor Provider reasonable access to TSG personnel who were
performing TSG Services.
M. Provide interim tapes of the AG Data, as reasonably requested.
N. Provide to Successor Provider multiple copies of the Airline Group
DASD volumes as requested by Successor Provider in cartridge or tape
medium.
O. Cooperate with Successor Provider in preparing and conducting of
transition testing to facilitate the orderly transfer of services.
P. Copy to cartridge, tape, or such other medium reasonably requested by
AMERICAN, all requested data files and other Confidential Information
of the Airline Group subject to the Airline Group's written
instructions.
Q. Deliver tapes of production data files (with content listings) and
printouts of control file information to Successor Provider.
R. Provide assistance to Successor Provider in the loading of data files
on Successor Provider's systems.
S. Provide assistance to Successor Provider with the turnover to
Successor Provider of the Network Services and in the execution of
parallel testing.
T. Provide assistance to Successor Provider with the Distributed Systems
Services transition.
U. After the Transition Period, TSG shall provide additional assistance
as reasonably
Exhibit L to Information Technology Services Agreement page 5
<PAGE> 112
requested by the Airline Group to facilitate continuity of operations
at market rates.
V. Before the end of the Transition Period, TSG shall return to the
Airline Group, at the Airline Group's request, any remaining property
of the Airline Group in TSG's possession or under its control,
including any remaining reports, data and other Confidential
Information of the Airline Group.
W. Certify to the Airline Group in writing that all the Airline Group
data and files have been removed from TSG's systems.
II. The Airline Group Responsibilities.
During the Transition Period, the Airline Group shall provide to TSG the
transition assistance described below:
A. Identify an individual to be the central point of contact between the
Airline Group and TSG during the Transition Period.
B. Make available to TSG, as reasonably requested by TSG, management
decisions, personnel information, approvals and acceptances necessary
for TSG to properly assist in the transition.
C. Cooperate with TSG in establishing appropriate testing criteria and
procedures for, and in the testing and conversion of applications and
systems.
D. Freeze all non-critical maintenance and enhancement requests during
the Transition Period, to ensure the integrity of the AG Data and
application programs being transferred from TSG to the Successor
Provider.
E. Schedule transition review meetings with the Successor Provider and
TSG to review status of transition according to the Successor
Provider's transition plan.
F. The Airline Group is responsible for managing the transition.
Exhibit L to Information Technology Services Agreement page 6
<PAGE> 113
Exhibit M: Dispute Resolution Appendix
Information Technology Services Agreement
A. Defined Terms. Various terms used in this Dispute Resolution
Appendix, which begin with a capital letter, are defined in the
Definitional Appendix to Information Technology Services Agreement.
In addition, the following terms used only in this Dispute Resolution
Appendix have the corresponding meanings:
"COMPLEX DISPUTE LIST": The "Complex Dispute List," 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.
"INITIAL EXECUTIVE REVIEW COMMITTEE": A committee consisting
of the Airline Group's CIO and the TSG division president
designated by TSG's Account Manager.
"SECOND EXECUTIVE REVIEW COMMITTEE": A committee consisting
of American's President and TSG's President.
"QUALIFICATIONS": Inclusion in the Complex Dispute List or
having extensive knowledge or experience, or both, regarding
information technology services similar to the TSG Service or
TSG Services that are the subject of the Dispute.
The interpretative matters set forth in the Definitional Appendix 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:
(a) Each Party shall instruct its Account Manager to
promptly negotiate in good faith with the other
Party's Account Manager to resolve the Dispute.
(b) If the Account Managers do not resolve the Dispute
within ten Business Days (or such longer period as
the Account Managers may agree) after the date of
referral of the Dispute to them, the Dispute shall be
referred (by either or both of the Account Managers)
to the Initial Executive Review Committee for
resolution.
Exhibit M to Information Technology Services Agreement page 1
<PAGE> 114
(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 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 to non-binding mediation in accordance with
Section B.2 of this Dispute Resolution Appendix.
(e) If the Dispute is not resolved by any of the
preceding steps and is not submitted to or is not
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), 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. 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 deemed to have the
Qualifications and to be accepted by the Parties.
Exhibit M to Information Technology Services Agreement page 2
<PAGE> 115
(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 addition to information
obtained under Section 23.2 of the Agreement) 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 Account Manager 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) 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
Exhibit M to Information Technology Services Agreement page 3
<PAGE> 116
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 in
addition to the information available under Section
23.2 of the Agreement. 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;
(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.
Exhibit M to Information Technology Services Agreement page 4
<PAGE> 117
(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 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
Exhibit M to Information Technology Services Agreement page 5
<PAGE> 118
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 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 Article
XIV 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.
Exhibit M to Information Technology Services Agreement page 6
<PAGE> 1
EXHIBIT 10.10
TRAVEL PRIVILEGES AGREEMENT
Between
AMERICAN AIRLINES, INC.
and
THE SABRE GROUP, INC.
Dated as of: July 1, 1996
<PAGE> 2
TRAVEL PRIVILEGES AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Termination of Information Technology Services Agreement . . 1
2.2 Events of Default . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Rights Upon Default . . . . . . . . . . . . . . . . . . . . . 2
3 EMPLOYEES OF AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Acquired Affiliates . . . . . . . . . . . . . . . . . . . . . 3
3.2 Transfer of a Partial Interest in an Affiliate . . . . . . . 3
4 CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Acquisition by Air Carrier . . . . . . . . . . . . . . . . . 3
4.2 Transfer of Eligible Employees to Non-Affiliate . . . . . . . 3
4.3 Post-Affiliation with American . . . . . . . . . . . . . . . 3
5 EMPLOYEE TRAVEL PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . 4
5.1 D1, D2 and D3 Travel Privileges . . . . . . . . . . . . . . . 4
5.2 A2, A4 and A6 Travel Privileges . . . . . . . . . . . . . . . 4
5.3 A9 Travel Privileges . . . . . . . . . . . . . . . . . . . . 4
5.4 ID20 Travel Privileges . . . . . . . . . . . . . . . . 4
6 RETIREE TRAVEL PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . 5
6.1 D2 and D3 Travel Privileges . . . . . . . . . . . . . . . . . 5
6.2 A2, A4 and A6 Travel Privileges . . . . . . . . . . . . . . . 5
6.3 A9 Travel Privileges . . . . . . . . . . . . . . . . . . . . 5
6.4 ID20 Travel Privileges . . . . . . . . . . . . . . . . 5
7 BOOKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Booking Procedures . . . . . . . . . . . . . . . . . . . . . 5
7.2 Reservations System Access . . . . . . . . . . . . . . . . . 5
8 CHANGES TO TRAVEL PRIVILEGES . . . . . . . . . . . . . . . . . . . . . 6
9 NON-DISCRIMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
10 TRAVEL CARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10.1 Issuance of Travel Cards . . . . . . . . . . . . . . . . . . . 6
10.2 Maximum Number of Travel Cards . . . . . . . . . . . . . . . . 7
10.3 Non-Transferrable . . . . . . . . . . . . . . . . . . . . . . . 7
10.4 Recovery of Travel Cards . . . . . . . . . . . . . . . . . . . 7
10.5 Lost, Destroyed, Transferred or Stolen Travel Cards . . . . . . 7
11 ABUSE OF TRAVEL CARDS AND TRAVEL PRIVILEGES . . . . . . . . . . . . . . 7
11.1 Risk of Misappropriated Travel Cards, Employee Numbers
and Passes . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.2 Abuse of Travel Privileges by Eligible Employees and Eligible
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12 CHARGES FOR TRAVEL PRIVILEGES . . . . . . . . . . . . . . . . . . . . . 8
12.1 Charges for Eligible Employee Travel Privileges . . . . . . . . 8
12.2 Charges for Eligible Retiree Travel Privileges . . . . . . . . 8
12.3 Date for Determining Travel Charges . . . . . . . . . . . . . . 8
12.4 Readjustment of Charges . . . . . . . . . . . . . . . . . 8
13 INVOICES AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
13.1 Travel Activity Reports . . . . . . . . . . . . . . . . . . . . 8
13.2 Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.1 Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . 9
14.2 Manner and Place of Payment . . . . . . . . . . . . . . . . . . 9
14.3 No Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.4 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.5 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.6 Disputed Charges . . . . . . . . . . . . . . . . . . . . . . . 9
14.7 Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . 10
15 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15.1 Allocation of Responsibility for Taxes . . . . . . . . . . . . 10
15.2 Claims for Refunds . . . . . . . . . . . . . . . . . . . . . . 10
15.3 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16 LIMITS OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
17.1 Transfer to Affiliate . . . . . . . . . . . . . . . . . 11
17.2 Conditions of Transfer . . . . . . . . . . . . . . . . 11
18 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . 12
18.1 Non-Disclosure . . . . . . . . . . . . . . . . . . . . 12
18.2 Return of Confidential Information . . . . . . . . . . 12
18.3 No Adequate Remedy at Law . . . . . . . . . . . . . . 12
19 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
19.1 Accrued Obligations . . . . . . . . . . . . . . . . . . 12
19.2 Survival in General . . . . . . . . . . . . . . . . . . 13
19.3 Survival as to Eligible Retirees . . . . . . . . . . . 13
20 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 13
20.1 Additional Representations and Warranties . . . . . . . 13
20.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 13
20.3 Binding Effect . . . . . . . . . . . . . . . . . . . . 14
20.4 Integration. . . . . . . . . . . . . . . . . . . . . . 14
20.5 No Third Party Beneficiaries . . . . . . . . . . . . . 14
20.6 No Partnership . . . . . . . . . . . . . . . . . . . . 14
20.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 14
20.8 Multiple Originals . . . . . . . . . . . . . . . . . . 15
20.9 Invalidity of Provisions . . . . . . . . . . . . . . . 15
20.10 Force Majeure . . . . . . . . . . . . . . . . . . . . . 15
20.11 Governing Law . . . . . . . . . . . . . . . . . . . . . 15
20.12 Dispute Resolution . . . . . . . . . . . . . . . . . . 15
20.13 Choice of Forum . . . . . . . . . . . . . . . . . . . 15
20.14 Compliance with Laws . . . . . . . . . . . . . . . . . 16
</TABLE>
Attachments
SCHEDULE A Travel Charges for Eligible Employees
SCHEDULE A-1 Allocated Administrative Costs
SCHEDULE B Travel Charges for Eligible Retirees
SCHEDULE C Maximum Number of Travel Cards
APPENDIX A Defined Terms
APPENDIX B Dispute Resolution Procedures
iii
<PAGE> 5
TRAVEL PRIVILEGES AGREEMENT
This Travel Privileges Agreement (together with the schedules and
appendices attached hereto, the "Agreement") is made and entered into as of the
first day of July, 1996, by and between American Airlines, Inc., a Delaware
corporation ("American"), and The SABRE Group, Inc., a Delaware corporation
("The SABRE Group").
RECITALS
WHEREAS, American makes available to its own employees and retirees
certain Travel Privileges as provided in AA Travel Policies; and
WHEREAS, as part of a reorganization of the technology business of AMR
Corporation, American transferred certain assets and employees of its STIN,
SCS, SDS and SABRE Interactive divisions to The SABRE Group; and
WHEREAS, American and The SABRE Group desire to make available to
certain employees and retirees of The SABRE Group Travel Privileges equivalent
to those enjoyed by employees and/or retirees of American; and
WHEREAS, American is willing to provide such Travel Privileges and The
SABRE Group is willing to pay for such Travel Privileges in accordance with the
terms and conditions in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, 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 the list of Defined Terms
annexed hereto as Appendix A. This Agreement shall be interpreted in
accordance with the rules of interpretation in Appendix A.
2 TERM AND TERMINATION This Agreement shall be effective as of The
Effective Date and shall continue in effect until June 30, 2008, unless this
Agreement is terminated sooner as provided elsewhere herein.
2.1 Termination of Information Technology Services Agreement
This Agreement may be terminated by American upon ninety (90) days Notice to
The SABRE Group in the event that the Information Technology Services Agreement
between American and The SABRE Group dated July 1, 1996 (or any replacement
agreement with The SABRE Group) is terminated by American due to a material
breach by The SABRE Group.
1
<PAGE> 6
2.2 Events of Default The occurrence of any one or more of
the following events shall constitute an Event of Default pursuant to the
terms of this Agreement:
2.2.1 A Party materially breaches any warranty,
agreement or covenant, or materially misrepresents any representation,
given by it in this Agreement, and such breach or misrepresentation
is not corrected or cured by such Party within the Cure Period.
2.2.2 A Party shall admit in writing its inability
to pay its debts generally as they become due.
2.2.3 A Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or substantially all of its
assets, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the U.S. Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the U.S.
Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting any of the foregoing.
2.2.4 A proceeding or case shall be commenced,
without the application or consent of a Party, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of such Party or of all or substantially all of
its assets, or (iii) similar relief in respect of such Party under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, and such proceeding or case
shall continue undismissed for a period of ninety (90) days, or an
order of relief against such Party shall be entered in an involuntary
case under the U.S. Bankruptcy Code or under any similar law.
2.3 Rights Upon Default Upon the occurrence of an Event of
Default, the Party not causing such Event of Default will be entitled to
immediately terminate this Agreement and all Travel Privileges granted
hereunder by giving Notice to the other Party and to seek all legal and
equitable remedies to which it is entitled, including without limitation all
actual and direct damages it may have suffered by virtue of such Event of
Default, except as limited hereunder. In the event of a Dispute as to whether
an Event of Default has occurred, the exercise of rights under this Section
shall be suspended until resolution of such Dispute.
3 EMPLOYEES OF AFFILIATES
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
2
<PAGE> 7
4 CHANGE OF CONTROL
4.1 [INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
4.2 Transfer of Eligible Employees to Non-Affiliate
American shall immediately be entitled to terminate, and upon such a
termination The SABRE Group shall immediately revoke, Travel Privileges and
Travel Cards that were provided to Eligible Employees who are (i) transferred
to a Person that is not an Affiliate of The SABRE Group, or (ii) are on
secondment for more than twenty-four (24) months in the aggregate (whether or
not consecutively) to the same Person.
4.3 Post-Affiliation with American Unless American
expressly consents in writing, which consent may be withheld in American's sole
discretion, the SABRE Group may not provide any Travel Privileges or Travel
Cards to any employees who are hired on or after the date on which The SABRE
Group ceases to be an Affiliate of American ("Disaffiliation Date").
4.3.1 In the event that an Eligible Employee who
holds Travel Privileges in any of Pass Categories A2, A4 or A6 after
the Disaffiliation Date ceases to hold such Travel Privileges for any
reason, The SABRE Group may give such travel privileges to another
Eligible Employee in accordance with the following Section.
4.3.2 Notwithstanding anything in Section 10.2 to
the contrary, on and after the Disaffiliation Date:
(a) the maximum number of Eligible Employees who may hold Travel
Privileges in Pass Category A2 shall be the number of Eligible
Employees who held such Travel Privileges immediately prior to the
Disaffiliation Date.
(b) the maximum number of Eligible Employees who may hold Travel
Privileges in Pass Category A4 shall be the remainder of (i) the
number of Eligible Employees who held such Travel Privileges in any of
Pass Categories A2 or A4 immediately prior to the Disaffiliation Date,
minus (iii) the number of Eligible Employees who from time to time
after the Disaffiliation Date hold Travel Privileges in Pass Category
A2.
(c) the maximum number of Eligible Employees who may hold Travel
Privileges in Pass Category A6 shall be the remainder of (i) the
number of Eligible Employees who held Travel Privileges in any of Pass
Categories A2, A4 or A6 immediately prior to the Disaffiliation Date,
minus (iii) the number of Eligible Employees who from time to time
after the Disaffiliation Date hold Travel Privileges in any of Pass
Categories A2 or A4.
3
<PAGE> 8
5 EMPLOYEE TRAVEL PRIVILEGES
5.1 D1, D2 and D3 Travel Privileges Subject to Section
10.2, The SABRE Group shall be entitled to give Eligible Employees the ability
to exercise Travel Privileges for D1, D2 and D3 Pass Category Space Available
travel on AA as specified in AA Travel Policies in a manner identical to that
available to American's employees. The SABRE Group shall not be entitled to
issue D3 passes to any individual other than an Eligible Employee or Eligible
Retiree, subject to the limits specified in AA Travel Policies.
5.2 A2, A4 and A6 Travel Privileges Subject to Section
10.2, The SABRE Group shall be entitled to give Eligible Employees who are
members of Senior Management the ability to exercise Travel Privileges for A2,
A4 and A6 Pass Category Positive Space travel on AA as specified in AA Travel
Policies in a manner identical to that available to American's equivalent
senior management employees.
5.3 A9 Travel Privileges Subject to Section 10.2, The SABRE
Group shall be entitled to give Eligible Employees the ability to exercise
emergency Travel Privileges in Pass Category A9 for travel on AA in the
circumstances and otherwise as specified in AA Travel Policies in a manner
identical to that available to American's employees.
5.4 ID20 Travel Privileges The SABRE Group shall be
entitled to give Eligible Employees the ability to purchase ID20 tickets for
travel as specified in AA Travel Policies in a manner identical to that
available to American's employees. ID20 tickets shall not be used for business
travel.
6 RETIREE TRAVEL PRIVILEGES
6.1 D2 and D3 Travel Privileges The SABRE Group shall be
entitled to give Eligible Retirees the ability to exercise Travel Privileges
for D2 and D3 Pass Category Space Available travel on AA as specified in AA
Travel Policies in a manner identical to that available to American's similarly
situated retirees.
6.2 A2, A4 and A6 Travel Privileges The SABRE Group
shall be entitled to give Eligible Retirees who retire as members of Senior
Management the ability to exercise Travel Privileges for A2, A4 and A6 Pass
Category Positive Space travel on AA as specified in AA Travel Policies in a
manner identical to that available to American's equivalent senior management
retirees.
6.3 A9 Travel Privileges The SABRE Group shall be entitled to
give Eligible Retirees the ability to exercise personal emergency Travel
Privileges in Pass Category A9 for travel on AA in the circumstances and as
otherwise specified in AA Travel Policies in a manner identical to that
available to American's retirees.
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6.4 ID20 Travel Privileges The SABRE Group shall be
entitled to give Eligible Retirees the ability to purchase ID20 tickets for
travel as specified in AA Travel Policies in a manner identical to that
available to American's retirees. ID20 tickets shall not be used for business
travel.
7 BOOKINGS
7.1 Booking Procedures Eligible Employees, Eligible
Retirees and Guests shall make all bookings for travel in the exercise of
Travel Privileges exclusively through American's Reservation System and shall
not make such bookings through any CRS or any other reservations system.
American shall not pay booking fees or other charges to The SABRE Group to the
extent related to the exercise of Travel Privileges.
7.2 Reservations System Access If requested by The SABRE
Group, American shall promptly give Eligible Employees and Eligible Retirees
direct computer access to the AA Reservations System at the Agreed Access Level
for use in the exercise of Travel Privileges. The SABRE Group shall encourage
all Eligible Employees and Eligible Retirees to make all bookings hereunder
using the direct computer access available to them. All computer access to the
AA Reservations System provided hereunder shall be used exclusively in
connection with the exercise of Travel Privileges and within the Agreed Access
Level.
8 CHANGES TO TRAVEL PRIVILEGES Subject to Section 9, American may,
from time to time, in its sole discretion, make changes to the AA Travel
Policies affecting Travel Privileges hereunder, including without limitation
changes in availability or changes in pricing as provided in Article 12.
American shall consult with The SABRE Group regarding such change as early as
practicable, so that The SABRE Group can provide at least as much notice to
Eligible Employees and Eligible Retirees as American provides to its own
employees and retirees. No such change shall be effective as to Eligible
Employees or Eligible Retirees before such change is applicable to American's
own employees and retirees.
9 NON-DISCRIMINATION It is the intention of the parties that the
Eligible Employees and Eligible Retirees who are given Travel Privileges will
have the same travel privileges as American gives to its own employees and
retirees, respectively. American shall honor the Travel Privileges given by
The SABRE Group under this Agreement in the same manner that it honors similar
privileges given to its own employees and retirees. American and its personnel
will not discriminate against Eligible Employees or Eligible Retirees in making
changes to AA Travel Policies or in the application of AA Travel Policies, or
against Eligible Employees or Eligible Retirees or their Guests in the use of
Travel Privileges. AA Travel Policies affecting the exercise of Travel
Privileges will be determined and applied to Eligible Employees, Eligible
Retirees and American's employees and retirees without regard to company
affiliation. American shall not amend AA Travel Policies if such amendment
would adversely affect the Travel Privileges given under this Agreement, unless
such
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adverse affect applies equally to American's own employees and retirees.
American shall not make any changes in Pass Category designations or the
assignment of Travel Privileges within Pass Categories which would adversely
affect the Travel Privileges given under this Agreement, unless such adverse
affect applies equally to American's own employees and retirees. Any such
change by American will be applied to Eligible Employees and Eligible Retirees
and to American's employees and retirees, respectively, in a non-discriminatory
manner. Boarding priority will be determined and applied on the basis of Pass
Category (subject to normal procedural variances), without regard to company
affiliation. American will investigate reports of discrimination against
Eligible Employees or Eligible Retirees in the application of AA Travel
Policies and against Eligible Employees or Eligible Retirees or their Guests in
the use of Travel Privileges, and American shall take appropriate action
against any American employee or contractor that it determines to have violated
this Agreement, including counseling or other disciplinary action.
10 TRAVEL CARDS
10.1 Issuance of Travel Cards American, upon request from
The SABRE Group, shall issue Travel Cards to Eligible Employees, Eligible
Retirees and Spouses in accordance with American's standard procedures. For
each Travel Card to be issued, The SABRE Group shall provide American a written
request containing the following information: Eligible Employee or Eligible
Retiree name, Spouse name, employee ID number, and Social Security Number.
10.2 Maximum Number of Travel Cards The maximum number
of Eligible Employees who may have Travel Privileges in any year shall be
limited to the numbers specified in Schedule C.
10.3 Non-Transferrable Travel Cards and Travel Privileges
shall not be transferrable by any present or former Eligible Employee,
Eligible Retiree or Spouse.
10.3.1 The SABRE Group cannot revoke Travel
Privileges from an Eligible Employee and reissue them to another
Eligible Employee, except in instances of abuse of the Travel
Privileges by the Eligible Employee from whom the Travel Privileges
are revoked.
10.4 Recovery of Travel Cards The SABRE Group shall
recover from any individual who ceases, for any reason, to be an Eligible
Employee, Eligible Retiree or Spouse all Travel Cards issued to such
individual. Recovered Travel Cards shall be returned to American, or destroyed
by The SABRE Group at American's request. The SABRE Group shall not permit any
terminated employee to exercise Travel Privileges unless such employee is
otherwise an Eligible Employee.
10.5 Lost, Destroyed, Transferred or Stolen Travel Cards
The SABRE Group shall inform American as promptly as practicable in the event
that any Travel Card is lost, destroyed, transferred or stolen.
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11 ABUSE OF TRAVEL CARDS AND TRAVEL PRIVILEGES
11.1 Risk of Misappropriated Travel Cards, Employee Numbers and
Passes The SABRE Group shall use commercially reasonable efforts to
recover misappropriated Travel Cards and travel passes, and to assist American
in preventing the use of Travel Cards, Eligible Employee identification
numbers and travel passes that are misappropriated by third parties. American
shall use commercially reasonable efforts to assist The SABRE Group to recover
misappropriated Travel Cards and passes presented to American Employees at its
ATO and CTO locations and to prevent misuse of misappropriated Eligible
Employee identification numbers. American and The SABRE Group shall share the
costs of the misuse of misappropriated Travel Cards, Eligible Employee
identification numbers and travel passes in proportion to the number of their
respective employees and retirees holding travel privileges. American and The
SABRE Group shall cooperate to recover payment for such costs from the culpable
individuals.
11.2 Abuse of Travel Privileges by Eligible Employees and
Eligible Retirees For good cause shown, and upon Notice from and as requested
by American, The SABRE Group shall, take appropriate disciplinary action
against any Eligible Employee or Eligible Retiree or Spouse who has transferred
a Travel Card or exercised Travel Privileges contrary to AA Travel Policies.
Such action shall be equivalent to the level of discipline that American takes
against its own employees and retirees in similar circumstances, and may
include requiring such employee to pay American for travel obtained contrary to
AA Travel Policies at the rates that American charges its own employees and
retirees in similar circumstances, and/or the suspension or termination of
Travel Privileges. In the event of the suspension or termination of an
individual's Travel Privileges, The SABRE Group shall use commercially
reasonable efforts to recover Travel Cards issued to such individual and to
assist American in preventing the use of such Travel Cards. The SABRE Group
shall bear all risks associated with the misuse of Travel Cards and Travel
Privileges by its Eligible Employees and Eligible Retirees, including without
limitation paying American for all travel obtained contrary to AA Travel
Policies at the rates that American takes against its own employees and
retirees in similar circumstances. AA shall, at The SABRE Group's expense,
provide commercially reasonable assistance to The SABRE Group to recover such
payments from culpable individuals. The SABRE Group shall, at The SABRE
Group's expense, assist American in prosecuting any individual whose use of
such Travel Cards or Travel Privileges was, in American's opinion, a violation
of criminal law.
12 CHARGES FOR TRAVEL PRIVILEGES
12.1 Charges for Eligible Employee Travel Privileges
For the exercise of Travel Privileges by Eligible Employees, American shall
charge The SABRE Group and The SABRE Group shall pay American the charges
described on Schedule A.
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12.2 Charges for Eligible Retiree Travel Privileges
For the exercise of Travel Privileges by Eligible Retirees, American shall
charge The SABRE Group and The SABRE Group shall pay American the charges
described on Schedule B.
12.3 Date for Determining Travel Charges The applicable
Travel Charges for any Flight Segment shall be determined as of the date on
which travel on such Flight Segment was scheduled to begin.
12.4 Readjustment of Charges Charges shall be reset by
American on January 1 of each year in accordance with Schedule A and Schedule
B. American shall provide to The SABRE Group by December 1 of each year data
supporting the proposed readjustment of charges. In September of each year,
American shall provide The SABRE Group with a non-binding estimate of such
charges for budgeting purposes.
13 INVOICES AND REPORTS
13.1 Travel Activity Reports American will provide to The
SABRE Group on the fourth Business Day of each month a Travel Activity Report,
which shall be in the format typically produced by American for its own
internal use, and shall describe travel activity by each Eligible Employee,
Eligible Retiree, Spouse and Guest. The Travel Activity Report shall specify
all Flight Segments flown, and for each Flight Segment shall specify the
applicable Employee number, flight number, Pass Category, flight date, Travel
Charge, Travel Charge collected, Taxes and Surcharges, Taxes and Surcharges
collected, and taxable value for income tax reporting purposes.
13.2 Invoices American will submit on the fourth Business
Day of each month an invoice to The SABRE Group which will set forth the
amounts payable by The SABRE Group hereunder, including Travel Charges for
travel activity related to Travel Privileges by each Eligible Employee and
Eligible Retiree, plus applicable Taxes and Surcharges and other expenses
permitted by this Agreement, net of any Travel Charges, Taxes and Surcharges
collected by American.
14 PAYMENTS
14.1 Time of Payment All amounts billed in an invoice shall be
due and payable immediately upon receipt of such invoice and shall be late if
not paid within thirty (30) days after the date of such invoice.
14.2 Manner and Place of Payment The SABRE Group shall pay all
charges hereunder to American via internal transfer billing for so long as The
SABRE Group is an Affiliate of American, and thereafter via wire transfer of
immediately available funds to an account designated by American.
14.3 No Set-Off Payments hereunder shall be made without
deduction or set-off.
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<PAGE> 13
14.4 Currency All amounts payable or creditable by either
Party to the other under this Agreement shall be paid or credited in United
States Dollars.
14.5 Audits The SABRE Group shall be entitled to conduct an
audit of those records necessary to validate the fees, charges and payments
hereunder; provided, however, that American shall not be required to turn over
Confidential Information of a third party. Absent a showing of good cause, the
audits shall take place no more frequently than once every six (6) months. The
audits shall be conducted either through internal auditors or disinterested
third parties, and in all cases in accordance with standard auditing
procedures. The SABRE Group shall bear the cost of the audit; provided,
however, that if an error in the charges is discovered as a result of the
audit, American shall correct the error and pay for the cost of the audit up to
the amount of the error. All records that may be necessary to validate the
charges and payments hereunder shall be retained for at least two (2) years
following the close of the calendar year to which such records relate.
14.6 Disputed Charges If within ninety (90) days after receipt
of an invoice hereunder, The SABRE Group provides Notice to American that The
SABRE Group in good faith reasonably disputes any or all of the charges billed
in such invoice, the Parties shall use their best efforts to resolve the
Dispute according to Section 20.12 and the Dispute Resolution Procedures. If
such Dispute is not resolved prior to the next invoice date, American will
issue a credit to The SABRE Group on such invoice for the amount of charges in
Dispute, which credit shall remain outstanding pending resolution of such
Dispute. Billing disputes for which Notice is not provided as specified herein
shall be deemed waived except in cases of fraud or obvious error.
14.7 Late Charges Any undisputed sum due hereunder that is not
paid within thirty (30) days after the date of the invoice shall thereafter
bear interest until paid at a rate of interest equal to one percentage point
(1%) per annum above the prime rate announced from time to time by the
principal New York office of Citibank, N.A., but in no event to exceed the
maximum rate of interest allowed by applicable law.
15 TAXES
15.1 Allocation of Responsibility for Taxes The SABRE Group
shall be responsible for (and shall indemnify and hold American harmless for)
all Taxes imposed in connection with this Agreement or the exercise of Travel
Privileges, provided, however, that American shall be responsible for all
Taxes, however designated or levied, that are imposed on, based on or measured
by American's income, revenues, capital, or net worth. The SABRE Group shall
be responsible for all Eligible Employee and Eligible Retiree income tax
withholding and income tax reporting relating to the exercise of Travel
Privileges.
15.2 Claims for Refunds Subject to American's reasonable
discretion, The SABRE Group may require American to apply, at The SABRE Group's
expense, for a refund of Taxes otherwise subject to indemnification under
Section 15. In lieu of pursuing such a claim, American may assign its rights
to a claim to The SABRE Group.
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15.3 Refunds American shall promptly pay over to The SABRE
Group an amount equivalent to any refund, credit, offset or abatement
(including interest thereon) received by American of Taxes, to the extent such
refunds, credits, offsets, or abatements are of amounts that were paid
hereunder by The SABRE Group to American or to a taxing authority.
15.4 Cooperation Each party shall cooperate as the other party
may reasonably request in minimizing Taxes incurred in connection with this
Agreement; provided, however, that neither party shall be required to take any
step that would be materially disadvantageous to its business or operations or
would require it to incur material additional costs unless the other party
agrees to reimburse the costs.
16 LIMITS OF LIABILITY EXCEPT AS PROVIDED BELOW, NEITHER PARTY SHALL BE
LIABLE UNDER ANY CIRCUMSTANCES FOR ANY EXEMPLARY, PUNITIVE, 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.
EXCEPT AS PROVIDED BELOW, IN NO EVENT SHALL EITHER PARTY'S LIABILITY HEREUNDER
DURING ANY CALENDAR YEAR EXCEED THE CHARGES PAID BY THE SABRE GROUP DURING THE
PRECEDING CALENDAR YEAR.
IN THE EVENT THAT AMERICAN MATERIALLY BREACHES THIS AGREEMENT BY WILFULLY OR
INTENTIONALLY FAILING OR REFUSING TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN
THE SABRE GROUP SHALL BE ENTITLED TO RECOVER ITS ACTUAL AND CONSEQUENTIAL
DAMAGES IN AN AMOUNT NOT TO EXCEED FIFTY MILLION DOLLARS ($50,000,000), AND IF
MONETARY DAMAGES AS SPECIFIED IN THE PRECEDING SENTENCE WOULD NOT BE AN
ADEQUATE REMEDY, THEN THE SABRE GROUP SHALL BE ENTITLED TO SPECIFIC ENFORCEMENT
OF THIS AGREEMENT. SPECIFIC ENFORCEMENT SHALL BE SOUGHT THROUGH ARBITRATION IN
ACCORDANCE WITH THE DISPUTE RESOLUTION PROCEDURES.
17 NO ASSIGNMENT Except as specifically set forth in this Agreement,
neither 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 Party,
which may be withheld in such parties sole discretion.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
17.2 Conditions of Transfer No assignment of this Agreement
shall be effective unless and until the transferee has executed a counterpart
of this Agreement evidencing its agreement to be bound by the provisions of and
to assume all of the obligations of the transferor under this
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Agreement, whether present or contingent. The Person receiving such an
assignment must further agree to implement and maintain at its own expense any
procedures that American may reasonably require for administering, auditing,
tracking and reporting the exercise of Travel Privileges. No such assignment
shall relieve the transferor of any of its obligations under this Agreement
arising prior to the date of such assignment. No such assignment may
materially adversely affect the rights and obligations of the nonassigning
Party under this Agreement. No assignment by The SABRE Group shall be made to
any Air Carrier that is not an Affiliate of American, or to any Affiliate of
such an Air Carrier, without the express prior written consent of American,
which may be withheld in its sole discretion. Any attempted assignment or
other transfer except in accordance with the provisions of this Section shall
be null and void ab initio.
18 CONFIDENTIALITY
18.1 Non-Disclosure Neither Party shall use, sell, transfer,
publish, disclose, display or otherwise make available to any third party,
Confidential Information of the other Party except (a) as permitted or intended
by this Agreement, or (b) as may be required by applicable law or by any
government in the exercise of its lawful authority, in which case the Party
from whom disclosure is sought shall (i) promptly notify the other Party, (ii)
use reasonable and lawful efforts to resist making any disclosure of
Confidential Information not approved by such other Party, (iii) use reasonable
and lawful efforts to limit the amount of Confidential Information to be
disclosed, and (iv) cooperate with the other Party (at such other Party's
expense) to obtain a protective order, confidential treatment or other
appropriate relief to minimize the further dissemination of any Confidential
Information to be disclosed. In addition, neither Party shall disclose the
Confidential Information of the other Party to any employee or agent, except on
a need-to-know basis. Each Party shall ensure that all such employees and
agents recognize that the Confidential Information of the other Party is
subject to this non-disclosure obligation. The Party that receives
Confidential Information from the other Party agrees to maintain such
information in secrecy at all times, using the same degree of care with respect
to such Confidential Information as it uses in protecting its own proprietary
information and trade secrets.
18.2 Return of Confidential Information Upon termination of
this Agreement for any cause or reason, each Party shall deliver to the other
Party all of such other Party's Confidential Information (including all copies
thereof) then in its or its Affiliates' possession and shall purge any copies
thereof encoded or stored on magnetic or other electronic media or processors
then in its or its Affiliates' possession.
18.3 No Adequate Remedy at Law Each Party acknowledges and
agrees that the other Party will have no adequate remedy at law if there is a
breach or threatened breach of this Section and, notwithstanding anything to
the contrary in Appendix B, that the other Party shall be entitled to an
injunction against such breach. Nothing herein shall be construed as a waiver
of any other legal or equitable remedies which may be available to either Party
if the other Party breaches this Section.
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19 SURVIVAL
19.1 Accrued Obligations Termination of this Agreement for
any cause shall not affect the transactions previously consummated under this
Agreement, nor release any Party from any liability, duty, or obligation which
at the time of termination has already accrued to the other Party or which
thereafter may accrue in respect of any act or omissions prior to such
termination, nor shall any such termination hereof affect in any way the
survival of any right, liability, duty, or obligation of the Parties which is
intended, expressly or impliedly, in accordance with the terms of this
Agreement to survive termination hereof.
19.2 Survival in General Notwithstanding anything to the
contrary contained herein, the rights and obligations under Articles 13, 14,
15, 16 and 18 shall survive any termination or expiration of this Agreement.
19.3 Survival as to Eligible Retirees Notwithstanding
anything to the contrary contained herein, the provisions hereunder relating to
rights and obligations of American and The SABRE Group with respect to Travel
Privileges for Eligible Retirees shall survive any termination or expiration of
this Agreement.
20 MISCELLANEOUS
20.1 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 or filings with, any governmental authority are required as a
condition to the valid execution, delivery and performance of this Agreement on
its part.
20.2 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:
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If to The SABRE Group: The SABRE Group, Inc.
MD 4202
4255 Amon Carter Boulevard
Fort Worth, TX 76155
URGENT ATTENTION: SABRE Group Chief
Financial Officer
Telecopy: (817) 931-5582
If to American: American Airlines, Inc.
MD 5115
4333 Amon Carter Boulevard
Fort Worth, TX 76155
URGENT ATTENTION: Managing Director
Corporate Human Resources
Telecopy: (817) 967-4380
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.
20.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Parties and their permitted successors and assigns.
20.4 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 both Parties.
20.5 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.
20.6 No Partnership The Parties do not intend hereby to create a
partnership, joint venture or other business combination or collaboration. The
existence of any such arrangement or entity is expressly disclaimed.
20.7 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. Failure by any Party to insist upon the
strict performance of, or 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 or any other failure to perform or breach of that
or any other covenant, duty, agreement, or condition. No
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waiver of a breach of any provision of this Agreement by either Party shall
constitute a waiver of any subsequent breach of the same or any other provision
hereof.
20.8 Multiple Originals This Agreement shall be executed in
counterparts or multiple originals, all of which together shall constitute one
agreement binding on each Party.
20.9 Invalidity of Provisions 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 either Party.
20.10 Force Majeure Except for the obligations to make payment,
neither Party shall be liable to the other in the event and to the extent that
performance by such Party is delayed or prevented by Force Majeure; provided
that in the event any failure to pay results from a Force Majeure preventing
the actual transfer of funds (e.g., failure of communication lines for transfer
of funds) such obligation to pay shall be suspended until such time as that
particular Force Majeure preventing the transfer of funds ends. The Party
claiming the existence of a Force Majeure shall give Notice to the other Party
as soon as practicable of the existence of the Force Majeure and shall use all
reasonable efforts to bring the Force Majeure to an end as soon as possible.
If the Force Majeure continues for a period of ninety (90) days, the other
Party shall have the right, but not the obligation, to terminate the Agreement
upon sixty (60) days Notice.
20.11 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.
20.12 Dispute Resolution Any Dispute shall be resolved in accordance
with the Dispute Resolution Procedures set forth in Appendix B.
20.13 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 non-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
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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 20.2.
20.14 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 IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the undersigned duly authorized representatives of
the Parties have executed this Travel Privileges Agreement as of the day and
year first written above.
AMERICAN AIRLINES, INC. THE SABRE GROUP, INC.
/s/ Donald J. Carty /s/ Michael J. Durham
By: Donald J. Carty By: Michael J. Durham
Title: President Title: President
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TRAVEL PRIVILEGES AGREEMENT
SCHEDULE A
TRAVEL CHARGES FOR ELIGIBLE EMPLOYEES
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
A - 1
<PAGE> 22
TRAVEL PRIVILEGES AGREEMENT
SCHEDULE A-1
ALLOCATED ADMINISTRATIVE COSTS
Travel Card Issuance
Travel Policy Administration
Travel Privileges Abuse Investigations
Ticket Loss Prevention
Personal SABRE usage
Non-Revenue Space Available Accounting
- - Collection Services (for off-payroll employees)
- - Billing to off-payroll employees
- - Journal entries/Imputed Income calculations for Eligible Employees
travelling A2/A4/A6
- - Written correspondence to us from SABRE employees requesting refunds
and disputing bills
- - Refunds on employee-discounted revenue tickets (ID-20s)
- - Refund requests via phone
Non-Revenue Ticket Stock
Notwithstanding anything to the contrary in the Agreement, The SABRE Group
shall not be obligated to bear any costs under the Agreement to the extent that
such costs are paid by it under the Management Services Agreement dated July 1,
1996 between the parties.
A - 2
<PAGE> 23
TRAVEL PRIVILEGES AGREEMENT
SCHEDULE B
TRAVEL CHARGES FOR ELIGIBLE RETIREES
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B - 1
<PAGE> 24
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
B - 2
<PAGE> 25
TRAVEL PRIVILEGES AGREEMENT
SCHEDULE C
MAXIMUM NUMBER OF ELIGIBLE EMPLOYEES
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
C - 1
<PAGE> 26
TRAVEL PRIVILEGES AGREEMENT
APPENDIX A
DEFINED TERMS
1 Definitions. As used in the Agreement, the following terms shall have
the following meanings:
"AA" refers to American and each Affiliate of American that is an Air
Carrier, including, at the Effective Date, Executive Airlines, Inc., Flagship
Airlines, Inc., Simmons Airlines, Inc., and Wings West Airlines, Inc.
"AA Reservations System" means American's internal systems for making
bookings on AA, including without limitation, American's internal computer
reservations system, American's ATO or CTO locations, American's reservations
centers and American's automated voice response system.
"AA Travel Policies" refers to the policies, practices, rules,
regulations, restrictions, terms and conditions governing personal travel on AA
by American's employees, as promulgated and published by American from time to
time, including without limitation those published in the AA conditions of
carriage and tariffs, American's Employee Handbook, and AA Regulations. In the
event of a conflict among the provisions of any documents on the following
list, the document appearing first shall supersede those listed after such
document: AA conditions of carriage and tariffs, the Agreement, AA
Regulations, American's Employee Handbook.
"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.
"AFS" means American Flagship Service offered by American, or any
domestic Flight Segment offering three Classes of Service.
"Agreed Access Level" means (A) so long as The SABRE Group is an
Affiliate of American, access to functions of the AA Reservations System that
are equivalent to those that American generally makes available to its
employees and retirees; (B) if The SABRE Group is not an Affiliate of American,
access to the following functions of the AA Reservations System: (1)"VNR"
display of the number of seats available to book in each cabin class and number
of non-revenue passengers flight listed in each cabin class; (2) "G*" (G Star)
display of the physical seats in each cabin class, number of reservations in
each cabin class, number of boarding passes issued in each cabin class.;(3)
Checking flight schedules; (4) Making bookings in the correct Pass Category;
(5) obtaining flight information (FLIFO); and (6) checking standby lists,
provided, however, that American may at its sole expense restrict access to
passenger name information on standby travel lists, so long as each Eligible
Employee and Eligible Retiree is able to determine his
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<PAGE> 27
or her position on the standby travel list; provided further, that American
shall not be required to provide Eligible Retirees with any access or
functionality if American does not provide the same access or functionality to
its own retirees.
"Agreement" means the Travel Privileges Agreement dated July 1, 1996,
entered into by and between American and The SABRE Group, to which this
Appendix A is attached and made a part, and all schedules, appendices and
attachments thereto.
[INFORMATION OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"American" means American Airlines, Inc., a Delaware corporation.
"ATO" means an airport ticket office operated by an Air Carrier.
"Business Day" means a day other than Saturday, Sunday, and national
holidays in the United States and days on which banks in Texas are permitted to
close.
"Claims" means any and all liabilities, damages, losses, expenses,
claims, demands, suits, fines or judgments including, but not limited to,
attorneys' fees, expert witness costs, court costs and expenses incident
thereto.
"Class of Service" means any of Coach Class, Business Class or First
Class service or their equivalents.
"Coach Class Travel Charges" means charges for travel in an assigned
seat in the Coach Class cabin by an Eligible Employee or Guest traveling in
Pass Categories A2, A4, A6, A9, D1, D2 or D3, as specified in Schedule A to the
Agreement.
"Confidential Information" means the Agreement, AA Travel Policies and
any and all trade secrets, proprietary and confidential information that is
owned (jointly or severally) by a Party and/or such Party's Affiliate,
concerning its past, present or future research, development, business
activities or affairs (including, without limitation, market intelligence),
finances, properties, methods of operation, processes and systems, which are
reasonably considered by it to be confidential. Notwithstanding the foregoing,
the following will not constitute "Confidential Information": (a) information
which was already in the receiving Party's possession prior to the Effective
Date (unless the receiving Party is prohibited from disclosing such information
to a Person other than the receiving Party by a contractual, legal or fiduciary
obligation to the disclosing Party) or that is independently developed by the
receiving Party without the use of any Confidential Information of the
disclosing Party; (b) information that is obtained from a third person who,
insofar as is known to the receiving Party, is not prohibited from transmitting
the information to the receiving Party by a contractual, legal or fiduciary
obligation to the disclosing Party; and (b) information which is or which
becomes generally available to the public, other than as a result of disclosure
by the receiving Party.
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"Control" means, with respect to any Person, owning, directly or
indirectly, more than 50% of the capital stock (or other ownership interest, if
not a corporation) of such Person ordinarily having voting rights or otherwise
having the right or ability, by contract or otherwise, to direct the management
and policies of such Person. "Controlling" and "Controlled" shall have
corresponding meanings.
"CRS" means a computer system which 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 system participants and which enables its subscribers and
other users to, among other things, (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.
"CTO" means a city ticket office or other off-airport ticket office
operated by an Air Carrier.
"Cure Period" means a period which expires thirty (30) days after
receipt of Notice of a breach, misrepresentation or failure to perform from the
non-defaulting Party; provided, however, that (i) if the breach,
misrepresentation or failure is not capable of being cured within thirty (30)
days following the receipt of such Notice but is capable of being cured within
180 days following the receipt of such Notice, then the Cure Period shall
expire 180 days following the receipt of such Notice so long as the defaulting
Party commences a cure within thirty (30) days following the receipt of such
Notice and diligently pursues such cure to completion within 180 days after its
receipt of Notice; (ii) the Cure Period for any failure to pay any sum of money
shall be limited to ten (10) Business Days, (iii) no Cure Period shall apply if
the breach, misrepresentation or failure to perform is not capable of being
cured within 180 days following the receipt of Notice, (iii) no Cure Period
shall apply if the breach, misrepresentation or failure to perform has occurred
twice previously during the preceding twelve (12) months.
"Current D2 Rate" means the service charge rates that American's
employees pay for D2 personal travel.
"Dependent Children" has the meaning assigned to that term in AA Travel
Policies.
"Dispute" means any dispute, disagreement, claim or controversy
arising in connection with 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 Procedures" means the dispute resolution
procedures attached as Appendix B to the Agreement.
"Dollars" or "$" means the lawful currency of the United States of
America.
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<PAGE> 29
"Effective Date" means July 1, 1996.
"Eligible Employee" means an individual (i) who is a full-time or
part-time employee of The SABRE Group or any of its Affiliates, (ii) to whom
The SABRE Group elects to make available Travel Privileges, (iii) whose date of
employment by The SABRE Group or American or any of their respective Affiliates
occurred before the date on which The SABRE Group ceased to be an Affiliate of
American, and (iv) who has been continuously employed since such employment
date by The SABRE Group or American or any of their respective Affiliates.
"Eligible Retiree" means an Eligible Employee who retires from The
SABRE Group or one of its Affiliates during the term of the Agreement and who
would have been eligible to receive retiree travel privileges from American had
he or she been employed by American at the time of retirement from The SABRE
Group or one of its Affiliates.
"Event of Default" has the meaning assigned to that term in Section 2.2
of the Agreement.
"Flight Segment" means each separate flight segment reservation
identified in a PNR.
"Force Majeure" means acts of God, war, warlike conditions, strikes or
other labor disputes, work stoppage, fire, flood, valid or invalid acts of
government or any other cause, whether similar or dissimilar, beyond the
reasonable control of the Party whose ability to perform is affected.
"Guest" means an individual traveling at the invitation of an Eligible
Employee or an Eligible Retiree as permitted by AA Travel Policies.
"IFS" means International Flagship Service offered by American, or any
International Flight Segment offering three Classes of Service.
"Notice" means a notice meeting the requirements of Section 20.2 of the
Agreement.
"Party" means each of the signatories to the Agreement, and their
permitted successors and assigns.
"Pass Category" means travel pass category A2, A4, A6, A9, D1, D2, or
D3, as applicable to a particular Flight Segment.
"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.
"PNR" means a passenger name record residing on American's Reservation
System.
A-4
<PAGE> 30
"Positive Space" means a reservation to travel with a confirmed space
ticket.
"Premium Class Travel Charges" means charges for travel in an assigned
seat in the First Class or Business Class cabin (and the Coach Class cabin on
any AFS or IFS Flight Segment) by an Eligible Employee or Guest traveling in
Pass Categories A2, A4, A6, A9, D1, D2 or D3, as specified in Schedule A to the
Agreement.
"Senior Management" means Eligible Employees who are designated as
members of senior management by The SABRE Group. Currently, senior management
is defined as employees in AMR Corporation management levels 7 and higher.
There is no limit on the number of senior management employees that may be
designated by The SABRE Group.
"Space Available" means a reservation to travel with a boarding
priority behind any passengers with confirmed space tickets.
"Spouse" has the meaning determined according to AA Travel Policies.
"Surcharges" means any charges generally imposed on all passengers by
American in addition to the base fare for a Flight Segment, including without
limitation airport, fuel and security surcharges.
"The SABRE Group" means The SABRE Group, Inc., a Delaware corporation.
"Taxes" means all current and future taxes, assessments, fees, levies,
imposts, duties, or other similar governmental charges, including any interest
or penalty thereon, including without limitation employment taxes,
transportation taxes, excise taxes, departure taxes, passenger facility
charges, and facility user fees.
"Travel Card" means a plastic card which shall indicate, among other
things, the name, company affiliation and approved Pass Category for the
exercise of Travel Privileges of the individual to whom the card is issued.
"Travel Charges" means Coach Class Travel Charges and/or Premium Class
Travel Charges.
"Travel Privileges" means the privileges described in Articles 5 and 6
of the Agreement.
2 Rules of Interpretation. The following rules of interpretation apply
to the Agreement:
2.1 the word "or" is not exclusive and the words "include" and
"including" are not limiting;
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<PAGE> 31
2.2 the words "hereby", "herein", "hereof", "hereunder" or other
words of similar meaning refer to the entire Agreement;
2.3 a reference to any agreement or other contract includes
permitted supplements, amendments and restatements;
2.4 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;
2.5 a reference to a Person includes its permitted successors and
assigns;
2.6 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;
2.7 a reference to an Article includes all Sections and
subsections contained in such Article, and a reference to a
Section or subsection includes all subsections of such Section
or subsection;
2.8 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;
2.9 all terms not otherwise defined herein or in the AA Travel
Policies shall have the meaning commonly ascribed thereto in
the airline industry.
A-6
<PAGE> 32
TRAVEL PRIVILEGES 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 Travel Privileges Agreement dated as of July 1, 1996 between
American Airlines, Inc. 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
respective human resources departments.
"REPRESENTATIVE" means, as to American, its managing director
responsible for overseeing its employee travel privileges
program, and as to The SABRE Group, its managing director
responsible for the administration of this Travel Privileges
Agreement.
"SECOND EXECUTIVE REVIEW COMMITTEE" means a committee
consisting of the Initial Executive Review Committee and the
senior vice presidents of American and The SABRE Group
responsible for overseeing their respective human resources
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 the Definitional Appendix 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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(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, either Party may submit the
Dispute to 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 either of the Parties' Presidents
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), 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
<PAGE> 34
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 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 deemed to have
the Qualifications and to be accepted by the Parties
as part of the panel.
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(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 provisions of this Dispute
Resolution Appendix applicable to
arbitration; and
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<PAGE> 36
(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 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.
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<PAGE> 37
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.
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<PAGE> 1
EXHIBIT 10.16
[STIN Building Assignment]
ASSIGNMENT AND AMENDMENT AGREEMENT
THIS ASSIGNMENT AND AMENDMENT AGREEMENT (this "Assignment") is
entered into to be effective as of 9:30 a.m., Central Daylight time, on the 1st
day of July, 1996, between AMERICAN AIRLINES, INC., a Delaware corporation
("Assignor"), THE SABRE GROUP, INC., a Delaware corporation ("Assignee") and
the DALLAS-FORT WORTH INTERNATIONAL AIRPORT BOARD (the "Board").
W I T N E S S E T H :
WHEREAS, Assignor is the lessee under that certain American
Airlines Special Facilities Lease Agreement (as amended and supplemented, the
"Lease") dated October 1, 1972, by and between Assignor and the Dallas-Fort
Worth Regional Airport Board now known as the Dallas-Fort Worth International
Airport Board, said Lease being further described on Exhibit "A" attached
hereto; and
WHEREAS, the Lease covers the land described on Exhibit "B",
attached hereto, and the improvements and appurtenances located thereon
(collectively, the "Leased Premises"); and
WHEREAS, the Leased Premises includes the land described by
metes and bounds on Exhibit "C", attached hereto, upon which that certain
multistory office building commonly known as the "Headquarters Building" and
having an address of 4200 American Blvd., Fort Worth, Texas 76115 and being
further identified on Exhibit "C", attached hereto, parking lots and certain
other improvements and appurtenances related thereto are located (collectively,
the "Assigned Premises"); and
WHEREAS, Assignor wishes to assign to Assignee all of
Assignor's right, title and interest in and to the Lease with respect to the
Assigned Premises, and Assignee wishes to assume from Assignor all of
Assignor's obligations thereunder with respect to the Assigned Premises from
and after the date hereof in accordance with the terms of this Assignment; and
WHEREAS, Assignor and Assignee wish to amend the Lease, and
the Board wishes to grant such an amendment, as set forth herein;
NOW, THEREFORE, in consideration of the above premises, the
mutual promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
<PAGE> 2
1. Assignment of Lease. Effective as of the date hereof,
Assignor hereby assigns and conveys to Assignee all of Assignor's right, title
and interest in, to and under the Lease with respect to the Assigned Premises
and all improvements and fixtures situated on the Assigned Premises including,
but not limited to, the right, if any, to any renewals and extensions of the
term of the Lease to the extent related to the Assigned Premises only.
Assignor hereby reserves, and this Assignment expressly excludes, that portion
of the Leased Premises that is not included within the description of the
Assigned Premises (herein referred to as the "Reserved Premises") and the
rights and obligations of Assignor in the Lease related to the Reserved
Premises. The Board consents to the foregoing assignment.
2. Covenants of Assignee. Assignee hereby assumes, and
agrees to pay, honor and discharge, all of Assignor's obligations under the
Lease with respect to the Assigned Premises arising on and after the date
hereof. Assignee shall observe and perform all of the terms and covenants and
conditions to be performed by Lessee under the Lease with respect to the
Assigned Premises and agrees not to do or suffer or permit anything to be done
that would result in a violation of, or a default under, the Lease or cause the
Lease to be terminated or render Assignor liable for any charge or expense
thereunder.
In the event any costs or other obligations are incurred under
the Lease that relate to the Leased Premises including the Assigned Premises,
Assignee shall pay its prorata portion of such costs, and shall be responsible
for its prorata portion of such obligations. Assignee's prorata portion of
such costs and obligations shall be calculated based on the ratio of the square
footage of the Assigned Premises to the square footage of the Leased Premises.
3. Ingress and Egress. Assignee and its officers, employees,
invitees, guests, and suppliers of materials and furnishers of services, shall
have a nonexclusive right of ingress and egress between the Assigned Premises
and any street or roadway by means of the roadways within the Leased Premises
leading to and from the Assigned Premises to be used in common with others
having a similar right of passage. The use of such roadways shall be subject
to the rules and regulations of the Board and Assignor now in effect or which
may hereafter be promulgated and any terms and conditions of the Lease.
4. Amendment.
(a) The parties hereto agree that notwithstanding the
provisions of Section 2.3(a), Article II, of the Second Supplemental Facilities
Agreement (as defined on Exhibit "A" hereto), Assignee shall be suffered and
permitted to have peaceful possession and quiet enjoyment of the Assigned
Premises for general office purposes and related and incidental uses.
(b) Assignee hereby waives any right it may have to require the Board
to issue Additional Bonds pursuant to Section 10.5(b) of the Facilities
Agreement, as defined on Exhibit "A"; provided, however, the foregoing waiver
shall not affect Assignor's rights with respect to the Reserved Premises or
Assignee's rights to make or have made improvements,
<PAGE> 3
alterations, modifications, additions, repairs and/or replacements to or on the
Assigned Premises as otherwise provided in the Lease.
(c) This Assignment does not modify, alter or change the terms,
covenant, or conditions of the Lease other than specified herein.
5. Continuing Liability of Assignor. Notwithstanding any
other provision hereof, Assignor shall remain liable to the Board for
compliance with the terms and provisions of the Lease pertaining to the
Assigned Premises.
6. Binding Effect. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
7. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO CHOICE OF LAWS PROVISIONS.
8. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this
Assignment by their authorized representatives as of the date first above
written to become effective as of such date.
Assignor:
--------
AMERICAN AIRLINES, INC., a Delaware corporation
By: /s/ GARY F. KENNEDY
------------------------
Name: Gary F. Kennedy
Title: Managing Director - Corporate Real Estate
Assignee:
--------
THE SABRE GROUP, INC., a Delaware corporation
By: /s/ JAMES K. LINES
------------------------
Name: James K. Lines
Title: Attorney-in-Fact
<PAGE> 4
The Board:
---------
DALLAS-FORT WORTH INTERNATIONAL AIRPORT
BOARD
By:
-----------------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 5
EXHIBIT "A"
DESCRIPTION OF LEASE
American Airlines Special Facilities Lease Agreement (the "Facilities
Agreement"), dated October 1, 1972, by and between the Dallas/Fort Worth
Regional Airport Board now known as Dallas/Fort Worth International Airport
Board (the "Board") and American Airlines, Inc. ("Lessee"), as supplemented by
that certain American Airlines Supplemental Special Facilities Agreement, dated
February 1, 1973, by and between the Board and Lessee, as supplemented by that
certain American Airlines Second Facilities Special Facilities Agreement (the
"Second Supplemental Facilities Agreement"), dated December 1, 1978, by and
between the Board and Lessee, as supplemented by that certain American Airlines
Third Supplemental Special Facilities Agreement, dated December 1, 1983 by and
between the Board and Lessee, as supplemented by that certain Supplement
Agreement, dated June 11, 1987, by and between the Board and Lessee, and as
supplemented by that certain American Airlines Fifth Supplemental Special
Facilities Agreement, dated September 1, 1993 by and between the Board and
Lessee.
<PAGE> 6
EXHIBIT "B"
DESCRIPTION OF LEASED PREMISES
AS DESCRIBED IN THE LEASE
<PAGE> 7
EXHIBIT "C"
DESCRIPTION OF ASSIGNED PREMISES
PROPERTY DESCRIPTION
BEING all of Lot 1, Block 2, and part of Lot 1, Block 3, of American Airlines
Addition, an Addition in the City of Fort Worth, Texas, according to the plat
thereof recorded in Volume 388-133, Page 60, Plat Records of Tarrant County,
Texas, being out of the Vincent J. Hutton Survey, Abstract No. 681 and the
William G. Matthews Survey, Abstract No. 1051, Tarrant County, Texas, and being
more particularly described as follows:
BEGINNING at the Northeast corner of Lot 1, Block 2 of said addition, said
point being in the West ROW line of State Highway No. 360 (a varying width
ROW);
THENCE: The following calls along the West ROW line State Highway No. 360 and
the East line of Lot 1, Block 2 of said addition;
S 00 degrees 23' 38" E, 87.75 feet to a point for corner;
S 34 degrees 45' 15" W, 60.96 feet to a point for corner;
S 00 degrees 14' 57" E, 149.86 feet to a point for corner;
S 14 degrees 13' 33" E, 103.15 feet to a point for corner;
S 00 degrees 12' 02" E, 99.93 feet to a point for corner;
S 16 degrees 25' 55" W, 104.32 feet to a point for corner;
S 03 degrees 04' 44" W, 601.18 feet to a point for corner;
S 01 degrees 38' 45" W, 300.25 feet to a point for corner;
S 03 degrees 30' 44" W, 182.88 feet to a point for corner;
S 43 degrees 58' 23" W, 73.34 feet to a point for corner in the North
ROW line of Trinity Boulevard (a varying width ROW) and the Southerly
line of Lot 1, Block 2 of said addition;
THENCE: The following calls along the North ROW line of Trinity Boulevard and
the South lines of Lot 1, Block 2 and Lot 1, Block 3 of said addition:
S 86 degrees 48' 36" W, 119.82 feet to a point for corner;
N 81 degrees 28' 13" W, 372.43 feet to a point for corner;
S 88 degrees 16' 20" W, 102.31 feet to a point for corner;
N 83 degrees 35'57" W, 244.00 feet to the beginning of a curve to the
right having a central angle of 04 degrees 21' 19", a
radius of 1372.00 feet, an arc distance of 104.29 feet;
S 67 degrees 57' 20" E, 146.40 feet to the beginning of a curve to the
left having a central angle of 54 degrees 27' 23", a
radius of 1428.00 feet, an arc distance of 1357.23 feet;
S 57 degrees 35' 18" W, 61.02 feet to a point for corner;
S 89 degrees 17' 00" W, 153.69 feet to a point for corner in the East
ROW line of American Boulevard (an 80' ROW);
<PAGE> 8
THENCE: The following calls along the East ROW line of American
Boulevard and the West line of Lot 1, Block 3 of said addition:
Northerly along a curve to the right having a central angle of 22
degrees 24' 10", a radius of 700.00 feet, an arc distance of 273.70
feet to the end of said curve.
N 01 degrees 41' 38" E, 26.19 feet to a point for corner;
N 00 degrees 17' 30" E, 533.43 feet to the beginning of a curve to the
right having a central angle of 24 degrees 57' 15", a
radius of 1270.00 feet, an arc distance of 533.12 feet;
N 24 degrees 29' 19" E, 368.81 feet to a point for corner;
THENCE: Leaving the East ROW line of American Boulevard, N 89 degrees 38'
30" E, 2487.17 feet to the PLACE OF BEGINNING and containing 97.01 acres of
land.
<PAGE> 1
EXHIBIT 10.17
CONFORMED
Airport Board Agreement
Number 23201-E
================================================================================
AMERICAN AIRLINES
SPECIAL FACILITIES LEASE AGREEMENT
---------
By and Between
THE DALLAS-FORT WORTH REGIONAL AIRPORT BOARD
and
AMERICAN AIRLINES, INC.
---------
(including provisions for net rent and ground rent)
---------
Dated as of October 1, 1972
================================================================================
<PAGE> 2
THE STATE OF TEXAS ) AMERICAN AIRLINES SPECIAL FACILITIES
COUNTY OF TARRANT ) LEASE AGREEMENT
THIS AMERICAN AIRLINES SPECIAL FACILITIES LEASE AGREEMENT (hereinafter
called this or the "Agreement"), made and entered into as of the 1st day of
October, 1972, by and between the DALLAS-FORT WORTH REGIONAL AIRPORT BOARD
(hereinafter called the "Board"), on the one hand, being the duly and lawfully
constituted and operating Board of Directors of the Dallas-Fort Worth Regional
Airport (hereinafter called the "Airport"), belonging to the Cities of Dallas
and Fort Worth, Texas (hereinafter called the "Cities"), and AMERICAN AIRLINES,
INC. a Delaware corporation (hereinafter called "Lessee"), on the other hand;
W I T N E S E T H:
WHEREAS, in the exercise of its lawful authority and the lawful
authority of the Cities, the Board has obtained, and will obtain in the future,
funds for the purpose of the construction, development and equipment of the
Airport in both its first and subsequent phases, the location and general
configuration of the Airport being shown, without reference to particular
phases, on Exhibit 1, attached hereto and made a part hereof; and
WHEREAS, the Airport, when its first phase is completed, will become
the major hub, primarily passenger and commercial cargo, airport for the
metropolitan area of Dallas and Fort Worth and the entire North Texas Region,
and in that regard will contain many separately identifiable systems, complexes
and facilities, each of which separately will constitute but a part of the
Airport as a whole, and all of which are and will be functionally relative and
essential to the proper functioning of the others; and
WHEREAS, it has been found and determined by the Board, in accordance
with its lawful duties acting on behalf of the Cities, that it is essential,
appropriate and necessary to the proper and orderly functioning of the Airport
for its public purposes and for the public in its travel and shipments by air
that adequate facilities of the types herein described be established,
constructed and equipped at the Airport, all as a part of the Airport's
essential and necessary systems and facilities all of which are or will be
functionally related and subordinate to the Airport; and
WHEREAS, Lessee, as a certificated air carrier serving the Airport and
hence as a member of the public making use thereof in accordance with its
Certificate(s) of Public Convenience and Necessity and applicable Federal Air
Regulations, requires for the purposes of its operations that certain Initial
Special Facilities and other Special Facilities (as these terms are hereinafter
defined) be provided at the Airport, all consistent with the needs of the other
members of the public served by the Airport and making use thereof; and
WHEREAS, the Initial Special Facilities constitute a part of the
Airport's total system ultimately serving all members of the public, Lessee's
portion thereof being leased herein to Lessee; and
WHEREAS, the funds with which to construct and develop the Airport
have been and will be obtained under the authority expressed, reserved and
recited in a certain ordinance adopted jointly by the Cities, effective as of
November 12, 1968, and bearing the short title "1968 Regional Airport
Concurrent Bond Ordinance" (hereinafter called "1968 Concurrent Bond
Ordinance"); and
WHEREAS, among other rights reserved therein and subject to its other
terms, Section 8.7 of the 1968 Concurrent Bond Ordinance reserves to the
Cities, when requested by the Board, the right, power and authority to issue
Special Facility Bonds for the purpose of paying all costs of construction,
fabrication and acquisition of the Initial Special Facilities; and
<PAGE> 3
WHEREAS, it has been determined necessary and appropriate by the Board
that the Initial Special Facilities be financed as "Special Facilities" within
the meaning of the 1968 Concurrent Bond Ordinance, through the issuance of the
Special Facility Bonds hereinafter described, and the Board intends to and will
request the Cities to issue such bonds for such purpose; and
WHEREAS, the Board, as permitted by law and by the Contract and
Agreement of the Cities, dated April 15, 1968, which provided for the Board's
creation, further considers it appropriate and necessary in the public interest
to have the Initial Special Facilities operated on its behalf by others, and to
have the same operated by Lessee, but under and subject to its jurisdiction and
control and to the jurisdiction and control of the Cities under said Contract
and Agreement, all as herein provided; and
WHEREAS, the 1968 Concurrent Bond Ordinance requires, as a
prerequisite to the issuance of Special Facility Bonds, the making of certain
agreements, therein called a "Net Rent Lease" and a "Ground Lease," which may
be incorporated into the same instrument, and this Agreement, together with
other agreements heretofore made, is responsive to and is in accordance with
that requirement; and
WHEREAS, the Board and Lessee have previously entered into an
agreement, dated February 9, 1970, which provides for the use and occupancy of
the Airport by Lessee, said agreement to be supplanted by a more definitive
Airport Use Agreement as soon as possible; and additionally the Board, the
Lessee and others have previously entered into a certain "Passenger Service
Special Facilities Agreement" (hereinafter called the "PSF Agreement"), dated
as of April 1, 1972; and
WHEREAS, the Lessee in order to encourage and facilitate the sale of
the Special Facility Bonds herein authorized hereby binds itself under the
terms and provisions of this Agreement to pay to the Board the rentals and
payments required herein in response to said requirements;
NOW, THEREFORE, the Board, for the term herein specified, and for and
in consideration of the rents herein and in the PSF Agreement reserved, and of
the covenants and agreements herein contained on the part of the Lessee to be
kept, observed and performed, has demised and leased, and does in part by these
presents demise and lease to Lessee, and the Lessee has agreed to take and does
hereby take (or in some instances has taken) from the Board, the Special
Facilities and the land (hereinafter defined and referred to as the "Leased
Land"), the Special Facilities and the Leased Land being hereinafter defined
and referred to collectively as the "Leased Premises", all upon and subject to
the following express terms, provisions, covenants and conditions, to wit:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1. DEFINITIONS. In and throughout this Agreement, the
following words shall have the following meanings, respectively, unless the
context shall clearly appear otherwise, to wit:
(a) "Additional Bonds" means any bonds issued for the
purposes specified in Section 10.5(b) hereof;
(b) "Airport" means the Dallas-Fort Worth Regional Airport,
as aforesaid;
(c) "Board" means the Dallas-Fort Worth Regional Airport
Board, as aforesaid;
(d) "Bonds" means the Series 1972 Bonds, the Completion
Bonds, the Additional Bonds and any Refunding Bonds issued in lieu
thereof, all of which are Special Facility Bonds within the meaning of
the 1968 Concurrent Bond Ordinance;
2
<PAGE> 4
(e) "Catering Facilities" means the facilities described as
such in subsection (k) below;
(f) "Cities" means the Cities of Dallas, Texas, and Fort
Worth, Texas, as aforesaid;
(g) "Completion Bonds" means any bonds issued for the purpose
of completing the payment of the Costs of the Initial Special
Facilities or of any other projects for which Additional Bonds have
been issued;
(h) "Completion Date" means, as to the Catering Facilities,
the date upon which said facility is constructed, substantially
completed and ready for occupancy, as established by a certificate of
the Airport Board's Deputy Executive Director, Engineering, specifying
such date. The Completion Date as to said facility shall not occur
and the same shall not be deemed substantially completed until such
facility has been formally accepted by the Lessee and the Board from
the contractor. The "Completion Date" as to the Passenger Service
Facilities shall be as defined in the PSF Agreement;
(i) "Construction Application" means Exhibit 2 attached
hereto and made a part hereof;
(j) "Costs of the Special Facilities" or "Costs of the
Initial Special Facilities" means all of the applicable items relating
to such facilities, as provided in paragraph 0 of Section 2.1 of the
1968 Concurrent Bond Ordinance, including, without limitation, the
following:
(i) all amounts paid by the Board in discharge of
its obligations under Article III, including without
limitation, all amounts paid under all construction,
engineering, architectural, insurance or other related
contracts;
(ii) all amounts authorized by the Lessee and paid
by the Board for changes to the complete plans and
specifications for the Special Facilities;
(iii) all amounts necessary to provide for work
performed, material purchased or expenditures incurred,
pertaining to or in connection with Special Facilities which
are approved by Lessee including without limitation, the
charges of any architects or engineers for plans,
specifications, drawings and supervision for the Special
Facilities, the charges of any surveyors or engineers, employed
to make plans, or conduct tests or analyses with respect to
the Leased Land;
(iv) the cost of any performance and payment bonds
procured in connection with the acquiring and construction of
the Special Facilities;
(v) legal, accounting and bond consultant fees and
expenses and all costs and expenses incident to the
authorization, preparation, printing, engraving, issuance,
delivery and sale of the Bonds, the preparation, execution,
delivery and recording of this Agreement, the Special
Facilities Bond Ordinance, any preliminary and the final
official statement pertaining to the Bonds, any purchase
agreement pursuant to which the Bonds will be sold and all
other agreements and documents involved and contemplated
hereby, the costs and fees incident to the qualification of
the Bonds for offer and sale under securities laws and the
preparation of any memorandum as to the eligibility of the
Bonds for investment under state laws;
(vi) interest accruing on the Bonds during any
period of construction, the period of construction to be
stated in the Special Facilities Bond Ordinance and any
ordinance authorizing the issuance of Completion Bonds and
Additional Bonds; and
3
<PAGE> 5
(vii) such other and additional fees, costs,
expenses and expenditures of whatever nature incidental or
pertaining to the completion of the Special Facilities,
including fiscal agent fees and expenses and paying agents'
fees.
(k) "Initial Special Facilities" means all of the following
properties, to wit:
(i) the "Passenger Service Facilities," which shall
mean and include the properties, facilities, structures and
equipment to be acquired, constructed, fabricated and
installed in, on or as a part of the terminal structure of the
Airport situated on the Terminal Tract, the same to consist of
equipment, fixtures, finishes and appurtenances of the
following types, to wit: passenger moving and baggage and
cargo handling equipment, conveyances and structures; floor,
ceiling, wall coverings and interior partitions; electrical and
plumbing fixtures, outlets, fixed-equipment and utilities in
or as a part of the terminal structure situated on the
Terminal Tract; aircraft loading bridges and ways connected or
affixed to the terminal structure, including alternate airside
stairways; ticketing and passenger waiting facilities,
furniture and fixtures within the terminal structure, terminal
structure public address equipment and facilities, passenger
control and terminal communications systems; terminal
structure interface connections with the interterminal
transportation system of the Airport, and graphics and visual
flight display facilities; and
(ii) the "Catering Facilities" which shall mean and
include kitchen facilities for the preparation of in-flight
meals, including food and catering equipment and cabin service
facilities to be constructed or equipped on or as a part of
Tract 1 of the Leased Land described on Sheet 2 of 2 Exhibit 3
attached hereto;
which in each instance where appropriate, may also include apron area
facilities, storerooms, shops, utilities, restrooms, support areas,
distribution lines, blast protection facilities, communications facilities, and
other necessary appurtenances and facilities;
(l) "Leased Land" means the tract of land described and shown
as Tract 1 on Exhibit 3 attached hereto and incorporated herein for
all purposes, plus the tract of land designated as "Tract 3-E" in the
PSF Agreement (herein called the "Terminal Tract"), and plus any other
land at the Airport which in the future is expressly made subject to
and leased under this Agreement by the parties hereto;
(m) "Leased Premises" means the Special Facilities and the
Leased Land;
(n) "Passenger Service Facilities" means the facilities and
properties described as such in subsection (k), above;
(o) "Runway and Taxiway Complex" means such facilities as now
exist and shall, from time to time, be constructed, provided and
maintained by the Board at the Airport for public and common use
including, without limitation thereto, use by the Lessee and other
aircraft operators, for the following purposes:
(i) Apron Area--space for loading and unloading
passengers, property and mail to or from aircraft, providing
aircraft with fuel and lubricants, performing ramp service
operations, inspection, maintenance of aircraft as set forth
in the rules and regulations of the Board and the parking of
mobile equipment used in connection therewith;
(ii) Runways--runways (including aerial approaches
and buffer zones and anything required for the effective and
safe operation of aircraft as required by the Federal Aviation
Administration at the Airport) for the landing and taking off
of aircraft;
4
<PAGE> 6
(iii) Taxiways--taxiways available at the Airport for
the purpose of ground movement of aircraft to, from and
between the runways, apron area, aircraft parking and storage
space, and other portions of the Apron Area; and
(iv) Facilities incidental to the runways, apron
area, aircraft parking and storage space and taxiways by which
is meant facilities for the purpose of controlling and
assisting arrivals, departures and operations of aircraft
using the Airport, such as control towers, signals, beacons,
wind indicators, floodlights, landing lights, boundary lights,
construction lights, radio and electronic aids or other aids
to operations, navigation or control of aircraft whether or
not of a type herein mentioned, even though located away from
the runway and taxiway complex or outside the Airport;
(p) "Series 1972 Bonds" means the series of Bonds to be
issued pursuant to this Agreement for the purpose of constructing,
equipping, acquiring and fabricating the Initial Special Facilities as
provided in Article III hereof, such Bonds to be entitled "Dallas-Ft.
Worth Regional Airport American Special Facilities Revenue Bonds,
Series 1972";
(q) "Special Facilities" means and shall include the Initial
Special Facilities and any and all extensions, additions or
improvements thereto and/or any other projects at the Airport, the
obligations to finance which are to be payable from rentals derived
from the Lessee under this Agreement;
(r) "Special Facilities Bond Ordinance" means the ordinance
to be adopted by the Cities for the purpose of authorizing the
issuance, sale and delivery of the Series 1972 Bonds.
(s) "Starting Date" as to the Passenger Service Facilities
shall mean the Starting Date defined as such in the PSF Agreement, and
"Starting Date" as to the Catering Facilities shall mean ninety (90)
days after written notice has been received by Lessee from the
Executive Director of the Board that the Federal Aviation
Administration (or other Federal agency succeeding to its
jurisdiction) has officially certified that the Airport is
operational, or ninety (90) days after the Completion Date as to the
Catering Facilities, whichever is later.
ARTICLE II
REPRESENTATIONS
Section 2.1 REPRESENTATIONS BY THE BOARD. The Board makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Board is the duly and lawfully created, existing and
organized Board of Directors of the Airport, having the power to enter
into the transaction contemplated by this Agreement and to carry out
its obligations hereunder, and by proper action the board has been
duly authorized to execute and deliver this Agreement; and
(b) The Board has full right and authority in and to the
Leased Land and will construct and equip thereon the Special
Facilities within the limitations set forth in this Agreement.
Section 2.2 REPRESENTATIONS BY LESSEE. The Lessee makes the
following representations as the basis for its undertakings herein contained:
(a) It is a corporation duly incorporated under the laws of
the State recited aforesaid; is in good standing under its Certificate
of Incorporation or Charter and the laws of said State; is duly
authorized to do business in the State of Texas; has
5
<PAGE> 7
the power to enter into this Agreement without violating the terms of
any other agreement to which it may be a party; and by proper
corporate action has been duly authorized to execute and deliver this
Agreement; and
(b) It will occupy and possess the Leased Premises on behalf
of the Cities and the Board for the public purposes of the Airport and
for which the same are being acquired or constructed and are to be
operated hereunder, upon and subject to the control and jurisdiction
of the Board and the Cities in accordance with the terms hereof.
ARTICLE III
FINANCING AND CONSTRUCTION OF THE INITIAL SPECIAL FACILITIES
Section 3.1. SPECIAL FACILITIES REVENUE BONDS, SERIES 1972.
(a) The costs of the Initial Special Facilities shall be paid
with the proceeds from the sale of the Series 1972 Bonds.
(b) The Board agrees to diligently undertake the preparation
of the Special Facilities Bond Ordinance for the submission of the
same to the Cities for concurrent adoption and to provide therein for
the issuance of Series 1972 Bonds in the amount of $8,700,000. It is
provided, however, that the Special Facilities Bond Ordinance shall
not be adopted until the Lessee has approved said Ordinance, as
provided in Section 10.7 hereof, after the receipt of which approval
the same shall be conclusively binding upon the Lessee. Subject to
the receipt of the proceeds from the sale of the Series 1972 Bonds and
the continuing adequacy and availability of said proceeds for the
purpose the Board will cause the Initial Special Facilities to be
constructed, fabricated, installed and equipped on the Leased Lands in
accordance with plans and specifications therefor approved in the
manner provided in this Article III.
Section 3.2. PLANS AND SPECIFICATIONS, APPROVALS, CONSTRUCTION,
CHANGES, CONTRACTS.
(a) The Initial Special Facilities shall be acquired,
constructed, installed, fabricated and equipped in accordance with
complete plans and specifications approved by the Board and the
Lessee. Preliminary plans, elevations, specifications and renderings
descriptive of the proposed construction shall be submitted by Lessee
to the Board for its approval. The preliminary submission by the
Lessee shall employ essentials of aesthetics, convenience, function
and design, and shall be compatible in such respects with those of
similar facilities at the Airport; provided that no greater aesthetics
treatment shall be required of Lessee than is required of other
tenants who may construct, install, fabricate or equip similar
facilities at the Airport.
Upon approval of the preliminary submission, Lessee shall
prepare complete plans and specifications of the Initial Special
Facilities. A Construction Application and complete plans and
specifications shall be submitted by Lessee to the Board for approval
and construction shall be substantially in accordance with such plans
and specifications, as may be approved by the Board and with such
changes as may be reasonably requested by Lessee and approved by the
Board; provided, however, that approval of such complete plans and
specifications shall not be required prior to the issuance and sale
of the Series 1972 Bonds.
(b) Upon completion of such plans and specifications and
approval of the same, bids will be taken for the construction,
acquisition, and/or fabrication of the Initial Special Facilities
based on said plans and specifications. Following the receipt of bids
from responsible bidders, the Board and Lessee will consider and
approve such bids and contracts will then be awarded to install,
construct, fabricate and equip the Initial
6
<PAGE> 8
Special Facilities. Lessee may, with the Board's prior approval,
enter into contracts for the design work and for the preparation of
the preliminary and complete plans and specifications described in
subsection (a), next above, and it may, with the Board's prior
approval, enter into contracts for the acquisition and construction of
the Initial Special Facilities, prior to the time that proceeds from
the sale of the Series 1972 Bonds are available, provided such
contracts contain a provision allowing assignment thereof to the Board
when such proceeds are available.
(c) Whenever approval of either the Board or the Lessee is
required in this Section 3.2, such approval shall not be unreasonably
withheld by either the Board or the Lessee.
(d) Contracts relating to the construction, acquisition,
equipping, fabrication or installation or the purchase in connection
with the Initial Special Facilities shall include those provisions
normally required by the Lessee (except for the Passenger Service
Facilities) and the Board for the purposes intended, including,
without limitation, appropriate provisions for expediting the work and
for performance and payment bonds so as to assure completion by
specified performance dates and to protect the Special Facilities
against liens, such bonds to name the Board as the beneficiary
thereof.
(e) All necessary approvals from governmental agencies shall
be obtained prior to acquiring, constructing, fabricating, equipping
or installing the Initial Special Facilities, and such improvements
shall be acquired, constructed, fabricated, equipped or installed in
compliance with all state and local laws, ordinances and regulations
applicable thereto. Upon completion of the Initial Special
Facilities, all required occupancy permits and authorizations from
appropriate authorities authorizing the occupancy and possession and
use of the Leased Premises for the purposes contemplated by Lessee
shall be obtained by Lessee. All changes, alterations, extras or
additions (hereinafter in this subsection (e) called "changes") to or
from any contracts or purchase orders executed or entered into
pursuant to the provisions of this Article III shall be approved in
advance by the parties hereto. All requests, approvals and agreements
required shall be in writing and signed by a duly designated
representative of the party making such request, granting such
approval or entering into such agreement. All changes which are not
contrary to the general nature and scope of the respective Initial
Special Facilities may be made after consultation with the Lessee.
Section 3.3. INSPECTION. The parties hereto and their authorized
representatives shall have full rights of inspection during the construction,
fabrication or installation of the Initial Special Facilities.
Section 3.4. INSUFFICIENCY IN FUNDS. In the event the proceeds from
the sale of the Series 1972 Bonds are insufficient to pay the Costs of the
Initial Special Facilities in full, then the Lessee shall either pay the amount
of the insufficiency or shall request the issuance of Completion Bonds for that
purpose in which even the Board shall request the Cities to issue Completion
Bonds for that purpose. In the event of the issuance of such Completion Bonds,
then the Net Rent payable under Section 5.2 hereof shall thereupon be
automatically increased in accordance with the ordinance authorizing such
Completion Bonds. It is provided, however, that such ordinance shall not be
adopted until the Lessee has approved such ordinance, after the receipt of
which approval the same shall be binding on Lessee. Such Completion Bonds
shall be on parity as to lien with the Series 1972 Bonds, and shall be issued
as Special Facilities Bonds subject to and in accordance with the terms,
conditions and provisions of the 1968 Concurrent Bond Ordinance and the Special
Facilities Bond Ordinance.
7
<PAGE> 9
ARTICLE IV
TERM, POSSESSION, QUIET ENJOYMENT, USE
Section 4.1. EFFECTIVE DATE, TERM, OPTION.
(a) This Agreement shall become effective upon the execution
and delivery hereof by the Board and by the Lessee, and the term
hereof and the rights of use and occupancy granted herein shall
commence on the Starting Date and, subject to the other provisions
hereof, shall expire on the earlier of (i) thirty-five (35) years from
the Starting Date as to the Catering Facilities, or (ii) December 31,
2009.
(b) Subject to the provisions of subsection (c), next below,
the Board, as a part of this Agreement, hereby grants the right and
option to the Lessee to expand the Leased Premises hereunder so as to
include all of the 14.479 acres, more or less, of land shown as Area A
and Area B on Sheet 1 of 2 of Exhibit 3 hereof. Lessee may exercise
its options to lease the whole of Area A and/or the whole of Area B at
any time during the term of this Agreement unless such has been leased
to another party, as provided in subsection (c), next below; provided
that Lessee shall not be permitted to exercise its option to lease
Area B unless it (i) has previously exercised its option to Lease Area
A, or (ii) exercises its option to lease both Area A and Area B
concurrently. If Area A and/or Area B is leased by the Airport Board
to another party after compliance with the requirements of said
subsection (c), then Lessee's options as herein granted shall be null
and void and of no further force and effect. The options granted in
this subsection may be exercised by the Lessee upon written notice to
the Board specifying the effective date upon which Area A and/or Area
B, as the case may be, shall become a part of the Leased Premises,
which effective date shall not be more than sixty (60) days from the
date of said notice. Upon and after such effective date, Area A
and/or Area B, as the case may be, shall, for all purposes hereof, be
deemed to be a part of the Leased Premises hereunder, the same as
though leased on the date of execution hereof, except that Ground Rent
applicable to such Area(s) at the rate per acre calculated in
accordance with Section 5.1 hereof, shall not commence until such
effective date.
(c) The acceptance of offers to lease Area A and/or Area B
made by third parties to the Board shall be subject to this subsection
(c). If, before the Lessee gives notice under subsection (b), next
above, exercising the options therein granted, the Board shall receive
a bona fide written offer from a third party to lease the whole of
Area A and/or the whole of Area B, as the case may be, the Board shall
forthwith give the Lessee written notice of such offer and the Lessee
shall have sixty (60) days in which to exercise the options granted in
subsection (b), next above. If the Lessee shall fail to exercise its
option for Area A and/or Area B, as the case may be, within sixty (60)
days from the date of receipt by it of such written notice, then the
Board shall have the right to lease Area A and/or Area B, as the case
may be, to the third party making such offer, provided, however, the
Board shall not accept an offer to lease only Area A unless Area B has
been previously leased to a third party in accordance with the
provisions of this subsection. If a lease is then consummated the
options granted in subsection (b), next above, shall become null
and void; if a lease is not then consummated, the options granted
herein shall remain in full force and effect.
(d) Upon the exercise of the options hereinabove granted, the
provisions of Article V hereof shall be appropriately revised, if
necessary, so as to expressly require the payment of Ground Rent upon
the same basis, at the same rate and at the same times as therein
required for Tract 1 of the Leased Lands.
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<PAGE> 10
Section 4.2 DELIVERY AND ACCEPTANCE OF POSSESSION. The Board shall
promptly notify the Lessee of the establishment of the Completion Date and the
Lessee shall have the exclusive right to possess, occupy and use the Leased
Premises on and after that date and throughout the remainder of the term of
this Agreement, subject to the other provisions hereof.
Section 4.3 QUIET ENJOYMENT, USE. Upon and subject to the other
terms and provisions hereof and unless a default shall have occurred hereunder,
the Lessee shall be suffered and permitted to have peaceful possession and
quiet enjoyment of the Leased Premises in accordance with the following,
to-wit:
(a) Following the Starting Date as to the Passenger Service
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Passenger Service
Facilities (expressly including the Terminal Tract presently granted
to Lessee under the PSF Agreement) to the same extent and under and
subject to the same terms and conditions as are provided in the PSF
Agreement for similar facilities provided in connection therewith and
located upon the Terminal Tract thereunder, the same to be utilized
for the same purposes therein permitted and provided.
(b) Following the Starting Date as to the Catering
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Catering Facilities for
all primary and incidental purposes relating to the preparation,
cooking, dispensing and delivery of food products and meals for
service to passengers and crews of aircraft while in flight, and the
same may be used incidentally for any other lawful reasonable and
appropriate activity which is not in violation of or prohibited by the
Board's reasonable rules and regulations. It is expressly provided,
however, that the operation of any cafeteria or other food service
outlet for ground personnel of Lessee shall be accomplished on a
non-profit basis to Lessee. Additionally, any personnel training
activities shall be limited to those persons employed or intended to
be employed by Lessee or by other persons engaged in the business of
in-flight food catering, and such training shall not, without the
consent of the Board, be performed on behalf of any others whose
business is competitive with any concessionaire, permittee or licensee
of the Board at the Airport (other than another person or company
engaged in the business of transportation by aircraft).
It is further provided that the Board reserves the rights--
(i) to designate areas not to exceed twenty (20)
feet in width along the periphery of Tract 1 of the Lease
Lands for use and to be maintained as landscaped areas; and
(ii) to itself, or to permit its contractors,
engineers and architects to enter upon the Leased Premises
whenever necessary and possible without undue interference
with Lessee's use of the Leased Premises for the purpose of
constructing, installing and/or maintaining under the surface
of the ground any portion of the Board's other systems, which
pass through the Leased Premises.
Section 4.4. INGRESS AND EGRESS, TAXIWAY 19.
(a) The Lessee's right of ingress and egress relating to the
Passenger Service Facilities shall be as specified for similar
facilities under the PSF Agreement and shall be governed thereby. As
to the remaining portions of the Initial Special Facilities hereunder,
the Lessee and its officers, employees, invitees, guests, and
suppliers of materials and furnishers of services, shall have the
right of ingress and egress between Tract 1 and any public street or
roadway outside the Airport by means of the roadways leading to and
from the Airport, and between the passenger enplaning and deplaning
complex within the Airport and said Tracts of Leased Land, and such
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<PAGE> 11
other points as may be designated by the Executive Director of the
Board, all of the same to be used in common with others having rights
of passage within the Airport, all without any further or additional
fees or charges except entrance booths at the Airport and other than
the rent described in Article V. The use of such roadways shall be
subject to reasonable rules and regulations of the Board now in effect
or which may hereafter be promulgated for the safe and efficient
operation of the Airport.
(b) The Board may, at any time, temporarily or permanently
close or consent to or request the closing of any such roadway and any
other area at the Airport presently or hereafter used as such, so long
as a reasonably equivalent means of ingress and egress, as provided
above, remains available to Lessee. Lessee hereby releases and
discharges the Board, its successors and assigns, of and from any and
all claims, demands or causes or action Lessee may have against the
Board by reason of the exercise of any of the powers reserved to the
Board under this subsection.
(c) Braniff Airways, Incorporated ("Braniff") has
incorporated into its Special Facilities Lease Agreement with the
Board as a part of the facilities to be financed thereunder, the cost
of the extension of Taxiway 19. Lessee shall have the right to use
said Taxiway and shall appropriately compensate Braniff therefor. In
the event of a dispute between Braniff and the Lessee over the use of
said Taxiway or the reasonableness of the compensation, such dispute
shall be resolved by the Executive Director of the Board. In such
event, the Executive Director, in arriving at a reasonable
compensation, shall take into consideration items of ground rental,
cost of construction, including general administrative and overhead,
and expenses of operation and maintenance of the said Taxiway and use
of the said Taxiway by Braniff, Lessee and others, for which Braniff
has been and is obligated to pay.
ARTICLE V
GROUND RENT AND NET RENT PROVISIONS
Section 5.1. GROUND RENT.
(a) The Lessee, under the terms and provisions of the PSF
Agreement, has heretofore agreed and obligated itself (along with
others in certain instances) to pay a "ground rental" (as that term is
defined in the 1968 Concurrent Bond Ordinance) for its rights in and
uses of the Terminal Tract. Accordingly, no additional ground rental
is or shall be herein required on account of the Terminal Tract and
the development, construction, fabrication or installation of the
Passenger Service Facilities therein. The provisions of this Section
5.1 relating to "Ground Rent" shall, therefore, relate solely to the
land included in the Leased Land as Tract 1. This subsection (a),
however, shall in no manner reduce or alter Lessee's obligation to pay
Net Rent in the full amount stated in Section 5.2. hereof.
(b) For the purposes of determining the rental payable with
respect to Tract 1 of the Leased Land to which this Section 5.1
applies, as aforesaid, and where used elsewhere in this Agreement, the
following definitions and terms, in addition to other definitions
contained in this Agreement, shall apply and have the following
meanings to wit:
(i) "Airport Services" means the general
administration and operation of the Airport by the
Board, including, but not limited to, the following
functions by the Board at the Airport, to wit:
airport police, crash, rescue and fire protection and
traffic control; the acquisition of land beyond the
initial boundaries of the Airport for use as a part
of the Airport; clearing, grading and draining, the
costs of which are not charged or chargeable in
specific terms to users under other agreements; the
collection and treatment of sewage and other wastes;
roadway systems, perimeter fencing and utilities
systems; the furnishing of
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<PAGE> 12
communications systems, facilities and tunnels;
landscaping; the construction, equipment and
maintenance of facilities on non-revenue producing
land and the maintenance of such land itself,
facilities and areas of subdivisions of the Airport
necessary in the operation and maintenance thereof,
including the Board's administration, maintenance,
police, crash, rescue, fire and operations space and
facilities.
(ii) "Airport Services Costs" means and
shall include the total of (a) the costs, expenses
and liabilities of the Board in providing Airport
Services, including the Board's operations and
maintenance costs and liabilities, however arising,
properly charged or chargeable on an accrual basis of
accounting to Airport Services; plus (b) 1.25 times
any debt service requirements on any revenue bonds of
the Airport (other than Special Facility Bonds)
allocable or chargeable to Airport Services, which
allocation or charge shall be in the proportion that
the Contract Costs (as hereinbelow defined) for the
construction or development of Airport Services bears
to the Contract Costs for the construction or
development of those portions of the Airport which
are not financed with private capital or Special
Facility Bonds; and plus (c) all other costs expenses
or liabilities of the Board, however arising (except
debt service on revenue bonds not allocable or
chargeable to Airport Services), not specifically
charged or chargeable in specific terms to the users
under other agreements relating to the use of the
Airport or any part thereof or of its lands. It is
expressly provided that the cost of the premiums for
insurance required or permitted to be carried under
Section 6.6 hereof shall be included in Airport
Services Costs.
(iii) "Base Period" means the period from the
Starting Date of the Catering Facilities through the
next succeeding 30th day of September, which is the
closing day of the Board's fiscal year.
(iv) "Contract Costs" means and shall
include the Board's costs for the acquisition of land
as provided in Section 5.1(b)(i) hereof, for labor
and payments to contractors, suppliers and
materialmen in connection with preparing,
constructing and otherwise acquiring, replacing,
extending and improving the Airport, and the costs,
not covered by insurance, of restoring property
damaged or destroyed in connection with construction.
(v) "Ground Rent" means the Preliminary
Ground Rent computed in accordance with paragraphs
(i) and (ii) of subsection (c), next below, as
adjusted to the Actual Ground Rent computed in
accordance with paragraph (iii) of subsection (c),
next below, such amounts being payable for the use
and occupancy of Tract 1 of the Leased Land and shall
be in addition to the payments of Net Rent and other
costs under Section 5.2 and 5.3 hereof.
(vi) "Total Developed Acreage on the
Airport" means all land within the Airport boundaries
(as the same may be changed from time to time) which
is revenue producing including, but not limited to,
all land under lease or permit, land actually
developed for a specific use and all land
specifically designated as part of the Runway and
Taxiway Complex.
(c) The Lessee hereby agrees to pay to the Board from the
Starting Date as to the Catering Facilities and throughout the term of
this Agreement a Preliminary Ground Rent, as adjusted to the Actual
Ground Rent, for the use and occupancy of Tract 1 of the Leased Land,
the specific amounts thereof to be determined in accordance with the
following provisions and principles and to be paid at the following
times and in the following amounts, to wit:
(i) Preliminary Ground Rent During the
Base Period--The Lessee shall pay a Preliminary
Ground Rent during the Base Period calculated on the
basis of
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<PAGE> 13
a rate of $3,064.00 per acre per annum for land
comprising Tract 1, such Preliminary Ground Rent to
be paid in equal monthly installments during the Base
Period, the first installment to be paid on the
Starting Date and thereafter on the first day of each
month during the Base Period. For historical
reference of the parties hereto, said rate was
determined in accordance with the following formula,
to wit:
<TABLE>
<S><C><<C> <C>
A = $16,854,000 Airport Services Costs projected on the date of this
A Agreement to be incurred or due and owing by
- = C the Board during the first twelve (12) months of
B operation of the Airport.
B = 5,550 Total Developed Acreage on the Airport projected for the
Starting Date.
C = $3,064.00 Rate per acre per annum applied to land comprising Tract 1 of the
Leased Land under this Agreement in computing Preliminary Ground Rent
for the Base Period.
</TABLE>
(ii) Preliminary Ground Rent During Each
Six-Month Period After Base Period--Not less than ten
(10) days prior to the close of the Base Period, and
not less than ten (10) days prior to the close of
each succeeding six (6) month period after the Base
Period, the Board shall compute a Preliminary Ground
Rent to be paid during the succeeding six (6) month
period and shall notify the Lessee of the amount
thereof. On the first day of such succeeding period
and on the first day of each month during such
period, the Lessee, subject to any rental credits
carried forward under the provisions of paragraph
(iii), next below, shall pay one sixth (1/6th) of the
amount thus stated, as Preliminary Ground Rent for
each such six (6) month period shall be determined in
accordance with the following formula, to wit:
<TABLE>
<S> <C> <C>
A = Estimated Airport Service Costs projected to be incurred
A during the next succeeding six (6) month period.
- x C = D
B B = Total Developed Acreage on the Airport projected for the first day of
the next succeeding six (6) month period.
C = The number of acres of land comprising the Leased Land at the time of
the computation.
D = Preliminary Ground Rent payable during the next succeeding six (6)
month period.
</TABLE>
(iii) Actual Ground Rent for Preceding
Period--At the close of the Base Period and at the
close of each six (6) month period thereafter the
Board shall compute and ascertain the amount of
Actual Ground Rent payable by the Lessee for the
respective period then closed. Such computations
shall be made and determined in accordance with the
following formula, to wit:
<TABLE>
<S> <C> <C>
A = Actual Airport Service Costs incurred during the period
A just closed.
- x C = D
B B = The average number of the Total Developed Acreage on the Airport
during the period just closed.
C = The average number of acres of land comprising the Leased Land during
the period just closed.
D = Actual Ground Rent payable for the period just closed.
</TABLE>
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<PAGE> 14
Upon making such computations, the Board shall notify the
Lessee of the result thereof. If the resulting Actual Ground Rent
shall be greater than the Preliminary Ground Rent paid during the Base
Period or other period to which the adjustment relates, then the
Preliminary Ground Rent for such period was deficient, and if such
computation shall be for a period ending on any September 30, then the
Lessee shall remit to the Board an amount equal to such difference
within five (5) days from the receipt of notice thereof; however, if
such computation reflecting a deficiency) shall be for a period ending
on any March 31, then such deficiency shall be spread in equal
installments over the remainder of the six (6) month period then in
effect and the monthly installment of Preliminary Ground Rent for such
period (as required by paragraph (ii), next above) shall be
automatically increased and invoiced accordingly. If such
computations reflect that the resulting Actual Ground Rent is less
than the amount of the Preliminary Ground Rent actually paid by the
Lessee during the period to which the adjustment relates, then the
amount of the overpayment shall be credited against the Preliminary
Ground Rent installments next due under paragraph (ii), next above,
until such credit has been exhausted.
(d) All estimates and projections required in the making of
the computations and determinations contemplated by subsection (c),
next above, shall be made by the Board and shall be reasonable and
made in the light of the latest data available or reasonably
obtainable by the Board.
(e) If the Starting Date as to the Catering Facilities
commences on a date other than the first day of a month or this
Agreement expires or is terminated on a date other than the last day
of a month, the Ground Rent payable for the part of the month during
which rent is due shall be computed by prorating the monthly Ground
Rent installment on a daily basis, and Ground Rent shall be paid only
for the portion of the month for which due.
Section 5.2. NET RENT.
(a) The Lessee hereby agrees to pay to the Board, in addition
to the Ground Rent specified in Section 5.1 hereof, an additional
rental (hereafter called the "Net Rent") throughout the period during
which the Series 1972 Bonds and any Completion Bonds or any Additional
Bonds are outstanding, an amount equal to the principal, interest, any
redemption premiums, and any special reserve requirements contained in
the Special Facilities Bond Ordinance, or in any ordinance authorizing
any such other Bonds together with an amount equal to the reasonable
cost and charges of any paying agent or paying agents thereunder and
any trustee or trustees therefor, the Net Rent to be payable at the
times and in the amounts specified and provided in the Special
Facilities Bond Ordinance.
(b) The Net Rent payable under the provisions of this Section
5.2 shall be reduced by the total of any amounts at any time on
deposit in any interest and sinking fund created by the Special
Facilities Bond Ordinance or any such other Ordinance referred to in
subsection (a), next above, in excess of the amount then needed for
the purpose of paying previously matured interest coupons, matured
Bonds, redemption premiums, if any, and any fees or expenses in
respect of the payment of any such interest, principal or redemption
premiums thereof, whether such access amounts become available by
reason of (i) previous overpayments of Net Rent, (ii) surplus funds
from bond proceeds deposited to the credit of such interest and
sinking fund at the end of the acquisition, construction, fabrication
and installation of the Special Facilities (as will be required in any
such ordinance), (iii) earnings made on the investment of any amounts
from time to time on deposit in any such interest and sinking fund,
(iv) any net reductions or savings in the costs related to the
acquisition, construction, fabrication and installation of the Special
Facilities, the effect of which is to provide
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<PAGE> 15
funds to such interest and sinking fund with which the Airport Board
can make payments of the interest on and principal of the Bonds, or
(v) any other circumstance which results in funds being properly
deposited in such interest and sinking fund; provided, however, that
such reduction in Net Rent payments shall be made only to the extent
that funds are not necessary to restore any deficiency then existing
in any reserve fund created by the Special Facilities Bond Ordinance
referred to in subsection (a), next above, it being understood that
excess amounts in the interest and sinking fund shall first be applied
to restore any such deficiency and then, if any amount remains, to the
reduction of the new Rent payments. The reductions in the New Rent
payments contemplated by this subsection (b) shall be made by
applying such excess amounts as a credit(s) against the next Net Rent
payment(s) due after funds have actually become available from the
foregoing permissible sources to the interest and sinking fund, until
such excess amounts are exhausted. Such reductions shall be reflected
in the appropriate billings under subsection (a), next above.
(c) It is understood and acknowledged by the Lessee that the
Series 1972 Bonds and any Completion Bonds or Additional Bonds, will
be sold to the purchasers thereof in reliance upon the commitment of
Lessee to make the payments of Net Rent provided in subsection (a),
above. Accordingly, the obligations of the Lessee to make the
payments of Net Rent thus required shall be absolute and unconditional
and until such time as the principal, interest and any redemption
premiums thereon shall have been fully paid, the Lessee (i) will not
suspend or discontinue any payments of Net Rent provided herein, and
(ii) will not terminate the lease evidenced hereby or otherwise seek
to avoid or reduce the payment of Net Rent for any reason, including,
without limiting the generality of the foregoing, failure of the Board
to complete the acquisition, construction, fabrication or installation
of the Initial Special Facilities or any portions thereof, or any acts
or circumstances that may constitute failure of consideration,
destruction or damage to such facilities, frustration of purpose, any
change in the tax or other laws of the United States of America or of
Texas, or any political subdivision of either thereof or any failure
of the Board to perform or observe any agreement, whether express or
implied, or any duty, liability or obligation arising out of or
connected with this Agreement. It is provided, however, that nothing
contained in this subsection shall be construed to release the Board
from the performance of any of the agreements on its part herein
contained, and in the event the Board should fail to perform any such
agreement, the Lessee may institute such action against the Board as
it may deem necessary to compel the performance thereof or to restrain
or enjoin forbidden acts so long as such shall not result in a
reduction of the payment of Net Rent hereunder.
Section 5.3. 1968 CONCURRENT BOND ORDINANCE; OTHER COSTS. This
Agreement is expressly subject at all times to the terms, provisions,
conditions and requirements of the 1968 Concurrent Bond Ordinance, and as
contemplated and required thereby, the Net Rent payable under Section 5.2,
above, is intended to be and shall be a net return to the Board, and
accordingly, in addition to the payment of the Ground Rent and the Net Rent,
the Lessee hereby agrees to pay all operation and maintenance expense
applicable to the Initial Special Facilities, including, without limitation,
any insurance premiums applicable thereto, any and all ad valorem or other
property taxes lawfully levied or assessed against the leasehold interest of
the Lessee in and to the Leased Premises any and all lawful excise or other
types of taxes imposed on or in respect of such properties and the expenses of
upkeep thereof of every kind and character, including the repair or ordinary
restoration thereof. No charges, fees, or tolls, other than herein expressly
provided for and other than the regular charges imposed at entrance control
booths at the Airport, if used, shall be charged or collected by the Board from
the Lessee, its agents and employees, or its suppliers of materials or
furnishers of service, for the use of any of
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<PAGE> 16
the Leased Premises or the exercise of any of the rights, licenses, services
and privileges expressed in or implied by this Agreement.
Section 5.4. PLACE OF PAYMENTS, USE OF FUNDS, DELINQUENCIES.
(a) All payments of Ground Rent and Net Rent shall be made on
the dates specified in this Article at the Principle office of the
Board. Moneys received by the Board as Ground Rent shall be and
become a part of the Gross Income of the Airport and shall be utilized
by the Board in accordance with the provisions of the 1968 Concurrent
Bond Ordinance. Moneys received by the Board as Net Rent shall be
utilized by the Board in accordance with the requirements of the
Special Facility Bond Ordinance and as may be therein directed.
(b) The Board, at its option, in addition to any remedy
available to it hereunder in the event of a default because of
nonpayment of rent, may impose a delinquency charge, payable upon
demand, against the Lessee, in accordance with the following formula:
A = Annual rate of interest, which rate
shall be four percentage points above
the rediscount rate charged member
banks of the Federal Reserve Bank in
Dallas, Texas, in effect on the first
business day of each January, April,
July and October.
C B = Amount of the bill due to the Board.
A.B x = --- = E
D C = Number of days the payment of the bill
is late.
D = Number of days in the calendar year.
E = Liquidated damages for late payment.
ARTICLE VI
OPERATIONS AND MAINTENANCE
INSURANCE, CONDEMNATION, INDEMNITY
Section 6.1. INSURANCE AS TO PASSENGER SERVICE FACILITIES. Inasmuch
as the Passenger Service Facilities will become a part of or be situated in the
terminal structure constructed on the Terminal Tract, it is hereby agreed that
the provisions of the PSF Agreement relating to operations, maintenance,
insurance, condemnation of similar facilities under that agreement shall govern
and control the Board and the Lessee regarding the same matters under this
Agreement relating to the Passenger Service Facilities. Accordingly, for the
purpose of this Article VI only, the term "Leased Premises" shall not include
the Passenger Service Facilities in instances where the same subject matter is
covered by the PSF Agreement with respect to similar facilities and the
Terminal Tract included therein.
Section 6.2. CARE, MAINTENANCE AND REPAIRS OF LEASED PREMISES
(a) The Lessee shall at all times keep in a clean and orderly
condition and appearance, the Leased Premises and all of the Lessee's
and the Board's fixtures, equipment and personal property which are
located in or upon any part thereof.
(b) The Lessee shall paint, repair, replace or rebuild all or
any part of the Leased Premises interior or exterior, structural or
non-structural, which may be damaged or destroyed. The Lessee shall
have the right to apply available insurance proceeds to such purposes
as contemplated by Section 6.7 or Section 6.9 hereof.
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<PAGE> 17
(c) Additionally, the Lessee shall--
(i) take good care of the Leased Premises; shall
maintain the same at all times in good condition; shall make
all repairs and replacements inside and outside, ordinary and
extraordinary, structural or otherwise, which repairs and
replacements by the Lessee shall be in quality and class not
inferior to the original material and workmanship; and shall
pay promptly the costs and expenses of such repairs,
replacements and maintenance, as provided in Section 5.3.
hereof; and
(ii) unless otherwise provided herein, maintain and
repair all utility service lines located upon the Leased
Premises to the extent used by the Lessee exclusively, except
to the extent that such maintenance or repair is the
obligation of the utility company providing such utility
service.
(d) In the event the Lessee fails to maintain, clean, repair,
replace, rebuild or paint, or fails diligently to continue to complete
the repair, replacement, rebuilding or painting of all the applicable
portions of the Leased Premises required to be repaired, replaced,
rebuilt or painted by the Lessee under the terms of this Agreement,
the Board, at its option, and in addition to any other remedies which
may be available to it, may repair, replace, rebuild, or paint all or
any part thereof and the cost thereof shall be payable by the Lessee
upon demand. The Board agrees, however, not to act pursuant to this
subsection (d) without first giving Lessee thirty (30) days' written
notice of default and, if the Lessee shall cure the specified default
during such period, the Board shall not exercise any right or remedy.
If the cure of Lessee's default requires action of a continuing
nature, commencement of the cure of such default within the notice
period and the continued exercise of due diligence in effecting such
cure shall be sufficient.
(e) The Lessee shall store its garbage, debris and other
waste materials in a clean and sanitary manner in trash receptacles
which the Board shall provide at Lessee's Premises, adequate to meet
the reasonable needs of Lessee, the size and location of which shall
be at the discretion of the Board. The Airport further agrees to
periodically remove such trash from the receptacles, and for such
service the Lessee shall pay at the rate of $1.00 per cubic yard of
trash so removed, which rate may be adjusted, depending on the
reasonable costs of administration, capital, labor and materials, by
the giving of thirty (30) days written notice to Lessee by the Board.
Section 6.3. SERVICES TO AIRPORT USERS, DISCRIMINATION. The Lessee,
in its operation of the Special Facilities or in the use of any portion of the
Leased Premises or in exercise of any privileges under this Agreement, shall
not on the grounds of race, creed, color or national origin discriminate or
permit discrimination against any person or group of persons in any manner
whatsoever.
Section 6.4. GOVERNMENTAL REQUIREMENTS, AIRPORT BOARD REGULATIONS.
(a) The Lessee shall comply with any applicable Federal
Aviation Regulations as the same may be amended from time to time, and
any other present or future laws, rules, regulations, orders or
directions of the United States of America, or the State of Texas
which from time to time may be applicable to the Lessee's operations
hereunder.
(b) The Lessee shall procure from all governmental
authorities having jurisdiction of the operations of the Lessee
hereunder, all licenses, franchises, certificates, permits or other
authorization which may be necessary for the conduct of such
operations and it shall comply with all laws and lawful ordinances,
and governmental rules,
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<PAGE> 18
regulations and orders during the term of this Agreement which from
time to time may be applicable to the Lessee's operations hereunder.
(c) The Lessee covenants and agrees to observe and obey (and
to require its officers and employees to observe and obey and to
exercise its best efforts to require guests and invitees and those
doing business with it to observe and obey) the reasonable rules and
regulations of the Board (including amendments and supplements
thereto) governing the conduct and operations of the Lessee and others
on the Leased Premises, and such future reasonable rules and
regulations as may, from time to time during the term hereof, be
promulgated by the Board for reasons of safety, health, sanitation,
and good order; provided that any such rules and regulations shall not
be inconsistent with the provisions of this Agreement or with the
rules and regulations of the Federal Aviation Administration. The
obligation of the Lessee to exercise its best efforts to require such
observance on the part of its guests, invitees and business visitors
shall apply only while such persons are on the Leased Premises.
(d) The Lessee covenants and agrees that this Agreement is
taken subject to the terms and provisions of Section 9.16 of the 1968
Concurrent Bond Ordinance.
(e) Subject to Section 5.2 hereof, nothing in this Section
6.4 shall be construed to deny the Lessee its right to contest the
application or validity of any such law, rule, regulation, order or
direction, and during such contest the Airport Board may not assert
any claim against Lessee for breach of this Agreement provided the
contest is promptly commenced and diligently prosecuted.
Section 6.5. PROHIBITED ACTS.
(a) Unless otherwise expressly permitted so to do, the Lessee
shall not install, maintain or operate, or permit the installation,
maintenance or operation, on the Leased Premises of any vending
machine or device designated to dispense or sell food, beverages,
tobacco, tobacco products or merchandise of any kind, except in
operational areas not available to other members of the public and on
a non-profit basis to the Lessee.
(b) The Lessee shall commit no nuisances on the Leased
Premises, and shall not do or permit to be done anything which may
result in the creation or commission or maintenance of a nuisance
thereon.
(c) The Lessee shall not permit a lien or liens to become
attached to the remainder interests of the Board and the Cities, or
upon the leasehold interest of the Lessee, without the consent of the
Board, or suffer or permit a lien or liens for taxes to be imposed or
attached thereto, unless Lessee is contesting in good faith the tax or
claim that is the basis of the lien, in which event Lessee shall
dissolve the lien or stay or prevent its foreclosure by bond or other
appropriate legal procedure.
Section 6.6. INSURANCE RELATING TO AIRPORT OTHER THAN SPECIAL
FACILITIES.
(a) The Board shall carry insurance relating to the Airport,
other than Special Facilities, in accordance with the provisions and
requirements of the 1968 Concurrent Bond Ordinance.
(b) The Board shall at all times during the term of this
Agreement maintain reasonably obtainable liability insurance with
respect to the Airport (other than Special Facilities) to the extent
required by Section 5.8(b) of the PSF Agreement or any substitute
agreement entered into by the Board and others in lieu of said
Section.
Section 6.7. INSURANCE RELATING TO SPECIAL FACILITIES OTHER THAN
PASSENGER SERVICE FACILITIES.
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(a) During the acquisition, construction, fabrication and
installation period of Special Facilities, the Board shall provide, or
cause to be provided, builder's risk insurance as to all items of
construction and all other insurance as to other items required and
reasonably obtainable with responsible insurers to insure against
risks of loss or damage to such facilities, so as to protect the
interest of the Board, the Lessee, contractors and suppliers therein.
During such period the Board shall also maintain, or cause the
contractors or suppliers to maintain, liability insurance, which shall
comply with the requirements of paragraph (iii), below. The Passenger
Service Facilities shall be insured upon completion by Lessee in the
same manner provided for similar facilities in the PSF Agreement.
Beginning with the Completion Date of the Catering Facilities and any
other Special Facilities (other than Passenger Service) the Lessee
shall maintain or cause to be maintained, with respect to the Catering
Facilities, and any other Special Facilities (other than Passenger
Service Facilities), with responsible insurers the following kinds and
the following amounts of insurance, with such variations as shall
reasonably be required to conform to applicable standard or customary
Texas insurance provisions, to wit:
(i) With respect to every structure and the
contents and fixtures thereof constituting part of the Special
Facilities, multi-risk insurance on each structure and its
fixtures and contents, covering direct physical loss or damage
(including the cost of removal of debris) to such structure
and its fixtures and contents, in such amount and of such
character as, under the terms and provisions thereof, will
provide a recovery, in the event of the occurrence of any loss
or damage from an insured cause, equal to the full amount of
loss or damage on a replacement cost basis up to the amount
reasonably obtainable as the maximum probable loss or damage
(including the cost of removal of debris) to such structure
and its fixtures and contents from any such cause. The risks
to be insured against pursuant to this paragraph are the risks
against direct physical damage or loss from fire and so-called
extended coverage perils to the extent such coverage is
reasonably obtainable and which is customarily obtained for
similar facilities at other major airports.
(ii) On all structures to become part of the Special
Facilities during the construction or reconstruction thereof
by the Lessee, such builder's risk insurance as is customarily
carried by others with respect to similar construction or
reconstruction, but the Lessee shall not be required to
maintain any such insurance to the extent that such insurance
is carried by contractors for the benefit of the Lessee and
the Board.
(iii) Public and other liability insurance of such
character and amount as shall be reasonably adequate to insure
the Board and the Lessee against risks to which the Board
and/or the Lessee may reasonably be or become subject in the
operation, construction or reconstruction of the Special
Facilities, as approved or reasonably required by the Counsel
for the Board, but the Lessee shall not be required to
maintain any such insurance to the extent that such insurance
is carried for its benefit by any licensee or other person
operating, occupying or using any part of the Special
Facilities or by contractors.
(iv) Such workmen's compensation or employer's
liability insurance as may be customarily carried or required
by law and such theft and other insurance as is customarily
carried by others engaged in the operation and maintenance of
facilities similar to the Special Facilities.
The Board shall provide Lessee with certificates of insurance
evidencing the renewal or substitution of such insurance. Such
certificates shall provide that Lessee shall be given 30 days' prior
written notice of any cancellation thereof.
(b) All policies evidencing insurance maintained or caused to
be maintained by the Lessee with respect to the Special Facilities
shall be issued by the home office
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of the insurer(s) or by a duly authorized agent of the insurer(s) and
shall name the Board and the Lessee as insureds, as their interest
shall appear, and shall be deposited with the Lessee. All proceeds
from claims shall be paid directly to the Lessee. The Board shall
have the right and is hereby authorized in its own name to demand and
sue, collect and receipt for claims and moneys hereunder if Lessee,
within a reasonable time, fails to do so, and in such event the Board
shall have the right to examine and inspect such policies. The net
proceeds of any and all such insurance required by paragraphs
(i) and (ii) of subsection (a), above, shall be applied as prescribed
in Section 6.8, below. In cases of restoration or rebuilding, the
Lessee shall deliver such proceeds to the Board as necessary to pay
the costs for such restoration or rebuilding of the Special
Facilities.
Section 6.8. DAMAGE, DESTRUCTION, DISPOSITION OF INSURANCE PROCEEDS.
(a) In the event the Special Facilities or a substantial part
thereof are damaged or destroyed by an insured casualty, the following
provisions shall be applicable:
(i) If at the time of the casualty there are Bonds
outstanding and the insurance proceeds together with any
moneys in any reserve fund are sufficient to pay all of the
interest, principal and other obligations accrued and to
accrue on said Bonds until they are fully and finally paid, or
if said proceeds and funds are insufficient and the Lessee
agrees to pay any deficiency, and the Lessee requests that
such Facility not be repaired or rebuilt, the Board will
terminate this Agreement and release the Lessee from all
unaccrued obligations hereunder, the insurance proceeds to be
deposited in the interest and sinking fund for the Bonds and
the moneys in said fund and in any reserve fund shall be
applied to pay the obligations with respect to the
outstanding Bonds. If the said proceeds and funds are in
excess of the amount then necessary to pay the obligations
with respect to the outstanding Bonds, any such excess shall
be paid to and retained by the Lessee.
(ii) If at the time of the casualty there are Bonds
outstanding and the insurance proceeds together with any
moneys in any reserve fund are not sufficient to pay all of
the interest, principal and other obligations accrued and to
accrue on said Bonds until they are fully and finally paid and
the Lessee does not agree to pay the Board the amount
necessary to make up the deficiency (or if the insurance
proceeds together with any moneys in the reserve fund are
sufficient to pay such obligations with respect to the
outstanding Bonds, but the Lessee requests that the Special
Facilities be repaired or rebuilt), such Facilities shall be
repaired or rebuilt and paid for with the insurance proceeds,
and if such proceeds are insufficient for such purposes the
Lessee shall pay the deficiency. If such proceeds are in
excess of the amount necessary for such purposes, any such
excess shall be paid to the Board and deposited by it to the
interest and sinking fund for said Bonds as a credit to the
next due payments of Net Rent, with such credit to continue
until the amount thereof is exhausted. The repair or
restoration of such Facilities shall be in accordance with the
original plans and specifications, together with alterations
or modifications made or agreed upon prior to the casualty, or
in accordance with new or modified plans and specifications,
the alternative to be determined by the Lessee.
(iii) If at the time of the casualty there are no
Bonds outstanding, the Lessee shall have the right to
determine whether or not the Special Facilities should be
reconstructed or repaired. If the Lessee elects not to
reconstruct or repair the Special Facilities, the insurance
proceeds shall be paid to and retained by the Lessee and this
Agreement and all unaccrued obligations hereunder shall
thereupon be terminated. If the Lessee elects to reconstruct
or repair the Special Facilities and if the insurance proceeds
are sufficient to reconstruct or repair
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the Special Facilities or if the insurance proceeds are
insufficient and the Lessee agrees to bear and pay the
deficiency, the insurance proceeds and the amount paid by the
Lessee shall be applied to the repair or restoration of such
Facilities, in accordance with the original plans and
specifications, together with any alterations or modifications
made or agreed upon prior to the casualty, or in accordance
with new or modified plans and specifications, the alternative
to be determined by the Lessee. If the said proceeds are in
excess of the amount necessary for such repair or restoration,
any such excess shall be paid to and retained by the Lessee.
(b) Sections 3.2 and 3.3 hereof shall apply to any
reconstruction or repair under this Section 6.8 to the same extent as
those Sections apply to the Initial Special Facilities.
Section 6.9. MISCELLANEOUS INSURANCE COVENANTS.
(a) The Lessee shall, at the commencement of the term hereof
and at each subsequent policy renewal date thereafter, file or cause
to be filed with the Board a certificate stating in reasonable detail
the insurance with respect to the Special Facilities then in effect
pursuant to the requirements of Section 6.7 hereof or otherwise, and
with respect to each policy the name of the insurer, the amount,
policy number, the expiration date, and the hazards covered thereby;
and whether the Lessee is then maintaining or causing to be maintained
insurance conforming in all respects with the requirements of Section
6.7 hereof.
(b) Any appraisal or adjustment of any loss, claim or damage
under any policy of insurance with respect to the Special Facilities,
and any settlement or payment of proceeds under any such policy which
may be agreed upon between the Lessee and any insurer, shall be
evidenced by a certificate of the Lessee filed with the Board,
approving such appraisal, adjustment, settlement or payment as
required and satisfactory in the interest of the Board and the Lessee.
(c) Lessee's obligation under Section 6.7 shall not affect
its right to carry additional insurance solely for its own account.
(d) In the event the Lessee fails to maintain or cause to be
maintained the full insurance coverage required by this Agreement, the
Board may (but shall be under no obligation to) obtain the required
insurance coverage and pay the premiums for the same; and all amounts
so advanced therefor by the Board shall become an additional
obligation of the Lessee to the Board, which amounts, together with
interest thereon at the rate of 10% per annum from the date of payment
thereof, the Lessee agrees to pay upon demand.
Section 6.10. CONDEMNATION.
(a) In the event that title to or use of the Leased Premises
or a substantial part thereof is taken under color of governmental
authority, the following provisions shall be applicable:
(i) If at the time of the taking there are Bonds
outstanding and the condemnation proceeds together with any
moneys in any reserve fund are sufficient to pay all of the
interest, principal and other obligations accrued and to
accrue on said Bonds until they are fully and finally paid, or
if said proceeds and funds are insufficient and the Lessee
requests that the Special Facilities not be rebuilt elsewhere
and agrees to pay any deficiency, or if land suitable for such
purpose is not available elsewhere, the Board will terminate
this Agreement and release the Lessee from all unaccrued
obligations hereunder, the condemnation proceeds to be
deposited in the interest and sinking fund for the Bonds and
moneys in
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said fund and in any reserve fund shall be applied to pay
the obligations with respect to the outstanding Bonds. If the
said proceeds and funds are in excess of the amount then
necessary to pay the obligations with respect to the
outstanding Bonds, any such excess shall be divided between
the Board and the Lessee as their respective interests appear
at the time of the taking.
(ii) If at the time of taking there are Bonds
outstanding and the condemnation proceeds together with any
moneys in any reserve fund are not sufficient to pay all of
the interest, principal and other obligations accrued and to
accrue on said Bonds until they are fully and finally paid and
the Lessee does not agree to pay the Board the amount
necessary to make up the deficiency (or if the condemnation
proceeds together with any moneys in the reserve fund are
sufficient to pay such obligations with respect to the
outstanding Bonds, but the Lessee requests that the Special
Facilities be rebuilt elsewhere and paid for with the
condemnation proceeds, and if such proceeds are insufficient
for such purposes the Lessee shall pay the deficiency. If
such proceeds are in excess of the amount necessary for such
purpose, any such excess shall be paid to the Board and
deposited by it to the interest and sinking fund for said
Bonds as a credit to the next due payment(s) of Net Rent, with
such credit to continue until the amount thereof is exhausted.
The rebuilding of the Special Facilities shall be in
accordance with the original plans and specifications,
together with alterations or modifications made or agreed upon
prior to the taking, or in accordance with new or modified
plans and specifications, the alternative to be determined by
the Lessee. In the event of rebuilding under this paragraph
(ii), the Ground Rent shall abate as to any of the Leased Land
rendered useless by the taking, as of the time of the taking,
and the parties shall appropriately amend the description of
the Leased Land and the new Ground Rent shall become effective
as of the date the Lessee is given beneficial use of the
rebuilt Special Facilities.
(iii) Subject to the provisions of paragraph (iv)
below, if at the time of the taking there are no Bonds
outstanding the condemnation proceeds are sufficient to
rebuild the Special Facilities elsewhere, or if the
condemnation proceeds are insufficient and the Lessee agrees
to bear and pay the deficiency, the condemnation proceeds and
the amount paid by the Lessee shall be applied to the
rebuilding of such Facilities elsewhere, provided land
suitable for such purpose is available, in accordance with the
plans and specifications, together with any alterations or
modifications made or agreed upon prior to the taking, or in
accordance with new or modified plans and specifications, the
alternative to be determined by the Lessee. If such proceeds
are in excess of the amount necessary for such purpose, any
such excess shall be divided between the Board and the Lessee
as their respective interests appear at the time of the
taking. In the event of a rebuilding under this paragraph
(iii), the Ground Rent shall abate as to any of the Leased
Land rendered useless by the taking, as of the time of the
taking, and the parties shall appropriately amend the
description of the Leased Land the new Ground Rent shall
become effective as of the date the Lessee is given beneficial
use of the rebuilt Special Facilities.
(iv) If at the time of the taking there are no Bonds
outstanding and the Lessee does not desire that the Special
Facilities be rebuilt elsewhere, in which event it shall advise
the Board of such decision within sixty (60) days after the
date of the taking, or land suitable for such purpose is not
available elsewhere, the Board will terminate this Agreement
and release the Lessee from all unaccrued obligations
hereunder. The condemnation proceeds shall be divided between
the Board and the Lessee as their respective interests appear
at the time of the taking.
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(b) In the event that title to or use of less than a
substantial part of the Leased Premises is taken by the power of
eminent domain (that is, if the primary use of the Special Facilities
is not substantially impaired by deletion of the part taken) the
Lessee shall determine whether any rebuilding is necessary. Any
condemnation proceeds not used for the purposes of rebuilding shall be
applied until exhausted in reduction of the Net Rent payable
hereunder.
(c) Section 3.2. and 3.3. hereof shall apply to any
rebuilding under this Section 6.10., to the same extent as those
Sections apply to the Initial Special Facilities.
Section 6.11. INDEMNIFICATION. The Lessee covenants and agrees to
indemnity and hold harmless the Board and the Cities, their directors,
councilmen, officers, agents and employees, from and against any and all claims
for damages or injuries, including death, to persons or property arising out of
or incident to the leasing of, or the use and occupancy of, the Leased Premises
during the term of this Agreement by Lessee, its agents, servants, employees,
contractors, or subcontractors; provided, however, that the Board shall give to
Lessee prompt written notice of any such claim or actions and Lessee shall have
the right to investigate, compromise and defend the same. This Section shall
not apply, however, to the negligent or willful acts of omissions of the parties
indemnified hereunder or any of them.
Section 6.12. MISCELLANEOUS OPERATION PROVISIONS.
(a) With the prior written approval of the Board, Lessee may
erect, maintain or display signs of advertising at or on the exterior
parts of the Leased Premises or in or on the Leased Premises so as to
be visible outside the Leased Premises. Exterior signs affecting
public safety and security shall be in accordance with established
Board standards. If the Board has not given approval, as aforesaid,
upon receipt of notice, the Lessee shall remove, obliterate, or paint
out any and all advertising, signs, posters, and similar devices placed
by the Lessee on the Leased Premises. In the event of a failure on the
part of the Lessee so to remove, obliterate or paint out each and every
sign or piece of advertising and to restore the Leased Premises to
their prior condition, the Board may perform the necessary work and the
Lessee shall pay the cost thereof to the Board on demand.
(b) The Lessee shall provide and maintain such obstruction
lights as the Board may reasonably direct, of the type and design
approved by the Board, and shall install such lights in the locations
on the Leased Premises designated by the Board and shall furnish and
install the bulbs and furnish the electricity necessary for the
operation thereof, and shall operate the same in accordance with the
directions of the Board. The Board hereby directs that all said
obstruction lights shall, until further notice be operated daily for a
period commencing thirty (30) minutes before sunset and ending thirty
(30) minutes after sunrise (as sunset and sunrise may vary from day to
day throughout the year) and for such other periods as may be directed
or requested by the control tower of the Airport. In addition, Lessee
shall also provide and maintain fire protection and safety equipment
and all other equipment of every kind and nature required by any law,
rule, order, ordinance or resolution of any governmental authority
having jurisdiction over the Airport.
(c) Except to the extent required for the performance of the
obligations or the exercise of rights of the Lessee hereunder, nothing
contained in this Agreement shall grant to the Lessee any rights
whatsoever in the air space above the Leased Premises in excess of a
height set forth in the plans and specifications for the Special
Facilities.
(d) All personal property and all property and installations
(including trade fixtures) removable without material damage to the
Leased Premises, which are installed by Lessee in or on the Leased
Premises shall be deemed to be and remain the property
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of the Lessee. All such property and installations may at Lessee's
option be removed by Lessee from the Leased Premises at any time
during the term of this Agreement, and unless otherwise agreed in
writing by the parties, shall be removed by Lessee at or before the
expiration or other termination of the term of this Agreement provided
that any damage to the leased premises caused by said removal shall be
repaired by Lessee so as to return the premises to the Board in the
same or similar condition as when entered by Lessee, reasonable wear
and tear excepted. Any such property remaining on the Leased Premises
beyond thirty (30) days thereafter shall be deemed to be abandoned by
Lessee.
(e) All water, gas, oil and mineral rights in and under the
soil are expressly reserved by the Board.
(f) The Lessee shall promptly furnish to the Board all books,
records and financial information relating to the Special Facilities
reasonably necessary for the Board to submit timely statements for the
payment of rent hereunder by the Lessee in a timely manner.
(g) Title to all permanent improvements, including, but not
limited to, buildings, structures and paved areas, shall immediately
vest in the Board and Cities as a part of the Airport.
(h) Lessee and Braniff Airways, Incorporated, shall
coordinate their adjacent land area (if the aforesaid option to expand
the Leased Premises is exercised) in order to establish exact boundary
lines. In the event of a dispute between Lessee and Braniff Airways,
Incorporated, such dispute shall be resolved by the Executive Director
of the Board.
ARTICLE VII
EVENT OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT DEFINED. The following shall be
"events of default as to the Lessee" under this Agreement and the term "events
of default as to the Lessee" shall mean, whenever it is used in this Agreement,
any one or more of the following events:
(a) Failure by the Lessee to pay when due or cause to be paid
when due either the Ground Rent or the Net Rent, or both, required to
be paid under Article V hereof.
(b) Failure by the Lessee to observe and perform any
covenant, condition or agreement on its part to be observed or
performed other than as referred to in subsection (a), next above, for
a period of thirty (30) days after written notice, specifying such
failure and requesting that it be remedied, given to the Lessee by the
Board, unless the Board shall agree in writing to an extension of such
time prior to its expiration.
(c) The Leased Premises shall be abandoned, deserted or
vacated by the Lessee or any lien shall be filed against the Leased
Premises or any part thereof in violation of this Agreement and shall
remain unreleased for a period of sixty (60) days from the date of such
filing unless within said period the Lessee is contesting in good
faith the validity of such lien.
(d) The dissolution or liquidation of the Lessee or the filing
by the Lessee of a voluntary petition in bankruptcy, or failure by the
Lessee within sixty (60 days to lift any execution, garnishment or
attachment of such consequence as will impair its ability to carry on
its operations at the Special Facilities, or the commission by the
Lessee of any act of bankruptcy or adjudication of the Lessee as a
bankrupt,
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or general assignment by the Lessee for the benefit of its creditors,
or the entry by the Lessee into an agreement of composition with its
creditors, or the approval by a court of competent jurisdiction of a
petition applicable to the Lessee in any proceeding for its
reorganization instituted under the provisions of the general
bankruptcy act, as amended, or under any similar act which may
hereafter be enacted. The term "dissolution or liquidation of the
Lessee," as used in this subsection, shall not be construed to include
the cessation of the corporate existence of the Lessee resulting
either from a merger or consolidation of the Lessee into or with
another corporation or a dissolution or liquidation of the Lessee
following a transfer of all or substantially all of its assets as an
entirety, under the conditions permitting such actions contained in
Section 9.2. hereof.
Section 7.2. REMEDIES ON DEFAULT. Whenever any event of default as
to the Lessee referred to in Section 7.1. hereof shall have happened and be
subsisting, the Board may take any one or more of the following remedial steps
as against the Lessee:
(a) The Board may re-enter and take possession of the Leased
Premises without terminating this Agreement and sublease (or operate
as sublessee) the Special Facilities for the account of the Lessee,
holding the Lessee liable for the difference between the rents and
other amounts payable by the Lessee hereunder and the rents and other
amounts payable by such sublessee in such subleasing or, if operated
by the Board, the difference between the net revenues received from
such operations and the rents and other amounts payable by the Lessee
hereunder.
(b) The Board may terminate this Agreement, exclude the
Lessee from possession of the Leased Premises and use its best efforts
to lease the same to another party for the account of the Lessee,
holding the Lessee liable for all rents and other amounts due under
this Agreement and not paid by such other party.
(c) The Board may take whatever other action at law or in
equity as may appear necessary or desirable, including in the
appropriate cases the remedies conferred under the PSF Agreement, to
collect the rent then due and thereafter to become due, or to enforce
performance and observance of any obligations, agreement or covenant
of the Lessee under this Agreement.
Section 7.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Board is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or in the appropriate
case under the PSF Agreement or hereafter existing under law or in equity. No
delay or omission to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Board to exercise
any remedy reserved to it in this Article, it shall not be necessary to give
any notice, unless such notice is herein expressly required or is required by
law.
Section 7.4. AGREEMENT TO PAY ATTORNEYS FEES AND EXPENSES. In the
event there should be a default under any of the provisions of this Agreement
and the Board should determine that the services of an Attorney are required or
the Board incurs other expenses for the collection of rent or the enforcement
of performance or observance of any obligation or agreement on the part of
Lessee, the Lessee agrees that it will on demand therefor pay to the Board the
reasonable and necessary fee of such attorneys and other reasonable expenses so
incurred.
Section 7.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any covenant contained in this Agreement should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
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ARTICLE VIII
TERMINATION BY LESSEE
Section 8.1. WHILE BONDS OUTSTANDING. As provided in Section 5.2(c)
hereof, this Agreement as to Net Rent is not subject to termination by Lessee
while any Series 1972 Bonds, any Completion Bonds or any Additional Bonds are
outstanding and not fully and finally paid.
Section 8.2. TERMINATION FOR OTHER PURPOSES. As to the payment of
Ground Rent, and as to all rental after all the Series 1972 Bonds, all
Completion Bonds and all Additional Bonds are fully and finally paid, Lessee
may terminate this Agreement upon the occurrence of any one or more of the
following reasons:
(a) If Lessee shall be prevented from operating its air
transportation system to and from the Airport by reason if its
inability to use a substantial part or all of the Runway and Taxiway
Complex:
(i) For a period longer than thirty (30)
consecutive days, resulting from any condition of the Airport
not due to the fault of Lessee; or
(ii) For a period longer than ninety (90)
consecutive days, resulting from a permanent injunction issued
by any court of competent jurisdiction; or
(iii) For a period longer than ninety (90)
consecutive days, resulting from any order, rule or regulation
of the Federal Aviation Administration, the Civil Aeronautics
Board, or other governmental agency having jurisdiction over
the operations of Lessee with which Lessee is unable to comply
at reasonable cost or expense; or
(iv) Because of the suspension, cancellation or
termination of Lessee's Certificate(s) of Public Convenience
and Necessity or other authority issued by this Civil
Aeronautics Board, or its successor, granting the right to
serve the Cities of Dallas and Fort Worth.
(b) The Board shall fail to perform any of its obligations
under this Agreement within twenty (20) days after receipt of notice
of default hereunder from Lessee (except where fulfillment of its
obligation requires activity over a period of time and the Board shall
commence to perform whatever may be required for fulfillment within
twenty (20) days after the receipt of notice and continue such
performance without interruption, except for causes beyond its
control).
Upon the occurrence of any of the foregoing events, or at any
time thereafter during the continuance of any such condition, Lessee
may, by twenty (20) days' written notice terminate this Agreement,
such termination to be effective upon the date set forth in such
notice and to have the same effect as if the term hereof had expired
on that date, subject, as aforesaid, to the provisions of Section 8.1
hereof.
No waiver by Lessee of any default on the part of the Board in
the performance of any of the terms, covenants or conditions hereof to
be performed, kept or observed by the Board shall be or be construed
to be a waiver by Lessee of any other or subsequent default in the
performance of any of said terms, covenants and conditions.
ARTICLE IX
ASSIGNMENTS, SUBLETTING
Section 9.1. ASSIGNMENTS BY AIRPORT BOARD AND CITIES. The Board and
the Cities may transfer or assign this Agreement to any successor in interest
to Board and
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the Cities to whom the Airport may be sold or assigned; provided, however, that
the successor in interest shall execute and deliver to the board, with a copy
to Lessee, an instrument assuming the lawful obligations of Board and the
Cities under this Agreement.
Section 9.2. ASSIGNMENTS AND SUBLEASES BY LESSEE.
(a) Lessee shall not make any assignment of or sublet under
this Agreement without the written consent of Board, which consent
will not be unreasonably withheld; provided, however, this Agreement
may be assigned without such consent to any successor in interest of
Lessee with or into which Lessee may merge or consolidate, or which
may succeed to the assets of Lessee or a major portion of its assets
related to its air transportation system.
(b) If Lessee assigns or sublets its interest in this
Agreement, except as hereinbefore permitted, or if the Leased Premises
are occupied by anyone other than Lessee, the Board may collect rent
therefrom and the Board shall apply the net amount collected to the
rents herein reserved, but no such collection shall be deemed a waiver
by the Board of the covenants contained herein or an acceptance by
the Board of any such assignee, sublessee, claimant or occupant as
a successor lessee, not a release of Lessee by the Board from the
further performance by the Lessee of the covenants imposed upon Lessee
herein.
ARTICLE X
MISCELLANEOUS
Section 10.1. LESSEE'S OBLIGATION UNDER PASSENGER SERVICE FACILITIES
AGREEMENT. Lessee hereby specially covenants and agrees as a part of this
Agreement that it will observe, recognize and perform all of its obligations
under the PSF Agreement, and it is expressly acknowledged and understood that a
default of the Lessee individually under the PSF Agreement shall constitute a
default of the Lessee as to the Passenger Service Facilities and the Terminal
Tract under this Agreement. Conversely, a default in the payment of Net Rent
under this Agreement shall constitute a default as to the Lessee individually
under the PSF Agreement.
Section 10.2. CONTRACTS AND WARRANTIES. All construction,
reconstruction or rebuilding pursuant to this Agreement shall be under
contracts entered into under procedures established by the Board. The Board
will cause construction contracts relating to the Special Facilities to contain
provisions for performance and payment bonds and the usual and appropriate
warranties for the benefit of all parties hereto.
Section 10.3. BOARD'S RIGHT OF ENTRY.
(a) The Board, its officers and employees, shall have the
right at all reasonable times to enter upon the Leased Premises for
the purpose of inspecting the same, and for the doing of any act or
thing which the Board may be obligated or have the right to do under
this Agreement.
(b) Without limiting the generality of the foregoing, the
Board shall have the right, for its own benefit or for the benefit of
the Lessee and others at the Airport to maintain existing and future
utilities systems or portion thereof on the Lease Premises, including
therein without limitation thereto, systems for the supply of heat,
water, gas, fuel and electricity, and for the furnishing of fire alarm,
fire protection sprinkler, sewage, drainage, telephone and telegraph
service, including all lines, pipe mains, wires, conduits and
equipment connected with or appurtenant to such to make such repairs,
replacements or alterations as may, in the opinion of the Board, but
deemed necessary or advisable and, from time to time, to construct or
install over, in or under the Leased Premises new systems or parts
thereof, including lines, pipe
26
<PAGE> 28
mains, wires, conduits and equipment; provided, however, that in
exercising such right the Board shall not interfere with the operation
of the Special Facilities or abridge the rights conferred on Lessee by
this Agreement.
Section 10.4. SERVICES TO LESSEE.
(a) Other than for the supply of water, which shall be
furnished by the Board and paid for by the Lessee at a metered rate,
the Board shall arrange with the appropriate utility or service
companies, or municipalities, or other suppliers, supplying utilities
and services in the area, for the supply to the Leased Premises of all
services including electric power, telephone conduits and telephone
connections within the Leased Premises. Any costs thereof required to
be paid by the Board shall constitute a Cost of the Special Facilities
payable from Bond proceeds. Lessee shall pay the appropriate utility
or service companies for the supply of such services.
(b) No failure to furnish, delay or interruption in any
service or services, whether such service or services shall be
supplied by the Board or by others, shall relieve or be construed to
relieve the Lessee of any of its obligations hereunder, or shall be
construed to be an eviction by the Board, or shall constitute grounds
for any diminution or abatement of the Ground Rent or the Net Rent
payable under this Agreement, or grounds for any claim by the Lessee
for damages, consequential or otherwise, except when resulting from
the negligence of the Board or from its willful failure to furnish or
supply such services, if any (except where the Lessee is in default in
the payment of rentals). It is provided, however, that nothing herein
shall diminish or abate the requirement herein that Net Rent shall be
paid unconditionally.
Section 10.5. ADDITIONAL EXTENSIONS AND MODIFICATIONS OF SPECIAL
FACILITIES, ADDITIONAL BONDS.
(a) The Lessee shall not, without the prior written approval
of the Board, erect or permit to be erected any structures or make any
improvements, alterations, modifications, additions, repairs to or
replacements of any structure hereafter built on the Leased Premises,
except as specifically provided herein or in the PSF Agreement as to
the Passenger Services Facilities; nor shall it install or permit to
be installed any fixtures (other than trade fixtures, removable
without material damage to the Leased Premises, any such damage to be
immediately repaired by the Lessee and which fixtures Lessee shall be
entitled to remove) without such written approval.
(b) The Board and the Lessee acknowledge that as the Airport
becomes more fully developed, such circumstance will likely require
that the Special Facilities be extended, improved and expanded in
order to provide convenient and necessary services at the Airport.
Accordingly, the Board shall make such acquisitions, additions,
extensions, improvements and modifications to or of such Special
Facilities as shall be requested by the Lessee. In order to obtain
funds for such purposes, the Board, when requested the Lessee, shall
take such action as may be requisite to issue Additional Bonds
therefor. Upon the issuance of any such Additional Bonds, the same
shall be on a parity as to lien with the Series 1972 Bonds and any
Completion Bonds or other Additional Bonds theretofore issued, and the
Net Rent payable hereunder shall automatically be increased in the
amounts required by the terms of the ordinance authorizing such
Additional Bonds. It is provided, however, that such ordinance shall
not be adopted until the Lessee has approved such ordinance, after the
receipt of which approval the same shall be binding upon the Lessee.
Such Additional Bonds shall be issued as Special Facility Bonds
subject to and in accordance with the Special Facilities Bond
Ordinance and any other ordinances authorizing Additional Bonds or
Completion Bonds. Section 3.2 and 3.3 hereof shall apply to any such
additions, extensions, improvements and modifications under this
Section 10.5 to the same extent as those Sections apply to the Initial
Special Facilities.
27
<PAGE> 29
(c) In the event the proceeds derived from the sale of any
Additional Bonds shall be insufficient to pay the Costs of the Special
Facilities for the project then being financed, the Lessee shall
either pay the amount of the insufficiency or shall request the
issuance of Completion Bonds for that purpose, in which event the
Board shall request the cities to issue completion Bonds for that
purpose. In the event of the issuance of such Completion Bonds, then
the Net Rent payable hereunder shall thereupon be automatically
increased in accordance with the ordinance authorizing such Completion
Bonds. It is provided, however, that such ordinance shall not be
adopted until the Lessee has approved such ordinance, after the receipt
of which approval the same shall be binding upon the Lessee. Such
Completion Bonds shall be on a parity as to lien with the Series 1972
Bonds, and shall be issued as Special Facilities Bonds subject to and
in accordance with the terms, conditions and provisions of the 1968
Concurrent Bond Ordinance, the Special Facilities Bond Ordinance and
any ordinances authorizing Additional Bonds or Completion Bonds.
Section 10.6. ISSUANCE OF COMPLETION BONDS AND ADDITIONAL BONDS. For
the purpose of determining whether or not Completion Bonds and Additional Bonds
can be issued under this Agreement:
(a) Completion Bonds may be issued upon the execution of a
certificate by the Director of Finance or similar officer of the Board
stating in substance that the proceeds of the Series 1972 Bonds have
been expended or totally appropriated for the purpose of the Initial
Special Facilities, and that additional funds are needed in order to
complete the payment of the Costs of the Initial Facilities, and as to
the completion of any item of extensions or other improvements or
acquisition of Special Facilities with Additional Bonds, Completion
Bonds may be issued upon the execution of a similar certificate
stating in substance that the proceeds of the series of Additional
Bonds are not adequate to complete the project for which the
Additional Bonds were issued.
(b) Additional Bonds may be issued at any time after the
Completion Date of any respective item of Initial Special Facilities,
or, as to subsequent improvements or acquisitions, at any time after
the same have been completed and Completion Bonds cannot be issued
therefor under the provisions of paragraph (a), above.
Section 10.7. FORMAL APPROVALS BY LESSEE.
(a) With respect to the approvals herein required of the
Lessee, Lessee shall furnish to the Board a certificate signed by its
Secretary or an Assistant Secretary under the seal of the corporation,
and such certificate shall set forth the officers or representatives
of Lessee who are authorized to grant such approvals to bind the
Lessee thereto; and the Board and all third parties affected by any
such approvals including the holders of Bonds, may rely upon any
writing purporting to grant such approvals signed by any officer or
representative thus certified as being conclusively binding upon
Lessee, and any such writing shall itself constitute conclusive
evidence that any and all corporate actions necessary to be taken with
respect to the matter thus approved by such officer or representative
shall be conclusively presumed to have been so taken by the
corporation, and that the approval therein given has been authorized
by the corporation.
(b) Whenever herein the approval of Lessee is required in
connection with the Special Facilities Bond Ordinance, the same shall
be deemed to mean the complete ordinance, except for rate of interest,
award provisions and the terms of sale and any other matters deferred
until the date of sale.
Section 10.8. REMEDIES AGAINST CONTRACTORS AND SUBCONTRACTORS AND
SURETIES. In the event of default of any contractor or subcontractor under any
contract made by it in connection with the construction of the Special
Facilities, the Board will promptly proceed, either separately or in
conjunction with others, to exhaust the remedies
28
<PAGE> 30
of the Board against the contractor of subcontractor so in default and against
the surety of each for the performance of such contract. The Board agrees to
advise the Lessee of the steps it intends to take in connection with any such
default. Any amounts recovered by way of damages, refunds, adjustments or
otherwise in connection with the foregoing prior to the Completion Date or the
completion of any construction, shall be made a part of the funds available for
the payment of the Costs of the Special Facilities. If any such recoveries are
made after the Completion Date or the completion of any construction in
connection with such Facilities, the amounts recovered shall be deposited in
the interest and sinking fund applied as a credit to the Net Rent obligation of
the Lessee hereunder, in accordance with Section 5.2(b) hereof.
Section 10.9. BROKERAGE. The Lessee represents and warrants that no
broker has been concerned on its behalf in the negotiation of this Agreement
and that there is no such broker who is or may be entitled to be paid a
commission in connection therewith. The Lessee shall indemnify and save
harmless the Board of and from any claim for commission or brokerage made by
any such broker when such claim is based in whole or in part upon any act or
omission by the Lessee.
Section 10.9. NOTICES. Notices provided for in this Agreement shall
be sufficient if sent by registered or certified mail, postage prepaid,
addressed, if to the Board--Dallas-Fort Worth Regional Airport Board, Post
Office Drawer DFW, Dallas-Fort Worth Airport, Texas 75261, Attention: Executive
Director, or to such other address and person as it may direct in writing; and
if to Lessee--American Airlines, Inc., 633 Third Avenue, New York, New York
10017, Attention: Vice President, Properties and Facilities, or to such other
address and person as it may direct in writing. Notices shall be deemed
completed when mailed unless otherwise herein required.
IN WITNESS WHEREOF, The parties hereto have executed these presents as
of the day and year first above written, but actually on October 22, 1972.
DALLAS-FORT WORTH REGIONAL
AIRPORT BOARD
By /s/ THOMAS M. SULLIVAN
------------------------------------
Executive Director
ATTEST:
/s/ DEAN MOORE
- ---------------------------------------
Staff Secretary
APPROVED:
/s/ LEE E. HOLT
- ---------------------------------------
Legal Counsel to Board
AMERICAN AIRLINES, INC.
By /s/ G. E. OVERBECK
------------------------------------
Senior Vice-President
ATTEST:
/s/ H. WAYNE WILE
- ---------------------------------------
Secretary
29
<PAGE> 31
THE STATE OF TEXAS
COUNTY OF TARRANT
BEFORE ME, the undersigned authority in and for Tarrant County, Texas
on this day personally appeared Thomas M. Sullivan and Dean Moore, of the
Dallas-Fort Worth Regional Airport Board, each known to me to be the person
whose name is subscribed to the foregoing instrument and known to me to be,
respectively, Executive Director and Staff Secretary of the Dallas-Fort Worth
Regional Airport Board, and each acknowledged to me that he executed the same
for the purposes and consideration therein expressed and in the capacity
therein stated, and as the act and deed of said Board.
GIVEN UNDER MY HAND and seal of office, this the 2nd day of October,
1972.
/s/ FRANCES D. MOORE
----------------------------------------
Notary Public in and for Tarrant County,
Texas
THE STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority in and for New York County, New
York on this day personally appeared Gene E. Overbeck and H. Wayne Wile, each
known to me to be respectively, Senior Vice President and Secretary, American
Airlines, Inc., a Delaware corporation, and each acknowledged to me that he
executed the same for the purpose and consideration therein stated, and as the
act and deed of said corporation.
GIVEN UNDER MY HAND and seal of office, this the 28th day of
September, 1972.
/s/ GALE KAY WALL
----------------------------------------------
Notary Public in and for New York County,
New York
30
<PAGE> 32
CONFORMED
Airport Board Agreement
Number 23201-E-S1
================================================================================
AMERICAN AIRLINES SUPPLEMENTAL
SPECIAL FACILITIES AGREEMENT
_______________
BY AND BETWEEN
THE DALLAS-FORT WORTH REGIONAL AIRPORT BOARD
and
AMERICAN AIRLINES, INC.
_______________
(including provisions for net rent and ground rent)
_______________
Dated as of February 1, 1973
================================================================================
<PAGE> 33
THE STATE OF TEXAS ) AMERICAN AIRLINES SUPPLEMENTAL
COUNTY OF TARRANT ) SPECIAL FACILITIES AGREEMENT
THIS AMERICAN AIRLINES SUPPLEMENTAL SPECIAL FACILITIES AGREEMENT
HEREIN CALLED THIS OR THE "SUPPLEMENTAL FACILITIES AGREEMENT"), MADE AND
ENTERED INTO AS OF THE 1ST DAY OF FEBRUARY, 1973, BY AND BETWEEN THE
DALLAS-FORT WORTH REGIONAL AIRPORT BOARD (HEREINAFTER CALLED THE "BOARD"), ON
THE ONE HAND, BEING THE DULY AND LAWFULLY CONSTITUTED AND OPERATING BOARD OF
DIRECTORS OF THE DALLAS-FORTH WORTH REGIONAL AIRPORT (HEREINAFTER CALLED THE
"AIRPORT"), BELONGING TO THE CITIES OF DALLAS AND FORT WORTH, TEXAS
(HEREINAFTER CALL THE "CITIES"), AND AMERICAN AIRLINES, INC., A DELAWARE
CORPORATION (HEREINAFTER CALLED "LESSEE"), ON THE OTHER HAND;
W I T N E S S E T H:
WHEREAS, heretofore, the Board and the Lessee executed and delivered a
certain case agreement entitled "American Airlines Special Facilities Lease
Agreement" (hereinafter called the "Facilities Agreement"), the same being
dated as of October 1, 1972, and pursuant to the terms of which the Board
initially leased to the Lessee and confirmed the prior lease of certain lands
therein described as the "Leased Lands" and additionally granted to the Lessee
in Section 4.1 thereof the right and option to lease additional lands in said
section described as Areas A and B (hereinafter called the "Option Tracts"),
upon the exercise of which said Tracts will be included as a part of the Leased
Lands and subject to the terms thereof and to the ground rentals payable with
respect thereto; and
WHEREAS, additionally pursuant to the Facilities Agreement, the
Cities, acting pursuant thereto and as requested by the Board, authorized,
among other things, the construction of certain facilities therein described as
the "Catering Facilities" upon the tract of land therein described as Tract 1
of the Leased Lands, and further authorized the fabrication and installation of
certain passenger service facilities on land theretofore leased from the Board,
the financing of all of such facilities having been accomplished pursuant to
concurrent ordinance (the "1972 American Bond Ordinance") of the City of Dallas
bearing number 13810 and of the City of Fort Worth bearing number 6727; and
WHEREAS, the Board has agreed to make certain acquisitions, additions,
extensions, improvements and modifications to or of the Special Facilities, as
therein defined, such additions, extensions and improvements being herein
defined as the "Combination Freight and Maintenance Facilities," and the Board
has further agreed to request the Cities to issue "Additional Bonds" therefor,
upon and subject to the terms specified in the 1972 American Bond Ordinance,
and the Lessee has agreed that upon the issuance of said bonds the "Net Rent"
payable under the Facilities Agreement shall automatically be increased in the
amounts required by the terms of the ordinance authorizing the same; and
WHEREAS, the Lessee and the Board accordingly desire hereby to
evidence their agreement (a) that the Lessee exercise its option to lease the
Option Tracts under and subject to the Facilities Agreement and to this
Supplemental Facilities Agreement; (b) that the Board cause to be constructed,
fabricated, equipped and installed upon the Option Tracts a project of
additional Special Facilities consisting of the Combination Freight and
Maintenance Facilities; (c) that the Lessee authorize and approve the issuance
of $6,300,000 in special facility revenue bonds for such purpose, the same to
constitute "Additional Bonds" within the meaning of the Facilities Agreement
and the
<PAGE> 34
1972 American Bond Ordinance; and (d) that the term of the Facilities Agreement
be amended and more specifically specified in the manner herein provided;
"NOW, THEREFORE, the Board and the Lessee, for and in consideration of
the rents reserved in the Facilities Agreement and herein confirmed, reserved
and increased, and the covenants and agreements herein contained, hereby
covenant and agree as follows, to-wit:
ARTICLE I
DEFINITIONS, THE FACILITIES AGREEMENT
Section 1.1 Definitions. (a) All words and terms used herein which
constituted defined terms and words in the Facilities Agreement shall have the
same meanings and definitions as are contained therefor in the Facilities
Agreement, except where the same words and terms are expressly defined
otherwise herein, and such defined words and terms are incorporated herein for
all purposes.
(b) In addition to the defined terms specified in the preambles hereto
and to those referred to in the paragraph (a), next above, the following words
and terms for the purposes of this Supplemental Facilities Agreement and of the
Facilities Agreement with respect to matters herein contained supplemental
thereto and amendatory thereof, shall have the following meanings,
respectively, unless the context shall clearly appear otherwise, to-wit:
(i) "1973 Additional Bond" means the bond herein approved and
authorized to be issued for the purpose of financing the Costs of the
Combination Freight and Maintenance Facilities, the same to be
entitled "Dallas-Fort Worth Regional Airport American Special
Facilities Revenue Bonds, Series 1973";
(ii) "Combination Freight and Maintenance Facilities" means
the properties, facilities, structures and equipment for the
maintenance, upkeep, repair and storage of aircraft, vehicles and
related equipment, together with air cargo and freight structures,
handling equipment and conveyances, all to be acquired, constructed,
fabricated, and installed on or as a part of the Option Tracts;
(iii) "Completion Date as to the Combination Freight and
Maintenance Facilities" means the date upon which said facilities are
constructed, substantially completed and ready for occupancy, as
established by a certificate of the Board's Deputy Executive Director,
Engineering, specifying such date;
(iv) "Costs of the Combination Freight and Maintenance
Facilities" means all of the items of cost and expense included within
the definition of Costs of the Special Facilities in Section 1.1 (j)
of the Facilities Agreement;
(v) "Starting Date as to the Combination Freight and
Maintenance Facilities" means ninety (90) days after written notice
has been received by Lessee from the Executive Director of the Board
that the Federal Aviation Administration (or other Federal agency
succeeding to its jurisdiction) has officially certified that the
Airport is operational or ninety (90) days after the Completion Date,
whichever is later.
Section 1.2. The Facilities Agreement. This Supplemental Facilities
Agreement is intended to and shall be supplemental to the Facilities Agreement,
and all matters included herein are subject to the terms of and shall be
controlled and governed by the Facilities Agreement where not expressly
provided for herein, and, without limiting the generality of the foregoing, in
applying the terms and provisions of the Facilities Agreement to the matters
included herein, it is hereby expressly provided (a) that the Options Tracts
shall be and constitute a part of the Leased Lands and the Leased Premises;
(b) that the Combination Freight and Maintenance Facilities shall be and
constitute a part of the Special Facilities; and (c) that the 1973 Additional
Bonds shall be "Additional Bonds" within the meaning of that term contained in
the Facilities Agreement and the 1972
2
<PAGE> 35
American Bond Ordinance, and the same shall be and constitute Special Facility
Bonds issued under the authority reserved to the Cities in the 1968 Concurrent
Bond Ordinance.
ARTICLE II
THE OPTION TRACTS, POSSESSION QUIET ENJOYMENT
SECTION 2.1. EXERCISE OF OPTION, WAIVER OF FORMALITIES. The Lessee
hereby exercises its right and option, reserved in Section 4.1 of the
Facilities Agreement, to lease the Option Tracts under and subject to the terms
and provisions thereof, and the parties jointly do hereby agree to and do waive
all formalities and notices required in connection therewith, and the Board,
accordingly, in consideration of the rents herein and in the Facilities
Agreement reserved, hereby demises and leases to Lessee, and Lessee hereby
takes from the Board the Option Tracts and the Combination Freight and
Maintenance Facilities, upon and subject to the terms and provisions of the
Facilities Agreement and this Supplemental Facilities Agreement and for the
term therein provided as herein amended.
Section 2.2. Delivery and Acceptance of Possession. The Board shall
promptly notify the Lessee of the establishment of the Completion Date as to
the Combination Freight and Maintenance Facilities and the Lessee shall have
the exclusive right to possess, occupy and use the Option Tracts and said
facilities on and after that date and throughout the remainder of the term of
the Facilities Agreement as amended by this Supplemental Facilities Agreement.
Section 2.3. Quiet Enjoyment and Use. Unless a default has occurred,
and upon and subject to the other terms and provisions hereof and of the
Facilities Agreement, following the Starting Date as to the Combination Freight
and Maintenance Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment thereof and of the Option Tracts for
any or all of the following combined purposes, to-wit:
(a) for all primary and incidental purposes (including the
training of personnel) related to the repair, upkeep, maintenance,
overhaul and storage of aircraft and aircraft parts, systems,
assemblies and equipment, and vehicles and vehicular equipment, parts
and assemblies; and
(b) for all primary and incidental purposes relating to the
gathering, receiving, collecting, storage, delivery, dispatching and
shipment of property, freight and cargo, including all lawful forms of
goods and merchandise, by air and ground transportation systems and
for the training of personnel engaged in these activities; and
(c) for any other incidental, reasonable and appropriate
activities which are not in violation of or prohibited by the Board's
reasonable rules and regulations.
It is further provided that the Board reserves the right to designate
areas not to exceed twenty (20) feet in width along the periphery of the Option
Tracts (but not along the line where the Option Tracts abut) for use and to be
maintained as landscape areas.
Section 2.4. Ingress and Egress.
(a) The Lessee and its officers, employees, invitees, guests,
and suppliers of materials and furnishers of services, shall have the
right of ingress and egress between the Option Tracts and any public
street or roadway outside the Airport by means of the roadways leading
to and from the Airport, and between the passenger enplaning and
deplaning complex within the Airport and said tracts of Leased Land,
and such other points as may be designated by the Executive Director of
the Board, all of the same to be used in common with others having
rights of passage within the Airport, all without any further or
additional fees or charges except entrance booths at the
3
<PAGE> 36
Airport and other than the rent described herein and in the Facilities
Agreement. The use of such roadways shall be subject to the reasonable
rules and regulations of the Board now in effect or which may hereafter
be promulgated for the safe and efficient operation of the Airport.
(b) The Board may, at any time, temporarily or permanently
close or consent to or request the closing of any such roadway and any
other area at the Airport presently or hereafter used as such, so long
as a reasonably equivalent means of ingress and egress, as provided
above, remains available to Lessee. Lessee hereby releases and
discharges the Board, its successors and assigns, of and from any and
all claims, demands or causes or action Lessee may have against the
Board by reason of the exercise of any of the powers reserved to the
Board under this subsection.
ARTICLE III
GROUND RENT, NET RENT
Section 3.1. Ground Rent.
(a) The Lessee, under the terms and provisions of the PSF
Agreement and the Facilities Agreement, has heretofore agreed and
obligated itself (along with others in certain instances) to pay a
"ground rental" (as that term is defined in the 1968 Concurrent Bond
Ordinance) for its rights in and uses of the Terminal Tract and Tract I
of the Leased Lands. Accordingly, no additional Ground Rent is or shall
be herein required on account of the Terminal Tract and Tract I of the
Leased Lands and the development, construction, fabrication or
installation of the Passenger Service Facilities and the Catering
Facilities thereon. The provisions of this Section 3.1 relating to
"Ground Rent" shall, therefore, relate solely to the Option Tracts as a
part of the Leased Lands. This subsection (a), however, shall in no
manner reduce or alter Lessee's obligation to pay Ground Rent or Net
Rent in the full amount stated in Sections 5.1 and 5.2 of the
Facilities Agreement.
(b) For the purposes of determining the rental payable with
respect to the Option Tracts to which this Section 3.1 applies, as
aforesaid, and where used elsewhere in this Supplemental Facilities
Agreement, the following definitions and terms, in addition to other
definitions contained in this Supplemental Facilities Agreement and the
Facilities Agreement shall apply and have the following meanings,
to-wit:
(i) "Airport Services" has the same meaning applied to
that term in Section 5.1 of the Facilities Agreement.
(ii) "Airport Services Costs" has the same meaning applied
to that term in Section 5.1 of the Facilities Agreement.
(iii) "Base Period" means the period from the Starting
Date as to the Combination Freight and Maintenance Facilities
through the next succeeding 30th day of September, which is the
closing day of the Board's fiscal year.
(iv) "Contract Costs" has the same meaning applied to that
term in Section 5.1 of the Facilities Agreement.
(v) "Ground Rent" means the Preliminary Ground Rent
computed in accordance with paragraphs (i) and (ii) of
subsection (c), next below, such amounts being payable for the
use and occupancy of the Option Tracts and shall be in addition
to the payments of Net Rent and other costs under this
Supplemental Facilities Agreement.
4
<PAGE> 37
(iv) "Total Developed Acreage on the Airport" has the same
meaning applied to that term in Section 5.1 of the Facilities
Agreement.
(c) The Lessee hereby agrees to pay to the Board from the
Starting Date as to the Combination Freight and Maintenance Facilities
and through the term of the Facilities Agreement, as amended by this
Supplemental Facilities Agreement, a Preliminary Ground Rent, as
adjusted to the Actual Ground Rent, for the use and occupancy of the
Option Tracts, the specific amounts thereof to be determined in
accordance with the following provisions and principles and to be paid
at the following times and in the following amounts, to-wit:
(i) Preliminary Ground Rent During The Base Period -- The
Lessee shall pay a Preliminary Ground Rent during the Base
Period calculated on the basis of a rate of $3,064.00 per acre
per annum for land comprising the Option Tracts, such
Preliminary Ground Rent to be paid in equal monthly
installments during the Base Period, the first installment to
be paid on the Starting Date as to the Combination Freight and
Maintenance Facilities and thereafter on the first day of each
month during the Base Period. For historical reference of the
parties hereto, said rate was determined in accordance with the
following formula, to-wit:
A=$16,854,000 Airport Services Costs projected on
the date of this Supplemental
Facilities Agreement to be incurred
or due and owing by the Board
during the first twelve (12) months
of operation of the Airport.
A
- = C B=5,500 Total Developed Acreage on the
B Airport projected for the Starting
Date as to the Combination Freight
and Maintenance Facilities.
C=$3,064.00 Rate per acre per annum applied to
land comprising the Option Tracts in
computing Preliminary Ground Rent
for the Base Period.
(ii) Preliminary Ground Rent During Each Six-Month Period
After Base Period -- Not less than ten (10) days prior to the
close of the Base Period, and not less than ten (10) days prior
to the close of each succeeding six (6) month period after the
Base Period, the Board shall compute a Preliminary Ground Rent
to be paid during the succeeding six (6) month period and shall
notify the Lessee of the amount thereof. On the first day of
such succeeding period and on the first day of each month
during such period, the Lessee, subject to any rental credits
carried forward under the provisions of paragraph (iii), next
below, shall pay one sixth (1/6th) of the amount thus stated,
as Preliminary Ground Rent for such period. The amount of the
Preliminary Ground Rent for each such six (6) month period
shall be determined in accordance with the following formula,
to-wit:
A = Estimated Airport Service Costs
projected to be incurred during the
next succeeding six (6) month
period.
A
- x C = D B = Total Developed Acreage on the
B Airport projected for the first day
of the next succeeding six (6)
month period.
C = The number of acres of land
comprising the Option Tracts at the
time of computation.
D = Preliminary Ground Rent payable
during the next succeeding six (6)
month period.
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<PAGE> 38
(iii) Actual Ground Rent for Preceding Period -- At the
close of each six (6) month period thereafter the Board shall
compute and ascertain the amount of Actual Ground Rent payable
by the Lessee for the respective period then closed. Such
computations shall be made and determined in accordance with
the following formula, to-wit:
A = Actual Airport Service Costs
incurred during the period just
closed.
B = The average number of the Total
A Developed Acreage on the Airport
- x C = D during the period just closed.
B
C = The average number of acres of land
comprising the Option Tracts during
the period just closed.
D = Actual Ground Rent payable for the
period just closed.
Upon making such computations, the Board shall notify the
Lessee of the result thereof. If the resulting Actual Ground
Rent shall be greater than the Preliminary Ground Rent paid
during the Base Period or other period to which the adjustment
relates, then the Preliminary Ground Rent for such period was
deficient, and if such computation shall be for a period ending
on any September 30, then the Lessee shall remit to the Board
an amount equal to such difference within five (5) days from
the receipt of notice thereof; however, if such computation
(reflecting a deficiency) shall be for a period ending on any
March 31, then such deficiency shall be spread in equal
installments over the remainder of the six (6) month period
then in effect and the monthly installment of Preliminary
Ground Rent for such period (as required by paragraph (ii),
next above), shall be automatically increased and invoiced
accordingly. If such computations reflect that the resulting
Actual Ground Rent is less than the amount of the Preliminary
Ground Rent actually paid by the Lessee during the period to
which the adjustment relates, then the amount of the
overpayment shall be credited against the Preliminary Ground
Rent installments next due under paragraph (ii), next above,
until such credit has been exhausted.
(d) For the purposes of computing Ground Rent as to those
tracts of land leased initially under the Facilities Agreement, and the
PSF Agreement, the Option Tracts shall not be considered as a part of
the Leased Lands thereunder.
(e) All estimates and projections required in the making of the
computations and determinations contemplated by subsection (c), next
above, shall be made by the Board and shall be reasonable and made in
the light of the latest data available or reasonably obtainable by the
Board.
(f) If the Starting Date as to the Combination Freight and
Maintenance Facilities commences on a date other than the first day of
a month or the term of the Facilities Agreement as amended hereby
expires or is terminated on a date other than the last day of a month,
the Ground Rent payable for the part of the month during which rent is
due shall be computed by prorating the monthly Ground Rent installment
on a daily basis, and Ground Rent shall be paid only for the portion of
the month for which due.
Section 3.2. Net Rent
(a) The Lessee hereby expressly covenants, acknowledges and
agrees that the 1973 Additional Bonds constitute "Additional Bonds"
under and subject to the terms and provisions of the Facilities
Agreement and are issued under, pursuant to and in compliance with the
1972 American Bond Ordinance. Accordingly, the Net Rent
6
<PAGE> 39
payable under the terms of Section 5.2 of the Facilities Agreement is
hereby expressly made applicable to the 1973 Additional Bonds, and the
Net Rent payable initially with respect to the Series 1972 Bonds shall
be and is hereby expressly increased to the amount required by Section
5.2 of the Facilities Agreement and by the 1972 American Bond Ordinance
in the event of the issuance of Additional Bonds thereunder and in
compliance therewith, and said Section 5.2 in its entirety is hereby
expressly confirmed and incorporated herein.
(b) The parties hereto expressly acknowledge, recite, covenant
and agree that this Supplemental Facilities Agreement is and shall
constitute the written instrument required by Section 8.2(c) of the
1972 American Bond Ordinance as a pre-requisite to the issuance of
Additional Bonds thereunder, and this Section 3.2 is included in
response thereto.
Section 3.3. 1968 Concurrent Bond Ordinance; Other Costs. This
Supplemental Facilities Agreement is expressly subject at all times to the
terms, provisions, conditions and requirements of the 1968 Concurrent Bond
Ordinance, and as contemplated and required thereby, the Net Rent payable under
Section 3.2, above, is intended to be and shall be a net return to the Board,
and accordingly, in addition to the payment of the Ground Rent and the Net Rent,
the Lessee hereby agrees to pay all operation and maintenance expenses
applicable to the Combination Freight and Maintenance Facilities, including,
without limitation, any insurance premiums applicable thereto, any and all ad
valorem or other property taxes lawfully levied or assessed against the
leasehold interest of the Lessee in and to the Leased Premises, any and all
lawful excise or other type of taxes imposed on or in respect of such
properties, and the expenses of upkeep thereof of every [ILLEGIBLE COPY] and
character, including the repair or ordinary restoration thereof. No charges,
fees or tolls, other than herein expressly provided for and other than the
regular charges imposed at entrance control booths at the Airport, if used,
shall be charged or [ILLEGIBLE COPY] by the Board from the Lessee, its agents
and employees, or its suppliers of materials or furnishers of service, for the
use of any of the Leased Premises or the exercise of any of the rights,
licenses, services and privileges expressed in or implied by this Supplemental
Facilities Agreement.
Section 3.4 Place of Payments, Use of Funds, Delinquencies.
(a) All payments of Ground Rent and Net Rent required under or
by reason of this Supplemental Facilities Agreement shall be paid, used
and applied in the manner, at the place and for the purposes stated in
Section 5.4 of the Facilities Agreement with respect to Ground Rent and
Net Rent initially payable thereunder.
(b) Subsection (b) of Section 5.4 of the Facilities Agreement
is hereby incorporated herein for all purposes and is hereby expressly
made applicable to the rentals payable hereunder.
ARTICLE IV
FINANCING AND CONSTRUCTION OF COMBINED FREIGHT AND MAINTENANCE FACILITIES
Section 4.1. 1973 Additional Bonds.
(a) The Costs of the Combination Freight and Maintenance
Facilities shall be paid with the proceeds from the sale of the 1973
Additional Bonds.
(b) The Board has prepared and the Lessee hereby approves the
form and substance of the ordinance authorizing the 1973 Additional
Bonds, which said approval shall be evidenced by the execution of a
separate approval executed by any officer of the Lessee, and such
approval shall be with and shall have the effect stated, recited and
contained in Section 10.5 of the Facilities Agreement.
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<PAGE> 40
(c) Subject to the receipt of the proceeds from the sale of
the 1973 Additional Bonds and the continuing adequacy and availability
of said proceeds for the purpose, the Board will cause the Combination
Freight and Maintenance Facilities to be constructed, fabricated,
installed and equipped on the Option Tracts in accordance with plans
and specifications therefor prepared and approved in the manner
provided in Section 4.2 hereof.
Section 4.2. Plans and Specifications, Approvals, Construction Charges,
Contracts. As provided in Section 10.5 of the Facilities Agreement, Sections
3.2 and 3.3 thereof shall apply to the development and construction of the
Combination Freight and Maintenance Facilities to the same extent as those
sections applied to the Initial Special Facilities.
ARTICLE V
MISCELLANEOUS
Section 5.1. Revision of Term of Facilities Agreement. Section 4.1(a)
of the Facilities Agreement is hereby revised and amended so as to provide that
the term thereof and of this Supplemental Facilities Agreement shall expire on
December 31, 2009.
Section 5.2. Incorporated Provisions. It is hereby expressly
understood and agreed that all terms and provisions of the Facilities Agreement
are incorporated herein for all purposes, and all rights, privileges and
obligations of the respective parties hereto and thereof are hereby made
applicable to the Combination Freight and Maintenance Facilities to the same
extent there made applicable to the Initial Special Facilities thereunder,
except that to the extent any provisions contained herein are or may be
inconsistent with the provisions of the Facilities Agreement, the Facilities
Agreement is hereby expressly amended to conform with the provisions hereof and
to authorize, confirm and ratify the transactions herein contained.
Section 5.3. Representations By The Board. The Board makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Board is the duly and lawfully created, existing and
organized Board of Directors of the Airport, having the power to enter
into the transaction contemplated by this Supplemental Facilities
Agreement and to carry out its obligations hereunder, and by proper
action the Board has been duly authorized to execute and deliver this
Supplemental Facilities Agreement; and
(b) The Board is not in default in any of its covenants or
obligations contained in the Facilities Agreement.
Section 5.4. Representations by Lessee. The Lessee makes the following
representations as the basis for its undertakings herein contained:
(a) It is a corporation duly incorporated under the laws of the
State recited aforesaid; is in good standing under its Certificate of
Incorporation or Charter and the laws of said State; is duly authorized
to do business in the State of Texas; has the power to enter into this
Supplemental Facilities Agreement without violating the terms of any
other agreement to which it may be a party; and by proper corporate
action has been duly authorized to execute and deliver this
Supplemental Facilities Agreement;
(b) It will occupy and possess the Leased Premises, including
expressly those facilities financed hereunder as a part of the American
Special Facilities, on behalf of the Cities and the Board for the
public purposes of the Airport and for which the same are being
acquired or constructed and are to be operated hereunder, subject to
the control and jurisdiction of the Board and the Cities in accordance
with the term hereof.
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<PAGE> 41
(c) It is not in default in any of its covenants or obligations
contained in the Facilities Agreement.
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and year first above written but actually on February 6, 1973.
DALLAS-FORT WORTH REGIONAL
AIRPORT BOARD
(SEAL)
By /s/ THOMAS M. SULLIVAN
------------------------------
Executive Director
ATTEST:
/s/ DEAN MOORE
- -------------------------------
Staff Secretary
APPROVED:
/s/ CHARLES C. WELLS
- -------------------------------
Legal Counsel to Board
AMERICAN AIRLINES, INC.
By /s/ GENE E. OVERBECK
------------------------------
Senior Vice-President
ATTEST:
/s/ H. WAYNE WILE
- -------------------------------
Secretary
(SEAL)
9
<PAGE> 42
THE STATE OF TEXAS
COUNTY OF TARRANT
BEFORE ME, the undersigned authority in and for Tarrant County, Texas,
on this day personally appeared Thomas M. Sullivan and Dean Moore, each known to
me to be the person whose name is subscribed to the foregoing instrument and
known to me to be, respectively, Executive Director and Staff Secretary of the
Dallas-Fort Worth Regional Airport Board, and each acknowledged to me that he
executed the same for the purposes and considerations therein expressed and in
the capacity therein stated, and as the act and deed of said Board.
GIVEN UNDER MY HAND and seal of office, this the 6th day of February, 1973.
/s/ FRANCES D. MOORE
------------------------------------------------
Notary Public in and for Tarrant County, Texas
THE STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority in and for New York County, New York,
on this day personally appeared Gene E. Overbeck and H. Wayne Wile, each known
to me to be respectively, Senior Vice President and Secretary of American
Airlines, Inc., a Delaware corporation, and each acknowledged to me that he
executed the same for the purposes and consideration therein stated, and as the
act and deed of said corporation.
GIVEN UNDER MY HAND and seal of office, this the 8th day of February, 1973.
/s/ GALE KAY WALL
------------------------------------------------
Notary Public in and for New York County, New
York
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<PAGE> 43
EXECUTED
AIRPORT BOARD AGREEMENT
NUMBER 23201-E-S2
================================================================================
AMERICAN AIRLINES SECOND
SUPPLEMENTAL SPECIAL
FACILITIES AGREEMENT
-----------------
By and Between
THE DALLAS-FORT WORTH REGIONAL AIRPORT BOARD
and
AMERICAN AIRLINES, INC.
-----------------
(including provisions for net rent and ground rent)
-----------------
Dated as of December 1, 1978
================================================================================
<PAGE> 44
THE STATE OF TEXAS) AMERICAN AIRLINES SECOND SUPPLEMENTAL
COUNTY OF TARRANT ) SPECIAL FACILITIES AGREEMENT
THIS AMERICAN AIRLINES SECOND SUPPLEMENTAL SPECIAL FACILITIES AGREEMENT (HEREIN
CALLED THIS OR THE "SECOND SUPPLEMENTAL FACILITIES AGREEMENT"), MADE AND
ENTERED INTO AS OF THE 1ST DAY OF DECEMBER, 1978, BY AND BETWEEN THE
DALLAS-FORT WORTH REGIONAL AIRPORT BOARD (HEREINAFTER CALLED THE "BOARD"), ON
THE ONE HAND, BEING THE DULY AND LAWFULLY CONSTITUTED AND OPERATING BOARD OF
DIRECTORS OF THE DALLAS-FORT WORTH REGIONAL AIRPORT (HEREINAFTER CALLED THE
"AIRPORT"), BELONGING TO THE CITIES OF DALLAS AND FORT WORTH, TEXAS
(HEREINAFTER CALLED THE "CITIES"), AND AMERICAN AIRLINES, INC., A DELAWARE
CORPORATION (HEREINAFTER CALLED "LESSEE"), ON THE OTHER HAND;
WITNESSETH
WHEREAS, heretofore, the Board and the Lessee executed and delivered a
certain lease agreement entitled "American Airlines Special Facilities Lease
Agreement" (hereinafter called the "Facilities Agreement"), the same being
dated as of October 1, 1972, and pursuant to the terms of which the Board
initially leased to the Lessee and confirmed the prior lease of certain lands
therein described as the "Leased Lands"; and
WHEREAS, pursuant to the Facilities Agreement, the Cities, as
requested by the Board, authorized, among other things, the construction of
certain facilities therein described as the "Catering Facilities" upon the
tract of land therein described as Tract 1 of the Leased Lands, and further
authorized the fabrication and installation of certain passenger service
facilities on land theretofore leased from the Board, the financing of all of
such facilities having been accomplished pursuant to concurrent ordinance (the
"1972 American Bond Ordinance") of the City of Dallas bearing number 13810 and
of the City of Fort Worth bearing number 6727; and
WHEREAS, subsequently, as of February 1, 1973, the Board and the
Lessee executed and delivered a certain supplemental lease agreement entitled
"American Airlines Supplemental Special Facilities Agreement" (hereinafter
called the "First Supplemental Facilities Agreement") and the Board therein
leased to Lessee certain additional lands and therein agreed to make certain
acquisitions, additions, extensions, improvements and modifications to or of
the "Special Facilities," as defined in the Facilities Agreement, said
facilities being therein defined as the "Combination Freight and Maintenance
Facilities"; and
WHEREAS, pursuant to the First Supplemental Facilities Agreement, the
Cities, as requested by the Board, authorized the financing of said
improvements by the issuance of additional bonds pursuant to the terms of an
additional concurrent ordinance (the "1973 American Bond Ordinance") of the
City of Dallas bearing number 13978 and the City of Fort Worth bearing number
6790; and
WHEREAS, the Board has determined it appropriate and desirable to
purchase certain airport properties from the City of Fort Worth, and to make
certain other acquisitions, additions, extensions, improvements and
modifications to or of the Special Facilities, as defined in the Facilities
Agreement, all of the same (hereinafter defined as the "Additional Special
Facilities") to constitute Special Facilities of and at the Airport, the same
to consist of, among others, American's "Flight Administration, Reservations
and Training Complex," certain "Passenger Service Facilities" to be constructed
at Terminal 3E at the Airport, and certain improvements to be made at the
Combination Freight and Maintenance Facilities aforesaid; and
WHEREAS, all of the Additional Special Facilities, when completed,
will constitute a part of the Airport's total systems functionally related and
subordinate thereto and to the needs or convenience of the general public,
including the Lessee as a common carrier serving the public at the Airport, the
same to be leased to Lessee hereunder and under the Facilities Agreement, as
supplemented; and
<PAGE> 45
WHEREAS, the Board has determined it appropriate and necessary to
pay for the costs of the Additional Special Facilities by the issuance of
"Additional Bonds" therefor, upon and subject to the terms specified in the
1972 American Bond Ordinance, and the Lessee has agreed that upon the issuance
of said bonds the "Net Rent" payable under the Facilities Agreement, as
heretofore and hereby supplemented, shall automatically be increased in the
amounts required by the 1972 American bond Ordinance; and
WHEREAS, the Lessee and the Board accordingly desire hereby to
evidence their agreement (a) that the Board will purchase and provide the
Additional Special Facilities and that the Lessee will lease the same under and
subject to the Facilities Agreement, to this Second Supplemental Facilities
Agreement and to certain other agreements described herein; (b) that the Lessee
authorize and approve the issuance of $147,000,000 of special facility revenue
bonds (herein defined as the "1979 Additional Bonds") for such purpose, the
same to constitute "Additional Bonds" within the meaning of the Facilities
Agreement, the 1972 American Bond Ordinance and the 1973 American Bond
Ordinance; (c) that the Facilities Agreement be further supplemented in the
manner herein provided; and (d) that the ordinance authorizing the 1979
Additional Bonds (said ordinance being herein called the "1979 American Bond
Ordinance") is approved by the parties; and
WHEREAS, the Board and the Lessee have previously entered into a
certain "Passenger Service Special Facilities Agreement" (hereinafter called
the "PSF Agreement"), dated as of April 1, 1972, and a certain "Airport Use
Agreement", dated as of January 1, 1974, as amended (hereinafter called the
"Use Agreement");
NOW, THEREFORE, the Board, for the respective terms herein specified,
and for and in consideration of the rents herein and in the Facilities
Agreement, the First Supplemental Facilities Agreement, the PSF Agreement and
the Use Agreement reserved, and of the covenants and agreements herein
contained, has demised and leased, and does by these presents demise and lease
to Lessee, and the Lessee has agreed to take and does hereby take from the
Board, the Additional Special Facilities and the land designated, respectively,
as Tract 1, Tract 2, Tract 3 and Tract 4 on Exhibit 1 attached hereto and
incorporated herein, and described by metes and bounds on the composite survey
attached hereto as Exhibit 2 and incorporated herein, upon and subject to the
following terms, provisions, covenants and considerations, and the parties
hereby covenant and agree as follows, to-wit:
ARTICLE I
DEFINITIONS, THE FACILITIES AGREEMENT
Section 1.1 Definitions. (a) All words and terms used herein which
constitute defined terms and words in the Facilities Agreement and the First
Supplemental Facilities Agreement (this Second Supplemental Facilities
Agreement and the First Supplemental Facilities Agreement being hereinafter
together called the "Supplemental Facilities Agreements") shall have the same
meanings and definitions as are contained therefor in said agreements, except
where the same words and terms are expressly defined otherwise herein, and such
defined words and terms are incorporated herein for all purposes.
(b) In addition to the defined terms specified in the preambles
hereto and to those referred to in paragraph (a), next above, the following
words and terms for the purposes of the Supplement Facilities Agreements and of
the Facilities Agreement with respect to matters herein contained supplemental
thereto, shall have the following meanings, respectively, unless the context
shall clearly appear otherwise, to-wit:
(i) "1979 Additional Bonds" means the bonds
herein approved and authorized to be issued for the purpose of
financing the Costs of the Additional Special Facilities, the same to
be entitled "Dallas-Fort Worth Regional Airport American Special
Facilities Revenue bonds, Series 1979";
(ii) "Additional Special Facilities" means the
flight Administration, Reservations and Training Complex, the
Passenger Service Facilities, and the Maintenance Facilities;
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<PAGE> 46
(iii) "Completion Date," with reference to the Flight
Administration Center, the Flight Reservations Center, the Maintenance
Facilities and the Passenger Service Facilities, means the respective
date upon which each of said facilities, respectively, is constructed,
substantially completed and ready for occupancy, as established by a
certificate of the Board's Director of Planning and Engineering,
specifying such date;
(iv) "Cost of the Additional Special Facilities"
include all of the items of cost included within the definition of
"Costs of the Special Facilities" in subsection 1.1(j) of the
Facilities Agreement, including any costs for community facilities
payable by the board under the applicable ordinances, rules and
regulations of the City of Fort Worth, and including the purchase
prices and acquisition costs of any land and existing improvements
comprising a part of the Flight Administration, Reservations and
Training Complex.
(v) "Flight Administration, Reservations and
Training Complex" means and includes the following properties, to-wit:
(a) the structures, properties, facilities,
furnishings and equipment comprising the "Flight Training
Center," consisting of the facilities known as the "American
Flight Academy" and the "American Training Center," the same
being situated on the land designated as Tract 1 on Exhibit 1
attached hereto, and including all training, recreational and
similar facilities now or hereafter constructed, installed and
operated on said Tract 1; and
(b) the structures, properties, facilities,
furnishings and equipment comprising the "Flight Reservations
Center," to be acquired, constructed, fabricated and installed
on or as a part of the land designated as Tract 3 on Exhibit 1
attached hereto: and
(c) the structures, properties, facilities,
furnishings and equipment comprising the "Flight
Administration Center" to be acquired, constructed, fabricated
and installed on or as a part of the land designated as Tracts
2 and 4 on Exhibit 1 attached hereto; and
(d) a flight computer center and a central
heating and cooling plant to be constructed as a part of the
Additional Special Facilities, together with any and all other
structures, properties, facilities, furnishings and equipment
ever hereafter acquired, constructed, fabricated and installed
on or as a part of said Tracts 1, 2, 3 or 4.
(vi) "Maintenance Facilities" means the additional
properties, structures, facilities, furnishings and equipment to be
financed with a part of the proceeds of the 1979 Additional Bonds and
to be made to the Combination Freight and Maintenance Facilities;
(vii) "Passenger Service Facilities" means the additional
properties, facilities, structures and equipment financed with a part
of the proceeds of the 1979 Additional Bonds and located upon the land
defined in the PSF Agreement and the Use Agreement as the Terminal
Tract, the same to consist generally of equipment, fixtures,
furnishings and appurtenances of the following types, to wit:
passenger moving and baggage and cargo handling equipment, conveyances
and structures; floor, ceiling, wall coverings and interior
partitions; electrical and plumbing fixtures, outlets, fixed equipment
and utilities in or as a part of or adjacent to the terminal
structure, all of which are or will be situated on the Terminal Tract,
aircraft loading bridges and ways connected or affixed to the terminal
structure, including alternate airside stairways;
(viii) "Starting Date" means --
(A) with respect to the Flight Training
Center, the date of delivery of title to the land and
improvements comprising said Tract 1 to the Board by the City
of Fort Worth, Texas; and
(B) with respect to the Flight
Reservations Center, the Flight Administration Center, the
Passenger Service Facilities and the Maintenance Facilities,
ninety (90) days after the Completion Date, for each of said
facilities, or the date of occupancy thereof by the Lessee,
whichever is earlier.
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<PAGE> 47
Section 1.2. The Facilities Agreement. This Second Supplemental
Facilities Agreement, together with the First Supplemental Facilities
Agreement, is intended to and shall be supplemental to the Facilities
Agreement, and all matters included herein are subject to the terms of and shall
be controlled and governed by the Facilities Agreement, and where applicable by
the First Supplemental Facilities Agreement, where not expressly provided for
herein, and, without limiting the generality of the foregoing, in applying the
terms and provisions of the Facilities Agreement and the First Supplemental
Facilities Agreement to the matters included herein. It is hereby expressly
provided (a) that the tracts of land designated and described on the Exhibits
hereto (said tracts of land being hereinafter called, respectively, "Tract 1,"
"Tract 2," "Tract 3," and "Tract 4") shall be and constitute a part of the
Leased Lands and the Leased Premises; (b) that the Additional Special
Facilities shall be and constitute a part of the Special Facilities; and (c)
that the 1979 Additional Bonds shall be "Additional Bonds" within the meaning
of that term contained in the Facilities Agreement and the 1972 American Bond
Ordinance, and the same shall be and constitute Special Facility Bonds issued
under the authority reserved to the Cities in the 1968 Concurrent Bond
Ordinance.
ARTICLE II
TERMS, POSSESSION, QUIET ENJOYMENT
Section 2.1. Effective Date, Terms, Option. (a) This Second
Supplemental Facilities Agreement shall become effective upon the execution and
delivery hereof by the Board and the Lessee. The rights of use and occupancy
granted herein shall commence --
(i) as to the Flight Training Center, on the
Starting Date as to that facility; and
(ii) as to the Flight Administration Center, the
Flight Reservations Center, the Passenger Service Facilities and the
Maintenance Facilities, the respective Starting Dates as to each of
said properties;
and, subject to the other provisions hereof, said respective terms shall
expire --
(A) as to Tract 1, on the date of forty (40) years from
the Starting Date as to the Flight Training Center; and
(B) as to Tracts 2, 3 and 4, on the date of the
expiration of the maximum term permitted by law, but not exceeding
forty (40) years from the Starting Date of the latter of the Flight
Administration Center and the Flight Reservations Center as to which
the Starting Date has occurred.
(C) as to the Passenger Service Facilities, on the date
of the expiration of the term as to the Terminal Tract as specified in
the PSF Agreement and the Use Agreement; and
(D) as to the Maintenance Facilities, on the date of the
expiration of the term a to the Combination Freight and Maintenance
Facility as specified in the Facilities Agreement, as supplemented by
the First Supplemental Facilities Agreement.
(b) Lessee shall have the option to extend the term, as to the
Flight Administration, Reservations and Training Complex, as specified in
subsection (a), next above, for up to four additional periods of five (5) years
each, under the same terms and conditions as herein set forth, except that the
rentals and charges for each such period shall be subject to mutual agreement
between the Board and the Lessee. Lessee may exercise each such option by
written notice to the Board given not later than six (6) months prior to the
expiration of the initial or any current extended period, as the case may be.
Section 2.2. Delivery and Acceptance of Possession. The Board shall
promptly notify the Lessee of the establishment of the Starting Date as to the
Flight Training Center and of the establishment of the respective Completion
Dates as to the remaining Additional Special Facilities
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<PAGE> 48
and the Lessee shall have the exclusive right to possess, occupy and use the
Additional Special Facilities and applicable land on and after each such
respective date and throughout the remainder of the applicable terms as
specified herein.
Section 2.3. Quiet Enjoyment and Use. Unless a default has occurred,
and upon and subject to the other terms and provisions hereof and of the
Facilities Agreement, and where applicable the First Supplemental Facilities
Agreement, the PSF Agreement and the Use Agreement, the Lessee shall be
suffered and permitted to have peaceful possession and quiet enjoyment of the
Additional Special Facilities and the land related thereto and leased hereunder
in accordance with the following, to-wit;
(a) Following each respective Starting Date as to the
Additional Special Facilities comprising the Flight Administration,
Reservations and Training Complex, the Lessee shall be suffered and
permitted to have peaceful possession and quiet enjoyment of such
Additional Special Facilities and Tracts 1,2,3 and 4 for all primary
and incidental purposes related to the general operations of the
Lessee as a common carrier serving the general public from, into and
at the Airport and connecting with other Airports served by the
Lessee, including (i) the training of persons who are to be involved
in flight-related activities by commercial air carriers and
others, cockpit crew training, the training of flight attendants,
aircraft repair specialists, passenger service and reservation
personnel, (ii) the development, storage, dissemination and use of
computerized information and programming relating to Lessee's flight,
passenger reservation and operational activities, including flight
scheduling and recruiting, passenger reservation data, communication
facilities and activities, aircraft availability, repair, scheduling,
fueling and loading data and information, and (iii) the execution and
administration of all of Lessee's flight activities, flight services,
terminal services, maintenance and cargo services at the Airport and
at other airports served by the Lessee, and including the
administration and executive needs and accounting for the activities
of the Flight Reservations Center and the Flight Training Center.
(b) Following the Starting Date as to the Passenger
Service Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Passenger Service
Facilities (expressly including the Terminal Tract presently granted
to Lessee under the PSF Agreement and the Use Agreement) to the same
extent and under and subject to the same terms and conditions as are
provided in the PSF Agreement and the Use Agreement for similar
facilities provided in connection therewith and located upon the
Terminal Tract thereunder, the same to be utilized for the same
purposes therein permitted and provided.
(c) Following the Starting Date as to the Maintenance
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Maintenance Facilities
to the same extent and under and subject to the same terms and
conditions as are provided in the Facilities Agreement as supplemented
and amended by the Supplemental Facilities Agreements for the
Combination Freight and Maintenance Facility, the same to be utilized
for the same purposes therein permitted and provided.
Section 2.4 Ingress and Egress.
(a) The Lessee and its officers, employees, invitees, guests, and
suppliers of materials and furnishers of services, shall have the right of
ingress and egress between the Flight Administration, Reservations and Training
Complex and any public street or roadway outside the Airport by means of the
roadways leading to and from the Airport, and between the passenger enplaning
and deplaning complex within the Airport and said tracts of Leased Land, and
such other points as may be designated by the Executive Director of the Board,
all of the same to be used in common with others having rights of passage
within the Airport, all without any further or additional fees or charges
except entrance booths at the Airport and other than the rent described in the
Supplemental Facilities Agreements, the Facilities Agreement, the PSF Agreement
and the Use Agreement.
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<PAGE> 49
The use of such roadways shall be subject to the reasonable rules and
regulations of the Board now in effect or which may hereafter be promulgated
for the safe and efficient operation of the Airport.
(b) The Board may, at any time, temporarily or permanently close
or consent to or request the closing of any such roadway which is subject to
its governmental jurisdiction, and any other area at the Airport presently or
hereafter used as such, so long as a reasonably equivalent means of ingress and
egress, as provided above, remains available to Lessee. Lessee hereby releases
and discharges the board, its successors and assigns, of and from any and all
claims, demands or causes of action Lessee may have against the Board by reason
of the exercise of any of the powers reserved to the Board under this
subsection.
ARTICLE III
GROUND RENT, NET RENT
Section 3.1. Ground Rent.
(a) The Lessee, under the terms and provisions of the PSF
Agreement, the Use Agreement, the Facilities Agreement and the First
Supplemental Facilities Agreement has heretofore agreed and obligated itself
(along with others in certain instances) to pay a "ground rental" (as that term
is defined in the 1968 Concurrent Bond Ordinance) for its rights in and uses of
the Terminal Tract and the land associated with the Combination Freight and
Maintenance Facility. Accordingly, no additional Ground Rent is or shall be
herein required on account of those lands, and the development, construction,
fabrication or installation of the Passenger Service Facilities and the
Maintenance Facilities thereon. The provisions of this Section 3.1 relating to
"Ground Rent" shall, therefore, relate solely to the lands designated on
Exhibit 1 hereto as Tracts 1, 2, 3 and 4. This subsection (a), however, shall
in no manner reduce or alter Lessee's obligation to pay Ground Rent or Net Rent
in the full amount stated in the Facilities Agreement, the First Supplemental
Facilities Agreement or said other agreements.
(b) The Lessee hereby agrees to pay to the Board beginning on the
first day of the first month after the Starting Date as to the Flight Training
Center and on the first day of each month thereafter throughout the initial
term of this Agreement as specified herein as to Tract 1, as Ground Rent for
the use and occupancy of Tract 1, a monthly rental in the amount of $1,250.00,
being the same ground rental presently being paid by Lessee under the terms of
the "American Airlines Training Facilities Lease", rescinded pursuant to Section
5.1 hereof.
(c) Subject to the optional method of payment granted to Lessee
below, the Lessee agrees to pay to the Board from January 1, 1982, the
estimated starting date as to the Flight Administration Center, and throughout
the initial term of this Agreement as to Tracts 2, 3, and 4, for the use and
occupancy of Tracts 2, 3 and 4, an annual Ground Rent in the amount of $75,000.
It is provided, however, that the Lessee shall have the right to fully prepay
the Ground Rent required by this sub-section (c) by contributing and conveying
to the Board, free and clear of all encumbrances by, through, or under it,
except for easements for utilities and public rights-of-way and alleys
appearing of record, and without additional cost to the Board, all of the land
comprising Tract 3. In the event the Lessee should elect to prepay such Ground
Rent in the manner above provided, it shall notify the Board of such election
not less than five (5) business days in advance of the date of proposed
delivery of the 1979 Additional Bonds, as such date is specified in the Board's
Contract of Purchase of said Bonds. If the Lessee elects to pay said Ground
Rent when and as due and payable, then the Board agrees to pay the Lessee for
said Tract 3 at said closing a purchase price therefor from the proceeds of the
1979 Additional Bonds in an amount mutually agreed upon, failing which the
Lessee shall prepay said Ground Rent by conveying Tract 3 to the Board in the
manner above provided.
(d) It is acknowledged by the Lessee that the Board has executed a
certain "Sale, Purchase and Continuing Services Agreement" with the City of
Fort Worth, by which said City has agreed to
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<PAGE> 50
perform certain continuing public services at the Flight Administration,
Reservations and Training Complex, thus relieving the Board from any obligation
to render such services to the Lessee and from the costs of rendering the same.
In the event the Lessee shall request the Board to perform any part or all of
such services through its own facilities and personnel or by means other than
by said City under said agreement, then the Lessee hereby agrees to pay during
the period of the initial term hereof as to Tracts 2, 3 and 4 during which such
services are otherwise rendered by the Board an additional Ground Rent for the
use and occupancy of said Tracts 2, 3 and 4 in an amount equal to the lesser of
(i) the actual out-of-pocket costs to the Board of providing the services
requested plus 10% or (ii) a Ground Rent as to Tracts 2, 3 and 4 computed in
accordance with the formula contained in Section 5.1(b) of the Facilities
Agreement.
(e) If the respective Starting Dates as to Tracts 2, 3 and 4,
commence on a date other than the first day of a month or the terms granted
hereunder, including the term granted as to Tract 1, or under the Facilities
Agreement as amended expires or is terminated on a date other than the last day
of a month, the ground rent payable for the part of the month during which rent
is due shall be computed by prorating the monthly ground rent installment on a
daily basis, and ground rent shall be paid only for the portion of the month
for which due.
Section 3.2 Net Rent
(a) The Lessee hereby expressly covenants, acknowledges and agrees
that the 1979 Additional Bonds constitute "Additional Bonds" under and subject
to the terms and provisions of the Facilities Agreement and the First
Supplemental Facilities Agreement, and are issued under, pursuant to and in
compliance with the 1972 American Bond Ordinance and the 1973 American Bond
Ordinance. Accordingly, the provisions of Section 5.2 of the Facilities
Agreement are hereby expressly made applicable to the 1979 Additional Bonds,
and the Net Rent payable initially with respect to the Series 1972 Bonds and
the Series 1973 Bonds shall be and is hereby expressly increased to the amount
required by Section 5.2 of the Facilities Agreement and by the 1972 American
Bond Ordinance and by the Series 1973 American Bond Ordinance in the event of
the issuance of Additional Bonds thereunder and in compliance therewith, and
said Section 5.2 in its entirety is hereby expressly confirmed and incorporated
herein.
(b) The parties hereto expressly acknowledge, recite, covenant and
agree that this Second Supplemental Facilities Agreement is and shall
constitute the written instrument required by Section 8.2(c) of the 1972
American Bond Ordinance as a prerequisite to the issuance of Additional Bonds
thereunder, and this Section 3.2 is included in response thereto.
Section 3.3 1968 Concurrent Bond Ordinance; Other Costs. This Second
Supplemental Facilities Agreement is expressly subject at all times to the
terms, provisions, conditions and requirements of the 1968 Concurrent Bond
Ordinance, and as contemplated and required thereby, the Net Rent payable under
Section 3.2, above, is intended to be and shall be a net return to the Board,
and accordingly, in addition to the payment of the Ground Rent and the Net
Rent, the Lessee hereby agrees to pay all operation and maintenance expenses
applicable to the Additional Special Facilities, including, without limitation,
any insurance premiums applicable thereto, any and all ad valorem or other
property taxes lawfully levied or assessed against the leasehold interest of
the Lessee in and to the Leased Premises, any and all lawful excise of other
type of taxes imposed on or in respect of such properties, and the expenses of
upkeep thereof of every kind and character, including the repair or ordinary
restoration thereof. No charges, fees, or tolls, other than herein expressly
provided for and other than the regular charges imposed at entrance control
booths at the Airport, if used, shall be charged or collected by the Board from
the Lessee, its agents and employees, or its suppliers of materials or
furnishers of service, for the use of any of the Leased Premises or the
exercise of any of the rights, licenses, services and privileges expressed in
or implied by this Second Supplemental Facilities Agreement.
Section 3.4 Place of Payments, Use of Funds, Delinquencies
(a) All payments of Ground Rent and Net Rent required under or by
reason of this Second Supplemental Facilities Agreement shall be paid, used and
applied in the manner, at the place and
7
<PAGE> 51
for the purposes stated in Section 5.4 of the Facilities Agreement with respect
to Ground Rent and Net Rent initially payable thereunder.
(b) Subsection (b) of Section 5.4 of the Facilities Agreement is
hereby incorporated herein for all purposes and is hereby expressly made
applicable to the rentals payable hereunder.
ARTICLE IV
FINANCING AND CONSTRUCTION OF ADDITIONAL SPECIAL FACILITIES
Section 4.1. 1979 Additional Bonds. (a) The Costs of the Additional
Special Facilities shall be paid with the proceeds from the sale of the 1979
Additional Bonds.
(b) The Board has prepared and the Lessee hereby approves the form
and substance of the ordinance authorizing the 1979 Additional Bonds, which
said approval shall be evidenced by the execution of a separate approval
executed by any officer of the Lessee, and such approval shall be with and
shall have the effect stated, recited and contained in Section 10.7 of the
Facilities Agreement.
(c) Subject to the receipt of the proceeds from the sale of the
1979 Additional Bonds and the continuing adequacy and availability of said
proceeds for the purpose, the Board will cause the Additional Special
Facilities to be constructed, fabricated, installed and equipped in accordance
with plans and specifications therefor prepared and approved in the manner
provided in Section 4.2 hereof.
Section 4.2. Plans and Specifications, Approvals, Construction
Charges, Contracts. Section 10.5 of the Facilities Agreement shall apply to
the development and construction of the Additional Special Facilities;
provided, however, that with respect to the Passenger Service Facilities, final
plans and specifications shall be prepared by the Board based upon conceptual
plans and specifications prepared by the Lessee.
ARTICLE V
MISCELLANEOUS
Section 5.1. Rescission of Existing Lease. It is hereby agreed by
the parties that the existing agreement, dated as of May 1, 1971, entitled
"American Airlines Training Facilities Lease," between the Board (as the
successor in interest to the City of Fort Worth, as original lessor), as lessor
and the Lessee, as lessee, and relating to the properties comprising the Flight
Training Center and Tract 1, is hereby mutually rescinded and declared to be
null and void, except only with respect to the Lessee's obligation to pay "Debt
Service Rental" under paragraphs (a), (b) and (c) of Section 3A thereof and
subject to the credits provided in said Section. It is acknowledged by the
Board, however, that pursuant to the terms and provisions of Article II of a
certain "Sale, Purchase, and Continuing Services Agreement," dated as of
December 1, 1978 between the Board and the City of Fort Worth, said City has
obligated itself to pay when due, and in full not later than the earliest
redemption date thereof, all principal, interest and redemption premiums owing
on the bonds to which the aforesaid Debt Service Rental relates; and the Board
hereby assigns to the Lessee, the right to seek enforcement of Article II of
said Sale, Purchase and Continuing Services Agreement should for any reason
said bonds be not paid as agreed; provided, however, such assignment shall not
prevent the Board, acting alone, from enforcing said obligation of said City.
Section 5.2. Extraordinary Redemption of 1979 Additional Bonds. It
is acknowledged and understood that the 1979 American Bond Ordinance will
require the Board to redeem the outstanding 1979 Additional Bonds prior to
maturity or other redemption date upon the happening of the extraordinary
conditions described in subsection 3.4(c) of the 1979 American Bond Ordinance.
The Board and the Lessee agree to take all legal and reasonable actions
appropriate to the avoidance of any such mandatory redemption, failing which
the following provisions shall apply, to-wit:
(a) In the event the Board is required by said subsection
3.4(c) to redeem the 1979 Additional Bonds on a date when there
remains outstanding an aggregate total of fifty percent (50%) or more
in principal amount of the 1979 Additional Bonds and of any future
issue of other Additional or Completion Bonds issued to finance the
completion of the Additional Special
8
<PAGE> 52
Facilities or the construction of other additional special facilities
on Tracts 1, 2, 3 and/or 4, the Board shall give written notice to the
Lessee at least ninety (90) days prior to the date upon which the 1979
Additional Bonds must be redeemed. Lessee shall provide the funds
necessary to accomplish such redemption not later than five (5)
business days prior to the redemption date and by one of the following
methods, at the Lessee's option, to-wit:
(i) by purchasing all of the properties
comprising the Flight Administration, Reservations and
Training Complex, subject to the rights of the holders of any
other said Additional or Completion Bonds at the time
outstanding, for a purchase price equal to the amount
necessary to redeem the then outstanding 1979 Additional
Bonds, and, upon payment of such amount, the Board shall
convey and transfer said properties to the Lessee free and
clear of encumbrances by, through or under it, except for
easements of record and for any rights of the holders of any
such other Additional or Completion Bonds; after all of which,
this Agreement shall be null and void insofar as it applies to
the Flight Administration, Reservations and Training Complex;
or
(ii) by continuing this Agreement and arranging
with the Board to refinance the then outstanding 1979
Additional Bonds, in which event the respective terms
prescribed herein for the Flight Administration, Reservations
and Training Complex and the Net Rent provisions hereof shall
be adjusted in such manner as is necessary to accommodate the
terms and amortization requirements of such refinancing
arrangement; or
(iii) by implementing another method of funding
mutually approved by the parties in a timely manner, failing
which, one of the above methods shall be implemented.
(b) In the event the Board is required by said subsection
3.4(c) to redeem the 1979 Additional Bonds on a date when there
remains outstanding an aggregate total of less than fifty percent
(50%) in principal amount of the 1979 Additional Bonds and of any
future issues of other Additional or Completion Bonds issued to
finance the completion of the Additional Special Facilities or the
construction of other additional special facilities on Tracts 1, 2, 3
and/or 4, the Board shall give written notice to the Lessee at least
ninety (90) days prior to the date upon which the 1979 Additional
Bonds must be redeemed. Lessee shall provide the funds necessary to
accomplish such redemption not later than five (5) business days prior
to the redemption date and by one of the following methods, at the
Lessee's option, to-wit:
(i) by providing the funds required for such
purpose and continuing this Agreement in all respects, except
that all Net Rent hereunder shall be treated as fully prepaid;
or
(ii) by implementing the method described in
subparagraph (ii) of paragraph (a), next above, or by the
action permitted as required by subparagraph (iii) of said
paragraph (a).
Section 5.3. Incorporated Provisions. It is hereby expressly
understood and agreed that all terms and provisions of the Facilities Agreement
and the First Supplemental Facilities Agreement are incorporated herein for all
purposes, and all rights, privileges and obligations of the respective parties
hereto and thereof are hereby made applicable to the Flight Administration,
Reservations and Training Complex to the same extent there made applicable to
the Initial Special Facilities thereunder, except that to the extent any
provisions contained herein are or may be inconsistent with the provisions of
the Facilities Agreement and the First Supplemental Facilities Agreement said
agreements are hereby expressly amended to conform with the provisions hereof
and to authorize, confirm and ratify the transactions herein contained.
Additionally, the Lessee hereby expressly agrees that this Agreement is subject
to the terms and provisions of the 1972 American Bond Ordinance, the 1973
American Bond Ordinance and the 1979 American Bond Ordinance; and any
provisions therein imposing any duty or obligation upon the Lessee shall be
fully binding upon the Lessee to the same extent as if such provisions were
expressly contained herein.
9
<PAGE> 53
Section 5.4. Insufficiency in Funds. In the event the proceeds
from the sale of the 1979 Additional Bonds are insufficient to pay the Costs of
the Additional Special Facilities in full,then the Lessee shall either (a) pay
the amount of the insufficiency, or (b) amend the plans and specifications
relating to the Additional Special Facilities so that the proceeds of the 1979
Additional Bonds will be sufficient to complete the Additional Special
Facilities, or (c) request the issuance of Completion Bonds for that purpose,
in which event the Board shall request the Cities to issue such Completion
Bonds. However, no representation is made or assurance given or implied by the
Board that the Cities will consent to the request of the Board, and the Cities
are not required to issue any such Completion Bonds. In the event the Cities
are unwilling for any reason to issue Completion Bonds, the Lessee shall either
pay the amount of any such deficiency or amend the plans and specifications to
produce the effect aforesaid. In the event of the issuance of such Completion
Bonds, then the Net Rent payable under Section 3.2 hereof shall thereupon be
automatically increased in accordance with the ordinance authorizing such
Completion Bonds. It is provided, however, that such ordinance shall not be
adopted until the Lessee has approved such ordinance, after the receipt of
which approval the same shall be binding on Lessee. Such Completion Bonds
shall be on a parity as to lien on "Pledged Revenues" (as defined in the 1972
American Bond Ordinance) with Series 1972 Bonds, the Series 1973 Bonds and the
1979 Additional Bonds and shall be issued as Special Facilities Bonds subject
to and in accordance with the terms, conditions and provisions of the 1968
Concurrent Bond Ordinance and the 1972 American Bond Ordinance.
Section 5.5. Representations By The Board. The Board makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Board is the duly and lawfully created, existing
and organized Board of Directors of the Airport, having the power to
enter into the transaction contemplated by this Second Supplemental
Facilities Agreement and to carry out its obligations hereunder, and
by proper action the Board has been duly authorized to execute and
deliver this Second Supplemental Facilities Agreement; and
(b) The Board is not in default in any of its covenants
or obligations contained in the Facilities Agreement or the First
Supplemental Facilities Agreement.
Section 5.6. Representations by Lessee. The Lessee makes the
following representations as the basis for its undertakings herein contained.
(a) It is a corporation duly incorporated under the laws
of the State recited aforesaid; is in good standing under its
Certificate of Incorporation or Charter and the laws of said State; is
duly authorized to do business in the State of Texas; has the power to
enter into this Second Supplemental Facilities Agreement without
violating the terms of any other agreement to which it may be a party;
and by proper corporate action has been duly authorized to execute and
deliver this Second Supplemental Facilities Agreement; and
(b) It will occupy and possess the Leased Premises,
including expressly those facilities financed hereunder as a part of
the American Special Facilities on behalf of the Cities and the Board
for the public purposes of the Airport and for which the same are
being acquired or constructed and are to be operated hereunder,
subject to the control and jurisdiction of the Board and the Cities in
accordance with the terms hereof.
(c) It is not in default in any of its covenants or
obligations contained in the Facilities Agreement or the First
Supplemental Facilities Agreement.
Section 5.7. Acquisition of Tracts 1, 2, 3 and 4. It is hereby
acknowledged and agreed that Tract 1 is to be purchased from the City of Fort
Worth pursuant to the terms of a certain "Sale, Purchase and Continuing
Services Agreement," between the Board and said City dated as of December 1,
1978, concurrently with the delivery of the 1979 Additional Bonds; that Tract 2
shall be purchased by the Board from the Lessee concurrently with the delivery
of the 1979 Additional Bonds for a purchase price equal to the acquisition
costs thereof by the Lessee; that Tract 3
10
<PAGE> 54
shall be acquired by the Board from the Lessee, either by purchase or in
prepayment of Ground Rent as elsewhere herein provided, concurrently with the
delivery of the 1979 Additional Bonds; and that Tract 4 is presently owned by
Lessee subject to certain encumbrances which will be removed by Lessee not
later than March 1, 1979, and will be purchased by the Board from the Lessee on
or before March 30, 1979, for a purchase price equal to the acquisition costs
thereof to the Lessee. The Board and Lessee hereby further agree that the
provisions hereof relating to said respective Tracts shall become operational
as to each on the respective dates upon which title to the same is acquired by
the Board. Lessee agrees that it will, upon the respective dates above
specified as to Tract 2, 3 and 4, and upon receipt of payment therefor except
with respect to Tract 3 should Lessee elect or be required to prepay Ground
Rent, (as aforesaid), deliver and convey to the Board good, sufficient and
marketable title to Tracts 2, 3 and 4, free and clear of all encumbrances,
except easements for public rights-of-way and utilities appearing of record,
under general warranty by Lessee, except as to Tract 3 in the event Ground Rent
is prepaid in which case the conveyance will be by special warranty from
Lessee, and in all events subject to such further title requirements as may be
required by the Board's Contract of Purchase of the 1979 Additional Bonds. It
is provided, however, that lessee, at any time prior to the conveyance of
Tracts 2 and/or 4 to the Board, is authorized to convey a single tract of land,
not exceeding five (5) acres, out of Tracts 2 and/or 4 to the City of Fort
Worth for the purpose of the construction of the fire station required by it
pursuant to the aforesaid Sale, Purchase and Continuing Services Agreement in
which event the tract conveyed to the City of Fort Worth shall not be included
within the land leased hereunder.
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and year first above written but actually on December 5, 1978.
DALLAS-FORT WORTH REGIONAL
(SEAL) AIRPORT BOARD
ATTEST:
/s/ BARBARA HOLLIS By /s/ ERNEST E. DEAN
- ----------------------------------- ----------------------------------
Staff Secretary Executive Director
APPROVED:
/s/ CHARLES C. WELLS
- -----------------------------------
Legal Counsel to Board
AMERICAN AIRLINES, INC.
ATTEST:
/s/ ROBERT C. DINEISTEIN By /s/ DAVID J. LLOYD JONES
- ----------------------------------- ----------------------------------
Secretary Senior Vice President
11
<PAGE> 55
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority in and for Dallas County, Texas,
on this day personally appeared Earnest E. Dean and Barbara Hollis, each known
to me to be the person whose name is subscribed to the foregoing instrument and
known to me to be, respectively, Executive Director and Staff Secretary of the
Dallas-Fort Worth Regional Airport Board, and each acknowledged to me that the
same was executed for the purposes and considerations therein expressed and in
the capacity therein stated, and as the act and deed of said Board.
GIVEN UNDER MY HAND and seal of office, this day of December,
1978.
-----------------------------------------------
Notary Public in and for Dallas County, Texas
THE STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority in and for New York County, New
York, on this day personally appeared (D. J. Lloyd Jones) and (R. Dineistein),
each known to me to be respectively, Senior Vice President and Secretary of
American Airlines, Inc., a Delaware corporation, and each acknowledged to me
that he executed the same for the purposes and consideration therein stated,
and as the act and deed of said corporation.
GIVEN UNDER MY HAND and seal of office, this the 3 day of December,
1978.
/s/ GALE KAY WALL
--------------------------------------------------
Notary Public in and for New York County, New York
GALE KAY WALL
Notary Public, State of New York
No. 31-9509200
Qualified in New York County
Commission Expires March 30, 1980
12
<PAGE> 56
[MAP]
- --------------------------------------------------------------------------------
DALLAS - FORT WORTH
[SEAL] REGIONAL AIRPORT
BOARD
<PAGE> 57
AIRPORT BOARD AGREEMENT
NUMBER 23201-E-S3
===============================================================================
AMERICAN AIRLINES THIRD
SUPPLEMENTAL SPECIAL
FACILITIES AGREEMENT
-----------------------------------------
BY AND BETWEEN
THE DALLAS-FORT WORTH REGIONAL AIRPORT BOARD
AND
AMERICAN AIRLINES, INC.
------------------------------------------
(including provisions for net rent and ground rent)
------------------------------------------
DATED AS OF DECEMBER 1, 1983
================================================================================
<PAGE> 58
THE STATE OF TEXAS) AMERICAN AIRLINES THIRD SUPPLEMENTAL
COUNTY OF TARRANT ) SPECIAL FACILITIES AGREEMENT
THIS AMERICAN AIRLINES THIRD SUPPLEMENTAL SPECIAL FACILITIES
AGREEMENT (HEREIN CALLED THIS OR THE "THIRD SUPPLEMENTAL FACILITIES AGREEMENT"),
MADE AND ENTERED INTO AS OF THE 1ST DAY OF DECEMBER, 1983, BY AND BETWEEN THE
DALLAS-FORT WORTH REGIONAL AIRPORT BOARD (HEREINAFTER CALLED THE "BOARD"),
BEING THE DULY AND LAWFULLY CONSTITUTED AND OPERATING BOARD OF DIRECTORS OF THE
DALLAS-FORT WORTH REGIONAL AIRPORT (HEREINAFTER CALLED THE "AIRPORT"),
BELONGING TO THE CITIES OF DALLAS AND FORT WORTH, TEXAS (HEREINAFTER CALLED THE
"CITIES"), AND AMERICAN AIRLINES, INC., A DELAWARE CORPORATION (HEREINAFTER
CALLED "LESSEE");
W I T N E S S E T H
WHEREAS, heretofore, the Board and the Lessee executed and delivered a
certain lease agreement entitled "American Airlines Special Facilities Lease
Agreement" (hereinafter called the "Facilities Agreement"), the same being
dated as of October 1, 1972, and pursuant to the terms of which the Board
initially leased to the Lessee and confirmed the prior lease of certain lands
therein described as the "Leased Lands"; and
WHEREAS, pursuant to the Facilities Agreement, the Cities, as
requested by the Board, authorized, among other things, the construction of
certain facilities therein described as the "Catering Facilities" upon the
tract of land therein described as Tract 1 of the Leased Lands, and further
authorized the fabrication and installation of certain passenger service
facilities on land theretofore leased from the Board, the financing of all of
such facilities having been accomplished pursuant to concurrent ordinance (the
"1972 American Bond Ordinance") of the City of Dallas bearing number 13810 and
of the City of Fort Worth bearing number 6727; and
WHEREAS, subsequently, as of February 1, 1973, the Board and the
Lessee executed and delivered a certain supplemental lease agreement entitled
"American Airlines Supplemental Special Facilities Agreement" (hereinafter
called the "First Supplemental Facilities Agreement") and the Board therein
leased to Lessee certain additional lands and therein agreed to make certain
acquisitions, additions, extensions, improvements and modifications to or of
the "Special Facilities," as defined in the Facilities Agreement, said
facilities being therein defined as the "Combination Freight and Maintenance
Facilities"; and
WHEREAS, pursuant to the First Supplemental Facilities Agreement, the
Cities, as requested by the Board, authorized the financing of said
improvements by the issuance of additional bonds pursuant to the terms of an
additional concurrent ordinance (the "1973 American Bond Ordinance") of the
City of Dallas bearing number 13978 and of the City of Fort Worth bearing
number 6790; and
WHEREAS, subsequently, as of December 1, 1978, the Board and the
Lessee executed and delivered a certain supplemental lease agreement entitled
"American Airlines Second Supplemental Special Facilities Agreement"
(hereinafter called the "Second Supplemental Facilities Agreement") and the
Board therein leased to Lessee certain lands and therein agreed to make certain
acquisitions, additions, extensions, improvements and modifications to or of
certain additional special facilities constituting the "Flight Administration,
Reservations and Training Complex," the "Passenger Service Facilities," and the
"Maintenance Facilities," all as defined in the Second Supplemental Facilities
Agreement; and
WHEREAS, pursuant to the Second Supplemental Facilities Agreement, the
Cities, as requested by the Board, authorized the financing of said
improvements by the issuance of additional bonds pursuant to the terms of an
additional concurrent ordinance (the "1979 American Bond Ordinance") of the
City of Dallas bearing number 16034 and the City of Fort Worth bearing number
7853; and
WHEREAS, the Board has determined it appropriate and desirable to
lease to Lessee certain additional lands and to make certain other
acquisitions, additions, extensions, improvements and
<PAGE> 59
modifications to or of the Special Facilities, as defined in the Facilities
Agreement, all of the same (hereinafter defined as the "Additional Special
Facilities") to constitute Special Facilities of an at the Airport, the same to
consist of, among others, certain improvements to American's "Flight
Administration, Reservations and Training Complex," certain "Passenger Service
Facilities" to be constructed at Terminal 2E and Terminal 3E at the Airport,
certain improvements to the "Combination Freight and Maintenance Facilities,"
certain parking improvements and extensions (the "Parking Facilities"), and
certain improvements and extensions to the "Catering Facilities"; and
WHEREAS, all of the Additional Special Facilities, when completed,
will constitute a part of the Airport's total systems and other facilities
functionally related and subordinate thereto and as such will be necessary to
the needs or convenience of the general public, including the Lessee as a
common carrier serving the public at the Airport, the same to be leased to
Lessee hereunder and under the Facilities Agreement, as heretofore and herein
supplemented; and
WHEREAS, the Board has determined it appropriate and necessary to pay
for the costs of the Additional Special Facilities by the issuance of "Special
Facility Bonds" therefor, upon and subject to the terms specified in the "1983
American Airlines Special Facilities Bond Ordinance" (as hereinafter defined),
which bonds are not additional bonds under the 1972 American Bond Ordinance,
but are separately and solely secured as provided in the 1983 American Airlines
Special Facilities Bond Ordinance, and the Lessee has agreed that upon the
issuance of said bonds the "Net Rent" payable under the Facilities Agreement,
as heretofore and hereby supplemented, shall automatically be increased in the
amounts required by the 1983 American Airlines Special Facilities Bond
Ordinance; and
WHEREAS, the Lessee and the Board accordingly desire hereby to
evidence their agreement (a) that the Board will purchase and provide the
Additional Special Facilities and that the Lessee will lease the same under and
subject to the Facilities Agreement, to this Third Supplemental Facilities
Agreement and to certain other agreements described herein; (b) that the Lessee
authorize and approve the issuance of $56,000,000 in principal amount of
special facility revenue bonds (herein defined as the "1983 Bonds") for such
purpose; (c) that the Facilities Agreement be further supplemented in the
manner herein provided; and (d) that the ordinance authorizing the 1983 Bonds
(said ordinance being herein called the "1983 American Airlines Special
Facilities Bond Ordinance") is approved by the Parties; and
WHEREAS, the Board and the Lessee have previously entered into (i) a
certain "Passenger Service Special Facilities Agreement" (hereinafter called
the "PSF Agreement"), dated as of April 1, 1972; (ii) a certain "Airport Use
Agreement", dated as of January 1, 1974, as amended (hereinafter called the
"Use Agreement"); (iii) a certain agreement dated as of May 1, 1983, relating
to certain hangar and maintenance facilities (the "Maintenance Lease"); and
(iv) a certain agreement dated as of December 1, 1983, relating to certain
parking facilities (the "Parking Agreement");
NOW, THEREFORE, the Board, for the respective terms herein specified,
and for and in consideration of the rents herein and in the Facilities
Agreement, the First Supplemental Facilities Agreement, the Second Supplemental
Facilities Agreement, the PSF Agreement, the Use Agreement, the Maintenance
Lease, and the Parking Agreement reserved, and of the covenants and agreements
herein contained, has demised and leased, and does by these presents demise and
lease to Lessee, and the Lessee has agreed to take and does hereby take from
the Board, the Additional Special Facilities and the land designated,
respectively, as Tract "D" 6-W on Exhibit 1 attached hereto (the "Flight
Kitchen Tract") and incorporated herein, upon and subject to the following
terms, provisions, covenants and considerations, and the parties hereby
covenant and agree as follows, to-wit:
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ARTICLE I
DEFINITIONS, THE FACILITIES AGREEMENT
Section 1.11 Definitions. (a) All words and terms used herein
which constitute defined terms and words in the 1983 American Airlines
Special Facilities Bond Ordinance, the Facilities Agreement, the First
Supplemental Facilities Agreement and the Second Supplemental Facilities
Agreement (this Third Supplemental Facilities Agreement, the First Supplemental
Facilities Agreement and the Second Supplemental Facilities Agreement being
hereinafter together called the "Supplemental Facilities Agreements"), or the
preambles of this Third Supplemental Agreement shall have the same meanings and
definitions as are contained therefor in said agreements, except where the same
words and terms are expressly defined otherwise herein, and such defined words
and terms are incorporated herein for all purposes.
(b) In addition to the defined terms specified in the preambles
hereto and to those referred to in paragraph (a), next above, the following
words and terms for the purposes of the Supplemental Facilities Agreements and
of the Facilities Agreement with respect to matters herein contained
supplemental thereto, shall have the following meanings, respectively, unless
the context shall clearly appear otherwise, to-wit:
(i) "1983 Bonds" means the bonds herein approved and
authorized to be issued for the purpose of financing the costs of the
Additional Special Facilities, the same to be entitled "Dallas-Fort
Worth Regional Airport American Airlines Special Facilities Revenue
Bonds, Series 1983";
(ii) "Additional Special Facilities" means the Training
Facilities, the Passenger Service Facilities, the Catering Facilities,
the Parking Facilities and the Maintenance Facilities;
(iii) "Catering Facilities" means the properties,
structures, facilities and equipment for the operation, maintenance,
upkeep and repair of certain catering and inflight kitchen facilities
to be acquired, constructed, fabricated and installed on or as a part
of the Leased Land described in Exhibit 1 hereto, together with the
improvements to "Catering Facilities" identified in the Facilities
Agreement, all to be financed with a part of the proceeds of the 1983
Bonds.
(iv) "Completion Date," with reference to the
Flight Administration Center, the Flight Reservations Center, the
Maintenance Facilities, the Catering Facilities, the Parking
Facilities, and the Passenger Service Facilities, means the respective
date upon which each of said facilities, respectively, is constructed,
substantially completed and ready for occupancy, as established by a
certificate of the Board's Director of Planning and Engineering,
specifying such date;
(v) "Costs of the Additional Special Facilities"
include all of the items of cost included within the definition of
"Costs of the Special Facilities" in subsection 1.1(j) of the
Facilities Agreement;
(vi) "Maintenance Facilities" means the additional
properties, structures, facilities, furnishings and equipment to be
financed with a part of the proceeds of the 1983 Bonds constituting
improvements and extensions to be made to the Combination Freight and
Maintenance Facilities and to the hangar and maintenance facilities
now being leased under the Maintenance Lease;
(vii) "Parking Facilities" means the additional properties,
structures, facilities, furnishings and equipment to be financed with
a part of the proceeds of the 1983 Bonds constituting certain
improvements and extensions to the 4W Remote Reduced Rate Parking
facility pursuant to the Parking Agreement;
(viii) "Passenger Service Facilities" means the additional
properties, facilities, structures and equipment financed with a part
of the proceeds of the 1983 Bonds and located upon the land defined in
the PSF Agreement and the Use Agreement as the Terminal Tract, the
same to consist generally of equipment, fixtures, furnishings and
appurtenances of the following types,
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to-wit: passenger moving and baggage and cargo handling equipment,
conveyances and structures; floor, ceiling, wall coverings and
interior partitions; electrical and plumbing fixtures, outlets, fixed
equipment and utilities in or as a part of or adjacent to the terminal
structure, all of which are or will be situated on the Terminal Tract,
aircraft loading bridges and ways connected or affixed to the terminal
structure, including alternate airside stairways;
(ix) "Starting Date" means with respect to the
Catering Facilities, the Parking Facilities, the Training Facilities,
the Passenger Service Facilities and the Maintenance Facilities,
ninety (90) days after the Completion Date, for each of said
facilities, or the date of occupancy thereof by the Lessee, whichever
is earlier; and
(x) "Training Facilities" means the additional
properties, structures, facilities, furnishings and equipment
comprising a DC-9 flight simulator and related properties, to
constitute a part of the "Flight Administration, Reservations and
Training Complex."
Section 1.2. The Facilities Agreement. This Third Supplemental
Facilities Agreement, together with the First Supplemental Facilities Agreement
and the Second Supplemental Facilities Agreement, is intended to and shall be
supplemental to the Facilities Agreement, and all matters included herein are
subject to the terms of and shall be controlled and governed by the Facilities
Agreement, and where applicable by the First Supplemental Facilities Agreement
and the Second Supplemental Facilities Agreement, where not expressly provided
for herein, and, without limiting the generality of the foregoing, in applying
the terms and provisions of the Facilities Agreement, the First Supplemental
Facilities Agreement and the Second Supplemental Facilities Agreement, to the
matters included herein, it is hereby expressly provided (a) that the tract of
land designated and described on the Exhibit 1 hereto shall be and constitute a
part of the Leased Lands and the Leased Premises; (b) that the Additional
Special Facilities shall be and constitute a part of the Special Facilities;
and (c) that the 1983 Bonds shall not be "Additional Bonds" within the meaning
of that term contained in the Facilities Agreement, but shall be separately and
solely secured by the Net Rent payable under this Third Supplemental Facilities
Agreement and other moneys pledged therefor in the 1983 American Airlines
Special Facilities Bond Ordinance and shall not be on a parity with the bonds
issued pursuant to the 1972 American Bond Ordinance, the 1973 American Bond
Ordinance, and the 1979 American Bond Ordinance, but the same shall be and
constitute separately secured "Special Facility Bonds" issued under the
authority reserved to the Cities in the 1968 Concurrent Bond Ordinance and in
Section 2.1(h) of the 1972 Bond Ordinance.
ARTICLE II
TERMS, POSSESSION, QUIET ENJOYMENT
Section 2.1. Effective Date, Terms, Option. This Third Supplemental
Facilities Agreement shall become effective upon the execution and delivery
hereof by the Board and the Lessee, and the rights of use and occupancy granted
herein with respect to each component of the Additional Special Facilities
shall commence on the Starting Date as to each such component and, subject to
the other provisions hereof, said respective terms shall expire --
(A) as to the Catering Facilities, on December 31, 2009;
and
(B) as to the Passenger Service Facilities, on the date
of the expiration of the term as to the Terminal Tract as specified in
the PSF Agreement and the Use Agreement.
(C) as to the Maintenance Facilities, on the date of the
expiration of the term as to the Combination Freight and Maintenance
Facility as specified in the Facilities Agreement, as supplemented by
the First Supplemental Facilities Agreement or the Maintenance Lease,
as applicable;
(D) as to the Training Facilities, on the date of
expiration of the term as to the Flight Training Center as specified
in the Second Supplemental Facilities Agreement, including any
extensions as provided therein; and
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(E) as to the Parking Facilities, on the date of
expiration of the term as to the Parking Facilities as specified in
the Parking Agreement, including any extensions as provided therein.
Section 2.2. Delivery and Acceptance of Possession. The Board shall
promptly notify the Lessee of the establishment of the respective Completion
Dates as to the Additional Special Facilities and the Lessee shall have the
exclusive right to possess, occupy and use the Additional Special Facilities
and applicable land on and after each such respective date and throughout the
remainder of the applicable terms as specified herein.
Section 2.3. Quiet Enjoyment and Use. Unless a default has occurred,
and upon and subject to the other terms and provisions hereof and of the
Facilities Agreement, and where applicable the First Supplemental Facilities
Agreement, the Second Supplemental Facilities Agreement, the Maintenance Lease,
the Parking Agreement, the PSF Agreement and the Use Agreement, the Lessee
shall be suffered and permitted to have peaceful possession and quiet enjoyment
of the Additional Special Facilities and the land related thereto and leased
hereunder in accordance with the following, to-wit:
(a) Following the Starting Date as to the Training
Facilities comprising a part of the Flight Administration,
Reservations and Training Complex, the Lessee shall be suffered and
permitted to have peaceful possession and quiet enjoyment of such
Training Facilities for all primary and incidental purposes related to
the general operations of the Lessee as a common carrier serving the
general public from, into and at the Airport and connecting with other
Airports served by the Lessee, including the training of persons who
are to be involved in flight-related activities by commercial air
carriers and others, cockpit crew training, the training of flight
attendants, aircraft repair specialists, passenger service and
reservation personnel.
(b) Following the Starting Date as to the Passenger
Service Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Passenger Service
Facilities (expressly including the Terminal Tract presently granted
to Lessee under the PSF Agreement and the Use Agreement) to the same
extent and under and subject to the same terms and conditions as are
provided in the PSF Agreement and the Use Agreement for similar
facilities provided in connection therewith and located upon the
Terminal Tract thereunder, the same to be utilized for the same
purposes therein permitted and provided.
(c) Following the Starting Date as to the Maintenance
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Maintenance Facilities
to the same extent and under and subject to the same terms and
conditions as are provided in the Facilities Agreement as supplemented
and amended by the Supplemental Facilities Agreements for the
Combination Freight and Maintenance Facility, and to the same extent
and under and subject to the same terms and conditions as provided in
the Maintenance Lease, as applicable, the same to be utilized for the
same purposes therein permitted and provided.
(d) Following the Starting Date as to the Catering
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Catering Facilities to
the same extent and under and subject to the same terms and conditions
as are provided in the Facilities Agreement as supplemented and
amended by the Supplemental Facilities Agreement for the Catering
Facilities, the same to be utilized for the same purposes therein
permitted and provided.
(e) Following the Starting Date as to the Parking
Facilities, the Lessee shall be suffered and permitted to have
peaceful possession and quiet enjoyment of the Parking Facilities
(expressly including the land leased under the Parking Agreement) to
the same extent and under and subject to the same terms and conditions
as are provided in the Parking Agreement, the same to be utilized for
the same purposes therein permitted and provided.
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Section 2.4. Ingress and Egress
(a) The Lessee and its officers, employees, invitees, guests, and
suppliers of materials and furnishers of services, shall have the right of
ingress and egress between the Flight Administration, Reservations and Training
Complex and any public street or roadway outside the Airport by means of the
roadways leading to and from the Airport, and between the passenger enplaning
and deplaning complex within the Airport and said tracts of Leased Land, and
such other points as may be designated by the Executive Director of the Board,
all of the same to be used in common with others having rights of passage
within the Airport, all without any further or additional fees or charges
except entrance booths at the Airport and other than the rent described in the
Supplemental Facilities Agreements, the Facilities Agreement, the Maintenance
Lease, the Parking Agreement, the PSF Agreement and the Use Agreement. The use
of such roadways shall be subject to the reasonable rules and regulations of
the Board now in effect or which may hereafter be promulgated for the safe and
efficient operation of the Airport.
(b) The Board may, at any time, temporarily or permanently close
or consent to or request the closing of any such roadway which is subject to
its governmental jurisdiction, and any other area at the Airport presently or
hereafter used as such, so long as a reasonably equivalent means of ingress and
egress, as provided above, remains available to Lessee. Lessee hereby releases
and discharges the Board, its successors and assigns, of and from any and all
claims, demands or causes of action Lessee may have against the Board by reason
of the exercise of any of the powers reserved to the Board under this
subsection.
ARTICLE III
GROUND RENT, NET RENT
Section 3.1. Ground Rent
(a) The Lessee, under the terms and provisions of the PSF
Agreement, the Use Agreement, the Maintenance Lease, the Parking Agreement, the
Facilities Agreement, the First Supplemental Facilities Agreement and the
Second Supplemental Facilities Agreement has heretofore agreed and obligated
itself (along with others in certain instances) to pay a "ground rental" (as
that term is defined in the 1968 Concurrent Bond Ordinance) for its rights in
and uses of the Terminal Tract and the land associated with the Combination
Freight and Maintenance Facility, the Flight Training Center, the Catering
Facilities, and the Parking Facilities. Accordingly, no additional Ground Rent
is or shall be herein required on account of those lands, and the development,
construction, fabrication or installation of the Additional Special Facilities
other than the Catering Facilities. This subsection (a), however, shall in no
manner reduce or alter Lessee's obligation to pay Ground Rent or Net Rent in
the full amount stated in the Facilities Agreement, the First Supplemental
Facilities Agreement, the Second Supplemental Facilities Agreement or said
other agreements.
(b) The Lessee hereby agrees to pay to the Board from the Starting
Date and throughout the term of this Agreement a Preliminary Ground Rent, as
adjusted to the Actual Ground Rent, for the use and occupancy of the Flight
Kitchen Tract, the specific amounts thereof to be determined in accordance with
the following provisions and principles and to be paid at the following times
and in the following amounts, to wit:
(i) Preliminary Ground Rent -- The Lessee shall pay a
Preliminary Ground Rent during the remainder of the first fiscal year
(October 1-September 30) of the lease calculated on the basis of a
rate of $9,000 per acre annum for land comprising the Flight Kitchen
Tract, such Preliminary Ground Rent to be paid in equal monthly
payments during the remainder of the first fiscal year, the first
payment to be paid on the Starting Date and thereafter on the first
day of
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each month during the remainder of the first fiscal year. For
historical reference of the parties hereto, said rate was determined
in accordance with the following formula, to-wit:
A = Airport Services Costs projected on
A the date of this Agreement to be
- = C incurred or due and owing by the
B Board during the first year of the
lease.
B = Total Developed Acreage on the
Airport projected for the Starting
Date.
C = Rate per acre per annum applied to
land comprising the Flight Kitchen
Tract under this Agreement in
computing Preliminary Ground Rent
for the first fiscal year.
(ii) Actual Ground Rent for Preceding Year -- At the close
of the fiscal year (each September 30), the Board shall compute and
ascertain the amount of Actual Ground rent payable by the Lessee for
the respective year, then closed. Such computation shall be made and
determined in accordance with the following formula, to-wit:
A = actual Airport Services Costs
incurred during the period just
closed
B = the average number of the Total
A Developed Acreage on the Airport
- x C = D during the year just closed
B
C = the average number of acres of land
comprising the Flight Kitchen Tract
during the year just closed
D = Actual Ground Rent payable for the
year just closed
Upon making such computations, the Board shall notify the Lessee of
the result thereof. If the resulting Actual Ground Rent shall be greater than
the Preliminary Ground Rent paid during the year to which the adjustment
relates, then the Preliminary Ground Rent for such year was deficient, then the
Lessee shall remit to the Board an amount equal to such difference within five
(5) days from the receipt of notice thereof. If such computations reflect that
the resulting Actual Ground Rent is less than the amount of the Preliminary
Ground Rent actually paid by the Lessee during the year to which the adjustment
relates, then the amount of the overpayment shall be credited against the
Ground Rent payment(s) next due under paragraph (ii), until such credit has
been exhausted.
(d) All estimates and projections required in the making of the
computations and determinations contemplated by subsection (b), next above,
shall be made by the Board and shall be reasonable and made in the light of the
latest data available to or reasonably obtainable by the Board.
(e) If the Starting Date commences on a date other than the first
day of a month or this Agreement expires or is terminated on a date other than
the last day of a month, the Ground Rent payable for the part of the month
during which rent is due shall be computed by prorating the monthly Ground Rent
payment on a daily basis, and Ground Rent shall be paid only for the portion of
the month for which due.
Section 3.2. Net Rent
(a) The Lessee hereby agrees to pay to the Board, in addition to
the Ground Rent specified in Section 3.1 hereof, as additional rental
(hereafter called the "Net Rent") throughout the period during which the 1983
Bonds are outstanding, an amount equal to the principal, interest, any
redemption premiums, and any special reserve requirements contained in the 1983
American Airlines Special Facilities Bond Ordinance, together with an amount
equal to the reasonable cost and charges of any paying agent or paying agents
thereunder and any trustee or trustees therefor, the Net Rent to be payable at
the times and in the amounts specified and provided in the 1983 American
Airlines Special Facilities Bond Ordinance.
(b) The Net Rent payable under the provisions of this Section 3.2
shall be reduced by amounts payable by draws under the Letter of Credit and
after the expiration thereof by the total of any
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amounts at any time on deposit in any interest and sinking fund created by the
1983 American Airlines Special Facilities Bond Ordinance, in excess of the
amount then needed for the purpose of paying accrued interest, matured 1983
Bonds, redemption premiums, if any, and any fees or expenses in respect of the
payment of any such interest, principal or redemption premiums thereof, whether
such excess amounts become available by reason of (i) previous overpayments of
Net Rent, (ii) surplus funds from bond proceeds deposited to the credit of such
interest and sinking fund at the end of the acquisition, construction,
fabrication and installation of the Additional Special Facilities (as will be
required in any such ordinance), (iii) earnings made on the investment of any
amounts from time to time on deposit in any such interest and sinking fund,
(iv) any net reductions or savings in the costs related to the acquisition,
construction, fabrication and installation of the Additional Special
Facilities, the effect of which is to provide funds to such interest and
sinking fund with which the Board can make payments of the interest on and
principal of the 1983 Bonds, or (v) any other circumstance which results in
funds being properly deposited in such interest and sinking fund; provided,
however, that such reduction in Net Rent payments shall be made only to the
extent that funds are not necessary to restore any deficiency then existing in
any reserve fund created by the 1983 American Airlines Special Facilities Bond
Ordinance, it being understood that excess amounts in the interest and
sinking fund shall first be applied to restore any such deficiency and then, if
any amount remains, to the reduction of the Net Rent payments. The reductions
in the Net Rent payments contemplated by this subsection (b) shall be made by
applying excess amounts as a credit(s) against the next Net Rent payment(s) due
after funds have actually become available from the foregoing permissible
sources to the interest and sinking fund, until such excess amounts are
exhausted. Such reductions shall be reflected in the appropriate billings
under subsection (a), next above.
(c) It is understood and acknowledged by the Lessee that the 1983
Bonds will be sold to the purchasers thereof in reliance upon the commitment of
Lessee to make the payments of Net Rent provided in subsection (a), above.
Accordingly, the obligations of the Lessee to make the payments of Net Rent
thus required shall be absolute and unconditional and until such time as the
principal, interest and any redemption premiums thereon shall have been fully
paid, the Lessee (i) will not suspend or discontinue any payments of Net Rent
provided herein, and (ii) will not terminate the lease evidenced hereby or
otherwise seek to avoid or reduce the payment of Net Rent for any reason,
including, without limiting the generality of the foregoing, failure of the
Board to complete the acquisition, construction, fabrication or installation of
the Additional Special Facilities or any portions thereof, or any acts or
circumstances that may constitute failure of consideration, destruction or
damage to such facilities, frustration of purpose, any change in the tax or
other laws of the United States of America or of the State, or any political
subdivision of either thereof or any failure of the Board to perform or observe
any agreement, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement. It is provided, however, that
nothing contained in this subsection shall be construed to release the Board
from the performance of any of the agreements on its part herein contained, and
in the event the board shall fail to perform any such agreement, the Lessee may
institute such actions against the Board as it may deem necessary to compel the
performance thereof or to restrain or enjoin forbidden acts so long as such
shall not result in a reduction of the payment of Net Rent hereunder.
(d) The Lessee hereby expressly covenants, acknowledges and agrees
that the 1983 Bonds do not constitute "Additional Bonds" under and subject to
the terms and provisions of the Facilities Agreement, the First Supplemental
Facilities Agreement and the Second supplemental Facilities Agreement and are
issued under, pursuant to and in compliance with the 1983 American Airlines
Special Facilities Bond Ordinance. Accordingly, the provisions of Section 5.2
of the Facilities Agreement are hereby expressly declared not to be applicable
to the 1983 Bonds, and the Net Rent payable initially with respect to the
Series 1972 Bonds, the Series 1973 bonds and the Series 1979 Bonds shall be and
is hereby expressly declared to be separate and apart from any and all Net Rent
ever payable hereunder. The Lessee may additionally pay other sums due or to
become due for any purpose under the 1983 American Airlines Special Facilities
Bond Ordinance. As provided in Section 5.2 hereof, all
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other provisions of the Facilities Agreement, including but not limited to
Article VII thereof, are fully incorporated except to the extent expressly
modified hereby.
(e) The parties hereto expressly acknowledge, recite, covenant and
agree that this Third Supplemental Facilities Agreement is and shall constitute
the written instrument required by Section 8.7 of the 1968 Concurrent Bond
Ordinance as a prerequisite to the issuance of Special Facility Bonds
thereunder, and this Section 3.2 is included in response thereto.
Section 3.3. 1968 Concurrent Bond Ordinances; Other Costs. This
Third Supplemental Facilities Agreement is expressly subject at all times to
the terms, provisions, conditions and requirements of the 1968 Concurrent Bond
Ordinance, and as contemplated and required thereby, the Net Rent payable under
Section 3.2, above, is intended to be and shall be a net return to the Board,
and accordingly, in addition to the payment of the Ground Rent an the Net Rent,
the Lessee hereby agrees to pay all operation and maintenance expenses
applicable to the Additional Special Facilities, including, without limitation,
any insurance premiums applicable thereto, any and all ad valorem or other
property taxes lawfully levied or assessed against the leasehold interest of
the Lessee in and to the Leased Premises, any and all lawful excise or other
type of taxes imposed on or in respect of such properties, and the expenses of
upkeep thereof of every kind an character, including the repair or ordinary
restoration thereof. No charges, fees, or tolls, other than herein expressly
provided for and other than the regular charges imposed at entrance control
booths at the Airport, if used, shall be charged or collected by the Board from
the Lessee, its agents and employees, or its suppliers of materials or
furnishers of service, for the use of any of the Leased Premises or the
exercise of any of the rights, licenses, services and privileges expressed in
or implied by this Third Supplemental Facilities Agreement. The Lessee further
agrees to pay all costs, fees and expenses of the Trustee, the Remarketing
Agent, the Indexing Agent, the Paying Agent, and the Bank as provided in the
1983 American Airlines Special Facilities Bond Ordinance.
Section 3.4. Place of Payments, Use of Funds, Delinquencies.
(a) All payments of Found Rent required under or by reason of this
Third Supplemental Facilities Agreement shall be paid, used and applied in the
manner, at the place and for the purposes stated in Section 5.4 of the
Facilities Agreement with respect to Ground Rent initially payable thereunder.
(b) Subsection (b) of Section 5.4 of the Facilities Agreement is
hereby incorporated herein for all purposes and is hereby expressly made
applicable to the rentals payable hereunder.
(c) All payments of Net Rent required to be paid by reason of this
Third Supplemental Facilities Agreement shall be paid to the Trustee under the
1983 American Airlines Special Facilities Bond Ordinance so long as the Bond
Fund is held by the Trustee under such Ordinance and thereafter shall be paid
in accordance with Article 5 of the Facilities Agreement.
ARTICLE IV
FINANCING AND CONSTRUCTION OF ADDITIONAL SPECIAL FACILITIES
Section 4.1. 1983 Bonds. (a) The Cost of the Additional Special
Facilities shall be paid with the proceeds from the sale of the 1983 Bonds.
(b) The Board has prepared and the Lessee hereby approves the form
and substance of the ordinance authorizing the 1983 Bonds, which said approval
shall be evidenced by the execution of a separate approval executed by any
officer of the Lessee, and such approval shall be with and shall have the
effect stated, recited and contained in Section 10.7 of the Facilities
Agreement.
(c) Subject to the receipt of the proceeds from the sale of the
1983 Bonds and the continuing adequacy and availability of said proceeds for
the purpose, the Board will cause the Additional
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Special Facilities to be constructed, fabricated, installed and equipped in
accordance with plans and specifications therefor prepared and approved in the
manner provided in Section 4.2 hereof.
Section 4.2. Plans and Specifications, Approvals, Construction
Charges, Contracts. Section 10.5 of the Facilities Agreement shall apply to
the development and construction of the Additional Special Facilities;
provided, however, that with respect to the Passenger Service Facilities, final
plans and specifications shall be prepared by the Board based upon conceptual
plans and specifications prepared by the Lessee.
ARTICLE V
MISCELLANEOUS
Section 5.1. Rescission of Existing Lease. It is hereby agreed by
the parties that the existing agreement, dated as of December 1, 1983, entitled
"American Airlines Special Facilities Lease Agreement," between the Board, as
lessor and the Lessee, as lessee, and relating to the properties comprising
certain of the Catering Facilities and the Flight Kitchen Tract, is hereby
mutually rescinded and declared to be null and void, except only with respect
to the Lessee's obligation to pay "Ground Rent." "Other Rent," and "Net Rent"
under Article V thereof and subject to terms of said Article.
Section 5.2. Incorporated Provisions. It is hereby expressly
understood and agreed that all terms and provisions of the Facilities
Agreement, the First Supplemental Facilities Agreement and the Second
Supplemental Facilities Agreement are incorporated herein for all purposes, and
all rights, privileges and obligations of the respective parties hereto and
thereof are hereby made applicable to the Additional Special Facilities to the
same extent there made applicable to the Initial Special Facilities thereunder,
except that to the extent any provisions contained herein are or may be
inconsistent with the provisions of the Facilities Agreement, the First
Supplemental Facilities Agreement and the Second Supplemental Facilities
Agreement said agreements are hereby expressly amended to conform with the
provisions hereof and to authorize, confirm and ratify the transactions herein
contained. Additionally, the Lessee hereby expressly agrees that this Agreement
is subject to the terms and provisions of the 1983 American Airlines Special
Facilities Bond Ordinance; and any provisions therein imposing any duty or
obligation upon the Lessee shall be fully binding upon the Lessee to the same
extent as if such provisions were expressly contained herein.
Section 5.4. Insufficiency in Funds. In the event the proceeds from
the sale of the 1983 Bonds are insufficient to pay the Costs of the Additional
Special Facilities in full, then the Lessee shall either (a) pay the amount of
the insufficiency, or (b) amend the plans and specifications relating to the
Additional Special Facilities so that the proceeds of the 1983 Bonds will be
sufficient to complete the Additional Special Facilities.
Section 5.5. Representations By The Board. The Board makes the
following representations as the basis for the undertaking on its part herein
contained:
(a) The Board is the duly and lawfully created, existing
and organized Board of Directors of the Airport, having the power to
enter into the transaction contemplated by this Third Supplemental
Facilities Agreement and to carry out its obligations hereunder, and
by proper action the Board has been duly authorized to execute and
deliver this Third Supplemental Facilities Agreement; and
(b) The Board is not in default in any of its covenants
or obligations contained in the Facilities Agreement, the First
Supplemental Facilities Agreement or the Second Supplemental
Facilities Agreement.
Section 5.6. Representations by Lessee. The Lessee makes the
following representations as the basis for its undertakings herein contained:
(a) It is a corporation duly incorporated under the laws
of the State recited aforesaid; is in good standing under its
Certificate of Incorporation or Charter and the laws of said State; is
duly
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authorized to do business in the State of Texas; has the power to enter
into this Third Supplemental Facilities Agreement without violating the
terms of any other agreement to which it may be a party; and by proper
corporate action has been duly authorized to execute and deliver this
Third Supplemental Facilities Agreement;
(b) It will occupy and possess the Leased Premises,
including expressly those facilities financed hereunder as a part of
the Additional Special Facilities on behalf of the Cities and the
Board for the public purposes of the Airport and for which the same
are being acquired or constructed and are to be operated hereunder,
subject to the control and jurisdiction of the Board and the Cities in
accordance with the terms hereof;
(c) It is not in default in any of its covenants or
obligations contained in the Facilities Agreement, the First
Supplemental Facilities Agreement or the Second Supplemental
Facilities Agreement;
(d) At least 90% of the proceeds of the 1983 Bonds (after
subtracting issuance expenses, underwriter's discount and the amount
of the Reserve Account) (the "Net Proceeds") will be used to provide
facilities which will quality as airport facilities within the meaning
of Section 103(b)(4)(D) of the Code, and not more than ten percent
(10%) of the aggregate amount of expenditures from the Construction
Fund at any time will be used for facilities which would not be exempt
under such Section 103(b)(4)(D) or for working capital or for property
of a character not subject to the allowance for depreciation as
prescribed in Section 103(b)(6)(A) of such Code. To the extent within
its control, the Lessee will not cause or permit any plans and
specifications for such facilities to be changed or revised, or such
facilities to be operated, maintained, repaired or renovated, in a
manner such that the facilities to be financed from the proceeds of at
least ninety percent (90%) of the Net Proceeds of the 1983 Bonds will
not qualify as airport facilities within the meaning of such Section
103(b)(4)(D), or take any other action which would cause the loss of
the exemption of interest on any 1983 Bonds from federal income
taxation;
(e) It will comply with the applicable requirements of
Section 103(c) of the Code, with respect to funds within its
possession, so that the 1983 Bonds will not be or become "arbitrage
bonds'' as defined therein; and
11
<PAGE> 69
(f) It will cause the proceeds of the 1983 Bonds to be
applied so that the "average reasonably expected economic life" of the
Additional Special Facilities, as defined in the Code, is, and at all
times hereafter shall be, at least 83.3% of the average weighted
maturity of the 1983 Bonds.
Section 5.7. Removal or Relocation of Parking Facilities. The Board
and the Lessee hereby agree, and expressly reserve the right, to relocate or
remove the Parking Facilities in accordance with the terms and conditions set
forth in the Parking Agreement. In the event of any relocation or removal of
the Parking Facilities, the Net Rent payable hereunder shall not be reduced or
abated.
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and year first above written but actually on December 20, 1983.
DALLAS-FORT WORTH REGIONAL
AIRPORT BOARD
ATTEST:
/s/ BARBARA HOLLIS By /s/ ERNEST E. DEAN
- ---------------------------------- --------------------------------------
Staff Secretary Executive Director
(SEAL)
APPROVED:
/s/ HUTCHISON PRICE BOYLE & BROOKS
- ----------------------------------
Bond Counsel to Board
for Special Facility Financing
AMERICAN AIRLINES, INC.
ATTEST:
/s/ THOMAS F. ANGSHADT By /s/ RICHARD B. JAMISON
- ---------------------------------- ---------------------------------------
Assistant Secretary Vice President
(SEAL)
12
<PAGE> 70
THE STATE OF TEXAS)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority in and for Dallas County, Texas
on this day personally appeared Ernest E. Dean and Barbara Hollis of the
Dallas/Fort Worth Regional Airport Board, each known to me to be the person
whose name is subscribed to the foregoing instrument and known to me to be,
respectively, the Executive Director and Staff Secretary of the Dallas/Fort
Worth Regional Airport Board, and each acknowledged to me that he or she
executed the same for the purposes and consideration therein expressed and in
the capacity therein stated, and as the act and deed of said Board.
GIVEN UNDER MY HAND and seal of office, this the 20th day of December,
1983.
(SEAL) /s/ FRANCES D. MOORE
------------------------------------
Notary Public in and for
Dallas County, Texas
THE STATE OF TEXAS)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority in and for Tarrant County, Texas,
on this day personally appeared Richard B. Jamison and Thomas F. Angshadt and
each known to me to be, respectively, the authorized officers of American
Airlines, Inc., a Delaware corporation, and each acknowledged to me that he or
she executed the same for the purposes and consideration therein stated, as the
act and deed of said corporation.
GIVEN UNDER MY HAND and seal of office, this the 20th day of December,
1983.
/s/ KATHLEEN A. ASHLEY
(SEAL) -----------------------------------
Notary Public in and for
Tarrant County, Texas
13
<PAGE> 71
[LOCATION MAP]
- --------------------------------------------------------------------------------
DALLAS - FORT WORTH SKY CHEFS WIDE BODY KITCHEN
[SEAL] REGIONAL AIRPORT
BOARD
- --------------------------------------------------------------------------------
<PAGE> 72
Airport Board
Agreement No. 23201-EC3
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made and entered into this 11th day of June, 1987,
by and between the Dallas-Fort Worth International Airport Board (hereinater
called the "Board"), having an office at 3200 East Airfield Drive, P.O. Drawer
DFW, Dallas-Fort Worth Airport, Texas 75261, and American Airlines, Inc.
(hereinafter called "Lessee"), a corporation of the State of Texas, whose
mailing address is P.O. Box 619616, Dallas-Fort Worth Airport, Texas 75261,
evidences the following:
WITNESSETH:
WHEREAS, the Parties hereto entered into that certain Agreement No.
23201-E (hereinafter referred to as the "Agreement") on the 1st day of October
1972, which let 14,479 acres for an American Airlines Aviation Support
Facility; and
WHEREAS, the Parties hereto desire to supplement the Agreement further
without waiving or abating any of the rights, duties, benefits or obligations
contained in the Agrement or its supplements unless hereinafter expressly set
forth;
NOW, THEREFORE, the Parties hereto, for and in consideration of the
covenants and conditions contained in the Agreement and those hereinafter set
forth, agree as follows:
I.
This Supplemental Agreement No. 23201-EC3 shall be incorporated into
the Agreement, and is made a part hereof.
<PAGE> 73
II.
The Premises (acreage) shall be reduced form 14.479 acres to 13.116
plus or minus acres (see Exhibit "A" attached) to provide additional taxiway
area to accommodate wide-body aircraft.
III.
That this Supplemental Agreement No. 23201-EC3, and Supplemental
Agrreement Nos. 23201-EC1 and 23201-EC2 constitute all the supplements to the
Agreement; that except for the portions of the Agreement so supplemented, the
Agreement shall remain in effect in its entirety; that this Supplemental
Agrement is mutually agreed upon as set forth herein and shall be considered as
if originally set forth in the agreement.
IN WITNESS WHEREOF, the Parties hereto have executed these presents at
East Airfield Drive, Dallas-Fort Worth Airport, Texas as of the day and year
first above written.
DALLAS-FORT WORTH INTERNATIONAL
AIRPORT BOARD
[ILLEGIBLE]
-------------------------------
Executive Director
APPROVED AS TO FORM:
[ILLEGIBLE]
- ---------------------------
Legal Counsel for the Board
ATTEST:
/s/ DEBBIE SINGLETON
- ----------------------------
Staff Secretary to the Board
<PAGE> 74
AMERICAN AIRLINES, INC.
/s/ THOMAS J. KIERNAN
-----------------------
THOMAS J. KIERNAN
Title: Vice President
Corporate Real Estate
ATTEST:
/s/ CHARLES D. MAVLETT
- ----------------------
CORPORATE SECRETARY
<PAGE> 75
THE STATE OF TEXAS ) AMERICAN AIRLINES FIFTH SUPPLEMENTAL
) SPECIAL FACILITIES AGREEMENT
COUNTY OF TARRANT ) NO. 23201-E- S5
This AMERICAN AIRLINES FIFTH SUPPLEMENTAL SPECIAL FACILITIES AGREEMENT
(herein called this or the "Fifth Supplemental Facilities Agreement"), made
and entered into as of the 1st day of September, 1993, by and between the
DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD (hereinafter called the "Board"),
being the duly and lawfully constituted and operating Board of Directors of the
Dallas/Fort Worth International Airport (hereinafter called the "Airport"),
belonging to the Cities of Dallas and Fort Worth, Texas (hereinafter called the
"Cities"), and AMERICAN AIRLINES, INC., a Delaware Corporation (hereinafter
called "Lessee");
WITNESSETH
WHEREAS, heretofore, the Board and the Lessee executed and delivered a
certain lease agreement entitled "American Airlines Special Facilities Lease
Agreement" (hereinafter called the "Facilities Agreement"), the same being
dated as of October 1, 1972, and pursuant to the terms of which the Board
initially leased to the Lessee and confirmed the prior lease of certain lands
therein described as the "Leased Lands"; and
WHEREAS, pursuant to the Facilities Agreement, the Cities, as
requested by the Board, authorized, among other things, the construction of
certain facilities therein described as the "Catering Facilities" upon the tract
of land therein described as Tract 1 of the Leased Lands, and further
authorized the fabrication and installation of certain passenger service
facilities on land theretofore leased from the Board, the financing of all of
such facilities having been accomplished pursuant to concurrent ordinance (the
"1972 American Bond Ordinance") of the City of Dallas bearing number 13810 and
of the City of Forth Worth bearing number 6727; and
WHEREAS, subsequently, as of February 1, 1973, the Board and the
Lessee executed and delivered a certain supplemental lease agreement entitled
"American Airlines Supplemental Special Facilities Agreement" (hereinafter
called the "First Supplemental Facilities Agreement") and the Board therein
leased to Lessee certain additional lands and therein agreed to make certain
acquisitions, additions, extensions, improvements and modifications to or of
the "Special Facilities," as defined in the Facilities Agreement, said
facilities being therein defined as the "Combination Freight and Maintenance
Facilities"; and
WHEREAS, pursuant to the First Supplemental Facilities Agreement, the
Cities, as requested by the Board, authorized the financing of said
improvements by the issuance of additional bonds pursuant to the terms of an
additional concurrent ordinance (the "1973 American Bond Ordinance") of the
City of Dallas bearing number 13978 and of the City of Fort Worth bearing
number 6790; and
<PAGE> 76
WHEREAS, subsequently, as of December 1, 1978, the Board and the
Lessee executed and delivered a certain supplemental lease agreement entitled
"American Airlines Second Supplemental Special Facilities Agreement"
(hereinafter called the "Second Supplemental Facilities Agreement") and the
Board therein leased to Lessee certain lands and therein agreed to make certain
acquisitions, additions, extensions, improvements and modifications to or of
certain additional special facilities constituting the "Flight Administration,
Reservations and Training Complex," the "Passenger Service Facilities," and the
"Maintenance Facilities," all as defined in the Second Supplemental Facilities
Agreement; and
WHEREAS, pursuant to the Second Supplemental Facilities Agreement, the
Cities as requested by the Board, authorized the financing of said improvements
by the issuance of additional bonds pursuant to the terms of an additional
concurrent ordinance (the "1979 American Bond Ordinance") of the City of Dallas
bearing number 16034 and of the City of Forth Worth bearing number 7853; and
WHEREAS, subsequently, as of December 1, 1983, the Board and Lessee
executed and delivered a certain supplemental lease agreement entitled
"American Airlines Third Supplemental Special Facilities Agreement"
(hereinafter called the "Third Supplemental Facilities Agreement") and the Board
therein leased to Lessee the Additional Special Facilities and the land
designated, respectively, as Tract "D" 6-W (the "Flight Kitchen Tract"); and
WHEREAS, pursuant to the Third Supplemental Facilities Agreement, the
Cities as requested by the Board, authorized the financing of said improvements
by the issuance of "Specialty Facility Bonds," which bonds were not additional
bonds under the 1972 American Bond Ordinance, but were separately and solely
secured as provided in the 1983A American Airlines Special Facilities Bond
Ordinance; and
WHEREAS, subsequently, as of June 11, 1987, the Board and Lessee
executed and delivered a certain supplemental lease agreement entitled
"Supplemental Agreement" (hereinafter called the "Fourth Supplemental
Agreement" {also previously identified as a result of typographical error as
23201-EC3}) and the Board and Lessee therein reduced the acreage for the
Lessee's Aviation Support Facility from 14.479 acres to 13.116 acres (the
Facilities Agreement and all heretofore described supplemental agreements and
all heretofore described bond ordinances collectively, shall be referred to
hereinafter as "Special Facility Bonds"); and
WHEREAS, the Lessee and the Board agree that a portion of Lessee's
"Leased Lands", (as defined in the Facilities Agreement as supplemented by the
Second Supplemental Facilities Agreement) comprising 9.055 acres of land,
(hereinafter referred to as "Tract A") and being more particularly described as
to location on Exhibit "A" and by metes and bounds on Exhibit "B" attached
hereto and incorporated herein, is non-essential to Lessee's future plans; and
WHEREAS, an appraisal of the Leased Lands on behalf of the Board
concludes that removing Tract A will not minimize, reduce or lessen the value
of the remaining Leased Lands or the improvements built thereon;
2
<PAGE> 77
WHEREAS, the Federal Aviation Administration ("FAA") desires to lease
said Tract A for expansion of existing FAA facilities located adjacent thereto;
and
WHEREAS, both Lessee and the Board mutually agree that such a lease to
the FAA is in the public's best interest; and
WHEREAS, both Lessee and Board are desirous of releasing Tract A from
Lessee's Leased Lands; and
WHEREAS, an opinion of the Board's Bond Counsel was delivered to the
Board with a finding that releasing Tract A from the Leased Lands does not
violate the Facilities Agreement, as supplemented, the 1968 Regional Airport
Concurrent Bond Ordinance of the Cities of Dallas and Fort Worth, Texas, or any
of the Bond Ordinances referenced above; and
WHEREAS, this Fifth Supplemental Facilities Agreement shall be
evidence that such release from the "Leased Lands" is being accomplished for
the benefit of the FAA pursuant to Board Resolution Number 93-08-221 approved
August 5, 1992;
NOW, THEREFORE, be it resolved that Section 3.1, Article III, Second
Supplemental Facilities Agreement is hereby amended and Lessee does hereby
grant, release, and convey unto the Cities, the Board, and their successors and
assigns for the use and benefit of the public and its agencies, all of Lessee's
interest in Tract A, and said Tract is hereby deleted from the "Leased Lands."
As an appurtenance to this grant, Lessee does hereby waive, release,
remise, quitclaim and forever hold harmless the Board and the Cities, their
successors and assigns from any and all claims for damages of any kind that
Lessee may now have or hereafter have by reason of the release of said Tract A
from the Lessee's "Leased Lands.
This Fifth Supplemental Facilities Agreement does not modify, alter or
change the terms, covenant, or conditions of the Second Supplemental Facilities
Agreement (Lease Number 23201-E-S2) other than specified herein.
3
<PAGE> 78
Fifth Supplemental Special Facilities Agreement No. 23201-E-S5
EXECUTED THIS 15TH DAY OF APRIL, 1994.
DALLAS/FORT WORTH
INTERNATIONAL AIRPORT BOARD
By [ILLEGIBLE]
---------------------------
Executive Director
Date 4/15/94
--------------------------
APPROVED AS TO FORM:
/s/ SANDRA PERKINS
- -------------------------
Legal Counsel for the Board
ATTEST:
/s/ NORMA CONTURE
- --------------------------
AMERICAN AIRLINES,INC.
By /s/ GARY F. KENNEDY
----------------------------
Title MANAGING DIRECTOR
CORPORATE REAL ESTATE
-------------------------
HUTCHISON BOYLE BROOKS & FISHER, P.C. Date 4/14/96
By: BEN A. BROOKS --------------------------
- -----------------------------
Bond Counsel for the Board
4
<PAGE> 79
EXHIBIT A
TRACT MAP
<PAGE> 1
EXHIBIT 10.18
[TOC & TCC-Tulsa]
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Assignment") is entered into
to be effective as of 9:30 a.m., Central Daylight time, on the 1st day of July,
1996, between American Airlines, Inc., a Delaware corporation ("Assignor"), and
The SABRE Group, Inc., a Delaware corporation ("Assignee").
W I T N E S S E T H :
WHEREAS, N. G. Henthorne, E. Fred Johnson, Richard Lloyd
Jones, Jr., James L. Maxwell and Wade C. Whiteside, jointly, as Trustees of
the Tulsa Municipal Airport Trust, a statutory trust duly created by a Trust
Indenture, dated August 2, 1957, and duly accepted by the City of Tulsa,
Oklahoma, as beneficiary thereof, under and by virtue of Ordinance No. 8236
enacted on August 6, 1957 (such Trustees, together with the trustees of the
Tulsa Municipal Airport Trust constituting, from time to time, the respective
successors of such Trustees, being hereinafter called "TMAT"), leases from the
City of Tulsa, Oklahoma (the "City") the premises described therein (the "Base
Lease Premises"), pursuant to that certain Lease dated August 6, 1957, as
amended, and pursuant to the Leases dated March 29, 1968 and July 31, 1969
(collectively, the Base Lease"); and
WHEREAS, Assignor is the lessee under that certain Sublease
(as amended and supplemented, the "Sublease"), by and between Assignor and TMAT
dated June 24, 1958, as further described on Exhibit "A" attached hereto, which
covers that portion of the Base Lease Premises described therein, together with
improvements and appurtenances located thereon (the "Subleased Premises");
WHEREAS, the Subleased Premises includes the property
described by metes and bounds on Exhibit "B" attached hereto upon which are
located those certain buildings commonly known as the Tulsa Computer Center and
the Tulsa Office Center and certain other improvements and appurtenances
related thereto (collectively, the "Assigned Premises"); and
WHEREAS, Assignor wishes to assign to Assignee all of
Assignor's right, title and interest in and to the Sublease with respect to the
Assigned Premises and Assignee wishes to assume from Assignor all of Assignor's
obligations thereunder with respect to the Assigned Premises from and after the
date hereof in accordance with the terms of this Assignment;
NOW, THEREFORE, in consideration of the premises, the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
1. Assignment of Sublease. Effective as of the date hereof,
Assignor hereby
<PAGE> 2
assigns and conveys to Assignee all of Assignor's right, title and interest in,
to and under the Sublease to the extent and only to the extent it covers and
includes the Assigned Premises and all improvements and fixtures situated on
the Assigned Premises, including, but not limited to, the right, if any, to any
renewals and extensions of the term of the Sublease to the extent related to
the Assigned Premises only. Assignor hereby reserves, and this Assignment
expressly excludes, that portion of the Subleased Premises that is not included
within the description of the Assigned Premises (herein referred to as the
"Reserved Premises") and the rights and obligations of Assignor in the Sublease
related to the Reserved Premises.
2. Covenants of Assignee. Assignee hereby assumes, and
agrees to pay, honor and discharge, all of Assignor's obligations under the
Sublease with respect to the Assigned Premises arising on and after the date
hereof. Assignee shall observe and perform all of the terms and covenants and
conditions to be performed by Assignor as lessee under the Sublease with
respect to the Assigned Premises and agrees not to do or suffer or permit
anything to be done that would result in a violation of, or a default under,
the Sublease or cause the Sublease to be terminated or render Assignor liable
for any charge or expense thereunder.
In the event any costs or other obligations are incurred under
the Sublease that relate to the Subleased Premises including the Assigned
Premises, Assignee shall pay its prorata portion of such costs, and shall be
responsible for its prorata portion of such obligations. Assignee's prorata
portion of such costs and obligations shall be calculated based on the ratio of
the square footage of the Assigned Premises to the square footage of the
Subleased Premises.
3. Ingress and Egress. Assignee and its officers, employees,
invitees, guests, agents, and suppliers of materials and furnishers of
services, shall have a nonexclusive right of ingress and egress between the
Assigned Premises and any street or roadway by means of the roadways within the
Subleased Premises leading to and from the Assigned Premises to be used in
common with others having a similar right of passage. The use of such roadways
shall be subject to the rules and regulations of the City of Tulsa, TMAT, the
Tulsa Airports Improvement Trust, the Tulsa Airport Authority and Assignor now
in effect or which may hereafter be promulgated and any terms and conditions of
the Base Lease and the Sublease.
4. Binding Effect. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA,
WITHOUT REGARD TO CHOICE OF LAWS RULES.
6. Counterparts. This Assignment may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this
Assignment by
<PAGE> 3
their authorized representatives as of the date first above written to become
effective as of such date.
Assignor:
--------
AMERICAN AIRLINES, INC., a Delaware corporation
By: /s/ GARY F. KENNEDY
------------------------
Name: Gary F. Kennedy
Title: Managing Director - Corporate Real
Estate
ATTEST:
- -----------------------------
Assistant Corporate Secretary
Assignee:
--------
THE SABRE GROUP, INC., a Delaware corporation
By: /s/ JAMES K. LINES
------------------------
Name: James K. Lines
Title: Attorney-in-Fact
ATTEST:
- -----------------------------
Assistant Corporate Secretary
<PAGE> 4
STATE OF TEXAS )
) ss
COUNTY OF DALLAS )
The foregoing Assignment Agreement was acknowledged before me this __
day of _______, 1996, by ________________ _____________,
_____________________________________ of American Airlines, Inc., a Delaware
corporation, on behalf of the Corporation.
Subscribed and sworn to before me this ___ day of ___________, 1996.
----------------------------
Notary Public
My commission expires:
- ------------------------------
STATE OF TEXAS )
) ss
COUNTY OF DALLAS )
The foregoing Assignment Agreement was acknowledged before me this __
day of _______, 1996, by ________________ _____________,
_____________________________________ of The SABRE Group, Inc., a Delaware
corporation, on behalf of the Corporation.
Subscribed and sworn to before me this ___ day of ___________, 1996.
----------------------------
Notary Public
My commission expires:
- ------------------------------
<PAGE> 5
EXHIBIT "A"
DESCRIPTION OF SUBLEASE
Sublease dated as of June 24, 1958, by and between the then
Trustees of the Tulsa Municipal Airport Trust (the Trustees and all predecessor
and successor Trustees of the Tulsa Municipal Airport Trust hereinafter the
"Trustees"), as Lessor, and American Airlines, Inc., a Delaware corporation
("American"), as Lessee (a copy of which was duly recorded in the records of
the County Clerk of Tulsa County, Oklahoma, in Book 3905, Pages 1610-1637 on
October 16, 1969), as amended by the First Amendment to the Sublease dated as
of May 1, 1963, by and between the Trustees, as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3341, Page 200, on May 16, 1963), as Exhibit A to the
Bond Indenture, dated as of May 1, 1963, between the Trustees and The Bank of
New York, bond trustee, as successor to Morgan Guaranty Trust Company of New
York, in New York, New York, and IBJ Schroder Bank & Trust Company, in New
York, New York, pursuant to which the Revenue Bonds, Series 1963, of such
Trustees were issued, and as further amended by the Second Amendment to the
Sublease dated as of December 1, 1969, by and between the Trustees, as Lessor,
and American, as Lessee (a copy of which was duly recorded in the records of
the County Clerk of Tulsa County, Oklahoma in Book 3912, Page 642 on December
22, 1969) and as further amended by the Third Amendment to the Sublease dated
as of the 1st day of June, 1971, by and between the Trustees, as Lessor, and
American, as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma, in Book 3992, Page 419 on November 8,
1971) and as further amended by the Fourth Amendment to the Sublease dated as
of the 9th day of September, 1974, by and between the Trustees, as Lessor, and
American, as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma in Book 4958, Page 108 on December 22,
1982), and as further amended by the Fifth Amendment to the Sublease dated as
of the 1st day of December, 1982, by and between the Trustees, as Lessor, and
American, as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma in Book 4658, Page 2225 on December 28,
1982), and as further amended by the Sixth Amendment to the Sublease dated as
of the 1st day of April, 1983, by and between the Trustees, as Lessor, and
American, as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma in Book 4681, Page 421 on April 5,
1983), and as further amended by the Seventh Amendment to the Sublease dated as
of November 17, 1983 by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 4910, Page 218, on December 3, 1985), and as
further amended by the Eighth Amendment to the Sublease dated as of by November
15, 1985, by and between the Trustees, as Lessor, and American, as Lessee (a
copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma in Book 4910, Page 1764 on December 5, 1985), and as further
amended by the Ninth Amendment to the Sublease dated as of January 1, 1988, by
and between the Trustees, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma
in Book 5081, Page 915 on February
<PAGE> 6
18, 1988), and as further amended by the Tenth Amendment to the Sublease dated
as of April 1, 1991, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 5317
, Page 1920 on April 26, 1991), and as
further amended by the Eleventh Amendment to the Sublease dated as of November
1, 1992, by and between the Trustees, as Lessor, and American, as Lessee (a
copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma in Book 5450, Page 2511 on November 5, 1992), and as further
amended by the Twelfth Amendment to the Sublease dated as of November 1, 1995,
by and between the Trustees as Lessor and American as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in Book 5761, at Page 393).
<PAGE> 7
EXHIBIT "B"
DESCRIPTION OF ASSIGNED PREMISES
(TO BE ATTACHED - AWAITING SURVEY)
<PAGE> 1
EXHIBIT 10.19
SUBLEASE
N. G. HENTHORNE, E. FRED JOHNSON,
RICHARD LLOYD JONES, JR., JAMES L. MAXWELL
and WADE C. WHITESIDE, Trustee of
TULSA MUNICIPAL AIRPORT TRUST
and
AMERICAN AIRLINES, INC.
THIS SUBLEASE, dated for convenience of reference only as of the first
day of June, 1958 (but for all other purposes the date hereof shall be deemed
the date of execution hereof), made and entered into as of this day of
, 1958, by and between N. G. HENTHORNE, E. FRED JOHNSON, RICHARD
LLOYD JONES, JR., JAMES L. MAXWELL and WADE C. WHITESIDE, jointly, as Trustees
of the Tulsa Municipal Airport Trust, a statutory trust duly created by a Trust
Indenture, dated August 2, 1957 and duly accepted by the City of Tulsa,
Oklahoma, as beneficiary thereof, under and by virtue of Ordinance No. 8236
enacted on August 6, 1957 (such Trustees, together with the trustees of the
Tulsa Municipal Airport Trust constituting, from time to time, the respective
successors of such Trustees, being hereinafter called the "Lessor"), having its
principal place of business at Oil Capital Building, Tulsa, Oklahoma, and
American Airlines, Inc. (hereinafter called the "Lessee"), having a principal
place of business at 100 Park Avenue, New York, New York:
W I T N E S S E T H:
In consideration of the mutual promises and covenants hereinafter
contained, the parties hereto do hereby agree as follows:
1. Leased Property. Lessor hereby subleases and demises to
Lessee, and Lessee hereby subleases and hires from Lessor, the following
property (hereinafter sometimes called the "Leased Property"):
(a) The following premises (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Lease dated August 6, 1957 from
the City of Tulsa to Lessor, as amended (hereinafter called the "Ground
Lease"), being 228 acres, more or less, in Tulsa County, Oklahoma, bounded and
described as follows:
All of that part of the S 1/2 of Section 13 and all that part
of the N 1/2 of Section 24, Township 20 North, Range 13 East,
particularly described as follows: Beginning at the northeast
corner of the SE 1/4 of said Section 13; thence west along the
north boundary of the SE 1/4 of said Section 13 to the
northwest corner of the SE 1/4 of said Section; thence south
along the half section line of said Section 13 to a point
<PAGE> 2
in the half section line 1565 feet north of the south boundary
of said Section 13; thence southwesterly along a line bearing
south 14 degrees 37' west a distance of 655.20 feet to a point
200 feet east of the east boundary of the taxiway now
constructed, which point is 165.34 feet west of the half
section line of said Section 13 and 931.06 feet north of the
south boundary of said Section 13;
Thence in a southwesterly direction and parallel to said
taxiway and 200 feet east from the east boundary of said
taxiway on a bearing south 3 degrees 4' 30" west a distance of
1537.65 feet to a point in the NE 1/4 of the NW 1/4 of Section
24, Township 20 North, Range 13 East and which point is 604.38
feet south of the north boundary of said Section 24 and 247.83
feet west of the north-south half section line of said Section
24; thence in a southeasterly direction and parallel to the
south boundary of the concrete apron of the maintenance base
of the American Airlines on a bearing south 76 degrees 00' 58"
east a distance of 2978.32 feet more or less to the east
boundary of said Section 24; thence north and along the east
boundary of Section 24 and 13, to the northeast corner of the
SE 1/4 of said Section 13, the point of beginning;
and, at the option of Lessee, exercisable by written notice to Lessor in the
event that Lessor shall obtain a leasehold interest therein, the following land
and the improvements thereon (herein sometimes called the "Disposal Plant");
All that lot consisting of approximately six acres located in
the SW 1/4 of Section 12, Township 20 North, Range 13 East, in
Tulsa, Oklahoma, approximately one-half mile to the north of
the above- described premises, on a portion of which there is
situated a sanitary sewer disposal plant owned, as of the date
of this Sublease, by the City of Tulsa, Oklahoma, together
with such sewer line easements as may be required between the
above-described premises and said lot and between said lot and
Bird Creek, lying approximately two miles to the North of said
lot,
which lot and easements, if leased by Lessor and subleased hereunder, shall be
included in the term "Base Premises" except as the context may otherwise
require;
(b) all buildings, improvements and fixtures owned by the City of
Tulsa, Oklahoma, and leased by said City to Lessor and now or hereafter located
on the Base Premises, including those to be constructed by Lessor and those to
be altered and modified by Lessor pursuant to Section 5 hereof, constituting or
to constitute an integrated facility for the overhaul of aircraft, all
equipment incidental thereto heretofore acquired by Lessor at its expense or to
be acquired by Lessor and installed on the Base Premises pursuant to said
Section 5, and all equipment which is hereafter acquired by Lessee at its
expense as a substitution for, or in renewal or replacement of, any such
equipment so acquired and installed at the expense of Lessor and which is used
as the basis for the removal from the Base Premises of any such equipment, all
as provided in Section 7 and Section 8 hereof (including successive
substitutions, renewals and replacements) (the property
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referred to in this subsection (b) being hereinafter sometimes collectively
called the "Improvements");
(c) an easement for the purpose of maintaining and operating a
transit waste disposal line, as granted to Lessor and as described in the
amendment dated May 27, 1958 to the Ground Lease, together with the transit
waste disposal line located thereon and all rights in connection therewith or
appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing, including free
access to Tulsa Municipal Airport, upon compliance with non-discriminatory
regulations governing entrance to and use of said Airport.
Lessor agrees to keep open or to cause to be kept open the taxiway now
extending from the southwesterly corner of the Base Premises to the easterly
side of the north-south 10,000 foot runway at the Tulsa Municipal Airport in
order to permit the movement of aircraft thereon between said Airport and the
Base Premises. Lessor expressly reserves all gas, oil and mineral rights in
and under the soil.
2. Term; Renewal Terms. The initial term of this Sublease shall
commence on the date hereof and shall end on a date thirty years from the last
day of the month in which the original construction and installation of the
Improvements referred to in Section 1 hereof shall be completed as evidenced by
delivery of the certificates of completion described in Section 5 hereof.
Lessee shall have the further option to extend such initial term for not more
than two additional renewal terms of ten years each, each such option to be
exercisable by Lessee giving written notice to Lessor of its election to extend
the then current term not less than six months prior to the termination of the
then current term. No notice to quit possession at the expiration of the final
term of this Lease shall be necessary, and Lessee covenants peaceably to
surrender possession of the Leased Property on or before the expiration date.
3. Rental. (a) During the initial term of this Sublease, Lessee
will pay to Lessor basic rental as follows:
(i) $39,000 per annum (prorated if for less than
a year) during the period commencing on the date hereof and
ending on January 31, 1966,
(ii) $42,500 per annum during the period
commencing on February 1, 1966 and ending January 31, 1976,
(iii) $46,350 per annum during the period
commencing on February 1, 1976 and ending January 31, 1986,
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<PAGE> 4
(iv) $50,585 per annum (prorated if for less than
a year) during the period commencing on February 1, 1986 and
ending on the expiration of the initial term of this Sublease,
payable, for the period ending on January 31, 1959, on the date hereof and
thereafter annually in advance on the 1st day of February in each year,
commencing February 1, 1959, and, if Lessee shall exercise its option to
sublease the Disposal Plan, Lessee will pay to Lessor additional basic rental
equal to, and payable at the same time as, any rental payments required to be
paid by Lessor to the City of Tulsa by reason of the lease of the Disposal
Plant.
(b) In addition to the payments contracted for in subsection 3(a)
above, Lessee will pay Lessor, with respect to each Bond Year (as defined
below), beginning June 1, 1959 and continuing until the Terminal Date (as
defined below), additional rentals per annum equal to the Annual Principal and
Interest Requirement (as defined below) for such Bond Year on such bonds
(hereinafter referred to as the "Bonds Series 1958") as shall be issued by
Lessor for the purpose of paying the costs of the Improvements. Such
additional rentals shall be payable in advance in 12 equal monthly installments
on the first day of each month in such Bond Year, provided that Lessee, if not
then in default hereunder, may in any year credit against such additional
rentals
(i) in the case of the rental for the Bond Year beginning
June 1, 1960 and subsequent years, the amount of any income or other
gain accruing during the preceding Bond Year from the investment of
funds held by the bond trustee (hereinafter referred to as the "Bank")
under the terms of the bond indenture (hereinafter referred to as the
"Indenture"), pursuant to which the Bonds Series 1958 are issued,
other than funds held in any construction fund to meet the cost of the
Improvements to be constructed or acquired by Lessor, and
(ii) the amount of any credit, determined pursuant to
subsection 3(d).
The term "Bond Year" means each period of twelve months beginning on
June 1 during the period beginning June 1, 1959 and continuing until the
Terminal Date. The term "Annual Principal and Interest Requirement" with
respect to any Bond Year shall mean the interest on the Bonds Series 1958
accruing in such Bond Year, plus the amount required on December 1 in such Bond
Year and on June 1 following such Bond Year on account of principal and
premium, if any, to redeem or prepay Bonds Series 1958 by application of any
sinking fund or otherwise to meet sinking fund requirements or to pay Bonds
Series 1958 at maturity. Such Annual Principal and Interest Requirement shall
be determined as of the beginning of each Bond Year, and no adjustment shall be
made therein nor any credit taken thereagainst until the beginning of the next
Bond Year. Upon the sale by Lessor of the Bonds Series 1958, a supplemental
schedule showing the Annual Principal and Interest Requirement for each year on
such Bonds will be furnished by Lessor, which shall be appended to this
Sublease and considered a part thereof.
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<PAGE> 5
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund or
otherwise under the Indenture and then available for the payment of interest
and premium, if any, on and principal of the Bonds Series 1958 shall equal or
exceed the amount required to redeem or pay all Bonds Series 1958 at the time
outstanding.
(c) In addition to such payments, Lessee shall pay as further
additional rental the fees, expenses and charges of the Bank and of any paying
agents incurred under or pursuant to the Indenture (including any expenses of
the Bank incurred pursuant to the Indenture in the enforcement of any of the
rights and remedies of the Bank and the bondholders thereunder) and also the
amount of any net losses suffered in connection with the investment pursuant to
the Indenture by the Bank of funds held by it thereunder. Any such fees,
expenses, charges and net losses shall be paid by Lessee within 30 days after
the receipt of a requisition from Lessor or the Bank under the Indenture for
such additional amounts.
(d) If for any reason the aggregate payments of additional rentals
made by Lessee pursuant to this Section 3 for any Bond Year shall exceed the
amounts actually payable by Lessor with respect to such Bond Year on account of
the principal of and interest and premium on the Bonds Series 1958, together
with all such fees, charges, expenses and net losses, if any, incurred with
respect to such year, then Lessee shall be entitled to have such excess
credited against additional rentals next due under this Section 3. Upon the
retirement of all Bonds Series 1958, Lessee shall also be entitled to take as
credits against any rentals thereafter due under this Section 3 an amount equal
in the aggregate to the aggregate of all moneys held by the Bank in any bond
reserve fund or otherwise under the Indenture and required to be paid to
Lessor.
(e) During the renewal terms of this Sublease, Lessee will pay to
Lessor basic rental at the rate of $50,585 per annum in the case of the first
ten-year renewal term and at the rate of $55,643 per annum in the case of the
second ten-year renewal term (in each case prorated if paid for any period of
less than a year), payable annually in advance on the 1st day of February in
each year with respect to the period commencing on such date and ending on
January 31 of the next succeeding year or on the expiration of the renewal term
in question.
(f) All such rentals shall be paid at the office of Lessor in
Tulsa, Oklahoma, or at such other place or places within or without the State
of Oklahoma as Lessor from time to time may designate by written notice to
Lessee.
(g) So long as any Bonds Series 1958 shall be outstanding and
unpaid, the rentals provided for in this Section 3 shall be net rentals and
shall be received by Lessor or its designee as net sums, and Lessee shall pay
any and all charges against or which might diminish such sums, and any property
tax or similar charge with respect to the Leased Property, so that such rentals
may be received by Lessor or its designee and used for the purposes provided
for in the Indenture or paid to the City of Tulsa under the Ground Lease
without diminution thereof for any reason whatsoever.
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<PAGE> 6
(h) It is understood and agreed that this Sublease, in addition to
being made for the benefit of Lessor and Lessee, is made for the benefit of any
and all of the holders of the Bonds Series 1958, and said holders or the Bank
shall succeed to all of the rights of Lessor in the manner prescribed in the
Indenture, that Lessor may pledge or assign any and all of its rights hereunder
(other than the annual basic rental payments provided for in subsection (a) of
this Section 3) as security for such Bonds, and that any assignment by Lessor
of any and all of its rights under this Sublease shall be irrevocable as long
as any of such Bonds are outstanding, and Lessee agrees to pay to the Bank (or
its successor) all rentals or other moneys payable to the Trustees hereunder,
as long as any of such Bonds are outstanding.
4. Rental Payments to be Absolute. (a) So long as any Bonds
Series 1958 shall be outstanding and unpaid, the rentals payable pursuant to
Section 3 hereof shall be certainly payable on the dates specified regardless
of any contingencies whatsoever, and notwithstanding any circumstance or
occurrence that may hereafter arise or take place, including, but without
limiting the generality of the foregoing, (1) the unavailability for use or
occupancy by Lessee on March 31, 1959 or any date thereafter, of any or all of
the Improvements for any cause whatsoever, or (2) any fault or failure of
Lessor, including the failure of Lessor to comply with any of the terms of this
Sublease, or (3) the partial or total destruction, by any cause whatsoever,
either before or after alteration, of any or all of the existing Improvements,
or (4) the partial or total destruction, by any cause whatsoever, either before
or after completion, of any or all of the Improvements to be constructed or
acquired and installed by Lessor in accordance with Section 5 hereof, or (5)
except as otherwise provided in Section 12 hereof, any taking of the Leased
Property by condemnation or for a term by any governmental authority. The
foregoing provisions of this subsection (a) shall not apply to any such rentals
or any other charges which shall be payable in respect of any period during
which Lessee shall be ejected from the Leased Property and the use and
occupancy thereof by wrongful affirmative acts of Lessor or by reason of any
defect in the title of Lessor or the City of Tulsa to the Leased Property.
(b) Lessee hereby warrants that it is not a party to any contract,
indenture or agreement of any nature whatsoever which in any way limits,
restricts or prevents Lessee from performing any of its obligations under this
Sublease including, but without limiting the generality of the foregoing, the
payment by it to Lessor of the rentals payable pursuant to Section 3 hereof,
and Lessee covenants that it will not enter into any contract, indenture or
agreement of any nature whatsoever which shall in any way limit, restrict or
prevent Lessee from performing any of such obligations.
5. Construction by Lessor. Lessor has entered into a
Construction Contract dated August 15, 1957 with Manhattan Construction
Company, as amended by agreement dated as of February 24, 1958, providing for
the performance of certain construction work on the Base Premises and for the
acquisition and installation on the Base Premises of certain equipment, all
pursuant to detailed drawings and specifications developed or to be developed,
with the approval of Lessor and Lessee, by Coston-Frankfurt-Short, Oklahoma
City, Oklahoma, architects. Lessor will use its best efforts to complete or
cause to be completed (as evidenced by the certificates of
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<PAGE> 7
completion referred to below) by March 31, 1959 such construction, acquisition
and installation in accordance with such drawings and specifications, and the
acquisition and installation of the additional equipment listed or described in
Equipment Specification dated as of May 15, 1958, a copy of which has been
furnished to Lessor, in each case with such changes therein as may be requested
by either party hereto and approved by the other without increasing the total
estimated cost of the Improvements of $17,735,145. In the event that the cost
of the Improvements shall exceed such amount, such excess cost shall be paid by
Lessee and such excess cost of that part of the Improvements not constituting
personal property or equipment shall be paid promptly from time to time by
Lessee to the Bank upon receipt by Lessee of duplicate originals or certified
copies of certificates of said architects that labor or material has been
furnished and money is due and owing therefor, and the cost of personal
property and equipment constituting part of the Improvements shall be paid
promptly from time to time by Lessee to the Bank as soon as each item of such
personal property and equipment is installed. Lessee at its expense shall have
the right to inspect the construction and installation work contemplated hereby
at all reasonable times and to inspect during regular business hours Lessor's
books, records, plans, specifications and other data relating thereto or to the
cost thereof. Upon the completion of such construction and installation,
Lessor and Lessee shall deliver to the Bank (i) their certificate of
completion, countersigned by said architects, stating that the Improvements
covered by the above Construction Contract, as it may be amended, have been
completed and are ready for occupancy by Lessee, stating the date on which
completion occurred and setting forth in reasonable detail the final cost of
such Improvements, and listing all items of equipment included in such
Improvements, (ii) a certificate of completion of Lessor, endorsed to show
Lessee's acceptance, stating that the other Improvements referred to in this
Section 5 have been acquired and installed and are ready for use by Lessee and
stating the final cost of such Improvements, and (iii) a certified copy of any
other certificate or permit which may be required by any federal, state or
local government or agency in connection with the occupancy thereof by Lessee.
6. Use of Leased Property. Lessee shall have the right to use
the Leased Property for the purpose of maintenance, repair and modification of
aircraft and aircraft engines of any type or design, whether now or hereafter
developed, including, without limitation, testing and experimenting with any of
such aircraft, aircraft engines or parts or components thereof, and for any
other purpose not in conflict with any applicable law or governmental
regulation. Lessee shall not suffer any use or occupancy of the Leased
Property contrary to any applicable law, ordinance or governmental regulation
now or hereafter in force, nor shall Lessee allow any part of the Leased
Property to be subjected to any mechanic's or materialmen's liens by reason of
work done for or materials ordered by Lessee or to be subjected to any other
encumbrance unless Lessee is contesting in good faith the applicable of such
law or governmental regulation or the application or validity of such lien or
encumbrance. Lessee covenants that no obstruction to air navigation, as such
is determined by applicable of the criteria of the Civil Aeronautics
Administration Technical Standard Order N-18, will be permitted on the Base
Premises, and this restriction shall run with the land.
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<PAGE> 8
7. Alterations and Additions by Lessee. Lessee at its expense
may make alterations of and additions to the Leased Property or any part
thereof which will not impair the capital value or rental value thereof,
including the construction on the Base Premises of any new building, structure
or improvement, and the installation of any machinery or equipment, provided
that such construction or installation shall be in accordance with applicable
laws, ordinances, rules and regulations and, in the case of structural
alterations of existing buildings and the construction of new buildings, shall
be subject to the approval of Lessor (which shall not be unreasonably
withheld). Subject to the provisions of Section 8 hereof (relating to the
removal of property by Lessee from the Base Premises), the following shall
immediately upon construction or installation become the property of Lessor (or
the lessor under the Ground Lease, as may be required thereby) and be included
in the term "Improvements": (a) all buildings, structures and fixtures so
added on the Base Premises, and (b) all equipment and personal property
constituting capital items under sound accounting practice which shall be
acquired and installed on the Base Premises as a substitute for, or in renewal
or replacement of, an Improvement or withdrawal of moneys pursuant to Section 8
hereof. All other equipment and personal property (whether or not affixed to
the realty and whether or not acquired and installed as a substitute for, or in
renewal or replacement of, an Improvement) which shall be acquired and
installed at the expense of Lessee and which shall not be certified as the
basis for removal of an Improvement or withdrawal of moneys pursuant to Section
8 hereof shall remain the property of Lessee.
8. Substitutions and Replacements. (a) Lessee will not, without
the prior written consent of Lessor, remove from the Base Premises any property
or equipment constituting an Improvement or part thereof. If Lessee is not at
the time in default under this Sublease, Lessor will, within 10 days from
receipt by Lessor of the notice and other items listed in the following
subdivisions (i) through (iv), grant such consent with respect to any
Improvement or part thereof which in the judgment of Lessee has become worn out
or obsolete or unfit for use or is surplus or not longer useful, necessary or
profitable for the operation of the Leased Property:
(i) written notice of the proposed removal, signed by a
responsible officer of Lessee,
(1) setting forth a brief description or
designation of the item to be removed, and stating its cost
and New Book Value, with appropriate reference to the latest
listing of Improvements;
(2) (A) stating that Lessee has deposited or is
depositing with Lessor or its designee an amount which,
together with all credits, if any, taken as provided
hereinafter in this clause (2), shall equal the Net Book Value
as of the date of such notice of the item to be removed, (B)
if Lessee desires to credit, as a basis for the proposed
removal, property or equipment constituting capital items
under sound accounting practice added by Lessee to the Leased
Property (which shall not include property or equipment
included in the original Improvements constructed and
installed pursuant to Section 5 hereof but which may include
property or
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<PAGE> 9
equipment added in compliance with Lessee's covenant to
maintain the Leased Property or personal property or equipment
acquired and installed on the Base Premises as a substitute
for, or in renewal of or replacement of an Improvement which
has been removed under the provisions of this Section 8),
setting forth a brief description or designation of the
property or equipment so to be used as a credit, stating its
cost and Net Book Value and specifying the amount of such Net
Book value to be used as a credit, and (C) if Lessee desires
to credit, as a basis for the proposed removal, expenditures
which Lessee proposes to make within 90 days after such
removal for the acquisition of property or equipment of the
character referred to in clause (2)(B) above, title to which
will be in Lessor pursuant hereto or will be conveyed to
Lessor, setting forth a brief description or designation of
the property or equipment so to be acquired and specifying the
amount of the proposed expenditure to be used as a credit;
(3) stating that no amount used as a credit for
the basis of such removal pursuant to clause (2) above has
been or will be made the basis for any other removal or for
the withdrawal of any deposit of money as provided below in
this Section 8 or represents an expenditure of proceeds of
insurance on the Leased Property or of any award for a taking
of Leased Property; and
(4) stating that each item of property or
equipment to be removed has become worn out or obsolete or
unfit for use or is surplus or no longer useful or profitable
for the operation of the Leased Property and that all
applicable conditions as set forth in this Section 8 as a
prerequisite to such removal have been complied with;
(ii) the amount (cash or certified check) specified
pursuant to clause (2)(A) of the above subdivision (i);
(iii) a bill of sale or other instrument of conveyance,
satisfactory to Lessor, transferring to or confirming in Lessor, or
the lessor under the Ground Lease, title to any property or equipment
used as the basis of a credit pursuant to clause (2)(B) of the above
subdivision (i); and
(iv) in case the amount specified pursuant to clause
(2)(C) of the above subdivision (i) for proposed expenditures to be
used for the basis of such removal shall exceed $100,000, evidence,
reasonably satisfactory to Lessor under all the circumstances, that
Lessee is committed to make such expenditures or that such
expenditures will be made.
Within 90 days after removal made in whole or in part on the basis of
a credit for expenditures proposed pursuant to clause (2)(C) of the above
subdivision (i), Lessee will either deliver to Lessor or its designee a
certificate signed by a responsible officer of Lessee stating that
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<PAGE> 10
such expenditure has been made and an appropriate bill of sale or instrument of
conveyance covering the item acquired by such expenditure, or will deposit with
Lessor or its designee an amount in cash or by certified check equal to such
credit.
(b) Lessee may sell or cause to be sold or otherwise dispose of
any Improvement or part thereof removed from the Base Premises pursuant to this
Section 8, free of any right or claim of Lessor, or the lessor under the Ground
Lease, and Lessor agrees to deliver to Lessee or as Lessee may direct all such
instruments of conveyance as may reasonably be requested by Lessee to convey
title thereto to Lessee or as directed by Lessee or to evidence or confirm such
sale or other disposition.
(c) Lessee shall pay the cost and expense of any such removal and
shall repair at its expense all damage to the Leased Property caused thereby.
No such removal shall in any way relieve Lessee of its obligation to make the
rental payments as specified in Section 3 hereof.
(d) Any moneys deposited with Lessor or its designee pursuant to
subsection 8(a) hereof shall, if Lessee is not at the time in default
hereunder, be paid from time to time by Lessor or such designee, as the case
may be, to Lessee (or as Lessee may direct) upon the making by Lessee of
expenditures or credits of the nature provided for in clauses (B) and (C) of
subdivision (i)(2) of said subsection 8(a) aggregating the amount of moneys
being withdrawn and upon the delivery to Lessor or its designee of a
certificate similar to the notice furnished pursuant to said subdivision (i)(2)
with such changes as may be appropriate to make such certificate applicable to
the withdrawal of moneys rather than to the removal of Improvements. If so
required by the terms of the Indenture, any moneys not so withdrawn within two
years after deposit may be retained by Lessor or its designee and applied to
the redemption or purchase of Bonds Series 1958 on such terms as shall be
required by the Indenture.
(e) Lessee shall maintain at all times a complete listing by
reasonable accounting classifications of all Improvements, showing the cost
thereof to Lessor or Lessee, as the case may be, and the Net Book Value
thereof. Within 120 days after the end of each Bond Year, Lessee shall deliver
to Lessor duplicate copies of such listing (or appropriate changes to listings
previously delivered) certified by independent public accountants (who may be
regularly retained by Lessee) selected by Lessee with the approval of Lessor,
it being understood that such certification may be based upon the Equipment
Specification, dated as of May 15, 1958, as amended and in effect at the time
of delivery of the completion certificates hereunder and upon such further
examination as is customary under usual corporate accounting practice for
annual audits. Lessee shall furnish to Lessor such additional information as
Lessor from time to time may reasonably request for the purpose of preparing an
annual report of properties held by Lessor.
(f) For the purposes of this Section 8, the term "Net Book Value"
shall mean, with respect to any item of property or equipment, the cost thereof
to Lessor or Lessee, as the case may be, less provision for depreciation,
obsolescence or amortization, all in accordance with the
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<PAGE> 11
accounting rules or regulations, if any, at the time prescribed by the Civil
Aeronautics Board or other regulatory authority under the jurisdiction of which
lessee or Lessor is operating and, to the extent not so covered, sound
accounting practices and principles. The buildings, structures and fixtures
which were leased to Lessee by the City of Tulsa under the lease dated January
10, 1946, as amended by agreement dated July 3, 1948, and which are now covered
by this Sublease, shall be deemed, for the purposes of this Section 8, to have
a cost to Lessor equal to the cost of reproduction thereof, less depreciation,
as established by the appraisal report, dated March 21, 1958, of American
Appraisal Company, and any other property or equipment which was leased to
Lessee by the City of Tulsa under said lease, as amended, and which is now
covered by this Sublease shall be deemed for such purposes to be without cost.
9. Repairs and Maintenance; Labels; Inspection. Subject to the
provisions of Sections 7 and 8 hereof, Lessee at its expense will keep the
Leased Property in good order and condition, will make all necessary and
appropriate repairs, replacements and renewals thereof, and will keep all
personal property and equipment constituting Improvements appropriately tagged
or labeled so as to evidence Lessor's ownership thereof. Lessee covenants that
it will not permit rubbish, debris, waste materials or anything detrimental to
health or unsightly, or likely to create a fire hazard, or conducive to
deterioration, to remain on any part of the Leased Property or to be improperly
disposed of and that it will provide and maintain obstruction lights and all
other equipment or devices now or at any time required by any applicable law,
ordinance or municipal, State or Federal regulation. Lessee further agrees at
its own expense to maintain the transit waste disposal line constructed over
the easement referred to in paragraph (c) of Section 1 hereof and the oil
separator equipment installed in connection therewith in good state of repair,
at its own election and determination, to remove said line and separator
equipment if at any time it ceases to require the use thereof and to abandon or
otherwise dispose thereof, and provided further that if said line is disposed
of to another purchaser, then such purchaser desiring or intending to use said
line in place must, prior to any use of said line, obtain the approval of the
City of Tulsa of such use. Lessor reserves the right to inspect the Leased
Property at any reasonable time. In the event of the failure of Lessee
continuously to perform such covenants, Lessor or its designee may at any time,
in the sole discretion of Lessor, or its designee, restore the Leased Property
to good order and condition and make all necessary and appropriate repairs,
replacements and renewals thereof and Lessee covenants that it will pay to
Lessor, or its designee, any costs reasonably incurred by Lessor or its
designee in so doing. If Lessor shall be required by the Indenture to furnish
to the Bank architects' certificates as to the condition of buildings and
structures (excluding fixtures and equipment) included in the Leased Property,
and if the architects selected by Lessor for such purpose shall be approved by
Lessee (which approval shall not be unreasonably withheld), Lessee at the
request of Lessor will reimburse Lessor from time to time for the fees and
expenses of such architects incurred in the inspection of the Leased Property
and the preparation of such certificates, provided that Lessee shall in no
event be required to pay the cost of more than one such inspection and
certificate in any period of thirty-six months. So long as any Bonds Series
1958 shall be outstanding, within one hundred twenty (120) days after the end
of each Bond Year, Lessee shall deliver to Lessor and the Bank, a certificate,
signed by two officers of Lessee, one of whom shall be a Vice President,
stating that as of the date of such certificate the Leased Property
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<PAGE> 12
is being maintained in good order and condition in full compliance with the
requirements of this Section 9.
Lessor hereby assigns to Lessee, effective upon completion of the
Improvements and delivery of completion certificates as provided in Section 5
hereof, all right, title and interest of Lessor in and to any and all
warranties, express or implied, made to Lessor under the Construction Contract
referred to in said Section 5 and under any and all other construction or
purchase contracts entered into by Lessor or otherwise accruing to the benefit
of Lessor and pertaining to the Leased Property, together with the right to
enforce the same for the benefit of Lessee, either in the name of Lessor or of
Lessee or otherwise, and expressly subrogates Lessee to all of Lessor's rights
of action and causes of action against the other parties to all such contracts.
Lessee will indemnify Lessor against damage, loss or expense resulting from
such enforcement and Lessee's efforts to enforce the same.
10. Insurance. Lessor at its expense or at the expense of
Manhattan Construction Company under the Construction Contract dated August 15,
1957, as amended, referred to in Section 5 hereof, during construction of the
Improvements covered by said Construction Contract, as amended, and until
delivery of certificates of completion as provided in Section 5 hereof, and
thereafter Lessee at its expense, shall keep all of the Improvements insured
against loss or damage (in excess of $50,000 in any one occurrence) by fire,
lightning, tornado, windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, vandalism, sprinkler leakage, aircraft, vehicles, smoke, or,
at the option of Lessor or Lessee, whichever at the time is responsible for
such insurance, under policies with standard extended coverage endorsements, in
amounts not less than 90% of the full insurable value of the Improvements in
question as determined from time to time by the insurer or insurers. When and
if and to the extent that war risk insurance can be procured at reasonable
rates from the United States of America or an agency thereof, Lessee will also
obtain at its expense such insurance on the Leased Property in an amount not
less than 90% of the full insurable value thereof. All insurance proceeds in
excess of $100,000 for any one loss shall be payable to Lessor or its designee.
No such loss or damage shall in any way relieve Lessee of its obligation to
make rental payments as specified in Section 3 hereof, except as otherwise
expressly provided in Sections 11 and 12 hereof.
Lessor at its expense or at the expense of Manhattan Construction
Company under the Construction Contract dated August 15, 1957, as amended,
referred to in Section 5 hereof, during construction of the Improvements
covered by said Construction Contract, as amended, and until delivery of
certificates of completion as provided in Section 5 hereof, and thereafter
Lessee at its expense, shall cause Lessor and Lessee to be insured, under
policies no more restrictive than the standard form of comprehensive liability
policy, against the claims of any and all persons, including employees and
licensees of Lessee, for bodily injury (including wrongful death) in a sum of
not less than $100,000 for any one person and not less than $1,000,000 for any
one accident, and for property damage in the sum of not less than $1,000,000
for any one accident, occurring on the Leased Property or incident to the
operation of the Leased Property, including the construction of the
Improvements. On or before September 30 of each year Lessee shall deliver
12
<PAGE> 13
to Lessor and the Bank a certificate, signed by two officers of Lessee, one of
whom shall be a Vice President, stating that as of the date of such certificate
that the insurance evidenced by such certificates complies with the
requirements of this Section 10.
All such insurance shall be effected under policies issued by insurers
of recognized responsibility authorized to do business in Oklahoma.
Certificates evidencing such insurance, in form satisfactory to Lessor and the
Bank, shall, promptly after the issuance of such policies, be delivered by
Lessee to Lessor and to the Bank. Such policies shall be non-cancellable
except after at lease 10 days' notice to Lessor, Lessee and the Bank.
11. Damage or Destruction; Restoration. In case of any material
damage to or destruction of the Improvements or any part thereof, Lessee will
give prompt written notice thereof to Lessor and its designee and, except as
otherwise provided for below in this Section 11, will promptly commence and
complete with due diligence (subject to delays beyond its control) at its
expense, to the extent of the insurance proceeds (plus the amount of any
deductible), the restoration of the Improvements as nearly as reasonably
practicable to the value and condition thereof immediately prior to such damage
or destruction (with alterations, at Lessee's election, pursuant to Section 7
hereof). In such event all net proceeds of insurance received by Lessor or its
designee, up to an amount equal to the cost of restoration incurred by Lessee
and not paid for with the proceeds of insurance received by Lessee, shall, if
Lessee is not at the time in default hereunder, be paid from time to time by
Lessor or such designee, as the case may be, to Lessee (or as Lessee may
direct) upon receipt from Lessee of appropriate certificates as to the cost of
the work by an architect or engineer qualified to do business in Oklahoma and
appropriate affidavits by an officer of Lessee as to the absence of liens,
charges and other encumbrances, and any balance of such insurance proceeds
shall be paid to Lessee upon completion of such restoration; provided, however,
that, if required by the Indenture, any balance of such proceeds and any
proceeds with respect to which no application for their payment to Lessee, and
no notice of intention to make such application, shall have been made or given
to the Bank and the Lessor by Lessee within six months from the date of the
receipt of such proceeds by the Bank or the Lessor, shall be paid to or
retained by the Bank and applied to the purchase or redemption of Bonds Series
1958. In case of the destruction of all or a substantial part of the
Improvements, Lessee may, within 120 days thereafter, elect not to restore or
replace the Leased Property or Improvements by giving written notice thereof to
Lessor, in which event Lessee shall pay to Lessor or its designee an amount in
cash equal to the excess, if any, of the amount required for the payment or
redemption of all the Bonds Series 1958 at the time outstanding (including
principal, redemption premium, if any, and interest to maturity or to the next
date on which such Bonds may be callable for redemption, whichever is the
earlier) over the aggregate amount of the net proceeds of insurance theretofore
or then being paid to Lessor or such designee upon the damage or destruction of
the Improvements, and upon the payment of such excess (or upon receipt of the
proceeds of insurance if there shall be no such excess) and upon the payment of
all other amounts then due and owing hereunder to Lessor or such designee, this
Sublease shall terminate.
13
<PAGE> 14
12. Condemnation. In case of the taking (other than for a term)
of the Leased Property or any part thereof or any interest therein or right
accruing thereto as the result of or in anticipation of the exercise of the
right of condemnation or eminent domain, (a) Lessee will give prompt written
notice thereof to Lessor, (b) Lessor and Lessee (if it is not in default under
this Sublease) may each file, prosecute and collect their respective claims for
an award on account of such taking, (c) so long as any Bonds Series 1958 are
outstanding, Lessee shall pay to the Bank the amount of any such award received
by Lessee in excess of $100,000 for any one taking, and (d) except as otherwise
provided for below in this Section 12, this Sublease shall remain in full force
and effect with respect to the remaining portion of the Leased Property and
Lessee will promptly commence and complete with due diligence (subject to delay
beyond its control) at its expense except as repaid from Lessor's award, but
limited in any event to the aggregate of the awards for such taking payable to
Lessee and Lessor, the restoration of the Leased Property as nearly as
reasonably practicable to the value and condition thereof immediately prior to
such taking (with alterations, at Lessee's election, pursuant to Section 7
hereof). In the event of any such taking, the awards received by Lessor and
Lessee, respectively, shall be applied in that order and to the extent required
towards such restoration, and any such award received by Lessor or, in case any
Bonds Series 1959 shall be outstanding, the aggregate of Lessor's and Lessee's
awards held by the Bank shall, if Lessee is not at the time in default
hereunder, be paid from time to time by Lessor or the Bank, as the case may be,
to Lessee (or as Lessee may direct) to pay for or reimburse Lessee for the cost
of restoration incurred by Lessee and not paid for by awards received by Lessee
upon receipt from Lessee of appropriate certificates as to the cost of the work
by an architect or engineer qualified to do business in Oklahoma and
appropriate affidavits by an officer of Lessee as to the absence of liens,
charges and other encumbrances, and any balance of Lessor's award shall be
retained by Lessor and any balance of Lessee's award shall be retained by or
paid to Lessee; provided, however, that if required by the Indenture, any such
awards with respect to which no application for their payment to Lessee, and no
notice of intention to make such application, shall have been made or given to
the Bank and the Lessor by the Lessee within six months from the date of the
receipt of such awards by the Bank or the Lessor shall be paid to or retained
by the Bank and applied to the extent required, in the order of Lessor's award
first and then Lessee's award, to the purchase or redemption of Bonds Series
1958, and any balance of Lessee's award remaining after such application shall
be paid to Lessee promptly after all Bonds Series 1958 shall have been paid or
provision for the payment thereof duly made. In the case of such a taking of
all or a substantial part of the Leased Property, Lessee may, within 120 days
thereafter, elect not to restore or replace the Leased Property by giving
written notice thereof to Lessor, in which event any such awards paid to the
Bank shall be applied as set forth in the proviso to the preceding sentence and
Lessee shall pay to Lessor or, if so required by the Indenture, to the Bank an
amount in cash equal to the excess, if any, of the amount required for the
payment or redemption of all Bonds Series 1958 at the time outstanding
(including principal, redemption premium, if any, and interest to maturity or
to the next date on which such Bonds may be callable for redemption, whichever
is the earlier) over the aggregate amount of the awards theretofore or then
being paid to Lessor or the Bank on account of such taking, and upon the
payment of such excess (or upon receipt of such award if there shall be no such
excess) and upon
14
<PAGE> 15
the payment of all other amounts then due and owing hereunder to Lessor or such
designee, this Sublease shall terminate.
13. Indemnification by Lessee. Lessee will protect, indemnify and
save harmless Lessor from and against all liabilities, costs and expenses
(including, without limitation, attorneys' fees) which may be imposed upon or
incurred by or asserted against Lessor by reason of (a) any accident, injury or
damage to any person or property occurring on the Leased Property or any part
thereof; (b) any use, non-use or condition of the Leased Property or any part
thereof; and (c) any failure on the part of Lessee to perform or comply with
any of the terms hereof. Lessee also hereby indemnifies Lessor and the City of
Tulsa and holds each of them harmless to the extent of any injury or loss
suffered or incurred by Lessor or said City which is caused by and directly
traceable to the disposal of industrial waste from the Improvements through the
effluent line of said City's Northeast Sewage Disposal Plant.
14. Assignments, Subleases, etc., by Lessee. The interest of
Lessee in this Sublease may not be assigned or otherwise transferred in whole
or in part by Lessee without the consent of Lessor, but Lessee may further
sublease all or any part of the Leased Property, provided that (a) the interest
of Lessee in this Sublease may be assigned or otherwise transferred in whole
upon the consolidation or merger of Lessee with or into any other corporation
or corporations, or any consolidation or merger of any other corporation with
or into Lessee, or successive consolidations or mergers in which Lessee and its
successor or successors shall be a party or parties, or upon any sale, lease or
transfer (or successive sales, leases or transfers) of the property and assets
of Lessee (or of its successor or successors) as an entirety or substantially
as an entirety, to any other corporation authorized to acquire the same, if
such assignee or transferee shall execute and deliver to Lessor an instrument,
satisfactory in substance and form to Lessor, assuming all the obligations
hereunder of Lessee which relate to the interest of Lessee hereunder which is
being assigned or transferred, and (b) no such sublease shall affect or reduce
any of the obligations of Lessee hereunder, but this Sublease and all
obligations of Lessee hereunder shall continue in full force and effect. So
long as any Bonds Series 1958 shall be outstanding, if Lessee shall further
sublet all or a part of the Leased Property and in the event that the annual
rental received under any such further sublease in any year shall exceed the
amount of Lessee's costs for such year, including rental costs under this
Sublease, properly attributable in accordance with sound accounting practices
to the portion of the Leased Property involved, Lessee shall pay to Lessor as
additional rental under this Sublease the excess of such rental receipts over
such costs; provided that such excess, if not required to make up any
deficiency in any reserve fund established for the security of said Bonds,
shall be promptly applied to the payment or prepayment of such Bonds, and any
balance of such additional rental remaining after the principal and interest
and redemption premium, if any, of all Bonds Series 1958 have been paid, or
provision for the payment thereof has been duly made, shall be credited to
Lessee. For the purpose of computing Lessee's costs hereunder, the total
amount of basic rental payable under Section 3(a) of this Sublease not
attributable to the Disposal Plant shall be allocated to the premises,
buildings, improvements and fixtures in existence on the date of this Sublease
in proportion to their respective values set forth in the appraisal report
dated March 21, 1958 of American Appraisal Company, with a value of
15
<PAGE> 16
$1,200 per acre ascribed to land for the purposes of this Section 14, and the
total amount of additional rentals payable under subsections 3(b) and (c) shall
be allocated to the Improvements in proportion to their respective Net Book
Values.
15. Default; Termination. If any one or more of the following
events of default shall happen:
(a) if default shall be made by Lessee in the due and punctual
payment of any rental for more than thirty days after its due date or
in the due performance of or compliance with any other term hereof for
more than sixty days after written notice from Lessor or the Bank to
Lessee of such default; or
(b) if Lessee shall file a voluntary petition in bankruptcy,
or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking any reorganization, composition,
readjustment, liquidation or similar relief for itself under any
present or future statute, law or regulation, or shall seek or consent
to or acquiesce in the appointment of any trustee, receiver or
liquidator of Lessee or of all or any substantial part of its
properties or of the Leased Property, or shall make any general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due; or
(c) if a petition shall be filed against Lessee seeking any
adjudication of bankruptcy, reorganization, composition, readjustment,
liquidation or similar relief under any present or future statute, law
or regulation, and shall remain undismissed or unstayed for an
aggregate of ninety days (whether or not consecutive), or if any
trustee, receiver or liquidator of Lessee or of all or any substantial
part of its properties or of the Leased Property shall be appointed
without the consent or acquiescence of Lessee and such appointment
shall remain unvacated or unstayed for an aggregate of ninety days
(whether or not consecutive);
then and in any such event Lessor or its designee may give a written
termination notice to Lessee, and upon the date specified in such notice, the
term of this Sublease shall expire and terminate by limitation and Lessor or
its designee may re-enter and take possession of the Leased Property unless
before such date all arrears of rental and all other amounts payable by Lessee
under this Sublease and all costs and expenses incurred by or on behalf of
Lessor or its designee in the premises, shall have been paid by Lessee, and all
other defaults or events of default at the time existing under this Sublease
shall have been cured or, in the case of any event of default other than the
non-payment of rent or any of the events set forth in clauses (b) and (c)
above, Lessee shall be taking appropriate action in good faith to effect its
cure.
16. Reletting. If any one or more of the events of default
specified in Section 15 shall happen, then, in lieu of terminating this
Sublease and upon notice to Lessee, Lessor or its designee may re-enter and
take possession of the Leased Property and, to the extent permitted by
16
<PAGE> 17
law, any property of Lessor located on or used in connection with the Leased
Property and may (but shall be under no obligation to) operate the same or
relet the same or any part thereof, in the name of Lessee or Lessor or
otherwise, all without notice to Lessee, for such term or terms and on such
conditions and for such uses as Lessor or its designee in its uncontrolled
discretion, may determine, and may collect and receive all revenues and rents
received therefrom and apply the same, after deduction of all appropriate
expenses, to the payment of the rentals payable hereunder, Lessee remaining
liable for any deficiency. Lessor or its designee shall not be responsible or
liable for any failure to so operate or relet the Leased Property or any part
thereof, or for any failure to collect any rent due upon any such reletting.
17. Survival of Lessee's Obligations; Damages. No expiration of
the term of this Sublease pursuant to Section 15 and no action taken by Lessor
under Section 16 shall relieve Lessee of its liability and obligations
hereunder.
In the event of any such expiration, Lessee shall pay to Lessor the
rentals and all other charges required to be paid by Lessee up to the time of
such expiration, and thereafter Lessee, until the end of what would have been
the term of this Sublease in the absence of such expiration, shall be liable to
Lessor and shall pay to Lessor as and for liquidated and agreed current damages
the rentals and any other charges which would be payable under this Sublease by
Lessee if the term of this Sublease had not expired, less the net proceeds, if
any, of any reletting. Lessee shall pay such current damages on the days on
which such rentals would have been payable under this Sublease if its term had
not expired.
At any time after any such expiration, whether or not Lessor shall
have collected any current damages as aforesaid, Lessor shall be entitled to
recover from Lessee on demand, as and for liquidated and agreed final damages
and in lieu of all current damages beyond the date of such demand, an amount
equal to the excess, if any, of the rentals and any other charges which would
be payable under this Sublease from the date of such demand (or, if it be
earlier, the date to which Lessee shall have satisfied in full its obligations
to pay current damages) for what would be the then unexpired term of this
Sublease if the same had not expired, over the then fair rental value of the
Leased Property for the same period.
It is understood and agreed that the rights and remedies of the Lessor
specified in Section 15, Section 16 and this Section 17 are not intended to be,
and shall not be, exclusive, and the Lessor shall have all other rights and
remedies (including the right to the appointment of a receiver of the Leased
Property and of the rents, issues and income thereof and the right to exercise
any landlord's or similar lien upon property of Lessee located on or used in
connection with the Leased Property) to which it may be entitled at law or in
equity, and that all such rights and remedies may be exercised by the Lessor or
by its designee. The waiver by the Lessor of any default of the Lessee in the
performance of its obligations under this Sublease shall not constitute a
waiver of any subsequent default upon the part of the Lessee. No failure of
Lessor or its designee to take any action permitted by this Sublease shall be
construed as a waiver by Lessor of any default of Lessee hereunder.
17
<PAGE> 18
18. Quiet Enjoyment. Subject to the provisions of Section 20
hereof, Lessor covenants that Lessee, on paying the rentals and performing its
covenants under this Sublease, shall have quiet and peaceable possession of the
Leased Property.
19. Use of Revenues; Compliance with Ground Lease. All revenues
derived by Lessor from rental of the Leased Property will either be used by
Lessor for the operation, maintenance, development or improvement of the Tulsa
Municipal Airport, or be paid by Lessor to the City of Tulsa for the account of
the Airport Fund of said City, provided, however, that any such revenues in
excess of the basic rental payable pursuant to paragraph (a) of Section 3 less
$4,000 per annum, being such of the revenues derived from the Leased Property
as are in excess of the amounts that would be due and accruing to the City of
Tulsa under the Lease dated January 10, 1946 between said City and Lessee, if
said Lease were still in effect, may be pledged or assigned by Lessor to the
Bank under the Indenture providing for the issuance of the Bonds Series 1958 or
otherwise pledged or assigned for airport revenue bond purposes. Lessor will
pay or cause to be paid all rentals due under the Ground Lease and will comply
with, or cause to be complied with, all other provisions of the Ground Lease.
Lessor will, promptly on receipt of any notice from the Lessor under the Ground
Lease pertaining to said Lease, transmit a copy of such notice to Lessee.
20. Reservation of Public Right of Flight. As provided in the
Ground Lease, the City of Tulsa reserves a public right of flight through the
air space above the Leased Property.
21. No Personal Liability. No trustee, director, officer or
employee of either party shall be held personally liable under or in connection
with the execution of this Sublease.
22. Notices, etc. All notices, demands, requests, consents,
approvals and other instruments under this Sublease shall be in writing, and
shall be deemed to have been properly given if sent by United States registered
mail, postage prepaid, if to Lessee, addressed to Lessee at 100 Park Avenue,
New York 17, N.Y., or at such other address as Lessee from time to time may
have designated by written notice to Lessor, and, if to Lessor, addressed to
Lessor at Oil Capital Building, Tulsa, Oklahoma, or at such other address as
Lessor from time to time may have designated by written notice to Lessee.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
this 24th day of June, 1958 and affixed their respective seals thereto.
LESSOR
/s/ N.G. HENTHORNE
---------------------------------
N. G. Henthorne
/s/ E. FRED JOHNSON
---------------------------------
E. Fred Johnson
/s/ RICHARD LLOYD JONES, JR.
---------------------------------
Richard Lloyd Jones, Jr.
/s/ JAMES L. MAXWELL
---------------------------------
James L. Maxwell
/s/ WADE C. WHITESIDE
---------------------------------
Wade C. Whiteside
TRUSTEES OF TULSA MUNICIPAL
AIRPORT TRUST
LESSEE
AMERICAN AIRLINES, INC.
[ILLEGIBLE]
---------------------------------
Vice President
Attest:
[ILLEGIBLE]
- ----------------------
Secretary
[Corporate Seal]
19
<PAGE> 20
State of Oklahoma, )
County of Tulsa ) ss.:
Before me, a Notary Public in and for said County and State, on this
20th day of June, 1958, personally appeared N. G. HENTHORNE, E. FRED JOHNSON,
RICHARD LLOYD JONES, JR., JAMES L. MAXWELL AND WADE C. WHITESIDE, to me known
to be the identical persons who executed the within and foregoing instrument
and they, being by me duly sworn, did depose and say that they reside at 1543
South Yorktown Place, 3155 South Zunis, 1754 E. 30th Street, 1503 E. 52nd
Place, and 1320 E. 26th Place, all in Tulsa, Oklahoma, respectively, that they
are Trustees of said Trust, that the seal affixed to said instrument is their
seal, that said instrument was signed and sealed in their names and on their
behalf and that they signed their names thereto; and said N. G. Henthorne, E.
Fred Johnson, Richard Lloyd Jones, Jr., James L. Maxwell and Wade C. Whiteside
duly acknowledged to me that they executed the same as their free and voluntary
act and deed, for the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last above
written.
[ILLEGIBLE]
--------------------------------
Notary Public
My commission expires:
Nov. 8, 1960
- ----------------------------
State of New York )
County of New York ) ss.:
Before me, [Doris Hall] a Notary Public in and for said State, on this
24th day of June, 1958, personally appeared [George C. Van Nostraud] to me
known to be the identical person who subscribed the name of AMERICAN AIRLINES,
INC. thereof to the foregoing instrument as its Vice President who being by me
duly sworn, did depose and say that he resides at [Greenwich, Conn.]; that he
is the Vice President of American Airlines, Inc., the corporation described in
and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order, and he acknowledged to me
that the same was his free and voluntary act and deed, and the free and
voluntary act and deed of such corporation for the uses and purposes therein
set forth.
/s/ DORIS HALL
--------------------------------
Notary Public
My commission expires:
March 30, 1959
- -----------------------------
20
<PAGE> 21
FIRST AMENDMENT TO THE SUBLEASE
This Agreement dated as of this 1st day of May, 1963, by and between
Byron V. Boone, L. L. Dresser, E. Fred Johnson, Richard Lloyd Jones, Jr. and
James L. Maxwell, as Trustees of the Tulsa Municipal Airport Trust, hereinafter
called the "Trustees", and American Airlines, Inc., a Delaware corporation,
hereinafter called "American".
W I T N E S S E T H:
In Consideration of the mutual promises and covenants hereinafter
contained, the parties hereto do hereby agree as follows:
ARTICLE I.
The Sublease dated as of June 1, 1958 (the "Sublease") by and between
N. G. Henthorne, E. Fred Johnson, Richard Lloyd Jones, Jr., James L. Maxwell
and Wade C. Whiteside, as the then Trustees of the Tulsa Municipal Airport
Trust, as Lessor, and American, as Lessee, covering:
(a) the following property in Tulsa County, Oklahoma, bounded and
described as follows:
All of that part of the S 1/2 of Section 13 and all that part
of the N 1/2 of Section 24, Township 20 North, Range 13 East,
particularly described as follows: Beginning at the northeast
corner of the SE 1/4 of said Section 13; thence west along the
north boundary of the SE 1/4 of said Section 13 to the
northwest corner of the SE 1/4 of said Section; thence south
along the half section line of said Section 13 to a point in
the half section line 1565 feet north of the south boundary of
said Section 13; thence southwesterly along a line bearing
south 14 degrees 37' west a distance of 655.20 feet to a point
200 feet east of the east boundary of the taxiway now
constructed, which point is 165.34 feet west of the half
section line of said Section 13 and 931.06 feet north of the
south boundary of said Section 13;
Thence in a southwesterly direction and parallel to said
taxiway and 200 feet east from the east boundary of said
taxiway on a bearing south 3 degrees 4' 30" west a distance of
1537.65 feet to a point in the NE 1/4 of the NW 1/4 of Section
24, Township 20 North, Range 13 East and which point is 604.38
feet south of the north boundary of said Section 24 and 247.83
feet west of the north-south half section line of said Section
24; thence in a southeasterly direction and parallel to the
south boundary of the concrete apron of the maintenance base
of the American Airlines on a bearing south 76 degrees 00' 58"
east a distance of 2978.32 feet more or less to the east
boundary of said Section 24; thence north and along the east
boundary of Section 24 and 13, to the northeast corner of the
SE 1/4 of said Section 13, the point of beginning;
1
<PAGE> 22
(b) at the option of American should the Trustees obtain a
leasehold interest therein, certain other land and
improvements thereon, sometimes referred to in the Sublease as
the "Disposal Plant";
(c) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(d) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, together with the
transit waste disposal line located thereon and all rights in
connection therewith or appurtenant thereto; and
(e) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the
foregoing.
a copy of which has been duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 2877, page 660, on June 27, 1958, as Exhibit A
to the bond indenture (hereinafter referred to as the "1958 Indenture"), dated
as of June 1, 1958, between the then Trustees of the Tulsa Municipal Airport
Trust and The Chase Manhattan Bank, pursuant to which such Trustees' 4 1/2%
Revenue Bonds, Series 1958, were issued, is hereby amended, in the manner and
to the extent set forth in this Article I, effective on the date as of which,
and only on the condition that, all such Revenue Bonds, Series 1958 (and any
additional bonds issued pursuant to the 1958 Indenture) shall be deemed to have
been paid for the purposes of the 1958 Indenture and any amendments or
supplements thereto and the right, title and interest of The Chase Manhattan
Bank thereunder shall thereupon have ceased, determined and become void:
A. Section 3 is amended by deleting subsections 3(b), 3(c) and
3(d) and by substituting therefor the following:
(b) In addition to the payments contracted for in
subsection 3(a) above, Lessee will pay Lessor, with respect to each
Bond Year (as defined below), beginning June 1, 1968 and continuing
until the Terminal Date (as defined below), additional rentals per
annum equal to the Annual Principal and Interest Requirement (as
defined below) for such Bond Year on such bonds as shall be issued by
Lessor for the purpose of providing funds to refund Lessor's 4 1/2%
Revenue Bonds, Series 1958 and on certain additional bonds as provided
for below in this subsection (b), all of such bonds being hereinafter
referred to as the "Bonds Series 1963". Such additional rentals shall
be payable by Bond Periods (as defined below) in advance in six equal
monthly installments on the first day of each month in such Bond
Period, so that there is paid during each Bond Period an amount equal
to the Semiannual Principal and Interest Requirement (as defined
below) for such Bond Period, provided that Lessee, if not then in
default hereunder, may in any Bond Year beginning with the Bond Year
commencing June 1, 1969 credit against the additional rentals provided
for in this subsection:
2
<PAGE> 23
(i) the amount of any balance transferred by the
bond trustee (hereinafter referred to as the "Bank"), pursuant
to the terms of the bond indenture (hereinafter referred to as
the "Indenture") under which the Bonds Series 1963 are issued,
from any bond retirement fund established thereunder to any
fund so established the moneys of which are to be used for the
payment of the principal of and interest and premium, if any,
on the Bonds, which credit shall be applied to the installment
or installments of additional rentals provided for in this
subsection next coming due, and
(ii) the amount of any credit determined pursuant
to subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 1968 and
continuing until the Terminal Date. The term "Bond Period" shall mean
each period of six months beginning on June 1 or December 1 during any
Bond Year. The term "Semiannual Principal and Interest Requirement"
with respect to any Bond Period shall mean the interest on the Bonds
Series 1963 accruing in such Bond Period plus the amount required on
the December 1 or June 1, as the case may be, following such Bond
Period on account of principal to pay Bonds Series 1963 at the stated
maturities thereof and on account of principal and premium, if any, to
redeem or prepay Bonds Series 1963 pursuant to any mandatory sinking
fund or redemption requirement applicable thereto. The term "Annual
Principal and Interest Requirement" with respect to any Bond Year
shall mean the sum of the Semiannual Principal and Interest
Requirements with respect to the Bond Periods comprising such Bond
Year. The Semiannual Principal and Interest Requirement for each Bond
Period shall be determined as of the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund
or otherwise under the Indenture and then available for the payment of
interest and premium, if any, on and principal of the Bonds Series
1963 shall equal or exceed the amount required to redeem or pay all
Bonds Series 1963 at the time outstanding.
In the event that any additional bonds hereafter issued under
the bond indenture dated as of June 1, 1958, of the Lessor, become
additional bonds issued under the Indenture (as provided in Article VI
of the Indenture), the term "Bonds Series 1963" wherever used herein
shall include all such additional bonds.
(bb) In addition to the payments contracted for in
subsections 3(a) and 3(b) above, Lessee will pay Lessor, with respect
to each Bond Period beginning June 1, 1968, additional rentals per
Bond Period equal to fifteen per cent (15%) of the Semiannual
Principal and Interest Requirement for such Bond Period. Such
additional rentals, which are to be deposited by the Bank in a bond
reserve fund established for the security of the Bonds Series 1963,
shall be payable in advance in six equal monthly installments on the
first day of each month in such Bond Period and shall be paid until
such time as there is on deposit in such
3
<PAGE> 24
reserve fund an amount equal to the maximum Annual Principal and
Interest Requirement for any Bond Year thereafter, provided that
Lessee, if not then in default hereunder, may in any Bond Period
credit against the additional rentals provided for in this subsection
the amount of any moneys then on deposit in such reserve fund (other
than moneys previously paid as additional rental pursuant to this
subsection) to the extent that such moneys shall not theretofore have
been used for purposes of any such credit.
As soon as sufficient moneys are on deposit in such reserve
fund, no further additional rentals shall thereafter be payable
pursuant to this subsection 3(bb) notwithstanding any subsequent
decrease in the amount of moneys so on deposit below the amount equal
to the maximum Annual Principal and Interest Requirement for any Bond
year thereafter.
(c) In addition to such payments, Lessee shall pay as
further additional rental the fees, expenses and charges of the Bank
and of any paying agents incurred under or pursuant to the Indenture
(including any expenses of the Bank incurred pursuant to the Indenture
in the enforcement of any of the rights and remedies of the Bank and
the bondholders thereunder) and also the amount of any net losses
suffered in connection with the investment pursuant to the Indenture
by the Bank of funds held by it thereunder. Any such fees, expenses,
charges and net losses shall be paid by Lessee within thirty days
after the receipt of a requisition from Lessor or the Bank under the
Indenture for such additional amounts.
(d) If for any reason the aggregate payments of
additional rentals made by Lessee pursuant to subsections 3(b) and
3(c) for any Bond Year shall exceed the amounts actually payable by
Lessor with respect to such Bond Year on account of the principal of
an interest and premium on the Bonds Series 1963, together with all
such fees, charges, expenses and net losses, if any, incurred with
respect to such year, then Lessee shall be entitled to have such
excess credited against additional rentals next due under subsection
3(b). Upon the retirement of all Bonds Series 1963. Lessee shall
also be entitled to take as credits against any rentals thereafter due
under this Section 3 an amount equal in the aggregate to the aggregate
of all moneys held by the Bank in any reserve fund or otherwise under
the Indenture and required to be paid to Lessor.
B. Sections 11 and 12 are each amended by deleting the
parenthetical phrase appearing, respectively, at page 19, lines 17 through 20,
and at page 21, lines 8 through 11, of the Sublease and substituting therefor
the following:
(including principal, redemption premium, if any, and interest to
their stated maturities or to the next date or dates on which such
Bonds may be callable for redemption, whichever is the earlier)
C. Section 14 is amended by deleting the words "subsections 3(b)
and (c)" at page 23, line 2, and by substituting therefor the words
"subsections 3(b), 3(bb) and 3(c)".
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<PAGE> 25
D. Section 22 is amended by substituting for the words "100 Park
Avenue, New York 17, N.Y.", specified therein as the Lessee's address, the
words "633 Third Avenue, New York 17, N.Y.", and by substituting for the words
"Oil Capital Building, Tulsa, Oklahoma", specified therein as the Lessor's
address, the words "P. O. Box 8086, Dawson Station, Tulsa Oklahoma".
E. The Sublease is amended by deleting the words "Bonds Series
1958" where such words appear and by substituting therefor the words "Bonds
Series 1963".
ARTICLE II.
On and after the effective date of the amendments set forth in Article
I of this First Amendment to the Sublease, the term "Sublease" shall mean the
Sublease dated as of June 1, 1958, as amended by this Amendment.
ARTICLE III.
Except as herein amended, the Sublease shall remain in full force and
effect.
ARTICLE IV.
No trustee, director, officer or employee of either party shall be
held personally liable under or in connection with the execution of this First
Amendment to the Sublease.
ARTICLE V.
American hereby consents to the assignment (subject to the trust
created in the 1958 Indenture and the terms and provisions of the 1958
Indenture) by the Trustees of any and all of their rights under the Sublease as
amended by this First Amendment to the Sublease to Morgan Guaranty Trust
Company of New York, as trustee under the bond indenture dated as of May 1,
1963, between the Trustees and Morgan Guaranty Trust Company of New York, and
American agrees to comply with the provisions of such assignment to the extent
applicable to it.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to the Sublease this day of May, 1963 and affixed their
respective seals hereto.
LESSOR
/s/ BYRON V. BOONE
--------------------------------------
Byron V. Boone
/s/ L.L. DRESSER
--------------------------------------
L. L. Dresser
/s/ E. FRED JOHNSON
---------------------------------------
E. Fred Johnson
/s/ RICHARD LLOYD JONES
--------------------------------------
Richard Lloyd Jones
/s/ JAMES L. MAXWELL
--------------------------------------
James L. Maxwell
Trustees of the Tulsa Municipal
Airport Trust
LESSEE
AMERICAN AIRLINES, INC.
By: [ILLEGIBLE]
-----------------------------------
Attest: Executive Vice President
[ILLEGIBLE]
- --------------------------------
Assistant Secretary
6
<PAGE> 27
SECOND AMENDMENT TO THE SUBLEASE
This Agreement, dated as of this first day of December, 1969, by and
between Richard Lloyd Jones, Jr., Byron V. Boone, P. C. Lauinger, John L.
Robertson and J. M. Hewgley, Jr., as Trustees of the Tulsa Municipal Airport
Trust (hereinafter the "Trustees"), and American Airlines, Inc., a Delaware
corporation (hereinafter "American"),
W I T N E S S E T H:
IN CONSIDERATION of the mutual promises and covenants hereinafter
contained, the parties hereto do hereby agrees as follows:
ARTICLE I.
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between N. G. Henthorne, E. Fred Johnson, Richard Lloyd Jones, Jr.,
James L. Maxwell and Wade C. Whiteside, as the then Trustees of the Tulsa
Municipal Airport Trust, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in book 3905, pages 1610-1637, on October 16, 1969), as amended by the First
Amendment to the Sublease (hereinafter the "First Amendment"), dated as of May
1, 1963, by and between Byron V. Boone, L. L. Dresser, E. Fred Johnson,
Richard Lloyd Jones, Jr., James L. Maxwell, as the then Trustees of the Tulsa
Municipal Airport Trust, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in book 3341, page 200, on May 16, 1963, as Exhibit A to the Bond Indenture
(hereinafter the "1963 Indenture"), dated as of May 1, 1963, between the then
Trustees of the
1
<PAGE> 28
Tulsa Municipal Airport Trust and Morgan Guaranty Trust Company of New York,
pursuant to which the Revenue Bonds, Series 1963 of such Trustees were issued),
covering:
(a) the following property in Tulsa County, Oklahoma, bounded and
described as follows:
All of that part of the S1/2 of Section 13 and all
that part of the N1/2 of Section 24, Township 20
North, Range 13 East, particularly described as
follows: Beginning at the northeast corner of the
SE1/4 of said Section 13; thence west along the north
boundary of the SE1/4 of said Section 13 to the
northwest corner of the SE1/4 of said Section; thence
south along the half section line of said Section 13
to a point in the half section line 1565 feet north
of the south boundary of said Section 13; thence
southwesterly along a line bearing south 14 degrees
37' west a distance of 655.14 feet to a point 200
feet east of the east boundary of the taxiway now
constructed, which point is 165.34 feet west of the
half section line of said section 13 and 931.06 feet
north of the south boundary of said Section 13;
Thence in a southwesterly direction and parallel to
said taxiway and 200 feet east from the east boundary
of said taxiway on a bearing south 3 degrees 4' 30"
west a distance of 1537.65 feet to a point in the
NE1/4 of the NW1/4 of Section 24, Township 20 North,
Range 13 East and which point is 604.38 feet south of
the north boundary of said Section 24 and 247.83 feet
west of the north-south half section line of said
Section 24; thence in a southeasterly direction and
parallel to the south boundary of the concrete
2
<PAGE> 29
apron of the maintenance base of the American
Airlines on a bearing south 76 degrees 00' 58" east a
distance of 2978.32 feet more or less to the east
boundary of said Section 24; thence north and along
the east boundary of Section 24 and 13, to the
northeast corner of the SE1/4 of said Section 13, the
point of beginning;
(b) at the option of American should the Trustees obtain a
leasehold interest therein, certain other land and
improvements thereon, sometimes referred to in the Sublease as
the "Disposal Plant";
(c) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(d) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, together with the
transit waste disposal line located thereon and all rights in
connection therewith or appurtenant thereto; and
(e) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the
foregoing.
is hereby further amended in the manner and to the extent set forth in this
Article I, effective as of the date that the Revenue Bonds, Series 1969 of the
Trustees are delivered to Lazard Freres & Co., Blyth & Co., Inc. and other
underwriters as contemplated by the parties hereto:
A. Section 1 is amended by deleting subsection (a)
thereof and by substituting therefor the following:
(a) The following premises (hereinafter sometimes
called the "Base Premises") which Lessor leases pursuant to
the Lease dated August 6, 1957, as amended, and pursuant to
the Leases dated March 29, 1968 and July 31, 1969, in
3
<PAGE> 30
each case from the City of Tulsa to Lessor (such leases being
hereinafter collectively called the "Ground Lease"), being
259.05 acres, more or less, bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20
North, Range 13 East, Tulsa County, Oklahoma,
beginning at the northeast corner of the southeast
quarter of said Section 13; thence south 00 degrees 00'
23" east a distance of 2,635.97 feet to the southeast
corner of said Section 13; thence south 00 degrees 01'
06" east a distance of 1,320 feet to a point on the
east line of said Section 24; thence north 76 degrees
00' 58" west a distance of 103.06 feet to a point;
thence south 00 degrees 01' 06" east a distance of
64.93 feet to a point; thence south 89 degrees 58' 54"
west a distance of 2,687.76 feet to a point; thence
north 15 degrees 28' 34" west a distance of 822.74 feet
to a point; thence south 76 degrees 00' 58" east a
distance of 120.19 feet to a point; thence north 3
degrees 04' 30" east a distance of 605.25 feet to a
point on the north line of said Section 24; thence
north 3 degrees 04' 30" east a distance of 2,641.10
feet to a point; thence south 89 degrees 52' 04" east a
distance of 2,715.22 feet to the point of beginning,
all as more particularly shown on the attached plat,
marked Exhibit A and made a part hereof,
subject to the right-of-way along Mingo Road containing 9.05
acres, more or less;
and, at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold
interest therein, the following land and the improvement
thereon (herein sometimes called the "Disposal Plant")
All that lot consisting of approximately six acres
located in the SW 1/4 of Section 12, Township 20
North, Range 13 East, in Tulsa, Oklahoma, approximately
one-half mile to the north of the above-described
premises, on a portion of which there is situated a
sanitary sewer disposal plant owned, as of the date of
this Sublease, by the City of Tulsa, Oklahoma, together
with such sewer line easements as may be required
between the above-described premises and said lot and
between said lot and Bird Creek, lying approximately
two miles to the North of said lot,
4
<PAGE> 31
which lot and easements, if leased by Lessor and subleased
hereunder, shall be included in the term "Base Premises"
except as the context may otherwise require;
and Section 1 is further amended by deleting the words "owned by the
City of Tulsa, Oklahoma, and leased by said City to Lessor and" in
paragraph (b) thereof.
B. Section 2 is amended by deleting the first two
sentences thereof and by substituting therefor the following:
The initial term of this Sublease shall commence on the date
hereof and shall end on June 1, 1994. Lessee shall have the
further option to extent such initial term for two additional
renewal terms, the first such term to be for seven years and
the second such term to be for ten years, each such option to
be exercisable by Lessee giving written notice to Lessor of
its election to extent the then current term not less than six
months prior to the termination of the then current term.
C. Section 3 is amended by deleting subsections (b) and
(bb) thereof and by substituting therefor the following:
(aa) In addition to the payments contracted for in
subsection 3(a) above and subsection 3(e) below, during the
initial and any renewal terms of this Sublease Lessee will pay
to Lessor additional basic rental in an amount per annum
(prorated if for less than a year) equal to 6% of the
appraised value (as it shall at the time have been determined
in the manner provided below) of the Additional Land (as
defined below), payable annually in advance on the lst day of
June in each year, commencing on June 1, 1990 (the
"Commencement Date").
The appraised value of the Additional Land shall be
determined, exclusive of any improvements at any time thereon, not
more than six months prior to the Commencement Date and thereafter, if
this Sublease is renewed, not more than six months prior to each
succeeding tenth anniversary of the Commencement Date, by an appraiser
appointed by Lessor, provided that
(i) Lessor shall give written notice to Lessee of
the value determined by such appraiser not more than six and
not less than five months prior to the Commencement Date or
such tenth anniversary date, as the case may be;
5
<PAGE> 32
(ii) if within 15 days of Lessee's receipt of such
notice Lessee shall have given written notice to Lessor of
objection to such appraisal, such determination shall be made
by two appraisers, one of whom shall be appointed by Lessor
(who may be the same appraiser as that already appointed by
Lessor) and the other of whom shall be appointed by Lessee,
such appointment to be made by each party by written notice
given to the other party within 15 days of Lessor's receipt of
Lessee's notice of objection to Lessor's appraisal.
(iii) if within one month of the second such
appointment such two appraisers shall be unable to agree on
such value, such determination shall be made by a third
appraiser acting individually, such third appraiser to be
jointly appointed by such two appraisers within 15 days of the
expiration of such one-month period; and
(iv) if such two appraisers shall fail so to
appoint such third appraiser within such period, such
determination shall be made by an appraiser appointed within
one month of the expiration of such period by the District
Court of Tulsa County, Oklahoma, upon the application of
either Lessor or Lessee;
and the additional basic rental payable by Lessee under this
subsection 3(aa) shall be increased or decreased on the basis of such
appraisal effective on the June 1 immediately following such
determination, provided, further, that in no event shall any such
appraisal result in an increase or decrease in the appraised value of
the Additional Land in excess of 10% of the appraised value in effect
immediately prior to such date. Prior to the date on which a final
appraisal of the value of the Additional Land shall first be made
pursuant to this subsection (aa), the appraised value of the
Additional Land in effect shall be deemed to be _______ per acre. In
the event that (a) on the Commencement Date or (b) on any June 1
constituting any tenth anniversary of the Commencement Date a final
appraisal of the value of the Additional Land shall not have been made
pursuant to this subsection (aa), on such June 1 or on the
Commencement Date, as the case may be, and in each case on the first
day of each month thereafter, Lessee shall pay (x) $27.00 per acre of
Additional Land, in the case of the Commencement Date and the first
day of each consecutive month thereafter until the completion of such
final appraisal, or (y) in every other case an amount equal to 90% of
the additional basic rental payable by Lessee immediately prior to
such June 1 constituting any tenth anniversary of the Commencement
Date, in each case until the first day of the month immediately
following the completion of such final appraisal, on which date and on
the first day of each succeeding month Lessee shall pay such
additional basic rental in an amount based on the appraised value of
the Additional Land in accordance with the provisions of this
subsection (aa), provided that the first such payment after such final
appraisal shall include an amount equal to the aggregate amount by
which all rental payments made by Lessee from and after such June 1
was less than the aggregate additional basic rental which would have
been payable by Lessee had such final appraisal been made prior to
such June 1.
6
<PAGE> 33
All appraisers appointed hereunder shall be competent,
qualified by training and experience, disinterested and independent
and shall be members in good standing of the American Institute of
Real Estate Appraisers or its successor and all appraisal reports
shall be rendered in writing and signed by the appraiser or appraisers
making the report. All reasonable costs, fees and expenses of the
appraisers shall be evenly divided between Lessor and Lessee; and any
court costs incurred in connection with the appointment of an
appraiser under paragraph (iv) above shall be borne by Lessee.
The term "Additional Land" shall mean the following
properties:
(1)(a) 64 acres, more or less, in Tulsa County,
Oklahoma, bounded and described as follows:
A tract of land in Section 24, Township 20
North Range 13 East, Tulsa County, Oklahoma,
beginning at a point determined by beginning at the
northeast corner of said Section 24; thence south
along the east line thereof a distance of 13__ feet;
thence south 89 degrees 58' west a distance of 100
feet to said point of beginning; thence south 89
degrees 58' 54" west a distance of 2,687.76 feet;
thence north 15 degrees 28' 34" west a distance of
822.74 feet; thence south 76 degrees 00' 58" east a
distance of 2,995.45 feet; thence south 00 degrees
01' 06" east a distance of 64.93 feet to the point of
beginning, all as more particularly shown on the
attached plat, marked as Exhibit B and made a part
hereof; and
(2) 3.5 acres, more or less, in Tulsa County,
Oklahoma, bounded and described as follows:
Beginning at the center of Section 13, Township 20
North, Range 13 East proceed south 00 degrees 00'
04" east a distance of 1,072.30' to a point; thence
proceed south 14 degrees 37' 00' west a distance of
655.14' to a point; thence proceed north 3 degrees
04' 30" east a distance of 1,708.70' to a point;
thence proceed south 89 degrees 52' 04" east a
distance of 73.65' to the point of beginning.
(b) In addition to the payments contracted for in
subsections 3(a) and 3(aa) above, Lessee will pay Lessor, with respect
to each Bond Year (as defined below), commencing on the first day of
the month following the effective date of the Second Amendment to the
Sublease and continuing until the Terminal Date (as defined below)
additional rentals per annum equal to the Annual Principal and
Interest Requirement (as defined below) for such Bond Year on (x) the
Revenue Bonds, Series 1963, of Lessor (hereinafter referred to as the
"Series 1963 Bonds") issued pursuant to the terms of the bond
indenture (hereinafter referred to as the "Indenture"), dated May 1,
1963, between Lessor and the bond trustee (hereinafter referred to as
the "Bank") and (y) the Revenue
7
<PAGE> 34
Bonds, Series 1969, of Lessor (hereinafter referred to as the "Series
1969 Bonds") issued pursuant to the terms of the First Supplemental
Bond Indenture, dated as of December 1, 1969 between Lessor and the
Bank (the Indenture as supplemented by the First Supplemental Bond
Indenture is hereinafter referred to as the "Supplemented Indenture").
Such additional rentals shall be payable by Bond Periods (as defined
below) in advance in equal monthly installments on the first day of
each month in such Bond Period, so that there is paid during each Bond
Period an amount equal to the Semiannual Principal and Interest
Requirement (as defined below) for such Bond Period, provided that
Lessee, if not then in default hereunder, may in any Bond Year
beginning with the Bond Year commencing June 1, 1969 credit against
the additional rentals provided for in this subsection (b):
(i) the amount of any balance transferred by the
Bank pursuant to the terms of the Supplemented Indenture from
any bond retirement fund established thereunder to any fund so
established the moneys of which are to be used for the payment
of principal of and interest and premium, if any, on the
Series 1963 Bonds or the Series 1969 Bonds (hereinafter
collectively referred to as the "Bonds"), or both, which
credit shall be applied against the installment or
installments of additional rentals provided for in this
subsection (b) next coming due, if and to the extent that such
credit would not result on the next succeeding June 1 or
December 1 in the moneys in any such latter fund available
therefor being insufficient to pay the interest and principal,
if any, due on such June 1 or December 1 or to redeem Bonds on
any such date to the extent required by the Supplemented
Indenture, and
(ii) the amount of any credit determined pursuant
to subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 1969 and
continuing until the Terminal Date. The term "Bond Period" shall mean
each period of six months beginning on June 1 or December 1 during any
Bond year. The term "Semiannual Principal and Interest Requirement"
with respect to any Bond Period shall mean the interest on the Bonds
accrued in such Bond Period plus any amount required on the December
or June 1, as the case may be, following such Bond Period on account
of principal to pay the Bonds at the stated maturities thereof and on
account of principal and premium, if any, to redeem or prepay the
Bonds pursuant to any mandatory sinking fund or redemption requirement
applicable thereto. The term "Annual Principal and Interest
Requirement" with respect to any Bond Year shall mean the sum of the
Semiannual Principal and Interest Requirements with respect to the
Bond Periods comprising such Bond year. The Semiannual Principal and
Interest Requirement for each Bond Period shall be determined as of
the beginning of such Bond Period.
8
<PAGE> 35
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund
or otherwise under the Supplemented Indenture and then available for
the payment of interest and premium, if any, on and principal of the
Bonds shall equal or exceed the amount required to redeem or pay all
the Bonds at the time outstanding (including principal, redemption
premium, if any, and interest to their stated maturities or to the
next date or dates on which such Bonds may be callable for redemption,
whichever is the earlier).
(bb) In addition to the payments contracted for in
subsections 3(a), 3(aa) and 3(b) above, Lessee will pay Lessor for
deposit by the Bank in a bond reserve fund established for the
security of the Series 1963 Bonds and the Series 1969 Bonds
(i) with respect to each Bond Period beginning
June 1, 1968, additional rentals per Bond Period equal to
fifteen percent (15%) of the Semiannual Principal and Interest
Requirement on the Series 1963 Bonds for such Bond Period
until such time as there shall have been paid into the bond
reserve fund pursuant to this subdivision (i) an amount equal
to the maximum Annual Principal and Interest Requirement on
the Series 1963 Bonds for any Bond Year thereafter; and
(ii) commencing no later than six months after
the 1969 Improvements (as defined in Section 5) are ready for
use or occupancy as evidenced by the certificates of Lessor
and Lessee referred to in Section 5 or, at the option of
Lessee, commencing on any June 1 or December 1 prior to such
readiness for use or occupancy, additional rentals per Bond
Period in substantially equal amounts so that by June 1, 1972
there shall have been paid into the reserve fund pursuant to
this subdivision (ii) an amount equal to the maximum Annual
Principal and Interest Requirement on the Series 1969 Bonds
for any Bond Year thereafter;
provided that, if not then in default hereunder, Lessee may at its
option in any Bond Period credit against the additional rentals
provided for in this subsection the amount of any moneys on deposit in
such reserve fund at the commencement of such Bond Period (other than
moneys previously paid as additional rental pursuant to this
subsection) to the extent that such moneys shall not theretofore have
been used for purposes of any such credit and, in the event that
Lessee exercises such option, Lessee will designate whether the amount
giving rise to such credit shall be applied against the additional
rental provided for in subdivision (i) or in subdivision (ii) of this
subsection 3(bb). Such rentals shall be payable in advance in equal
monthly installments on the first day of each month in such Bond
Period.
Notwithstanding the foregoing paragraph of this Subsection
3(bb), from and after such time when all of the Series 1963 Bonds
shall have become due and payable in accordance with their terms, or
shall have been duly called for redemption or irrevocable
9
<PAGE> 36
instructions to call the Series 1963 Bonds for redemption shall have
been given by the Trustees to the Bank, or proceedings for the
prepayment of the Series 1963 Bonds shall have been duly taken under
Article III of the Supplemented Indenture, and the whole amount of the
principal and interest and the premium, if any, so due and payable
upon all of the Series 1963 Bonds and coupons pertaining thereto then
outstanding shall be paid to or sufficient money shall be held by the
Bank and the Paying Agents (as defined in the Supplemented Indenture)
for the Series 1963 Bonds for such purpose, the additional rentals
payable pursuant to this Subsection 3(bb) shall be paid only until
such time as there is on deposit in the bond reserve fund an amount
equal to the interest accruing on the Series 1969 Bonds in the then
current Fiscal Year (as defined in the Supplemented Indenture).
and is further amended by deleting the words "ten-year" in each place in which
they appear in subsection (e) thereof and by deleting the words "subsection
(a)" in the seventh line of subsection (h) and inserting in lieu thereof the
words "subsections (a) and (aa)".
D. Section 4 is amended by deleting the words "on March 31, 1959
or any date thereafter," in the places in which they appear in subsection (a)
thereof.
E. Section 5 is amended by deleting such Section in its entirety
and by substituting therefor the following:
5. Construction by Lessee. Lessee has entered into an
agreement (hereinafter referred to as the "Construction Contract"),
dated April 17, 1968, with Manhattan Construction Company, providing
for the performance of certain construction work on the Base Premises
and has also entered into certain other agreements for the acquisition
and installation on the Base Premises of certain equipment, all
pursuant to detailed drawings and specifications developed or to be
developed with the approval of Lessor and lessee by
Frankfurt-Short-Emery-McKinley or any other architect approved in
writing by each (all improvements and equipment so constructed,
acquired or installed pursuant to the Construction Contract and such
other agreements being hereinafter referred to as the "1969
Improvements"). Lessee will use its best efforts to cause such
construction, acquisition and installation to be satisfactorily
completed in accordance with such drawings and specifications, with
such changes therein as may be requested by either party hereto and
approved by the other, without increasing the total estimated cost of
the 1969 Improvements above $14,000,000. In the event that the cost
of the 1969 Improvements shall exceed such amount, such excess cost
shall be paid by Lessee and any excess cost of that part of the 1969
Improvements not constituting personal property or equipment shall be
paid promptly from time to time by Lessee to the Bank upon receipt by
Lessee of
10
<PAGE> 37
duplicate originals or certified copies of certificates of said
architects that labor or material has been furnished and money due and
owing therefor, and such excess cost of that part of the 1969
Improvements constituting personal property and equipment shall be
paid promptly from time to time by Lessee to the Bank as soon as each
item of such personal property and equipment is installed. Lessor and
Lessee shall have the right to inspect the construction and
installation work contemplated hereby at all reasonable times and to
inspect during regular business hours all books, records, plans,
specifications of the other party hereto and other data relating
thereto or to the cost thereof. At such time as the 1969 Improvements
are ready for use or occupancy, Lessor and Lessee shall deliver to the
Bank (i) a certificate of Lessor, countersigned by such architects,
stating that the 1969 Improvements are ready for use or occupancy by
Lessee, stating the date on which such readiness occurred, setting
forth in reasonable detail the final costs of the construction,
acquisition or installation of the 1969 Improvements, and stating that
such final costs have been paid in full or, in the event that such
final costs have not been paid in full, the amount to be retained by
the Bank in the 1969 Construction Fund (as defined in the Supplemented
Indenture) to pay all such final costs in full; and (ii) a certificate
of Lessee stating that the 1969 Improvements have been constructed,
acquisition or installation of the 1969 Improvements, and stating that
such final costs have been paid in full or, in the event that such
final costs have not been paid in full, the amount to be retained by
the Bank in the 1969 Construction Fund (as defined in the Supplemented
Indenture) to pay all such final costs in full. In the event that the
certificates of Lessor and Lessee required to be delivered by clauses
(i) and (ii) of this Section 5 shall not state therein that all final
costs have been paid in full, as promptly as practicable after such
time as all final costs of the construction, acquisition and
installation of the 1969 Improvements shall have been paid in full,
Lessor and Lessee shall each deliver to the Bank a certificate to such
effect. Lessee agrees that all work (including such construction,
acquisition and installation) under the Construction Contract and such
other agreements has been undertaken by Lessee as agent on behalf of
Lessor, that the 1969 Improvements are the property of Lessor, and
that Lessee will not enter into any amendment of the Construction
Contract or such other agreements without the prior approval of
Lessor, which approval shall not be unreasonably withheld.
F. Section 6 is amended by deleting the words "Civil Aeronautics
Administration Technical Standard Order N-18" in the last sentence thereof and
by substituting therefor the following:
Part 77 of the Federal Aviation Regulations, entitled "Objects
Affecting Navigable Air Space".
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<PAGE> 38
G. Section 10 is amended by deleting all of the text therein
through the word "(in" in the first paragraph thereof and by substituting
therefor the following:
10. Insurance. Lessee, at its expense, shall keep (or
cause to be kept) all of the Improvements insured against loss or
damage (in
and is further amended by deleting all of the text through the words "shall
cause Lessor and" in the second paragraph thereof and by substituting therefor
the following:
Lessee, at its expense, shall cause Lessor and
and is further amended by deleting the figure "$1,000,000" in each place in
which it appears in the second paragraph thereof and by substituting therefor
the figure "$2,000,000".
H. Section 14 is amended by deleting the last sentence thereof
and by substituting therefor the following:
For the purpose of computing Lessee's costs hereunder, (x) the total
amount of basic rental payable under Section 3(a) of this Sublease not
attributable to the Disposal Plant shall be allocated to the premises,
buildings, improvements and fixtures in existence on the date of this
Sublease in proportion to their respective values set forth in the
appraisal report dated March 21, 1958 of American Appraisal Company,
with a value of $1,200 per acre ascribed to land for the purposes of
this Section 14, (y) the total amount of additional basic rental
payable under Subsection 3(aa) of this Sublease shall be allocated to
the premises, building, improvements and fixtures in existence on the
Commencement Date in proportion to their respective values set forth
in the appraisal report dated November 27, 1967 of T. G. Grant Co.,
with a value of $6,000 per acre ascribed to the Additional Land for
the purposes of this Section 14, and (z) the total amount of
additional rentals payable under subsections 3(b), 3(bb) and 3(c)
shall be allocated to the Improvements in proportion to their
respective Net Book Values.
and the Sublease is further amended by renumbering Section 22 thereof as
Section 25 thereof, and by adding thereto, as new Sections 22, 23 and 24, the
following:
22. Non-Discrimination. Lessee will not discriminate or
permit any discrimination against any employee or applicant for
employment on the ground of race, creed, color or national origin. In
the event of any violation of this Section 22 Lessor shall
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<PAGE> 39
have the right to take such action as the United States of America may
require with respect thereto.
23. Lessee to Furnish Certain Information and Reports.
(a) Lessee will furnish or cause to be furnished to the Bank
semi-annually in each year during the periods June 15 to June 30,
inclusive, and December 15 to December 31, inclusive, commencing with
the period December 15 to December 31, 1969, and at such other times
as the Bank may request in writing, a list or lists in such form as
the Bank may reasonably require containing all information in the
possession or control of Lessee or any Paying Agent with respect to
the Bonds other than the Bank as to the names and addresses of the
holders of the Bonds obtained by Lessee or any such Paying Agent since
the date as of which the next previous list, if any, was furnished by
Lessee to the Bank. Any such list may be dated as of a date not more
than 15 days prior to the time such information is furnished or caused
to be furnished and need not include information received after such
date.
(b) Lessee will file with the Bank, within 15 days after
Lessee is required to file the same with the Securities and Exchange
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as said Commission may from time to time by rules and
regulations prescribe) which Lessee is required to file with said
Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934; or, if Lessee is not required to file
information, documents or reports pursuant to either of such Sections,
then to file with the Bank and said Commission, in accordance with
rules and regulations prescribed by said Commission, such of the
supplementary and periodic information, documents and reports which
may be required pursuant to Section 13 of the Securities Exchange Act
of 1934 in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and
regulations.
(c) Lessee will file with the Bank and the Securities and
Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such additional
information, documents, and reports with respect to compliance by
Lessee with the conditions and covenants provided for herein and in
the Supplemented Indenture, as may be required from time to time by
such rules and regulations, including in the case of annual reports,
if required by such rules and regulations, certificates or opinions of
independent public accountants conforming to the requirements of
Section 1.3 of the Indenture and of subsection (e) of Section 314 of
the Trust Indenture Act of 1939, as to compliance with conditions or
covenants, compliance with which is subject to verification by
accountants.
(d) Lessee will transmit to the holders of the Bonds
within thirty days after the filing thereof with the Bank, in the
manner and to the extent provided in subsection (c) of Section 8.18 of
the Indenture with respect to reports pursuant to said Section 8.18,
such summaries of any information, documents and reports required to
be filed by Lessee
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<PAGE> 40
pursuant to the preceding two paragraphs of this Section 23 as may be
required by rules and regulations prescribed from time to time by the
Securities and Exchange Commission.
(e) Lessee will furnish to the Bank a certificate or
opinion of an engineer, appraiser or other expert as to the fair value
of any property to be released from the lien of the Supplemented
Indenture, which certificate or opinion (i) shall state that in the
opinion of the person making the same the proposed release will not
impair the security under the Supplemented Indenture in contravention
of the provisions thereof, and (ii) shall be made by an independent
engineer, appraiser, or other expert, if the fair value of such
property and of all other property released since the commencement of
the then current calendar year, as set forth in the certificates or
opinions required by this paragraph is 10% or more of the aggregate
principal amount of Bonds at the time outstanding; but such
certificate or opinion of an independent engineer, appraiser, or other
expert shall not be required in the case of any release of property,
if the fair value thereof as set forth in the certificate or opinion
required by this clause is less than Twenty-five Thousand Dollars
($25,000) or less than 1% of the aggregate principal amount of Bonds
at the time outstanding.
(f) Lessee will furnish to the Bank a certificate or
opinion of an engineer, appraiser, or other expert as to the fair
value to Lessor and to Lessee of any property the subjection of which
to the lien of the Supplemented Indenture is to be made the basis for
the withdrawal of cash subject to the lien and pledge thereof, or the
withdrawal of any proceeds of insurance or condemnation award held by
the Bank under the Supplemented Indenture or in accordance with this
Sublease, or the release of any property subject to the lien of the
Supplemented Indenture, and if
(1) within six (6) months prior to the date of
acquisition thereof by Lessor or Lessee, such property has
been used or operated, by a person or persons other than
Lessee, in a business similar to that in which it has been or
is to be used or operated by Lessee, and
(2) the fair value to Lessor and Lessee of such
property as set forth in such certificate or opinion is not
less than Twenty-five Thousand Dollars ($25,000) and not less
than 1% of the aggregate principal amount of Bonds at the time
outstanding,
such certificate or opinion shall be made by an independent engineer,
appraiser, or other expert.
Except for the certificate of the architect required by
paragraph (c) of this Section 23, (i) in all cases in which this
Section requires that a certificate or opinion be made by an
independent person, such certificate or opinion shall be made by an
independent engineer, appraiser or other expert, as the case may be,
selected or approved by the Bank in the exercise of reasonable care,
and (ii) in all cases in which this Section does not require such
14
<PAGE> 41
certificate or opinion to be made by an independent person, such
certificate or opinion may be made by any engineer, appraiser, or
other expert, as the case may be, who is an officer of, or is employed
by, Lessor or Lessee. Each certificate or opinion delivered hereunder
with respect to compliance with a condition or covenant provided for
in this Sublease shall include: (i) a statement that the person
making such certificate or opinion has read such covenant or
condition; (ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (iii) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been
complied with; and (iv) a statement as to whether or not, in the
opinion of such person such condition or covenant has been complied
with.
24. Rights Granted to Bank. Lessor and Lessee agree that
the Bank shall have all of the powers under this Sublease granted to
it pursuant to Section 7.13 of the Supplemented Indenture.
I. The Sublease is further amended by deleting the words "Bonds
Series 1963" and "Indenture" in each place in which they appear and by
substituting therefor the words "Series 1963 Bonds and Series 1969 Bonds" and
"Supplemented Indenture", respectively, except that the words "Series 1963
Bonds or Series 1969 Bonds" are substituted for the words "Bonds Series 1963"
where the latter words appear in Section 9 of the Sublease, in the first two
places in which they appear in Section 12 thereof, and in the first place in
which they appear in Section 14 thereof.
ARTICLE II.
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 1, 1958, as amended by the First Amendment and by
this Second Amendment to the Sublease.
ARTICLE III.
Except as herein amended, the Sublease shall remain in full force and
effect.
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<PAGE> 42
ARTICLE IV.
No trustee, director, officer or employee of either party shall be
held personally liable under or in connection with the execution of this Second
Amendment to the Sublease.
ARTICLE V.
American hereby consents to the assignment (subject to the trusts
created in the Indenture and the terms and provisions thereof) by the Trustees
of any and all of their rights under the Sublease as amended by the First
Amendment to the Sublease and this Second Amendment to the Sublease to Morgan
Guaranty Trust Company of New York, as trustee under the 1963 Indenture as
supplemented by the First Supplemental Bond Indenture, dated as of November 1,
1969, between the Trustees and Morgan Guaranty Trust Company of New York, and
American agrees to comply with the provisions of such assignment to the extent
applicable to it.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to the Sublease this day of December 1969 and affixed their
respective seals hereto.
LESSOR
/s/ RICHARD LLOYD JONES, JR.
-------------------------------------
Richard Lloyd Jones, Jr.
/s/ BYRON V. BOONE
-------------------------------------
Byron V. Boone
/s/ P.C. LAUINGER
-------------------------------------
P. C. Lauinger
-------------------------------------
John L. Robertson
/s/ J.M. HEWGLEY, JR.
-------------------------------------
J. M. Hewgley, Jr.
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
LESSEE
AMERICAN AIRLINES, INC.
By: [ILLEGIBLE]
----------------------------------
Attest:
[ILLEGIBLE]
- -------------------------
17
<PAGE> 44
THIRD AMENDMENT TO THE SUBLEASE
This Agreement, dated as of this first day of June, 1971, by and
between Richard Lloyd Jones, Jr., Byron V. Boone, Robert J. LaFortune, P. C.
Lauinger and John L. Robertson, as Trustees of the Tulsa Municipal Airport
Trust (hereinafter the "Trustees"), and American Airlines, Inc., a Delaware
corporation (hereinafter "American"),
W I T N E S S E T H:
IN CONSIDERATION of the mutual promises and covenants hereinafter
contained, the parties hereto do hereby agrees as follows:
ARTICLE I.
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between N. G. Henthorne, E. Fred Johnson, Richard Lloyd Jones, Jr.,
James L. Maxwell and Wade C. Whiteside, as the then Trustees of the Tulsa
Municipal Airport Trust, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in book 3905, pages 1610-1637, on October 16, 1969), as amended by the First
Amendment to the Sublease (hereinafter the "First Amendment"), dated as of May
1, 1963, by and between Byron V. Boone, L. L. Dresser, E. Fred Johnson,
Richard Lloyd Jones, Jr., James L. Maxwell, as the then Trustees of the Tulsa
Municipal Airport Trust, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in book 3341, page 200, on May 16, 1963, as Exhibit A to the Bond Indenture
(hereinafter the "1963 Indenture"), dated as of May 1, 1963, between the then
Trustees of the Tulsa Municipal Airport Trust and Morgan Guaranty Trust
Company of New York, pursuant to
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<PAGE> 45
which the Revenue Bonds, Series 1963 of such Trustees were issued), and as
further amended by the Second Amendment to the Sublease (hereinafter the
"Second Amendment"), dated as of December 1, 1969, by and between Richard Lloyd
Jones, Jr., Byron V. Boone, P. C. Lauinger, John L. Richardson and J. M.
Hewgley, Jr., as the then Trustees of the Tulsa Municipal Airport Trust, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma, in book 3912, page 642,
on December 22, 1969), covering:
(a) the following premises (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Lease dated
August 6, 1957, as amended, and pursuant to the Leases dated
March 29, 1968 and July 31, 1969, in each case from the City
of Tulsa to Lessor (such leases being hereinafter collectively
called the "Ground Lease"), being 259.05 acres, more or less,
bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20
North, Range 13 East, Tulsa County, Oklahoma, beginning at
the northeast corner of the southeast quarter of said
Section 13; thence south 00 degrees 00' 23" east a distance
of 2,635.97 feet to the southeast corner of said Section
13; thence south 00 degrees 01' 06" east a distance of
1,320 feet to a point on the east line of said Section 24;
thence north 76 degrees 00' 58" west a distance of 103.06
feet to a point; thence south 00 degrees 01' 06" east a
distance of 64.93 feet to a point; thence south 89 degrees
58' 54" west a distance of 2,687.76 feet to a point; thence
north 15 degrees 28' 34" west a distance of 822.74 feet to
a point; thence south
2
<PAGE> 46
76 degrees 00' 58" east a distance of 120.19 feet to a
point; thence north 3 degrees 04' 30" east a distance of
605.25 feet to a point on the north line of said Section
24; thence north 3 degrees 04' 30" east a distance of
2,641.10 feet to a point; thence south 89 degrees 52' 04"
east a distance of 2,715.22 feet to the point of
beginning, all as more particularly shown on the plat
attached to the Second Amendment to the Sublease and made
a part hereof,
subject to the right-of-way along Mingo Road containing 9.05
acres, more or less; and, at the option of Lessee, exercisable
by written notice to Lessor in the event that Lessor shall
obtain a leasehold interest therein, the following land and
the improvements thereon (herein sometimes called the
"Disposal Plant")
All that lot consisting of approximately six acres located
in the SW 1/4 of Section 12, Township 20 North, Range 13
East, in Tulsa, Oklahoma, approximately one-half mile to
the north of the above-described premises, on a portion of
which there is situated a sanitary sewer disposal plant
owned, as of the date of this Sublease, by the City of
Tulsa, Oklahoma, together with such sewer line easements
as may be required between the above-described premises
and said lot and between said lot and Bird Creek, lying
approximately two miles to the North of said lot,
which lot and easements, if leased by Lessor and subleased
hereunder, shall be included in the term "Base Premises"
except as the context may otherwise require;
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
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<PAGE> 47
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, together with the
transit waste disposal line located thereon and all rights in
connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the
foregoing.
is hereby further amended in the manner and to the extent set forth in this
Article I, effective as of the date that the Revenue Bonds, Series 1971, of the
Trustees are delivered to Lazard Freres & Co., Blyth & Co., Inc. and other
underwriters as contemplated by the parties hereto:
A. Section 2 is amended by deleting the first two
sentences thereof and by substituting therefor the following:
The initial term of this Sublease shall commence on
the date hereof and shall end on June 1, 2006. Lessee shall
have the further option to extend such initial term for one
additional renewal term for five years, such option to be
exercisable by Lessee giving written notice to Lessor of its
election to extend the term not less than six months prior to
the termination of such term.
B. Paragraph (a) of Section 3 is amended by deleting
subparagraph (iv) thereof and by substituting therefor the following:
(iv) $50,585 per annum (prorated if for less than a year)
during the period commencing on February 1, 1986 and ending on
May 31, 1996, and
(v) $55,643 per annum (prorated if for less than a year)
during the period commencing on June 1, 1996 and ending on May
31, 2006,
C. Section 3 is further amended by deleting subsections
(b) and (bb) thereof and by substituting therefor the following:
(b) In addition to the payments contracted for in
subsections 3(a) and 3(aa) above, Lessee will pay to Lessor,
with
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<PAGE> 48
respect to each Bond Year (as defined below), commencing on the first
day of the month following the effective date of the Third Amendment
to the Sublease and continuing until the Terminal Date (as defined
below) additional rentals per annum equal to the Annual Principal and
Interest Requirement (as defined below) for such Bond Year on (x) the
Revenue Bonds, Series 1963, of Lessor (hereinafter referred to as the
"Series 1963 Bonds") issued pursuant to the terms of the bond
indenture (hereinafter referred to as the "Indenture"), dated May 1,
1963, between Lessor and the bond trustee (hereinafter referred to as
the "Bank"), (y) the Revenue Bonds, Series 1969, of Lessor
(hereinafter referred to as the "Series 1969 Bonds") issued pursuant
to the terms of the First Supplemental Bond Indenture, dated as of
December 1, 1969 between Lessor and the Bank, and (z) the Revenue
Bonds, Series 1971, of Lessor (hereinafter referred to as the "Series
1971 Bonds") issued pursuant to the terms of the Second Supplemental
Bond Indenture, dated as of June 1, 1971, between Lessor and the Bank
(the Indenture as supplemented by such First Supplemental Bond
Indenture and such Second Supplemental Bond Indenture is hereinafter
referred to as the "Supplemented Indenture"). Such additional rentals
shall be payable by Bond Periods (as defined below) in advance in
equal monthly installments on the first day of each month in such Bond
Period, so that there is paid during each Bond Period an amount equal
to the Semiannual Principal and Interest Requirement (as defined
below) for such Bond Period, provided that Lessee, if not then in
default hereunder, may in any Bond Year beginning with the Bond Year
commencing June 1, 1971 credit against the additional rentals provided
for in this subsection (b):
(i) the amount of any balance transferred by the Bank
pursuant to the terms of the Supplemented Indenture from any bond
retirement fund established thereunder to any fund so established the
moneys of which are to be used for the payment of principal of and
interest and premium, if any, on the Series 1963 Bonds, the Series
1969 Bonds or the Series 1971 Bonds (hereinafter collectively referred
to as the "Bonds"), or any combination thereof, which credit shall be
applied against the installment or installments of additional rentals
provided for in this subsection (b) next coming due, if and to the
extent that such credit would not result on the next succeeding June 1
or December 1, as the case may be, in the moneys in any such latter
fund available therefor being insufficient to pay the interest and
principal, if any, due on such June 1 or December 1 or to redeem Bonds
on any such date to the extent required by the Supplemented Indenture,
and
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<PAGE> 49
(ii) the amount of any credit determined pursuant
to subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 1971 and
continuing until the Terminal Date. The term "Bond Period" shall mean
each period of six months beginning on June 1 or December 1 during any
Bond year. The term "Semiannual Principal and Interest Requirement"
with respect to any Bond Period shall mean the interest on the Bonds
accrued in such Bond Period plus any amount required on the December
or June 1, as the case may be, following such Bond Period on account
of principal to pay the Bonds at the stated maturities thereof and on
account of principal and premium, if any, to redeem or prepay the
Bonds pursuant to any mandatory sinking fund or redemption requirement
applicable thereto. The term "Annual Principal and Interest
Requirement" with respect to any Bond Year shall mean the sum of the
Semiannual Principal and Interest Requirements with respect to the
Bond Periods comprising such Bond year. The Semiannual Principal and
Interest Requirement for each Bond Period shall be determined as of
the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund
or otherwise under the Supplemented Indenture and then available for
the payment of interest and premium, if any, on and principal of the
Bonds shall equal or exceed the amount required to redeem or pay all
the Bonds at the time outstanding (including principal, redemption
premium, if any, and interest to their stated maturities or to the
next date or dates on which such Bonds may be callable for redemption,
whichever is the earlier).
(bb) In addition to the payments contracted for in
subsections 3(a), 3(aa) and 3(b) above, Lessee will pay Lessor for
deposit by the Bank in a bond reserve fund established for the
security of the Series 1963 Bonds, the Series 1969 Bonds and the
Series 1971 Bonds
(i) with respect to each Bond Period beginning
June 1, 1968, additional rentals per Bond Period equal to
fifteen percent (15%) of the Semiannual Principal and Interest
Requirement on the Series 1963 Bonds for such Bond Period
until such time as there shall have been paid into the bond
reserve fund pursuant to this subdivision (i) an amount equal
to the maximum Annual Principal and Interest Requirement on
the Series 1963 Bonds for any Bond Year thereafter; and
(ii) commencing no later than six months after
the 1969 Improvements (as defined in Section 5) are ready for
use or occupancy as evidenced by the certificates of Lessor
and Lessee referred to in Section 5 or, at the option of
Lessee, commencing on any June 1 or December 1 prior to such
readiness for use or occupancy, additional rentals per Bond
Period in substantially equal amounts so
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<PAGE> 50
that by June 1, 1972 there shall have been paid into the
reserve fund pursuant to this subdivision (ii) an amount equal
to the maximum Annual Principal and Interest Requirement on
the Series 1969 Bonds for any Bond Year thereafter; and
(iii) commencing no later than six months after the
1971 Improvements (as defined in Section 5A) are ready for use
or occupancy as evidenced by the certificates of Lessor and
Lessee referred to in Section 5A or, at the option of Lessee,
commencing on any June 1 or December 1 prior to such readiness
for use or occupancy, additional rentals per Bond Period in
substantially equal amounts so that by June 1, 1974 there
shall have been paid into the reserve fund pursuant to this
subdivision (iii) an amount equal to the maximum Annual
Principal and Interest Requirement on the Series 1971 Bonds
for any Bond Year thereafter;
provided that, if not then in default hereunder, Lessee may at its
option in any Bond Period credit against the additional rentals
provided for in this subsection the amount of any moneys on deposit in
such reserve fund at the commencement of such Bond Period (other than
moneys previously paid as additional rental pursuant to this
subsection) to the extent that such moneys shall not theretofore have
been used for purposes of any such credit and, in the event that
Lessee exercises such option, Lessee will designate whether the amount
giving rise to such credit shall be applied against the additional
rental provided for in subdivision (i), subdivision (ii) or in
subdivision (iii) of this subsection 3(bb). Such rentals shall be
payable in advance in equal monthly installments on the first day of
each month in such Bond Period.
Notwithstanding the foregoing paragraph of this Subsection
3(bb), from and after such time when all of the Series 1963 Bonds
shall have become due and payable in accordance with their terms, or
shall have been duly called for redemption or irrevocable instructions
to call the Series 1963 Bonds for redemption shall have been given by
the Trustees to the Bank, or proceedings for the prepayment of the
Series 1963 Bonds shall have been duly taken under Article III of the
Supplemented Indenture, and the whole amount of the principal and
interest and the premium, if any, so due and payable upon all of the
Series 1963 Bonds and coupons pertaining thereto then outstanding
shall be paid to or sufficient money shall be held by the Bank and the
Paying Agents (as defined in the Supplemented Indenture) for the
Series 1963 Bonds for such purpose, the additional rentals payable
pursuant to this Subsection 3(bb) shall be paid only until such time
as there is on deposit in the bond reserve fund an amount equal to the
interest accruing on the Series 1969 Bonds and the Series 1971 Bonds
in the then current Fiscal Year (as defined in the Supplemented
Indenture).
7
<PAGE> 51
D. Section 3 is further amended by deleting subsection (e)
thereof and by substituting therefor the following:
(e) During the renewal term, if any, Lessee will pay to
Lessor basic rental at the rate of $61,207 per annum (prorated if paid
for any period of less than a year), payable annually in advance on
the 1st day of February in each year with respect to the period
commencing on such date and ending on January 31 of the next
succeeding year or on the expiration of such renewal term.
E. A new Section 5A is inserted immediately following Section 5,
as follows:
5A. Construction by Lessee. Lessee has entered into two
agreements (hereinafter collectively referred to as the "1971
Construction Contract"), dated September 10, 1969, as amended, and
November 19, 1970, with Manhattan Construction Company, providing for
the performance of certain construction work on the Base Premises and
has also entered into certain other agreements for the acquisition and
installation on the Base Premises of certain equipment, all pursuant
to detailed drawings and specifications developed or to be developed
with the approval of Lessor and Lessee by Frankfurt-Short-Emery-
McKinley or any other architect approved in writing by each (all
improvements and equipment so constructed, acquired or installed
pursuant to the Construction Contract and such other agreements being
hereinafter referred to as the "1971 Improvements"). Lessee will use
its best efforts to cause such construction, acquisition and
installation to be satisfactorily completed in accordance with such
drawings and specifications, with such changes therein as may be
requested by either party hereto and approved by the other, without
increasing the total estimated cost (together will all financing,
legal and printing costs incurred in connection therewith) of the 1971
Improvements above $27,500,000. In the event that such cost of the
1971 Improvements shall exceed such amount, such excess cost shall be
paid by Lessee and any excess cost of that part of the 1971
Improvements not constituting personal property or equipment shall be
paid promptly from time to time by Lessee to the Bank upon receipt by
Lessee of duplicate originals or certified copies of certificates of
said architects that labor or material has been furnished and money
due and owing therefor, and such excess cost of that part of the 1971
Improvements constituting personal property and equipment shall be
paid promptly from time to time by Lessee to the Bank as soon as each
item of such personal property and equipment is installed. Lessor and
Lessee shall have the right to inspect the construction and
installation work contemplated hereby at all reasonable times and to
inspect during regular business hours all books, records, plans,
specifications of the other party hereto and other data relating
thereto or to the cost thereof. At such time as the 1971 Improvements
are ready for use or occupancy, Lessor and Lessee shall deliver to the
Bank (i) a certificate of Lessor, countersigned by such architects,
stating that the 1971 Improvements are ready for use or occupancy by
Lessee, stating the date on which such
8
<PAGE> 52
readiness occurred, setting forth in reasonable detail the final costs
of the construction, acquisition or installation of the 1971
Improvements, and stating that such final costs have been paid in full
or, in the event that such final costs have not been paid in full, the
amount to be retained by the Bank in the 1971 Construction Fund (as
defined in the Supplemented Indenture) to pay all such final costs in
full; and (ii) a certificate of Lessee stating that the 1971
Improvements have been constructed, acquired and installed and are
ready for use or occupancy by Lessee and stating the final costs of
the construction, acquisition or installation of the 1971
Improvements, and stating that such final costs have been paid in full
or, in the event that such final costs have not been paid in full, the
amount to be retained by the Bank in the 1971 Construction Fund to pay
all such final costs in full. In the event that the certificates of
Lessor and Lessee required to be delivered by clauses (i) and (ii) of
this Section 5A shall not state therein that all final costs have been
paid in full, as promptly as practicable after such time as all final
costs of the construction, acquisition and installation of the 1971
Improvements shall have been paid in full, Lessor and Lessee shall
each deliver to the Bank a certificate to such effect. Lessee agrees
that all work (including such construction, acquisition and
installation) under the 1971 Construction Contract and such other
agreements has been undertaken by Lessee as agent on behalf of Lessor,
that the 1971 Improvements are the property of Lessor, and that Lessee
will not enter into any amendment of the 1971 Construction Contract or
such other agreements without the prior approval of Lessor, which
approval shall not be unreasonably withheld.
F. The second paragraph of Section 9 is deleted in its entirety
and the following paragraph is inserted in lieu thereof:
Lessor hereby assigns to Lessee effective upon completion of
the Improvements and, in the case of the 1969 Improvements, delivery
of completion certificates as provided in Section 5 hereof and, in the
case of the 1971 Improvements, delivery of completion certificates as
provided in Section 5A hereof, all right, title and interest of Lessor
in and to any and all warranties, express or implied, made to Lessor
under, in the case of the 1969 Improvements, the Construction Contract
and, in the case of the 1971 Improvements, the 1971 Construction
Contract and under any and all other construction or purchase
contracts entered into by Lessor or otherwise accruing to the benefit
of Lessor and pertaining to the Leased Property, together with the
right to enforce the same for the benefit of Lessee, either in the
name of Lessor or of Lessee or otherwise, and expressly subrogates
Lessee to all of Lessor's rights of action and causes of action
against the other parties to all such contracts. Lessee will
indemnify Lessor against damage, loss or expense resulting from such
enforcement and Lessee's efforts to enforce the same.
G. (a) Section 1(b) is amended by inserting immediately after the
words "Section 5" the first time they appear in Section 1(b) the words "or
Section 5A" and by inserting immediately
9
<PAGE> 53
after the words "Section 5" the second time they appear in Section 1(b) the
words "or said Section 5A".
(b) Sections 4(a) and 8(a)(i)(2)(B) are amended by inserting
immediately after the words "Section 5" the words "or Section 5A".
H. The Sublease is further amended by deleting the words "Series
1963 Bonds and Series 1969 Bonds" in each place in which they appear and by
substituting therefor the words "Series 1963 Bonds, Series 1969 Bonds and
Series 1971 Bonds" and by deleting the words "Series 1963 Bonds or Series 1969
Bonds" where such words appear in Sections 9, 12 and 14 of the Sublease and by
substituting therefor the words: "Series 1963 Bonds, Series 1969 Bonds or
Series 1971 Bonds".
ARTICLE II.
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 1, 1958, as amended by the First Amendment, the
Second Amendment, and this Third Amendment to the Sublease.
ARTICLE III.
Except as herein amended, the Sublease shall remain in full force and
effect.
ARTICLE IV.
No trustee, director, officer or employee of either party shall be
held personally liable under or in connection with the execution of this Third
Amendment to the Sublease.
ARTICLE V.
American hereby consents to the assignment by the Trustees of any and
all of their rights under the Sublease as amended by the First Amendment, the
Second Amendment, and this Third
10
<PAGE> 54
Amendment to the Sublease to Morgan Guaranty Trust Company of New York, as
trustee under the 1963 Indenture as supplemented by the First Supplemental Bond
Indenture, dated as of December 1, 1969, and the Second Supplemental Bond
Indenture, dated as of June 1, 1971, each between the Trustees and Morgan
Guaranty Trust Company of New York, and American agrees to comply with the
provisions of such assignment to the extent applicable to it.
11
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to the Sublease this day of October, 1971 and affixed their
respective seals hereto.
LESSOR
/s/ RICHARD LLOYD JONES, JR.
----------------------------------------
Richard Lloyd Jones, Jr.
/s/ BYRON V. BOONE
----------------------------------------
Byron V. Boone
/s/ ROBERT J. LAFORTUNE
----------------------------------------
Robert J. LaFortune
/s/ P.C. LAUINGER
----------------------------------------
P. C. Lauinger
/s/ JOHN L. ROBERTSON
----------------------------------------
John L. Robertson
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
LESSEE
AMERICAN AIRLINES, INC.
By: [ILLEGIBLE]
-------------------------------------
Attest:
[ILLEGIBLE]
- --------------------------
12
<PAGE> 56
AMENDMENT NO. 4 TO SUBLEASE
THIS AGREEMENT between ROBERT J. LAFORTUNE, and RICHARD LLOYD JONES,
JR., and JOHN ROBERTSON, and JOHN W. BATES, JR., and EDWARD L. MCFARLAND, as
Trustees of the Tulsa Municipal Airport Trust, herein called the Trustees, and
AMERICAN AIRLINES, INC., hereinafter called American,
W I T N E S S E T H:
That for and in consideration of the terms, covenants, and conditions
herein set forth, the parties have agreed and hereby agree as follows:
1. Recitals. Heretofore as of June 1, 1958, the Trustees of said
Trust, as Lessor, and American, as Lessee, entered into a sublease of certain
lands at the then Tulsa Municipal Airport, now known as the Tulsa International
Airport, which has subsequently been amended by first, second, and third
amendments executed in 1963, 1969, and 1971, respectively. Said Sublease, so
amended, is now in full force and effect. To provide a more convenient
location for fire, crash rescue equipment, Trustees have arranged to have
constructed, the improvements necessary for the housing and use of such
equipment.
2. Amendment. For and in consideration of the premises, and to
obtain the benefits of having the fire, crash rescue equipment housed at and
operated from a more desirable location, American has agreed to release and
hereby releases from its sublease, the following described lands in Tulsa
County, Oklahoma:
INDIAN MERIDIAN
T 20 N, R 13 E
SECTION 13, a tract of land in the NW 1/4, NW 1/4, SE
1/4 and the NE 1/4, NE 1/4, SW 1/4, more particularly
described as:
<PAGE> 57
Beginning at a point on the north line of said NE
1/4, NE 1/4, SW 1/4, said point being 73.65 feet West of the
Northeast corner thereof:
thence S 03 degrees 04' 30" W, 350.55 feet;
thence S 80 degrees 52' 04" E, 341.77 feet;
thence N 14 degrees 20' 57" E, 361.15 feet,
more or less, to a point on the north line of said NW 1/4, NW
1/4, SE 1/4; thence N 80 degrees 52' 04" W, along
said north line and the north line of the NE 1/4,
NE 1/4, SW 1/4, 412.47 feet, more or less, to the
point of beginning, aggregating 3.03 acres, more or
less.
3. Possession. Concurrently with the execution hereof, American
releases to the Trustees, quiet and peaceable possession of the lands above
described, and said Trustees accept the same.
4. Scope. Nothing herein contained shall be deemed or construed
to alter or modify said Sublease between the Trustees and American, as
previously amended, except to delete therefrom the particular portion of the
premises subleased thereby above described.
2
<PAGE> 58
IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to
said Sublease, this 9th day of September, 1974.
TULSA MUNICIPAL AIRPORT TRUST
By [ILLEGIBLE]
-----------------------------
By /s/ JOHN L. ROBERTSON
-----------------------------
John L. Robertson
By /s/ ROBERT J. LAFORTUNE
-----------------------------
Robert J. LaFortune
By [ILLEGIBLE]
-----------------------------
By [ILLEGIBLE]
-----------------------------
Sublessors
AMERICAN AIRLINES, INC.
By: [ILLEGIBLE]
----------------------------
[ILLEGIBLE]
-------------------------------
(Title)
Sublessee
Attest:
[ILLEGIBLE]
- -----------------------
State of Oklahoma, ) ss.
Tulsa County. )
Before me, a Notary Public in and for said County and State, on this
9th day of September, 1974, personally appeared these five persons to me known
to be the identical persons who executed the within and foregoing instrument,
and acknowledged to me that they executed the same as their free and voluntary
act and deed, and as their free and voluntary act and deed of the Tulsa
Municipal Airport Trust, for the uses and purposes therein set forth.
[ILLEGIBLE]
---------------------------
My commission expires: July 14, 1975
---------------------------
3
<PAGE> 59
FIFTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF DECEMBER 1, 1982
1
<PAGE> 60
FIFTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of this 1st day of December, 1982, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware Corporation
(hereinafter "American").
W I T N E S S E T H:
NOW THEREFORE, for and in consideration of the mutual promises, terms,
conditions and covenants herein contained, the parties hereto do hereby agree
as follows:
ARTICLE I.
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport hereinafter "Trustees"), as Lessor, and American, as Lessee (a copy of
which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma, in book 3905, pages 1610-1637, on October 16, 1969), as amended by
the First Amendment to Sublease (hereinafter the "First Amendment"), dated as
of May 1, 1963, by and between the Trustees, as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in book 3341, page 200, on May 16, 1963, as Exhibit A to the
Bond Indenture dated as of May 1, 1963, between the Trustees and Morgan
Guaranty Trust Company of New York, in New York, New York, as bond trustee
(such trustee being succeeded by J. Henry Schroder Bank & Trust Company, in New
York, New York)), pursuant to which the Revenue Bonds, Series 1963, of such
Trustees were
2
<PAGE> 61
issued, and as further amended by the Second Amendment to the Sublease
(hereinafter the "Second Amendment"), dated as of December 1, 1969, by and
between the Trustees, as Lessor, and American, as Lessee, (a copy of which was
duly recorded in the records of the County Clerk of Tulsa County, Oklahoma, in
book 3912, page 642, on December 22, 1969) and as further amended by the Third
Amendment to the Sublease (hereinafter the "Third Amendment") dated as of the
1st day of June, 1971, by and between the Trustees, as Lessor, and American, as
Lessee, (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 3992, Page 419 on November 8, 1971) and as
further amended by the Fourth Amendment to the Sublease (hereinafter "Fourth
Amendment"), dated as of the 9th day of September, 1974, by and between the
Trustees, as Lessor, and American, as Lessee, (a copy of which was duly
recorded in the records of the County Clerk of Tulsa County, Oklahoma in Book
4658, Page 108 on December 22, 1982). Said Sublease, as so amended, covers the
following property in Tulsa County, Oklahoma:
(a) The following premises as revised by mutual agreement
of the parties hereto, (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Lease dated August 6,
1957, as amended, and pursuant to the Leases dated March 29, 1968 and
July 31, 1969, in each case from the City of Tulsa to Lessor (such
leases being hereinafter collectively called the "Ground Lease"),
being 244.75 acres, more or less, bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
3
<PAGE> 62
Commencing at the Northeast Corner of Section 24; Thence S 00
-01'-42" W, along the East line of said Section, a distance of
1320.00 feet; Thence N 76 degrees -01'-30" W a distance of
51.53 feet to the Point of Beginning;
Thence N 76 degrees -01'-30" W a distance of 51.53;
Thence S 00 degrees -01'-42" E a distance of 64.93;
Thence S 89 degrees -58'-18" W a distance of 2490.00;
Thence N 16 degrees -23'-59" W a distance of 998.78;
Thence N 02 degrees -54'-49" E a distance of 3050.00;
Thence S 89 degrees -51'-46" E a distance of 37.97;
Thence S 00 degrees -47'-20" E a distance of 350.00;
Thence S 89 degrees -30'-35" E a distance of 247.72;
Thence N 13 degrees -48'-11" E a distance of 361.67;
Thence S 89 degrees -51'-16" E a distance of 1017.66;
Thence S 00 degrees -01'-14" E a distance of 100.00;
Thence S 39 degrees -51'-16" E a distance of 1270.77;
Thence S 00 degrees -01'-24" E a distance of 285.87;
Thence S 11 degrees -16'-36" W a distance of 51.03;
Thence S 00 degrees -01'-24" E a distance of 430.10;
Thence S 44 degrees -58'-36" W a distance of 42.43;
Thence S 00 degrees -10'-24" E a distance of 50.00;
Thence S 45 degrees -01'-24" E a distance of 42.43;
Thence S 00 degrees -01'-24" E a distance of 359.90;
Thence S 11 degrees-20'-24" E a distance of 50.96;
Thence S 00 degrees -01'-24" E a distance of 700.00;
Thence S 11 degrees -16'-36" W a distance of 50.03;
Thence S 00 degrees -01'-24" E a distance of 450.00;
Thence S 44 degrees -58'-36" W a distance of 70.71;
Thence N 89 degrees -53'-37" W a distance of 10.90;
Thence S 45 degrees -01'-42" E a distance of 100.27;
Thence S 11 degrees -01'-42" E a distance of 1236.92;
To the Point of Beginning,
and at the option of Lessee, exercisable by written notice to Lessor
in the event that Lessor shall obtain a leasehold interest therein,
the following land and the improvements thereon (herein sometimes
called the "Disposal Plant")
All that lot consisting of approximately six (6) acres located
in the SW 1/4 of Section 12, Township 20 North, Range 13 East,
in Tulsa, Oklahoma, approximately one-half mile to the north
of the above- described premises, on a
4
<PAGE> 63
portion of which there is situated a sanitary sewer disposal
plant owned, as of the date of this Sublease, by the City of
Tulsa, Oklahoma, together with such sewer line easements as
may be required between the above-described premises and said
lot and between said lot and Bird Creek, lying approximately
two (2) miles to the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder,
shall be included in the term "Base Premises" except as the context
may otherwise require;
(b) certain other buildings, improvements and fixtures,
sometimes referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, together with the transit
waste disposal line located thereon and all rights in connection
therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments
and appurtenances belonging or appertaining to any of the foregoing.
The Sublease, as heretofore amended, is hereby further amended
in the manner and to the extent as hereinafter set forth, effective as of the
1st day of December, 1982 as follows:
A. Section 2 is amended by deleting the first two
sentences thereof and by substituting therefor the following:
The term of this Sublease commenced on June 24, 1958 and shall, unless
terminated prior thereto as herein provided, expire at 12:00 noon,
Tulsa time, June 1, 2011.
B. Paragraph (a) of Section 3 is amended by deleting
subparagraph (iii), (iv) and (v) thereof and by substituting therefor the
following:
(iii) $46,350 per annum during the period commencing
February 1, 1976 and ending January 31, 1983,
(iv) $92,700.00 per annum, (in advance) prorated if for
less than one (1) year, during the period commencing on February 1,
1983 and ending January 31, 1988. Within one hundred eighty (180)
days after the effective date of this Fifth Amendment to Sublease, the
Base Premises as set forth in Article I hereof shall be appraised as
improved without consideration for the structural improvements
thereon. Said appraisal shall be
5
<PAGE> 64
termed the "Preliminary 1983 Base Appraisal". Lessor shall inform
Lessee of the Preliminary 1983 Base Appraisal. Said appraisal shall
become the "Final 1983 Base Appraisal" unless Lessee shall within
thirty (30) days of receipt of said notice, notify Lessor in writing,
that it does not concur with the Preliminary 1983 Base Appraisal.
Concurrently with Lessee's objection to the Preliminary 1983 Base
Appraisal, Lessee shall furnish to Lessor the name and address of a
qualified appraiser for determining the value of the Base Premises as
heretofore set forth. Thereafter, the two (2) appraisers, one (1)
appointed each by Lessor and Lessee, shall select a third appraiser,
and in the event of their failure to agree upon such third appraiser,
either party may apply to the District Court of Tulsa County,
Oklahoma, to appoint a qualified third appraiser. The three (3)
appraisers so chosen shall determine the value of the Base Premises
exclusive of the structural improvements thereon. Their appraisal
shall thereupon be binding upon the parties hereto and be deemed the
Final 1983 Base Appraisal. Thereafter, on or about November 1, 1987,
Lessor shall again initiate an appraisal process which shall be
conducted in the same manner as the 1983 appraisal. The final result
of such appraisal shall be termed the "Final 1988 Base Appraisal".
For the period February 1, 1988 through January 31, 1993, the annual
land rental for the premises shall be determined by multiplying
$92,700.00 by a fraction, the numerator of which is the final 1988
appraisal and the denominator of which is the final 1983 appraisal,
provided, however, that for the period February 1, 1988 through
January 31, 1990, the annual rental will not exceed $115,875.00. For
the period February 1, 1990 through January 31, 1993, the annual land
rental shall be an amount calculated by utilization of the formula
heretofore set forth without regard to any limitation for the period
February 1, 1988 through January 31, 1990. Commencing February 1,
1993 for the period through January 31, 1998, and for each succeeding
five (5) year period, the annual rental shall be determined by
multiplying $92,700.00 by a fraction the numerator of which is the
Final Base Appraisal determined during the three (3) months
immediately preceding such five (5) year period and the denominator of
which is the 1983 Final Base Appraisal. All such appraisals shall be
conducted in the same manner as the 1983 Base Appraisal and the 1988
Base Appraisal.
(v) In addition to the base rentals as set forth in
subparagraph (iv) herein, there shall be payable February 1 of each
year of the term hereof an Administrative fee in the sum of $8,000 or
actual Administrative costs of Lessor, whichever is greater; provided
however that the amount of $8,000 provided in this section shall be
adjusted upward or downward by the percentage of upward or downward
changes in the implicit price deflator index published by the U. S.
Department of Commerce utilizing the calendar year 1983 as the base
year.
C. Section 3 is further amended by deleting subsections
(aa) and (b) thereof and by substituting therefor the following:
6
<PAGE> 65
(b) In addition to the payments contracted for in
subsection 3(a) above, Lessee will pay Lessor, with respect to each
Bond Year (as defined below), commencing on the first day of the month
following the effective date of the Fifth Amendment to the Sublease
and continuing until the Terminal Date (as defined below) additional
rentals per annum equal to the Annual Principal and Interest
Requirement (as defined below) for such Bond Year on (i) the Revenue
Bonds, Series 1963, of Lessor (hereinafter referred to as the "Series
1963 Bonds") issued pursuant to the terms of the Bond Indenture
(hereinafter referred to as the "Indenture"), dated May 1, 1963,
between Lessor and the bond trustee (hereinafter referred to as the
"Bank"), (ii) the Revenue Bonds, Series 1969, of Lessor (hereinafter
referred to as the "Series 1969 Bonds") issued pursuant to the terms
of the Indenture and the First Supplemental Bond Indenture, dated as
of December 1, 1969 between Lessor and the Bank, (iii) the Revenue
Bonds, Series 1971, of Lessor (hereinafter referred to as the "Series
1971 Bonds") issued pursuant to the terms of the Indenture and the
Second Supplemental Bond Indenture, dated as of June 1, 1971, between
Lessor and the Bank, and (iv) the Revenue Bonds, Series 1982A, of
Lessor (hereinafter referred to as "Series 1982A Bonds") issued
pursuant to the terms of the Indenture and the Third Supplemental Bond
Indenture, dated as of December 1, 1982 between Lessor and Bank (the
Indenture as amended and supplemented by such First Supplemental Bond
Indenture, said Second Supplemental Bond Indenture and said Third
Supplemental Bond Indenture is hereinafter referred to as the
"Supplemented Indenture"). Such additional rentals shall be payable
by Bond Periods (as defined below) in advance in equal monthly
installments on the first day of each month in such Bond Period, so
that there is paid during each Bond Period an amount equal to the
Semiannual Principal and Interest Requirement (as defined below) for
such Bond Period, provided that Lessee, if not then in default
hereunder, may in any Bond Year beginning with the Bond Year
commencing June 1, 1982 credit against the additional rentals provided
for in this subsection (b):
(i) the amount of any balance transferred by the Bank
pursuant to the terms of the Supplemented Indenture from any bond
retirement fund established thereunder to any fund so established the
moneys of which are to be used for the payment of principal of and
interest and premium, if any, on the Series 1963 Bonds, the Series
1969 Bonds, the Series 1971 Bonds or the Series 1982A Bonds
(hereinafter collectively referred to as the "Bonds"), or any
combination thereof, which credit shall be applied against the
installment or installments of additional
7
<PAGE> 66
rentals provided for in this subsection (b) next coming due, if
and to the extent that such credit would not result on the next
succeeding June 1 or December 1, as the case may be, in the
moneys in any such latter fund available therefor being
insufficient to pay the interest and principal, if any, due on
such June 1 or December 1 or to redeem Bonds on any such date
to the extent required by the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to
subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 1982 and
continuing until the Terminal Date. The term "Bond Period" shall mean
each period of six months beginning on June 1 or December 1 during any
Bond year. The term "Semiannual Principal and Interest Requirement"
with respect to any Bond Period shall mean the interest on the Bonds
accrued in such Bond Period plus any amount required on the December 1
or June 1, as the case may be, following such Bond Period on account
of principal to pay the Bonds at the stated maturities thereof and on
account of principal and premium, if any, to redeem or prepay the
Bonds pursuant to any mandatory sinking fund or redemption requirement
applicable thereto. The term "Annual Principal and Interest
Requirement" with respect to any Bond Year shall mean the sum of the
Semiannual Principal and Interest Requirements with respect to the
Bond Periods comprising such Bond year. The Semiannual Principal and
Interest Requirement for each Bond Period shall be determined as of
the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund
or otherwise under the Supplemented Indenture and then available for
the payment of interest and premium, if any, on and principal of the
Bonds shall equal or exceed the amount required to redeem or pay all
the Bonds at the time outstanding (including principal, redemption
premium, if any, and interest to their stated maturities or to the
next date or dates on which such Bonds may be callable for redemption,
whichever is the earlier).
D. Section 3 is further amended by deleting subsection
(e) thereof without substitution therefore.
E. A new Section 5B is inserted immediately following
Section 5A, as follows:
5B. Construction, Acquisition or Installation of 1982A
Improvements.
8
<PAGE> 67
The Series 1982A Bonds are being issued for the purpose of
providing long-term financing for a portion of the cost of
construction and installation at the Base, of additional facilities
and equipment, including facilities and support equipment for the
maintenance of the new Boeing 767 aircraft, and additional equipment,
modifications and improvements to existing facilities. The cost of
construction and installation of facilities will exceed the funds made
available from the proceeds of the sale of the Series 1982A Bonds.
Lessee presently intends to request Lessor to issue Additional Bonds
under the Supplemented Indenture to finance such excess costs. In the
event that such Additional Bonds are not sold or the proceeds of such
Additional Bonds are not sufficient to pay the additional or excess
costs, Lessee shall pay the cost of the facilities in excess of the
funds available from the Series 1982A Bonds and any excess cost of
that part of the 1982A improvements, not constituting personal
property or equipment shall be paid promptly from time to time, by
Lessee to the Bank upon receipt by Lessee of duplicate originals or
certified copies of certificates of said architects that labor and
material has been furnished and money due and owing therefore, and
such excess cost of that part of the 1982A Improvements, constituting
personal property and equipment shall be paid promptly, from time to
time, by Lessee, to the Bank as soon as each item of such personal
property and equipment is installed. Lessor and Lessee shall have the
right to inspect the construction and installation of work
contemplated hereby at all reasonable times and to inspect during
regular business hours, all books, records, plans and specifications
of the other party hereto and other data relating thereto or to the
cost thereof. At such time as the 1982A Improvements are ready for
use or occupancy, Lessor and Lessee shall deliver to the Bank (i) a
certificate of Lessor, countersigned by such architects, stating that
the 1982A Improvements are ready for use or occupancy by Lessee,
stating the date on which such readiness occurred, setting forth in
reasonable detail the final cost of the construction, acquisition or
installation of the 1982A Improvements and stating that such final
costs have been paid in full or, in the event that such final costs
have not been paid in full, the amount to be retained by the Bank in
the 1982A Construction Fund (as defined in the Supplemented Indenture)
to pay all such final costs in full; and (ii) a certificate of Lessee
stating that the 1982A Improvements have been constructed, acquired
and installed and are ready for use or occupancy by Lessee and stating
the final costs of the construction, acquisition or installation of
the 1982A Improvements and stating that such final costs have been
paid in full or, in the event that such final costs have not been paid
in full, the amount to be retained by the Bank in the 1982A
Construction Fund to pay all such final costs in full. In the event
that certificates of Lessor and Lessee required to be delivered by
clauses (i) and (ii) of this Section 5B shall not state therein that
all final costs have been paid in full as promptly as practical after
such time as all final costs of the construction, acquisition and
installation of the 1982A Improvements shall have been paid in full,
Lessor and Lessee shall each deliver to the Bank, a certificate to
such effect. Lessee agrees that all work (including such
construction, acquisition and installation) under any construction and
acquisition contracts consented to by Lessor or such other agreements
as undertaken by Lessee as Agent on behalf of Lessor, and the 1982A
Improvements are the property of Lessor. Lessee agrees it will not
enter into any amendment of any contract or such other
9
<PAGE> 68
agreements without the prior approval of the Lessor, which approval
shall not be unreasonably withheld.
F. A new paragraph shall be added to Section 6 as
follows:
The Lessee covenants and agrees that it will not take or
authorize or permit any action within its control to be taken, and has
not taken or authorized or permitted any action to be taken, which
would result in interest paid on any of the Bonds issued under the
Supplemented Indenture being included in gross income for purposes of
Federal income taxation (other than Bonds held by a "substantial user"
of the Leased Premises or a "related person", as such terms are
defined in Section 103(b) of the Internal Revenue Code of 1954, as
amended ). The Lessee hereby covenants and agrees that it will not
cause or permit any of the proceeds of any of the Bonds issued under
the Supplemented Indenture to be used or applied directly or
indirectly in such manner as to render any such Bond an "arbitrage
bond" as that term is defined in Section 103(c) of said Code. Without
limiting the generality of the foregoing, the Lessee covenants it will
not cause any use of the proceeds of any of the Bonds issued under the
Supplemented Indenture to be made which, if such use had been
reasonably expected on the date of issue of such Bonds, would have
caused such Bonds to be "arbitrage bonds" within the meaning of said
Section 103(c), and the Lessee shall comply with the requirements of
the said Section 103(c) and any applicable regulations issued with
respect thereto, as may be in force from time to time, throughout the
term of such Bonds.
The Lessee further covenants and agrees that the proceeds of
the Series 1982A Bonds will be applied such that the facilities
financed from the proceeds of at least ninety percent (90%) of the
Series 1982A Bonds will qualify as airport facilities within the
meaning of Section 103(b) (4) (D) of the Internal Revenue Code of
1954, as amended, and application of the proceeds of the Series 1982A
Bonds will not result in more than ten percent (10%) of the aggregate
amount of expenditures from the 1982A Construction Fund at any time
being used for a facility which would not be exempt under said Section
103(b) (4) (D) or for working capital or for property of a character
not subject to the allowance for depreciation as prescribed in Section
103(b) (6) (A) of said Code. The Lessee will not cause or permit any
plans and specifications for the facilities to be financed from the
proceeds of the Series 1982A Bonds to be changed or revised, or such
facilities to be operated, maintained, repaired or renovated, in a
manner such that such facilities to be financed from the proceeds of
at least ninety percent (90%) of the proceeds of the Series 1982A
Bonds will not qualify as airport facilities within the meaning of
Section 103(b) (4) (D) of the Code, or take any other action which
would cause the loss of the exemption of interest on any Series 1982A
Bonds from Federal income taxation.
G. The second paragraph of Section 9 is deleted in its
entirety and the following paragraph is inserted in lieu thereof:
10
<PAGE> 69
Lessor hereby assigns to Lessee effective upon completion of
the 1982A Improvements and delivery of completion certificates as
provided in Section 5, 5A and 5B hereof, all right, title and interest
of Lessor in and to any and all warranties, express or implied, made
to Lessor under, in the case of the 1982A Improvements and under any
and all other construction or purchase contracts entered into by
Lessor or otherwise accruing to the benefit of Lessor and pertaining
to the Leased Property, together with the right to enforce the same
for the benefit of Lessee, either in the name of Lessor or of Lessee
or otherwise, and expressly subrogates Lessee to all of Lessor's
rights of action and causes of action against the other parties to all
such contracts. Lessee will indemnify Lessor against damage, loss or
expense resulting from such enforcement and Lessee's efforts to
enforce the same.
H. Section 10 is hereby deleted in its entirety and the following
new Section 10 is inserted in lieu thereof:
10. Insurance. Lessee, at its expense, shall keep (or
cause to be kept) all of the Improvements insured against loss or
damage (in excess of $100,000 in any one occurrence) by fire,
lightning, tornado, windstorm, hail, explosion, riot, riot attending a
strike, civil commotion, vandalism, sprinkler leakage, aircraft,
vehicles, smoke, or, at the option of Lessor or Lessee, whichever at
the time is responsible for such insurance, under policies with
standard extended coverage endorsements, in amounts not less than 90%
of the full insurable value of the Improvements in question when and
if to the extent that war risk insurance can be procured at reasonable
rates from the United States of America or an agency thereof, Lessee
will also obtain at its expense such insurance on the Leased Property
in an amount not less than 90% of the full insurable value thereof.
All insurance proceeds in excess of $100,000 for any one loss shall be
payable to Lessor or its designee. No such loss or damage shall in
any way relieve Lessee of its obligation to make rental payments as
specified in Section 3 hereof, except as otherwise expressly provided
in Sections 11 and 12 hereof.
Lessee, at its expense, shall cause Lessor and Lessee to be
insured, under policies no more restrictive than the standard form of
comprehensive liability policy, against the claims of any and all
persons, including employees and licenses of Lessee, for bodily injury
(including wrongful death) and property damage in a sum of not less
than $50,000,000 combined single limit for any one accident, occurring
on the Leased Property, or incident to the operation of the Leased
Property, including the construction of the Improvements. On or
before September 30 of each year Lessee shall deliver to Lessor and
the Bank a certificate, signed by two (2) officers of Lessee, one of
whom shall be a Vice President, stating that as of the date of such
certificate that the insurance evidenced by such certificates complies
with the requirements of this Section 10.
11
<PAGE> 70
All such insurance shall be effected under policies issued by
insurers of recognized responsibility authorized to do business in
Oklahoma. Certificates evidencing such insurance, in form
satisfactory to Lessor and the Bank, shall, promptly after the
issuance of such policies, be delivered by Lessee to Lessor and to the
Bank. Such policies shall be non-cancellable except after at least
thirty (30) days' written notice to Lessor, Lessee and the Bank.
I. Section 19 is hereby deleted in its entirety and the
following new Section 19 (Use of Revenues; Compliance with Ground Lease.) is
hereby inserted in lieu thereof.
Use of Revenues; Compliance with Ground Lease. All revenues
derived by Lessor from rental of the Leased Property will either be
used by Lessor for the operation, maintenance, development or
improvement of Tulsa International Airport (formerly Tulsa Municipal
Airport), or be paid by Lessor to the Trustees of the Tulsa Airports
Improvement Trust (Airport Discretionary Account) for the operation,
maintenance, development or improvement of the Tulsa Airports System,
provided, however, that the portion of the basic rental payable
pursuant to subparagraph (v) of paragraph 3(a) of Section 3, plus all
other amounts payable under Subsection 3(a) of the Sublease shall be
paid to Lessor to be held or expended by them free and clear of the
lien of Supplemented Indenture; provided, however, that the amount of
$8,000 provided in said subparagraph (v) shall be adjusted upward or
downward by the percentage of upward or downward changes in the
implicit price deflator index published by the U. S. Department of
Commerce utilizing the calendar year 1983 as the base year, being such
of the revenues derived from the Leased Property as are in excess of
the amounts that would be due and accruing to the City of Tulsa under
Lease dated January 10, 1946 between said City and Lessee, if said
Lease were still in effect, may be pledged or assigned by Lessor to
the Bank under the Supplemented Indenture providing for the issuance
of the Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds or
Series 1982A Bonds, or otherwise pledged or assigned for airport
revenue bond purposes. Lessor will pay or cause to be paid all
rentals due under the Ground Lease and will comply with, or cause to
be complied with, all other provisions of the Ground Lease. Lessor
will, promptly on receipt of any notice from Lessor under the Ground
Lease pertaining to said Lease, transmit a copy of said notice to
Lessee.
J. (a) Section 1(b) is amended by inserting immediately
after the words "Section 5 or Section 5A" the first time they appear in Section
1(b) the words "or Section 5B" and by inserting immediately after the words
"Section 5 or said Section 5A" the second time they appear in Section 1(b) the
words "or said Section 5B".
12
<PAGE> 71
(b) Sections 4(a) and 8(a)(i)(2)(B) are amended by inserting
immediately after the words "Section 5 or Section 5A" the words "or Section
5B".
K. The Sublease is further amended by deleting the words "Series
1963 Bonds, Series 1969 Bonds and Series 1971 Bonds" in each place in which
they appear and by substituting therefor the words "Series 1963 Bonds, Series
1969 Bonds, Series 1971 Bonds and Series 1982A Bonds" and by deleting the words
"Series 1963 Bonds, Series 1969 Bonds or Series 1971 Bonds" where such words
appear in Sections 9, 12 and 14 of the Sublease and by substituting therefor
the words "Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds or Series
1982A Bonds."
ARTICLE II.
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended by the First Amendment, Second
Amendment, Third Amendment, Fourth Amendment and this Fifth Amendment to the
Sublease.
ARTICLE III.
Except as herein amended, the Sublease shall be and remain in full
force and effect.
ARTICLE IV.
No trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution or the
terms or provisions or conditions of this Fifth Amendment to the Sublease.
13
<PAGE> 72
ARTICLE V.
American hereby consents to the assignment by the Trustees of any and
all of their right under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment and this Fifth
Amendment to the Sublease to J. Henry Schroder Bank & Trust Company, New York,
New York as successor Trustee under the 1963 Indenture as supplemented by the
First Supplemental Bond Indenture, dated as of December 1, 1969, and the Second
Supplemental Bond Indenture, dated as of June 1, 1971 and the Third
Supplemental Bond Indenture dated as of December 1, 1982, each between the
Trustees and J. Henry Schroder Bank & Trust Company of New York, New York and
American agrees to comply with the provisions of such assignment to the extent
applicable to it. Lessee specifically approves and consents to the terms and
provisions of the Third Supplemental Bond Indenture, dates as of December 1,
1982.
14
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment to the Sublease this 16th day of December, 1982.
Lessor
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ J.W. BATES, JR.
-------------------------------------------
J. W. Bates, Jr. Chairman
ATTEST:
[ILLEGIBLE]
- ------------------------
Secretary
Lessee
AMERICAN AIRLINES, INC.
By: [ILLEGIBLE]
-------------------------------------------
Vice President Properties & Facilities (Acting)
ATTEST:
[ILLEGIBLE]
- ------------------------
Secretary
15
<PAGE> 74
STATE OF OKLAHOMA, )
) ss.
COUNTY OF TULSA Section
The foregoing Fifth Amendment to the Sublease dates as of
December 1, 1982, was acknowledged before me this 16th day of December, 1982 by
J. W. Bates, Jr., Chairman of the Trustees of the Tulsa Municipal Airport
Trust, a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 16th day of December,
1982.
[ILLEGIBLE]
----------------------------------
Notary Public
My commission expires:
April 15, 1986
- ----------------------
STATE OF TEXAS )
ss.
COUNTY OF DALLAS )
Before me, Myrna King, a Notary Public in and for said State, on this 23rd day
of December, 1982, personally appeared [illegible] to me known to be the
identical person who prescribed the name of American Airlines, Inc. thereof to
the foregoing instrument as its Vice President who being duly sworn, do depose
and say that he resides at [illegible] that he is the Vice President of
American Airlines, Inc., the corporation described herein for which executed
the above instrument; that he knows the seal of said corporation; that said
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation, in that he signed his
name thereto by like order, and acknowledged to me that the same was his free
and voluntary act and deed and the free and voluntary act and deed of such
corporation for the use and purposes therein set forth.
Subscribed and sworn to before me this 23rd day of December, 1982.
/s/ MYRNA KING
----------------------------------
Notary Public
My commission expires:
9/20/84
- ----------------------
16
<PAGE> 75
MUTUAL RELEASE AND RESCISSION
OF THE
SIXTH AMENDMENT TO THE SUBLEASE
DATED DECEMBER 15, 1982
THIS Mutual Release and Rescission dated as of this 15th day of March,
1983, between the Trustees of the Tulsa Municipal Airport Trust ("Trustees"), a
trust created and existing pursuant to the laws of the State of Oklahoma, and
American Airlines, Inc., a Delaware corporation ("American"):
WHEREAS, the Trustees and American heretofore entered into a Sixth
Amendment to the Sublease, dated as of December 15, 1982 (the "December 15,
1982 Sixth Amendment to the Sublease"), in connection with amending and
supplementing that certain Sublease dated as of June 24, 1958 between the
Trustees and American, duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 2877 at page 550 et seq. on June 27, 1958 as
subsequently amended and supplemented, which December 15, 1982 Sixth Amendment
to Sublease provided for the lease of certain additional improvements and
equipment at the Base Premises leased to American under such Sublease, and the
payment of additional rentals by American sufficient to provide for the payment
of the proposed $28,500,000 principal amount of "Trustees of the Tulsa
Municipal Airport Trust, Revenue Bonds, Series 1982B", to be dated as of
December 15, 1982 (the "Series 1982B Bonds");
WHEREAS, the December 15, 1982 Sixth Amendment to the Sublease covers
the following property in Tulsa County, State of Oklahoma, set forth in Exhibit
"A", attached hereto, and incorporated by reference as if set forth herein;
WHEREAS, the December 15, 1982 Sixth Amendment to the Sublease was
duly recorded on December 29, 1982 in Book 4659 at page 73 et seq. of the
records of the County Clerk of the County of Tulsa and State of Oklahoma; and
WHEREAS, none of the Series 1982B Bonds have been issued or delivered;
and
WHEREAS, the Trustees and American now desire to enter into a new
Amendment to Sublease for the lease of certain additional improvements and
equipment at the Base Premises leased to American under the Sublease, and in
contemplation thereof to release and rescind the December 15, 1982 Sixth
Amendment to the Sublease;
NOW, THEREFORE, the Trustees and American by these presents hereby
mutually release and rescind the December 15, 1982 Sixth Amendment to the
Sublease from this day forth.
<PAGE> 76
Said Sublease covers the property in Tulsa County, State of Oklahoma, as set
forth in Exhibit "A", attached hereto.
IN WITNESS WHEREOF, the parties have executed this Mutual Release and
Rescission of the December 15, 1982 Sixth Amendment to the Sublease on the day
and year first above written.
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ J. W. BATES
----------------------------------------
J. W. Bates, Jr. Chairman
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------
Secretary
LESSEE
AMERICAN AIRLINES, INC.
By /s/ RICHARD B. JAMISON
--------------------------------------
Richard B. Jamison
Vice President-Properties & Facilities
--------------------------------------
Title
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------
Assistant Secretary
<PAGE> 77
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Mutual Release and Rescission of the Sixth Amendment to
the Sublease dated December 15, 1982, was acknowledged before me this 29th day
of March, 183 by J. W. BATES, JR., Chairman of the Trustees of the Tulsa
Municipal Airport Trust, a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 29th day of March, 1983.
/s/ PAULA S. HALLAN
------------------------------------
Paula S. Hallan
Notary Public
My Commission Expires:
April 25, 1986
- ------------------------------
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
Before me, Kathleen A. Ashley, a Notary Public in and for said State
on this 30th day of March, 1983, personally appeared RICHARD B. JAMISON, to me
known to be the identical person who prescribed the name of American Airlines,
Inc. thereof to the foregoing instrument as its V.P. Prop. & Fac., who being by
me duly sworn, does depose and say that he resides at ________________________;
that he is the V.P. Prop. & Fac. of American Airlines, Inc., the corporation
described herein for which executed the above instrument; that he knows the
seal of said corporation; that said seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation, in that he signed his name thereto by like order, and
acknowledged to me that the same was his free and voluntary act and deed and
the free and voluntary act and deed of such corporation for the use and
purposes therein set forth.
Subscribed and sworn to before me this 30th day of March, 1983.
/s/ KATHLEEN A. ASHLEY
-----------------------------------
Notary Public
My Commission Expires:
7/21/84
- ------------------------------
<PAGE> 78
EXHIBIT "A"
(a) The following premises as revised by mutual agreement of the
parties hereto, (hereinafter sometimes called the "Base Premises") which
Lessor leases pursuant to the Lease dated August 6, 1957, as amended, and
pursuant to the Leases dated March 29, 1968 and July 31, 1969, in each case
from the City of Tulsa to Lessor (such leases being hereinafter collectively
called the "Ground Lease") being 244.75 acres, more or less, bounded and
described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13 East,
Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00 degrees -01'
-42" W, along the East line of said Section, a distance of 1320.00 feet;
Thence N 76 degrees -01 -30" W a distance of 51.53 feet to the Point of
Beginning;
Thence N 76 degrees -01' -30" W a distance of 51.53;
Thence S 00 degrees -01' -42" E a distance of 64.93;
Thence S 89 degrees -58' -18" W a distance of 2490.00;
Thence N 16 degrees -23' -59" W a distance of 998.78;
Thence N 2 degrees -54' -49" E a distance of 3050.00;
Thence S 89 degrees -51' -46" E a distance of 37.97;
Thence S 00 degrees -47' -20" E a distance of 350.00;
Thence S 89 degrees -30' -35" E a distance of 247.72;
Thence N 13 degrees -48' -11" E a distance of 361.67;
Thence S 89 degrees -51' -16" E a distance of 1017.66;
Thence S 00 degrees -01' -14" E a distance of 100.00;
Thence S 89 degrees -51' -16" E a distance of 1270.77;
Thence S 00 degrees -01' -24" E a distance of 285.87;
Thence S 11 degrees -16' -36" W a distance of 51.03;
Thence S 00 degrees -01' -24" E a distance of 430.10;
Thence S 44 degrees -58' -36" W a distance of 42.43;
Thence S 00 degrees -10' -24" E a distance of 50.00;
Thence S 45 degrees -01' -24" E a distance of 42.43;
Thence S 00 degrees -01' -24" E a distance of 359.90;
Thence S 11 degrees -20' -24" E a distance of 50.96;
Thence S 00 degrees -01' -24" E a distance of 700.00;
Thence S 11 degrees -16' -36" W a distance of 50.03;
Thence S 00 degrees -01' -24" E a distance of 450.00;
Thence S 44 degrees -58' -36" W a distance of 70.71;
Thence N 89 degrees -53' -37" W a distance of 10.90;
Thence S 45 degrees -01' -42" E a distance of 100.27;
Thence S 11 degrees -01' -42" E a distance of 1236.92;
<PAGE> 79
To the Point of Beginning,
and at the option of Lessee, exercisable by written notice to Lessor in the
event that Lessor shall obtain a leasehold interest therein, the following
land and the improvements thereon (herein sometimes called the "Disposal
Plant")
All that lot consisting of approximately six (6) acres located in the
SW 1/4 of Section 12, Township 20 North, Range 13 East, in Tulsa,
Oklahoma, approximately one-half mile to the north of the
above-described premises, on a portion of which there is situated a
sanitary sewer disposal plant owned, as of the date of this Sublease,
by the City of Tulsa, Oklahoma, together with such sewer line
easements as may be required between the above-described premises and
said lot and between said lot and Bird Creek, lying approximately two
(2) miles to the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder, shall
be included in the term "Base Premises" except as the context may otherwise
require;
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and operating
a transit waste disposal line, together with the transit waste disposal line
located thereon and all rights in connection therewith or appurtenant
thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
EXHIBIT "A"
-2-
<PAGE> 80
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR RECORDED
1983 APR -5 PM 12:57
ANITA NESBITT
COUNTY CLERK
- --------------------------------------------------------------------------------
SIXTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF APRIL 1, 1983
- --------------------------------------------------------------------------------
<PAGE> 81
SIXTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the first day of April, 1983, by
and between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American"),
W I T N E S S E T H:
WHEREAS, the Trustees have heretofore entered into a Sixth
Amendment to the Sublease dated as of December 15, 1982 (the "Sixth Amendment
to the Sublease"), in connection with amending and supplementing that certain
Sublease dated as of June 24, 1958 between the Trustees and American, duly
recorded in the records of the County Clerk of Tulsa County, Oklahoma in Book
2877 at Page 550 et seq. on June 27, 1958 as subsequently amended and
supplemented, which Sixth Amendment to Sublease provided for the lease of
certain additional improvements and equipment at the Base Premises leased to
American under such Sublease, and the payment of additional rentals by American
sufficient to provide for the payment of the proposed issuance by the Trustees
of $28,500,000 principal amount of "Trustees of the Tulsa Municipal Airport
Trust, Revenue Bonds, Series 1982B", to be dated as of December 15, 1982 (the
"Series 1982B Bonds");
-1-
<PAGE> 82
WHEREAS, the Sixth Amendment to the Sublease was duly recorded
on December 29, 1982 in Book 4659 at page 73 et seq. of the records of the
County Clerk of the County of Tulsa, State of Oklahoma; and
WHEREAS, none of the 1982B Bonds have been issued or
delivered; and
WHEREAS, the Trustees and American have mutually released and
rescinded said Sixth Amendment to Sublease as of the ________ day of March,
1983, duly recorded on ________, 1983 in Book _____ at page _____ et seq. of
the records of the County Clerk of the County of Tulsa, State of Oklahoma; and
WHEREAS, the Trustees and American now desire to enter into a
new Sixth Amendment to the Sublease for the lease of certain additional
improvements and equipment at the Base Premises leased to American under the
Sublease, and in contemplation thereof to release and rescind the Sixth
Amendment to the Sublease; and
NOW THEREFORE, for and in consideration of the mutual
promises, terms conditions and covenants herein contained, the parties hereto
do hereby agree as follows:
-2-
<PAGE> 83
ARTICLE I
The Sublease, dated as of June 24, 1958, (hereinafter the
"Sublease"), by and between the then Trustees of the Tulsa Municipal Airport
Trust (the Trustees and all predecessor and successor Trustees of the Tulsa
Municipal Airport Trust hereinafter "Trustees"), as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to Sublease (hereinafter the "First Amendment"),
dated as of May 1, 1963, by and between the Trustees, as Lessor, and American,
as Lessee (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 3341, Page 200, on May 16, 1963, as Exhibit
A to the Bond Indenture dated as of May 1, 1963, between the Trustees and
Morgan Guaranty Trust Company of New York, in New York, New York, as bond
trustee (such trustee being succeeded by J. Henry Schroder Bank & Trust
Company, in New York, New York)), pursuant to which the Revenue Bonds, Series
1963, of such Trustees were issued, and as further amended by the Second
Amendment to the Sublease (hereinafter the "Second Amendment"), dated as of
December 1, 1969, by and between the Trustees, as Lessor and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 3912, Page 642 on December 22, 1969) and as
further amended by the Third Amendment to the Sublease
-3-
<PAGE> 84
(hereinafter the "Third Amendment") dated as of the 1st day of June, 1971, by
and between the Trustees, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in Book 3992, Page 419 on November 8, 1971) and as further amended by the
Fourth Amendment to the Sublease (hereinafter "Fourth Amendment"), dated as of
the 9th day of September, 1974, by and between the Trustees, as Lessor, and
American as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma in Book 4958, Page 108 on December 22,
1982, and as further amended by the Fifth Amendment to the Sublease
(hereinafter "Fifth Amendment") dated as of the 1st day of December, 1982, by
and between the Trustees, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma
in Book 4658, Page 2225 on December 28, 1982). Said Sublease, as so amended,
covers the following property in Tulsa County, Oklahoma:
(a) The following premises as revised by mutual agreement of
the parties hereto, (hereinafter sometimes called the "Base Premises")
which Lessor leases pursuant to the Lease dated August 6, 1957, as
amended, and pursuant to the Leases dated March 29, 1968 and July 31,
1969, in each case from the City of Tulsa to Lessor (such leases being
hereinafter collectively called the "Ground Lease") being 244.75
acres, more or less, bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00 degrees
-01'-42" W, along the East line of said Section, a distance of 1320.00
feet; Thence N 76 degrees -01'-30" W a distance of 51.53 feet to the
Point of Beginning;
-4-
<PAGE> 85
Thence N 76 degrees -01'-30" W a distance of 51.53;
Thence S 00 degrees -01'-42" E a distance of 64.93;
Thence S 89 degrees -58'-18" W a distance of 2490.00;
Thence N 16 degrees -23'-59" W a distance of 998.78;
Thence N 2 degrees -54'-49" E a distance of 3050.00;
Thence S 89 degrees -51'-46" E a distance of 37.97;
Thence S 00 degrees -47'-20" E a distance of 350.00;
Thence S 89 degrees -30'-35" E a distance of 247.72;
Thence N 13 degrees -48'-11" E a distance of 361.67;
Thence S 89 degrees -51'-16" E a distance of 1017.66;
Thence S 00 degrees -01'-14" E a distance of 100.00;
Thence S 89 degrees -51'-16" E a distance of 1270.77;
Thence S 00 degrees -01'-24" E a distance of 285.87;
Thence S 11 degrees -16'-36" W a distance of 51.03;
Thence S 00 degrees -01'-24" E a distance of 430.10;
Thence S 44 degrees -58'-36" W a distance of 42.43;
Thence S 00 degrees -10'-24" E a distance of 50.00;
Thence S 45 degrees -01'-24" E a distance of 42.43;
Thence S 00 degrees -01'-24" E a distance of 359.90;
Thence S 11 degrees -20'-24" E a distance of 50.96;
Thence S 00 degrees -01'-24" E a distance of 700.00;
Thence S 11 degrees -16'-36" W a distance of 50.03;
Thence S 00 degrees -01'-24" E a distance of 450.00;
Thence S 44 degrees -58'-36" W a distance of 70.71;
Thence N 89 degrees -53'-37" W a distance of 10.90;
Thence S 45 degrees -01'-42" E a distance of 100.27;
Thence S 11 degrees -01'-42" E a distance of 1236.92;
To the Point of Beginning,
and at the option of Lessee, exercisable by written notice to Lessor
in the event that Lessor shall obtain a leasehold interest therein,
the following land and the improvements thereon (herein sometimes
called the "Disposal Plant")
All that lot consisting of approximately six (6) acres located
in the SW 1/4 of Section 12, Township 20 North, Range 13 East,
in Tulsa, Oklahoma, approximately one-half mile to the north
of the above-described premises, on a portion of which there
is situated a sanitary sewer disposal plant owned, as of the
date of this Sublease, by the City of Tulsa, Oklahoma,
together with such sewer line easements as may be required
between the above-described premises and said lot and between
said lot and Bird Creek, lying approximately two (2) miles to
the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder,
shall be included in the term "Base Premises" except as the context
may otherwise require;
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<PAGE> 86
(b) certain other buildings, improvements and fixtures,
sometimes referred to in the Sublease as the "Improvements"; and
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all
rights in connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
The Sublease, as heretofore amended, is hereby further amended
in the manner and to the extent as hereinafter set forth, effective as of the
1st day of April, 1983, as follows:
A. Section 3 is amended by deleting subsection (b) thereof and
by substituting therefor the following:
(b) In addition to the payments contracted for in subsections
3(a) and 3(aa) above, Lessee will pay Lessor, with respect to each
Bond Year (as defined below), commencing on the first day of the month
following the effective date of the Sixth Amendment to the Sublease
and continuing until the Terminal Date (as defined below) additional
rentals per annum equal to the Annual Principal and Interest
Requirement (as defined below) for such Bond Year on (i) the Revenue
Bonds, Series 1963, of Lessor (hereinafter referred to as the "Series
1963 Bonds") issued pursuant to the terms of the Bond Indenture
(hereinafter referred to as the "Indenture"), dated May 1, 1963 between
Lessor and the bond trustee (hereinafter referred to as the "Bank"),
(ii) the Revenue Bonds, Series, 1969, of Lessor (hereinafter referred
to as the "Series 1969 Bonds") issued pursuant to the terms of the
Indenture and the First Supplemental Bond Indenture, dated as of
December 1, 1969 between Lessor and the Bank, (iii) the Revenue Bonds,
Series 1971, of Lessor (hereinafter referred to as the "Series 1971
Bonds") issued pursuant to the terms of the Indenture and the Second
Supplemental Bond Indenture, dated as of June 1, 1971, between Lessor
and the Bank, (iv) the Revenue Bonds, Series 1982A, of Lessor
(hereinafter referred to as "Series 1982A Bonds") issued pursuant to
the terms of the Indenture and the Third Supplemental Bond Indenture,
dated as of December 1, 1982 between Lessor and Bank and
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<PAGE> 87
(v) the Revenue Bonds, Series 1983, of Lessor (hereinafter referred to
as "Series 1983 Bonds") issued pursuant to the terms of the Fourth
Supplemental Bond Indenture, dated as of April 1, 1983 between Lessor
and Bank (the Indenture as supplemented and amended by said First
Supplemental Bond Indenture, said Second Supplemental Bond Indenture,
said Third Supplemental Bond Indenture, and said Fourth Supplemental
Bond Indenture is hereinafter referred to as the "Supplemented
Indenture"). Such additional rentals shall be payable by Bond Periods
(as defined below) in advance in equal monthly installments on the
first day of each month in such Bond Period, so that there is paid
during each Bond Period an amount equal to the Semiannual Principal
and Interest Requirement (as defined below) for such Bond Period,
provided that Lessee, if not then in default hereunder, may in any
Bond Year beginning with the Bond Year commencing June 1, 1982 credit
against the additional rentals provided for in this subsection (b):
(i) the amount of any balance transferred by the Bank pursuant
to the terms of the Supplemented Indenture from any bond retirement
fund established thereunder to any fund so established the moneys of
which are to be used for the payment of principal of and interest and
premium, if any, on the Series 1963 Bonds, the Series 1969 Bonds, the
Series 1971 Bonds, the Series 1982A Bonds or the Series 1983 Bonds
(hereinafter collectively referred to as the "Bonds"), or any
combination thereof, which credit shall be applied against the
installment or installments of additional rentals provided for in this
subsection (b) next coming due, if and to the extent that such credit
would not result on the next succeeding June 1 or December 1, as the
case may be, in the moneys in any such latter fund available therefor
being insufficient to pay the interest and principal, if any, due on
such June 1 or December 1 or to redeem Bonds on any such date to the
extent required by the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to
subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 198_ and continuing
until the Terminal Date. The term "Bond Period" shall mean each period of six
months beginning on June 1 or December 1 during any Bond Year. The term
"Semiannual Principal and Interest Requirement" with respect to any Bond Period
shall mean the interest on the Bonds accrued in such Bond Period plus any
amount required on the December 1 or June 1, as the case may be, following such
Bond Period on account of principal to pay the Bonds at the stated maturities
thereof and on account of principal and premium, if any, to redeem or prepay
the Bonds pursuant to any mandatory
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<PAGE> 88
sinking fund or redemption requirement applicable thereto. The term "Annual
Principal and Interest Requirement" with respect to any Bond Year shall mean
the sum of the Semiannual Principal and Interest Requirements with respect to
the Bond Periods comprising such Bond Year. The Semiannual Principal and
Interest Requirement for each Bond Period shall be determined as of the
beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund or
otherwise under the Supplemented Indenture and then available for the payment
of interest and premium, if any, on and principal of the Bonds shall equal or
exceed the amount required to redeem or pay all the Bonds at the time
outstanding (including principal, redemption premium, if any, and interest to
their stated maturities or the next date or dates on which such Bonds may be
callable for redemption, whichever is the earlier).
Pursuant to the Fourth Supplemental Bond Indenture providing
for the issuance of the Series 1983 Bonds the Lessor has reserved the right to
permanently establish the rate of interest on the Series 1983 Bonds for the
balance of the term thereof (the "Permanent Interest Rate"). In consideration
of the rentals paid by Lessee hereunder the Lessor hereby grants to Lessee the
right to direct the Lessor to exercise the right to establish the Permanent
Interest Rate. Such direction must be made by notice in writing to the Lessor,
the Bank and the Purchasing Trustee under the Bond Purchase Trust Agreement
hereinafter mentioned not later than the forty-fifth (45th) day preceding the
effective date of the Permanent Interest Rate specifying the date the Permanent
Interest Rate shall be determined (which shall not be less than five (5)
business days prior to the effective date thereof) and setting forth the
effective date thereof (which shall be the first business day of a calendar
month). Such direction shall be accompanied by an opinion of nationally
recognized bond counsel acceptable to the Lessor stating that such
establishment of a Permanent Interest Rate is authorized or permitted by the
Supplemented Indenture, and that establishment of a Permanent Interest Rate
will not adversely affect the exemption of the interest on the Series 1983
Bonds from federal income taxation.
The Lessee has entered into a Bond Purchase Trust Agreement
dated as of April 1, 1983 between itself, J. Henry Schroder Bank & Trust
Company, in its separate corporate capacity as Purchasing Trustee thereunder
and not as the Bank, and E. F. Hutton & Company Inc., for the benefit of the
holders of the Series 1983 Bonds. Pursuant to such agreement Lessee has,
subject to the terms and conditions provided therein, provided the holders of
the Series 1983 Bonds certain rights and benefits. Lessee hereby covenants and
agrees that it will enter into the aforesaid Bond Purchase Trust Agreement and
shall comply with the terms and provisions thereof and
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<PAGE> 89
perform all of its duties and obligations thereunder. In order to inform
holders of the Series 1983 Bonds of the rights provided them under the
aforesaid Bond Purchase Trust Agreement, Lessor agrees to provide a summary of
the rights, terms and conditions provided in such agreement in the forms of
the Series 1983 Bonds. However, it is expressly understood that the rights
provided to holders of the Series 1983 Bonds under the aforesaid Bond Purchase
Trust Agreement do not constitute and shall not be deemed to constitute rights
of such holders under the Indenture, as amended and supplemented, or under such
Series 1983 Bonds.
B. A new Section 5C is inserted immediately following Section
5B, as follows:
5C. Construction, Acquisition or Installation of 1983
Improvements.
The Series 1983 Bonds are being issued for the purpose of
providing long-term financing for a portion of the cost of
construction and installation at the Base, of additional facilities
and equipment, including facilities and support equipment for the
maintenance of the new Boeing 767 aircraft, and additional equipment,
modifications and improvements to existing facilities. The cost of
construction and installation of facilities may exceed the funds made
available from the proceeds of the sale of the Series 1983 Bonds. The
Lessee shall develop plans and specifications for such additional
facilities and equipment and for such purpose may retain, subject to
the written approval of the Lessor, an architect or firm of architects
(which may be staff of the Lessee) (all improvements and equipment
constructed, acquired or installed pursuant to such plans and
specifications being hereinafter referred to as the "1983
Improvements"). In the event that the proceeds of the Series 1983 Bonds
are not sufficient to pay the additional or excess costs, Lessee shall
pay the cost of the facilities in excess of the funds available from
the Series 1983 Bonds and any excess cost of that part of the 1983
Improvements, not constituting personal property or equipment, shall
be paid promptly from time to time, by Lessee to the Bank upon receipt
by Lessee of duplicate originals or certified copies of certificates
of said architects that labor and material has been furnished and
money due and owing therefore, and such excess cost of that part of
the 1983 Improvements, constituting personal property and equipment
shall be paid promptly, from time to time, by Lessee, to the Bank as
soon as each item of such personal property and equipment is
installed. Lessor and Lessee shall have the right to inspect the
construction and installation of work contemplated hereby at all
reasonable times and to inspect during regular business hours,
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<PAGE> 90
all books, records, plans and specifications of the other party hereto
and other data relating thereto or to the cost thereof. At such time
as the 1983 Improvements are ready for use or occupancy, Lessor and
Lessee shall deliver to the Bank (i) a certificate of Lessor,
countersigned by such architects, stating that the 1983 Improvements
are ready for use or occupancy by Lessee, stating the date on which
such readiness occurred, setting forth in reasonable detail the final
cost of the construction, acquisition or installation of the 1983
Improvements and stating that such final costs have been paid in full
or, in the event that such final costs have not been paid in full, the
amount to be retained by the Bank in the 1983 Construction Fund (as
defined in the Supplemented Indenture) to pay all such final costs in
full; and (ii) a certificate of Lessee stating that the 1983
Improvements have been constructed, acquired and installed and are
ready for use or occupancy by Lessee and stating the final costs of
the construction, acquisition or installation of the 1983 Improvements
and stating that such final costs have been paid in full or, in the
event that such final costs have not been paid in full, the amount to
be retained by the Bank in the 1983 Construction Fund to pay all such
final costs in full. In the event the Lessee determines that all or
part of the construction and installation of the work contemplated
hereby is not required then, notwithstanding the foregoing, in lieu of
the certificates required by clauses (i) and (ii) of the preceding
sentence of this Section 5C the Lessee shall deliver to the Lessor and
the Bank a certificate stating that by proper corporate action the
Lessee has determined that all or part of the 1983 Improvements are
not required; setting forth those portions of the 1983 Improvements to
which such determination applies; stating that the portion of the 1983
Improvements which have been or will be constructed, acquired or
installed and the date such portion of the 1983 Improvements are
expected to be ready for use and occupancy by the Lessee; stating the
final cost of the construction, acquisition and installation of that
portion of the 1983 Improvements completed or to be completed, and
stating that such final costs have been paid in full, or in the event
that such final costs have not been paid in full, the amount to be
retained in the 1983 Construction Fund to pay all such final costs in
full; stating that the construction, acquisition and installation of
that portion of the 1983 Improvements completed or to be completed
will not impair the operation of the Base as a complete integral
function unit; and evidencing the concurrence of the aforesaid
architect with respect to the matters set forth in such certificate
(except such architect need not concur with respect to that portion of
the certificate relating to the corporate action making the
determination that all or part of the 1983 Improvements are not
required). In the
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<PAGE> 91
event that certificates of Lessor and Lessee required to be delivered
by clauses (i) and (ii) of the sixth sentence of this Section 5C or
the certificate issued in lieu of such certificates required to be
delivered by the seventh sentence of this Section 5C shall not state
therein that all final costs have been paid in full, as promptly as
practical after such time as all final costs of the construction,
acquisition and installation of the 1983 Improvements shall have been
paid in full, Lessor and Lessee shall each deliver to the Bank, a
certificate to such effect. Lessee agrees that all work (including
such construction, acquisition and installation) under any
construction and acquisition contracts consented to by Lessor or such
other agreements as undertaken by Lessee as Agent on behalf of Lessor,
the 1983 Improvements are the property of Lessor. Lessee agrees it
will not enter into any amendment of any contract or such other
agreements without the prior approval of the Lessor, which approval
shall not be unreasonably withheld.
C. A new paragraph shall be added to Section 6 as follows:
The Lessee covenants and agrees that the proceeds of the
Series 1983 Bonds will be applied such that the facilities financed from the
proceeds of at least ninety percent (90%) of the Series 1983 Bonds will qualify
as airport facilities within the meaning of Section 103(b)(4)(D) of the
Internal Revenue Code of 1954, as amended, and application of the proceeds of
the Series 1983 Bonds will not result in more than ten percent (10%) of the
aggregate amount of expenditures from the 1983 Construction Fund at any time
being used for a facility which would not be exempt under said Section
103(b)(4)(D) or for working capital or for property of a character not subject
to the allowance for depreciation as prescribed in Section 103(b)(6)(A) of said
Code. The Lessee will not cause or permit any plans and specifications for the
facilities to be financed from the proceeds of the Series 1983 Bonds to be
changed or revised, or such facilities to be operated, maintained, repaired or
renovated, in a manner such that such facilities to be financed from the
proceeds of at least ninety percent (90%) of the proceeds of the Series 1983
Bonds will not qualify as airport facilities within the meaning of Section
103(b)(4)(D) of the Code, or take any other action which would cause the loss
of the exemption of interest on any Series 1983 Bonds from federal income
taxation.
D. The second paragraph of Section 9 is deleted in its
entirety and the following paragraph is inserted in lieu thereof;
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<PAGE> 92
Lessor hereby assigns to Lessee effective upon completion of
the 1983 Improvements and delivery of completion certificates as
provided in Section 4, 4A, 5B and 5C hereof, all right, title and
interest of Lessor in and to any and all warranties, express or
implied, made to Lessor under, in the case of the 1983 Improvements
and under any and all other construction or purchase contracts entered
into by Lessor or otherwise accruing to the benefit of Lessor and
pertaining to the Leased Property, together with the right to enforce
the same for the benefit of Lessee and pertaining to the Leased
Property, together with the right to enforce the same for the benefit
of Lessee, either in the name of Lessor or Lessee or otherwise, and
expressly subrogates Lessee to all of Lessor's rights of action and
causes of action against the other parties to all such contracts.
Lessee will indemnify Lessor against damage, loss or expense resulting
from such enforcement and Lessee's efforts to enforce the same.
E. (a) Section 1(b) is amended by inserting immediately after
the words "Section 5 or Section 5A or Section 5B" the first time they appear in
Section 1(b) the words "or Section 5C" and by inserting immediately after words
"Section 5, Section 5A or said Section 5B" the second time they appear in
Section 1(b) the words "or said Section 5C".
(b) Sections 4(a) and 8(a)(i)(2)(B) are amended by
inserting immediately after the words "Section 5, Section 5A or Section 5B" the
words "or Section 5C".
F. The Sublease is further amended by deleting the words
"Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds and Series 1982A
Bonds" in each place in which they appear and by substituting therefor the
words "Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds, Series 1982A
Bonds and Series 1983 Bonds" and by deleting the words "Series 1963 Bonds,
Series 1969 Bonds, Series 1971 Bonds or Series 1982A Bonds"
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<PAGE> 93
where such words appear in Sections 9, 12 and 14 of the Sublease and by
substituting therefor the words "Series 1963 Bonds, Series 1969 Bonds, Series
1971 Bonds, Series 1982A Bonds or Series 1983 Bonds."
ARTICLE II
On and after the date hereof, the term "Sublease" shall mean
the Sublease dated as of June 24, 1958, as amended by the First Amendment,
Second Amendment, Third Amendment, Fourth Amendment, the Fifth Amendment and
this Sixth Amendment to the Sublease.
ARTICLE III
Except as herein amended, the Sublease shall be and remain in
full force and effect.
ARTICLE IV
No trustee, director, officer or employee of either party
hereto shall be held personally liable under or in connection with the
execution of the terms or provisions or conditions of this Sixth Amendment to
the Sublease.
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<PAGE> 94
ARTICLE V
American hereby consents to the assignment by the Trustees of
any and all of their right under the Sublease as amended by the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the
Fifth Amendment and this Sixth Amendment to the Sublease to J. Henry Schroder
Bank & Trust Company, New York, New York as successor Trustee under the 1963
Indenture as supplemented by the First Supplemental Bond Indenture, dated as of
December 1, 1969, the Second Supplemental Bond Indenture, dated as of June 1,
1971, the Third Supplemental Bond Indenture dated as of December 1, 1982 and
the Fourth Supplemental Bond Indenture dated as of April 1, 1983, each between
the Trustees and J. Henry Schroder Bank & Trust Company of New York, New York
and American agrees to comply with the provisions of such assignment to the
extent applicable to it. Lessee specifically approves and consents to the
terms and provisions of the Fourth Supplemental Bond Indenture, dated as of
April 1, 1983.
IN WITNESS WHEREOF, the parties hereto have executed this
Sixth Amendment to the Sublease this 29th day of March, 1983.
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<PAGE> 95
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
[ILLEGIBLE]
-----------------------------------
J. W. BATES, Jr., Chairman
ATTEST:
/s/ J. RICHARD STUDENNY
- -----------------------------------
Secretary
LESSEE
AMERICAN AIRLINES, INC.
By /s/ RICHARD B. JAMISON
-----------------------------------
Vice President-Properties & Facilities
-----------------------------------
Title
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------------
Asst. Secretary
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<PAGE> 96
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Sixth Amendment to the Sublease dated as of
April 1, 1983, was acknowledged before me this 29th day of March, 1983 by J. W.
BATES, JR., Chairman of the Trustees of the Tulsa Municipal Airport Trust, a
public trust, on behalf of the Trust.
Subscribed and sworn to before me this 29th day of March,
1983.
/s/ PAULA S. HOLLAN
-----------------------------------
Notary Public
My Commission Expires:
April 15, 1986
- --------------------
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
Before me Kathleen A. Ashley, a Notary Public in and for said
State, this 30th day of March, 1983, personally appeared Richard B. Jamison, to
me known to be the identical person who prescribed the name of American Airlines
Inc. thereof to the foregoing instrument as its Vice President-Properties &
Facilities, who being by me duly sworn, does depose and say that he resides at
________________________; that he is the Vice President-Properties & Facilities,
of American Airlines, Inc., the corporation described herein for which executed
the above instrument; that he knows the seal of said corporation; that said seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, in that he signed his name
thereto by like order, and acknowledged to me that the same was his free and
voluntary act and deed and the free and voluntary act and deed of such
corporation for the use and purposes therein set forth.
Subscribed and sworn to before me this 30th day of March,
1983.
/s/ KATHLEEN A. ASHLEY
-----------------------------------
Notary Public
My Commission Expires:
7/21/84
- --------------------
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<PAGE> 97
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR RECORDED
1985 DEC -3 AM 11: 19
SJ
JOAN HASTINGS
TULSA COUNTY CLERK
EXECUTION COPY
- --------------------------------------------------------------------------------
SEVENTH AMENDMENT TO SUBLEASE
BY AND BETWEEN
THE TRUSTEES OF TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF NOVEMBER 17, 1983
- --------------------------------------------------------------------------------
<PAGE> 98
SEVENTH AMENDMENT TO SUBLEASE
THIS AGREEMENT dated as of the 17th day of November, 1983, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American").
W I T N E S S E T H:
NOW, for and in consideration of the mutual promises, terms,
conditions and covenants herein contained, the parties hereto do hereby agree
as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958, (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the "First
Amendment"), dated as of May 1, 1963, by and
<PAGE> 99
between the Trustees, as Lessor, and American, as Lessee (a copy of which was
duly recorded in the records of the County Clerk of Tulsa County, Oklahoma, in
Book 3341, Page 200, on May 16, 1963), as Exhibit A to the Bond Indenture,
dated as of May 1, 1963, between the Trustees and Morgan Guaranty Trust Company
of New York, in New York, New York, as bond trustee (such trustee being
succeeded by J. Henry Schroder Bank & Trust Company, in New York, New York)),
pursuant to which the Revenue Bonds, Series 1963, of such Trustees were issued,
and as further amended by the Second Amendment to the Sublease (hereinafter the
"Second Amendment"), dated as of December 1, 1969, by and between the Trustees,
as Lessor and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma in Book 3912, Page 642
on December 22, 1969) and as further amended by the Third Amendment to the
Sublease (hereinafter the "Third Amendment") dated as of the 1st day of June,
1971, by and between the Trustees, as Lessor, and American, as Lessee (a copy
of which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma, in Book 3992, Page 419 on November 8, 1971) and as further amended by
the Fourth Amendment to the Sublease (hereinafter the "Fourth Amendment"),
dated as of the 9th day of September, 1974, by and between the Trustees, as
Lessor, and American as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma in Book 4958, Page 108 on
December 22, 1982), and as further amended by the
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<PAGE> 100
Fifth Amendment to the Sublease (hereinafter the "Fifth Amendment"), dated as
of the 1st day of December, 1982, by and between the Trustees, as Lessor, and
American, as Lessee (a copy of which was duly recorded in the records of the
County Clerk of Tulsa County, Oklahoma in Book 4658, Page 2225 on December 28,
1982), and as further amended by the Sixth Amendment to Sublease (hereinafter
the "Sixth Amendment"), dated as of the 1st day of April, 1983, by and between
the Trustees, as Lessor, and American, as Lessee (a copy of which was duly
recorded in the records of the County Clerk of Tulsa County, Oklahoma in Book
4681, Page 421 on April 5, 1983). Said Sublease, as so amended, covers the
following property in Tulsa County, Oklahoma:
(a) The following premises as revised by mutual agreement of
the parties hereto (hereinafter sometimes called the "Base Premises")
which Lessor leases pursuant to the Lease dated August 6, 1959, as
amended, and pursuant to the Leases dated March 29, 1968 and July 31,
1969, as amended, in each case from the City of Tulsa to Lessor (such
leases being hereinafter collectively called the "Ground Lease"),
being 244.75 acres, more or less, bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24;
Thence S 00 degrees -01'-42", along the East line of said Section, a
distance of 1320.00 feet;
Thence N 76 degrees -01'-30" W a distance of 51.53 feet to the Point
of Beginning;
Thence S 00 degrees -01'-42" E a distance of 64.93;
Thence S 89 degrees -58'-18" W a distance of 2490.00;
Thence N 16 degrees -23'-59" w a distance of 998.78;
Thence N 2 degrees -54'-49" E a distance of 3050.00;
Thence S 89 degrees -51'-46" E a distance of 37.97;
Thence S 00 degrees -47'-20" E a distance of 350.00;
Thence S 89 degrees -30'-35" E a distance of 247.72;
Thence N 13 degrees -48'-11" E a distance of 361.67;
Thence S 89 degrees -51'-16" E a distance of 1017.66;
-3-
<PAGE> 101
Thence S 00 degrees -01'-14" E a distance of 100.00;
Thence S 89 degrees -51'-16" E a distance of 1270.77;
Thence S 00 degrees -01'-24" E a distance of 285.87;
Thence S 11 degrees -16'-36" W a distance of 51.03;
Thence S 00 degrees -01'-24" E a distance of 430.10;
Thence S 44 degrees -58'-36" W a distance of 42.43;
Thence S 00 degrees -10'-24" E a distance of 50.00;
Thence S 45 degrees -01'-24" E a distance of 42.43;
Thence S 00 degrees -01'-24" E a distance of 359.90;
Thence S 11 degrees -20'-24" E a distance of 50.96;
Thence S 00 degrees -01'-24" E a distance of 700.00;
Thence S 11 degrees -16'-36" W a distance of 50.03;
Thence S 00 degrees -01'-24" E a distance of 450.00;
Thence S 44 degrees -58'-36" W a distance of 70.71;
Thence N 89 degrees -53'-37" W a distance of 10.90;
Thence S 45 degrees -01'-42" E a distance of 100.27;
Thence S 11 degrees -01'-42" E a distance of 1236.92;
To the Point of Beginning,
and at the option of Lessee, exercisable by written notice to Lessor in the
event that Lessor shall obtain a leasehold interest therein, the following land
and the improvements thereon (herein sometimes called the "Disposal Plant"):
All that lot consisting of approximately six (6) acres located in the
SW 1/4 of Section 12, Township 20 North, Range 13 East, in Tulsa,
Oklahoma, approximately one-half mile to the north of the
above-described premises, on a portion of which there is situated a
sanitary sewer disposal plant owned, as of the date of this Sublease,
by the City of Tulsa, Oklahoma, together with such sewer line
easements as may be required between the above-described premises and
said lot and between said lot and Bird Creek, lying approximately two
(2) miles to the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder, shall be
included in the term "Base Premises", except as the context may otherwise
require;
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements';
(c) a certain easement for the purpose of maintaining and operating a
transit waste disposal line, located thereon and all rights in connection
therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
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<PAGE> 102
The Sublease, as heretofore amended, is hereby further amended in the
manner and to the extent as hereinafter set forth, effective as of the 17th day
of November, 1983, as follows:
A. Section 1 is hereby amended by deleting from Subsection (a) a
certain parcel of land, to be hereafter leased by separate conveyance to the
Trustees of the Tulsa Airports Improvement Trust, a public trust created and
existing pursuant to the laws of the State of Oklahoma (hereinafter "TAIT") to
American for the express use and purpose of construction of a Co-located Secure
Computer Center. Said parcel of land is more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, T20N,
R13E, Indian Meridian, Tulsa County, Oklahoma, thence in a southerly direction
along the centerline of Mingo Road which is the east line of Section 13, a
distance of 287.50 feet, thence in a westerly direction along a line
perpendicular to centerline of Mingo Road a distance of 673.71 feet to at the
point of beginning:
Thence in a southerly direction along a line parallel to the center line of
Mingo Road a distance of 372.66 feet
Thence in a westerly direction along a line perpendicular to the centerline of
Mingo Road a distance of 317.00 feet
Thence in a northerly direction along a line parallel to the centerline of
Mingo Road a distance of 372.66 feet
Thence in an easterly direction along a line perpendicular to the centerline of
Mingo Road a distance of 317.00 feet to the P.O.B.
said tract containing an area of 2.71 acres, more or less, (as illustrated on
Attachment "A"; attached hereto and made a part hereof) is hereby expressly
excluded from the leased premises known as the "Base Premises"; provided,
however,
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<PAGE> 103
that American hereby releases said tract of land from this Sublease and does
hereby reserve unto itself, and the Trustees do hereby grant to American, an
easement, running concurrently with the Term hereof, for the purposes and to
the extent necessary for utility access and ingress and egress to said
Co-located Secure Computer Center site.
B. Section 1(a) is hereby further amended to add to and to be included
in the term "Base Premises" certain premises constituting a portion of the
"Old" Cargo Building, and certain premises contiguous thereto, Tulsa
International Airport (hereinafter the "Flight Kitchen Site"), more
particularly described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly
described as follows:
Commencing at the Southeast corner of said Section 26; thence N 00
degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a
distance of 177.15 to the Point of Beginning:
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.93 to the Point
of Beginning;
Said tract contains approximately 1.58 acres, more or less as
illustrated on Attachment "B" attached hereto and made a part hereof. The
premises to be utilized and subleased by American to Sky Chefs, a division of
Flagship
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<PAGE> 104
International, Inc., a Delaware corporation, and a wholly owned subsidiary of
AMR Corporation or its successor in interest (hereinafter "Sky Chefs"), for the
express purpose of construction and installation of flight kitchen facilities
(hereinafter "Flight Kitchen") by Sky Chefs or its successor in interest to
serve certificated air carriers utilizing the airport. The Trustees hereby
consent to the subleasing of the Flight Kitchen Site by American to Sky Chefs
or its successor in interest for the purposes of conducting the business rights
and privileges afforded Sky Chefs under the TAIT - Sky Chefs Amendment to Lease
Agreement dated November 11, 1982 (hereinafter "Sky Chefs Agreement");
provided, however, the Trustees' consent to the subleasing of the Flight
Kitchen Site is with the express understanding that said consent and subleasing
shall be for the period of the time of the Sky Chefs Agreement and that Sky
Chefs or its successor in interest will assume and agree to perform all of the
terms, covenants and conditions of this Sublease to be performed by American as
the same shall apply to the Flight Kitchen Site and has agreed to pay,
punctually as and when due and without default all rentals deemed to become due
under Section 3, subsection (a) (vi) hereof.
C. Section 3(a) is hereby amended by adding subsection (vi) which is
hereinafter set forth as follows:
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<PAGE> 105
"(vi) Rentals (ground and building) for the Flight Kitchen Site shall
be as follows:
<TABLE>
<CAPTION>
Year Rental Amount
---- -------------
<S> <C>
First 6 months (Dec. 1, 1985-April 30, 1985) $ -0-
Second 6 months (May 1, 1985-Nov. 30, 1985) 10,000.00
2 27,000.00
3 31,000.00
4 35,000.00
5 40,000.00
</TABLE>
The rentals for each five (5) year period thereafter of the term
hereof shall be adjusted by multiplying the rental for the 5th year of the
previous period by the percentage change in the Implicit Price Deflator Index
for the Gross National Product Index published by the Bureau of Economic
Analysis of the Office of Business Economics of the United States Department of
Commerce or such successor index as the case may be (hereinafter "Index") based
upon the period 1972 equals 100, 3rd Quarter 1984 equals 221.5. (Example:
$40,000 plus $40,000 x percentage change in the Index comparing 3rd quarter
1984 to 3rd quarter 1989). It is provided, however, that in no event shall the
rental rate for each succeeding five year period be less than the preceding
period's rental rate; and to the extent mathematically practical (rounding to
the nearest cent) the annual payments shall be paid in equal monthly
installments on or before the tenth (10th) day of each month. Payments required
under this subsection shall be paid directly to the Trustees of the Tulsa
Airports Improvement Trust at P.0.
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<PAGE> 106
Box 581838, Tulsa, Oklahoma 74158, as part of the gross revenues of the Tulsa
International Airport.'
D. The Sublease is further amended by renumbering Section 25 (Notices,
etc.) thereof, as Section 26 thereof, and by adding thereto, as a new Section
25, the following:
25. Environmental Covenant. Lessee has previously installed
and maintains on the Base Premises, an injection well, which is
utilized as a Controlled Industrial Waste Disposal Site ("Disposal
Site") for the disposal of Controlled Industrial Waste ("Waste"), as
such terms are defined in the Oklahoma Controlled Industrial Waste
Disposal Act (the "Act"), Title 63, O.S.1981, Section 1-2001 et seq.
Said Disposal Site is located on the Base Premises as follows:
The NE/4 of the NW/4 of the SE/4 of Section 13, Township 20 North,
Range 13 East, said parcel containing ten (10) acres, more or less,
and as graphically illustrated on Attachment "C" attached hereto and
made a part hereof.
Lessor and Lessee desiring to fully comply with the provisions
of the Act, and all rules and regulations adopted in accordance
therewith mutually covenant that the use of that portion of the Base
Premises heretofore described and graphically illustrated on
Attachment "C" are hereby restricted as follows:
(a) Lessee, all future owners and occupiers of that
portion of the Base Premises set forth in Attachment
"C" and any operator of the Disposal Site are
permanently barred from any of the following
activities: Altering or disturbing the final cover,
line(s) or monitoring system(s); interfering with or
altering the waste in place or features of disposal
site, or allowing the Waste contained in or on the
site to leave the site boundaries following the
closure of the site, except as hereinafter provided;
(b) Lessee, any future owner or occupier of that portion
of the Base Premises as set forth in Attachment "C"
or operator of the Disposal Site may make application
to the State Department of Health for permission to
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<PAGE> 107
remove, treat, stabilize or otherwise treat the Waste
contained in the Disposal Site to an incognuous
state, provided that such application shall be
subject to the requirements of the Act and all rules
and regulations adopted in accordance therewith; and
(c) Lessor and Lessee intend for the covenants herein set
forth to run with the land, constituting a
restriction thereon; therefore, any deed, lease,
conveyance or contract made in violation of this
Agreement shall be null and void.
The parties hereto agree that this Seventh Amendment to Sublease will
be recorded in the Land Records of the County Clerk, Tulsa County, Oklahoma.
ARTICLE II
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended, by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment and this Seventh Amendment to Sublease.
ARTICLE III
Except as herein amended, the Sublease shall be and remain in full
force and effect.
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<PAGE> 108
ARTICLE IV
No Trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution of this
terms or provisions or conditions of this Seventh Amendment to Sublease.
ARTICLE V
American hereby consents to the assignment by the Trustees of any and
all of their rights under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment and this Seventh Amendment to the Sublease, to
J. Henry Schroder Bank and Trust Company, New York, New York, as Successor
Trustee under the 1963 Indenture, as supplemented by the First Supplemental
Bond Indenture, dated as of December 1, 1969, the Second Supplemental Bond
Indenture, dated as of June 1, 1971, the Third Supplemental Bond Indenture,
dated as of December 1, 1982 and the Fourth Supplemental Bond Indenture, dated
as of April 1, 1983, each between the Trustees and J. Henry Schroder Bank and
Trust Company of New York, New York. American agrees to comply with the
provisions of such assignment to the extent applicable to it.
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<PAGE> 109
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment
to Sublease as of the 17th day of November, 1983.
LESSOR
TRUSTEES OF THE TULSA
MUNICIPAL AIRPORT TRUST
By /s/ J. W. BATES, JR.
-----------------------------------
J. W. Bates, Jr., Chairman
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------
Secretary
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Seventh Amendment to Sublease dated as of November 17,
1983, was acknowledged before me this 2nd day of December, 1985, by J.W. BATES,
JR., Chairman of the Trustees of the Tulsa Municipal Airport Trust, a public
trust, on behalf of the Trust.
Subscribed and sworn to before me this 2nd day of December, 1985.
/s/ PAULA S. HALLAN
-----------------------------------
Notary Public
My commission expires:
April 15, 1986
- ----------------------
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<PAGE> 110
LESSEE
AMERICAN AIRLINES, INC.
By /s/ J.W. BATES, JR.
-----------------------------------
Vice President & Treasurer
-----------------------------------
Title
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------------
Secretary
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
Before me, Geneva Stegemann, a Notary Public in and for said State on
this 2nd day of December, 1985, personally appeared F. Dixon McElwee, Jr., to
me known to be the identical person who prescribed the name of American
Airlines, Inc. thereof to the foregoing instrument as its V.P. & Treasurer, who
being by me duly sworn, does depose and say that he is the Vice President &
Treasurer of American Airlines, Inc., the corporation described herein for
which executed the above instrument; that he knows the seal of said
corporation; that said seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of such corporation,
in that he signed his name thereto by like order, and acknowledged to me that
the same was his free and voluntary act and deed and the free and voluntary act
and deed of such corporation for the use and purposes therein set forth.
Subscribed and sworn to before me this 2nd day of December, 1985.
/s/ GENEVA STEGEMANN
-----------------------------------
Notary Public
My commission expires:
2/15/88
- ----------------------
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<PAGE> 111
[MAP]
ATTACHMENT "A"
<PAGE> 112
[MAP]
ATTACHMENT "B"
<PAGE> 113
AMERICAN AIRLINES LEASE
[MAP]
<PAGE> 114
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR REPORTED
1985 DEC-5 AM 11:14
JUAN HASTINGS
TULSA COUNTY CLERK
================================================================================
EIGHTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF NOVEMBER 15, 1985
===============================================================================
<PAGE> 115
EIGHTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the fifteenth day of November, 1985, by
and between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American")
For and in consideration of the mutual promises, terms, conditions and
covenants herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the "First
Amendment"), dated as of May 1, 1963, by and between the Trustees, as Lessor,
and American,
<PAGE> 116
as Lessee (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 3341, Page 200, on May 16, 1963, as Exhibit
A to the Bond Indenture, dated as of May 1, 1963, between the Trustees and
Morgan Guaranty Trust Company of New York, in New York, New York, as bond
trustee (such trustee being succeeded by J. Henry Schroder Bank & Trust
Company, in New York, New York)), pursuant to which the Revenue Bonds, Series
1963, of such Trustees were issued, and as further amended by the Second
Amendment to the Sublease (hereinafter the "Second Amendment"), dated as of
December 1, 1969, by and between the Trustees, as Lessor and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 3912, Page 642 on December 22, 1969) and as
further amended by the Third Amendment to the Sublease (hereinafter the "Third
Amendment"), dated as of the 1st day of June, 1971, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma, in Book 3992,
Page 419 on November 8, 1971) and as further amended by the Fourth Amendment to
the Sublease (hereinafter the "Fourth Amendment"), dated as of the 9th day of
September, 1974, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 4958, Page 108 on December 22, 1982, and as
further amended by the Fifth Amendment to the Sublease (hereinafter the "Fifth
Amendment"),
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<PAGE> 117
dated as of the 1st day of December, 1982, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa county, Oklahoma in Book 4658; Page 2225
on December 28, 1982, and as further amended by the Sixth Amendment to the
Sublease (hereinafter the "Sixth Amendment"), dated as of the 1st day of April,
1983, by and between the Trustees, as Lessor and American, as Lessee (a copy of
which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma in Book 4681, Page 421 on April 5, 1983) and as further amended by the
Seventh Amendment to the Sublease (hereinafter the "Seventh Amendment"), dated
as of November 17, 1983, by and between the Trustees, as Lessor, and American,
as Lessee (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 4910, Page 218, on December 3, 1985). Such
Sublease, as so amended, covers the following property in Tulsa County,
Oklahoma:
(a) The following premises as revised by mutual agreement
of the parties hereto (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Lease dated August 6,
1957, as amended, and pursuant to the Leases dated March 19, 1968 and
July 31, 1969, as amended, in each case from the City of Tulsa to
Lessor (such leases being hereinafter collectively called the "Ground
Lease"), being 244.75 acres, more or less, bounded and described as
follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00
degrees-01'-41" W, along the East line of said Section, a distance of
1320.00 feet; Thence N 76 degrees-01'-30" W a distance of 51.53 feet to
the Point of Beginning;
Thence N 76 degrees-0l'-30" W a distance of 51.53;
Thence S 00 degrees-0l'-42" E a distance of 64.93;
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<PAGE> 118
Thence S 89 degrees-58'-18" W a distance of 2490.00;
Thence N 16 degrees-23'-59" W a distance of 998.78;
Thence N 2 degrees-54'-49" E a distance of 3050.00;
Thence S 89 degrees-51'-46" E a distance of 37.97;
Thence S 00 degrees-47'-20" E a distance of 350.00;
Thence S 89 degrees-30'-35" E a distance of 247.72;
Thence N 13 degrees-48'-11" E a distance of 361.67;
Thence S 89 degrees-5l'-16" E a distance of 1017.66;
Thence S 00 degrees-01'-14" E a distance of 100.00;
Thence S 89 degrees-5l'-16" E a distance of 1270.77;
Thence S 00 degrees-01'-24" E a distance of 285.87;
Thence S 11 degrees-16'-36" W a distance of 51.03;
Thence S 00 degrees-01'-24" E a distance of 430.10;
Thence S 44 degrees-58'-36" W a distance of 42.43;
Thence S 00 degrees-10'-24" E a distance of 50.00;
Thence S 45 degrees-01'-24" E a distance of 42.43;
Thence S 00 degrees-01'-24" E a distance of 359.90;
Thence S 11 degrees-20'-24" E a distance of 50.96;
Thence S 00 degrees-01'-24" E a distance of 700.00;
Thence S 11 degrees-16'-36" W a distance of 50.03;
Thence S 00 degrees-01'-24" E a distance of 450.00;
Thence S 44 degrees-58'-36" W a distance of 70.71;
Thence N 89 degrees-53'-37" w a distance of 10.90;
Thence S 45 degrees-01'-42" E a distance of 100. 27;
Thence S 11 degrees-01'-42" E a distance of 1236.92;
To the Point of Beginning;
less a parcel of land more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, Township
20 North, Range 13 East, Indian Meridian, Tulsa County, Oklahoma,
thence in a southerly direction along the centerline of Mingo Road
which is the east line of Section 13, a distance of 287.50 feet,
thence in a westerly direction along a line perpendicular to
centerline of Mingo Road a distance of 673.71 feet to the Point of
Beginning;
Thence in a southerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in a westerly direction along a line perpendicular to
the centerline of Mingo Road a distance of 317.00 feet;
Thence in a northerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in an easterly direction along a line perpendicular to
the centerline of Mingo Road a distance of 317.00 feet to the
Point of Beginning;
said tract containing an area of approximately 2.71 acres;
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<PAGE> 119
and including a parcel of land containing an area of approximately 1.58 acres,
more or less, to be utilized as a flight kitchen facility and more particularly
described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly
described as follows:
Commencing at the Southeast corner of said Section 26; thence N 00
degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a
distance of 177.15 to the Point of Beginning:
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.92 to the
Point of Beginning;
and further including at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold interest therein, the
following land and the improvements thereon (herein sometimes called the
"Disposal Plant")
All that lot consisting of approximately six (6) acres located
in the SW 1/4 of Section 12, Township 20 North, Range 13 East,
in Tulsa, Oklahoma, approximately one-half mile to the north
of the above-described premises, on a portion of which there
is situated a sanitary sewer disposal plant owned, as of the
date of this Sublease, by the City of Tulsa, Oklahoma,
together with such sewer line easements as may be required
between the above-described premises and said lot and between
said lot and Bird Creek, lying approximately two (2) miles to
the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder,
shall be included in the term "Base Premises", except as the context
may otherwise require;
(b) certain other buildings, improvements and fixtures,
sometimes referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all
rights in connection therewith or appurtenant thereto; and
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<PAGE> 120
(d) all rights of way, licenses, easements, hereditaments
and appurtenances belonging or appertaining to any of the foregoing.
The Sublease, as heretofore amended, is hereby further amended
in the manner and to the extent as hereinafter set forth, effective as of the
date on which the Series 1985 Bonds (hereinafter mentioned) are delivered and
paid for, as follows:
A. Term. Section 2 is amended by deleting the first two
sentences thereof and by substituting therefor the following:
The term of this Sublease commenced on June 24, 1958 and
shall, unless terminated prior thereto as herein provided,
expire at 12:00 noon, Tulsa time, January 31, 2038.
B. Section 3(a) is hereby amended by deleting
subparagraph (iv) thereof and by substituting therefor the following:
(iv) For the period of the term the base "ground rentals" payable in
advance on February 1 of each year thereof shall be as follows:
Current period through January 31, 1988 $ 92,700.00
February 1, 1988 through January 31, 1990 115,875.00
February 1, 1990 through January 31, 1993 122,828.00
February 1, 1993 through January 31, 1998 135,111.00
February 1, 1998 through January 31, 2003 148,622.00
February 1, 2003 through January 31, 2008 163,484.00
February 1, 2008 through January 31, 2013 179,832.00
February 1, 2013 through January 31, 2018 197,816.00
February 1, 2018 through January 31, 2023 217,597.00
February 1, 2023 through January 31, 2028 239,357.00
February 1, 2028 through January 31, 2033 263,293.00
February 1, 2033 through January 31, 2038 289,622.00
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<PAGE> 121
C. Section 3 is amended by deleting subsection (b) thereof
and by substituting therefor the following:
(b) In addition to the payments contracted for in subsection 3(a)
above, Lessee will pay Lessor, with respect to each Bond Year (as
defined below), commencing on the first day of the month following the
effective date of the Eighth Amendment to the Sublease and continuing
until the Terminal Date (as defined below) additional rentals per
annum equal to the Annual Principal and Interest Requirement (as
defined below) for such Bond Year on (i) the Revenue Bonds, Series
1969, of Lessor (hereinafter referred to as the "Series 1969 Bonds")
issued pursuant to the terms of the Bond Indenture and the First
Supplemental Bond Indenture, dated as of December 1, 1969 between
Lessor and the Bank, (ii) the Revenue Bonds, Series 1971, of Lessor
(hereinafter referred to as the "Series 1971 Bonds") issued pursuant
to the terms of the Indenture and the Second Supplemental Bond
Indenture, dated as of June 1, 1971, between Lessor and the Bank,
(iii) the Revenue Bonds, Series 1982A, of Lessor (hereinafter referred
to as "Series 1982A Bonds") issued pursuant to the terms of the
Indenture and the Third Supplemental Bond Indenture, dated as of
December 1, 1982 between Lessor and the Bank, (iv) the Revenue Bonds,
Series 1983, of Lessor (hereinafter referred to as the "Series 1983
Bonds") issued pursuant to the terms of the Indenture and the Fourth
Supplemental Bond Indenture dated as of April 1, 1983 between Lessor
and the Bank, including any amount contemplated by Section 2.10(b) of
the Fifth Supplemental Indenture to be paid by the Company to make up
any deficiency in the Escrow Fund upon the redemption of the Series
1983 Bonds on June 1, 1986 as provided for in Section 2.10, and (v)
the Revenue Bonds, Series 1985, of Lessor (hereinafter referred to as
"Series 1985 Bonds") issued pursuant to the terms of the Indenture and
the Fifth Supplemental Bond Indenture, dated as of November 15, 1985
between Lessor and the Bank (the Indenture as supplemented and amended
by such First Supplemental Bond Indenture, such Second Supplemental
Bond Indenture, such Third Supplemental Bond Indenture, such Fourth
Supplemental Bond Indenture, and such Fifth Supplemental Bond
Indenture is hereinafter referred to as the "Supplemented Indenture").
Such additional rentals shall be payable by Bond Periods (as defined
below) in advance in equal monthly installments on the first day of
each month in such Bond Period, so that there is paid during each Bond
Period an amount equal to the Semiannual Principal and Interest
Requirement (as defined below) for such Bond Period, provided that
Lessee, if not then in default hereunder, may in any Bond Year
beginning with
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<PAGE> 122
the Bond Year commencing June 1, 1985 credit against the additional
rentals provided for in this subsection (b)
(i) the amount of any balance transferred by the Bank
pursuant to the terms of the Supplemented Indenture from any bond
retirement fund established thereunder to any fund so established the
moneys of which are to be used for the payment of principal of and
interest and premium, if any, on the Series 1963 Bonds, the Series 1969
Bonds, the Series 1971 Bonds, the Series 1982A Bonds, the Series 1983
Bonds or the Series 1985 Bonds (hereinafter collectively referred to as
the "Bonds"), or any combination thereof, which credit shall be applied
against the installment or installments of additional rentals provided
for in this subsection (b) next coming due, if and to the extent that
such credit would not result on the next succeeding June 1 or December
1, as the case may be, in the moneys in any such latter fund available
therefor being insufficient to pay the interest and principal, if any,
due on such June 1 or December 1 or to redeem Bonds on any such date to
the extent required by the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to
subsection 3(d).
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning June 1, 1985 and continuing
until the Terminal Date. The term "Bond Period" shall mean each period of six
months beginning on June 1 or December 1 during any Bond Year. The term
"Semiannual Principal and Interest Requirement" with respect to any Bond Period
shall mean the interest on the Bonds accrued in such Bond Period plus any amount
required on the December 1 or June 1, as the case may be, following such Bond
Period on account of principal to pay the Bonds at the stated maturities thereof
and on account of principal and premium, if any, to redeem or prepay the Bonds
pursuant to any mandatory sinking fund or redemption requirement applicable
thereto. The term "Annual Principal and Interest Requirement" with respect to
any Bond Year shall mean the sum of the Semiannual Principal and Interest
Requirements with respect to the Bond Periods comprising such Bond Year. The
Semiannual Principal and Interest Requirement for each Bond Period shall be
determined as of the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which the
aggregate of all moneys held by the Bank in any bond reserve fund or otherwise
under the Supplemented Indenture and then available for the payment of interest
and premium, if any, on and principal of the Bonds shall equal or exceed tile
amount required to redeem or pay all the Bonds at the time outstanding
(including principal, redemption premium, if any, and interest to their stated
maturities or to the next
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date or dates on which such Bonds may be callable for redemption, whichever is
the earlier).
The Lessee has entered into a Bond Purchase Trust Agreement dated as
of November 15, 1985 between itself, Bank of Oklahoma, Tulsa, N.A., in its
separate corporate capacity as Purchase Trustee thereunder and not as the
Co-Bond Trustee under the Indenture, and Morgan Stanley & Co., Inc. for the
benefit of the holders of the Series 1983 Bonds. Pursuant to such agreement
Lessee has, subject to the terms and conditions provided therein, provided the
holders of the Series 1985 Bonds certain rights and benefits. Lessee hereby
covenants and agrees that it will enter into the aforesaid Bond Purchase Trust
Agreement and shall comply with the terms and provisions thereof and perform
all of its duties and obligations thereunder. In order to inform holders of the
Series 1985 Bonds of the rights provided them under the aforesaid Bond Purchase
Trust Agreement, Lessor agrees to provide a summary of the rights, terms and
conditions provided in such agreement in the forms of the Series 1985 Bonds.
However, it is expressly understood that the rights provided to holders of the
Series 1985 Bonds under the aforesaid Bond Purchase Trust Agreement do not
constitute and shall not be deemed to constitute rights of such holders under
the Indenture, as amended and supplemented, or under such Series 1985 Bonds.
D. Section 3 is amended by deleting subsection (c) thereof and by
substituting therefor the following:
(c) In addition to such payment, Lessee shall pay as further
additional rental the fees, expenses and charges of the Bank, any Co-Bond
Trustee, any registrar and of any paying agents incurred under or pursuant to
the Indenture (including any expenses of the Bank and any Co-Bond Trustee
incurred pursuant to the Indenture in the enforcement of any of the rights and
remedies of the Bank, and any Co-Bond Trustee and the Bond holders thereunder)
and also the amount of any net losses suffered in connection with the
investment pursuant to the Indenture by the Bank or any Co-Bond Trustee of
funds held by it thereunder. Any such fees, expenses, charges and net losses
shall be paid by Lessee within thirty (30) days after the receipt of a
requisition from Lessor or the Bank or any Co-Bond Trustee under the Indenture
for such additional amounts.
E. A new Section 5D is inserted immediately folllowing
Section 5C, as follows:
5D. Construction, Acquisition or Installation of 1985
Improvements.
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The Series 1985 Bonds are being issued for the purpose of
refunding in advance of maturity the Series 1983 Bonds, of the Lessor
and for the purpose of providing long-term financing for a portion of
the cost of construction and installation at the Base of additional
facilities and equipment, including facilities and support equipment
for B767 and MD-80 aircraft, additional equipment, modifications and
improvements to existing facilities. The cost of construction and
installation of such facilities may exceed the funds made available
from the proceeds of the sale of the Series 1985 Bonds. The Lessee
shall develop plans and specifications for such additional facilities
and equipment and for such purpose may retain, subject to the written
approval of the Lessor, an architect or firm of architects (which may
be staff of the Lessee) (all improvements and equipment constructed,
acquired or installed pursuant to such plans and specifications being
hereinafter referred to as the "1985 Improvements"). In the event that
the proceeds of the Series 1985 Bonds are not sufficient to pay the
additional or excess costs, Lessee shall pay the cost of the
facilities in excess of the funds available from the Series 1985 Bonds
and any excess cost of that part of the 1985 Improvements, not
constituting personal property or equipment, shall be paid promptly,
from time to time, by Lessee to the Bank upon receipt by Lessee of
duplicate originals or certified copies of certificates of said
architects that labor and material has been furnished and money is due
and owing therefor, and such excess cost of that part of the 1985
Improvements, constituting personal property and equipment shall be
paid promptly, from time to time, by Lessee, to the Bank as soon as
each item of such personal property and equipment is installed. Lessor
and Lessee stall have the right to inspect the construction and
installation of work contemplated hereby at all reasonable times and
to inspect during regular business hours, all books, records, plans
and specifications of the other party hereto and other data relating
thereto or to the cost thereof. At such time as the 1985 Improvements
are ready for use or occupancy, Lessor and Lessee shall deliver to the
Bank (i) a certificate of Lessor, countersigned by such architects,
stating that the 1985 Improvements are ready for use or occupancy by
Lessee, stating the date on which such readiness occurred, setting
forth in reasonable detail the final cost of the construction,
acquisition or installation of the 1985 Improvements and stating that
such finial costs have been paid in full or, in the event that such
final costs have in been paid in full, the amount to the retained by
the Bank in the 1985 Construction Fund (as defined in the Supplemented
Indenture to pay all such final costs in full; and (ii) at certificate
of Lessee stating that the 1985 Improvememts have been constructed,
acquired and installed and are
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<PAGE> 125
ready for use or occupancy by Lessee and stating the final costs of
the construction, acquisition or installation of the 1985 Improvements
and stating that such final costs have been paid in full or, in the
event that such final costs have not been paid in full, the amount to
be retained by the Bank in the 1985 Construction Fund to pay all such
final costs in full. In the event the Lessee determines that all or
part of the construction and installation of the work contemplated
hereby is not required, then, notwithstanding the foregoing, in lieu
of the certificates required by clauses (i) and (ii) of the preceding
sentence of this Section 5D the Lessee shall deliver to the Lessor and
the Bank a certificate stating that by proper corporate action the
Lessee has determined that all or part of the 1985 Improvements are
not required; setting forth those portions of the 1985 Improvements to
which such determination applies; stating that the portion of the 1985
Improvements which have been or will be constructed, acquired or
installed and the date such portion of the 1985 Improvements are
expected to be ready for use and occupancy by the Lessee; stating the
final cost of the construction, acquisition and installation of that
portion of the 1985 Improvements completed or to be completed, and
stating that such final costs have been paid in full, or in the event
that such final costs have not been paid in full, the amount to be
retained in the 1985 Construction Fund to pay all such final costs in
full; stating that the construction, acquisition and installation of
that portion of the 1985 Improvements completed or to be completed
will not impair the operation of the Base as a complete integral
functional unit; and evidencing the concurrence of the aforesaid
architects with respect to the matters set forth in such certificate
(except such architects need not concur with respect to that portion
of the certificate relating to the corporate action making the
determination that all or part of the 1985 Improvements are not
required). In the event that the certificates of Lessor and Lessee
required to be delivered by clauses (i) and (ii) of the sixth sentence
of this Section 5D or the certificate issued in lieu of such
certificates required to be delivered by the seventh sentence of this
Section 5D shall not state therein that all final costs have been paid
in full, as promptly as practical after such time as all final costs
of the construction, acquisition and installation of the 1985
Improvements shall have been paid in full, Lessor and Lessee shall
each deliver to the Bank, a certificate to such effect. Lessee agrees
that all work (including such construction, acquisition and
installation) under any construction and acquisition contracts
consented to by Lessor or such other agreements are undertaken by
Lessee as Agent on behalf of Lessor, and the 1935 Improvements are the
property of Lessor. Lessee agrees it will not enter into any
amendment of any
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contract or such other agreements without the prior approval of the
Lessor, which approval shall not be unreasonably withheld.
F. A new paragraph shall be added to Section 6 as follows:
The Lessee covenants and agrees that the proceeds of the Series
1985 Bonds will be applied such that the facilities financed from the proceeds
of at least ninety percent (90%) of the Series 1985 Bonds will qualify as
airport facilities within the meaning of Section 103(b) (4) (D) of the Internal
Revenue Code of 1954, as amended (the "Code"), and application of the proceeds
of the Series 1985 Bonds will not result in more than ten percent (10%) of the
aggregate amount of expenditures from the 1985 Construction Fund at any time
being used for a facility which would not be exempt under such Section 103 (b)
(4) (D) or for working capital or for property of a character not subject to the
allowance for depreciation as prescribed in Section 103 (b) (6) (A) of the Code.
The Lessee will not cause or permit any plans and specifications for the
facilities to be financed from the proceeds of the Series 1985 Bonds to be
changed or revised, or such facilities to be operated, maintained, repaired or
renovated, in a manner such that such facilities to be financed from the
proceeds of at least ninety percent (90%) of the proceeds of the Series 1985
Bonds will not qualify as airport facilities within the meaning of Section 103
(b) (4) (D) of the Code, or take any other action which would cause the loss of
the exemption of interest on any Series 1985 Bonds from federal income taxation.
G. The second paragraph of Section 9 is deleted in its
entirety and the following paragraph is inserted in lieu thereof:
Lessor hereby assigns to Lessee effective upon completion of
the 1969, 1971, 1982A, 1983 and 1985 Improvements respectively and
delivery of completion certificates as provided in Section 5, 5A, 5B,
5C and 5D hereof respectively, all right, title and interest of Lessor
in and to any and all warranties, express or implied, made to Lessor
under, in the case of the 1969, 1971, 1982A, 1983 and 1985
Improvements, all construction and purchase contracts entered into
with respect to such Improvements, and under any and all other
construction or purchase contracts entered into by Lessor or otherwise
accruing to the benefit of Lessor and pertaining to the Leased
Property, together with the right to enforce the same for the benefit
of Lessee and pertaining to the Leased Property, together with the
right to enforce the same for the benefit of Lessee, either in the
name of
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Lessor or Lessee or otherwise, and expressly subrogates Lessee to all
of Lessor's rights of action and causes of action against the other
parties to all such contracts. Lessee will indemnify Lessor against
damage, loss or expense resulting from such enforcement and Lessee's
efforts to enforce the same.
H. (a) Section 1(b) is amended by inserting immediately
after the words "Section 5 or Section 5A or Section 5B or Section 5C" the first
time they appear in Section 1(b) the words "or Section 5D" and by inserting
immediately after words "Section 5, Section 5A or said Section 5B or said
Section 5C" the second time they appear in Section 1(b) the words "or said
Section 5D".
(b) Sections 4 (a) and 8 (a) (i) (2) (B) are amended by
inserting immediately after the words "Section 5, Section 5A or Section 5B or
Section 5C" the words "or Section 5D".
I. The Sublease is further amended by deleting the words
"Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds and Series 1982A Bonds
and Series 1983 Bonds" in each place in which they appear and by substituting
therefor the words "Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds,
the Series 1983 Bonds and Series 1985 Bonds" and by deleting the words "Series
1983 Bonds, Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds or Series
1983 Bonds" where such words appear in Sections 9, 12, 14 and 19 of the
Sublease and by substituting therefor the words "Series 1969 Bonds, Series
1971 Bonds, Series 1982A Bonds, Series 1983 Bonds or Series 1985 Bonds and by
deleting the words "Series 1963 Bonds,
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Series 1969 Bonds, Series 1971 Bonds or Series 1982A Bonds" where such words
appear in Section 19 of the Sublease and by substituting therefor the words
"Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1983 Bonds
or Series 1985 Bonds."
ARTICLE II
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment and this Eighth Amendment
to the Sublease.
ARTICLE III
Except as herein amended, the Sublease shall be and remain in full force and
effect.
ARTICLE IV
No trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution of the
terms or provisions or conditions of this Eighth Amendment to the Sublease.
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<PAGE> 129
ARTICLE V
American hereby consents to the assignment by the Trustees of any and
all of their right under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment and this Eighth Amendment
to the Sublease to J. Henry Schroder Bank & Trust Company, Bond Trustee as
successor Trustee under the 1963 Indenture as supplemented by the First
Supplemental Bond Indenture, dated as of December 1, 1969, the Second
Supplemental Bond Indenture, dated as of June 1, 1971, the Third Supplemental
Bond Indenture, dated as of December 1, 1982, the Fourth Supplemental Bond
Indenture, dated as of April 1, 1983, and the Fifth Supplemental Bond
Indenture, dated as of November 15, 1985, each between the Trustees and J.
Henry Schroder Bank & Trust Company, Bond Trustee and American agrees to comply
with the provisions of such assignment to the extent applicable to it. Lessee
specifically approves and consents to the terms and provisions of the Fifth
Supplemental Bond Indenture, dated as of November 15, 1985.
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<PAGE> 130
IN WITNESS WHEREOF, the parties hereto have executed this Eighth
Amendment to the Sublease as of this fifteenth day of November, 1985.
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ J.W. BATES, JR.
--------------------------------
J.W. Bates, Jr., Chairman
ATTEST:
/s/ J. RICHARD STUDENNY
- ------------------------------
Secretary
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Eighth Amendment to the Sublease dated as of November
15, 1985, was acknowledged before me this 3rd day of December, 1985, by J. W.
BATES, JR., Chairman of the Trustees of the Tulsa Municipal Airport Trust, a
public trust, on behalf of the Trust.
Subscribed and sworn to before me this 3rd day of December, 1985.
/s/ [ILLEGIBLE]
-----------------------------------
Notary Public
My commission expires:
April 15, 1986
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<PAGE> 131
LESSEE
AMERICAN AIRLINES, INC.
By /s/ F. DIXON MCELWEE, JR.
------------------------------
Vice President & Treasurer
------------------------------
Title
ATTEST:
/s/ ANNE H. MCNAMARA
- ------------------------------
Secretary
STATE OF TEXAS )
) ss.
COUNTY OF Tarrant )
Before me, Geneva Stegemann, a Notary Public in and for said State on
this 2nd day of December, 1985, personally appeared F. Dixon McElwee, Jr., to me
known to be the identical person who prescribed the name of American Airlines,
Inc. thereof to the foregoing instrument as its V.P. & Treasurer, who being by
me duly sworn, does depose and say that he is the Vice President & Treasurer of
American Airlines, Inc., the corporation described herein for which executed
the above instrument; that he knows the seal of said corporation; that said
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of such corporation, in that he signed his
name thereto by like order, and acknowledged to me that the same was his free
and voluntary act and deed and the free and voluntary act and deed of such
corporation for the use and purposes therein set forth.
Subscribed and sworn to before me this 2nd day of December, 1985.
/s/ GENEVA STEGEMANN
-----------------------------------
Notary Public
My commission expires:
2/15/88
- ------------------------------
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<PAGE> 132
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR RECORDED
88 FEB 18 AM 10:45
JOAN HASTINGS
TULSA COUNTY CLERK
================================================================================
NINTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF JANUARY 1, 1988
================================================================================
<PAGE> 133
NINTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the first day of January, 1988, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American").
For and in consideration of the mutual promises, terms, conditions
and covenants herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the "First
Amendment"), dated as of May 1, 1963, by and between the Trustees, as Lessor,
and American, as Lessee (a copy of which was duly recorded in the records of
<PAGE> 134
the County Clerk of Tulsa County, Oklahoma, in Book 3341, Page 200, on May 16,
1963, as Exhibit A to the Bond Indenture, dated as of May 1, 1963, between the
Trustees and The Bank of New York, bond trustee, as successor to Morgan
Guaranty Trust Company of New York, in New York, New York, and IBJ Schroder
Bank & Trust Company, in New York, New York, pursuant to which the Revenue
Bonds, Series 1963, of such Trustees were issued, and as further amended by the
Second Amendment to the Sublease (hereinafter the "Second Amendment"), dated as
of December 1, 1969, by and between the Trustees, as Lessor and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 3912, Page 642 on December 22, 1969) and as
further amended by the Third Amendment to the Sublease (hereinafter the "Third
Amendment"), dated as of the 1st day of June, 1971, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma, in Book 3992,
Page 419 on November 8, 1971) and as further amended by the Fourth Amendment to
the Sublease (hereinafter the "Fourth Amendment"), dated as of the 9th day of
September, 1974, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 4958, Page 108 on December 22, 1982), and as
further amended by the Fifth Amendment to the Sublease (hereinafter the "Fifth
Amendment"), dated as of the 1st day of December, 1982, by and between the
Trustees, as Lessor, and American, as
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<PAGE> 135
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 4658, Page 2225 on December 28, 1982), and as
further amended by the Sixth Amendment to the Sublease (hereinafter the "Sixth
Amendment"), dated as of the 1st day of April, 1983, by and between the
Trustees, as Lessor and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma in Book 4681, Page
421 on April 5, 1983), and as further amended by the Seventh Amendment to the
Sublease (hereinafter the "Seventh Amendment"), dated as of November 17, 1983,
by and between the Trustees, as Lessor, and American, as Lessee (a copy of
which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma, in Book 4910, Page 218, on December 3, 1985), and as further amended
by the Eighth Amendment to Sublease (hereinafter "Eighth Amendment"), dated as
of November 15, 1985, by and between the Trustees, as Lessor, and American, as
Lessee, (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 4910, Page 1764 on December 5, 1985). Such
Sublease, as so amended, covers the following property (land and improvements
collectively referred to as "Leased Property") in Tulsa County, Oklahoma:
(a) The following premises as revised by mutual agreement
of the parties hereto (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Lease dated August 6,
1957, as amended, and pursuant to the Leases dated March 29, 1968 and
July 31, 1969, as amended, in each case from the City of Tulsa to
Lessor (such leases being hereinafter collectively called the
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<PAGE> 136
"Ground Lease"), being 244.75 acres, more or less, bounded and
described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00 degrees-
01'-42" W, along the East line of said Section, a distance of 1320.00
feet; Thence N 76 degrees-01'-30" W a distance of 51.53 feet to the
Point of Beginning;
Thence N 76 degrees-01'-30" W a distance of 51.53;
Thence S 00 degrees-01'-42" E a distance of 64.93;
Thence S 89 degrees-58'-18" W a distance of 2490.00;
Thence N 16 degrees-23'-59" W a distance of 998.78;
Thence N 22 degrees-54'-49" E a distance of 3050.00;
Thence S 89 degrees-51'-46" E a distance of 37.97;
Thence S 00 degrees-47'-20" E a distance of 350.00;
Thence S 89 degrees-30'-35" E a distance of 247.72;
Thence N 13 degrees-48'-11" E a distance of 361.67;
Thence S 89 degrees-51'-16" E a distance of 1017.66;
Thence S 00 degrees-O1'-14" E a distance of 100.00;
Thence S 89 degrees-51'-16" E a distance of 1270.77;
Thence S 00 degrees-01'-24" E a distance of 285.87;
Thence S 11 degrees-16'-36" W a distance of 51.03;
Thence S 00 degrees-01'-24" E a distance of 430.10;
Thence S 44 degrees-58'-36" W a distance of 42.43;
Thence S 00 degrees-10'-24" E a distance of 50.00;
Thence S 45 degrees-01'-24" E a distance of 42.43;
Thence S 00 degrees-01'-24' E a distance of 359.90;
Thence S 11 degrees-20'-24" E a distance of 50.96;
Thence S 00 degrees-01'-24" E a distance of 700.00;
Thence S 11 degrees-16'-36" W a distance of 50.03;
Thence S 00 degrees-01'-24" E a distance of 450.00;
Thence S 44 degrees-58'-36' W a distance of 70.71;
Thence N 89 degrees-53'-37" W a distance of 10.90;
Thence S 45 degrees-O1'-42" E a distance of 100.27;
Thence S 11 degrees-O1'-42" E a distance of 1236.92;
To the Point of Beginning;
less a parcel of land more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, Township
20 North, Range 13 East, Indian Meridian, Tulsa County, Oklahoma,
thence in a southerly direction along the centerline of Mingo Road
which is the east line of Section 13, a distance of 287.50 feet,
thence in a westerly direction along a line perpendicular to
centerline of Mingo Road a distance of 673.71 feet to the Point of
Beginning;
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<PAGE> 137
Thence in a southerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in a westerly direction along a line perpendicular to
the centerline of Mingo Road a distance of 317.00 feet;
Thence in a northerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in an easterly direction along a line perpendicular to
the centerline of Mingo Road a distance of 317.00 feet to the
Point of Beginning;
said tract containing an area of approximately 2.71 acres;
and including a parcel of land containing an area of approximately 1.58 acres,
more or less, to be utilized as a flight kitchen facility and more particularly
described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly
described as follows:
Commencing at the Southeast corner of said Section 26; thence N 00
degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a
distance of 177.15 to the Point of Beginning:
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.92 to the
Point of Beginning;
and further including at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold interest therein, the
following land and the improvements thereon (herein sometimes called the
"Disposal Plant"):
All that lot consisting of approximately six (6) acres located
in the SW 1/4 of Section 12, Township 20 North, Range 13 East,
in Tulsa, Oklahoma, approximately one-half mile to the north
of the above-described premises, on a portion of which there
is situated a sanitary sewer disposal plant owned, as of the
date of this Sublease, by the City of Tulsa, Oklahoma,
together with such sewer line easements as may be required
between the above-described premises and said lot and between
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<PAGE> 138
said lot and Bird Creek, lying approximately two (2) miles to
the North of said lot,
which lot and easements, if leased by Lessor and subleased hereunder,
shall be included in the term "Base Premises", except as the context
may otherwise require;
(b) certain other buildings, improvements and fixtures,
sometimes referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all
rights in connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments
and appurtenances belonging or appertaining to any of the foregoing.
The Sublease, as heretofore amended, is hereby further amended in the
manner and to the extent as hereinafter set forth, effective as of the date on
which the 1988 Adjustable Rate Revenue Obligations of Issuer (hereinafter
ARROs) are delivered and paid for, as follows:
A. Term. Section 2 is amended by deleting the first
two sentences thereof and by substituting therefor the following:
(a) Term. The term of this Sublease commenced on June 24,
1958 and shall, unless terminated prior thereto as herein provided,
expire at 12:00 noon, Tulsa time, January 31, 2038 (the "Lease Term")
provided, however, that the term of this Sublease with respect to the
1988 Improvements as defined in Section 5E hereof, and the Base
Premises Allocable to the 1988 Improvements, as defined below, shall,
unless terminated prior thereto as herein provided, expire at 12:00
noon, Tulsa time, December 1, 2020. For the purposes of this Section 2
the term "Base Premises Allocable to the 1988 Improvements" shall mean
(i) each piece of unimproved real property constituting a portion of
the Base Premises upon which a specific separate and discrete 1988
Improvement which constitutes real property will be constructed; (ii)
such piece of improved real property constituting a portion of
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<PAGE> 139
the Leased Premises upon which Hangar No.1 is located to which certain
1988 Improvements will be made; (iii) such piece of improved real
property constituting a portion of the Leased Premises upon which
Hangar No. 2 is located to which certain 1988 Improvements will be
made; (iv) such piece of improved real property constituting a portion
of the Leased Premises upon which Hangar No. 3 is located to which
certain 1988 Improvements will be made; (v) such piece of improved
real property constituting a portion of the Leased Premises upon which
Hangar No. 4 is located to which certain 1988 Improvements will be
made; (vi) and such piece of improved real property constituting a
portion of the Leased Premises upon which Hangar No. 5 is located to
which certain 1988 Improvements will be made. The term of this
Sublease as applied to all of the foregoing Base Premises Allocable to
the 1988 Improvements and the 1988 Improvements to be made thereto or
thereon is hereinafter collectively referred to as the "1988
Improvement Lease Term".
(b) Fair Market Value Renewal. Upon expiration of the
1988 Improvement Lease Term, the Lessee shall have the option to renew
this Sublease with respect to all or any portion of the Base Premises
Allocable to the 1988 Improvements and any 1988 Improvements to be
made thereto or thereon which constitute real property (the
"Improvements") for a period not exceeding the Lease Term at the fair
market value of the Improvements (but without regard to the Base
Premises Allocable to the 1988 Improvements) determined at the time of
the renewal hereof. The fair market value of such Improvements shall
be determined by an independent engineer, appraiser or other expert
with expertise in the valuation of airport properties selected by
the Lessor with the approval of the Lessee. In the event all or any
portion of the Base Premises Allocable to the 1988 Improvements and
related Improvements are leased to a party other than the Lessee, or a
related party, the Trustees shall charge such party as rental for such
Base Premises Allocable to the 1988 Improvements and related
Improvements an amount at least equal to the fair market value of the
Improvements and the Base Premises Allocable to the 1988 Improvements
so leased, as determined above. The rental paid by such party
representing the fair market value of the Base Premises Allocable to
the 1988 Improvements shall be paid by Lessor to Lessee during the
remainder of the Lease Term only as compensation for the loss of use
of such surrendered Lease Term with respect to the Base Premises
Allocable to the 1988 Improvements so leased to such third party. In
the event all or any portion of the Base Premises Allocable to the
1988 Improvements is leased to a party other than Lessee, or a related
party, the Lessee shall provide to such party access, or an easement
for access to any portion of the Base Premises Allocable to
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the 1988 Improvements leased to such other party. The Lessee may
charge a fair market rent for any easement or access that it provides
in accordance with this provision.
(c) Option to Extend 1988 Improvements Lease Term. The
1988 Improvements Lease Term has been established on the basis of a
term not more than 80% of the reasonably expected economic life of the
1988 Improvements. Notwithstanding the provisions of subsection (b) of
this Section 2, the Lessee shall have the option to extend the 1988
Improvement Lease Term set forth in subsection 2 for a term not to
exceed the shorter of (Y) 80% of the reasonably expected economic life
of the 1988 Improvements, as revised in accordance with this
subsection (c), and (x) the remainder of the Lease Term, in the event
that the Lessee furnishes to the Lessee (i) an opinion of an
independent engineer, appraiser or other expert having an expertise in
the valuation of airport properties to the effect that the reasonably
expected economic life of one or more of the 1988 Improvements is in
fact longer than initially estimated in establishing the 1988
Improvements Lease Term and setting forth a revised estimate of the
reasonably expected economic life or lives of the 1988 Improvement or
1988 Improvements and (ii) an opinion of Bond Counsel (as defined in
the Sixth Supplemental Indenture, dated as of January 1, 1988 between
the Lessor and the Bank, the Indenture as supplemented and amended by
such First Supplemental Bond Indenture, such Second Supplemental Bond
Indenture, such Third Supplemental Bond Indenture, such Fourth
Supplemental Bond Indenture, such Fifth Supplemental Bond Indenture
and such Sixth Supplemental Indenture is hereinafter referred to as
the "Supplemented Indenture") to the effect that such extension of the
1988 Improvement Lease Term will not have an adverse effect on the
exclusion of interest on the ARROs as defined in Section 3(b) hereof
from gross income for federal income tax purposes.
(d) Obligation to Continue Rental Payments. Nothing in
this Section 2 shall affect Lessee's obligation to pay rentals under
subsection (b) Section 3 hereof sufficient to pay principal of
premium, if any, and interest on the Bonds when due and payable and to
pay the base ground rental referred to in paragraph (iv) of subsection
(a) of Section 3.
(e) No notice to quiet possession at the expiration of
the final term of this Lease shall be necessary, and Lessee covenants
peaceably to surrender possession of the Leased Property on or before
the expiration date.
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B. Section 3(a) is hereby amended by deleting
subparagraph (iv) thereof and by substituting therefor the following:
(iv) For the period of the term the base "ground rentals" payable
in advance on February 1 of each year thereof shall be as follows:
February 1, 1988 through January 31, 1990 $115,875.00
February 1, 1990 through January 31, 1993 122,828.00
February 1, 1993 through January 31, 1998 135,111.00
February 1, 1998 through January 31, 2003 148,622.00
February 1, 2003 through January 31, 2008 163,484.00
February 1, 2008 through January 31, 2013 179,832.00
February 1, 2013 through January 31, 2018 197,816.00
February 1, 2018 through January 31, 2023 217,597.00
February 1, 2023 through January 31, 2028 239,357.00
February 1, 2028 through January 31, 2033 263,293.00
February 1, 2033 through January 31, 2038 289,622.00
C. Section 3 is amended by deleting subsections (b) and
(bb) thereof and by substituting therefor the following:
(b) In addition to the payments contracted for in subsection
3(a) above, Lessee will pay Lessor, with respect to each Bond Year (as
defined below), commencing on the first day of the month following the
effective date of the Ninth Amendment to the Sublease and continuing
until the Terminal Date (as defined below) additional rentals per
annum equal to the Annual Principal and Interest Requirement (as
defined below) for such Bond Year on (i) the Revenue Bonds, Series
1969, of Lessor (hereinafter referred to as the "Series 1969 Bonds")
issued pursuant to the terms of the Bond Indenture and the First
Supplemental Bond Indenture, dated as of December 1, 1969 between
Lessor and the Bank, (ii) the Revenue Bonds, Series 1971, of Lessor
(hereinafter referred to as the "Series 1971 Bonds") issued pursuant
to the terms of the Indenture and the Second Supplemental Bond
Indenture, dated as of June 1, 1971, between Lessor and the Bank,
(iii) the Revenue Bonds, Series 1982A, of Lessor (hereinafter referred
to as Series 1982A Bonds") issued pursuant to the terms of the
Indenture and the Third Supplemental Bond Indenture, dated as of
December 1, 1982 between Lessor and the Bank, (iv) the Revenue Bonds,
Series 1985, of Lessor (hereinafter referred to as
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"Series 1985 Bonds") issued pursuant to the terms of the Indenture and
the Fifth Supplemental Bond Indenture, dated as of November 15, 1985
between Lessor and the Bank, and (v) the 1988 Adjustable Rate Revenue
Obligations (herein referred to as "ARROs") issued pursuant to the
terms of the Indenture and the Sixth Supplemental Indenture. Such
additional rentals shall be payable by Bond Periods (as defined below)
in advance in equal monthly installments on the first day of each
month in such Bond Period, so that there is paid during each Bond
Period an amount equal to the Semiannual Principal and Interest
Requirement (as defined below) for such Bond Period, except, that
additional rentals payable with respect to interest on ARROs prior to
the Conversion Date shall be payable as follows: with respect to
ARROs, other than ARROs which have Interest Payment Dates (as defined
in the Sixth Supplemental Indenture) occurring at intervals of one
month or less, an amount on the first day of each month such that, if
the same amount were so credited on the first day of each succeeding
month thereafter, the aggregate of such amounts on credit to the Bond
and Interest Fund on the next succeeding Interest Payment Date will be
equal to the amount required to pay the installment of interest
falling due on ARROs on such Interest Payment Date, or to reimburse
the Support Bank (as defined in the Sixth Supplemental Indenture) for
a draw on, or borrowing or payment under, the Support Facility (as
defined in the Sixth Supplemental Indenture) made to provide funds for
payment of the installment of interest falling due on ARROs on such
Interest Payment Date; and with respect to ARROs which have Interest
Payment Dates occurring at intervals of one month or less, an amount
sufficient to pay the installment of interest payable on ARROs on the
next succeeding Interest Payment Date or to reimburse the Support Bank
for a draw on or borrowing or payment under, the Support Facility made
to provide funds for the payment of the interest payable on the ARROs
on such Interest Payment Date which shall be payable as follows: with
respect to ARROs bearing interest at a Commercial Paper Rate or a
Monthly Rate (as defined in the Sixth Supplemental Indenture) such
payment shall be made on each Interest Payment Date and with respect
to ARROs bearing interest at a Daily Rate or a Weekly Rate (as defined
in the Sixth Supplemental Indenture) such payment shall be made on the
first Business Day (as defined in the Sixth Supplemental Indenture) or
each month on or prior to such Interest Payment Date, provided further
that Lessee, if not then in default hereunder, may in any Bond Year
beginning with the Bond Year commencing as of December 1, 1987 credit
against the additional rentals provided for in this subsection (b):
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(i) the amount of any balance transferred by the Bank
pursuant to the terms of the Supplemented Indenture from any bond
retirement fund established thereunder to any fund so established the
moneys of which are to be used for the payment of principal of and
interest and premium, if any, the Series 1969 Bonds, the Series 1971
Bonds, the Series 1982A Bonds, the Series 1985 Bonds or the ARROs
(hereinafter collectively referred to as the "Bonds"), or any
combination thereof, which credit shall be applied against the
installment or installments of additional rentals provided for in this
subsection (b) next coming due, if and to the extent that such credit
would not result on the next succeeding June 1 or December 1, as the
case may be, or Interest Payment Date with respect to ARROs, in the
moneys in any such latter fund available therefor being insufficient
to pay the interest and principal, if any, due on such June 1 or
December 1 as the case may be, or Interest Payment Date with respect
to ARROs, or to redeem Bonds at the times and to the extent required
by the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to
subsection 3(d).
All amounts payable pursuant to this subsection 3(b) shall be
payable notwithstanding the change in lease term referred to in Section 2, the
expiration of the 1988 Improvement Lease Term, the inability of Lessee, or a
related party, to use or make use of any portion of the Base Premises upon
expiration of the 1988 Improvement Lease Term or the letting of any portion of
the Base Premises to a party other than Lessee, or a related party, upon
expiration of the 1988 Improvement Lease Term.
The term "Bond Year" shall mean each period of twelve months
beginning on June 1 during the period beginning as of December 1, 1987 and
continuing until the Terminal Date. The term "Bond Period" shall mean each
period of six months beginning on June 1 or December 1 during any Bond Year.
The term "Semiannual Principal and Interest Requirement" with respect to any
Bond Period shall mean the interest on the Bonds accrued and payable on any
Interest Payment Date during or immediately following such Bond Period plus any
amount required on the December 1 or June 1, as the case may be, following such
Bond Period on account of principal to pay the Bonds at the stated maturities
thereof and on account of principal and premium, if any, to redeem or prepay
the Bonds pursuant to any mandatory sinking fund or redemption requirement
applicable thereto.
The term "Annual Principal and Interest Requirement" with
respect to any Bond Year shall mean the sum of the Semi-annual Principal and
Interest Requirements with respect to the
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Bond Periods comprising such Bond Year. The Semiannual Principal and Interest
Requirement for each Bond Period shall be determined as of the beginning of
such Bond Period.
The term "Terminal Date" shall mean the first date on which
the aggregate of all moneys held by the Bank in any bond reserve fund or
otherwise under the Supplemented Indenture and then available for the payment
of interest and premium, if any, on and principal of the Bonds shall equal or
exceed the amount required to redeem or pay all the Bonds at the time
outstanding (including principal, redemption premium, if any, and interest to
their stated maturities or to the next date or dates on which such Bonds may be
callable for redemption, whichever is the earlier).
(bb) In addition to the payments contracted for in
Subsections 3(a), 3(aa) and 3(b) above, Lessee will pay Lessor for deposit by
the Bank in the Reserve Fund or Special Reserve (as defined in the Sixth
Supplemental Indenture):
(i) the initial funding amount, if any, as provided in
the Supplemented Indenture required to be accumulated in the Reserve
Fund or Special Reserve with respect to each Series of Bonds from
amounts on deposit in the Project Fund,
(ii) the amount required to be deposited in the Reserve
Fund or Special Reserve in the event of any deficiency therein; and
(iii) the amount necessary to fully fund the Reserve Fund
with respect to all Bonds on the Conversion Date (as defined in the
Sixth Supplemental Indenture),
provided that, if not then in default hereunder, Lessee may at its option in
any Bond Period credit against the additional rentals provided for in this
subsection the amount of any moneys on deposit in the Reserve Fund or Special
Reserve at the commencement of such Bond Period (other than moneys previously
paid as additional rental pursuant to this subsection) to the extent that such
moneys shall not theretofore have been used for purposes of any such credit.
Such rental shall be payable in advance in equal monthly installments on the
first day of each month in such Bond Period.
D. Section 3 is amended by deleting subsection (c)
thereof and by substituting therefor the following:
(c) In addition to such payment, Lessee shall pay as
further additional rental the fees, expenses and charges of the Bank, any
Co-Bond Trustee, Purchase Trustee, Remarketing Agent (as defined in the Sixth
Supplemental Indenture), any registrar and of any paying agents incurred under
or pursuant
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to the Indenture (including any expenses of the Bank and any Co-Bond Trustee
incurred pursuant to the Indenture in the enforcement of any of the rights and
remedies of the Bank, and any Co-Bond Trustee and the Bond holders thereunder)
and also the amount of any net losses suffered in connection with the
investment pursuant to the Indenture by the Bank or any Co-Bond Trustee of
funds held by it thereunder or by the Purchase Trustee under the Purchase Trust
Agreement, but only to the extent necessary to make up any deficiencies
thereunder. Any such fees, expenses, charges and net losses shall be paid by
Lessee within thirty (30) days after the receipt of a requisition from Lessor
or the Bank or any Co-Bond Trustee under the Indenture for such additional
amounts.
E. Section 3 is amended by adding the following
subsection (i):
(i) The Lessee has entered into a Bond Purchase Trust
Agreement dated as of January, 1988 between itself, The Bank of New York, in
its separate corporate capacity as Purchase Trustee thereunder and not in any
other capacity under the Indenture, for the benefit of the registered owners of
the ARROs. Pursuant to such agreement Lessee has, subject to the terms and
conditions provided therein, provided the registered owners of the ARROs
certain rights and benefits and has agreed to pay the Purchase Trustee for
deposit in the Bond Purchase Fund established under the Bond Purchase Trust
Agreement an amount equal to the purchase price on all ARROs to the extent such
purchase price is not paid from remarketing proceeds or the proceeds of a draw
on, or borrowing or payment under, the Support Facility (as defined in the
Sixth Supplemental Bond Indenture. Lessee hereby covenants and agrees that it
will enter into the aforesaid Bond Purchase Trust Agreement and shall comply
with the terms and provisions thereof and perform all of its duties and
obligations thereunder. Lessor agrees to provide a summary of the rights, terms
and conditions provided in, and references to the provisions regarding, the
Bond Purchase Trust Agreement in the Sixth Supplemental Bond Indenture and in
the form of the ARROs. Notwithstanding herein or in the Indenture to, it is
expressly understood that the rights provided to registered owners of the ARROs
under the aforesaid Bond Purchase Trust Agreement do not constitute rights of
such registered owners under the Indenture, as amended and supplemented, or
under such ARROs. Lessee shall pay as further additional rental all amounts
payable under the Bond Purchase Trust Agreement. It is further expressly
understood that any moneys payable by the Lessee pursuant to the Bond Purchase
Trust Agreement are not payable to the Trustees hereunder and are not subject
to the lien of the Indenture.
The Lessee has entered into a Reimbursement Agreement (the
"Reimbursement Agreement") dated as of January 1,
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1988, between itself and each of Societe Generale, acting through its Houston
Agency, The Mitsubishi Bank, Limited, acting through its Houston Agency, the
Fuji Bank, Limited, acting through its Houston Agency and The Sumitomo Bank,
Limited, acting through its Houston Agency, as issuers of the Letter of Credit,
and its successors and assigns (collectively, the "Support Bank") providing for
the issuance of a letter of credit (the "Letter of Credit") thereunder for the
benefit of the registered owners of the ARROs. Except as otherwise provided in
the Sixth Supplemental Bond Indenture, payments of interest on and principal of
ARROs will be paid directly to the registered owners of the ARROs pursuant to a
draw on the Letter of Credit and will be subject to reimbursement of the
Support Bank by the Lessee pursuant to the Reimbursement Agreement. Payments
of the purchase price of ARROs (consisting of the principal amount thereof,
accrued interest, if any, and premium, if any thereon) subject to optional or
mandatory tender for purchase in accordance with the Sixth Supplemental Bond
Indenture shall be paid with the proceeds of a draw on the Letter of Credit in
the event the proceeds of a remarketing of such ARROs are insufficient to make
such payment. Any such draw shall be subject to reimbursement of the Support
Bank by the Lessee pursuant to the Reimbursement Agreement. Other fees, charges
and expenses are also payable by the Lessee to the Support Bank. Lessee shall
pay as further additional rental the fees, charges and expenses of the Support
Bank and all amounts subject to reimbursement pursuant to the Reimbursement
Agreement. Lessee shall also pay as further additional rental all amounts
payable, including any fees, charges and expenses, under any Support Facility
(as defined in the Sixth Supplemental Indenture). It is further expressly
understood that any moneys payable by the Lessee pursuant to the Reimbursement
Agreement are not payable to the Trustees hereunder and are not subject to the
lien of the Indenture.
E. The references to "Section 5E" and "5E" referred to in the
first and third lines respectively of Section E of the Eighth Amendment to the
Sublease are hereby amended to read "Section 5D" and "5D" respectively and the
reference to "Section 5D" in the second line of said Section E is hereby
amended to read "Section 5C". A new Section 5E is inserted immediately
following Section 5D, as follows:
5E. Construction, Acquisition or Installation of 1988
Improvements.
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The ARROs are being issued for the purpose of providing long-term
financing for a portion of the cost of construction and installation at the
Base of additional facilities and equipment, including the facilities,
equipment, improvements, betterments and additions referred to in Exhibit A
attached hereto. The cost of construction and installation of such facilities
may exceed the funds made available from the proceeds of the sale of the ARROs.
The Lessee shall develop plans and specifications for such additional
facilities and equipment and for such purpose may retain, subject to the
written approval of the Lessor, an architect or firm of architects (which may
be staff of the Lessee) (all improvements and equipment constructed, acquired
or installed pursuant to such plans and specifications being herein referred to
as the "1988 Improvements"). In the event that the proceeds of the ARROs are
not sufficient to pay the additional or excess costs, Lessee shall pay the cost
of the facilities in excess of the funds available from the ARROs and any
excess cost of that part of the 1988 Improvements, not constituting personal
property or equipment, shall be paid promptly, from time to time, by Lessee to
the Bank upon receipt by Lessee of duplicate originals or certified copies of
certificates of said architects that labor and material has been furnished and
money is due and owing therefor, and such excess cost of that part of the
1988 Improvements, constituting personal property and equipment shall be paid
promptly, from time to time, by Lessee, to the Bank as soon as each item of
such personal property and equipment is installed. Lessor and Lessee shall have
the right to inspect the construction and installation of work contemplated
hereby at all reasonable times and to inspect during regular business hours,
all books, records, plans and specifications of the other party hereto and
other data relating thereto or to the cost thereof. At such time as the 1988
Improvements are ready for use or occupancy, Lessor and Lessee shall deliver to
the Bank (i) a certificate of Lessor, countersigned by such architects, stating
that the 1988 Improvements are ready for use or occupancy by Lessee, stating
the date on which such readiness occurred, setting forth in reasonable detail
the final cost of the construction, acquisition or installation of the 1988
Improvements and stating that such final costs have been paid in full or, in
the event that such final costs have not been paid in full, the amount to be
retained by the Bank in the 1988 Construction Fund (as defined in the
Supplemented Indenture) to pay all such final costs in full; and (ii) a
certificate of Lessee stating that the 1988 Improvements have been constructed,
acquired and installed and are ready for use or occupancy by Lessee and stating
the final costs of the construction, acquisition or installation of the 1988
Improvements and stating that such final costs have been
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paid in full or, in the event that such final costs have not been paid in full,
the amount to be retained by the Bank in the 1988 Construction Fund to pay all
such final costs in full. In the event the Lessee determines that all or part
of the construction and installation of the work contemplated hereby is not
required, then, notwithstanding the foregoing, in lieu of the certificates
required by clauses (i) and (ii) of the preceding sentence of this Section 5E
the Lessee shall deliver to the Lessor and the Bank a certificate stating that
by proper corporate action the Lessee has determined that all or part of the
1988 Improvements are not required; setting forth those portions of the 1988
Improvements to which such determination applies; stating the portion of the
1988 Improvements which have been or will be constructed, acquired or installed
and the date such portion of the 1988 Improvements are expected to be ready for
use and occupancy by the Lessee; stating the final cost of the construction,
acquisition and installation of that portion of the 1988 Improvements completed
or to be completed, and stating that such final costs have been paid in full,
or in the event that such final costs have not been paid in full, the amount to
be retained in the 1988 Construction Fund to pay all such final costs in full;
stating that the construction, acquisition and installation of that portion of
the 1988 Improvements completed or to be completed will not impair the
operation of the Base as a complete integral functional unit; and evidencing
the concurrence of the aforesaid architects with respect to the matters set
forth in such certificate (except such architects need not concur with respect
to that portion of the certificate relating to the corporate action making the
determination that all or part of the 1988 Improvements are not required). In
the event that the certificates of Lessor and Lessee required to be delivered
by clauses (i) and (ii) of the sixth sentence of this Section 5E or the
certificate issued in lieu of such certificates required to be delivered by the
seventh sentence of this Section 5E shall not state therein that all final
costs have been paid in full, as promptly as practical after such time as all
final costs of the construction, acquisition and installation of the 1988
Improvements shall have been paid in full, Lessor and Lessee shall each deliver
to the Bank, a certificate to such effect. Lessee agrees that all work
(including such construction, acquisition and installation) under any
construction and acquisition contracts consented to by Lessor or such other
agreements are undertaken by Lessee as Agent on behalf of Lessor, and the 1988
Improvements are the property of Lessor. Lessee agrees it will not enter
into any amendment of any contract or such other agreements without the prior
approval of the Lessor, which approval shall not be unreasonably withheld.
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F. A new paragraph shall be added to Section 6 as
follows:
The Lessee hereby covenants that so long as any ARROs shall be
outstanding, the Lessee shall comply with all applicable provisions of Sections
103 and 141-150 of the Internal Revenue Code of 1986, as amended (the "Code")
and all applicable regulations of the Internal Revenue Service proposed and
promulgated thereunder.
The Lessee covenants and agrees that the proceeds of the ARROs
will be applied such that the facilities financed from the proceeds of at least
ninety-five percent (95%) of the ARROs will qualify as airport facilities
within the meaning of Section 142(a)(1) of the Code and application of the
proceeds of the ARROs will not result in more than five percent (5%) of the
aggregate amount of expenditures from the 1988 Construction Fund at any time
being used for a facility which would not be exempt under such Section 142(a)
(1), for issuance expenses in excess of 2% of the proceeds of the ARROs or for
working capital or for property of a character not subject to the allowance for
depreciation. The Lessee will not cause or permit any plans and specifications
for the facilities to be financed from the proceeds of the ARROs to be changed
or revised, or such facilities to be operated, maintained, repaired or
renovated, in a manner such that such facilities to be financed from the
proceeds of at least ninety-five percent (95%) of the proceeds of the ARROs
will not qualify as airport facilities within the meaning of Section 142(a)
(1) of the Code, or take any other action which would cause the loss of the
exclusion of interest on any ARROs from gross income for federal income tax
purposes.
The Lessee hereby irrevocably elects not to claim depreciation
and an investment tax credit with respect to the 1988 Improvements in
accordance with Section 142(b)(1)(B)(i) of the Code. This election shall be
binding on the Lessee and all successors in interest hereunder.
In order to ensure compliance by the Lessor and the Lessee
with the tax covenants set forth above and with the provisions of Section
148(f) of the Code, the Lessor, the Lessee and Bank of Oklahoma, N.A., as
Co-Bond Trustee for the ARROs have entered into an Arbitrage Agreement, dated
as of February 18, 1988. The Lessee hereby agrees to pay, or cause to be paid,
as additional rent under this Sublease, directly to the United States the
rebate payments required to be paid to the United States in the amounts and at
the times provided in such Arbitrage Agreement and in Section 148(f) of the
Code and the Treasury Regulations promulgated or to be promulgated thereunder
to the extent such amounts are not paid from earnings on amounts held in the
1988 Construction Fund.
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G. The second paragraph of Section 9 is deleted in its
entirety and the following paragraph is inserted in lieu thereof:
Lessor hereby assigns to Lessee effective upon completion of
the 1969, 1971, 1982A, 1983, 1985 and 1988 Improvements respectively
and delivery of completion certificates as provided in Section 5, 5A,
5B, 5C and 5D hereof respectively, all right, title and interest of
Lessor in and to any and all warranties, express or implied, made to
Lessor under, in the case of the 1969, 1971, 1982A, 1983, 1985 and
1988 Improvements, all construction and purchase contracts entered
into with respect to such Improvements, and under any and all other
construction or purchase contracts entered into by Lessor or otherwise
accruing to the benefit of Lessor and pertaining to the Leased
Property, together with the right to enforce the same for the benefit
of Lessee and pertaining to the Leased Property, together with the
right to enforce the same for the benefit of Lessee, either in the
name of Lessor or Lessee or otherwise, and expressly subrogates Lessee
to all of Lessor's rights of action and causes of action against the
other parties to all such contracts. Lessee will indemnify Lessor
against damage, loss or expense resulting from such enforcement and
Lessee's efforts to enforce the same.
H. (a) Section 1(b) is amended by inserting immediately
after the words "Section 5 or Section 5A or Section 5B or Section 5C or Section
5D" the first time they appear in Section 1(b) the words "or Section 5E" and by
inserting immediately after words "Section 5, Section 5A or said Section 5B or
said Section 5C or Section 5D" the second time they appear in Section 1(b) the
words "or said Section 5E".
(b) Sections 4(a) and 8(a)(i)(2)(B) are amended
by inserting immediately after the words "Section 5, Section 5A or Section 5B
or Section 5C or Section 5D" the words "or Section 5E".
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I. The Sublease is further amended by deleting the words
"Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds,
Series 1983 Bonds and Series 1985 Bonds" in each place in which they appear and
by substituting therefor the words "Series 1969 Bonds, Series 1971 Bonds,
Series 1982A Bonds, Series 1985 Bonds and ARROs" and by deleting the words
"Series 1963 Bonds, Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds,
Series 1983 Bonds or Series 1985 Bonds" where such words appear in Sections 9,
12, 14 and 19 of the Sublease and by substituting therefor the words "Series
1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985 Bonds or
ARROs.".
ARTICLE II
On and after the date hereof, the term "Sublease" shall mean
the Sublease dated as of June 24, 1958, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment and
this Ninth Amendment to the Sublease.
ARTICLE III
Except as herein amended, the Sublease shall be and remain in
full force and effect.
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ARTICLE IV
No trustee, director, officer or employee of either party
hereto shall be held personally liable under or in connection with the
execution of the terms or provisions or conditions of this Ninth Amendment to
the Sublease.
ARTICLE V
Lessee hereby consents to the assignment by the Trustees of
any and all of their right under the Sublease as amended by the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the
Fifth Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth
Amendment and this Ninth Amendment to the Sublease to The Bank of New York,
Bond Trustee as successor Trustee under the 1963 Indenture as supplemented by
the First Supplemental Bond Indenture, dated as of December 1, 1969, the Second
Supplemental Bond Indenture, dated as of June 1, 1971, the Third Supplemental
Bond Indenture, dated as of December 1, 1982, the Fourth Supplemental Bond
Indenture, dated as of April 1, 1983, the Fifth Supplemental Bond Indenture,
dated as of November 15, 1985, the Sixth Supplemental Bond Indenture, dated as
of January 1, 1988, each between the Trustees and The Bank of New York, Bond
Trustee and Lessee agrees to comply with the provisions of such assignment to
the extent applicable to it. Lessee specifically approves and consents to the
terms and
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provisions of the Sixth Supplemental Bond Indenture, dated as of January 1,
1988.
The Sixth Supplemental Indenture provides for the taking of
certain actions with respect to the ARROs by the Trustees at the request of the
Company. The Trustees hereby agree to and shall comply with any such request to
the extent permitted by law. The Secretary is hereby authorized on behalf of
the Trustees, and shall be deemed, to grant and agree to any such request, and
shall provide evidence of such consent in such manner and at such times as the
Company may reasonably request, upon receipt of (i) the opinion of Bond Counsel
if required in connection with such action under the Sixth Supplemental
Indenture to the effect that taking such action will not violate the Act (as
defined in the Sixth Supplemental Indenture), or (ii) if an opinion of Bond
Counsel is not required in connection with such action, the secretary may rely
upon the advice of counsel to the Lessor in such form as the secretary shall
deem appropriate. In the event Bond Counsel or counsel to the Lessor is unable
to deliver such opinion or in unable to deliver such opinion without further
action of the Trustees, the Trustees hereby agree to use their best efforts to
take such action by the time requested by the Company as may be required to
grant and agree to the Company's request.
-21-
<PAGE> 154
IN WITNESS WHEREOF, the parties hereto have executed this
Ninth Amendment to the Sublease as of this first day of January, 1988.
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ J. W. BATES, JR.
----------------------------------------
J. W. Bates, Jr., Chairman
ATTEST:
/s/ J. RICHARD STUDENNY
- ----------------------------------
Secretary
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Ninth Amendment to the Sublease dated as of
January 1, 1988, was acknowledged before me this 11th day of February, 1988,
by J. W. BATES, JR., Chairman of the Trustees of the Tulsa Municipal Airport
Trust, a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 11th day of February, 1988.
/s/ PAULA S. MCDANIEL
----------------------------------------
Paul S. McDaniel
Notary Public
My commission expires:
April 15, 1990
- ----------------------
-22-
<PAGE> 155
LESSEE
AMERICAN AIRLINES, INC.
By /s/ DOUGLAS A. HACKER
-------------------------------------
Douglas A. Hacker
Title: Vice President and Treasurer
ATTEST:
/s/ C.D. NEARLETT
- ----------------------------------
Secretary
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
Before me, Geneva Stegemann, a Notary Public in and for said
State on this 15th day of February, 1988, personally appeared Douglas A.
Hacker, to me known to be the identical person who prescribed the name of
American Airlines, Inc. thereof to the foregoing instrument as its Vice
President, who being by me duly sworn, does depose and say that he is the Vice
President of American Airlines, Inc., the corporation described herein for
which executed the above instrument; that he knows the seal of said
corporation; that said seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of such corporation,
in that he signed his name thereto by like order, and acknowledged to me that
the same was his free and voluntary act and deed and the free and voluntary act
and deed of such corporation for the use and purposes therein set forth.
Subscribed and sworn to before me this 15th day of February, 1988.
/s/ GENEVA STEGEMANN
----------------------------------------
Notary Public
My commission expires:
February 15, 1992
- ---------------------
-23-
<PAGE> 156
EXHIBIT A
1. Turbine Engine Building $23.6 Million 45 Years
Construction of 200,000 sq/ft of space to accommodate engine shops,
landing gear shops and machine process shops to product/process
approximately 300 engines annually.
2. Support Shop Building $21.3 Million 45 Years
A 270,000 sq/ft facility to house a new seat shop for wide body aircraft
seats and to provide space for shops which will be moved from Hangar 1.
3. Supply Services Warehouse $10.3 Million 60 Years
$ 7.1 Million 12 Years
A 120,000 sq/ft facility with an automated storage and retrieval system
store and access to the large quantity of various parts required for
aircraft and engine maintenance.
4. Facilities Maintenance Building $ 4.0 Million 45 Years
A 50,000 sq/ft facility to house the support functions for the maintenance
base such as automotive repair, tool repair, and carpentry shop.
5. Parking $ 1.7 Million 20 Years
The construction of 1,800 parking spaces required due to the use of
existing parking areas as construction sites for new buildings.
6. Fire Protection Facility $ 1.5 Million 45 Years
Construction of new pump house to supply fire protection capabilities for
the new base facilities.
7. Fleet Service Building $ 1.2 Million 45 Years
A 14,000 sq/ft facility for the maintenance base work face.
8. Flammables and Barrel Storage Building $ 1.1 Million 45 Years
A 12,200 sq/ft facility to safely house and contain flammable and
hazardous materials.
9. Fuel Farm $ 1.0 Million 22 Years
A series of tank storage and transfer facilities for 185,000 gallons of
jet fuel, 20,000 gallons of gasoline and 1,000 gallons of propane.
<PAGE> 157
-2-
10. Hangar #1 and Core $14.8 Million 45 Years
The creation of new side opening doors and three additional aircraft
docking positions in the hangar, as well as renovation of other areas of
the hangar.
11. Hangar #4 and Core $13.5 Million 45 Years
The construction of two new aircraft docking positions, shop space, and
shipping/receiving areas.
12. Hangars #2, 3 and 5 $11.6 Million 45 Years
Installation of new concrete flooring, plumbing, lighting and fire
protection facilities. Construction of tool rooms, loading areas and
office space.
13. Engine Test Cells #1 and 2 $ 7.1 Million 45 Years
Renovation and upgrading of engine test cells. Construction of a
preparation area and thrust reverse shop.
The $20.2 million equipment portion of the project is comprised of two types of
equipment:
1. Boeing 767 Support Equipment $15.0 MM 12 Years
Equipment for engine, airframe and avionics testing and maintenance.
2. Utilities Equipment $ 5.2 MM 22 Years
Air compressors, boilers, and chiller units to provide compressed air,
steam, and chilled water necessary to support the new facilities.
<PAGE> 158
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR RECORDED
91 APR 26 PM 2:48
JOAN HASTINGS
TULSA COUNTY CLERK
================================================================================
TENTH AMENDMENT TO THE SUBLEASE
by and between
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
and
AMERICAN AIRLINES, INC.
DATED AS OF APRIL 1, 1991
================================================================================
<PAGE> 159
TENTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the first day of April, 1991, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American").
For and in consideration of the mutual promises, terms, conditions and
covenants herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the "First
Amendment"), dated as of May 1, 1963, by and between the Trustees, as Lessor,
and American, as Lessee (a copy of which was duly recorded in the records of
the County Clerk of Tulsa County, Oklahoma, in Book 3341, Page 200, on May 16,
1963), as Exhibit A to the Bond Indenture, dated as of May 1, 1963, between the
Trustees and The Bank of New York, bond trustee, as successor to Morgan
Guaranty Trust Company of New York, in New York, New York, and IBJ Schroder
Bank & Trust Company, in New York, New York, pursuant to which the Revenue
Bonds, Series 1963, of such Trustees were issued, and as further amended by the
Second Amendment to the Sublease (hereinafter the "Second Amendment"), dated as
of December 1, 1969, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma in Book 3912, Page 642 on December 22, 1969) and as
further amended by the Third Amendment to the Sublease (hereinafter the "Third
Amendment"), dated as of the lst day of June, 1971, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma, in Book 3992,
Page 419 on November 8, 1971) and as further amended by the Fourth Amendment to
the Sublease (hereinafter the "Fourth Amendment"), dated as of the 9th day of
September, 1974, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the
<PAGE> 160
records of the County Clerk of Tulsa County, Oklahoma in Book 4958, Page 108 on
December 22, 1982), and as further amended by the Fifth Amendment to the
Sublease (hereinafter the "Fifth Amendment"), dated as of the lst day of
December, 1982, by and between the Trustees, as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma in Book 4658, Page 2225 on December 28, 1982), and as further
amended by the Sixth Amendment to the Sublease (hereinafter the "Sixth
Amendment"), dated as of the lst day of April, 1983, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma in Book 4681, Page
421 on April 5, 1983), and as further amended by the Seventh Amendment to the
Sublease (hereinafter the "Seventh Amendment"), dated as of November 17, 1983,
by and between the Trustees, as Lessor, and American, as Lessee (a copy of which
was duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in Book 4910, Page 218, on December 3, 1985), and as further amended by the
Eighth Amendment to Sublease (hereinafter the "Eighth Amendment"), dated as of
November 15, 1985, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 4910, Page 1764 on December 5, 1985), and as
further amended by the Ninth Amendment to the Sublease (hereinafter the "Ninth
Amendment"), dated as of January 1, 1988, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma, in Book 5081, Page 915 on
February 18, 1988). Such Sublease, as so amended, covers the following property
(land and improvements collectively referred to as "Leased Property") in Tulsa
County, Oklahoma:
(a) The following premises as revised by mutual agreement of the
parties hereto (hereinafter sometimes called the "Base Premises") which Lessor
leases pursuant to the Lease, dated August 6, 1957, as amended, and pursuant to
the Leases, dated March 29, 1968 and July 31, 1969, as amended, in each case
from the City of Tulsa to Lessor (such leases being hereinafter collectively
called the "Ground Lease"), being 244.75 acres, more or less, bounded and
described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the North East Corner of Section 24; Thence S 00
degrees-01'-42" W, along the East line of said Section, a distance of 1320.00
feet; Thence N 76 degrees-011-30" W, a distance of 51.53 feet to the Point of
Beginning;
Thence N 76 degrees-01'-30" W a distance of 51.53;
Thence S 00 degrees-01'-42" E a distance of 64.93;
2
<PAGE> 161
Thence S 89 degrees-58'-18" W a distance of 2490.00;
Thence N 16 degrees-23'-59" W a distance of 998.78;
Thence N 2 degrees-54'-49" E a distance of 3050.00;
Thence S 89 degrees-51'-46" E a distance of 37.97;
Thence S 00 degrees-47'-20" E a distance of 350.00;
Thence S 89 degrees-30'-35" E a distance of 247.72;
Thence N 13 degrees-48'-11" E a distance of 361.67;
Thence S 89 degrees-51'-16" E a distance of 1017.66;
Thence S 00 degrees-11'-14" E a distance of 100.00;
Thence S 89 degrees-51'-16" E a distance of 1270.77;
Thence S 00 degrees-01'-24" E a distance of 285.87;
Thence S 11 degrees-16'-36" W a distance of 51.03;
Thence S 00 degrees-01'-24" E a distance of 430.10;
Thence S 44 degrees-58'-36" W a distance of 42.43;
Thence S 00 degrees-10'-24" E a distance of 50.00;
Thence S 45 degrees-01'-24" E a distance of 42.43;
Thence S 00 degrees-01'-24" E a distance of 359.90;
Thence S 11 degrees-20'-24" E a distance of 50.96;
Thence S 00 degrees-O1'-24" E a distance of 700.00;
Thence S 11 degrees-16'-36" W a distance of 50.03;
Thence S 00 degrees-01'-24" E a distance of 450.00;
Thence S 44 degrees-58'-36" W a distance of 70.71;
Thence N 89 degrees-53'-37" W a distance of 10.90;
Thence S 45 degrees-01'-42" E a distance of 100.27;
Thence S 11 degrees-11'-42" E a distance of 1236.92;
To the Point of Beginning;
less a parcel of land more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, Township
20 North, Range 13 East, Indian Meridian, Tulsa County, Oklahoma, thence in a
southerly direction along the centerline of Mingo Road which is the east line
of Section 13, a distance of 287.50 feet, thence in a westerly direction along
a line perpendicular to centerline of Mingo Road a distance of 673.71 feet to
the Point of Beginning;
Thence in a southerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in a westerly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet;
Thence in a northerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in an easterly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet to the Point of Beginning;
said tract containing an area of approximately 2.71 acres, more or less;
3
<PAGE> 162
and including a parcel of land containing an area of approximately 1.58 acres,
more or less, to be utilized as a flight kitchen facility and more particularly
described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly described as
follows:
Commencing at the Southeast corner of said Section 26; thence N 00
degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a distance
of 177.15 to the Point of Beginning;
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.92 to the Point
of Beginning;
and further including at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold interest therein, the
following land and the improvements thereon (herein sometimes called the
"Disposal Plant"):
All that lot consisting of approximately six (6) acres located in the
SW 1/4 of Section 12, Township 20 North, Range 13 East, in Tulsa, Oklahoma,
approximately one-half mile to the north of the above-described premises, on a
portion of which there is situated a sanitary sewer disposal plant owned, as of
the date of this Sublease, by the City of Tulsa, Oklahoma, together with such
sewer line easements as may be required between the above-described premises
and said lot and between said lot and Bird Creek, lying approximately two (2)
miles to the North of said lot, which lot and easements, if leased by Lessor
and subleased hereunder, shall be included in the term "Base Premises", except
as the context may otherwise require;
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all rights in
connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
4
<PAGE> 163
The Sublease, as heretofore amended, is hereby further amended
in the manner and to the extent as hereinafter set forth, effective as of the
date on which the Series 1991 Revenue Bonds of the Trustees (hereinafter the
Series 1991 Bonds) are delivered and paid for, as follows:
A. Term. Section 2 is amended by deleting paragraphs
(d) and (e) thereof and adding the following:
(d) Notwithstanding the Lease Term, the term of this Sublease with
respect to the 1991 Improvements as defined in Section 5F hereof, and the Base
Premises Allocable to the 1991 Improvements, as defined below, shall, unless
terminated prior thereto as herein provided, expire at 12:00 noon, Tulsa time,
January 1, 2027. For the purposes of this Section 2 the term "Base Premises
Allocable to the 1991 Improvements" shall mean (i) each piece of unimproved
real property constituting a portion of the Base Premises upon which a specific
separate and discrete 1991 Improvement which constitutes real property will be
constructed; and (ii) each piece of improved real property constituting a
portion of the Leased Premises upon or in which any 1991 Improvements will be
constructed, installed or added. The term of this Sublease as applied to all of
the foregoing Base Premises Allocable to the 1991 Improvements and the 1991
Improvements to be made thereto or thereon is hereinafter collectively referred
to as the "1991 Improvement Lease Term".
(e) Fair Market Value Renewal. Upon expiration of the 1991
Improvement Lease Term, the Lessee shall have the option to renew this Sublease
with respect to all or any portion of the Base Premises Allocable to the 1991
Improvements and any 1991 Improvements to be made thereto or thereon which
constitute real property (the "Base Improvements") for a period not exceeding
the Lease Term at the fair market value of the Base Improvements (but without
regard to the Base Premises Allocable to the 1991 Improvements) determined at
the time of the renewal hereof. The fair market value of such Base Improvements
shall be determined by an independent engineer, appraiser or other expert with
expertise in the valuation of airport properties selected by the Lessor with
the approval of the Lessee. In the event all or any portion of the Base
Premises Allocable to the 1991 Improvements and related Base Improvements are
Leased to a party other than the Lessee, or a related party, the Trustees shall
charge such party as rental for such Base Premises Allocable to the 1991
Improvements and related Base Improvements an amount at least equal to the fair
market value of the Base Improvements and the Base Premises Allocable to the
1991 Improvements so leased, as determined above. The rental paid by such party
representing the fair market value of the Base Premises Allocable to the 1991
Improvements shall be paid by Lessor to Lessee during the remainder of the
Lease Term only as compensation for the loss of use of such surrendered Lease
Term
5
<PAGE> 164
with respect to the Base Premises Allocable to the 1991 Improvements so leased
to such third party. In the event all or any portion of the Base Premises
Allocable to the 1991 Improvements is leased to a party other than Lessee, or a
related party, the Lessee shall provide to such party access, or an easement
for access to any portion of the Base Premises Allocable to the 1991
Improvements leased to such other party. The Lessee may charge a fair market
rent for any easement or access that it provides in accordance with this
provision.
(f) Options to Extend 1991 Improvements Lease Term. The 1991
Improvements Lease Term has been established on the basis of a term not more
than 80% of the reasonably expected economic life of the 1991 Improvements.
Notwithstanding the provisions of subsection (b) of this Section 2, the Lessee
shall have the option to extend the 1991 Improvement Lease Term set forth in
subsection (a) for a term not to exceed the shorter of 80% of the reasonably
expected economic life of the 1991 Improvements, as revised in accordance with
this subsection (c), and the remainder of the Lease Term, in the event that the
Lessee furnishes to the Lessee (i) an opinion of an independent engineer,
appraiser or other expert having expertise in the valuation of airport
properties to the effect that the reasonably expected economic life of one or
more of the 1991 Improvements is in fact longer than initially estimated in
establishing the 1991 Improvements Lease Term and setting forth a revised
estimate of the reasonably expected economic life or lives of the 1991
Improvement or 1991 Improvements and (ii) an opinion of Wood Dawson Smith &
Hellman or any other firm of nationally recognized bond counsel experienced in
the financing of airport facilities and acceptable to the Lessor and the
Lessee, to the effect that such extension of the 1991 Improvement Lease Term
will not have an adverse effect on the exclusion of interest on the Series 1991
Bonds as defined in Section 3(b) hereof from gross income for federal income
tax purposes.
(g) Obligation to Continue Rental Payments. Nothing in this
Section 2 shall affect Lessee's obligation to pay rentals under subsections (b)
and (bb) of Section 3 hereof sufficient to pay principal of and premium, if
any, and interest on the Bonds when due and payable and amounts required to be
deposited in the Reserve Fund and to pay the base ground rental referred to in
paragraph (iv) of subsection (a) of Section 3.
(h) No notice to quit possession at the expiration of the final
term of this Sublease shall be necessary, and Lessee covenants peaceably to
surrender possession of the Leased Property on or before the expiration date.
B. Amendment of Section 3, subsection (b) and (bb). Section 3 is
amended by deleting subsections (b) and (bb) thereof and by substituting
therefor the following:
6
<PAGE> 165
(b) In addition to the payments contracted for in subsection
3(a) above, Lessee will pay Lessor, with respect to each Bond Year (as defined
below), commencing on the first day of the month following the effective date of
the Tenth Amendment to the Sublease and continuing until the Terminal Date (as
defined below) additional rentals per annum equal to the Annual Principal and
Interest Requirement (as defined below) for such Bond Year (as defined below) on
(i) the Revenue Bonds, Series 1969, of Lessor (hereinafter referred to as the
"Series 1969 Bonds") issued pursuant to the terms of the Bond Indenture and the
First Supplemental Bond Indenture, dated as of December 1, 1969 between Lessor
and the Bank, (ii) the Revenue Bonds, Series 1971, of Lessor (hereinafter
referred to as the "Series 1971 Bonds") issued pursuant to the terms of the
Indenture and the Second Supplemental Bond Indenture, dated as of June 1, 1971,
between Lessor and the Bank, (iii) the Revenue Bonds, Series 1982A, of Lessor
(hereinafter referred to as "Series 1982A Bonds") issued pursuant to the terms
of the Indenture and the Third Supplemental Bond Indenture, dated as of December
1, 1982, between Lessor and the Bank, (iv) the Revenue Bonds, Series 1985, of
Lessor (hereinafter referred to as "Series 1985 Bonds") issued pursuant to the
terms of the Indenture and the Fifth Supplemental Bond Indenture, dated as of
November 15, 1985, between Lessor and the Bank, (v) the 1988 Adjustable Rate
Revenue Obligations (herein referred to as "ARROs") issued pursuant to the terms
of the Indenture and the Sixth Supplemental Indenture, dated as of January 1,
1988, and (vi) the Revenue Bonds, Series 1991, of the Lessor (hereinafter
referred to as the "Series 1991 Bonds") issued pursuant to the terms of the
Indenture and the Seventh Supplemental Indenture, dated as of April 1, 1991 (the
Indenture as supplemented and amended by such First Supplemental Bond Indenture,
such Second Supplemental Bond Indenture, such Third Supplemental Bond Indenture,
such Fourth Supplemental Bond Indenture, such Fifth Supplemental Bond Indenture,
such Sixth Supplemental Indenture and such Seventh Supplemental Indenture is
hereinafter referred to as the "Supplemented Indenture"). Such additional
rentals shall be payable by Bond Periods (as defined below) in advance in equal
monthly installments on the first day of each month in such Bond Period, so that
there is paid during each Bond Period an amount equal to the Semiannual
Principal and Interest Requirement (as defined below) for such Bond Period,
except, that additional rentals payable with respect to interest on ARROs prior
to the Conversion Date shall be payable as follows: with respect to ARROs, other
than ARROs which have Interest Payment Dates (as defined in the Sixth
Supplemental Indenture) occurring at intervals of one month or less, an amount
on the first day of each month such that, if the same amount were so credited on
the first day of each succeeding month thereafter, the aggregate of such amounts
on credit to the Bond and Interest Fund on the next succeeding Interest Payment
Date will be equal to the amount required to pay the installment of interest
falling due on ARROs on such Interest Payment Date, or to reimburse the Support
Bank (as defined in the Sixth Supplemental Indenture) for a draw on, or
7
<PAGE> 166
borrowing or payment under, the Support Facility (as defined in the Sixth
Supplemental Indenture) made to provide funds for payment of the installment of
interest falling due on ARROs on such Interest Payment Date; and with respect
to ARROs which have Interest Payment Dates occurring at intervals of one month
or less, an amount sufficient to pay the installment of interest payable on
ARROs on the next succeeding Interest Payment Date or to reimburse the Support
Bank for a draw on or borrowing or payment under the Support Facility made to
provide funds for the payment of the interest payable on the ARROs on such
Interest Payment Date which shall be payable as follows: with respect to ARROs
bearing interest at a Commercial Paper Rate or a Monthly Rate (as defined in
the Sixth Supplemental Indenture) such payment shall be made on each Interest
Payment Date and with respect to ARROs bearing interest at a Daily Rate or a
Weekly Rate (as defined in the Sixth Supplemental Indenture) such payment shall
be made on the first Business Day (as defined in the Sixth Supplemental
Indenture) of each month on or prior to such Interest Payment Date, provided
further that Lessee, if not then in default hereunder, may in any Bond Year
beginning with the Bond Year commencing as of December 1, 1987 credit against
the additional rentals provided for in this subsection (b):
(i) the amount of any balance transferred by the Bank pursuant to
the terms of the Supplemented Indenture from any bond retirement fund
established thereunder to any fund so established the moneys of which are to be
used for the payment of principal of and interest and premium, if any, on the
Series 1969 Bonds, the Series 1971 Bonds, the Series 1982A Bonds, the Series
1985 Bonds, the ARROs or the Series 1991 Bonds (hereinafter collectively
referred to as the "Bonds"), or any combination thereof, which credit shall be
applied against the installment or installments of additional rentals provided
for in this subsection (b) next coming due, if and to the extent that such
credit would not result on the next succeeding June 1 or December 1, as the
case may be, or Interest Payment Date with respect to ARROS, in the moneys in
any such latter fund available therefor being insufficient to pay the interest
and principal, if any, due on such June 1 or December 1 as the case may be, or
Interest Payment Date with respect to ARROS, or to redeem Bonds at the times
and to the extent required by the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to subsection
3(d).
All amounts payable pursuant to this subsection 3(b) shall be payable
notwithstanding the change in Lease Term referred to in Section 2, the
expiration of the 1991 Improvement Lease Term, the inability of Lessee, or a
related party, to use or make use of any portion of the Base Premises upon
expiration of the 1991 Improvement Lease Term or the letting of any portion of
the Base
8
<PAGE> 167
Premises to a party other than Lessee, or a related party, upon expiration of
the 1991 Improvement Lease Term.
The term "Bond Year" shall mean each period of twelve months beginning
on June 1 and continuing until the Terminal Date. The term "Bond Period" shall
mean each period of six months beginning on June 1 or December 1 during any
Bond Year. The term "Semiannual Principal and Interest Requirement" with
respect to any Bond Period shall mean the interest on the Bonds accrued and
payable on any Interest Payment Date during or immediately following such Bond
Period plus any amount required on the December 1 or June 1, as the case may
be, following such Bond Period on account of principal to pay the Bonds at the
stated maturities thereof and on account of principal and premium, if any, to
redeem or prepay the Bonds pursuant to any mandatory sinking fund or redemption
requirement applicable thereto.
The term "Annual Principal and Interest Requirement" with respect to
any Bond Year shall mean the sum of the Semi-annual Principal and Interest
Requirements with respect to the Bond Periods comprising such Bond Year. The
Semiannual Principal and Interest Requirement for each Bond Period shall be
determined as of the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which the
aggregate of all moneys held by the Bank in any bond reserve fund or otherwise
under the Supplemented Indenture and then available for the payment of interest
and premium, if any, on and principal of the Bonds shall equal or exceed the
amount required to redeem or pay all the Bonds at the time outstanding
(including principal, redemption premium, if any, and interest to their stated
maturities or to the next date or dates on which such Bonds may be callable for
redemption, whichever is the earlier).
(bb) In addition to the payments contracted for in subsections 3(a),
3(aa) and 3(b) above, Lessee will pay Lessor for deposit by the Bank in the
Reserve Fund or Special Reserve (as defined in the Sixth Supplemental
Indenture):
(i) the initial funding amount, if any, as provided in the
Supplemented Indenture required to be accumulated in the Reserve Fund or
Special Reserve with respect to each Series of Bonds from amounts on deposit in
the Project Fund,
(ii) the amount required to be deposited in the Reserve Fund or
Special Reserve in the event of any deficiency therein; and
(iii) the amount necessary to fully fund the Reserve Fund with respect
to all Bonds on the Conversion Date (as defined in the Sixth Supplemental
Indenture), provided that, if not then in default hereunder, Lessee may at its
option in any Bond Period
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credit against the additional rentals provided for in this subsection the
amount of any moneys on deposit in the Reserve Fund or Special Reserve at the
commencement of such Bond Period (other than moneys previously paid as
additional rental pursuant to this subsection) to the extent that such moneys
shall not theretofore have been used for purposes of any such credit. Such
rental shall be payable in advance in equal monthly installments on the first
day of each month in such Bond Period.
C. Amendment of Section 3, subsection (c). Section 3 is amended
by deleting subsection (c) thereof and by substituting therefor the following:
(c) In addition to such payment, Lessee shall pay as further
additional rental the fees, expenses and charges of the Bank, any Co-Bond
Trustee, Purchase Trustee, Remarketing Agent (as defined in the Sixth
Supplemental Indenture), any registrar and of any paying agents incurred under
or pursuant to the Indenture (including any reasonable expenses of the Bank and
any Co-Bond Trustee incurred pursuant to the Indenture in the enforcement of
any of the rights and remedies of the Bank, and any Co-Bond Trustee and the
Bond holders thereunder) and also the amount of any net losses suffered in
connection with the investment pursuant to the Indenture by the Bank or any
Co-Bond Trustee of funds held by it thereunder or by the Purchase Trustee under
the Purchase Trust Agreement, but only to the extent necessary to make up any
deficiencies thereunder. Any such fees, expenses, charges and net losses shall
be paid by Lessee within thirty (30) days after the receipt of a requisition
from Lessor or the Bank or any Co-Bond Trustee under the Indenture for such
additional amounts.
D. A new Section 5F is inserted immediately following Section 5E, as
follows:
5F. Construction, Acquisition or Installation of 1991 Improvements.
The Series 1991 Bonds are being issued for the purpose of providing
long-term financing for a portion of the cost of construction and installation
at the Base of additional facilities and equipment, including the facilities,
equipment, improvements, betterments and additions referred to in Exhibit A
attached hereto. The cost of construction and installation of such facilities
may exceed the funds made available from the proceeds of the sale of the Series
1991 Bonds. The Lessee shall develop plans and specifications for such
additional facilities and equipment and for such purpose may retain, subject to
the written approval of the Lessor, an architect or firm of architects (which
may be staff of the Lessee) (all improvements and equipment constructed,
acquired or installed pursuant to such plans and specifications being herein
referred to as the "1991 Improvements"). Lessee will use its best efforts to
cause such construction, acquisition and installation
10
<PAGE> 169
to be satisfactorily completed in accordance with such drawings and
specifications, with such changes therein as may be requested by either party
hereto and approved by the other, without increasing the total estimated cost
of the 1991 Improvements. In the event that the proceeds of the Series 1991
Bonds are not sufficient to pay the additional or excess costs, Lessee shall
pay the cost of the facilities in excess of the funds available from the Series
1991 Bonds and any excess cost of that part of the 1991 Improvements, not
constituting personal property or equipment, shall be paid promptly, from time
to time, by Lessee to the Bank upon receipt by Lessee of duplicate originals or
certified copies of certificates of said architects that labor and material has
been furnished and money is due and owing therefor, and such excess cost of
that part of the 1991 Improvements, constituting personal property and
equipment shall be paid promptly, from time to time, by Lessee, to the Bank as
soon as each item of such personal property and equipment is installed. Lessor
and Lessee shall have the right to inspect the construction and installation of
work contemplated hereby at all reasonable times and to inspect during regular
business hours, all books, records, plans and specifications of the other party
hereto and other data relating thereto or to the cost thereof. At such time as
the 1991 Improvements are ready for use or occupancy, Lessor and Lessee shall
deliver to the Bank (i) a certificate of Lessor, countersigned by such
architects, stating that the 1991 Improvements are ready for use or occupancy
by Lessee, stating the date on which such readiness occurred, setting forth in
reasonable detail the final cost of the construction, acquisition or
installation of the 1991 Improvements and stating that such final costs have
been paid in full or, in the event that such final costs have not been paid in
full, the amount to be retained by the Bank in the 1991 Construction Fund (as
defined in the Supplemented Indenture) to pay all such final costs in full; and
(ii) a certificate of Lessee stating that the 1991 Improvements have been
constructed, acquired and installed and are ready for use or occupancy by
Lessee and stating the final costs of the construction, acquisition or
installation of the 1991 Improvements and stating that such final costs have
been paid in full or, in the event that such final costs have not been paid in
full, the amount to be retained by the Bank in the 1991 Construction Fund to
pay all such final costs in full. In the event the Lessee determines that all
or part of the construction and installation of the work contemplated hereby is
not required, then, notwithstanding the foregoing, in lieu of the certificates
required by clauses (i) and (ii) of the preceding sentence of this Section 5F
the Lessee shall deliver to the Lessor and the Bank a certificate stating that
by proper corporate action the Lessee has determined that all or part of the
1991 Improvements are not required; setting forth those portions of the 1991
Improvements to which such determination applies; stating the portion of the
1991 Improvements which have been or will be constructed, acquired or installed
and the date such portion of the 1991 Improvements are expected to be ready for
11
<PAGE> 170
use and occupancy by the Lessee; stating the final cost of the construction,
acquisition and installation of that portion of the 1991 Improvements completed
or to be completed, and stating that such final costs have been paid in full,
or in the event that such final costs have not been paid in full, the amount to
be retained in the 1991 Construction Fund to pay all such final costs in full;
stating that the construction, acquisition and installation of that portion of
the 1991 Improvements completed or to be completed will not impair the
operation of the Leased Premises as a complete integral functional unit; and
evidencing the concurrence of the aforesaid architects with respect to the
matters set forth in such certificate (except such architects need not concur
with respect to that portion of the certificate relating to the corporate
action making the determination that all or part of the 1991 Improvements are
not required). In the event that the certificates of Lessor and Lessee
required to be delivered by clauses (i) and (ii) and the seventh sentence of
this Section 5F or the certificate issued in lieu of such certificates required
to be delivered by the eighth sentence of this Section 5F shall not state
therein that all final costs have been paid in full, as promptly as practical
after such time as all final costs of the construction, acquisition and
installation of the 1991 Improvements shall have been paid in full, Lessor and
Lessee shall each deliver to the Bank, a certificate to such effect. Lessee
agrees that all work (including such construction, acquisition and
installation) under any construction and acquisition contracts consented to by
Lessor or such other agreements are undertaken by Lessee as Agent on behalf of
Lessor, and the 1991 Improvements are the property of Lessor. Lessee agrees it
will not enter into any amendment of any contract or such other agreements
without the prior approval of the Lessor, which approval shall not be
unreasonably withheld.
E. A new paragraph shall be added to Section 6 as follows:
The Lessee hereby covenants that so long as any Series 1991 Bonds
shall be outstanding or unpaid, the Lessee shall comply with all applicable
provisions of Sections 103 and 141-150 of the Internal Revenue Code of 1986, as
amended (the "Code") and all applicable regulations of the Internal Revenue
Service thereunder.
The Lessee covenants and agrees that the proceeds of the Series 1991
Bonds will be applied such that at least ninety-five percent (95%) of the
proceeds of the Series 1991 Bonds (the initial public offering price of the
Series 1991 Bonds less proceeds of the Series 1991 Bonds deposited to the
Reserve Fund plus earnings on amounts in the 1991 Construction Fund) will be
used to provide facilities which will qualify as airport facilities within the
meaning of Section 142(a)(1) of the Code and application of the proceeds of the
Series 1991 Bonds will not result in more than five percent (5%) of the
aggregate amount of expenditures from the
12
<PAGE> 171
proceeds at any time being used for a facility which would not be exempt under
such Section 142(a)(1), for issuance expenses in excess of 2% of the public
offering price of the Series 1991 Bonds or for working capital or for property
of a character not subject to the allowance for depreciation. The Lessee will
not cause or permit any plans and specifications for the facilities to be
financed from the proceeds of the Series 1991 Bonds to be changed or revised,
or such facilities to be operated, maintained, repaired or renovated, in a
manner such that such facilities to be financed from the proceeds of at least
ninety-five percent (95%) of the proceeds of the Series 1991 Bonds will not
qualify as airport facilities within the meaning of Section 142(a)(1) of the
Code, or take any other action which would cause the loss of the exclusion of
interest on any Series 1991 Bonds from gross income for federal income tax
purposes.
The Lessee hereby irrevocably elects not to claim depreciation and an
investment tax credit with respect to the 1991 Improvements in accordance with
Section 142(b)(1)(B)(i) of the Code. This election shall be binding on the
Lessee and all successors in interest hereunder.
In order to ensure compliance by the Lessor and the Lessee with the
tax covenants set forth above and with the provisions of Section 148(f) of the
Code, the Lessor, the Lessee and Bank of Oklahoma, N.A., as Co-Bond Trustee for
the Series 1991 Bonds have entered into an Arbitrage Agreement, dated as of
April 1, 1991. The Lessee hereby agrees to pay, or cause to be paid, as
additional rent under this Sublease, directly to the United States the rebate
payments required to be paid to the United States in the amounts and at the
times provided in such Arbitrage Agreement and in Section 148(f) of the Code
and the Treasury Regulations promulgated or to be promulgated thereunder to the
extent such amounts are not paid from earnings on amounts held in the 1991
Construction Fund.
F. The second paragraph of Section 9 is deleted in its entirety
and the following paragraph is inserted in lieu thereof:
Lessor hereby assigns to Lessee effective upon completion of the 1969,
1971, 1982A, 1983, 1985, 1988 and 1991 Improvements respectively and delivery
of completion certificates as provided in Section 5, 5A, 5B, 5C, 5D, 5E and 5F
hereof respectively, all right, title and interest of Lessor in and to any and
all warranties, express or implied, made to Lessor under, in the case of the
1969, 1971, 1982A, 1983, 1985, 1988 and 1991 Improvements, all construction and
purchase contracts entered into with respect to such Improvements, and under
any and all other construction or purchase contracts entered into by Lessor or
otherwise accruing to the benefit of Lessor and pertaining to the Leased
Property, together with the right to enforce the same for
13
<PAGE> 172
the benefit of Lessee and pertaining to the Leased Property, together with the
right to enforce the same for the benefit of Lessee, either in the name of
Lessor or Lessee or otherwise, and expressly subrogates Lessee to all of
Lessor's rights of action and causes of action against the other parties to all
such contracts. Lessee will indemnify Lessor against damage, loss or expense
resulting from such enforcement and Lessee's efforts to enforce the same.
G. (a) Section l(b) is amended by inserting immediately after the
words "Section 5 or Section 5A or Section 5B or Section 5C or Section 5D or
Section E" the first time they appear in Section l(b) the words "or Section
5F" and by inserting immediately after the words "Section 5, Section 5A or
Section 5B or Section 5C or Section 5D or Section 5E" the second time they
appear in Section 1(b) the words "or Section 5F".
(b) Sections 4(a) and 8(a)(i)(2)(B) are amended by
inserting immediately after the words "Section 5, Section 5A or Section 5B or
Section 5C or Section 5D or Section 5E" the words "or Section 5F".
H. Except as provided in I with respect to Section 3(d), the
Sublease is further amended by deleting the words "Series 1963 Bonds, Series
1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985 Bonds" and ARROS
in each place in which they appear and by substituting therefor the words
"Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985 Bonds,
ARROs and Series 1991 Bonds" and by deleting the words "Series 1963 Bonds,
Series 1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985 Bonds and
ARROS" where such words appear in Sections 9, 12, 14 and 19 of the Sublease and
by substituting therefor the words "Series 1969 Bonds, Series 1971 Bonds,
Series 1982A Bonds, Series 1985 Bonds, ARROs and Series 1991 Bonds".
I. The second sentence of Section 3(d) is hereby amended to read
as follows:
Upon the retirement of all Series 1969 Bonds, Series 1971
Bonds, Series 1982A Bonds, Series 1985 Bonds, ARROs and Series
1991 Bonds, Lessee shall also be entitled to take as credits
against any rentals thereafter due under this Section 3 an
amount equal in the aggregate to the aggregate of all moneys
held by the Bank under the Supplemented Indenture and required
to be paid to Lessor and upon the retirement of all Series
1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985
Bonds and ARROs, Lessee shall also be entitled to take as
credits against any rentals thereafter due under this Section
3 an amount equal in the aggregate to the aggregate of all
moneys held by the Bank in the Reserve Fund under the
Supplemented Indenture to the extent that amounts therein
14
<PAGE> 173
are applied to the payment of any rentals due under this
Section 3.
ARTICLE II
Lessee acknowledges and agrees to the assumption of such duties of the
Bank by the Co-Bond Trustee as set forth in the Amended and Restated Tripartite
Agreement, dated as of April 1, 1991, among the Lessor, the Bank and the
Co-Bond Trustee and agrees to make all rental payments hereunder directly to
the Co-Bond Trustee except annual base rental payments payable under Subsection
3(a) hereof and any rental payments with respect to the Leased Property defined
in Section I hereof, to the extent that any such payments may be required from
time to time to pay the rentals payable by the Trustees under the Ground Lease,
which payments will be made directly to the Trustees.
ARTICLE III
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment and this Tenth Amendment to the Sublease.
ARTICLE IV
Except as herein amended, the Sublease shall be and remain in full
force and effect.
ARTICLE V
No trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution of the
terms or provisions or conditions of this Tenth Amendment to the Sublease.
ARTICLE VI
Lessee hereby consents to the assignment by the Trustees of any and
all of their rights under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment and this Tenth Amendment to the Sublease to The Bank of New
York, Bond Trustee as successor Trustee under the 1963 Indenture as
supplemented by the First Supplemental Bond Indenture, dated as of December 1,
1969, the Second Supplemental Bond Indenture, dated as of June 1, 1971, the
Third Supplemental Bond Indenture, dated as
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<PAGE> 174
of December 1, 1982, the Fourth Supplemental Bond Indenture, dated as of April
1, 1983, the Fifth Supplemental Bond Indenture, dated as of November 15, 1985,
the Sixth Supplemental Bond Indenture, dated as of January 1, 1988, and the
Seventh Supplemental Bond Indenture, dated as of April 1, 1991, each between
the Trustees and The Bank of New York, as Bond Trustee, and Lessee agrees to
comply with the provisions of such assignment to the extent applicable to it.
Lessee specifically approves and consents to the terms and provisions of the
Seventh Supplemental Bond Indenture, dated as of April 1, 1991.
The Seventh Supplemental Bond Indenture provides for the taking of
certain actions with respect to the Series 1991 Bonds by the Trustees at the
request of the Company. The Trustees hereby agree to and shall comply with any
such request to the extent permitted by law. The Secretary is hereby authorized
on behalf of the Trustees, and shall be deemed, to grant and agree to any such
request, and shall provide evidence of such consent in such manner and at such
times as the Company may reasonably request, upon receipt of (i) the opinion of
Bond Counsel if required in connection with such action under the Seventh
Supplemental Indenture to the effect that taking such action will not violate
Title 60, Oklahoma Statutes 1981, Section 176 et seq., as amended, or (ii) if
an opinion of Bond Counsel is not required in connection with such action, the
Secretary may rely upon the advice of counsel to the Lessor in such form as the
Secretary shall deem appropriate. In the event Bond Counsel or counsel to the
Lessor is unable to deliver such opinion or is unable to deliver such opinion
without further action of the Trustees, the Trustees hereby agree to use their
best efforts to take such action by the time requested by the Company as may be
required to grant and agree to the Company's request.
IN WITNESS WHEREOF, the parties hereto have executed this Tenth
Amendment to the Sublease as of this first day of April, 1991.
16
<PAGE> 175
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ J.W. BATES, JR.
-------------------------------
ATTEST: J. W. Bates, Jr., Chairman
/s/ J. RICHARD STUDENNY
- -----------------------------
Secretary
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Tenth Amendment to the Sublease dated as of April 1,
1991, was acknowledged before me this 26th day of April, 1991, by J. W. BATES,
JR., Chairman of the Trustees of the Tulsa Municipal Airport Trust, a public
trust, on behalf of the Trust.
Subscribed and sworn to before me this 26th day of April, 1991.
/s/ PAULA S. MCDANIEL
-------------------------
My commission expires: Notary Public
April 15, 1994
- ----------------------
17
<PAGE> 176
LESSEE
AMERICAN AIRLINES, INC.
By /s/ DANIEL P. GARTON
-----------------------------
VICE PRESIDENT & TREASURER
-------------------------------
Title
ATTEST:
/s/ C.D. MARLETT
- ---------------------------
Secretary
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
Before me, Debra Douglas, a Notary Public in and for said State on this
[ILLEGIBLE] day of APRIL 1991, personally appeared Daniel P. Garton, to me
known to be the identical person who prescribed the name of American Airlines,
Inc., thereof to the foregoing instrument as its Vice President & Treasurer,
who being by me duly sworn, does depose and say that (s)he is the Vice
President & Treasurer of American Airlines, Inc., the corporation described
herein for which executed the above instrument; that (s)he knows the seal of
said corporation; that said seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of such
corporation, in that (s)he signed his/her name thereto by like order, and
acknowledged to me that the same was his/her free and voluntary act and deed
and the free and voluntary act and deed of such corporation for the use and
purposes therein set forth.
Subscribed and sworn to before me this [ILLEGIBLE] day of [ILLEGIBLE]
1991.
[ILLEGIBLE]
-------------------------------
Notary Public
My commission expires
11/08/92
- --------------------------------
18
<PAGE> 177
SCOPE OF PROJECTS March 12, 1991
TUL 264 HANGAR NO. 6 COMPLEX
Scope:
Construction of a three bay wide-body hangar at the southern boundary of the
Maintenance Base.
The Hangar complex will include support shop space, offices, ramp area, a wash
bay, 1,000 car surface parking lot, a Central Plant capable of providing steam
and chilled water to the southern half of the Maintenance Base (Hangars No. 5
and 6, Support Shops, and the Warehouse), Aircraft Docks, and Gear Pits.
The Hangar will be comparable in design to Hangar No. 6 with parallel parking
for aircraft. The finished project will afford American two MD-11ER size bays
with a wash bay capable of handling a B747-400 aircraft.
TUL 244 WAREHOUSE ELECTRICAL IMPROVEMENTS
Scope:
Add critical existing building services such as: certain personal computers,
overhead doors, conveyors, dock levelers, and dock locks to standby generator
power circuit. Correct harmonic problem in dedicated circuits and add power and
communication outlets in Training Rooms.
TUL 260 CAFETERIA RENOVATION
Scope:
Renovate the existing Cafeteria located on the second floor, south end of the
Hangars No. 3 and 4 Central Core.
TUL 261 EMERGENCY GENERATOR AT CENTRAL FACILITIES
Scope:
The installation of a second 350 KVA Diesel Engine Generator with parallel
control capability primarily serving the MOC & TEO TI Rooms.
TUL 255 & 266 (TMB 800) ASBESTOS ABATEMENT
Scope:
The abatement of asbestos for the Tulsa maintenance and engineering Base
including the Administration Building but excluding the TCO and TOC.
EXHIBIT "A"
Page 1 of 5
<PAGE> 178
TUL 273 HANGARS NO. 1 & NO. 2 CENTRAL CORE RENOVATION -- PHASE II
Scope:
Renovate the existing Core Areas to provie new spaces, shops, services, and
equipment associated with the new Hangar Dock Maintenance operations.
TUL 275 HANGAR NO. 2 RENOVATION
Scope:
Renovation of existing Hangar No. 2 includes upgrade of electrical, lighting,
and heating systems, replacement of portions of the floor, completion of
interior painting, modification of Dock 2D from an engine change to full
"C-Check" capability, connection of all industrial waste systems to the Base
Industrial Drain System, upgrade or construct new Solvent Cleaning, Paint,
Sanding, and Component Repair Shops, and installation of new fire foam
protection system.
TUL 277 MDT BUILDING
Scope:
The design and construction of a new non-destructive testing building for
Isotope inspection of aircraft equipment.
TUL 283 RE-ROOF HANGARS
Scope:
Remove and replace existing gypsum roof deck and roofing on Hangars No. 1, No.
2, No. 3, No. 4, No. 5, Hangars No. 1/No. 2 Core Area, and Hangars No. 3/No. 4
Core Area (approximately 1,000,000 sf).
The removal and replacement will be accomplished within the restrictions of the
present hangar renovation construction schedules or while the hangars are in
use. The replacement roofs will be four-ply built-up on new metal decking.
TUL 286 RAMP REPLACEMENT, PHASE I & II
Scope:
Phase I - Replacement of aircraft ramp originally constructed in the 1940's,
contiguously adjacent to Hangar No. 3.
Phase II - Replacement of the remainder of the aircraft ramp originally
constructed in the 1940's surrounding Hangars No. 3 and No. 4, abutting engine
test cell pavement and the north face of Hangars No. 1 and No. 2.
EXHIBIT "A"
Page 2 of 5
<PAGE> 179
(TUL 286 continued)
Parking Lot Replacement- Rebuild/overlay east TEO employee parking, rebuild
road north of TEO Building and asphalt overlay in Hangar corridor areas.
TUL 287 PIPELINE LIGHTS, LADDERS, AND PLATFORMS
Scope:
Provide general purpose lighting located on the west side of the overhead
pipeline between the Turbine Engine Overhaul Building and Hangar No. 5; provide
access platforms with ladders to allow for maintenance of the valves and steam
tracer system on the overhead piping system; modify the steam tracer system;
and construct a propane dispensing station west of the Warehouse.
TUL 295 INTERSECTION IMPROVEMENTS
Scope:
Improve roadway intersection at 35th Street North and Mingo Road (Main Entrance
to Tulsa Maintenance and Engineering Base) in order to improve traffic flow
entering and exiting the base.
TEO 296 TEO BUILDING RENOVATION
Scope:
Complete renovation of all interior areas in the 388,000 sf Turbine Engine
Overhauls Building to provide upgraded work space for Pratt & Whitney and Rolls
Royce Engine Service. Construction will be completed so as to keep the TEO in
full operation. This project specifically includes:
o Demolition and replacement of primary and secondary electrical systems.
o Demolition and upgrading of HVAC systems.
o Extensive upgrading of Building Service Systems (pressurized air,
industrial drains, underfloor drains, etc.)
o Upgrading and expansion of the Fire Alarm and Public Address System.
o Complete interior finish upgrade.
o Demolition and clean up of existing Plating Shop.
o Purchase and installation of office furniture and miscellaneous
equipment.
TUL 305 INDUSTRIAL WASTEWATER TREATMENT PLANT, PHASE I
Scope:
A primary treatment plant to handle effluent from the Industrial Drain System
at the rate of 1,200 GMP. It will consist of screening, grit removal, skimmer,
and sludge removal.
EXHIBIT "A"
Page 3 of 5
<PAGE> 180
(TUL 305 continued)
Demolition and removal of the existing Industrial Waste disposal tanks and
soils remediation. Construct new EPA approved tanks, sludge de-watering
equipment, grit removal, skimmers, and other equipment as required by current
EPA regulations.
TUL 316 CENTRAL PLANT SAND FILTERS SYSTEMS
Scope:
Furnish and install sand filtration systems for the chilled water and cooling
tower water circulation systems. The filters will clean the suspended solids
from the circulation system. The project includes the replacement of the boiler
feedwater pumps and modification to the piping system. This will allow the
boiler systems to operate satisfactorily.
TUL 318 CENTRAL PLANT FEEDWATER PUMP SYSTEMS
Scope:
Replace two existing boiler feedwater pumps.
Revised Scope:
Modify the boiler feedwater piping system to allow simultaneous operation of
feedwater pumps to meet full capacity requirements of all boilers including
independent operations of any of the pumps working with either of two existing
dezerators to serve Boilers 3 and 4 or Boilers 2 and 5.
TUL 326 BLAST FENCE
Scope:
Install 1,150 lineal feet of 14 foot high blast fence and 75 lineal feet of 35
foot high blast fence. Fence is to be installed at the western limits of the
existing American Airlines ramp starting at the south end and running
approximately 1,100 feet north. An additional 200 feet of fence will be placed
north of the existing taxiway.
TME 450 & 451 TEST CELLS 1, 2, & 3 EXPANSION
Scope:
Replace the engine test equipment in Test Cells No. 1 and No. 2; provide a
bridge crain system for the engine prep area.
EXHIBIT "A"
Page 4 of 5
<PAGE> 181
TMB 940 BACKFLOW PREVENTION
Scope:
Provide backflow prevention devices in accordance with the City of Tulsa
guidelines for each of the connections of the base fire water to the City of
Tulsa system. Provide design and obtain construction cost for the installation
of the backflow prevention devices for the domestic water connections to the
City of Tulsa system. This will allow for compliance with a pending ordinance.
TUL 095 CONSTRUCTION OF NEW METAL PLATING SHOP
Scope:
Construction of a new metal plating shop sized to meet the requirements of the
growth Fleet and equipped with the latest in plating equipment. (The new
facility replaces an existing facility constructed in the 1960's.)
TUL 284 PARKING EXPANSION - PHASE III
Scope:
Rehabilitate the existing 1,000 car parking lot located adjacent to the new
Warehouse and Support Shops Building Facilities; construct a new 250 car
parking lot in the northwest area of the base and base security fencing.
(Northwest Parking Area has been deleted.)
EXHIBIT "A"
Page 5 of 5
<PAGE> 182
STATE OF OKLAHOMA
TULSA COUNTY
FILED OR RECORDED
92NOV-5 PM 4:05
JOAN HASTINGS
TULSA COUNTY CLERK
================================================================================
ELEVENTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF NOVEMBER 1, 1992
================================================================================
[SEAL]
<PAGE> 183
ELEVENTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the first day of November, 1992, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American").
For and in consideration of the mutual promises, terms, conditions and
covenants herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the
"First Amendment"), dated as of May 1, 1963, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma, in Book 3341, Page 200,
on May 16, 1963), as Exhibit A to the Bond Indenture, dated as of May 1, 1963,
between the Trustees and The Bank of New York, bond trustee, as successor to
Morgan Guaranty Trust Company of New York, in New York, New York, and IBJ
Schroder Bank & Trust Company, in New York, New York, pursuant to which the
Revenue Bonds, Series 1963, of such Trustees were issued, and as further
amended by the Second Amendment to the Sublease (hereinafter the "Second
Amendment"), dated as of December 1, 1969, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma in Book 3912, Page 642 on
December 22, 1969) and as further amended by the Third Amendment to the
Sublease (hereinafter the "Third Amendment"), dated as of the lst day of June,
1971, by and between the Trustees, as Lessor, and American, as Lessee (a copy
of which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma, in Book 3992, Page 419 on November 8, 1971) and as further amended by
the Fourth Amendment to the Sublease (hereinafter the "Fourth Amendment"),
dated as of the 9th day of September, 1974, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma in Book 4958, Page 108 on
December 22, 1982), and as further amended by the Fifth Amendment to the
Sublease (hereinafter the "Fifth Amendment"), dated as of the lst day of
December, 1982, by and between the Trustees, as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County,
<PAGE> 184
Oklahoma in Book 4658, Page 2225 on December 28, 1982), and as further amended
by the Sixth Amendment to the Sublease (hereinafter the "Sixth Amendment"),
dated as of the lst day of April, 1983, by and between the Trustees, as Lessor,
and American, as Lessee (a copy of which was duly recorded in the records of
the County Clerk of Tulsa County, Oklahoma in Book 4681, Page 421 on April 5,
1983), and as further amended by the Seventh Amendment to the Sublease
(hereinafter the "Seventh Amendment"), dated as of November 17, 1983, by and
between the Trustees, as Lessor, and American, as Lessee (a copy of which was
duly recorded in the records of the County Clerk of Tulsa County, Oklahoma,
in Book 4910, Page 218, on December 3, 1985), and as further amended by the
Eighth Amendment to Sublease (hereinafter the "Eighth Amendment"), dated as of
November 15, 1985, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 4910, Page 1764 on December 5, 1985), and as
further amended by the Ninth Amendment to the Sublease (hereinafter the "Ninth
Amendment"), dated as of January 1, 1988, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma, in Book 5081, Page 915
on February 18, 1988) and as further amended by the Tenth Amendment to the
Sublease (hereinafter the "Tenth Amendment"), dated as of April 1, 1991, by and
between the Trustees, as Lessor, and American, as Lessee (a copy of which was
duly recorded in the records of the County Clerk of Tulsa County, Oklahoma, in
Book 5317, Page 1920 on April 26, 1991. Such Sublease, as so amended, covers
the following property (land and improvements collectively referred to as
"Leased Property") in Tulsa County, Oklahoma:
(a) The following premises (for which a new and revised
legal description is hereby substituted in its entirety) as revised by mutual
agreement of the parties hereto (hereinafter sometimes called the "Base
Premises") which Lessor leases pursuant to the Leases, dated August 6, 1957, as
amended, and pursuant to the Leases, dated March 29, 1968 and July 31, 1969, as
amended, in each case from the City of Tulsa to Lessor (such leases being
hereinafter collectively called the "Ground Lease"), being 246.14 acres, more or
less, bounded and described as follows:
A tract of land in Sections 13 and 24, Township 20 North, Range 13
East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00 degrees
- -O1'-42" E, along the East line of said Section, a distance of 1320.00 feet;
Thence N 76 degrees-O1'-30" W, a distance of 51.53 feet to the Point of
Beginning;
Thence N 76 degrees- 01'-30" W a distance of 51.53 feet;
Thence S 00 degrees- O1'-42" E a distance of 64.93 feet;
2
<PAGE> 185
Thence S 89 degrees-58'-18" W a distance of 2550.00 feet;
Thence N 16 degrees-23'-59" W a distance of 290.00 feet;
Thence N 21 degrees-20'-14" W a distance of 395.20 feet;
Thence N 03 degrees-18'-37" W a distance of 574.11 feet;
Thence N 15 degrees-40'-56" E a distance of 226.52 feet;
Thence N 02 degrees-54'-49" E a distance of 2220.00 feet;
Thence S 89 degrees-30'-35" E a distance of 308.30 feet;
Thence N 13 degrees-48'-1l" E a distance of 316.67 feet;
Thence S 89 degrees-51'-16" E a distance of 1017.66 feet;
Thence S 00 degrees-01'-14" E a distance of 100.00 feet;
Thence S 89 degrees-51'-16" E a distance of 1270.77 feet;
Thence S 00 degrees-01'-24" E a distance of 285.87 feet;
Thence S 11 degrees-16'-36" W a distance of 51.03 feet;
Thence S 00 degrees-01'-24" E a distance of 430.10 feet;
Thence S 44 degrees-58'-36" W a distance of 42.43 feet;
Thence S 00 degrees-01'-24" E a distance of 50.00 feet;
Thence S 45 degrees-01'-24" E a distance of 42.43 feet;
Thence S 00 degrees-01'-24" E a distance of 359.90 feet;
Thence S 11 degrees-20'-24" E a distance of 50.96 feet;
Thence S 00 degrees-01'-24" E a distance of 700.00 feet;
Thence S 11 degrees-16'-36" W a distance of 51.03 feet;
Thence S 00 degrees-01'-24" E a distance of 450.00 feet;
Thence S 44 degrees-58'-36" W a distance of 70.71 feet;
Thence N 89 degrees-53'-37" W a distance of 10.90 feet;
Thence S 45 degrees-01'-42" E a distance of 100.27 feet;
Thence S 00 degrees-01'-42" E a distance of 1236.92 feet;
To the Point of Beginning, containing 246.14 acres, more or less, less a parcel
of land more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, Township
20 North, Range 13 East, Indian Meridian, Tulsa County, Oklahoma, thence in a
southerly direction along the centerline of Mingo Road which is the east line
of Section 13, a distance of 287.50 feet, thence in a westerly direction along
a line perpendicular to centerline of Mingo Road a distance of 673.71 feet to
the Point of Beginning;
Thence in a southerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in a westerly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet;
Thence in a northerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in an easterly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet to the Point of Beginning;
said tract containing an area of approximately 2.71 acres, more or less;
and including a parcel of land containing an area of approximately
3
<PAGE> 186
1.58 acres, more or less, to be utilized as a flight kitchen facility and more
particularly described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly described as
follows:
Commencing at the Southeast corner of said Section 26; thence N 00
degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a distance
of 177.15 to the Point of Beginning;
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.92 to the Point
of Beginning;
and further including at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold interest therein, the
following land and the improvements thereon (herein sometimes called the
"Disposal Plant"):
All that lot consisting of approximately six (6) acres located in the
SW 1/4 of Section 12, Township 20 North, Range 13 East, in Tulsa, Oklahoma,
approximately one-half mile to the north of the above-described premises, on a
portion of which there is situated a sanitary sewer disposal plant owned, as of
the date of this Sublease, by the City of Tulsa, Oklahoma, together with such
sewer line easements as may be required between the above-described premises
and said lot and between said lot and Bird Creek, lying approximately two (2)
miles to the North of said lot, which lot and easements, if leased by Lessor
and subleased hereunder, shall be included in the term "Base Premises", except
as the context may otherwise require;
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(C) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all rights in
connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
The Sublease, as heretofore amended, is hereby further
4
<PAGE> 187
amended in the manner and to the extent as hereinafter set forth, effective as
of the date on which the Series 1992 Revenue Bonds of the Trustees (hereinafter
the Series 1992 Bonds) are delivered and paid for, as follows:
A. Amendment and Revision of Legal Description of Base Premises.
The legal description for the Base Premises has been amended, modified, and
revised as hereinabove set forth in Article I, subsection (a).
B. Amendment of Section 3, subsection (b) and (bb). Section 3 is
amended by deleting subsections (b) and (bb) thereof and by substituting
therefor the following:
(b) In addition to the payments contracted for in subsection 3(a)
above, Lessee will pay Lessor, with respect to each Bond Year (as defined
below), commencing on the first day of the month following the effective date
of the Eleventh Amendment to the Sublease and continuing until the Terminal
Date (as defined below) additional rentals per annum equal to the Annual
Principal and Interest Requirement (as defined below) for such Bond Year (as
defined below) on (i) the Revenue Bonds, Series 1969, of Lessor (hereinafter
referred to as the "Series 1969 Bonds") issued pursuant to the terms of the
Bond Indenture (the "Indenture") and the First Supplemental Bond Indenture,
dated as of December 1, 1969 between Lessor and the Bank, (ii) the Revenue
Bonds, Series 1971, of Lessor (hereinafter referred to as the "Series 1971
Bonds") issued pursuant to the terms of the Indenture and the Second
Supplemental Bond Indenture, dated as of June 1, 1971, between Lessor and the
Bank, (iii) the Revenue Bonds, Series 1985, of Lessor (hereinafter referred to
as "Series 1985 Bonds") issued pursuant to the terms of the Indenture and the
Fifth Supplemental Bond Indenture, dated as of November 15, 1985, between
Lessor and the Bank, (iv) the 1988 Adjustable Rate Revenue Obligations (herein
referred to as "ARROs") issued pursuant to the terms of the Indenture and the
Sixth Supplemental Bond Indenture, dated as of January 1, 1988, (v) the Revenue
Bonds, Series 1991, of the Lessor (hereinafter referred to as the "Series 1991
Bonds") issued pursuant to the terms of the Indenture and the Seventh
Supplemental Bond Indenture, dated as of April 1, 1991, (vi) the Revenue Bonds,
Series 1992 Bonds, of the Lessor (hereinafter referred to as the "Series 1992
Bonds", issued pursuant to the terms of the Indenture and the Eighth
Supplemental Bond Indenture, dated as of November 1, 1992, (the Indenture as
supplemented and amended by such First Supplemental Bond Indenture, such Second
Supplemental Bond Indenture, such Third Supplemental Bond Indenture, such
Fourth Supplemental Bond Indenture, such Fifth Supplemental Bond Indenture,
such Sixth Supplemental Bond Indenture, such Seventh Supplemental Bond
Indenture, and such Eighth Supplemental Bond Indenture is hereinafter referred
to as the "Supplemented Indenture"). Such additional rentals shall be payable
by Bond Periods (as defined below) in advance in equal monthly installments
5
<PAGE> 188
on the first day of each month in such Bond Period, so that there is paid
during each Bond Period an amount equal to the Semiannual Principal and
Interest Requirement (as defined below) for such Bond Period, provided that
Lessee, if not then in default hereunder, may in any Bond Year beginning with
the Bond Year commencing as of June 1, 1992 credit against the additional
rentals provided for in this subsection (b):
(i) the amount of any balance transferred by the Bank pursuant to
the terms of the Supplemented Indenture from any bond retirement fund
established thereunder to any fund so established the moneys of which are to be
used for the payment of principal of and interest and premium, if any, on the
Series 1969 Bonds, the Series 1971 Bonds, the Series 1985 Bonds, the ARROS, the
Series 1991 Bonds or the Series 1992 Bonds (hereinafter collectively referred
to as the "Bonds"), or any combination thereof, which credit shall be applied
against the installment or installments of additional rentals provided for in
this subsection (b) next coming due, if and to the extent that such credit
would not result on the next succeeding June 1 or December 1, as the case may
be, in the moneys in any such latter fund available therefor being insufficient
to pay the interest and principal, if any, due on such June 1 or December 1 as
the case may be, or to redeem Bonds at the times and to the extent required by
the Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to subsection
3(d).
The term "Bond Year" shall mean each period of twelve months beginning
on June 1 and continuing until the Terminal Date. The term "Bond Period" shall
mean each period of six months beginning on June 1 or December 1 during any
Bond Year. The term "Semiannual Principal and Interest Requirement" with
respect to any Bond Period shall mean the interest on the Bonds accrued and
payable on any Interest Payment Date during or immediately following such Bond
Period plus any amount required on the December 1 or June 1, as the case may
be, following such Bond Period on account of principal to pay the Bonds at the
stated maturities thereof and on account of principal and premium, if any, to
redeem or prepay the Bonds pursuant to any mandatory sinking fund or redemption
requirement applicable thereto.
The term "Annual Principal and Interest Requirement" with respect to
any Bond Year shall mean the sum of the Semi-annual Principal and Interest
Requirements with respect to the Bond Periods comprising such Bond Year. The
Semiannual Principal and Interest Requirement for each Bond Period shall be
determined as of the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which the
aggregate of all moneys held by the Bank in any bond
6
<PAGE> 189
reserve fund or otherwise under the Supplemented Indenture and then available
for the payment of interest and premium, if any, and principal of the Bonds
shall equal or exceed the amount required to redeem or pay all the Bonds at the
time outstanding (including principal, redemption premium, if any, and interest
to their stated maturities or to the next date or dates on which such Bonds may
be callable for redemption, whichever is the earlier).
(bb) In addition to the payments contracted for in subsections 3(a),
3(aa) and 3(b) above, Lessee will pay Lessor for deposit by the Bank in the
Reserve Fund:
(i) the initial funding amount, if any, as provided in the
Supplemented Indenture required to be accumulated in the Reserve Fund with
respect to each Series of Bonds from amounts on deposit in the Project Fund,
and
(ii) the amount required to be deposited in the Reserve Fund in the
event of any deficiency therein.
C. Amendment of Section 3, subsection (c). Section 3 is amended
by deleting subsection (c) thereof and by substituting therefor the following:
(c) In addition to such payment, Lessee shall pay as further
additional rental the fees, expenses and charges of the Bank, any Co-Bond
Trustee, any registrar and of any paying agents incurred under or pursuant to
the Indenture (including any reasonable expenses of the Bank and any Co-Bond
Trustee incurred pursuant to the Indenture in the enforcement of any of the
rights and remedies of the Bank, and any Co-Bond Trustee and the Bond holders
thereunder) and also the amount of any net losses suffered in connection with
the investment pursuant to the Indenture by the Bank or any Co-Bond Trustee of
funds held by it thereunder, but only to the extent necessary to make up any
deficiencies thereunder. Any such fees, expenses, charges and net losses shall
be paid by Lessee within thirty (30) days after the receipt of a requisition
from Lessor or the Bank or any Co-Bond Trustee under the Indenture for such
additional amounts.
D. A new paragraph shall be added to Section 6 as follows:
The Lessee hereby covenants that so long as any Series 1992 Bonds
shall be outstanding or unpaid, the Lessee shall comply with all applicable
provisions of Section 103 of the Internal Revenue Code of 1954, as amended (the
"1954 Code"), and Sections 103 and 141-150 of the Internal Revenue Code of
1986, as amended (the "1986 Code") and all applicable regulations of the
Internal Revenue Service thereunder.
7
<PAGE> 190
In order to ensure compliance by the Lessor and the Lessee with the
tax covenants set forth above and with the provisions of Section 148(f) of the
1986 Code, the Lessor, the Lessee and Bank of Oklahoma, N.A., as Co-Bond
Trustee for the Series 1992 Bonds have entered into an Arbitrage Agreement,
dated as of November 1, 1992. The Lessee hereby agrees to pay, or cause to be
paid, as additional rent under this Sublease, directly to the United States the
rebate payments required to be paid to the United States in the amounts and at
the times provided in such Arbitrage Agreement and in Section 148(f) of the
1986 Code and the Treasury Regulations promulgated or to be promulgated
thereunder.
E. Except as provided in F with respect to Section 3(d), the
Sublease is further amended by deleting the words "Series 1969 Bonds, Series
1971 Bonds, Series 1982A Bonds, Series 1985 Bonds, ARROs and Series 1991 Bonds"
in each place in which they appear and by substituting therefor the words
"Series 1969 Bonds, Series 1971 Bonds, Series 1985 Bonds, ARROs, Series 1991
Bonds and Series 1992 Bonds" and by deleting the words "Series 1969 Bonds,
Series 1971 Bonds, Series 1985 Bonds, ARROS, and Series 1991 Bonds" where
such words appear in Sections 9, 12, 14 and 19 of the Sublease and by
substituting therefor the words "Series 1969 Bonds, Series 1971 Bonds, Series
1985 Bonds, ARROs, Series 1991 Bonds and Series 1992 Bonds".
F. The second sentence of Section 3(d) is hereby amended to read
as follows:
Upon the retirement of all Series 1969 Bonds, Series 1971 Bonds, Series
1985 Bonds, ARROs, Series 1991 Bonds and Series 1992 Bonds, Lessee
shall also be entitled to take as credits against any rentals
thereafter due under this Section 3 an amount equal in the aggregate to
the aggregate of all moneys held by the Bank under the Supplemented
Indenture and required to be paid to Lessor and at such time as the
Reserve Fund is no longer required to be maintained under the
Indenture, Lessee shall also be entitled to take as credits against any
rentals thereafter due under this Section 3 an amount equal in the
aggregate to the aggregate of all moneys held by the Bank in the
Reserve Fund under the Supplemented Indenture to the extent that
amounts therein are applied to the payment of any rentals due under
this Section 3.
ARTICLE II
Lessee acknowledges and agrees to the assumption of such duties of the
Bank by the Co-Bond Trustee as set forth in the Amended and Restated Tripartite
Agreement, dated as of November 1, 1992, among the Lessor, the Bank and the Co-
Bond Trustee and agrees to make all rental payments hereunder directly to the
Co-Bond
8
<PAGE> 191
Trustee except annual base rental payments payable under Subsection 3(a) hereof
and any rental payments with respect to the Leased Property defined in Section
1 hereof, to the extent that any such payments may be required from time to
time to pay the rentals payable by the Trustees under the Ground Lease, which
payments will be made directly to the Trustees.
ARTICLE III
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment, the Tenth Amendment and this Eleventh Amendment to the
Sublease.
ARTICLE IV
Except as herein amended, the Sublease shall be and remain in full
force and effect.
ARTICLE V
No trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution of the
terms or provisions or conditions of this Eleventh Amendment to the Sublease.
ARTICLE VI
Lessee hereby consents to the assignment by the Trustees of any and
all of their rights under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment, and the Tenth Amendment, and this Eleventh Amendment to
the Sublease to The Bank of New York, Bond Trustee as successor Trustee under
the Indenture as supplemented by the First Supplemental Bond Indenture, dated
as of December 1, 1969, the Second Supplemental Bond Indenture, dated as of
June 1, 1971, the Third Supplemental Bond Indenture, dated as of December 1,
1982, the Fourth Supplemental Bond Indenture, dated as of April 1, 1983, the
Fifth Supplemental Bond Indenture, dated as of November 15, 1985, the Sixth
Supplemental Bond Indenture, dated as of January 1, 1988, the Seventh
Supplemental Bond Indenture, dated as of April 1, 1991, and the Eighth
Supplemental Bond Indenture, dated as of November 1, 1992, each between the
Trustees and The Bank of New York, as Bond Trustee, and Lessee agrees to comply
with the provisions of such assignment to the extent applicable to it. Lessee
specifically approves and consents to the terms and provisions of the Eighth
9
<PAGE> 192
Supplemental Bond Indenture, dated as of November 1, 1992.
The Eighth Supplemental Bond Indenture provides for the taking of
certain actions with respect to the Series 1992 Bonds by the Trustees at the
request of American. The Trustees hereby agree to and shall comply with any
such request to the extent permitted by 1aw. The Secretary is hereby authorized
on behalf of the Trustees, and shall be deemed, to grant and agree to any such
request, and shall provide evidence of such consent in such manner and at such
times as American may reasonably request, upon receipt of (i) the opinion of
Bond Counsel if required in connection with such action under the Eighth
Supplemental Bond Indenture to the effect that taking such action will not
violate Title 60, Oklahoma Statutes 1991, Section 176 et seq., as amended, or
(ii) if an opinion of Bond Counsel is not required in connection with such
action, the Secretary may rely upon the advice of counsel to the Lessor in such
form as the Secretary shall deem appropriate. In the event Bond Counsel or
counsel to the Lessor is unable to deliver such opinion or is unable to deliver
such opinion without further action of the Trustees, the Trustees hereby agree
to use their best efforts to take such action by the time requested by American
as may be required to grant and agree to American's request.
IN WITNESS WHEREOF, the parties hereto have executed this Eleventh
Amendment to the Sublease as of this first day of November, 1992.
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ JOSEPH L. PARKER, JR.
----------------------------------
Joseph L. Parker, Jr., Chairman
ATTEST:
/s/ RICHARD STUDENNY
- --------------------------
J. Richard Studenny
Secretary
[SEAL]
10
<PAGE> 193
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Eleventh Amendment to the Sublease dated as of November
1, 1992, was acknowledged before me this 4th day of November, 1992, by
JOSEPH L. PARKER, JR., Chairman of the Trustees of the Tulsa Municipal Airport
Trust, a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 4th day of NOVEMBER 1992.
My commission expires:
APRIL 15, 1994 /s/ PAULA S. MCDANIEL
- --------------------------- ---------------------------
Notary Public
[SEAL]
11
<PAGE> 194
STATE OF OKLAHOMA )
ss:
COUNTY OF TULSA )
The foregoing Eighth Supplemental Bond Indenture, dated as of November
1, 1992, was acknowledged before me this 4th day of November, 1992, by JOSEPH
L. PARKER, JR., Chairman of the Trustees of the Tulsa Municipal Airport Trust,
a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 4th day of November, 1992.
/s/ PAULA S. MCDANIEL
------------------------------
My commission expires: Notary Public
APRIL 15, 1994
- ---------------------------
[SEAL]
V-3
<PAGE> 195
================================================================================
TWELFTH AMENDMENT TO THE SUBLEASE
BY AND BETWEEN
TRUSTEES OF THE TULSA MUNICIPAL AIRPORT TRUST
AND
AMERICAN AIRLINES, INC.
DATED AS OF NOVEMBER 1, 1995
================================================================================
<PAGE> 196
TWELFTH AMENDMENT TO THE SUBLEASE
This Agreement, dated as of the lst day of November, 1995, by and
between the Trustees of the Tulsa Municipal Airport Trust (hereinafter the
"Trustees"), such Trust having been created and existing pursuant to the laws
of the State of Oklahoma, and American Airlines, Inc., a Delaware corporation
(hereinafter "American").
For and in consideration of the mutual promises, terms, conditions and
covenants herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
The Sublease, dated as of June 24, 1958 (hereinafter the "Sublease"),
by and between the then Trustees of the Tulsa Municipal Airport Trust (the
Trustees and all predecessor and successor Trustees of the Tulsa Municipal
Airport Trust hereinafter the "Trustees"), as Lessor, and American, as Lessee
(a copy of which was duly recorded in the records of the County Clerk of Tulsa
County, Oklahoma, in Book 3905, Pages 1610-1637 on October 16, 1969), as
amended by the First Amendment to the Sublease (hereinafter the "First
Amendment"), dated as of May 1, 1963, by and between the Trustees, as Lessor,
and American, as Lessee (a copy of which was duly recorded in the records of
the County Clerk of Tulsa County, Oklahoma, in Book 3341, Page 200, on May 16,
1963), as Exhibit A to the Bond Indenture, dated as of May 1, 1963, between the
Trustees and The Bank of New York, bond trustee, as successor to Morgan
Guaranty Trust Company of New York, in New York, New York, and IBJ Schroder
Bank & Trust Company, in New York, New York, pursuant to which the Revenue
Bonds, Series 1963, of such Trustees were issued, and as further amended by the
Second Amendment to the Sublease (hereinafter the "Second Amendment"), dated as
of December 1, 1969, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 3912, Page 642 on December 22, 1969) and as
further amended by the Third Amendment to the Sublease (hereinafter the "Third
Amendment"), dated as of the lst day of June, 1971, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma, in Book 3992,
Page 419 on November 8, 1971) and as further amended by the Fourth Amendment to
the Sublease (hereinafter the "Fourth Amendment"), dated as of the 9th day of
September, 1974, by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 4958, Page 108 on December 22, 1982), and as
further amended by the Fifth Amendment to the Sublease (hereinafter the "Fifth
Amendment"), dated as of the 1st day of December, 1982, by and between the
Trustees, as Lessor, and American, as Lessee (a copy Of which was duly recorded
in the records of the County Clerk of
<PAGE> 197
Tulsa County, Oklahoma, in Book 4658, Page 2225 on December 28, 1982), and as
further amended by the Sixth Amendment to the Sublease (hereinafter the "Sixth
Amendment"), dated as of the lst day of April, 1983, by and between the
Trustees, as Lessor, and American, as Lessee (a copy of which was duly recorded
in the records of the County Clerk of Tulsa County, Oklahoma, in Book 4681,
Page 421 on April 5, 1983), and as further amended by the Seventh Amendment to
the Sublease (hereinafter the "Seventh Amendment"), dated as of November 17,
1983, by and between the Trustees, as Lessor, and American, as Lessee (a copy
of which was duly recorded in the records of the County Clerk of Tulsa County,
Oklahoma, in Book 4910, Page 218, on December 3, 1985), and as further amended
by the Eighth Amendment to Sublease (hereinafter the "Eighth Amendment"), dated
as of November 15, 1985, by and between the Trustees, as Lessor, and American,
as Lessee (a copy of which was duly recorded in the records of the County Clerk
of Tulsa County, Oklahoma, in Book 4910, Page 1764 on December 5, 1985), and as
further amended by the Ninth Amendment to the Sublease (hereinafter the "Ninth
Amendment"), dated as of January 1, 1988, by and between the Trustees, as
Lessor, and American, as Lessee (a copy of which was duly recorded in the
records of the County Clerk of Tulsa County, Oklahoma, in Book 5081, Page 915
on February 18, 1988), and as further amended by the Tenth Amendment to the
Sublease (hereinafter the "Tenth Amendment"), dated as of April 1, 1991, by and
between the Trustees, as Lessor, and American, as Lessee (a copy of which was
duly recorded in the records of the County Clerk of Tulsa County, Oklahoma, in
Book 5317, Page 1920 on April 26, 1991), and as further amended by the Eleventh
Amendment to Sublease (hereinafter the "Eleventh Amendment"), dated as of
November 1, 1992 by and between the Trustees, as Lessor, and American, as
Lessee (a copy of which was duly recorded in the records of the County Clerk of
Tulsa County, Oklahoma, in Book 5450, Page 2511 on November 5, 1992. Such
Sublease, as so amended, covers the property (land and improvements
collectively referred to as "Leased Property"and sometimes called the "Base
Premises") in Tulsa County, Oklahoma, containing 246.14 acres, more or less,
and more particularly described in Attachment A attached hereto and made a part
hereof.
The Sublease, as heretofore amended, is hereby further amended in the
manner and to the extent as hereinafter set forth, effective as of the date on
which the Revenue Bonds Series 1995 of the Trustees are delivered and paid for,
as follows:
A. Amendment and Revision of Legal Description of Base Premises.
The legal description for the Base Premises has been amended, modified, and
revised as hereinabove set forth in Article I, subsection (a).
B. Amendment of Section 3, subsection (b) and (bb). Section 3 is
amended by deleting subsections (b) and (bb) thereof and by substituting
therefor the following:
2
<PAGE> 198
(b) In addition to the payments contracted for in subsection 3 (a)
above, Lessee will pay Lessor, with respect to each Bond Year (as defined
below), commencing on the first day of the month following the effective date of
this Twelfth Amendment to the Sublease and continuing until the Terminal Date
(as defined below) additional rentals per annum equal to the Annual Principal
and Interest Requirement (as defined below) for such Bond Year (as defined
below) on (i) the 1988 Adjustable Rate Revenue Obligations (herein referred to
as "ARROS") issued pursuant to the terms of the Indenture and the Sixth
Supplemental Bond Indenture, dated as of January 1, 1988, (ii) the Revenue
Bonds, Series 1991, of the Lessor (hereinafter referred to as the "Series 1991
Bonds") issued pursuant to the terms of the Indenture and the Seventh
Supplemental Bond Indenture, dated as of April 1, 1991, (iii) the Revenue Bonds,
Series 1992, of the Lessor (hereinafter referred to as the "Series 1992 Bonds"),
issued pursuant to the terms of the indenture and the Eighth Supplemental Bond
Indenture, dated as of November 1, 1992, (iv) the Revenue Bonds, Series 1995
Bonds (hereinafter referred to as the "Series 1995 bonds"), issued pursuant to
the terms of the Indenture and Ninth Supplemental Bond Indenture, dated as of
November 1, 1995, (the Indenture as supplemented and amended by the First
Supplemental Bond Indenture, the Second Supplemental Bond Indenture, the Third
Supplemental Bond Indenture, the Fourth Supplemental Bond Indenture, the Fifth
Supplemental Bond Indenture, the Sixth Supplemental Bond Indenture, the Seventh
Supplemental Bond Indenture, the Eighth Supplemental Bond Indenture, and the
Ninth Supplemental Bond Indenture is hereinafter referred to as the
"Supplemented Indenture"). Such additional rentals shall be payable by Bond
Periods (as defined below) in advance in equal monthly installments on the first
day of each month in such Bond Period, so that there is paid during each Bond
Period an amount equal to the Semiannual Principal and Interest Requirement (as
defined below) for such Bond Period, provided that Lessee, if not then in
default hereunder, may in any Bond Year beginning with the Bond Year commencing
as of June 1, 1995, credit against the additional rentals provided for in this
subsection (b):
(i) the amount of any balance transferred by the Bank pursuant to
the terms of the Supplemented Indenture from any bond retirement fund
established thereunder to any fund so established the moneys of which are to be
used for the payment of principal of and interest and premium, if any, the
Arros, the Series 1991 Bonds or the Series 1992 Bonds or the Series 1995 Bonds,
or (hereinafter collectively referred to as the "Bonds"), or any combination
thereof, which credit shall be applied against the installment or installments
of additional rentals provided for in this subsection (b) next coming due, if
and to the extent that such credit would not result on the next succeeding June
1 or December 1, as the case may be, in the moneys in any such latter fund
available therefor being insufficient to pay the interest and principal, if
any, due on such June 1 or December 1 as the case may
3
<PAGE> 199
be, or to redeem Bonds at the times and to the extent required by the
Supplemented Indenture, and
(ii) the amount of any credit determined pursuant to subsection
3(d).
The term "Bond Year" shall mean each period of twelve months beginning
on June 1 and continuing until the Terminal Date. The term "Bond Period" shall
mean each period of six months beginning on June 1 or December 1 during any
Bond Year. The term "Semiannual Principal and Interest Requirement" with
respect to any Bond Period shall mean the interest on the Bonds accrued and
payable on any Interest Payment Date during or immediately following such Bond
Period plus any amount required on the December 1 or June 1, as the case may
be, following such Bond Period on account of principal to pay the Bonds at the
stated maturities thereof and on account of principal and premium, if any, to
redeem or prepay the Bonds pursuant to any mandatory sinking fund or redemption
requirement applicable thereto.
The term "Annual Principal and Interest Requirement" with respect to
any Bond Year shall mean the sum of the Semi-annual Principal and Interest
Requirements with respect to the Bond Periods comprising such Bond Year. The
Semiannual Principal and Interest Requirement for each Bond Period shall be
determined as of the beginning of such Bond Period.
The term "Terminal Date" shall mean the first date on which the
aggregate of all moneys held by the Bank in any bond reserve fund or otherwise
under the Supplemented Indenture and then available for the payment of interest
and premium, if any, and principal of the Bonds shall equal or exceed the
amount required to redeem or pay all the Bonds at the time outstanding
(including principal, redemption premium, if any, and interest to their stated
maturities or to the next date or dates on which such Bonds may be callable for
redemption, whichever is the earlier).
(bb) From and after the issuance of the Series 1995 Bonds, the Reserve
Fund shall no longer be required to be maintained under the Indenture and all
references to Section 3(bb) contained in the Sublease, as amended, regarding
the Reserve Fund, deposits to or credits for or payments from the Reserve Fund,
shall be of no further force and effect.
C. Amendment of Section 3, subsection (c). Section 3 is amended
by deleting subsection (c) thereof and by substituting therefor the following:
(c) In addition to such payment, Lessee shall pay as further
additional rental the fees, expenses and charges of the bank, any Co-Bond
Trustee, any registrar and of any paying agents incurred under or pursuant to
the Indenture (including any
4
<PAGE> 200
reasonable expenses of the Bank and any Co-Bond Trustee incurred pursuant to
the Indenture in the enforcement of any of the rights and remedies of the Bank,
and any Co-Bond Trustee and the Bond holders thereunder) and also the amount of
any net losses suffered in connection with the investment pursuant to the
Indenture by the Bank or any Co-Bond Trustee of funds held by it thereunder,
but only to the extent necessary to make up any deficiencies thereunder. Any
such fees, expenses, charges and net losses shall be paid by Lessee within
thirty (30) days after the receipt of a requisition from Lessor or the Bank or
any Co-Bond Trustee under the Indenture for such additional amounts.
D. A new paragraph shall be added to Section 6 as follows:
The Lessee hereby covenants that so long as any Series 1995 Bonds
shall be outstanding or unpaid, the Lessee shall comply with all applicable
provisions of Section 103 of the Internal Revenue Code of 1954, as amended (the
"1954 Code"), and Sections 103 and 141-150 of the Internal Revenue Code of
1986, as amended (the "1986 Code") and all applicable regulations of the
Internal Revenue Service thereunder.
In order to ensure compliance by the Lessor and the Lessee with the
tax covenants set forth above and with the provisions of Section 148(f) of the
1986 Code, the Lessor, the Lessee and Bank of Oklahoma, N.A., as Co-Bond
Trustee for the Series 1995 Bonds have entered into an Arbitrage Agreement,
dated as of November 1, 1995. The Lessee hereby agrees to pay, or cause to be
paid, as additional rent under this Sublease, directly to the United States the
rebate payments required to be paid to the United States in the amounts and at
the times provided in such Arbitrage Agreement and in Section 148(f) of the
1986 Code and the Treasury Regulations promulgated or to be promulgated
thereunder.
E. The Sublease is further amended by deleting the words "Series
1969 Bonds, Series 1971 Bonds, Series 1982A Bonds, Series 1985 Bonds, ARROs and
Series 1991 Bonds" in each place in which they appear and by substituting
therefor the words "ARROS, Series 1991 Bonds, Series 1992 Bonds and Series 1995
Bonds" and by deleting the words "ARROS, Series 1991 Bonds and Series 1992
Bonds" where such words appear in Sections 9, 12, 14 and 19 of the Sublease and
by substituting therefor the words "ARROS, Series 1991 Bonds, Series 1992 Bonds
and Series 1995 Bonds".
F. Section 3(d) is hereby amended by deleting the second sentence
thereof which currently reads as follows:
Upon the retirement of all Series 1969 Bonds, ARROS, Series 1991 Bonds,
and Series 1992 Bonds, Lessee shall also be entitled to take as credits
against any rentals thereafter due under this Section 3 an amount equal
in
5
<PAGE> 201
the aggregate to the aggregate of all moneys held by the bank under the
supplemented indenture and required to be paid to lessor and at such
time as the Reserve Fund is no longer required to be maintained under
the indenture, lessee shall also be entitled to take as credits against
any rentals thereafter due under this section 3 an amount equal in the
aggregate to the aggregate of all moneys held by the bank in the
reserve fund under the supplemented indenture to the extent that
amounts therein are applied to the payment of any rentals due under
this Section 3.
ARTICLE II
Lessee acknowledges and agrees to the assumption of such duties of the
Bank by the Co-Bond Trustee as set forth in the Amended and Restated Tripartite
Agreement, dated as of November 1, 1995, among the Lessor, the Bank and the Co-
Bond Trustee, and agrees to make all rental payments hereunder directly to the
Co-Bond Trustee except annual base rental payments payable under Subsection 3(a)
hereof and any rental payments with respect to the Leased Property defined in
Section 1 hereof, to the extent that any such payments may be required from
time to time to pay the rentals payable by the Trustees under the Ground Lease,
which payments will be made directly to the Trustees.
ARTICLE III
On and after the date hereof, the term "Sublease" shall mean the
Sublease dated as of June 24, 1958, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment, the Tenth Amendment, the Eleventh Amendment and this
Twelfth Amendment to the Sublease.
ARTICLE IV
Except AS herein amended, the Sublease shall be and remain in full
force and effect.
ARTICLE V
No trustee, director, officer or employee of either party hereto shall
be held personally liable under or in connection with the execution of the
terms or provisions or conditions of this Twelfth Amendment to the Sublease.
6
<PAGE> 202
ARTICLE VI
Lessee hereby consents to the assignment by the Trustees of any and
all of their rights under the Sublease as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment,
the Ninth Amendment, the Tenth Amendment, the Eleventh Amendment, and this
Twelfth Amendment to the Sublease to The Bank of New York, Bond Trustee as
successor Trustee under the Indenture as supplemented by the First Supplemental
Bond Indenture, dated as of December 1, 1969, the Second Supplemental Bond
Indenture, dated as of June 1, 1971, the Third Supplemental Bond Indenture,
dated as of December 1, 1982, the Fourth Supplemental Bond Indenture, dated as
of April 1, 1983, the Fifth Supplemental Bond Indenture, dated as of November
15, 1985, the Sixth Supplemental Bond Indenture, dated as of January 1, 1988,
the Seventh Supplemental Bond Indenture, dated as of April 1, 1991, the Eighth
Supplemental Bond Indenture, dated as of November 1, 1992, and the Ninth
Supplemental Bond Indenture dated as of November 1, 1995, each between the
Trustees and The Bank of New York, as Bond Trustee, and Lessee agrees to comply
with the provisions of such assignment to the extent applicable to it. Lessee
specifically approves and consents to the terms and provisions of the Ninth
Supplemental Bond Indenture, dated as of November 1, 1995.
The Ninth Supplemental Bond Indenture provides for the taking of
certain actions with respect to the Series 1995 Bonds by the Trustees at the
request of American. The Trustees hereby agree to and shall comply with any
such request to the extent permitted by law. The Secretary is hereby authorized
on behalf of the Trustees, and shall be deemed, to grant and agree to any such
request, and shall provide evidence of such consent in such manner and at such
times as American may reasonably request, upon receipt of (i) the opinion of
Bond Counsel if required in connection with such action under the Ninth
Supplemental Bond Indenture to the effect that taking such action will not
violate Title 60, Oklahoma Statutes 1991, Section 176 et seq., as amended, or
(ii) if an opinion of Bond Counsel is not required in connection with such
action, the Secretary may rely upon the advice of counsel to the Lessor in such
form as the Secretary shall deem appropriate. In the event Bond Counsel or
counsel to the Lessor is unable to deliver such opinion or is unable to deliver
such opinion without further action of the Trustees, the Trustees hereby agree
to use their best efforts to take such action by the time requested by American
as may be required to grant and agree to American's request.
IN WITNESS WHEREOF, the parties hereto have executed this
7
<PAGE> 203
Twelfth Amendment to the Sublease AS OF THIS 1ST DAY OF November, 1995.
LESSOR
TRUSTEES OF THE TULSA MUNICIPAL
AIRPORT TRUST
/s/ THOMAS E. BENNETT, JR.
-------------------------------
Thomas E. Bennett, Jr., Chairman
ATTEST:
/s/ J. RICHARD STUDENNY
- ------------------------
J. Richard Studenny
Secretary
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing Twelfth Amendment to the Sublease dated as
of November 1, 1995, was acknowledged before me this 15 day of
November, 1995, by THOMAS E. BENNETT, JR., Chairman of the Trustees of the
Tulsa Municipal Airport Trust, a public trust, on behalf of the Trust.
Subscribed and sworn to before me this 15 day of November, 1995.
/s/ PAULA S. MCDANIEL
------------------------------
My commission expires: Notary Public
April 15, 1998
- ----------------------
LESSEE
AMERICAN AIRLINES, INC.
By [ILLEGIBLE]
--------------------------------
Vice President-Corporate Development and Treasurer
ATTEST: --------------------------------------------------
[ILLEGIBLE]
- --------------------
Secretary
8
<PAGE> 204
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
Before me, Sheree Sutton, a Notary Public in and for said State on this
13th day of November, 1995, personally appeared Jeffery M. Jackson, to me known
to be the identical person who prescribed the name of American Airlines Inc.,
thereof to the foregoing instrument as its Vice President-Corporate Development
and Treasurer who being by me duly sworn, does depose and say that (s)he is the
Vice President-Corporate Development and Treasurer of American Airlines, Inc.,
the corporation described herein for which executed the above instrument; that
(s)he knows the seal of said corporation; that said seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of such corporation, in that (s)he signed his/her name thereto by
like order, and acknowledged to me that the same was his/her free and voluntary
act and deed and the free and voluntary act and deed of such corporation for the
use and purposes therein set forth.
Subscribed and sworn to before me this 13th day of November, 1995.
- -----------------------------
SHEREE SUTTON
Notary Public. State of Texas
/s/ SHEREE SUTTON
My Commission Expires -----------------------------
4/05/99
- ----------------------------- Notary Public
My commission expires:
9
<PAGE> 205
ATTACHMENT A
(a) A tract of land in Sections 13 and 24, Township 20 North,
Range 13 East, Tulsa County, Oklahoma;
Commencing at the Northeast Corner of Section 24; Thence S 00 degrees -
01' - 42" E, along the East line of said Section, a distance of 1320-00 feet;
Thence N 76 degrees - 01'- 30" W, a distance of 51.53 feet to the Point of
Beginning;
Thence N 76 degrees - 01' - 30" W a distance of 51.53 feet;
Thence S 00 degrees - O1' - 42" E a distance of 64.93 feet;
Thence S 89 degrees - 58' - 18" W a distance of 2550.00 feet;
Thence N 16 degrees - 23' - 59" W a distance of 290.00 feet;
Thence N 21 degrees - 20' - 14" W a distance of 395.20 feet;
Thence N 03 degrees - 18' - 37" W a distance of 574.11 feet;
Thence N 15 degrees - 40' - 56" E a distance of 226.52 feet;
Thence N 02 degrees - 54' - 49" E a distance of 2220.00 feet;
Thence S 89 degrees - 30' - 35" E a distance of 308.30 feet;
Thence N 13 degrees - 48' - 11" E a distance of 316.67 feet;
Thence S 89 degrees - 51' - 16" E a distance of 1017.66 feet;
Thence S 00 degrees - 01' - 14" E a distance of 100.00 feet;
Thence S 89 degrees - 51' - 16" E a distance of 1270.77 feet;
Thence S 00 degrees - 01' - 24" E a distance of 285.87 feet;
Thence S ll degrees - 16' - 36" W a distance of 51.03 feet;
Thence S 00 degrees - 01' - 24" E a distance of 430.10 feet;
Thence S 44 degrees - 58' - 36" W a distance of 42.43 feet;
Thence S 00 degrees - 01' - 24" E a distance of 50.00 feet;
Thence S 45 degrees - 01' - 24" E a distance of 42.43 feet;
Thence S 00 degrees - 01' - 24" E a distance of 359.90 feet;
Thence S 11 degrees - 20' - 24" E a distance of 50.96 feet;
Thence S 00 degrees - O1' - 24" E a distance of 700.00 feet;
Thence S 11 degrees - 16' - 36" W a distance of 51.03 feet;
Thence S 00 degrees - O1' - 24" E a distance of 450.00 feet;
Thence S 44 degrees - 58' - 36" W a distance of 70.71 feet;
Thence N 89 degrees - 53' - 37" W a distance of 10.90 feet;
Thence S 45 degrees - 01' - 42" E a distance of 100.27 feet;
Thence S 00 degrees - 01' - 42" E a distance of 1236.92 feet;
To the Point of Beginning, containing 246.14 acres, more or less, less a parcel
of land more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, Township
20 North, Range 13 East, Indian Meridian, Tulsa County, Oklahoma, thence in a
southerly direction along the centerline of Mingo Road which is the east line
of Section 13, a distance of 287.50 feet, thence in a westerly direction along
a line perpendicular to centerline of Mingo Road a distance of 673.71 feet to
the Point of Beginning;
Page 1 of 3
<PAGE> 206
Thence in a southerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in a westerly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet;
Thence in a northerly direction along a line parallel to the
centerline of Mingo Road a distance of 372.66 feet;
Thence in an easterly direction along a line perpendicular to the
centerline of Mingo Road a distance of 317.00 feet to the Point of Beginning;
said tract containing an area of approximately 2.71 acres, more or less;
and including a parcel of land containing an area of approximately 1.58 acres,
more or less, to be utilized as a flight kitchen facility and more particularly
described as follows:
A parcel of land located in the Northeast 1/4, Section 26, Township 20
North, Range 13 East, Tulsa County, Oklahoma, more particularly described as
follows:
Commencing at the Southeast corner of said Section 26; thence
N 00 degrees 03'36" W a distance of 3860.69; thence S 89 degrees 56'24" W a
distance of 177.15 to the Point of Beginning;
Thence S 89 degrees 53'03" W a distance of 230.48;
Thence N 00 degrees 06'57" W a distance of 200.86;
Thence N 37 degrees 28'35" E a distance of 174.09;
Thence S 52 degrees 31'25" E a distance of 233.83;
Thence S 37 degrees 38'35" W a distance of 100.00;
Thence S 00 degrees 06'57" E a distance of 116.92 to the Point
of Beginning;
and further including at the option of Lessee, exercisable by written notice to
Lessor in the event that Lessor shall obtain a leasehold interest therein, the
following land and the improvements thereon (herein sometimes called the
"Disposal Plant"):
All that lot consisting of approximately six (6) acres located in the
SW 1/4 of Section 12, Township 20 North, Range 13 East, in Tulsa, Oklahoma,
approximately one-half mile to the north of the above-described premises, on a
portion of which there is situated a sanitary sewer disposal plant owned, as of
the date of this Sublease, by the City of Tulsa, Oklahoma, together with such
sewer line easements as may be required between the above-described premises
and said lot and between said lot and Bird Creek, lying approximately two (2)
miles to the North of said lot, which lot and easements, if leased by Lessor
and subleased hereunder, shall be included in the term "Base Premises", except
as the context may otherwise require;
Page 2 of 3
<PAGE> 207
(b) certain other buildings, improvements and fixtures, sometimes
referred to in the Sublease as the "Improvements";
(c) a certain easement for the purpose of maintaining and
operating a transit waste disposal line, located thereon and all rights in
connection therewith or appurtenant thereto; and
(d) all rights of way, licenses, easements, hereditaments and
appurtenances belonging or appertaining to any of the foregoing.
Page 3 of 3
<PAGE> 1
EXHIBIT 10.20
[SCC-Tulsa]
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Assignment") is entered into
to be effective as of 9:30 a.m., Central Daylight time, on the 1st day of July,
1996, between American Airlines, Inc., a Delaware corporation ("Assignor"), and
The SABRE Group, Inc., a Delaware corporation ("Assignee").
W I T N E S S E T H :
WHEREAS, the Tulsa Airports Improvement Trust ("TAIT") leases certain
property from the City of Tulsa, Oklahoma known as the Tulsa International
Airport (the "Base Lease Premises") pursuant to the terms of that certain
Agreement by and between the City of Tulsa, Oklahoma ("Landlord"), and TAIT,
dated as of October 1, 1978 (the "Base Lease"); and
WHEREAS, Assignor is the lessee under that certain Amended and
Restated Sublease Agreement (the "Sublease"), by and between Assignor and TAIT,
being further described on Exhibit "A" attached hereto; and
WHEREAS, the Sublease covers a portion of the Base Lease
Premises described by metes and bounds on Exhibit "B", attached hereto, upon
which that certain building commonly known as the Secure Computer Center and
certain appurtenances related thereto are located (collectively, the
"Premises"); and
WHEREAS, Assignor wishes to assign to Assignee all of
Assignor's right, title and interest in and to the Sublease and Assignee wishes
to assume from Assignor all of Assignor's obligations thereunder from and after
the date hereof in accordance with the terms of this Assignment;
NOW, THEREFORE, in consideration of the premises, the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
1. Assignment of Sublease. Effective as of the date hereof,
Assignor hereby assigns and conveys to Assignee all of Assignor's right, title
and interest in, to and under the Sublease and all improvements and fixtures
situated on the Premises, including, but not limited to, the right, if any, to
renewals and extensions of the term of the Sublease.
2. Covenants of Assignee. Assignee hereby assumes, and
agrees to pay, honor and discharge, all of Assignor's obligations under the
Sublease arising on and after the date hereof. Assignee shall observe and
perform all of the terms and covenants and conditions to
<PAGE> 2
be performed by Assignor as lessee under the Sublease and agrees not to do or
suffer or permit anything to be done that would result in a violation of, or a
default under, the Sublease or cause the Sublease to be terminated or render
Assignor liable for any charge or expense thereunder.
3. Binding Effect. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
4. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA,
WITHOUT REGARD TO CHOICE OF LAWS PROVISIONS.
5. Counterparts. This Assignment may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this
Assignment by their authorized representatives as of the date first above
written to become effective as of such date.
Assignor:
--------
AMERICAN AIRLINES, INC., a Delaware corporation
By: /s/ GARY F. KENNEDY
------------------------
Name: Gary F. Kennedy
Title: Managing Director - Corporate Real Estate
ATTEST:
- -----------------------------
Assistant Corporate Secretary
Assignee:
--------
THE SABRE GROUP, INC., a Delaware corporation
By: /s/ JAMES. K. LINES
------------------------
Name: James K. Lines
Title: Attorney-in-Fact
ATTEST:
- -----------------------------
Assistant Corporate Secretary
<PAGE> 4
EXHIBIT "A"
DESCRIPTION OF SUBLEASE
Amended and Restated Sublease Agreement by and between the Tulsa
Airports Improvement Trust, a public trust organized under the laws of the
State of Oklahoma, as lessor, and American Airlines, Inc., a Delaware
corporation, as lessee, for Co-Located Computer Site
<PAGE> 5
EXHIBIT "B"
DESCRIPTION OF PREMISES
(TO BE ATTACHED)
<PAGE> 1
EXHIBIT 10.21
================================================================================
AMENDED AND RESTATED
SUBLEASE AGREEMENT
by and between
TULSA AIRPORTS IMPROVEMENT TRUST
AND
AMERICAN AIRLINES, INC.
FOR
CO-LOCATED COMPUTER SITE
================================================================================
<PAGE> 2
SUBLEASE AGREEMENT
TULSA AIRPORTS IMPROVEMENT TRUST
AND
AMERICAN AIRLINES, INC.
I N D E X
<TABLE>
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Term
2.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . 2
2.2 Options to Extend . . . . . . . . . . . . . . . . . . . . . 3
2.3 Surrender of Possession; Holding Over . . . . . . . . . . . 3
ARTICLE III
Lessor's Grants; Reservations
3.1 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Aviation Easement . . . . . . . . . . . . . . . . . . . . . 3
3.3 Reservation of Mineral Rights . . . . . . . . . . . . . . . 3
3.4 Title to Existing Improvements . . . . . . . . . . . . . . 4
3.5 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . 4
3.6 No Joint Venture or Partnership . . . . . . . . . . . . . . 4
ARTICLE IV
Use
4.1 Use of Leased Premises . . . . . . . . . . . . . . . . . . . 4
4.2 Security Plan . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V
Improvements to the Premises
5.1 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Plans and Specifications. . . . . . . . . . . . . . . . . . 5
5.3 Effect of New Improvements . . . . . . . . . . . . . . . . . 5
5.4 Removal and Ownership of Airport Structures on Leased
Premises. . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Radar Screening . . . . . . . . . . . . . . . . . . . . . . 6
5.6 Fences and Gates . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
Rentals, Fees and Charges
6.1 Land Rentals . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Land Rentals, Subsequent Periods . . . . . . . . . . . . . . 6
6.3 No Decrease in Rentals . . . . . . . . . . . . . . . . . . . 7
6.4 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . 7
6.5 Place of Payments . . . . . . . . . . . . . . . . . . . . . 7
6.6 Delinquencies . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII
Maintenance and Care of Leased Premises
7.1 Maintenance and Care of Leased Premises . . . . . . . . . . 7
ARTICLE VIII
Indemnity and Insurance
8.1 Indemnity - General . . . . . . . . . . . . . . . . . . . . 8
8.2 Hazardous Substance Compliance and Indemnity . . . . . . . . 8
8.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE IX
Governmental Requirements
9.1 Governmental Requirements - General . . . . . . . . . . . .12
9.2 No Liability for Exercise of Powers . . . . . . . . . . . .13
9.3 Nondiscrimination . . . . . . . . . . . . . . . . . . . . .13
9.4 Taxes and Other Governmental Charges . . . . . . . . . . . .14
9.5 Domestication . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE X
Events of Default
10.1 Events of Default Defined . . . . . . . . . . . . . . . . .14
10.2 Remedies upon Lessee's Default . . . . . . . . . . . . . . .15
10.3 Nonwaiver . . . . . . . . . . . . . . . . . . . . . . . . .17
10.4 Event of Default by the Lessor, Lessee's Remedies . . . . .17
10.5 Condemnation . . . . . . . . . . . . . . . . . . . . . . . .17
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI
Transfer of Interests
11.1 Assignments by the Lessor and the City . . . . . . . . . . .18
11.2 Assigning, Subletting and Encumbering . . . . . . . . . . .18
ARTICLE XII
Miscellaneous
12.1 Corporate Existence . . . . . . . . . . . . . . . . . . . .18
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .19
12.3 Severability . . . . . . . . . . . . . . . . . . . . . . . .19
12.4 Entire Agreement; Modification . . . . . . . . . . . . . . .19
12.5 Execution of Counterparts . . . . . . . . . . . . . . . . .19
12.6 Effect of Sundays and Legal Holidays . . . . . . . . . . . .19
12.7 Descriptive Headings; Table of Contents . . . . . . . . . .20
12.8 Choice of Law; Enforcement . . . . . . . . . . . . . . . . .20
12.9 Force Majeure . . . . . . . . . . . . . . . . . . . . . . .20
12.10 Construction of Agreement . . . . . . . . . . . . . . . . .20
12.11 Consent Not Unreasonably Withheld . . . . . . . . . . . . .20
12.12 Waiver of Depreciation and Tax Credit . . . . . . . . . . .20
12.13 Recovery of Attorney's Fees and Costs . . . . . . . . . . .20
12.14 Binding Effect . . . . . . . . . . . . . . . . . . . . . . .21
Signatures . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit "I" . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit "II" . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 5
SUBLEASE AGREEMENT
This Agreement is entered into between the Tulsa Airports Improvement
Trust, a public trust organized under the laws of the State of Oklahoma ("the
Lessor") and AMERICAN AIRLINES, INC., a Delaware corporation ("Lessee").
R E C I T A L S:
1. The Lessor leases Tulsa International Airport pursuant to the terms
of an Amended Lease between the City of Tulsa, Oklahoma, and the Lessor, dated
November 25, 1987, effective as of July 1, 1987, and amended by Amendment No. 1
to Amended Lease Agreement on June 30, 1989, effective as of July 1, 1989, by
which amendment the Tulsa Airport Authority, a charter agency of the City, is
authorized to manage the Airport on a daily basis for the Lessor.
2. The Lessor desires to sublease certain lands as hereinafter
defined, being situated on said leased property, and Lessee desires to sublease
from the Lessor for a term of years, the hereinafter defined premises.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained to be kept and performed by the parties hereto and upon the
provisions and conditions hereinafter set forth, the Lessor and Lessee hereby
do agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Throughout this Agreement, the following words
shall have the following meanings, respectively, unless the context clearly
shall indicate some other meaning:
a. Agreement means this Sublease Agreement between the Lessor and
Lessee;
b. Airport means Tulsa International Airport;
c. Authority means the Tulsa Airport Authority, a charter agency of
the City of Tulsa;
d. City means the City of Tulsa, Oklahoma;
e. EPA means the United States Environmental Protection Agency and any
federal, state or local agency, or governmental entity, succeeding
to, or being delegated with its jurisdiction, functions, or
responsibilities.
f. FAA means the Federal Aviation Administration of the United States,
or any federal agency succeeding to its jurisdiction or function;
<PAGE> 6
g. FAR means Federal Aviation Regulations and shall include, but not
be limited to, all regulations, policies, statements and directives
promulgated or issued by the FAA.
h. Governmental Requirements means all federal, state and local laws,
rules, regulations, security plans, and rulings, including all
amendments, now in effect or hereinafter enacted;
i. Leased Premises means the area described and illustrated on
Exhibits "I" and "II"; and
j. Term means the period of time that this Agreement shall be in
effect, as set forth in Section 2.1 hereof.
Section 1.2 Rules of Construction. Throughout this Agreement, unless the
context clearly shall require otherwise:
a. The singular includes the plural and vice versa;
b. The words "and" and "or" shall be both conjunctive and disjunctive;
c. The words "all" and "any" mean "any and all";
d. The word "including" means "including without limitation";
e. The word "he" or any other masculine pronoun includes any
individual regardless of sex;
f. Reference to any exhibits shall mean exhibits attached to this
Agreement which shall be deemed incorporated by reference; and
g. Reference to articles or sections respectively shall mean articles
or sections of this Agreement.
ARTICLE II
Term
Section 2.1 Term of Agreement. The Term of this Agreement shall be
effective as of the 1st day of December 1983 and shall expire concurrently with
the Sublease Agreement by and between the Trustees of the Tulsa Municipal
Airport Trust and American Airlines, Inc. dated June 24, 1958, as amended,
expiring at 12:00 noon, Tulsa time on January 31, 2038 unless otherwise
terminated or canceled. Provided, as of the effective date of termination or
cancellation of this Agreement, all obligations which have been incurred by
Lessee, or with respect to which Lessee shall be in default, shall survive such
termination or cancellation.
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<PAGE> 7
Section 2.2 Options to Extend. Unless otherwise provided herein, this
Agreement shall not create any right or option to extend this Agreement beyond
the Term stated herein.
Section 2.3 Surrender of Possession; Holding Over. Except as otherwise
expressly provided in this Agreement, at the expiration or sooner termination
of the Agreement, or any extension hereof, Lessee agrees to surrender
possession of Leased Premises peacefully and promptly to the Lessor in as good
condition as existed at the effective date of this Agreement.
If Lessee shall hold over after the termination of this Agreement, the
Lessor may allow Lessee to remain on the Leased Premises as a tenant at will.
During such tenancy, Lessee shall pay to the Lessor one and one half (1 1/2)
times the rentals, fees and charges set forth herein, and Lessee shall be bound
by all of the additional provisions of this Agreement.
ARTICLE III
Lessor's Grants; Reservations
Section 3.1 Sublease. The Lessor hereby offers and subleases to Lessee,
and Lessee hereby accepts and subleases from the Lessor, the Leased Premises
for the Term of this Agreement, subject to the provisions and conditions herein
set forth and at all times subject and subordinate in all respects to the
Agreement of Lease between City and Lessor and to the provision of any existing
or future agreement between City and the United States of America or between
Lessor and the United States of America, for the purposes of construction of an
advanced co-located computer facility. Lessee accepts the Leased Premises in
the condition in which they exist at the commencement of this Agreement.
Section 3.2 Aviation Easement. The Lessor reserves the right to take such
action as may be necessary to protect the aerial approaches of the Airport
against obstruction in accordance with applicable standards or Governmental
Requirements, together with the right to prevent Lessee or any other person
from erecting or permitting to be erected any antenna, equipment, building or
other facility or structure on the Airport (other than any buildings to be
constructed in compliance with and pursuant to the plans and specifications
approved pursuant to Article V hereof), which would conflict with such
standards and Governmental Requirements. The Lessor also reserves for itself,
the Authority, and City and their licensees, an aviation easement in, over and
across the air space above the Leased Premises and the unrestricted right to
subject the Leased Premises to such Airport noise and vibration as may result
from the flight of aircraft, warm up of engines, testing of engines or motors
and other aviation related activities.
Section 3.3 Reservation of Mineral Rights. The Lessor reserves all right,
title and interest in and to all minerals in, on or under the Leased Premises.
Lessee shall not engage in any
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<PAGE> 8
mining or drilling activities in, on or under the Leased Premises during the
Term of this Agreement. "Minerals" as used herein shall mean all mineral
substances and deposits whether solid, gaseous, or liquid.
Section 3.4 Title to Existing Improvements. Title to all improvements
which have been made to the Leased Premises as of the execution hereof shall be
and remain in the Lessor and the City during the Term and any extended term of
this Agreement.
Section 3.5 Quiet Enjoyment. Unless Lessee shall have defaulted in its
obligations hereunder, it shall have quiet enjoyment of the Leased Premises.
PROVIDED, HOWEVER, the Lessor MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER
EXPRESS OR IMPLIED, AS TO THE CONDITION OF THE LEASED PREMISES OR THAT THEY
WILL BE SUITABLE FOR LESSEE'S PURPOSES AND NEEDS.
Section 3.6 No Joint Venture or Partnership. This Agreement shall not be
deemed or construed (a) to create any relationship of joint venture or
partnership between the Lessor and Lessee, (b) to give the Lessor any interest
in the business of Lessee, or (c) to grant to Lessee any powers as an agent or
representative of the Lessor, the Authority, or the City for any purpose or to
bind the Lessor, the Authority, or the City.
ARTICLE IV
Use
Section 4.1 Use of Leased Premises. Lessee shall be entitled to use the
Leased Premises for all lawful purposes related to the commercial activities
which Lessee is specifically authorized to conduct pursuant to this Agreement.
Lessee, its representatives, agents and invitees shall have the right, in
common with others, of ingress and egress to and from the Leased Premises. The
Lessor and the Authority reserve the right to close any means of ingress and
egress, so long as other reasonable means of ingress and egress to the Leased
Premises are available to Lessee.
Section 4.2 Security Plan. At its sole cost and expense to the extent
applicable, Lessee shall comply with the Airport security plan. Lessee shall
require all persons entering the Leased Premises to comply with the Airport
security plan and the Airport rules and regulations established by the
Authority.
ARTICLE V
Improvements to the Premises
Section 5.1 Title. Lessee shall be entitled to construct new improvements
to the Leased Premises. Title to all improvements constructed by Lessee shall
be and remain in Lessee during the Term of this Agreement and any extensions or
renewals thereof.
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<PAGE> 9
However, on or before the expiration of this Agreement, Lessee shall be
entitled to remove all improvements which it may make during the Term of this
Agreement and any extensions hereof. Provided, however, at the expiration or
earlier termination of this Agreement, title to all buildings, structures and
improvements on the Leased Premises shall automatically be vested in Lessor.
Section 5.2 Plans and Specifications. All plans and specifications for
new improvements on the Leased Premises shall be prepared by Lessee in
compliance with all Governmental Requirements. Lessee shall furnish to the
Lessor copies of permits and licenses needed for construction. A construction
application, in a form prepared by Authority, and plans and specifications
shall be submitted by Lessee to the Lessor for approval. Thereafter, the Lessor
shall have thirty (30) days after receipt within which to approve the plans and
specifications, or to notify Lessee of any objections thereto. Each objection
and the grounds therefor shall be stated separately. Lessee shall have a
reasonable time thereafter within which to make any revisions to remove the
Lessor's objections. Upon the Lessor's receipt of the final plans and
specifications, the Lessor shall have thirty (30) days within which to approve
or reject Lessee's revised proposal. After the Lessor's approval of the final
plans and specifications, Lessee may proceed with construction. Construction
shall be substantially in accordance with the approved plans and
specifications. Upon completion of construction, Lessee shall furnish to the
Lessor one (1) complete set of reproducible "as built" plans and
specifications.
Section 5.3 Effect of New Improvements. Construction of new improvements
on the Leased Premises shall not be permitted to adversely affect existing
improvements, other Airport tenants, Airport property or other property
contiguous to the Airport.
Section 5.4 Removal and Ownership of Airport Structures on Leased
Premises. Lessee may not remove or otherwise alter any improvement to the
Leased Premises owned by the Lessor or the City without prior written consent
of the Lessor. Lessee may request permission, in writing, to remove or alter
such improvements. Within thirty (30) days of receipt of such written request,
the Lessor shall notify Lessee of either the rejection or approval of the
request. Ownership and title to all improvements removed from or altered on
the Leased Premises shall remain in the Lessor and the City. Removal, storage,
maintenance, transportation and disposal of the improvements shall be made at
Lessee's sole cost.
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<PAGE> 10
Section 5.5 Radar Screening. Lessee agrees to install at its sole cost,
in conformity with FAA and Authority requirements and regulations, all radar
screening or other material necessary to prevent or eliminate any radar
ghosting or interference caused by, any new construction, modification,
rehabilitation, or other development of, the Leased Premises.
Section 5.6 Fences and Gates. If any part of the Leased Premises, or the
improvements thereon, are enclosed within the secure area ("the Security Line")
of the Airport, Lessee shall provide all materials and labor, at its sole cost,
necessary to comply with the Airport Security Plan and FAR Part 107 (Airport
Security). Lessee shall pay for the cost of all additional gates or doors
required for access by Lessee and its employees, business invitees, or others
from the landside of the Airport to the airside of the Airport through the
Security Line. At all security gates or doors on the Leased Premises, Lessee
shall install (a) communication devices which shall be connected to the Airport
phone system; and (b) an entry card system approved by the Authority pursuant
to the Airport Security Plan submitted to and approved by the FAA. Any
alteration of the communication devices or entry card system, which may be
necessitated by a change in Authority or FAA requirements shall be made at the
expense of Lessee.
ARTICLE VI
Rentals, Fees and Charges
Section 6.1 Land Rentals. The Leased Premises, as particularly described
in Exhibit "I" and "II" contain approximately 2.7 acres of land, more or less.
Said acreage is formerly a part of the TMAT Leased Premises which were leased
by City to TMAT to Lessee for its Maintenance & Engineering Base at the Airport
("Base Premises"). Consideration of Lessee's operation and maintenance of the
Base Premises and the recognition that the deletion of the Leased Premises from
the TMAT facilities did not result in a diminution of rentals paid thereunder,
TAIT shall charge Lessee an initial annual rental of Twelve Thousand Dollars
($12,000.00) per year, to be paid on or before the 1st day of December of each
year of the term hereof.
Section 6.2 Rentals, Subsequent Periods. The land rentals shall be
adjusted each five (5) year period of the term, with the first readjustment to
be in calendar 1998. TAIT shall, at least sixty (60) days prior to the
expiration of this current five (5) year period of the term hereof, notify
Lessee of the rentals for the next succeeding five (5) year period of the
term. Said rentals shall be calculated by taking the rental rate and adjusting
the same based upon the Implicit Price Deflator Index for Gross National
Product, published by the Bureau of Economic Analysis of the United States
Department of Commerce (or successor index) by comparing the percentage change
in the Index as follows: (i) for the next five (5) year period of the term
hereof, comparison shall
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<PAGE> 11
be made of the Index for the second quarter 1996 (Base Year) and the second
quarter 1998; (ii) for the next five (5) year period of the term hereof,
comparison shall be made of the second quarter 1998 and the second quarter
2003. Said procedures shall be utilized for each five (5) year period
thereafter of the term hereof or any extensions or renewals of the term.
Section 6.3 No Decrease in Prevailing Lease Rate. The rentals for any
succeeding rental period shall not be, in any event, less than the Prevailing
Lease Rate established for the preceding rental period. The rental so
determined shall be payable in the same manner as set forth in this Article.
Section 6.4 Landlord's Lien. The Lessor shall have the first lien,
paramount to all others, on every right and interest of Lessee in this
Agreement, on all improvements, equipment and fixtures to the Leased Premises.
The lien is granted for the purpose of securing the payment of rentals, fees,
charges, taxes, assessments, liens, penalties and damages herein covenanted to
be paid by Lessee, and for the purpose of securing the performance, all and
singular, of the covenants, conditions and obligations of this Agreement to be
performed and observed by Lessee. This lien shall be in addition to all rights
of a landlord given under the laws of the State of Oklahoma.
Section 6.5 Place of Payments. All sums payable by Lessee hereunder shall
be delivered to:
Tulsa Airports Improvement Trust
Department 598
Tulsa, Oklahoma 74182
Section 6.6 Delinquencies. In addition to any remedy available to it
hereunder, the Lessor may impose as additional rental a delinquency charge on
all overdue payments, at the rate of eighteen percent (18%) per annum or the
then maximum rate allowed by law, whichever is greater and allowed by law.
ARTICLE VII
Maintenance and Care of Leased Premises
Section 7.1 Maintenance and Care of Leased Premises. Lessee shall perform
all maintenance, including all repairs relative to heating, electrical,
plumbing and air conditioning systems; roofs; walls; structure; structural
improvements and paving on the Leased Premises. Lessee also shall perform
mowing of, and snow removal from, the Leased Premises. Lessee at all times
shall keep in a clean and orderly condition and appearance all of the Leased
Premises and all of Lessee's fixtures, equipment and personal property which
are located thereon. Lessee shall not
7
<PAGE> 12
commit or suffer to be committed any nuisance on the Leased Premises. Lessee
shall conduct its operations in an orderly and proper manner so as not to
annoy, disturb, or be offensive to others at the Airport. Lessee shall take all
reasonable measures to keep the sound level of its operations as low as
reasonably possible. Lessee shall not permit the accumulation of any rubbish,
trash or other waste material. Except in tanks and in the manner approved by
appropriate governmental authorities, Lessee shall not store any gasoline or
other material likely to give off fumes or gases or any material likely to
constitute a fire, safety or security hazard on the Leased Premises. Lessee
shall not cause or permit any hazardous or flammable substance to be used,
stored, generated or disposed of on the Airport or Leased Premises.
ARTICLE VIII
Indemnity and Insurance
Section 8.1 Indemnity - General. Lessee shall indemnify, protect, defend
and hold completely harmless, the Lessor, the Authority, and the City, and
their trustees, officers, councilors, agents and employees from and against all
liability, losses, suits, claims, judgments, fines or demands arising from
injury or death of any person or damage to any property, including all
reasonable costs for investigation and defense thereof (including attorney
fees, court costs, and expert fees), of any nature whatsoever arising out of or
incident to this Agreement, Lessee's use or occupancy of the Leased Premises,
the Airport, or the rights, licenses, or privileges granted Lessee herein, or
the acts or omissions of Lessee's officers, agents, employees, contractors,
subcontractors, licensees, or invitees, regardless of where the injury, death
or damage may occur, unless such injury, death or damages is caused by the sole
negligence of the Lessor. the Lessor shall give notice to Lessee of any such
liability, loss, suit, claim or demand, and Lessee shall defend the same using
counsel reasonably acceptable to the Lessor. The provisions of this section
shall survive the expiration or early termination of this Agreement.
Section 8.2 Insurance. Lessee shall maintain in force during the Term and
any extended period commercial public liability and property damage insurance
in comprehensive form including but not limited to airport liability, aircraft
liability, broad form property damage, personal injury and any excess liability
in umbrella form, with such coverage and limits as reasonably may be required
by the Lessor from time to time, but in no event for less than the sum of One
Million Dollars ($1,000,000) combined single limit. The insurance shall be
issued by an insurer licensed to do business in the State of Oklahoma.
Lessee agrees to maintain contractual liability insurance to insure
Lessee's obligation to indemnify and hold the Lessor, Authority, and City,
their councilors, trustees, agents, officers,
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<PAGE> 13
servants, and employees harmless and in accordance with the indemnification
provisions of this agreement.
Concurrent with the execution of this Agreement, Lessee shall provide
proof of insurance coverage by providing a certificate of Lessee's insurance
coverage, a copy of the declarations page of the insurance policy, and a copy
of all endorsement(s) applicable to the insurance required herein. The
certificate(s) of insurance, or endorsement(s) attached thereto, shall provide
that (a) the insurance coverage shall not be canceled, changed in coverage, or
reduced in limits without at least thirty (30) days prior written notice to the
Lessor, (b) the Lessor, the Authority, and the City, and their trustees,
councilors, agents, officers, servants, and employees are named as additional
insureds, (c) the policy shall be considered primary as regards any other
insurance coverage the Lessor or the Authority may possess, including any
self-insured retention or deductible the Lessor or the Authority may have, and
any other insurance coverage the Lessor or the Authority may possess shall be
considered excess insurance only, (d) the limits of liability required therein
are on an occurrence basis, and (e) the policy shall be endorsed with a
severability of interest or cross-liability endorsement, providing that the
coverage shall act for each insured and each additional insured, against whom a
claim is or may be made in a manner as though a separate policy had been
written for each insured or additional insured; however, nothing contained
herein shall act to increase the limits of liability of the insurance company.
Any deductibles must be declared in writing to and approved by the
Lessor. At the option of the Lessor, either (a) the Lessee shall reduce or
eliminate such deductibles as respects the Lessor, the Authority, the City, and
their trustees, councilors, agents, officers, and employees or (b) Lessee shall
procure a bond equal to the amount of such deductibles or self-insured
retentions guaranteeing payment of losses and related investigations, claims
administration and defense expenses (including attorneys' fees, court costs and
expert fees).
If the insurance coverage required herein is canceled, changed in
coverage or reduced in limits, Lessee shall, within fifteen (15) days, but in
no event later than the effective date of cancellation, change or reduction,
provide to the Lessor a certificate showing that insurance coverage has been
reinstated or provided through another insurance company. Upon failure to
provide such certificate, without further notice and at its option, the Lessor
either may, in addition to all its other remedies (a) exercise the Lessor's
rights as provided in the default provisions of this Agreement, or (b) procure
insurance coverage at Lessee's expense whereupon Lessee promptly shall
reimburse the Lessor for such expense. Lessee shall indemnify, protect, defend
and hold the Lessor, the Authority and the City, and their trustees,
councilors, officers, agents and employees completely harmless from and against
all liability, losses, suits, claims, judgments, fines or demands
9
<PAGE> 14
arising from injury or death of any person or damage to any property, including
all reasonable costs for investigation and defense thereof (including attorney
fees, court costs, and expert fees), of any nature whatsoever arising out of or
incident to this Agreement, Lessee's use or occupancy of the Airport premises,
the rights, licenses, or privileges granted Lessee's employees, contractors,
subcontractors, licensees, agents or invitees, regardless of where the injury,
death or damage may occur, unless such injury, death or damage is caused by the
sole negligence of the Lessor. the Lessor shall give notice to Lessee of any
such liability, loss, suit, claim or demand, and Lessee shall defend same using
counsel reasonably acceptable to the Lessor. The provisions of this section
shall survive the expiration or early termination of this Agreement.
Section 8.3 Hazardous Substance Compliance and Indemnity. Lessee shall
not cause or permit any "Hazardous Substance" as hereinafter defined, to be
brought upon, generated, stored, or used in or about the Leased Premises by
Lessee, its agents, employees, contractors, or invitees, except for such
Hazardous Substance of the type and quantity as is necessary to Lessee's
business and with prior written notice to the Lessor. Any Hazardous Substance
permitted on the Leased Premises as provided herein, and all containers
therefor, shall be used, kept, stored, and disposed of in a manner that
complies with all federal, state and local laws or regulations applicable to
this Hazardous Substance.
Lessee shall not cause or permit, release, discharge, leak, or emit, nor
permit to be discharged, leaked, released, or emitted, any Hazardous Substance
into the atmosphere, ground, storm or sewer system, or any body of water,
ditch, stream, if that Hazardous Substance (as is reasonably determined by the
Lessor, or any governmental authority) does or may pollute or contaminate the
same, or may adversely affect (a) the health, welfare, or safety of persons,
whether located on the Leased Premises or elsewhere, or (b) the condition, use
or enjoyment of the building, facilities or any other real or personal
property. Operator shall fully and timely comply with all applicable federal,
state and local statutes, ordinances and regulations relating to protection of
the environment, including, without limitation, 42 U.S.C. Sections 6991-6991i.
a. Disclosure. At the commencement of each year of the term hereof,
Lessee shall disclose to the Lessor the names and approximate
amounts of all Hazardous Substance that Lessee intends to store,
use, or dispose of on the Leased Premises in the first year of the
Term hereof. In addition, at the commencement of each additional
year of the Term hereof, beginning with the second year, Lessee
shall disclose to the Lessor the names and amounts of all Hazardous
Substances that were actually used, stored, or disposed of on the
Leased Premises if those materials were not previously identified
to the Lessor at the commencement of the previous lease year.
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b. Compliance Action. Lessee shall, at Lessee's sole expense,
clean-up, remove, and remediate (1) any hazardous substances in,
on, or under the Leased Premises in excess of allowable levels
established by all applicable federal, state and local laws and
regulations, and (2) all contaminants and pollutants, in, on, or
under the Leased Premises that create or threaten to create a
substantial threat to human health or the environment and that are
required to be moved, cleaned up, or remediated by any applicable
federal, state, or local law, regulation, standard or order. This
obligation does not apply to a release of hazardous substances,
pollutants, contaminants, or petroleum products that existed on the
Leased Premises prior to the execution of the agreement caused
solely by the act or omission of the Authority or a third party for
whom the operator is not responsible (e.g. not a customer, invitee,
employee, agent, or person having any contractual or business
relationship with Lessee).
c. Definition of Hazardous Substances. Hazardous Substances: As used
herein, the term "hazardous substances" means and includes any and
all substances, chemicals, waste, sewage or other materials, which
are now or hereafter regulated, controlled or prohibited by any
local, state, or federal law or regulation requiring removal,
warning or restrictions on the use, generation, disposal or
transportation thereof, including, without limitation (a) any
substance defined as a "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", or "air pollutant" in the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA), 42 U.S.C. Section 9601 et seq., The Hazardous Materials
Transportation Act (HMTA), 49 U.S.C. Section 1801 et seg., The
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Section
6901 et seg., Federal Water Pollution Control Act (FWPC), 33 U.S.
Section 1251 et seg., or the Clean Air Act (CAA), 42 U.S.C. Section
7401 et seq., all as amended and amended hereafter; (b) any
substance defined as a "hazardous substance", "hazardous waste",
"toxic substance", "extremely hazardous waste", "RCRA hazardous
waste", "waste", "hazardous material" or "controlled industrial
waste", as defined in the Oklahoma Industrial Waste Disposal Act,
63 O.S. Sections 1-2000 et seq.; (c) any hazardous substance,
hazardous waste, toxic substance, toxic waste, hazardous material,
waste, chemical, or compound described in any other federal, state,
or local statute, ordinance, code, rule, regulation, order, decree,
or other law now or at any time hereafter in effect, regulating,
relating to or imposing liability or standards of conduct
concerning any hazardous, toxic, or dangerous substance, chemical,
material, compound or
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<PAGE> 16
waste. As used herein, the term "hazardous substances" also means
and includes, without limitation, asbestos, flammable, explosive or
radioactive materials; gasoline; oil; motor oil; waste oil;
petroleum (including without limitation, crude oil, or any fraction
thereof); petroleum based products; paints and solvents; leads;
cyanide; DDT; printing inks; acids; pesticides; ammonium compounds;
polychlorobiphenyls; and other regulated chemical products.
d. Indemnity Non-Compliance/Notice of Violation. Lessee hereby fully
agrees that it shall be fully liable for all costs and expenses
related to the use, storage, and disposal of Hazardous Substances
kept on the Leased Premises by Lessee, and the Lessee shall give
immediate notice to the Lessor of any violation or potential
violation of the provisions hereof. Without limiting any provisions
of this Agreement, Lessee shall defend, indemnify, and hold
harmless the Lessor, the Authority, the City, and their trustees,
councilors, officers, agents, and employees from and against any
claims, demands, penalties, fines, liabilities, settlements,
damages, costs, or expenses (including, without limitation,
attorneys' and consultants' fees, court costs, and litigation
expenses) of whatever kind or nature, known or unknown, contingent
or otherwise, arising out of or in any way related to (a) any
liabilities, damages, suits, penalties, judgments and environmental
cleanup, removal, response, assessment, or remediation costs,
arising from actual, threatened or alleged contamination of the
Leased Premises. Lessee's obligation under this section shall
survive termination or expiration of this agreement; (b) the
presence, disposal, release, or threatened release of any such
Hazardous Substance that is on, from, or affecting the soil, water,
vegetation, buildings, personal property, persons, animals, or
otherwise; (c) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to
that Hazardous Substance; (d) any lawsuit brought or threatened,
settlement reached, or government order relating to that Hazardous
Substance; or (e) any violation of any laws applicable thereto. The
provisions hereof shall be in addition to any other obligations and
liabilities Lessee may have to the Lessor at law or equity and
shall survive the transactions contemplated herein and shall
survive the termination of this Agreement.
ARTICLE IX
Governmental Requirements
Section 9.1 Governmental Requirements - General. Lessee shall comply with
all Governmental Requirements applicable to
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<PAGE> 17
Lessee's use and operation of the Leased Premises. Without limiting the
generality of the foregoing, Lessee shall at all times use and occupy the
Airport in strict accordance with all rules, regulations and security plans
that may be imposed by the FAA or the Lessor, the Authority or the City with
respect to the Airport and operations thereof.
Lessee shall procure, and require all its subsidiaries or assignees to
procure, from all governmental authorities having jurisdiction over the
operation of Lessee hereunder, all licenses, franchises, certificates, permits
or other authorizations which may be necessary for the conduct of Lessee's
business on the Leased Premises.
Lessee shall require its guests and invitees and those doing business
with it to comply with all Governmental Requirements relating to the conduct
and operation of Lessee's business on the Leased Premises.
Section 9.2 No Liability for Exercise of Powers. Neither the Lessor, the
Authority, nor the City shall be liable to Lessee for any diminution or
deprivation of its rights which may result from the proper exercise of any
power reserved to the Lessor, the Authority or the City in this Agreement;
Lessee shall not be entitled to terminate this Agreement by reason thereof,
unless the exercise of such power shall interfere with Lessee's rights
hereunder so as to constitute a termination of this Agreement by operation of
law.
Section 9.3 Nondiscrimination. Lessee, and its successors in interest,
and assigns, as a part of the consideration hereof, does covenant and agree
hereby, as a covenant running with the land, that in the event facilities are
constructed, maintained or otherwise operated on property described in this
Agreement for a purpose for which a Department of Transportation program or
activity is extended or for another purpose involving the provisions of similar
services or benefits, Lessee shall remain and operate such facilities and
services in compliance with all other requirements imposed pursuant to Title 49
CFR Part 21, (Nondiscrimination in Federally-Assisted Programs of the
Department of Transportation-Effectuation of Title VI of the Civil Rights Act
of 1964), Part 23, (Participation by Minority Business Enterprises and DOT
Programs) and Part 27 (Nondiscrimination on Basis of Handicap and Programs and
Activities Receiving or Benefiting from Federal Assistance) and the regulations
promulgated thereunder or may hereafter be amended.
Lessee, and its successors in interest, and assigns, as a part of the
consideration hereof, does hereby covenant and agree, as a covenant running
with the land, that (1) no person shall be excluded from participation in,
denied the benefits of, or otherwise be subjected to discrimination in the use
of said facilities on the grounds of race, color, creed, national origin, or
handicap,
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<PAGE> 18
(2) in the construction of any improvements on, over or under such land, and
the furnishings of services thereon, no person shall be excluded from
participation in, denied the benefits of, or otherwise be subjected to
discrimination in the use of said facilities, on the grounds of race, color,
creed, national origin, or handicap, (3) Lessee shall use the Leased Premises
in compliance with all other requirements imposed by or pursuant to Title 49
CFR Part 21, (Non-discrimination in Federally-Assisted Programs of the
Department of Transportation-Effectuation of Title VI of the Civil Rights Act
of 1964), Part 23, (Participation by Minority Business Enterprises and DOT
Programs) and Part 27 (Nondiscrimination on Basis of Handicap and Programs and
Activities Receiving or Benefiting from Federal Assistance) and the regulations
promulgated thereunder or may hereafter be amended.
To the extent applicable, Lessee assures that it will undertake an
Affirmative Action Program as required by 14 CFR Part 152, Subpart E, to ensure
that, on the grounds of race, color, creed, national origin or sex, no person
shall be excluded from participating in any employment activities covered in 14
CFR Part 152, Subpart E. Lessee assures that it will require that its covered
suborganizations provide assurances to the Lessor that they similarly will
undertake Affirmative Action Programs and that they will require assurances
from their suborganizations as required by 14 CFR Part 152, Subpart E to this
same effect.
Section 9.4 Taxes and Other Governmental Charges. Lessee shall pay, as
the same become due, all taxes and governmental charges of any kind whatsoever
that at any time lawfully may be assessed or levied against or with respect to
Lessee's improvements, machinery, equipment or other property installed or used
upon the Airport, including any ad valorem or personal property tax that may be
assessed against any leasehold interest or estate created by this Agreement. In
good faith and with due diligence, Lessee may contest any such taxes or
governmental charges.
Section 9.5 Domestication. If Lessee is a foreign corporation, it shall
domesticate its corporate status within the State of Oklahoma. Lessee shall
obtain a certificate of good standing from the Secretary of the State of
Oklahoma and provide to the Lessor such evidence of good standing as the Lessor
from time to time reasonably may require.
ARTICLE X
Events of Default
Section 10.1 Events of Default Defined\Cure. The following shall be
"events of default" under this Agreement, and the terms "events of default" or
"default" shall mean, whenever they are used herein, any one or more of the
following:
a. Lessee shall fail to pay when due and owing any rentals, fees or
charges payable hereunder and such nonpayment
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<PAGE> 19
shall continue for thirty (30) days after written notice thereof by
the Lessor;
b. Lessee shall (1) mortgage, pledge or encumber, any portion of its
interest in this Agreement; (2) subject the Leased Premises to any
lien of whatsoever nature, or (3) transfer, sublease or assign,
either voluntarily or by operation of law, any portion of its
interest in this Agreement, except in accordance with the
provisions hereof;
c. Lessee shall terminate its corporate structure, except as permitted
herein;
d. Lessee shall file a petition requesting relief or institute a
proceeding under any act, state or federal, relating to the subject
of bankruptcy or insolvency; or an involuntary petition in
bankruptcy or any other similar proceeding shall be instituted
against Lessee and continued for ninety (90) days; or a receiver of
all or substantially all of the property of Lessee shall be
appointed and the receiver shall not be dismissed for thirty (30)
days; or the Lessee shall make any assignment for the benefit of
the Lessee's creditors;
e. Lessee shall abandon, desert, or vacate the Leased Premises
voluntarily;
f. Lessee shall fail to comply with insurance requirements imposed in
Section 8.2 hereof.
If Lessee commits an event of default as set forth in Subsections 10.1(b)
through (f) hereof, and such failure shall continue unremedied for thirty (30)
days after the Lessor shall have given to the Lessee written notice specifying
such default. Provided, the Lessor may grant Lessee (in writing) such
additional time as reasonably is required to correct any such default if Lessee
has instituted corrective action and is diligently pursuing the same.
Section 10.2 Remedies upon Lessee's Default and Failure to Cure. Whenever
an event of default of Lessee shall occur, and upon Lessee's failure to cure,
the Lessor may pursue any available right or remedy at law or equity,
including:
a. Termination. the Lessor may terminate this Agreement without
delivery of notice to Lessee. In the alternative, and at its
exclusive option, the Lessor may deliver to Lessee written notice
of termination, specifying the date upon which the Agreement will
terminate. In the event of termination, Lessee's rights to
possession of the Leased Premises shall cease immediately. the
Lessor may then reenter and take
15
<PAGE> 20
possession of the Leased Premises and Lessee forthwith shall
surrender possession of the Leased Premises. Upon termination of
this Agreement, Lessee shall be liable for payment of:
(1) All sums accrued through the date of termination;
(2) The balance of all rentals required to be paid by Lessee for
the entire Term of the Agreement ("Outstanding Rental Balance");
(3) The reasonable costs incurred by the Lessor to relet the Leased
Premises, or any portion thereof; and
(4) The reasonable cost incurred by the Lessor to restore the
Leased Premises or any portion thereof to the condition in which
they originally were leased, ordinary wear and tear excepted.
All rentals received by the Lessor from reletting the Leased
Premises after the termination of this Agreement shall be credited
against the Outstanding Rental Balance. The acceptance by the
Lessor of any rentals from Lessee after the termination of this
Agreement shall not reinstate this Agreement.
b. Nontermination. As an alternative remedy upon Lessee's default, the
Lessor may elect not to terminate this Agreement in which event the
Lessee shall continue to perform all conditions and obligations to
be performed by Lessee hereunder, notwithstanding any entry or
reentry by the Lessor, or commencement of any suit in unlawful
detainer or other action brought by the Lessor for the purpose of
effecting such entry or reentry or obtaining possession of the
Leased Premises. After giving Lessee 10 days written notice, the
Lessor may reenter the Leased Premises to take possession thereof.
The Lessor shall use reasonable diligence to relet the Leased
Premises upon such terms and conditions as the Lessor may deem
advisable. Lessee agrees that this Agreement constitutes full and
sufficient notice of the right of the Lessor to relet the Leased
Premises in the event of such reentry, without effecting the
surrender or termination of this Agreement. Rentals or other
proceeds received by the Lessor from subletting the Leased Premises
shall be credited against the Outstanding Rental Balance after
deducting from such proceeds all of the Lessor's expenses in
connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses,
attorneys fees, expenses of employees, removal costs, alteration
costs and expenses of preparation for reletting.
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<PAGE> 21
c. Release of Liability; Waiver. If the Lessor takes possession of the
Leased Premises upon Lessee's default, the Lessor may expel Lessee
and those claiming through or under Lessee and remove their
property. The Lessor may remove all Lessee's property in or upon
the leased premises and place such property in storage for the
account of and at the expense of Lessee.
d. Acceleration of Rentals. The Lessor may, at its option, declare
installments of rentals payable under this Agreement for the
remainder of the Term to be due and payable immediately.
e. Remedies Cumulative. Each remedy available to the Lessor under this
Section shall be cumulative and shall be in addition to every other
remedy of the Lessor under this Agreement or existing at law or in
equity.
Section 10.3 Nonwaiver. Neither the waiver by the Lessor of any breach of
Lessee of any provision hereof nor any forbearance by the Lessor to seek a
remedy for any such breach shall operate as a waiver of any other breach by
Lessee.
Section 10.4 Event of Default by the Lessor, Lessee's Remedies. The
Lessor shall not be in default in the performance of any of its obligations
hereunder until the Lessor shall have failed to perform such obligations for
thirty (30) days or such additional time as is reasonably required to correct
any such nonperformance, after notice by Lessee to the Lessor specifying
wherein the Lessor has failed to perform any such obligations; neither the
occurrence nor existence of any default by the Lessor shall relieve Lessee of
its obligation hereunder to pay rentals, fees and charges. However, Lessee may
institute such action against the Lessor as Lessee may deem necessary to compel
performance or recover its damages for non-performance.
Section 10.5 Condemnation. If, at any time during the Term and any
extended term, the Leased Premises or the improvements located thereon or any
portion thereof shall be taken by exercise of the power of eminent domain by a
governmental entity other than the Lessor, the Authority, or the City, the
proceeds and awards in the condemnation proceedings shall be divided, and
rentals required hereunder shall be adjusted in such manner as shall be just
and equitable. If the Lessor and Lessee are unable to agree upon a just and
equitable division of proceeds and adjustment of rentals within thirty days
after rendition of any condemnation award, the matters then in dispute shall be
submitted for determination by a court of competent jurisdiction. If the Leased
Premises are taken wholly by condemnation, this Agreement shall terminate.
Provided, valuation of Lessee's interest in the Leased Premises and any
improvements thereon shall be determined in the manner set forth in the section
entitled Termination of Agreement for Airport Purposes.
17
<PAGE> 22
ARTICLE XI
Transfer of Interests
Section 11.1 Assignments by the Lessor and the City. The Lessor and the
City may transfer or assign this Agreement to any successor in interest to whom
the Airport may be sold or assigned; however, the successor in interest shall
execute and deliver to the Lessor, with a copy to Lessee, an Instrument
assuming the obligations of the Lessor and the City under this Agreement.
Section 11.2 Assigning, Subletting and Encumbering.
a. Lessee shall not assign, sublet or encumber the Leased Premises or
any part thereof, including improvements thereon, without the
Lessor's prior written consent. Provided, however, Lessor hereby
specifically acknowledges the Assignment of Lease from Lessee to
THE SABRE GROUP, INC., a Delaware corporation. Lessee shall notify
TAIT of the business entity which shall be the final assignee
pursuant to this Consent.
b. Lessee shall pay the then current administrative fee required by
the Lessor for the Lessor's approval of each (1) sale of leasehold
improvements, (2) assignment, (3) collateral assignment, (4)
release of lease, (5) amendment or supplement to this Agreement, or
(6) any other modification to this Agreement requested by Lessee
requiring approval by the Lessor. The administrative fee shall be
paid to the Lessor by Lessee simultaneously with submission of
Lessee's written request for the Lessor approval.
ARTICLE XII
Miscellaneous
Section 12.1 Corporate Existence. If Lessee is a corporation, Lessee
shall maintain its corporate existence, and Lessee shall not dispose of all or
substantially all of its assets and shall not consolidate with or merge into
another corporation or permit one or more other corporations to consolidate
with or merge into it; however, without violating the prohibition contained in
this section, consolidate with or merge into another corporation, or permit one
or more other corporations to consolidate with or merge into it, or sell or
otherwise transfer to another corporation all or substantially all of its
assets as an entity and thereafter dissolve, if the surviving or transferee
corporation (a) assumes in writing all of the obligations of Lessee herein, (b)
has net assets and capital (both paid in and surplus) at least equal to the net
assets and capital of Lessee immediately prior to such consolidation, merger,
sale or transfer, and (c) is qualified to do business in Oklahoma.
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<PAGE> 23
Section 12.2 Notices. All notices, certificates, statements, demands,
requests, consents, approvals, authorizations, offers, agreements,
appointments, designations or other communication which may be or are required
to be given by either party thereto to the other shall be deemed to have been
sufficiently given on the third day following the day on which the same are
mailed by registered or certified mail, postage prepaid as follows, if to the
Lessor or the Authority:
Tulsa Airports Improvement Trust
or Tulsa Airport Authority
Attention: Airports Director
P.0. Box 581838
Tulsa, Oklahoma 74158-1838
and if to Lessee:
American Airlines, Inc.
Attn: VP-CRE
P.O. Box 619616
Dallas-Ft. Worth Airport, TX 75261-9616
the Lessor, the Authority, or the Lessee may designate, by notice given
hereunder, any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.
Section 12.3 Severability. In the event any provisions of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof, unless such holding shall materially affect the rights of either party
as set forth herein.
Section 12.4 Entire Agreement; Modification. This Agreement expresses the
entire understanding of the Lessor and Lessee concerning the Leased Premises
and all agreements of the Lessor and Lessee with each other concerning the
subject matter hereof. Neither the Lessor nor Lessee has made or shall be bound
by any agreement or any representation to the other concerning the Leased
Premises or the subject matter hereof which is not set forth expressly in this
Agreement. This Agreement may be modified only by a written agreement of
subsequent date hereto signed by the Lessor and Lessee.
Section 12.5 Execution of Counterparts. This Agreement simultaneously may
be executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
Section 12.6 Effect of Sundays and Legal Holidays. Whenever this
Agreement requires any action to be taken on a Sunday or a
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<PAGE> 24
legal holiday, such action shall be taken on the first business day occurring
thereafter. Whenever in this Agreement, the time within which any action is
required to be taken, or within which any right will lapse or expire, shall
terminate on Sunday or a legal holiday, such time shall continue to run until
11:59 p.m. on the next succeeding business day.
Section 12.7 Descriptive Headings; Table of Contents. The descriptive
headings of the Sections of this Agreement and any Table of Contents annexed
hereto are inserted or annexed for convenience of reference only and do not
constitute a part of this Agreement, and shall not affect the meaning,
construction, interpretation or effect of this Agreement.
Section 12.8 Choice of Law,, Enforcement. This Agreement shall be
construed and enforced in accordance with the laws of the State of Oklahoma.
Whenever in this Agreement it is provided that either party shall make any
payment or perform, or refrain from performing, any act or obligation, each
such provision, even though not so expressed, shall be construed as an express
covenant to make such payment or to perform or not to perform, as the case may
be, such act or obligation.
Section 12.9 Force Majeure. Neither the Lessor nor Lessee shall be deemed
in violation of this Agreement if it is prevented from performing any of the
obligations hereunder by reason of embargoes, shortages or material, acts of
God, acts of the public enemy, acts of superior governmental authority, weather
conditions, floods, riots, rebellions, sabotage, or any other circumstances for
which it is not responsible or which are not within its control, and the time
for performance automatically shall be extended by the period the party is
prevented from performing its obligations hereunder; however, these provisions
shall not apply to the failure of Lessee to pay the rentals and other charges
required hereunder.
Section 12.10 Construction of Agreement. This Agreement and each
provision and covenant hereof shall constitute both a contract and a sublease
by and between the parties hereto.
Section 12.11 Consent Not Unreasonably Withheld. Whenever it is provided
herein that the consent of the Lessor, the City or Lessee is required, such
consent shall not be unreasonably withheld, conditioned or delayed, except as
provided herein.
Section 12.12 Waiver of Depreciation and Tax Credit. Neither Lessee nor
any successor in interest hereunder may claim depreciation or an investment tax
credit with respect to property leased by the Lessor to Lessee under this
Agreement.
Section 12.13 Recovery of Attorney's Fees and Costs. If the Lessor shall
bring any legal or equitable action against Lessee, and the Lessor shall be
adjudged the prevailing party, Lessee shall pay the reasonable attorney's fee
and costs incurred by the Lessor
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<PAGE> 25
in such action and any appeal therefrom. For purposes of this section, "costs"
shall include expert witness fees, court reporter fees, and court costs.
Section 12.14 Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Lessor, Lessee and their respective successors
and assigns, if such assignment shall have been made in conformity with the
provisions of this Agreement.
IN WITNESS WHEREOF, the Lessor and Lessee have entered into this Amended
and Restated Sublease Agreement at Tulsa, Oklahoma on the day of May, 1996.
TULSA AIRPORTS IMPROVEMENT TRUST
ATTEST:
BY: [ILLEGIBLE]
-----------------------------------
Chairman
- -----------------------------------
Secretary
APPROVED AS TO SUBSTANCE:
- -----------------------------------
Airports Director
APPROVED AS TO FORM:
- -----------------------------------
TAIT Counsel
AMERICAN AIRLINES, INC.
BY: /s/ GARY F. KENNEDY
-----------------------------------
Title
ATTEST:
/s/ CHARLES D. MARLETT
- -----------------------------------
Corporate Secretary
Charles D. Marlett
21
<PAGE> 26
LEGAL DESCRIPTION OF CO-LOCATED COMPUTER CENTER
Said parcel of land is more particularly described as:
Commencing at the northeast corner of the SE/4, Section 13, T20N, R13E,
Indian Meridian, Tulsa County, Oklahoma, thence in a southerly direction along
the centerline of Mingo Road which is the east line of Section 13, a distance
of 287.50 feet, thence in a westerly direction along a line perpendicular to
centerline of Mingo Road a distance of 673.71 feet to the point of beginning:
Thence in a southerly direction along a line parallel to the centerline of
Mingo Road a distance of 372.66 feet
Thence in a westerly direction along a line perpendicular to the centerline of
Mingo Road a distance of 317.00 feet
Thence in a northerly direction along a line parallel to the centerline of
Mingo Road a distance of 372.66 feet
Thence in an easterly direction along a line perpendicular to the centerline of
Mingo Road a distance of 317.00 feet to the P.O.B.
said tract of land containing an area of 2.71 acres, more or less.
EXHIBIT I
<PAGE> 27
PLAT OF CO-LOCATED COMPUTER CENTER
[MAP]
EXHIBIT II
<PAGE> 1
EXHIBIT 10.22
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Assignment") is entered into
as of 9:30 a.m., Central Daylight Time, on July 1, 1996, between AMERICAN
AIRLINES, INC., a Delaware corporation ("Assignor"), and THE SABRE GROUP, INC.,
a Delaware corporation ("Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the tenant under that certain Office
Lease Agreement dated January 19, 1996 (the "Lease"), by and between Assignor
and Maguire/Thomas Partners - Westlake/Southlake Partnership, a Texas general
partnership ("Landlord"), covering the premises described therein (the
"Premises"); and
WHEREAS, Assignor wishes to assign to Assignee all of
Assignor's right, title and interest in and to the Lease and Assignee wishes to
assume from Assignor all of Assignor's obligations thereunder from and after
the date hereof in accordance with the terms of this Assignment;
NOW, THEREFORE, in consideration of the above Premises, the
mutual promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
1. Assignment of Lease. Effective as of the date hereof,
Assignor hereby assigns and conveys to Assignee all of Assignor's right, title
and interest in, to and under the Lease and all improvements and fixtures
situated on the Premises, and Assignee is hereby deemed to be the "Tenant"
under the Lease for all purposes as if Assignee had been the original tenant
that executed the Lease.
2. Covenants of Assignee. Assignee hereby assumes, and
agrees to pay, honor and discharge, all of Assignor's obligations under the
Lease arising on and after the date hereof.
3. Representations and Warranties of Assignor. Assignor
hereby represents and warrants to Assignee that (a) the Lease is in full force
and effect on the date hereof, (b) as of the date hereof, any and all defaults
under the Lease by Assignor have been cured or waived by the Landlord and (c)
no event has occurred and is continuing as of the date hereof which, with the
giving of notice or the passage of time or both, would constitute a default
under the Lease.
<PAGE> 2
4. Binding Effect. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE
PREMISES ARE LOCATED WITHOUT REGARD TO CONFLICTS OF LAWS PROVISIONS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this
Assignment by their authorized representatives as of the date first above
written to become effective as of such date.
ASSIGNOR:
AMERICAN AIRLINES, INC.,
a Delaware corporation
By: /s/ Gary F. Kennedy
------------------------------------
Gary F. Kennedy, Managing Director,
Corporate Real Estate
ASSIGNEE:
THE SABRE GROUP, INC.,
a Delaware corporation
By: /s/ James K. Lines
------------------------------------
James K. Lines, Attorney-in-Fact
-3-
<PAGE> 1
EXHIBIT 10.23
OFFICE LEASE AGREEMENT
THIS LEASE AGREEMENT, ("Lease") is made as of the 19th day of
January, 1996, between Maguire/Thomas Partners - Westlake/ Southlake
Partnership, a Texas general partnership, hereinafter called "Landlord", and
American Airlines, Inc., a Delaware corporation, hereinafter called "Tenant".
LEASE OF PREMISES
In consideration of the mutual covenants herein, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, subject to all
the terms and conditions hereinafter set forth, those certain premises
(hereinafter called the "Premises") set forth in Items 1 and 2 of the Basic
Lease Provisions and shown on the drawings attached hereto and made a part
hereof as Exhibit "A". The office building in which the Premises are located
(the "Building"), the structured and surface parking which serve the Building
including any such facilities if constructed pursuant to Section 16.24 (the
"Parking Facilities"), all improvements and appurtenances to the Building and
the land on which the Building, Parking Facilities, improvements and
appurtenances are situated, are referred to collectively herein as the
"Project", all as outlined on the site plan attached hereto as Exhibit "A-2".
The Project is located within that certain development of Landlord in the
Westlake/Southlake area as more particularly shown in Exhibit "A-3", attached
hereto, which is hereinafter referred to as the "Complex". The land, on which
the Project is situated, is more particularly described in Exhibit "A-1"
attached hereto.
BASIC LEASE PROVISIONS
1. Building Name and Address: Southlake Building, 1 East Kirkwood Blvd.,
Southlake, Texas
2. Suites #: 100-500 Floors: One through Five
Rentable Area: 375,057 square feet
Parking Spaces: See attached Exhibit "F".
3. Total Rentable Area of Building: 375,057 square feet
Tenant's Building Expense Percentage: 100% (See Article 2)
4. a. Basic Rent: Months 1-60 (being from July 1, 1996, through
June 30, 2001, unless extended by reason of "Delay" as defined
in Section 1.01) being the annual amount of $5,550,843.60
($14.80 per rentable sq.ft.), payable in the monthly amount of
$462,570.30.
OFFICE LEASE AGREEMENT
<PAGE> 2
Months 61-90 (being from July 1, 2001, through December 31,
2003, unless extended by reason of Delay as defined in Section
1.01) being the annual amount of $6,300,957.60 ($16.80 per
rentable sq.ft.), payable in the monthly amount of
$525,079,80.
Months 91-120 (being from January 1, 2004 through June 30,
2006, unless extended by reason of Delay as defined in Section
1.01) being in the annual amount of $7,426,128.60 ($19.80 per
rentable sq.ft.), payable in the monthly amount of
$618,844.05.
The foregoing represent the months after the Rent Commencement Date.
From February 1, 1996, through June 30, 1996, no Basic Rent is due as
long as the License Agreement dated as of December 8, 1995, by and
between Landlord and Tenant ("License") remains in effect; however, if
the License is terminated for any reason permitted by the License
after entry into this Lease, then Tenant shall pay Landlord the sum of
$191,000, less any payments of the Basic Fee under the License
previously made by Tenant and, in consideration therefor, Tenant shall
be allowed to remain in possession of 20,000 rentable square feet of
space as referenced in the License (the "License Space") through June
30, 1996. If, on and after February 1, 1996, but prior to July 1,
1996, Tenant occupies any space in the Building for purposes of
conducting its business, other than the License Space, then Tenant
shall pay to Landlord for such additional space the sum of $.45 per
month per rentable square foot of such additional space, as such
rentable square feet are reasonably estimated by Landlord, which
payment will reimburse Landlord for Operating Expenses (as defined in
Section 2.02 A2) incurred in connection with Tenant's use of such
additional space. Beginning February 1, 1996, Tenant, under all
circumstances, shall pay to Landlord all Tenant's Electrical Expenses
(as defined in Section 2.02 A10) for the Project. The foregoing sums
shall be paid in advance on the first of each month with the exception
of the payment of the Tenant's Electrical Expenses which shall be made
fifteen (15) days after Landlord's delivery of a bill for same to
Tenant.
b. Tenant's Expense Stop: $ 5.40 per rentable sq.ft.
(See Article 2)
c. Additional Rent: see Article 2
d. Initial estimated monthly installment of Basic and Additional
Rent: $462,570.30 plus Electrical Expenses
e. Intentionally Deleted.
5. Term: Ten (10) years and five (5) months from the Commencement Date,
unless extended by Delay (as defined in Section 1.01) or
OFFICE LEASE AGREEMENT
<PAGE> 3
renewed in accordance with Exhibit K or terminated in accordance with
the provisions of the Lease.
6. Rent Commencement Date: July 1, 1996, unless extended by reason of
Delay (as defined in Section 1.01)
7. Intentionally Deleted
8. Broker(s): The Staubach Company
9. Permitted Use: General office use and data processing, in keeping with
the first class standards of the Complex and uses incidental or
related thereto including, without limitation, an employee cafeteria
and kitchens.
10. Intentionally deleted.
11. Addresses for notices due under this Lease:
Landlord: Tenant:
Maguire/Thomas Partners - American Airlines, Inc.
Westlake/Southlake Partnership 4255 Amon Carter Blvd.
Suite 550 Fort Worth, Texas 76155
Nine Village Circle Attn: Managing Director
Westlake, Texas 76262 Corporate Real Estate
Attn: Ms. Ann Withington Telecopy No. 817-967-3111
Telecopy No.: 817-430-8750
and and
Maguire/Thomas Partners - American Airlines, Inc.
Westlake/Southlake Partnership 4333 Amon Carter Blvd.
Suite 500 Fort Worth, Texas 76155
Nine Village Circle Attn: Corporate Secretary
Westlake, Texas 76262 Telecopy No.: 817-967-2937
Attn: Mr. Tom Allen
Telecopy No.: 817-430-8750
and
Maguire/Thomas Partners -
Westlake/Southlake Partnership
355 South Grand Suite 4500
Los Angeles, California 90071
Attn: Mr. Dan Gifford
Telecopy No.: 213-628-9531
Each reference in this Lease to any of the Basic Lease Provisions shall be
construed to incorporate all of the terms provided under each such Basic Lease
Provision.
OFFICE LEASE AGREEMENT
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 1 - Term and Possession 1
Article 2 - Rent 3
Article 3 - Intentionally Deleted 12
Article 4 - Occupancy and Use 12
Article 5 - Utilities and Services 14
Article 6 - Repairs, Maintenance, Alterations 17
and Improvements
Article 7 - Insurance, Fire and Casualty 20
Article 8 - Condemnation 26
Article 9 - Liens 27
Article 10 - Taxes on Tenant's Property 28
Article 11 - Subletting and Assigning 29
Article 12 - Transfers By Landlord 32
Article 13 - Default 33
Article 14 - Notices 36
Article 15 - Waiver of Landlord's Lien 37
Article 16 - Miscellaneous Provisions 37
</TABLE>
Exhibit A - Floor Plan
Exhibit A-1 - Legal Description
Exhibit A-2 - Site Plan
Exhibit A-3 - Complex Site Plan
Exhibit B - Intentionally Deleted
Exhibit C - Rent Commencement Date Memorandum
Exhibit D - Agreement for Construction
OFFICE LEASE AGREEMENT
<PAGE> 5
Exhibit E - Rules and Regulations
Exhibit F - Parking Agreement
Exhibit G - Project Maintenance Association
Exhibit H - Janitorial Specifications
Exhibit I - HVAC Standards
Exhibit J - Surface Parking Location
Exhibit K - Renewal Options
Exhibit L - Subordination, Non-Disturbance and Attornment Agreements
Exhibit M - Hazardous Substances
Exhibit N - Release of Lease and Waiver of Claim
Exhibit O - Memorandum of Lease
OFFICE LEASE AGREEMENT
<PAGE> 6
ARTICLE I
TERM AND POSSESSION
SECTION 1.01. COMMENCEMENT AND EXPIRATION. The term of this Lease for the
payment of Basic Rent as defined below shall be the period of time specified in
Item 5 of the Basic Lease Provisions with an expiration date on June 30, 2006
(the "Expiration Date") as such date may be extended as provided below. The
Rent commencement date (the "Rent Commencement Date") shall be July 1, 1996, as
specified in Item 6 of the Basic Lease Provisions except as may be delayed as
provided below. The commencement date (the "Commencement Date") of this Lease
shall be February 1, 1996. The term of this Lease shall expire, without notice
to Tenant, on the Expiration Date required by Item 5 of the Basic Lease
Provisions which date shall be memorialized in Exhibit C to be signed by the
parties.
The prior tenant's employees in the Building shall vacate the Premises by the
Commencement Date. If the prior tenant's employees have not vacated the
Premises by the Commencement Date (such failure to vacate being referred to as
the "Delay"), then Tenant shall deliver notice of such Delay, if any, by
February 4, 1996, to Landlord and, as Tenant's sole remedy, the Rent
Commencement Date shall be delayed one day for each day of Delay and the
Expiration Date shall also be extended one day for each day of Delay (e.g., if
the prior tenant's employees do not vacate the Building until February 5, 1996,
then the Rent Commencement Date shall be July 5, 1996, and the Expiration Date
shall be July 4, 2006). Failure to deliver the written notice to Landlord of
the prior tenant's employees' failure to vacate the Premises shall waive the
Tenant's rights in the event of Delay. Landlord and Tenant shall promptly sign
Exhibit C attached hereto upon the occurrence of the Commencement Date. If the
Rent Commencement Date is any day after July 1, 1996, then the first and last
month's Basic Rent shall be pro-rated accordingly.
Landlord shall send its regular cleaning crew through the Building on February
1, 1996, or immediately after the prior tenant's employees have vacated, to
clean and remove trash and any of the prior tenant's personalty such as desks,
chairs, movable filing cabinets or the like from the Premises (but not the
items specified in Section 16.26 below) after the prior tenant's employees
vacate the Premises. The parties recognize that some equipment and personalty
of the prior tenant and Landlord will remain in the Premises under Section
16.26 of this Lease; the presence of this personalty will not cause Delay as
above defined as Delay can only be caused by the presence of the prior tenant's
employees within the Premises for any purpose other than turning over the
Premises to Tenant.
SECTION 1.02. CONSTRUCTION OF TENANT WORK AND POSSESSION. Tenant will
perform or cause to be performed the Tenant Work as defined in
OFFICE LEASE AGREEMENT - Page 1
<PAGE> 7
Exhibit "D", in accordance with the terms of said Exhibit "D". Subject to
Landlord's obligations after completion of the Tenant Work under Section 6.01
below, Landlord has delivered and Tenant accepts the Premises in an "AS IS,
WHERE IS, AND WITH ALL FAULTS" condition. Tenant assumes responsibility for
timely completion of the Tenant Work. Landlord's right to approve the Tenant
Work shall be in accordance with Exhibit "D". Tenant shall be responsible for
compliance, at Tenant's expense, of the Building and all Tenant Work and Parking
Facilities with all laws, codes, and ordinances, including, without limitation,
the Americans with Disabilities Act, except for replacement of the roof and
repairs of the foundation and load-bearing structures of the Building and the
Parking Facilities (which shall be Landlord's responsibility and at its expense
as provided herein) unless such repairs are caused by the Tenant.
SECTION 1.03. SURRENDER OF THE PREMISES. Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Premises without terminating this Lease, Tenant shall immediately
surrender the Premises and all keys to the Premises to Landlord, together with
all alterations, improvements and other property as provided elsewhere herein,
in good order, condition and repair, except for ordinary wear and tear and
damage by casualty; provided that at Landlord's written request as provided in
Section 6.02C herein, Tenant shall remove at its expense any Tenant Alterations
to the Premises which have become a part of and otherwise would have remained
with the Premises. Tenant shall, at its expense, promptly repair any damage
caused by removal of any Tenant Alterations (but not Tenant Work) requested by
Landlord as aforesaid, and shall restore the Premises to the condition
existing prior to the installation of the items removed. If Tenant fails to
surrender the Premises in the condition aforesaid, then Landlord may restore
the Premises to such a condition at Tenant's expense. Upon the expiration or
earlier termination of the Lease, Tenant will, at the option of Landlord,
execute a Release of Lease and Waiver of Claim in the form attached as Exhibit
N, in recordable form, containing Tenant's release of all its interest in the
Premises, but, in any event, Tenant's interest in the Premises shall terminate
upon expiration or earlier termination of this Lease.
Any personalty or trade fixtures left by Tenant which remain in the Premises or
in Landlord's custody for more than thirty (30) days after expiration or
earlier termination of this Lease shall be considered abandoned and Landlord
may dispose of same, at Tenant's cost, in such manner as Landlord deems
advisable without liability to Tenant.
SECTION 1.04. HOLDING OVER. In the event Tenant, or any party under Tenant
claiming rights to this agreement, retains possession of the Premises after the
expiration or earlier termination of this Lease, such possession shall be an
unlawful detainer, and no tenancy or interest shall result from such
possession; such parties
OFFICE LEASE AGREEMENT - Page 2
<PAGE> 8
shall be subject to eviction and removal, and Tenant or any such party shall
pay Landlord as rent for the period of such holdover an amount equal to one and
one-half times the then current Basic Rent for the Premises during the time of
holdover. Tenant shall also pay any and all direct damages sustained by
Landlord as a result of such holdover's effect on Landlord's ability to relet
the Project. Tenant will vacate the Premises and deliver same to Landlord
immediately upon Tenant's receipt of notice from Landlord to so vacate. The
rent during such holdover period shall be payable to Landlord within fifteen
days after Landlord's delivery of a bill for same to Tenant. No holding over by
Tenant shall operate to extend this Lease.
SECTION 1.05. NO WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED HEREIN, TENANT
ACKNOWLEDGES THAT LANDLORD MAKES NO WARRANTIES REGARDING THE PREMISES IN THIS
LEASE AND LANDLORD HEREBY EXPRESSLY DISCLAIMS THE IMPLIED WARRANTY THAT THE
PREMISES ARE SUITABLE FOR THEIR INTENDED COMMERCIAL PURPOSE. TENANT HAS HAD A
REASONABLE OPPORTUNITY TO INSPECT THE PREMISES AND FINDS THAT THE PREMISES
REASONABLY SUIT TENANT'S PURPOSES. TENANT HAS REASONABLE KNOWLEDGE OF THE
PREMISES AND WITH THIS KNOWLEDGE HAS VOLUNTARILY AGREED TO DISCLAIM THE IMPLIED
WARRANTY OF SUITABILITY. BOTH LANDLORD AND TENANT HAVE EXPRESSLY BARGAINED FOR
AND AGREED TO THIS DISCLAIMER. FOR AND IN CONSIDERATION OF THE EXECUTION OF
THIS LEASE, LANDLORD AND TENANT AGREE THAT LANDLORD WOULD NOT HAVE SIGNED THIS
LEASE BUT FOR THE WAIVER CONTAINED HEREIN, AND TENANT WAIVES ANY WARRANTY
REGARDING THE PREMISES EXCEPT THOSE EXPRESSLY PROVIDED IN THIS LEASE.
ARTICLE 2
RENT
SECTION 2.01. BASIC RENT. Tenant shall pay as Basic Rent for the Premises
the annual and monthly sums shown in Item 4(a) of the Basic Lease Provisions.
The Basic Rent shall be payable in monthly installments in advance, without
demand or deduction, commencing on the Rent Commencement Date and continuing on
the first day of each calendar month thereafter. If the Rent Commencement Date
of this Lease commences on a day other than the first day of a calendar month,
the Basic Rent for such partial month shall be prorated in the proportion that
the number of days this Lease is in effect during such partial month bears to
the number of days in that calendar month.
SECTION 2.02. ADDITIONAL RENT.
A. Definitions. For purposes of this Section 2.02, the following
definitions shall apply:
1. "Additional Rent" shall mean the amount of "Tenant's Share of
Operating Expenses", as defined in Section 2.02 A.12 hereof, for a particular
calendar year, or portion thereof.
OFFICE LEASE AGREEMENT - Page 3
<PAGE> 9
2. "Operating Expenses" shall mean the total of all actual costs,
expenses and disbursements incurred or paid by Landlord in connection with the
management, operation, maintenance (including cleaning, protecting and
servicing), and repair of the Project for a particular calendar year or portion
thereof as reasonably and consistently determined by Landlord in accordance
with Generally Accepted Accounting Principles, consistently applied ("GAAP"),
which Operating Expenses shall include, without limitation, (i) the cost of
air-conditioning, electricity, heating, mechanical, ventilation and elevator
systems and all other utilities and the cost of supplies and equipment and
maintenance and service contracts in connection therewith, (ii) the cost of
repairs, general maintenance, cleaning, trash removal, janitorial service,
light bulb and tube replacement, and supplies and security service, (iii) the
cost of fire, extended coverage, boiler, sprinkler, apparatus, public
liability, property damage, rent, earthquake and all other insurance, (iv)
wages, salaries and other labor costs directly related to the management and
operation of the Project, including taxes, insurance, retirement, medical and
other employee benefits, (v) fees, charges and other costs including management
fees (which management fees shall not exceed 3% of gross revenues from the
Project), consulting fees, legal fees and accounting fees of all independent
contractors engaged by Landlord or reasonably charged by Landlord if Landlord
performs such services, (vi) the cost of supplying, replacing and cleaning
employee uniforms, (vii) the cost of the property manager's offices in the
Complex, provided such office is devoted to the management, operation,
maintenance or repair of the Project and the Complex, (viii) the cost of
business taxes and licenses, (ix) all costs of operating, cleaning,
maintaining, servicing, repairing and staffing the Parking Facilities and
associated landscaped areas, (x) all Real Property Taxes as hereinafter
defined, (xi) any fees or charges imposed by any federal, state or local
government for fire protection, police, trash or other similar service which
does not constitute a Real Property Tax, (xii) landscaping, (xiii) assessments
by the Project Maintenance Association, as further described in Exhibit "G"
attached hereto, and (xiv) Cost Saving Capital Improvement Amortization, as
hereinafter defined. Certain of the foregoing expenses may be incurred by
Landlord for the Project in conjunction with one or more additional buildings
in the Complex ("Shared Expenses") in which event, Operating Expenses will
include the Building's pro-rata share of any such Shared Expenses, calculated
as follows: The Building's pro-rata share of any category of Shared Expense
shall be equal to the total of such Shared Expense category multiplied by a
fraction, the numerator of which is the total Rentable Area in the Building and
the denominator of which is the total Rentable Area of all buildings incurring
such category of Shared Expenses. Operating Expenses and Shared Expenses shall
exclude any expenses paid for directly by Tenant or by any other tenants of the
Project and/or Complex, and the amount and allocation of any item of Shared
Expenses shall not exceed the amount such item of Operating Expenses would have
been if such cost had not been shared by Tenant with other tenants in the
Complex
OFFICE LEASE AGREEMENT - Page 4
<PAGE> 10
(i.e., Tenant will not pay more by paying an item that is a Shared Expense than
Tenant would have paid if it had paid the entire cost of the item itself).
Notwithstanding the foregoing, certain exclusions from the definition of
Operating Expenses are set forth in Section 2.02B below.
"Operating Expenses" shall not include any amounts expended by
Landlord for repairs to the foundation and load- bearing structures or to the
replacement of the roof unless such repairs are caused by Tenant. The cost of
repairs to and maintenance of the roof and Building Systems (as hereinafter
defined), but excluding the foundation and load bearing structures, unless the
need for such repairs are caused by Tenant, will be included in Operating
Expenses; provided, whether such costs for work done on the roof and Building
Systems (as such Building Systems exist on January 31, 1996) constitute
expenses (to be included within Operating Expenses) or capital expenditures
(which, except as provided herein, are excluded from Operating Expenses) will
be determined in accordance with GAAP. To the extent that Building Systems as
same exist on January 31, 1996, must be replaced (as determined by GAAP) during
the term of this Lease, such cost of replacement will not be included in
Operating Expenses, but to the extent any Tenant Work or Tenant Alterations add
additional capacity or elements to the Building Systems as same exist on
January 31, 1996, the capital cost of replacing such additional capacity or
elements will be included within Operating Expenses. As referenced above, all
costs of operation of the Building Systems will be included in Operating
Expenses.
3. "Real Property Taxes" shall mean all taxes, assessments
(special or otherwise) and charges levied upon or with respect to the Project
and ad valorem taxes for any personal property used in connection therewith.
Real Property Taxes shall include, without limitation, any tax, fee or excise
on the act of entering into this Lease, on the occupancy of Tenant, the Rent
hereunder or in connection with the business of owning and/or renting space in
the Project which are now or hereafter levied, assessed or imposed or assessed
against Landlord by the United States of America, any State or any political
subdivision, public corporation, district or other political or public entity,
and shall also include any other tax, assessment, fee or excise, however
described (whether general or special, ordinary or extraordinary, foreseen or
unforeseen) which may be levied, assessed or imposed in lieu of, as a
substitute, in whole or in part, for or as an addition to, any other Real
Property Taxes. Landlord may pay any such special assessments in installments
when allowed by law, in which case, Real Property Taxes shall include any
interest charged. Real Property Taxes shall not include income, franchise,
transfer, inheritance or capital stock taxes, unless, due to a change in the
method of taxation, any of such taxes are levied, assessed or imposed against
Landlord in lieu of, or as a substitute, in whole or in part, for or as an
addition to, any other tax which would otherwise constitute a Real Property
Tax. Real Property Taxes
OFFICE LEASE AGREEMENT - Page 5
<PAGE> 11
shall also include reasonable legal fees, costs and disbursements incurred in
connection with proceedings to contest, determine or reduce Real Property
Taxes, but shall exclude any penalties or interest due to Landlord's late
payment of such Real Property Taxes.
4. "Cost Saving Capital Improvement" shall mean, except as
otherwise expressly provided herein, any equipment, device or other improvement
acquired by Landlord (i) reasonably anticipated to achieve economies in the
operation, maintenance and repair of the Building or other portion of the
Project, but Tenant shall be responsible for reimbursing the cost of any
equipment, device or other improvement purchased which is reasonably
anticipated to achieve economies in operation and consequently such cost shall
be included in Cost Saving Capital Improvements only to the extent reasonably
anticipated cost savings are realized, (ii) to comply with any statute,
ordinance, code, mandatory controls or guidelines more particularly described
in Section 5.05, or (iii) to comply with any other governmental requirement
with respect to the Building or any other portion of the Project, including
without limitation, fire, health, safety or construction requirements, if the
cost thereof is capitalized on the books of Landlord in accordance with GAAP,
to the extent such governmental requirements are imposed after the Commencement
Date.
5. "Cost Saving Capital Improvements Amortization" shall mean
the amount determined by multiplying the actual cost of each Cost Saving
Capital Improvement acquired by Landlord by the constant annual percentage
required to fully amortize such cost over the useful life of the Cost Saving
Capital Improvement (including interest at the rate paid by Landlord for
Landlord's financing on the Project or if there is no financing on the Project,
then at the rate of One Hundred Fifty (150) basis points above the Ask Yield
for Treasury Bonds and Notes as quoted from time to time in The Wall Street
Journal or another reputable financial publication which quote reflects a bond
or note maturing at the point in time which most nearly approximates the useful
life of the Cost Savings Capital Improvement) required to fully amortize such
cost over the useful life of the Cost Saving Capital Improvements in question
determined in accordance with GAAP. The Cost Saving Capital Improvement
Amortization shall be allocated and charged to Tenant as an amount per square
foot of Rentable Area of the Premises.
6. "Electrical Expenses" shall mean that portion of Operating
Expenses incurred in the form of charges for electrical current for the
Project, except for such charges incurred by the Project Maintenance
Association.
7. "Non-Electrical Expenses" shall mean Operating Expenses minus
Electrical Expenses.
OFFICE LEASE AGREEMENT - Page 6
<PAGE> 12
8. "Tenant's Building Expense Percentage" shall mean 100% of all
Operating Expenses attributable to the Project.
9. "Tenant's Expense Stop" shall be the amount of $2,025,308.00
(which is the product of $5.40 per rentable square foot in the Premises times
the number of square feet of rentable area in the Premises [375,057]).
10. "Tenant's Electrical Expenses" shall be 100% of the Project's
Electrical Expenses.
11. "Tenant's Non-Electrical Expenses" shall be the amount, if
any, by which the Non-Electrical Expenses for the Project exceeds Tenant's
Expense Stop.
12. "Tenant's Share of Operating Expenses" shall be the sum of
Tenant's Electrical Expenses and Tenant's Non-Electrical Expenses (to the
extent Tenant's Non-Electrical Expenses exceed Tenant's Expense Stop).
B. Operating Expense Exclusions.
The following shall be excluded from the definition of Operating
Expenses as set forth in Section 2.02 A2 above.
1. Costs of labor and materials, and contract costs, of other
services directly and separately charged to other tenants or subtenants in the
Complex, other than through operating expenses charged to such tenants and
subtenants.
2. Costs incurred in connection with leasing, licensing or
otherwise granting the right to use space in the Complex, and the extension or
renewal thereof, including without limitation, leasing commissions, brokerage
or finder's fees, marketing costs, legal and consulting fees, advertising
expenses, and payments, free rent, lease takeover obligations and other
inducements.
3. Costs of constructing or renovating space or alterations or
improvements for tenants or other subtenants or space vacated by any tenants or
other subtenants in the Complex.
4. Costs of utilities directly and separately charged to other
tenants or subtenants in the Complex, other than through operating expenses
charged to such tenants and subtenants.
5. Depreciation for assets that constitute real property.
6. All debt or financing costs other than Cost Saving Capital
Improvements, including, without limitation, interest, points and fees on debt,
amortization payments on mortgages or deeds of trust.
OFFICE LEASE AGREEMENT - Page 7
<PAGE> 13
7. Legal and other related expenses associated with the
negotiation, amendment, and enforcement of leases and other agreements
regarding occupancy of the Complex, or the defense of Landlord's title to the
Complex and legal and other related expenses which are incurred in the
management of Landlord's internal partnership affairs such as preparing
amendments to the partnership agreement of Landlord, preparing assignments of
partnership interests in Landlord's partnership, admitting new partners to
Landlord's partnership and the like.
8. Landlord's general corporate overhead and general
administrative expenses except for costs directly related to the management and
operation of the Complex and the 3% management fee charged on gross revenues
for the Project payable to the property manager.
9. Any compensation paid to clerks, attendants or other persons
in commercial concessions operated by Landlord, if any, and costs incurred in
connection with the operation, maintenance and management of commercial
concessions operated in space which is not included in the rentable area of the
Complex.
10. Costs separately reimbursed (including without limitation by
virtue of fees or other charges) to Landlord by Tenant or by others, including
without limitation, utilities, taxes, reimbursement under warranties, by
insurance carriers, by condemning authorities, or by tenants other than
operating expenses charged to such tenants, occupants or other users of the
Complex or such other costs for which Landlord is separately reimbursed
including costs for repairs caused by casualty events for which Landlord is
required to maintain insurance under this Lease.
11. Costs to acquire, construct, equip and complete the Complex,
except as such costs are reflected in (i) the Basic Rent or (ii) Cost Saving
Capital Improvements.
12. Costs of any subsidies to any restaurant, food stand or other
food service or hotel, health club, child care center, or other retail
operation of any kind in the Complex.
13. Costs in connection with the purchase, sale, financing or
refinancing of the Complex, or of Landlord, or any portion of or interest
(direct or indirect) in either.
14. Costs expressly excluded from Operating Expenses pursuant to
any other provision of this Lease.
15. Costs (including penalties) incurred by Landlord due to the
violation by Landlord or any tenant (or other occupant) of the terms and
conditions of any lease (or other occupancy agreement) for space in the Complex
but only if such violation has been determined to occur by a final judicial
order.
OFFICE LEASE AGREEMENT - Page 8
<PAGE> 14
16. Costs paid to Landlord or to subsidiaries or affiliates of
Landlord for services in the Complex to the extent the same exceeds the costs
of such services if rendered by unaffiliated third parties on a competitive
basis.
17. Contributions to civic or charitable organizations.
18. Costs arising out of the default or breach by Landlord under
any contract, including without limitation penalties and interest due to late
payment, but only if such default or breach has been determined to occur by a
final judicial order.
19. Increases in insurance rates caused by Landlord or other
tenants (but excluding changes in rates caused by market conditions).
20. The cost of any services that Tenant supplies at its own,
separate cost.
21. Environmental remediation or clean up costs of Landlord
pursuant to Section 16.28 and any indemnification obligations of Landlord under
Exhibit "M".
In the event of any conflict between Sections 2.02A and 2.02B, then Section
2.02B shall control except for the specific manner in which repairs and
maintenance of the roof, foundation, load-bearing structures and Building
Systems are addressed in Section 2.02A2 above shall control in all
circumstances.
C. Payment Obligation. In addition to the Basic Rent specified in this
Lease, Tenant shall pay to Landlord as Additional Rent for the Premises, in
each calendar year or partial calendar year during the term of this Lease, an
amount equal to Tenant's Share of Operating Expenses for such calendar year.
1. Payment of Tenant's Share of Operating Expenses: Tenant's
Share of Operating Expenses for the remainder of the calendar year after the
Commencement Date has been estimated in Item 4d of the Basic Lease Provisions
and for each subsequent calendar year (or partial calendar year) shall be
estimated by Landlord, and written notice thereof (including an itemized
breakdown of such estimated expenses) shall be given to Tenant as soon as
reasonably practical, but no later than thirty (30) days prior to the beginning
of each calendar year. For any such remainder of the calendar year after the
Commencement Date, Tenant shall pay to Landlord each month, at the same time
the Basic Rent is due, an amount equal to the amount of such estimated
Additional Rent for the remainder of such calendar year divided by the number
of months remaining in such year; and for each calendar year thereafter Tenant
shall pay to Landlord each month, at the same time the Basic Rent is due, an
amount equal to one-twelfth (1/12) of the estimated annual Additional Rent due.
OFFICE LEASE AGREEMENT - Page 9
<PAGE> 15
2. Revisions in Estimated Additional Rent: If Operating Expenses
increase during a calendar year as a result of Tenant's change in operations
during such calendar year, Landlord may revise the estimated Additional Rent
during such year by giving Tenant written notice to that effect, and
thereafter, but no sooner than thirty (30) calendar days after Landlord's
delivery of such notice, Tenant shall pay to Landlord, in each of the remaining
months of such year, an additional amount equal to the amount of such estimated
increase in Tenant's Share of Operating Expenses divided by the number of
months remaining in such year.
3. Adjustments to Actual Additional Rent: Within ninety (90) days
after the end of each calendar year, or as soon thereafter as is reasonably
possible, Landlord shall prepare and deliver to Tenant an itemized statement
showing in reasonable detail Tenant's actual Additional Rent for the previous
calendar year prepared by a reputable accounting firm. Within thirty (30) days
after receipt of the aforementioned statement, Tenant shall pay to Landlord, or
Landlord shall credit against the next Additional Rent payment or payments due
from Tenant (or Landlord shall pay such amount to Tenant if there are
insufficient future Additional Rent payments to exhaust such credit), as the
case may be, the difference between Tenant's actual Additional Rent for the
preceding calendar year and the estimated Additional Rent paid by Tenant during
such year.
D. Rent: The Basic Rent, the Additional Rent, and all other sums required
to be paid by Tenant hereunder are sometimes collectively referred to as, and
shall constitute, "Rent."
Rent shall be paid by Tenant when due, without prior demand therefor and
without deduction or set off unless otherwise specifically provided herein, at
the office of the property manager or at such other place as Landlord may
designate in writing.
In the event more than two (2) installments of Rent under this Lease in any
calendar year shall not be paid when due, a "Late Charge" of three cents ($.03)
per each dollar so overdue may be charged by Landlord, for the purpose of
defraying Landlord's administrative and other expenses incident to the handling
of such overdue payments. Landlord and Tenant agree that such Late Charge will
fairly compensate Landlord for such administrative and other expenses which
both parties agree cannot be determined precisely.
E. Audit Rights: Landlord agrees that it will maintain complete and
accurate records of all costs, expenses and disbursements which are incurred by
Landlord, its employees, agents and/or contractors, with respect to Operating
Expenses and the constituent components thereof. Tenant and/or its employees
or a nationally recognized CPA firm, or a nationally recognized and competent
real estate auditing firm, at Tenant's sole cost and expense except as provided
below, shall have the right to inspect and/or audit not more often than once
per calendar year Landlord's books and records relating to this Lease for any
year or years during the Term of this Lease
OFFICE LEASE AGREEMENT - Page 10
<PAGE> 16
but such audit shall only be for the preceding two (2) years of the Term of
this Lease (but not to include any period of time before January 1, 1996). Any
such inspection and/or audit shall be conducted at Landlord's office during
normal business hours and shall be completed in a reasonable manner and within
a reasonable time not to exceed four weeks from the commencement of such audit.
Tenant must give Landlord notice of Tenant's intent to audit within two (2)
years after Tenant has received a statement setting forth the prior Lease
Year's Operating Expenses chargeable to Tenant and if such notice is not sent
by Tenant within two (2) years then Tenant waives its right to an audit for
that Lease Year. Landlord agrees to reimburse Tenant for the professional or
accounting costs and expenses incurred by Tenant in connection with any such
inspection and/or audit conducted by or for Tenant, but only if said inspection
and/or audit shall prove that Operating Expenses for the Lease Year(s) covered
by such inspection and/or audit shall have been overstated by two percent (2%)
or more, but such auditing expense incurred by Tenant to be reimbursed by
Landlord shall not exceed a total of $20,000. If Tenant's auditors shall prove
that Operating Expenses for the Lease Year(s) covered by such inspection and/or
audit shall have been overstated, then Tenant may inspect and/or audit the
expense line items and only those line items for which Tenant has proved an
overstatement for two additional prior Lease Years (i.e., not to exceed four
Lease Years). Such auditors may not be compensated on a contingency basis.
The right of Tenant to audit and any audit by Tenant of Landlord's books and
records shall not affect the obligation of Tenant to pay, in accordance with
the terms hereof, estimated Additional Rent subject, however, to Landlord's
reimbursement and/or reconciliation obligations set forth herein. Landlord's
and Tenant's obligations to reconcile estimated Additional Rent with Additional
Rent shall survive the expiration or termination of this Lease for a period not
to exceed two (2) years after the termination or expiration of this Lease.
Tenant and its authorized representatives shall keep any such audit
confidential and shall sign appropriate confidentiality agreements except as
such disclosure is required by judicial proceedings or compliance with
regulatory requirements or as necessary for Tenant's attorneys, accountants,
employees and consultants in undertaking such audit and performing Tenant's
usual business, but any disclosure of such audit to another tenant or sublessee
in the Complex is prohibited. If Landlord and Tenant mutually agree that an
error occurred and the amount of such error, Landlord will refund Tenant such
amount within thirty (30) days. If the parties cannot agree on whether errors
exist or the cumulative amount of any errors, then the parties shall submit
such dispute for resolution to a panel of not more than three arbitrators with
one arbitrator selected by Landlord, one selected by Tenant and one selected by
the foregoing two arbitrators. The arbitrators shall hold a Certified Public
Accountant certification with at least ten (10) years in the real estate
industry and none of the arbitrators shall have worked for or been employed by
Landlord and/or Tenant for at least three (3) years prior to such appointment.
After at least ten (10) days prior written notice to Landlord and Tenant,
OFFICE LEASE AGREEMENT - Page 11
<PAGE> 17
such arbitrators shall hold a hearing at which Landlord and Tenant may present
evidence and such arbitrators shall render a written decision within twenty
(20) days after the date of such hearing. The non-prevailing party in such
dispute shall pay the prevailing party the reasonable costs of such
arbitration, but not to exceed Twenty Thousand and No/100 Dollars ($20,000). A
"Lease Year" for purposes of this Section 2.02E is any calendar year during the
Term of this Lease.
ARTICLE 3
INTENTIONALLY DELETED
ARTICLE 4
OCCUPANCY AND USE
SECTION 4.01. USE OF PREMISES. The Premises shall be used solely for the
purposes specified in Item 9 of the Basic Lease Provisions. Tenant will not
use, occupy or permit the use or occupancy of the Premises for any purpose
which is forbidden by law, ordinance or governmental or municipal regulation or
order, or which may be dangerous to life, limb or property; or permit the
maintenance of any public or private nuisance; or at any time operate a
restaurant or food service facility for sale of food to persons other than
Tenant's employees, invitees or licensees; or use any apparatus which might
make undue noise or set up vibrations in the Project; or permit anything to be
done which would be hazardous.
SECTION 4.02. RULES AND REGULATIONS. The "Rules and Regulations" attached
hereto as Exhibit E are hereby made a part hereof and Tenant agrees to comply
with all such Rules and Regulations. Landlord shall have the right at all
times to change the Rules and Regulations or to amend them in any reasonable
and non-discriminatory manner, provided, Tenant shall have ten (10) days prior,
written notice of such changes, and such changes will not unreasonably
interfere with the uses of the Building as permitted under this Lease. All
changes and amendments will be sent by Landlord to Tenant in writing and shall
be thereafter carried out and observed by Tenant, its employees and business
invitees.
SECTION 4.03. SIGNS. Subject to the "Required Signage Approvals" as set
forth below, (i) Tenant may, at Tenant's cost, have the exclusive right to
affix or display its name or logo on one location on the Building and (ii)
Landlord, at Landlord's cost, will install Tenant identification signage on the
existing monument located at the entrance to the building from Kirkwood
Boulevard which signage on the monument shall be exclusive to Tenant.
Additionally, Tenant may place Tenant identification information in the lobby
of the Building and within the Premises, provided that any signage visible from
the exterior of the Building will be
OFFICE LEASE AGREEMENT - Page 12
<PAGE> 18
subject to the Required Signage Approvals. For purposes of this article,
Required Signage Approvals includes (i) the right of Landlord to approve the
design, size, lighting and location of all exterior signage and (ii) any and
all necessary approvals related to city and governmental ordinances and
regulations.
SECTION 4.04. ACCESS. Except in the event of an emergency, Landlord or its
authorized agents shall, upon twenty-four (24) hours prior written notice to
Tenant, at all times have the right to enter the Premises to inspect the same,
to show the Premises to prospective lenders or purchasers, to alter or improve
the exterior of the Building or, if requested by Tenant, to alter or improve
the interior and, if necessary, to repair the interior of the Premises or any
other portion of the Project, or, during the last year of the initial term of
the Lease or the last year of any exercised renewal term if such term is
renewed in accordance with this Lease, to show same to prospective tenants, all
without being deemed guilty of an eviction of Tenant and without abatement of
Rent, and may for that purpose erect scaffolding and other necessary structures
where reasonably required by the character of the work to be performed,
provided the business of Tenant shall be interfered with as little as is
reasonably practicable. Landlord or its authorized agents, without notice to
Tenant, shall at any and all reasonable times, have the right to enter the
Premises to supply janitorial service or any other service to be provided by
Landlord to Tenant pursuant to this Lease without being deemed guilty of an
eviction. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby;
provided Landlord uses reasonable efforts to minimize disruption to Tenant's
business. Notwithstanding anything to the contrary contained in this Section
4.04, except in an event of emergency, at Tenant's option, Landlord shall be
accompanied by a representative of Tenant when Landlord enters the Premises for
any purpose other than to render janitorial service or other services required
by Landlord under this Lease. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to enter the Premises,
excluding Tenant's vaults and safes and any areas designated by Tenant as
highly secured. Landlord shall have the right to use any and all means which
Landlord may deem proper to enter any part or all of the Premises in an
emergency without liability therefor.
SECTION 4.05. QUIET POSSESSION. Upon Tenant's paying the Rent reserved
hereunder and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant
shall have the quiet possession of the Premises for the entire Term hereof,
subject to all of the provisions of this Lease. Landlord warrants to Tenant
that Landlord holds fee simple title to the land described in Exhibit A-1 and
otherwise owns the Building and other improvements located on such land,
subject to liens filed of record and held by Sumitomo Bank, Limited, which
Landlord warrants is the only
OFFICE LEASE AGREEMENT - Page 13
<PAGE> 19
lienholder as of January 1, 1996, on such land, the Building and other
improvements located thereon.
ARTICLE 5
UTILITIES AND SERVICES
SECTION 5.01. SERVICES TO BE PROVIDED. Provided Tenant is not in default
hereunder which default has not been cured prior to the expiration of any
applicable cure period, Landlord agrees to furnish or cause to be furnished to
the Premises comparable to other first-class buildings in the Dallas-Fort Worth
area, the utilities and services described below, subject to the conditions and
in accordance with the standards set forth herein:
A. Landlord shall provide automatic elevator facilities on a 24 hour a
day, seven day a week basis, subject to any repair and maintenance
requirements.
B. By prior, written notice to Landlord, Tenant may set such hours and
days of operation of the Building as Tenant deems appropriate. However, Tenant
understands that Tenant's Expense Stop has been based on the Building being
operated on generally accepted business days from 7 a.m. to 6 p.m., and on
Saturdays from 8 a.m. to 12 noon. Landlord shall ventilate the Premises and
furnish heating or air conditioning in accordance with the HVAC Standards
attached hereto as Exhibit I, subject to (i) any governmental requirements or
standards relating to, among other things, energy conservation and/or (ii) the
effect of the Tenant Work or Tenant Alterations, but only to the extent such
Tenant Work and/or Tenant Alterations adversely impact Landlord's ability to
supply HVAC services in accordance with Exhibit I.
C. Landlord has allowed Tri-County Electric Cooperative, Inc.,
("Tri-County") to provide three (3) 2500 KVA transformers (the "Transformers")
for the Project and Tenant shall have the sole right to use such transformers
to provide electric power to the Premises, subject to interruptions. The costs
of all electrical consumption by the Project shall be borne by Tenant. As of
the Commencement Date, the Building has 19.997 watts per rentable square foot
of power in the Building for all purposes including convenience, core, HVAC,
etc., calculated as follows: 3 X 2500 X 1000 = 7,500,000 watts divided by
375,057 rentable square feet.
D. Landlord shall furnish water for drinking, hot and cold water for
cleaning and lavatory purposes and water for HVAC.
E. Landlord shall provide janitorial services to the Premises in
accordance with the Janitorial Specifications set forth in Exhibit H attached
hereto, which specifications exclude cleaning the Building's cafeteria.
OFFICE LEASE AGREEMENT - Page 14
<PAGE> 20
F. Landlord shall supply one security person for the Project from 7 a.m.
to 6 p.m. on generally accepted business days.
G. Landlord shall periodically undertake pest control within the
Premises.
H. Landlord shall provide lighting for the surface and structured parking
in the Project.
I. Landlord shall provide personnel for the HVAC system from 7 a.m. to 6
p.m. on generally accepted business days and 8 a.m. to 12 noon on Saturdays.
By Tenant's reasonable prior notice to Landlord, Tenant may cause Landlord to
operate the HVAC systems for the Building at other times other than from 7 a.m.
to 6 p.m. on generally accepted business days and from 8 a.m. to 12 noon on
Saturdays provided Tenant shall pay all actual costs (plus the 3% management
fee) of supplying such additional HVAC services specifically including, without
limitation, the cost of personnel and the cost of electricity.
J. Landlord shall furnish landscaping and mowing services to the Project.
K. Landlord shall furnish one day porter for the Premises from 7 a.m. to
6 p.m. on generally accepted business days.
SECTION 5.02 ADDITIONAL SERVICES. Tenant may submit a written request for
services related to the Project that Landlord is not obligated to supply under
this Lease ("Additional Services"). If Landlord and Tenant can mutually agree
upon the scope and cost of such Additional Services, including without
limitation the fee to be paid to Landlord, then Landlord shall supply the
Additional Services.
SECTION 5.03. COOPERATION WITH UTILITIES. Tenant agrees to reasonably
cooperate fully at all times with Landlord in abiding by all regulations and
requirements which any utility may prescribe for the use of the above utilities
and services.
SECTION 5.04. SERVICE INTERRUPTION.
A. Except for rent abatement as provided in Section 5.04B below,
Landlord shall not be liable for, and Tenant shall not be entitled to, any
abatement or reduction of Rent by reason of Landlord's failure to maintain
temperature or electrical constancy levels or to furnish any of the foregoing
services when failure is caused by accident, breakage, repairs, strikes,
lockouts or other labor disturbance or labor dispute of any character,
governmental regulation, moratorium or other governmental action, failure of
any electrical or other utility provider, inability by exercise of reasonable
diligence to obtain electricity, water or fuel, or by any other cause beyond
Landlord's reasonable control, nor shall any such failure, stoppage or
interruption of any such service be
OFFICE LEASE AGREEMENT - Page 15
<PAGE> 21
construed as an eviction of Tenant, or relieve Tenant from the obligation to
perform any covenant or agreement herein, and in no event shall Landlord be
responsible for damage to persons or property or loss of income, or in default
hereunder, as a result of such failure, stoppage or interruption of any such
service. In the event of any failure, stoppage or interruption thereof,
however, Landlord shall use reasonable diligence to resume service promptly.
B. Notwithstanding the preceding Section 5.04A above, if there is
a failure to provide electricity, air, chilled water, and/or sewer service to
the Premises which makes a material portion of the Premises Untenantable (as
hereinafter defined), then Landlord shall have three (3) business days within
which to fully restore such services or to provide such interim services as
necessary on an interim basis until the problem can be remedied; if Landlord
fails to restore such services or repair such problem within three (3) business
days, then Tenant may undertake to provide such interim services for itself by
temporary generators, temporary chillers, port-o-lets and/or bottled water, and
Landlord shall cooperate in the provision of such temporary services but Tenant
may not assume control of repairs necessary to provide a long-term repair of
the problem. Tenant may abate the payment of Rent for the period of time during
which the Premises are Untenantable after three (3) consecutive business days.
Also, Landlord agrees to use reasonable efforts to restore the services or to
cause the appropriate utilities to restore the delivery of such services, but
Landlord shall not have the obligation to expend funds in such undertaking.
Landlord will reimburse Tenant for Tenant's reasonable costs incurred in
supplying and/or operating temporary generators, temporary chillers,
port-o-lets and/or bottled water for the Premises. Except as provided below,
Tenant's right to rent abatement after three (3) business days and right of
reimbursement for the costs of supplying the temporary generators, temporary
chillers, port-o-lets and bottled water for the Premises shall be Tenant's sole
remedies under this Lease. The term "Untenantable" shall mean the condition
whereby Tenant's use or enjoyment of the Premises is disrupted to the degree
that Tenant's employees cannot reasonably use a material portion of the
Premises for the uses permitted in this Lease. Notwithstanding the foregoing,
if Landlord has restored the services so the Premises are not Untenantable, but
such restoration of services has been accomplished through the use of any
temporary measure, then the Rent will be equitably adjusted by Landlord and
Tenant to reflect any material adverse effect, if any, on Tenant's use of the
Premises for the uses permitted under this Lease until such services have been
restored by measures which are not temporary. The foregoing shall not pertain
to a casualty under Section 7 below.
SECTION 5.05. MANDATORY REQUIREMENTS. If from and after the Commencement
Date, any governmental entity promulgates or materially revises any statute,
ordinance or building, fire or other code or imposes controls or guidelines on
Landlord or the
OFFICE LEASE AGREEMENT - Page 16
<PAGE> 22
Project or any part thereof, relating to the use or conservation of energy,
water, gas, light or electricity or the reduction of automobile or other
emissions or the provision of any other utility or service provided with
respect to this Lease or in the event Landlord is required to make alterations
to the Building or any other part of the Project in order to comply with any
other controls or guidelines enacted by governmental authority whatsoever,
Landlord may, in its reasonable discretion, comply with such controls or
guidelines or make such alterations to the Building or any other part of the
Project related thereto without creating any liability of Landlord to Tenant
under this Lease whatsoever. If the Premises are rendered completely
Untenantable for more than three (3) consecutive days because of Landlord's
compliance or attempt to comply with such controls or guidelines then Tenant's
sole remedy shall be to receive an abatement of Rent under this Lease after
three (3) days. In addition, the cost of such compliance and alterations shall
be deemed to be Cost Saving Capital Improvements, as defined in Section 2.02A.4
hereof. Landlord will, to the extent practicable, undertake such compliance
with the controls and guidelines hereunder in a manner reasonably calculated to
avoid material interference with Tenant's use and occupancy of the Premises.
Nothing herein shall be deemed to apply to any casualty loss.
SECTION 5.06. MODIFICATIONS. Notwithstanding anything hereinabove to the
contrary, if Tenant ever subleases any portion of the Premises with Landlord's
approval to any party other than a Tenant Affiliate, Landlord reserves the
right in conjunction with any such approval to require reasonable modifications
to the metering for utilities and the provision for appropriate access to the
subleased premises and if Tenant ever sells a Tenant Affiliate that is
subleasing space in the Premises to a third party, then Tenant will install
such metering and provide appropriate access for such subleased premises.
ARTICLE 6
REPAIRS, MAINTENANCE, ALTERATIONS AND IMPROVEMENTS
SECTION 6.01. REPAIRS AND MAINTENANCE OF THE BUILDING. Except as otherwise
provided herein, Landlord shall provide for the cleaning, repair and
maintenance of the Building and the Project, including the repair or
replacement of the roof, if necessary, and Landlord shall make any necessary
repairs of the foundation and load-bearing structures of the Project, and
Landlord shall maintain and repair the Building Systems (as defined below) and
provide such additional maintenance as may be necessary, but Landlord shall use
reasonable efforts not to materially interfere with Tenant's business in making
any such repairs unless caused by casualty or emergency, all subject to cost
recovery; provided Landlord's right to recovery from Tenant for such costs are
only to the extent allowed by and as set forth in Article 2 or otherwise in
this Lease. Landlord shall
OFFICE LEASE AGREEMENT - Page 17
<PAGE> 23
not be liable to Tenant for losses due to theft or burglary, or for damages
done by any persons on the Premises.
SECTION 6.02. IMPROVEMENTS AND ALTERATIONS.
A. Landlord's obligation under this Lease related to the construction of
the Tenant Work (as defined in Exhibit "D" below) is solely as set forth in the
Agreement for Construction attached hereto as Exhibit "D" and incorporated
herein by this reference.
B. Landlord shall have the right at any time to change the name or
designation by which the Complex is commonly known.
C. Except as provided below, Tenant shall not make any alterations,
repairs, additions or improvements in, to or about the Premises (collectively
"Tenant Alterations" but excluding the Tenant Work) without the prior written
consent of Landlord which shall not be unreasonably withheld, delayed or
conditioned. If such approval is given, Landlord shall be allowed to: (i)
approve all plans which consent shall not be unreasonably withheld, (ii)
require reasonably satisfactory insurance, (iii) require reasonably
satisfactory security for construction obligations, and (iv) reasonably approve
the contractor. Should Landlord's approval be granted, any such Tenant
Alterations shall be at Tenant's sole cost and expense including Landlord's
reasonable costs associated with Landlord's approval of such Tenant
Alterations. Tenant agrees to make application and to receive building permits
from applicable local municipal authorities, state and federal agencies
necessary to make such Tenant Alterations. All Tenant Alterations (except
Tenant's Property, as hereinafter defined) shall become the property of
Landlord, and shall be surrendered with the Premises, as a part thereof, at the
expiration or earlier termination of the Lease; provided, however, that
Landlord may, by written notice to Tenant provided at the time of Landlord's
approval of such Tenant Alterations, require Tenant to remove any Tenant
Alterations and to restore the Premises to their condition prior to
installation of such Tenant Alterations, at Tenant's expense at the expiration
or earlier termination of the Term of this Lease.
Landlord's prior, written approval of any Tenant Alterations will be required
for any Tenant Alterations that (x) cost in excess of $100,000 for any one job,
or any separate number of jobs that total more than $500,000 in any calendar
year, (y) have a more than de minimis effect on the Building Systems and/or the
structural integrity of the Building, or (z) affect the exterior or exterior
appearance of the Building. However, even if Landlord's approval is not
required, Tenant will notify Landlord in writing prior to undertaking such
Tenant Alterations and supply Landlord with copies of "as built" plans after
completion of such Tenant Alterations.
The Premises as of December 31, 1995, have an HPR insurance rating which is a
benefit to Tenant and other tenants in the Complex and, notwithstanding
anything set forth above, Landlord will not approve
OFFICE LEASE AGREEMENT - Page 18
<PAGE> 24
any proposed Tenant Alterations that threaten to affect adversely such HPR
insurance rating.
The "Building Systems" mean the elevators, concrete slabs, stairwells,
mechanical equipment located within the core, chillers, transformers, exterior
walls, load-bearing structures, risers for plumbing or the electrical systems,
plumbing, electrical, and/or HVAC systems.
Tenant shall be responsible for securing any and all necessary governmental
permits and assuring compliance with applicable governmental laws, codes, and
ordinances for any Tenant Alterations. Tenant shall also be responsible for
assuring that any Tenant Alterations are free of liens.
Tenant Alterations are those changes in the Premises made by Tenant after
completion of the Tenant Work. Tenant Alterations shall be made at Tenant's
sole cost and expense. If Landlord must approve any Tenant Alterations, then
Tenant shall physically deliver a full and complete set of construction plans
and specifications to Landlord for approval at least ten (10) days prior to
commencement of construction of such proposed Tenant Alterations. Landlord
shall advise Tenant in writing within ten (10) days after receipt of such plans
and specifications of Landlord's approval or disapproval or any conditions to
approval of such plans and specifications. If Landlord fails to respond in
writing, then Landlord shall be deemed to have approved such plans and
specifications as delivered by Tenant to Landlord.
SECTION 6.03. LANDLORD'S OPTION TO REPAIR. Landlord may, at its option and
at the cost and expense of Tenant (if not covered by Landlord's insurance as
provided below) repair or replace any damage or injury done to the Building,
Project, Complex or any part thereof, caused by Tenant, Tenant's agents,
employees, licensees, invitees or visitors. Prior to undertaking any repairs
to the Project at Tenant's cost, Landlord shall, if reasonably possible, give
Tenant written notice of such damage or injury to the Project and a reasonable
time of not less than ten (10) days (except in an emergency) or more than
thirty (30) days to repair same at Tenant's cost and subject to Landlord's
reasonable rights to approve all aspects of such repair. Tenant shall pay the
cost thereof, plus interest thereon as provided in Section 16.12 herein, to
Landlord within fifteen (15) days after Landlord's delivery to Tenant of a bill
for same. Tenant further agrees to maintain and keep the interior of the
Premises in good repair and condition at Tenant's expense, normal wear and tear
excepted, and Landlord shall give Tenant thirty (30) days written notice of and
an opportunity to make any repairs to the interior of the Premises prior to
Landlord undertaking any such repairs. Tenant agrees not to commit or allow
any waste or damage to be committed on any portion of the Premises, the
Building or the Project.
OFFICE LEASE AGREEMENT - Page 19
<PAGE> 25
ARTICLE 7
INSURANCE, FIRE AND CASUALTY
SECTION 7.01. TOTAL OR PARTIAL DESTRUCTION OF THE PREMISES, BUILDING,
PROJECT OR COMPLEX.
A. In the event the Base Building (as hereinafter defined) and/or Parking
Facilities, as applicable, are damaged by fire or other casualty and if said
damage can be fully repaired within one hundred eighty (180) days as reasonably
estimated by a competent general contractor selected by Landlord after notice
to Landlord of the occurrence of the damage, Landlord shall promptly commence
and diligently proceed to repair such damage and to return the Base Building
and/or Parking Facilities, as appropriate, to materially the same condition as
existed immediately preceding the damage, subject to compliance with codes,
with reasonable diligence after receipt of insurance proceeds and if permitted
to do so by its mortgagee. In the event any part of the Premises is rendered
untenantable for the conduct of Tenant's business, the Basic Rent shall be
reduced and abated in proportion to the part of the Premises which is so
rendered untenantable until the damaged portion of the Premises have been made
tenantable for the conduct of Tenant's business or until the term of this Lease
expires or terminates, whichever occurs first; provided that (a) there shall be
no abatement of Rent with respect to any portion of the Premises which is
rendered unusable for a period of three (3) days or less, and (b) there shall
be no abatement of Rent whatsoever with respect to any damage caused in whole
or in part by the willful act of Tenant, its agents, employees, contractors,
licensees or invitees.
B. If the Base Building or Parking Facilities are damaged by fire or
other casualty so that the repair of the Base Building or Parking Facilities
cannot, in the reasonable opinion of a competent general contractor selected by
Landlord, be completed within one hundred eighty (180) days after notice to
Landlord of the occurrence of the damage, either Landlord or Tenant shall have
the option, to be exercised by written notice from one party to the other
within sixty (60) days after Landlord receives notice of the occurrence of the
damage, to terminate this Lease as of a date not less than thirty (30) days or
more than sixty (60) days after such party's written notice. If the parties
fail to exercise such right of termination, then the Rent shall be equitably
adjusted by Landlord and Tenant until such repairs are substantially completed.
If neither party elects to cancel this Lease after receipt of the general
contractor's written opinion as set forth above, then in the event the Base
Building or Parking Facilities, as appropriate, so damaged is not repaired or
restored within the period specified in the written opinion of the general
contractor referenced above, either party may terminate this Lease within
thirty (30) days after the expiration of the period specified in the written
opinion of the general contractor referenced above upon written notice to the
other party. Since Tenant insures the Tenant Work and Tenant
OFFICE LEASE AGREEMENT - Page 20
<PAGE> 26
Alterations, Tenant is responsible for repairing or restoring same at Tenant's
expense and such work is not included in the period specified in the general
contractor's written opinion set forth above. Notwithstanding anything in this
Article 7 to the contrary, if the casualty occurs during the last two years of
the then existing Term of this Lease and repair of the Base Building or Parking
Facilities cannot be repaired, in the reasonable opinion of a competent general
contractor selected by Landlord, within one hundred eighty (180) days, then
Landlord may, but shall not be obligated to, restore or rebuild the Base
Building and/or Parking Facilities unless Tenant exercises any then available
right of renewal by written notice to Landlord within thirty (30) days of the
date on which Landlord notifies Tenant in writing of Landlord's election not to
rebuild and, in such event, Tenant waives any rights of cancellation because of
such casualty.
C. If either Landlord or Tenant elects to terminate this Lease, Tenant
will pay Landlord the insurance proceeds that Tenant is required to carry under
Section 7.03B below or if Tenant fails to carry such insurance, the amount that
Tenant would have received if Tenant had carried such insurance within thirty
(30) days after either party delivers the termination notice to the other; such
payment to be to the extent the Tenant improvements have been damaged or
destroyed, but such payment shall not exceed the amount of the Allowance.
D. In the event either party terminates this Lease pursuant to the terms
of Section 7.01, this Lease and the estate and interest of the Tenant in the
Premises shall terminate and expire on the date specified in such party's
notice of termination and the Rent payable hereunder shall be prorated as of
such date, subject to rent abatement, if any, to the extent provided in Section
7.01.
E. Nothing contained in Sections 7.01 or 7.02 shall relieve, discharge or
any way affect Tenant's liability to Landlord in connection with any damage or
destruction to the Premises, Building, Project or any portion of the Complex
arising out of the willful acts or omissions of Tenant, its agent, employees,
contractors, licensees and invitees, to the extent same are not covered by any
insurance policies benefitting Landlord required to be carried by either party
under this Lease.
F. Since Tenant is required under this Lease to carry insurance for such
losses and Tenant has agreed to look to such insurance for recovery of any
damages suffered by Tenant, Landlord shall not be liable for any loss of
business, inconvenience or annoyance arising from any repair or restoration of
any portion of the Premises, Building, Project or other portions of the Complex
as a result of any damage from fire or other casualty. Furthermore, in the
event of such damage from fire or other casualty, Landlord shall have no
obligation (i) to repair any equipment, furniture, fixtures, panelling,
ceilings, carpets or other floor coverings, partitions, drapes or any of
Tenant's Property installed in or about the
OFFICE LEASE AGREEMENT - Page 21
<PAGE> 27
Premises by Landlord or Tenant or (ii) to expend any amount for the repair of
the Premises.
G. Base Building for purposes of this Section 7, but not for purposes of
Exhibit D, refers to the "AS IS" condition of the Project, excluding the tenant
improvements, as of December 31, 1995.
SECTION 7.02. TENANT'S RESPONSIBILITIES.
A. Except for claims (i) for which either party has obtained insurance,
(ii) for which this Lease requires such party to obtain insurance (whether such
insurance is actually obtained or not), or (iii) obligations arising out of
this Lease for which the remedies for breach of which obligations are otherwise
established by this Lease, Tenant and Landlord each agree to indemnify the
other party for any and all loss, cost and expense caused by the negligent acts
or omissions of such party to the extent and only to the extent that the
indemnified party's losses are the result of liability arising from the
indemnifying party's negligent acts or omissions and are not otherwise covered
by insurance required to be carried by such party under this Lease and such
indemnity shall be limited to direct, and not consequential, damages only.
B. If the tenant improvements (including, without limitation, the Tenant
Work and any Tenant Alterations) in the Project shall be damaged by fire or
other casualty, such damage shall be repaired or reconstructed by Tenant with
the proceeds from the insurance Tenant is required to maintain for repair or
replacement of such tenant improvements or otherwise at Tenant's cost, with
such repair or reconstruction to be subject to the approval of Landlord
pursuant to Section 6.02 above. If this Lease is terminated for any reason as
a result of a casualty loss and Tenant does not repair or reconstruct the
tenant improvements, then Tenant shall, within thirty (30) days after
Landlord's delivery to Tenant of a bill for same, reimburse Landlord for (i)
the Tenant Allowance as defined in Exhibit D, and (ii) the value at the time of
such loss of the personalty owned by Landlord referenced in Section 16.26.
SECTION 7.03. TENANT'S INSURANCE. Tenant covenants and agrees that from and
after the date of delivery of the Premises from Landlord to Tenant, Tenant will
carry and maintain, at its sole cost and expense, the following types of
insurance, in the amounts specified and in the form hereinafter provided, as
follows:
A. Bodily injury liability and property damage liability insurance (also
known as commercial general liability insurance) adequate to protect Landlord
against liability for injury to or death of any person or damage to property in
connection with the use, operation or condition of the Premises. Such bodily
injury and property damage liability insurance at all times shall be in an
amount of not less than Fifteen Million Dollars ($15,000,000), combined single
limit, for injuries to persons and property damage
OFFICE LEASE AGREEMENT - Page 22
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with a deductible or deductibles which are no greater than those maintained by
similarly situated tenants in first-class office buildings located in suburban
Dallas/Fort Worth. If, in the reasonable opinion of Landlord's lender or of
the insurance broker retained by Landlord, the amount of bodily injury
liability and property damage liability insurance coverage required to be
carried by Tenant is not adequate, Tenant shall increase the insurance coverage
to the reasonable amounts required by either Landlord's lender or Landlord's
insurance broker but not more often than once every two years and any
individual increase in limits of coverage shall be commercially reasonable.
Such policy shall name Landlord and Landlord's lender as additional insureds
and shall contain a provision or endorsement providing that the insurance
afforded by such policy for the benefit of Landlord shall be primary as
respects any claims, losses or liabilities arising out of the use of the
Premises by the Tenant or by Tenant's operation and that any insurance carried
by Landlord shall be excess and non-contributing.
B. Policies of insurance covering: (a) all leasehold improvements
(including all Tenant Work as defined in the Agreement for Construction and any
permitted Tenant Alterations pursuant to the provisions of Section 6.02
hereof), trade fixtures, merchandise and other property including Landlord's
property under Section 16.26 below, from time to time during the term of this
Lease in, on or upon the Premises, in an amount not less than one hundred
percent (100%) of their actual replacement cost from time to time during the
term of this Lease, providing protection against any peril included within the
classification "Fire and Extended Coverage", together with insurance against
sprinkler damage, vandalism and malicious mischief; and (b) all plate glass in
the Premises. Landlord shall be named as a loss payee under any such policy or
policies. The proceeds of such insurance, so long as this Lease remains in
effect, shall be used for the repair or replacement of the property so insured.
The full replacement value of the items to be insured under this Section 7.03
shall be determined by the company issuing the insurance policy at the time the
policy is initially obtained and acknowledged by issuance of any agreed amount
endorsement and shall be increased as reasonably requested by Landlord from
time to time.
C. Loss of income or business interruption insurance in such amounts as
will reimburse Tenant for direct or indirect loss of earnings attributable to
all perils commonly insured against by prudent tenants or attributable to
prevention of access to the Premises, to the Building or to the Project as a
result of such perils.
D. Worker's compensation insurance for Tenant's benefit, but with
appropriate waivers of subrogation for Landlord's benefit.
E. All insurance required to be carried by Tenant hereunder shall be
issued by responsible insurance companies rated A-12 or better by Best's
Insurance Reports, and which are qualified to do business
OFFICE LEASE AGREEMENT - Page 23
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in the State of Texas. Except for worker's compensation insurance, each policy
required to be carried by Tenant hereunder shall name Landlord, its successors
and assigns, and Landlord's lender, as designated by Landlord to Tenant in
writing, as additional insureds or loss payees, as above provided, as their
interests may appear, and copies of all such policies, or certificates
evidencing the existence and amounts of such insurance, shall be delivered to
Landlord by Tenant at least ten (10) days prior to Tenant's occupancy of the
Premises or any portion thereof. Each such policy shall provide that it shall
not be cancelable or subject to reduction of coverage or otherwise subject to
modification except after thirty (30) days prior written notice to the parties
named as insureds or additional insureds. Tenant shall, at least fifteen (15)
days prior to the expiration of any such policy, furnish Landlord with
certificates of renewal or certificates of replacement policies which fully
comply with the requirements of this Lease, or, following five (5) calendar
days prior written notice to Tenant, Landlord may order such insurance and
charge the reasonable cost thereof to Tenant, which amount shall be payable by
Tenant within fifteen (15) days after Landlord's delivery to Tenant of a copy
of an invoice for same. Any policy may be carried under so-called "blanket
coverage" form of insurance policies, provided any such blanket policy
specifically provides that the amount of insurance coverage required hereunder
shall in no way be prejudiced by other losses covered by the policy. Neither
the issuance of any such insurance policy nor the minimum limits specified in
this Section 7.03 for coverages shall be deemed to limit or restrict in any way
Tenant's liability arising under or out of this Lease.
SECTION 7.04. LANDLORD'S INSURANCE. Landlord shall at all times during the
term of this Lease carry and maintain bodily injury and property damage
liability insurance (also known as commercial general liability insurance) to
protect such party against liability for injury to or death of any person or
damage in connection with the Complex in the total amount of at least
$15,000,000 combined single limit, including any self-insured deductibles or
retentions. Landlord shall also have property insurance policies that cover
the Base Building, Parking Facilities, and the Building Systems and other
equipment owned by Landlord (excluding property required to be insured by
Tenant) providing protection against perils included within the standard Texas
form of fire and extended coverage insurance policy, together with insurance
against sprinkler damage, vandalism and malicious mischief, and such other
risks in the amount of at least one hundred percent (100%) of actual
replacement value and with any such self-insurance deductibles as Landlord may
from time to time determine. Landlord shall carry such property insurance for
its equipment for the actual replacement value which Landlord may self-insure.
Landlord shall carry rental loss insurance for at least one (1) year of rental
loss. If Landlord has employees, Landlord shall carry worker's compensation
coverage if permitted by law and employer's liability insurance with a limit of
at least $1,000,000 per occurrence.
OFFICE LEASE AGREEMENT - Page 24
<PAGE> 30
Any insurance provided for in this Section 7.04 may be effected by a policy or
policies of blanket insurance, covering additional items or locations or
assureds, provided that the requirements of this Paragraph are otherwise
satisfied. Tenant shall have no rights in any policy or policies maintained by
Landlord and shall not, by reason of payment by Tenant, as part of the
Operating Expenses, of its pro rata share of the Landlord's premium for the
insurance, be entitled to be an additional insured or loss payee thereunder.
SECTION 7.05. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
their respective rights of recovery against the other for injury or loss due to
hazards covered by insurance either carried by or required in this Lease to be
carried by such party and each releases the other from any direct or
consequential damage to the property or business of the other or under its
control and any claims for personal injuries or death to their employees,
officers, directors, or third parties including in such release each such
parties' partners, officers, directors and employees. Such release shall also
include any loss or damage to any other portion of the Project caused by fire
or other casualty (including liability for loss of rent or loss of profits or
other loss) to the extent such damage or loss is insured or is required by this
Lease to be insured against under a policy or policies of insurance, whether or
not such damage or loss may be attributable to the negligence or act of such
party(ies) or its/their respective agents, invitees, contractors, servants or
employees. This waiver of subrogation shall include a waiver by each of Tenant
and Landlord of any deductibles or retentions in or for any policy of insurance
required to be maintained under this Lease by such party. Such waiver shall in
no way be construed or interpreted to limit or restrict any indemnity or other
waiver made by any party under the terms of this Lease except to the extent the
party claiming indemnification has been reimbursed or should have been
reimbursed by insurance proceeds if such party had carried the insurance
required to be carried in this Lease by such party. The Landlord and Tenant
each agree to use reasonable efforts to get waivers of subrogation endorsements
from their respective insurance carriers and to notify the other party if it is
not able to obtain the same. This Section 7.05 hereby modifies all preceding
sections of this Article 7. It is the intent of the parties that each party
shall maintain insurance as required herein and that to the extent each party
receives insurance proceeds or should have received insurance proceeds if it
had carried the insurance required in this Lease, that such party shall have no
claim against each of Tenant and/or Landlord for such loss and that such
parties' insurance carriers shall likewise have no subrogation claim against
Landlord and/or Tenant. Each of the parties agree that the foregoing release
and waiver applies to any deductible or self-insured retentions or the like
maintained by such party.
OFFICE LEASE AGREEMENT - Page 25
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ARTICLE 8
CONDEMNATION
8.1 Condemnation.
(a) If there shall be taken during the Term by
condemnation proceedings or for public or quasi-public use (a "Taking", and the
property subject to a Taking being "Taken") any portion of the Premises, then
this Lease shall terminate as to the portion so Taken as of the date possession
thereof is Taken by such condemning authority; and, subject to the provisions
set out hereinafter, this Lease shall continue, unabated in full force and
effect, as to those portions not so Taken. Basic Rent and Additional Rent
attributable to the portion of the Premises Taken or made unusable as a result
of such Taking shall abate and shall no longer be payable or accrue from and
after the date of such Taking.
(b) If (i) all or a portion of the Premises is Taken and
such Taking is of such magnitude or extent or nature as to render twenty-five
percent (25%) or more of the Rentable Area of the Premises unusable, or (ii)
twenty- five percent (25%) or more of the parking spaces in the Parking
Facilities in the Project are Taken and Landlord does not replace such parking
spaces with other parking facilities in the Complex conveniently located to the
Project containing an equal number of parking spaces to those parking spaces so
Taken, then either Landlord or Tenant may terminate this Lease by delivering
written notice thereof to the other within sixty (60) days of such Taking,
which termination shall be effective as of the earlier to occur of (i) the date
possession of such portion of the Premises is so Taken or (ii) the termination
date set forth in such notice; provided, that the termination date set forth in
such notice shall not be earlier than sixty (60) days prior to the date such
portion of the Premises or Parking Facilities if Landlord elects not to replace
such parking spaces, is physically occupied by the condemning authority.
(c) A Taking entitling either Landlord or Tenant to
terminate this Lease pursuant to Sections 8.1(b) above shall hereinafter be
referred to as a "Substantial Taking". If only a part of the Premises or
Parking Facilities is Taken, and such Taking is not a Substantial Taking, or if
such Taking is a Substantial Taking and neither Landlord nor Tenant (to the
extent either has a right to do so) elects to terminate this Lease, then
Landlord shall be obligated, but only to the full extent of any condemnation
proceeds or awards for the Premises or Parking Facilities (but not for any
other condemnation awards not related to the value of the Premises) actually
received by Landlord in connection with such Taking which Landlord's mortgagee
permits Landlord to use for repair or reconstruction, to promptly erect such
improvements as may be necessary to enclose the remaining portion of the
Premises and to restore the property so Taken to an
OFFICE LEASE AGREEMENT - Page 26
<PAGE> 32
architectural unit as nearly like its condition prior to such Taking as can be
practicably done under all of the facts and circumstances or to construct an
equal number of parking spaces so Taken in a place in the Complex conveniently
located to the Project; provided, that Landlord shall not be so obligated to
erect such improvements or restore if such Taking shall occur during the last
twenty-four (24) months of the Term and such restoration will take more than
one hundred eighty (180) days to complete unless Tenant exercises any then
available right of renewal by written notice to Landlord within thirty (30)
days of the date of such Taking. In each event in which this Lease is
terminated, in part or in its entirety, pursuant to Sections 8.1(a)-(b) above,
all unaccrued prepaid Rent (or the appropriate portions thereof in the case of
partial termination) theretofore paid by Tenant to Landlord shall promptly be
refunded to Tenant and, if this Lease is terminated in its entirety, the
parties shall be released from any obligations thereafter accruing under this
Lease (except as otherwise provided herein).
8.2 Rights to Condemnation Award. Upon the commencement of any
eminent domain or condemnation proceeding with respect to the Premises,
Landlord shall promptly notify Tenant of such proceeding and shall thereafter
use reasonable efforts to keep Tenant informed as to the status of any such
proceeding. In the event of any such Taking, Landlord shall receive any such
award for the Premises, the land on which the Premises are situated, any
unamortized tenant improvements paid for by Landlord, the leasehold interest of
Tenant, and any sums otherwise payable for damage to Landlord's business except
that Tenant shall be entitled to the award, if any, relating to (i) the taking
of any of Tenant's Property belonging to and not removable or removed by
Tenant, (ii) the interruption of, damage to or relocation of Tenant's business,
and (iii) the unamortized value of any Tenant Work and Tenant Alterations in
the Premises and other tenant improvements paid for by Tenant. Tenant shall
not be entitled to any award for the loss of part or all of the leasehold
estate rented by this Lease; it is the intent of the parties that any
condemnation for any land or physical improvements paid for by Landlord shall
be paid to Landlord, as appropriate, and not to Tenant except as provided in
(iii) above. Landlord's mortgagee shall be entitled to claim any interest in
the proceeds of such condemnation pursuant to its mortgage.
ARTICLE 9
LIENS
Tenant shall keep the Premises free from any liens arising out of any work
performed, materials furnished, or obligations incurred by or for Tenant. In
the event that Tenant shall not, within thirty (30) days following the
imposition of any such lien, cause the same to be released of record by payment
or post a satisfactory bond to secure payment of such lien within thirty (30)
days after Tenant
OFFICE LEASE AGREEMENT - Page 27
<PAGE> 33
receives notice of the filing thereof (or within such shorter period of time as
required to avoid foreclosure of said lien and shall not allow such lien to be
foreclosed upon), Landlord shall have, in addition to all other remedies
provided herein and by law, the right but not the obligation, to cause the same
to be released by such means as it shall deem proper, including payment of or
defense against the claim giving rise to such lien. All sums paid by Landlord
and all expenses incurred by it in connection therewith shall create
automatically an obligation of Tenant to pay within fifteen (15) days after
Landlord's delivery of a bill for same to Tenant an equivalent amount, plus
interest thereon as provided in Section 16.12 herein, as Rent. No work which
Landlord permits Tenant to perform in the Premises shall be deemed to be for
the use and benefit of Landlord so that no mechanics or other lien shall be
allowed against the estate of Landlord by reason of its consent to such work,
which consent may be withheld in Landlord's sole discretion. Landlord shall
have the right to post notices that it is not responsible for payment for any
such work.
Tenant shall use its reasonable efforts to prevent the filing of any mechanic's
lien or other lien. If a mechanic's lien or other lien is filed against the
Project or any portion of the Project by a contractor or subcontractor of
Tenant, Tenant shall discharge or cause to be discharged such lien of record,
or shall post a satisfactory bond to secure payment of such lien, within thirty
(30) days after Tenant receives notice of the filing thereof, or within such
shorter period of time (i) as required to avoid foreclosure of said lien and,
under all circumstances, Tenant shall not allow such lien to be foreclosed upon
or (ii) if such lien may cause a default under any lien of Landlord's lender.
If such a foreclosure is threatened and Tenant does not immediately post a
satisfactory bond sufficient to cause the withdrawal of such threat Landlord
may, but is not obligated to, pay any such mechanic's lien to claimant and
recover such payment from Tenant fifteen (15) days after Landlord has delivered
to Tenant a bill for same. Any increase in any tax, assessment or charge
levied or assessed as a result of the Work or any Tenant Alterations by Tenant
shall be payable by Tenant.
ARTICLE 10
TAXES ON TENANT'S PROPERTY
Tenant shall be liable for and shall pay to the applicable taxing authority, or
to Landlord if billed to Landlord, at least ten (10) days prior to their
becoming delinquent, any and all taxes and assessments levied against any
personal property or trade or other fixtures placed by Tenant in or about the
Project.
OFFICE LEASE AGREEMENT - Page 28
<PAGE> 34
ARTICLE 11
SUBLETTING AND ASSIGNING
SECTION 11.01. RESPONSIBILITIES. Except to a Tenant Affiliate or a Permitted
Transferee (each as hereinafter defined), Tenant shall not assign this Lease,
or allow it to be assigned, in whole or in part, by operation of law or
otherwise or mortgage or pledge the same, or sublet the Premises, or any part
thereof, without the prior written consent of Landlord, which shall not be
unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing,
however, Tenant may assign its rights under this Lease, sublet, or otherwise
transfer possession of the Premises, in whole or in part, to a Tenant Affiliate
or a Permitted Transferee, without Landlord's consent (each, a "Permitted
Transfer"). A "Tenant Affiliate" shall mean, with respect to Tenant, any other
entity directly or indirectly controlling or controlled by, or under common
control with, Tenant. A "Permitted Transferee" shall mean any corporation,
person, or entity that directly or indirectly acquires or succeeds to all or a
majority of the business or assets of The SABRE Group (as hereinafter defined).
"The SABRE Group" shall mean the business entities or units comprising
information technology business of Tenant and/or a Tenant Affiliate. In the
event of any Permitted Transfer, Tenant shall remain fully liable for any
obligations arising under this Lease from and after the date of such Permitted
Transfer unless the Tenant Affiliate or Permitted Transferee, as applicable,
(i) agrees in a written assignment delivered to Landlord to be responsible to
Landlord for all obligations of Tenant under this Lease and (ii) such Tenant
Affiliate or Permitted Transferee has either (A) total stockholder's equity of
Three Billion Five Hundred Million and No/100 Dollars ($3,500,000,000.00) or
more or (B) AMR Corporation guarantees the obligations of such Tenant Affiliate
or Permitted Transferee pursuant to a full and complete guaranty of all
financial and other obligations under this Lease from AMR Corporation to
Landlord which agreement shall be in form and substance satisfactory to
Landlord, provided AMR Corporation has a total stockholder's equity at such
time at least equal to the total stockholder equity of American Airlines, Inc.,
at such time, and is reasonably expected to retain such total stockholder's
equity after giving effect to any corporate restructuring, if any, reflected in
any then existing filings with the Securities and Exchange Commission or other
governmental regulatory body.
SECTION 11.02. CONDITIONS OF SUBLEASE. Irrespective of whether Landlord's
consent is required or not, if the Tenant desires to assign or sublet all or
any part of the Premises, it shall so notify Landlord at least twenty-five (25)
days in advance of the date on which Tenant desires to make such assignment or
sublease and Tenant shall state in writing whether such party is a Tenant
Affiliate or Permitted Transferee. Tenant shall provide Landlord with a copy
of the proposed assignment or sublease, and such information as Landlord might
reasonably request concerning the
OFFICE LEASE AGREEMENT - Page 29
<PAGE> 35
proposed sublessee or assignee to allow Landlord to make informed judgments as
to whether Landlord's consent to the proposed assignment or sublease is
required. If such proposed assignee or sublessor is a Tenant Affiliate or
Permitted Transferee, then no Landlord consent shall be required. Landlord
shall notify Tenant in writing within twenty-five (25) days if Landlord does
not agree that such proposed assignee or sublessee is a Tenant Affiliate or
Permitted Transferee; otherwise if Landlord fails to notify Tenant that
Landlord does not believe such assignee or sublessee is a Tenant Affiliate or
Permitted Transferee, then Landlord shall be deemed to have consented to such
assignment or sublease. If Landlord's consent to such assignment or sublease
is required, then, within ten (10) business days after Landlord's receipt of
Tenant's proposed assignment or sublease, and all required information
concerning the proposed subtenant(s) or assignee(s) financial condition,
reputation, operations and general desirability. Landlord shall provide to
Tenant written notice of its decision to, either
A. Consent to the proposed assignment or sublease, which consent will not
be unreasonably withheld, delayed or conditioned; or,
B. Refuse its consent to the proposed assignment or sublease, which
option shall be deemed to be elected unless Landlord gives Tenant written
notice providing otherwise.
In the event of a refusal to grant its consent, Landlord shall notify Tenant in
writing of its reasons for refusing to so consent.
However, under all circumstances, if the rent due and payable by any assignee
or sublessee under any such assignment or sublease except for a sublease or
assignment to a Tenant Affiliate (or a combination of the rent payable under
such assignment or sublease plus any bonus or any other consideration therefor
or any payment, incident thereto less bona fide expenses incurred by Tenant in
conjunction with the implementation of such assignment or sublease) exceeds
the Rent payable under the Lease for such space, Tenant shall pay to Landlord
fifty percent (50%) of such excess rent and other excess consideration within
ten (10) days following receipt thereof by Tenant.
SECTION 11.03. CONTINUING LIABILITY. Except as provided in Section 11.01, no
consent or approval by Landlord to any assignment or sublease by Tenant shall
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether arising before or after the assignment or sublease. The consent or
approval by Landlord of any assignment or sublease shall not relieve Tenant
from the obligation to obtain Landlord's express written consent to any other
assignment or sublease. Any assignment or sublease which is not in compliance
with this Section 11 shall be voidable and, at the option of Landlord, shall
constitute a material default by Tenant under this Lease. The acceptance of
rent by Landlord from
OFFICE LEASE AGREEMENT - Page 30
<PAGE> 36
a proposed assignee or sublessee shall not constitute the consent to such
assignment or sublease by Landlord.
SECTION 11.04. SALE BY TENANT. Any sale or other transfer, including by
consolidation, merger or reorganization, of a majority of the voting stock of
Tenant, if Tenant is a corporation, or any sale or other transfer of a majority
in interest (whether of profits, losses, capital or voting power) or a majority
of the persons composing the managers of the partnership, if Tenant is a
partnership, shall be an assignment for purposes of this Section 11, if the
leasehold estate of Tenant under this Lease constitutes all or substantially
all of the assets of Tenant as of the date of the sale or other transfer.
SECTION 11.05. ASSUMED LIABILITIES. Each assignee, sublessee, mortgagee,
pledgee, or other transferee (including but not limited to an assignee by
assignment made pursuant to the provisions of Title 11 U.S.C. Section 101 et
seq. as amended and in effect from time to time) other than Landlord, shall
assume, as provided in this Section 11.05, all obligations of Tenant under this
Lease (including without limitation those contained in this Section 11 on
subletting, assignment, transfer, hypothecation, sale and encumbrance), and
shall be and remain liable jointly and severally with Tenant (except as
provided in Section 11.01 hereinabove) for the payment of the rent, and for the
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the term of this Lease;
provided, however, that the assignee, sublessee, mortgagee, pledgee or other
transferee shall be liable to Landlord for rent only in the amount set forth in
the assignment or sublease. No assignment or sublease, as applicable, shall be
binding on Landlord unless the assignee or sublessee, as appropriate, or Tenant
shall deliver to Landlord a counterpart of the assignment and a form of lease
assumption reasonably satisfactory in substance and form to Landlord,
consistent with the requirements of this Section 11.05, but the failure or
refusal of the assignee or sublessee, as appropriate, to execute such
instrument of assumption shall not release or discharge the assignee or
sublessee, as appropriate, from its liability as set forth above.
SECTION 11.06. BANKRUPTCY. If this Lease is assigned to any person or entity
pursuant to the provisions of the Federal Bankruptcy Code, Title 11 U.S.C.
Section 101, et seq., as subsequently amended (the "Bankruptcy Code"), any and
all monies or other considerations payable or otherwise to be delivered in
connection with such assignment will be paid or delivered to Landlord (which
shall include the cure of any existing monetary defaults by payment of same to
Landlord and the cure of any non-monetary defaults by performance within ten
(10) business days of the assumption of this Lease by Assignee), will be and
remain the exclusive property of Landlord and will not constitute property of
Tenant within the meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding
OFFICE LEASE AGREEMENT - Page 31
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sentence not paid or delivered to Landlord will be held in trust for the
benefit of Landlord and be promptly paid to or turned over to Landlord. For
purposes of Section 365(f) (2) of the Bankruptcy Code "adequate assurances of
future performance" will include, but not be limited to, a Security Deposit,
net worth, and creditworthiness equal to that of Tenant on the date of this
Lease. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, will be deemed without further act or deed
to have assumed all of the obligations arising under this Lease on and after
the date of such assignment. Any such assignee will upon demand execute and
deliver to Landlord an instrument confirming such assumption.
ARTICLE 12
TRANSFERS BY LANDLORD
SECTION 12.01. SALE OF THE PROJECT. Landlord has the unrestricted right to
sell, transfer or assign its rights in the Building, the Project, the Complex,
this Lease, or any portion of the foregoing without Tenant's authority or
approval. In the event of a sale or conveyance by Landlord of the Project
and/or the Building, the same shall operate to release Landlord from any and
all liability under this Lease arising after the date of such sale. Tenant's
right to quiet possession of the Premises shall not be disturbed so long as
Tenant shall pay the Rent and observe and perform all of the provisions of this
Lease to be observed and performed by Tenant, unless this Lease is terminated
pursuant to specific provisions relating thereto or contained herein.
SECTION 12.02. SUBORDINATION AND ATTORNMENT.
A. This Lease is subject and subordinate to the liens of any and all
mortgages or deeds of trust, regardless of whether such lease, mortgages or
deeds of trust now exist or may hereafter be created with regard to all or any
part of the Project, and to any and all advances to be made thereunder, and to
the interest thereon, and all modifications, consolidations, renewals,
replacements and extensions thereof. Tenant also agrees that any lessor,
mortgagee or trustee may elect to have this Lease prior to any lease or lien of
its mortgage or deed of trust, and in the event of such election and upon
notification by such lessor, mortgagee or trustee to Tenant to that effect,
this Lease shall be deemed prior to said lease, mortgage or deed of trust,
whether this Lease is dated prior to or subsequent to the date of said lease,
mortgage or trust deed.
B. Tenant shall, in the event of the sale or assignment of Landlord's
interest in the Premises (except in a sale- leaseback financing transaction),
or in the event of the termination of any lease in a sale-leaseback financing
transaction wherein Landlord is the lessee, attorn to and recognize such
purchaser or assignee or mortgagee as Landlord under this Lease, but subject to
the terms
OFFICE LEASE AGREEMENT - Page 32
<PAGE> 38
and conditions of Section 3(b) of the Subordination, Non-Disturbance and
Attornment Agreements attached hereto as Exhibit L.
C. Tenant shall, in the event of any proceedings brought for the
foreclosure of, or in the event of the exercise of the power of sale under, any
mortgage or deed of trust covering the Premises, attorn to and recognize such
purchaser or assignee or mortgagee as Landlord under this Lease.
D. The above subordination and attornment clauses shall be self-operative
and no further instruments of subordination or attornment need be required by
any mortgagee, trustee, lessor, purchaser or assignee. In confirmation
thereof, Tenant agrees that, upon the request of Landlord, or any such lessor,
mortgagee, trustee, purchaser or assignee, Tenant shall execute and deliver
whatever instruments may be required for such purposes and to carry out the
intent of this Section. Landlord's successor shall not be liable for
Landlord's breaches, if any, of this Lease.
E. Landlord, Tenant and Landlord's lender, Sumitomo Bank, Limited, shall
jointly sign Subordination, Non- Disturbance and Attornment Agreements in the
form attached hereto as Exhibit "L" concurrently with the execution of this
Lease by Landlord and Tenant. For any mortgage or deed of trust placed on the
Building, other than the mortgage or deed of trust of Sumitomo Bank, Limited,
notwithstanding anything otherwise set forth herein, Landlord shall secure a
subordination, non-disturbance and attornment agreement in form reasonably
satisfactory to Tenant, Landlord and Landlord's subsequent lender and any
subordination and attornment of Tenant to such party shall not be effective
until such subordination, non-disturbance and attornment agreement has been
signed by Tenant.
ARTICLE 13
DEFAULT
ARTICLE 13.01. The occurrence of any of the following shall constitute a
default and breach of this Lease by Tenant:
A. Any failure by Tenant to pay Rent or to make any other payment
required to be made by Tenant hereunder when due; but Landlord shall give
Tenant written notice of such failure to pay and a period of ten (10) calendar
days to cure such default, but Tenant shall nevertheless remain liable for (i)
Late Charges for any late payment of Rent in excess of two late payments per
year and (ii) interest under all circumstances except that no interest will be
charged on up to two monthly payments of Basic Rent and/or Additional Rent per
calendar year so long as such late Rent payments are paid within ten (10) days
of the payment date.
B. Any failure by Tenant to observe and perform any non-monetary
provision of this Lease to be observed or performed by Tenant
OFFICE LEASE AGREEMENT - Page 33
<PAGE> 39
other than the payment of Rent, where such failure continues for thirty (30)
days after written notice to Tenant (or such additional period as may be
reasonably required to cure such failure if the same may not be reasonably
cured within thirty (30) days, provided that Tenant promptly commences such
cure and thereafter diligently prosecutes such cure to completion).
C. Tenant cannot meet its obligations as they become due; or is declared
insolvent according to any law; or assignment of Tenant's property is made for
the benefit of creditors; or a receiver or trustee is appointed for Tenant or
its property; or the interest of Tenant under this lease is levied on under
execution or under other legal process; or any petition is filed by or against
Tenant to declare Tenant bankrupt or to delay, reduce or modify Tenant's
capital structure if Tenant is a corporation or other entity (provided that no
such levy, execution, legal process or petition filed against Tenant shall
constitute a breach of this Lease if Tenant shall vigorously contest the same
by appropriate proceedings and shall remove or vacate the same within thirty
(30) days from the date of its creation, service or filing).
SECTION 13.02. REMEDIES OF LANDLORD. Upon the occurrence of any event of
default specified in this Lease, Landlord, at its option, may have all rights
and remedies provided at law or in equity and, in addition, shall have the
following remedies:
A. Landlord may terminate this Lease and with an appropriate court order
repossess the Premises and be entitled to recover as damages a sum of money
equal to the total of (1) the reasonable cost of recovering the Premises, (2)
the unpaid Rent earned at the time of termination, (3) Late Charges on unpaid
Rent, (4) the balance of the Rent for the remainder of the term discounted to
present value, less the reasonable fair market rental value of the Premises for
the then unexpired term discounted to present value, using the same discount
rate for both calculations, (5) the reasonable costs of reletting and
refurbishing the Premises, and (6) pre- and post-judgment interest on all of
the foregoing amounts at the highest rate permitted by law. Landlord has no
obligation to relet the Premises.
B. Landlord may immediately terminate Tenant's right of possession of the
Premises, but not terminate the Lease, and without notice or demand enter upon
the Premises or any part thereof and take absolute possession of the same,
expel or remove Tenant and any other person or entity who may be occupying the
Premises, change the locks, and at Landlord's option, Landlord may relet the
Premises or any part thereof, as Tenant's agent, for such terms and such rents
as Landlord may reasonably elect. In the event Landlord shall elect to so
relet, then rent received by Landlord from such reletting shall be applied
first, to the payment of any indebtedness other than Rent due hereunder from
Tenant to Landlord, second, to the payment of any cost of such reletting,
including, without limitation, refurbishing costs and leasing
OFFICE LEASE AGREEMENT - Page 34
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commissions, and third, to the payment of Rent due and unpaid hereunder, and
Tenant shall satisfy and pay any deficiency upon demand therefor from time to
time. Any entry into and possession of the Premises by Landlord under this
Article shall be without liability or responsibility for damages to Tenant and
shall not be in lieu of or in substitution for any other rights of Landlord
hereunder at law or in equity. Reletting of the Premises shall not be
construed as an election on the part of Landlord to terminate this Lease and,
notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for such previous breach.
C. Landlord may also terminate Tenant's right of possession of the
Premises, but not terminate the Lease and thereafter Tenant agrees that
Landlord may file suit from time to time to recover any outstanding and unpaid
Rent then due under the terms of this Lease and that no recovery of any portion
due Landlord hereunder shall be any defense to any subsequent action brought
for any amount not theretofore reduced to judgment in favor of Landlord or not
previously paid to Landlord.
D. If, at any time prior to the Commencement Date, any action is taken by
or against Tenant in any court pursuant to any statutes pertaining to
bankruptcy or insolvency or the reorganization of Tenant and the petition is
not dismissed within 120 days after filing, Tenant makes any general assignment
for the benefit of creditors, a trustee or receiver is appointed to take
possession of all or substantially all of Tenant's assets or of Tenant's
interest in this Lease which is brought by Tenant or, if not, such petition is
not dismissed within 60 days, or there is an attachment, execution or other
judicial seizure of all or substantially all of Tenant's assets or of Tenant's
interest in this Lease, then this Lease shall ipso facto be cancelled and
terminated and of no further force or effect. In such event, neither Tenant
nor any person claiming through or under Tenant or by virtue of any statute or
of any order of any court shall be entitled to possession of the Premises or
any interest in this Lease and Landlord shall, in additional to any other
rights and remedies under this Lease, be entitled to retain any rent, security
deposit, or other monies received by Landlord from Tenant as liquidated
damages.
E. Notwithstanding anything otherwise set forth herein, in no event will
Landlord lock out Tenant or terminate Tenant's access to the Premises without a
court order.
SECTION 13.03. DEFAULTS BY LANDLORD. Except as otherwise provided in this
Lease, if Landlord fails to perform any of its obligations hereunder and said
failure continues for a period of thirty (30) days after written notice thereof
from Tenant to Landlord and Landlord's lender, Sumitomo Bank, Limited, or any
subsequent or successor lenders of Landlord for which Tenant is given thirty
(30) days prior written notice of its name and address (unless such failure
cannot reasonably be cured within thirty (30) days and
OFFICE LEASE AGREEMENT - Page 35
<PAGE> 41
Landlord shall have commenced to cure said failure within said thirty (30) days
and continues diligently to pursue the curing of the same) and Landlord's
lenders are given the time to cure such failure of performance as set forth in
any subordination, non-disturbance and attornment agreement signed by and among
Landlord, Tenant and Landlord's lender, then Landlord may be held to be in
default hereunder. If Landlord shall be in default under this Lease after the
expiration of any applicable cure period, then, except for any provisions which
specifically limit Tenant's remedy in such event, Tenant shall have any and all
remedies provided in this Lease, including the right of specific performance
and any rights at law or in equity that Tenant may otherwise have and, if as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the right, title and
interest of Landlord in the Project as the same may then be encumbered and
Landlord shall not be liable for any deficiency. In no event shall Tenant have
the right to levy execution against any property of Landlord other than its
interest in the Project as hereinbefore expressly provided, nor shall Tenant be
entitled to any offset against Rent. No waiver by Tenant of any violation or
breach of any of the terms contained in this Lease shall waive Tenant's rights
regarding any future violation of such term or violation of any other term.
Sumitomo Bank, Limited's, address for notices shall be as set forth in the
Subordination, Non-Disturbance and Attornment Agreement attached hereto as
Exhibit L. Landlord shall give written notice to Tenant of the address for
purposes of notice for any subsequent or successor lenders to Landlord.
ARTICLE 14
NOTICES
All notices, consents, approvals, requests, demands or other communications
which Landlord or Tenant shall be required, or may desire, to serve on the
other shall be in writing and may be served, either by (x) personal service, or
(y) depositing the same with the U.S. Postal Service, by registered or
certified mail, postage prepaid, or (z) overnight delivery through a reputable,
national overnight courier service (such as Federal Express or DHL), addressed
as follows: (i) to Landlord at the address set forth in Item 11 of the Basic
Lease Provisions; (ii) prior to the Rent Commencement Date of this Lease, to
Tenant at the address set forth in Item 11 of the Basic Lease Provisions; and
(iii) after the Rent Commencement Date, to Tenant at the Premises. Any notices
by mail as aforesaid shall be deemed delivered, served and given two (2)
business days after deposit of the same with the postal authority. The
addresses stated above shall be effective for all notices to the respective
parties until written notice of a change of address is given pursuant to the
provisions hereof. Any notices to Landlord shall also be sent to Landlord's
lender at the address
OFFICE LEASE AGREEMENT - Page 36
<PAGE> 42
shown in Exhibit L. Any notice of default pursuant to Article 13, sent by
either party to the other shall additionally be sent by telecopy to the numbers
shown in Item 11 of the Basic Lease Provisions.
ARTICLE 15
WAIVER OF LANDLORD'S LIEN
Landlord hereby waives any and all statutory landlord's liens that Landlord may
now or hereafter have the right to assert against Tenant or Tenant's Property
arising out of this Lease.
ARTICLE 16
MISCELLANEOUS PROVISIONS
ARTICLE 16.01. ESTOPPEL CERTIFICATE. Not more often than twice in any
calendar year Tenant or Landlord shall, within twenty (20) days after receipt
of written request by such party or any first mortgagee of Landlord, to the
other, without additional consideration, deliver an Estoppel Certificate to
such party, consisting of statements, if true, that:
A. This Lease is in full force and effect, with rental paid through
[list applicable date] ;
B. This Lease has not been modified or amended [or listing such
amendments];
C. [Landlord or Tenant, as appropriate with "Landlord" filled in if the
certificate is given by Tenant or "Tenant" filled in if the certificate is
given by Landlord] is not in default and has fully performed all of its
obligations under this Lease. If, in the certificate-giver's opinion, any of
the above statements are not true, such party shall indicate its opinion of the
true state of affairs by either (i) stating separately the correct entries, or
(ii) modifying the statement(s) above in order to make it (them), in such
party's opinion, true and correct; and
D. Such further matters as Landlord or Tenant may reasonably require
including instruments of a similar nature evidencing the agreement of Tenant to
the mortgage or other hypothecation of the reversionary interest by Landlord
hereunder as may be reasonably requested by Landlord or any mortgagee of
Landlord.
Such party's failure to supply such estoppel certificate within twenty (20)
business days of such party's receipt of such estoppel certificate shall cause
a $25 per day delay charge after such party has delivered a second written
request for such estoppel
OFFICE LEASE AGREEMENT - Page 37
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certificate to the other party with an additional twenty (20) days to return
such estoppel certificate.
SECTION 16.02. Intentionally Deleted.
SECTION 16.03. ATTORNEY'S FEES. In the event of any legal action or
proceeding brought by either party against the other arising out of this Lease,
the prevailing party shall be entitled to recover reasonable attorney's fees
and costs incurred in such action and such amount shall be included in any
judgment rendered in such proceeding.
SECTION 16.04. WAIVER. No waiver by Landlord of any provision of this Lease
or of any breach of Tenant hereunder shall be deemed to be a waiver of any
other provision hereof, or of any subsequent breach by Tenant of the same or
any other provision. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any
subsequent act of Tenant. No act or thing done by Landlord or Landlord's
agents during the term of this Lease shall be deemed an acceptance of a
surrender of the Premises, unless done in writing signed by Landlord. The
delivery of the keys to any employee or agent of Landlord shall not operate as
a termination of the Lease or a surrender of the Premises. The acceptance of
any Rent by Landlord following a breach of this Lease by Tenant shall not
constitute a waiver by Landlord of such breach or any other breach unless such
waiver is expressly stated in writing signed by Landlord.
SECTION 16.05. APPLICABLE LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of Texas.
SECTION 16.06. COMMON FACILITIES; PARKING. Tenant shall have such parking
rights as are set forth in the Parking Agreement attached hereto as Exhibit
"F". Subject to Tenant's option under Section 16.24 below, Landlord does not
warrant to Tenant that it will build any other buildings or facilities in the
Complex except for those substantially completed at the time of signing this
Lease.
SECTION 16.07. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
SECTION 16.08. BROKERS. Tenant warrants that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this
Lease, excepting only the broker(s) named in Item 8 of the Basic Lease
Provisions, and that it knows of no other real estate broker(s) or agent(s) who
is (are) or might be entitled to a commission in connection with this Lease.
Tenant agrees to indemnify, defend and hold harmless Landlord from and
OFFICE LEASE AGREEMENT - Page 38
<PAGE> 44
against any liability or claim, whether meritorious or not, arising in respect
to broker(s) not so named.
SECTION 16.09. SEVERABILITY. If any provision of this Lease or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Lease and the application of
such provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
SECTION 16.10. NAME. Tenant shall not, without the written consent of
Landlord, use the name or logo of the Project or Complex for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
and in no event shall Tenant acquire any rights in or to such names.
SECTION 16.11. EXAMINATION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
SECTION 16.12. INTEREST ON TENANT'S OBLIGATIONS. Any amount due from Tenant
to Landlord (other than interest) which is not paid when due shall bear
interest at the rate then paid by Landlord for Landlord's financing in the
Project or if there is no financing on the Project, then at the rate of One
Hundred Fifty (150) basis points above the Ask Yield for Treasury Bonds and
Notes as quoted from time to time in The Wall Street Journal or another
reputable financial publication for treasury notes maturing in one year or as
close to one year as then available, but not to exceed the highest rate allowed
by law, from the date such payment is due until paid, but the payment of such
interest shall not excuse or cure the default.
SECTION 16.13. TIME. Time is of the essence in this Lease and in each and
all of the provisions hereof.
SECTION 16.14. DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as singular. If more
than one person is named as Tenant, the obligations of such persons are joint
and several. The headings and titles to the articles of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
SECTION 16.15. CORPORATE AUTHORITY. Tenant does hereby covenant and warrant
that Tenant is a duly authorized and existing corporation, that Tenant has and
is qualified to do business in Texas, that the corporation has full right and
authority to enter into this Lease, and that each person signing on behalf of
the corporation was authorized to do so.
OFFICE LEASE AGREEMENT - Page 39
<PAGE> 45
Landlord does hereby covenant and warrant that Landlord is a duly existing
general partnership, that such partnership has full right and authority to
enter into this Lease, and that each person signing on behalf of a general
partner of the partnership is authorized to do so.
Landlord and Tenant each covenants and warrants that this Lease is legally
binding on each of Landlord and Tenant.
SECTION 16.16. FORCE MAJEURE. Excluding (i) the Rent Commencement Date, (ii)
Tenant's obligation to pay Rent to Landlord under this Lease, (iii) Article 13
of this Lease, and (iv) expiration of the Term of this Lease whenever a period
of time is herein prescribed for action to be taken by either Landlord or
Tenant, there shall be excluded from the computation for any such period of
time, any delays due to Acts of God, strikes, riots, war, governmental laws,
regulations or restrictions or any other causes of any kind whatsoever which
are beyond the control of such party.
SECTION 16.17. RECORDING. This lease shall not be recorded. However, the
parties shall record a short form or memorandum thereof, at Landlord's expense,
in the form attached as Exhibit "O".
SECTION 16.18. RENT TAX. If applicable in the jurisdiction where the
Premises are situated either now or in the future, Tenant shall pay and be
liable for all rental, sales and use taxes or other similar taxes, if any
levied or imposed by any city, state, county or other governmental body having
authority, such payments to be in addition to all other payments required to be
paid to Landlord by Tenant under the terms of this Lease. Any such payment
shall be paid concurrently with the payment of the Rent upon which such tax is
based.
SECTION 16.19. LANDLORD'S RIGHT TO PERFORM. All covenants and agreements to
be performed by Tenant under any of the terms of this Lease shall be performed
by Tenant at Tenant's sole expense and without abatement of Rent except as
otherwise provided herein. If Tenant shall fail to observe and perform any
covenant, condition, provision or agreement contained in this Lease or shall
fail to perform any other act required to be performed by Tenant, Landlord may,
upon notice to Tenant and opportunity to cure by Tenant except in an emergency,
all as set forth in Section 13.01 above, without obligation, and without
waiving or releasing Tenant from any default or obligations of Tenant, make any
such payment or perform any such obligation on Tenant's part to be performed.
All sums so paid by Landlord and all costs incurred by Landlord, including
attorneys' fees, together with interest at the rate allowed under Section 16.12
above, shall be payable to Landlord within fifteen (15) days after Landlord's
delivery to Tenant of a bill for such sums and Tenant covenants to pay any such
sums, and Landlord shall have (in addition to any other right or remedy
hereunder) the same
OFFICE LEASE AGREEMENT - Page 40
<PAGE> 46
rights and remedies in the event of the non-payment thereof by Tenant as in the
case of default by Tenant in the payment of Rent.
SECTION 16.20. GIFT POLICY. Tenant acknowledges that the business practice
of Landlord prohibits its employees from accepting trade discounts which are
not available to all persons and from accepting gifts or gratuities arising out
of business relationships. Therefore, Tenant agrees that it shall not offer
gifts or gratuities to employees of Landlord or their family members other than
nominal gifts given in the ordinary course of business which are not unlawful
or immoral nor subject to adverse criticism, and Tenant agrees to comply with
said policy.
SECTION 16.21. CONFIDENTIALITY. Landlord and Tenant acknowledge and agree
that the terms of this Lease are confidential and constitute proprietary
information of Landlord and Tenant. Disclosure of the terms hereof could
adversely affect the ability of Landlord to negotiate other leases with respect
to the Complex and impair Landlord's relationship with other tenants of the
Complex. Except as provided below, each of Landlord and Tenant agree that
they, and their respective partners, officers, directors, employees and
attorneys shall not disclose the terms and conditions of this Lease to any
other person without the prior written consent of the other party hereto, which
consent will not be unreasonably withheld, delayed or conditioned. The
foregoing shall not extend to disclosure by Landlord of the terms of this Lease
to the holder of any Underlying Mortgage, or any portion thereof, or to any
prospective purchaser of the Project or the Complex, or to Landlord's partners,
and their constituent partners, if any, and such partners' officers, directors
and employees, or any interest therein, nor to disclosure by either party to
the independent accountants who audit their respective financial statements or
the parties' other professional advisors on a "need to know" basis or to
enforce this Lease or as required by law. It is understood and agreed that
damages would be an inadequate remedy for the breach of this provision by any
party hereto and each of the parties hereto shall have the right to specific
performance of this provision and to injunctive relief to prevent its breach or
continued breach.
Additionally, this Section 16.21 shall not apply to disclosure by Tenant (i) to
its officers, directors, employees, and/or tax, legal and other professional
advisors, (ii) to any proposed or actual Tenant Affiliate, Permitted
Transferee, or other Landlord-approved assignee or subtenant after such parties
agree in writing to be bound by this Section 16.21 and Landlord has been given
copies of such agreements, (iii) any purchaser or potential purchaser of Tenant
(or a portion thereof), or (iv) as may be required by applicable federal
securities laws and regulations, or other laws or governmental requirements.
Tenant shall provide Landlord prior written notice if Tenant is disclosing the
foregoing pursuant to litigation.
OFFICE LEASE AGREEMENT - Page 41
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SECTION 16.22. TENANT'S PROPERTY. Tenant's property shall include Tenant's
computers, furniture, trade fixtures, telecommunications equipment, secretarial
work stations, file cabinets, satellite dish and other personalty located in or
about the Project and owned by Tenant (referred to hereinafter as "Tenant's
Property").
SECTION 16.23. COMMUNICATIONS EQUIPMENT. Tenant, at Tenant's expense, may
install a satellite dish and related communications equipment at a location
designated by Landlord either on the roof of the Building or on the ground
adjacent to the Building. Tenant shall provide reasonable screening for such
satellite dish and related communications equipment if same is located on the
ground. All costs of operating and maintaining such satellite dish and related
communications equipment including, without limitation, electricity, shall be
paid by Tenant. Tenant shall repair any and all damage caused by installation
of the satellite dish and related communication equipment, including, without
limitation, such damage as may exist at the time such satellite equipment and
related communications equipment is removed. Tenant shall comply with all
governmental requirements in connection with such satellite dish and related
communications equipment.
SECTION 16.24. BUILDING PARKING. As of the Commencement Date, the Building has
approximately 1,088 parking spaces available for exclusive use by Tenant, its
employees, invitees and licensees. Tenant may elect to increase the number of
parking spaces adjacent to the Building for Tenant's exclusive use by requiring
Landlord to construct additional spaces either by (i) converting the top level
of the existing parking garage to a parking area through the addition of an
access ramp, topping slab and stairs (at a cost of $228,000) or (ii) creating
additional surface parking of a design and type like the existing surface
parking at the Project by paving in a location or locations approved by
Landlord, including the location shown on Exhibit J (the "Exhibit J Property"),
provided that no surface parking will be constructed on the location shown on
the Exhibit J Property, unless Landlord reasonably determines that adequate
surface parking spaces cannot be constructed on the land described in Exhibit
A-1 in locations approved by Landlord. Except as provided below for the
Exhibit J Property, Tenant must provide written notice to Landlord of its
election to require additional parking by July 1, 1996. As to the location
shown on Exhibit J, Tenant shall have until February 1, 1999, to deliver
written notice to Landlord of Tenant's request that Landlord construct
additional surface parking in the area shown on Exhibit J.
All costs related to the design and construction of any such additional parking
(except that the costs for converting the top level of the existing parking
garage to a parking area shall be limited to $228,000 as set forth in Section
16.24(i) above) (excluding any Landlord construction management fee or Landlord
overhead component of any sort but including all other permits, fees and costs
necessary to comply with all codes and ordinances)
OFFICE LEASE AGREEMENT - Page 42
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(the "Additional Parking Costs") will, at the option of Tenant, be paid by one
of the following methods, provided that Tenant will notify Landlord of its
selected method of payment at the time it notifies Landlord of its request for
additional parking:
1) Tenant may elect to reimburse Landlord for the total amount of
the Additional Parking Costs, with such reimbursement to be
made by Tenant within thirty (30) days after Landlord has
completed the parking additions, or
2) Tenant may require Landlord to pay for such additional costs
up to a maximum amount of $500,000, in which event Tenant and
Landlord will sign an amendment to this Lease increasing the
monthly payments of Basic Rent to be paid by Tenant to
Landlord pursuant to this Lease by the amount necessary to
amortize fully such Additional Parking Costs over the
remaining portion of the initial term of this Lease at a ten
percent (10%) interest rate. For example, if the Additional
Parking Costs were $200,000 and ten (10) years remained in the
initial term of the Lease, then each monthly payment of Basic
Rent due during the ten year term of this Lease beginning on
the Rent Commencement Date and continuing each month
thereafter would be increased by the sum of $2,643.01.
Tenant, at Tenant's cost, and subject to approval of appropriate governmental
authorities and Landlord as to appearance (which Landlord's approval shall not
be unreasonably withheld), may re-stripe the parking garage and all surface
lots except for the concrete paver surface lot located along the south side of
the Building.
If Tenant exercises the option to cause Landlord to build additional parking in
the area shown on Exhibit J, then such additional parking will become part of
the Project upon substantial completion of such construction and all Operating
Expenses of same shall be paid by Tenant to the extent allowed by Article 2 of
this Lease.
SECTION 16.25. TELECOMMUNICATIONS REGULATIONS. Tenant acknowledges and agrees
that all telephone and telecommunications services desired by Tenant shall be
ordered and utilized at the sole expense of Tenant. Landlord shall have no
responsibility for the maintenance of Tenant's telecommunications equipment,
including wiring; nor for any wiring or other infrastructure to which Tenant's
telecommunications equipment may be connected. Tenant agrees that, to the
extent any such service is interrupted, curtailed or discontinued, Landlord
shall have no obligation or liability with respect thereto and it shall be the
sole obligation of Tenant at its expense to obtain substitute service.
OFFICE LEASE AGREEMENT - Page 43
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As of December 31, 1995, Southwestern Bell provides telecommunications services
to the Building. In the event that Tenant wishes at any time to utilize the
services of a telephone or telecommunications provider whose equipment is not
then servicing the Building, no such provider shall be permitted to install its
lines or other equipment within the Building without first securing the prior
written approval of the Landlord which shall not be unreasonably withheld.
Landlord's approval shall not be deemed any kind of warranty or representation
by Landlord, including, without limitation, any warranty or representation as to
the suitability, competence, or financial strength of the provider. Without
limitation of the foregoing standard, unless all of the following conditions are
satisfied to Landlord's satisfaction, it shall be reasonable for Landlord to
refuse to give its approval: (i) Landlord shall incur no expense whatsoever with
respect to any aspect of the provider's provision of its services, including
without limitation, the costs of installation, materials and services; (ii)
prior to commencement of any work in or about the Building by the provider, the
provider shall supply Landlord with such written indemnities and/or insurance as
Landlord reasonably deems necessary to protect Landlord; (iii) the provider
agrees to abide by such rules and regulations, building and other codes, job
site rules and such other requirements as are reasonably determined by Landlord
to be necessary to protect the interests of the Project and Landlord, in the
same or similar manner as Landlord has the right to protect itself and the
Project with respect to proposed alterations as described in Article 6.02 of
this Lease; (iv) Landlord receives from the provider such compensation as is
reasonably determined by Landlord to compensate it for the out-of-pocket costs
which may reasonably be expected to be incurred by Landlord; (v) the provider
agrees to deliver to Landlord detailed "as built" plans promptly after the
installation of the provider's equipment is complete; and (vi) all of the
foregoing matters are documented in a written license agreement between Landlord
and the provider, the form and content of which is reasonably satisfactory to
Landlord including any restoration or removal requirements of Landlord for such
equipment.
SECTION 16.26. FURNITURE AND EQUIPMENT. The prior tenant in the Building will
leave all conference and training room furniture, all audio/visual equipment in
the conference and training rooms and all CRAC (Computer Room Air Conditioning)
and PDUs (Power Distribution Unit) on the raised floor space (collectively, the
"Prior Tenant's F&E") within the Premises will be left for Tenant's use. Such
Prior Tenant's F&E will be left for Tenant's use in an "AS IS, WHERE IS, AND
WITH ALL FAULTS" condition and without any warranty or representation of
fitness for any general or special purpose whatsoever, any and all of which
warranties, either express, implied or statutory, are hereby disclaimed.
Tenant shall be solely responsible for the maintenance and repair of Prior
Tenant's F&E at Tenant's expense. An inventory of the foregoing furniture and
equipment will be compiled on February 1, 1996, or reasonably soon thereafter
and initialed by all parties.
OFFICE LEASE AGREEMENT - Page 44
<PAGE> 50
Also, Landlord shall allow Tenant the right to use all furniture in the main
lobby of the Building and all cafeteria equipment, ovens, dishwashers, tables
and chairs located in the Building's cafeteria as of February 1, 1996
("Landlord's Furniture and Equipment"). Landlord's Furniture and Equipment is
provided to Tenant in an "AS IS, WHERE IS, AND WITH ALL FAULTS" condition and
without any warranty or representation of fitness for any general or special
purposes whatsoever, any and all of which warranties, whether express, implied
or statutory, are hereby disclaimed. Tenant shall be solely responsible for
the maintenance and repair of the Landlord's Furniture and Equipment at
Tenant's expense. Upon the expiration or earlier termination of this Lease,
Tenant shall redeliver the Landlord's Furniture and Equipment to Landlord in
good condition, reasonable wear and tear excepted, except that any of
Landlord's Furniture and Equipment that has been replaced at Tenant's expense
shall be owned and removed by Tenant.
Landlord shall use reasonable efforts to secure a transfer document from the
prior tenant transferring title to the Prior Tenant's F&E, but the transfer
document shall be without warranty or representation of fitness for any general
or special purposes whatsoever, all of which warranties, whether express,
implied, or statutory, will be disclaimed.
SECTION 16.27. TENANT'S EXCLUSIVE USE. Landlord will not construct any
additional improvements on the land described in Exhibit A-1 without Tenant's
prior written approval except (i) for such additional parking on the land as
Tenant may elect pursuant to Section 16.24 above and (ii) for any repairs,
replacements or installation of additional utilities in public easements or
rights-of-way. Subject to the other provisions of this Lease, Tenant shall
have the exclusive right to use the land described in Exhibit A-1, but Tenant
may not construct additional improvements on such land, park vehicles in places
other than on surface and structural parking in locations specified by Landlord
or do anything else not specifically permitted by this Lease on such land
without Landlord's prior written approval.
SECTION 16.28. ENVIRONMENTAL. Attached hereto as Exhibit M and made a part
hereof for all purposes are the provisions of the parties addressing
indemnities for Hazardous Substances (as defined in such exhibit). Landlord
additionally agrees to remediate or cause others to remediate, if necessary,
any Hazardous Substances in violation of applicable laws in the Project caused
by parties other than (i) Landlord, its partners, employees, agents,
contractors, subcontractors, licensees and invitees, or (ii) Tenant, its
officers, directors, employees, agents, contractors, subcontractors, licensees
and invitees, but Tenant shall remain fully liable for all damages and costs of
remediation caused by Tenant and Tenant's officers, directors, employees,
contractors, subcontractors, agents, invitees and licensees.
OFFICE LEASE AGREEMENT - Page 45
<PAGE> 51
SECTION 16.29. ENTIRE AGREEMENT. This Lease contains all of the agreements
of the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement, understanding or representation pertaining to
any such matter shall be effective for any purpose. No provision of this Lease
may be amended or added to except by an agreement in writing signed by the
parties hereto or their respective successors in interest.
IN WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of
the foregoing provisions and Articles 1 through 16, together with all Exhibits
attached hereto and incorporated herein by this reference, as of the date first
above written.
TENANT:
AMERICAN AIRLINES, INC., a Delaware
corporation
By: /s/ THOMAS J. KIERNAN
----------------------------------------
Name: Thomas J. Kiernan
----------------------------------
Title: Sr. Vice President
---------------------------------
Date: January 15, 1996
-------------------------------------
LANDLORD:
MAGUIRE/THOMAS PARTNERS-WESTLAKE/
SOUTHLAKE PARTNERSHIP, a Texas general
partnership
By: MAGUIRE/THOMAS PARTNERS -
DALLAS, LTD., a California Limited
Partnership, General Partner
By: MAGUIRE/THOMAS PARTNERS,
INC., A California Corporation
Its General Partner
By: /s/ ROBERT F. MAGUIRE
------------------------------
Name: ROBERT F. MAGUIRE III
-------------------------
Title: MANAGING PARTNER
------------------------
By: International Business Machines
Corporation, a New York corporation,
General Partner
By: /s/ J.R. MAYO
-----------------------------------
Its: Director, Finance, Investments
& Asset Management
IBM Real Estate Services
----------------------------------
OFFICE LEASE AGREEMENT - Page 46
<PAGE> 52
[L2-Map and Plat Records of Solana/Southlake, Texas -Tenant Build-Out Documents]
EXHIBIT 'A'
PAGE 2
<PAGE> 53
[L3-Map and Plat Records of Solana/Southlake, Texas -Tenant Build-Out Documents]
EXHIBIT 'A'
PAGE 3
<PAGE> 54
[L4-Map and Plat Records of Solana/Southlake, Texas-Tenant Build-Out Documents]
EXHIBIT 'A'
PAGE 4
<PAGE> 55
[LSE-Map and Plat Records of Solana/Southlake, Texas-Tenant Build-Out Documents]
EXHIBIT 'A'
PAGE 5
<PAGE> 56
EXHIBIT "A-1"
Lot 1, Block B, of MTP-IBM Addition No. 1, City of Southlake, Texas, as filed
in Volume 388-211, Page 68-69 of the Map and Plat Records of Tarrant County,
Texas, and in Cabinet G, Page 208 of the Map and Plat Records of Denton County,
Texas.
OFFICE LEASE AGREEMENT - Page 1
<PAGE> 57
[MAP]
EXHIBIT 'A-2'
SITE PLAN
<PAGE> 58
[MAP OF SOLANA MASTER PLAN - BOUNDARY OF COMPLEX AND SOUTHLAKE BUILDING]
<PAGE> 59
EXHIBIT "C"
RENT COMMENCEMENT DATE MEMORANDUM
This Memorandum is made and entered into as of ____________, ____, by and
between MAGUIRE/THOMAS PARTNERS - WESTLAKE/SOUTHLAKE PARTNERSHIP (the
"Landlord") and AMERICAN AIRLINES, INC., a Delaware corporation,(the "Tenant")
with respect to that certain Lease Agreement between Landlord and Tenant dated
as of _________, 1996 (the "Lease").
Landlord and Tenant hereby agree that:
1. The Commencement Date is _______________, 1996.
2. The Rent Commencement Date of the Lease is the ______ day of
_______________, 1996.
3. The Expiration Date of the initial term of the Lease is the ____ day
of ____________, 2006, subject to renewal rights or earlier
termination as set forth in the Lease.
4. Notwithstanding anything to the contrary expressed or implied herein,
Tenant acknowledges that Landlord makes no warranties regarding the
Premises except as specifically provided in the Lease and Tenant
hereby expressly disclaims the implied warranty that the Premises are
suitable for their intended commercial purpose. Tenant has
constructed the Tenant Work in the Premises and finds that the
Premises suit Tenant's purposes. Tenant has knowledge of the Premises
and, with this knowledge, voluntarily disclaims the implied warranty
of suitability.
All other terms and conditions of the Lease are hereby ratified and
acknowledged to be unchanged.
EXHIBIT "C" - Page 1
<PAGE> 60
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum
as of the date set forth in the first paragraph above.
LANDLORD:
MAGUIRE/THOMAS PARTNERS - WESTLAKE/
SOUTHLAKE PARTNERSHIP, a Texas General
Partnership
By: MAGUIRE/THOMAS PARTNERS - DALLAS,
LTD., a California Limited
Partnership, a General Partner
By: MAGUIRE/THOMAS PARTNERS, INC.
A California Corporation
Its General Partner
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
TENANT:
AMERICAN AIRLINES, INC.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EXHIBIT "C" - Page 2
<PAGE> 61
EXHIBIT "D"
AGREEMENT FOR CONSTRUCTION
This Agreement for Construction constitutes part of the Lease
Agreement (the "Lease") dated as of January __, 1996, executed concurrently
herewith, by and between MAGUIRE/THOMAS PARTNERS - WESTLAKE/SOUTHLAKE
PARTNERSHIP, as Landlord, and AMERICAN AIRLINES, INC., as Tenant, covering
those certain premises described in the Lease (The "Premises").
The parties hereby agree as follows:
1. Construction of Building.
1.1 Landlord has constructed the Building consisting of
the following: (a) the building shell, (b) the core area, including mechanical,
electrical and plumbing systems within the Building core, (c) heating,
ventilating and air conditioning systems for standard office use including
terminal boxes, electric heating coils, and V.A.V. controls and other air
distribution devices, (d) ceiling grid system installed and ceiling tiles
installed, (e) lighting fixtures installed, (f) toilet rooms including plumbing
fixtures, ceramic tile floors, accessories, ceilings and lighting, (g)
passenger elevators and lobbies, (h) parking facilities, (i) exterior plazas
and landscaping, and (j) sprinkler main loop including one sprinkler head per
130 usable square feet within the Premises. The current "AS IS" condition of
the Building, including the tenant improvements constructed for the prior
tenant, are referred to as the "Base Building" in this Exhibit D. To the
extent that the design and/or construction of the Base Building must be changed
or added to in order to accommodate the special needs of Tenant in the
Premises, such changes or additions shall be considered part of the Tenant Work
and shall be paid for by Tenant in accordance with Section 2.5 hereof. Tenant
recognizes that tenant improvements have previously been constructed in the
Base Building and that demolition of portions of such prior tenant improvements
may be necessary to perform the Tenant Work (as defined below).
1.2 Tenant Work shall mean all changes in the Base
Building including, without limitation, the following:
(a) Installation or movement of ceiling tiles and
light fixtures.
(b) Floor finish in the Premises.
(c) Interior finishes of any kind in the Premises.
(d) Entrance and any required exit doors and
interior partitions, doors, and hardware
within the Premises.
(e) Tenant's furniture, fixtures and equipment.
EXHIBIT "D" - Page 1
<PAGE> 62
(f) Modification or additions to the mechanical,
electrical and plumbing systems currently in
the Base Building.
(g) Relocation of, or additions to, the sprinkler
heads provided in Base Building.
(h) Exterior building sign for the Tenant and the
power therefor.
(i) Electrical service distribution throughout the
Premises.
(j) Building standard window coverings.
(k) Any changes to the items previously purchased
and/or installed by Landlord.
(l) Any fire and life safety devices or signs
within the Premises.
(m) Any permits or approvals required by
governmental authorities having jurisdiction.
(n) Any demolition of any existing improvements
in the Premises.
(o) Installation of any satellite dish.
2. Plans and Specifications
2.1 Tenant's designated architect, Corgan Associates (the
"Architect") will prepare, at Tenant's cost, a space plan for the Premises and
will issue all construction plans and specifications for the Tenant Work.
2.2 Tenant's design and construction of the Tenant Work
will be on a fast-track basis. Tenant will give Landlord notice of and permit
Landlord's representatives to attend weekly design and construction meetings so
Landlord and its consultants may become and remain familiar with the Tenant
Work and schedule proposed by Tenant.
2.3 Tenant may elect to deliver to Landlord for
Landlord's review a set of plans for installing telecommunications and computer
cabling in the Premises (the "Cabling Plans") prior to delivering the
Construction Plans referenced below. If Tenant elects to deliver the Cabling
Plans prior to delivering the Construction Plans, then such Cabling Plans shall
be complete and the Construction Plans as delivered to Landlord shall be
consistent with the Cabling Plans. If Tenant elects not to deliver the Cabling
Plans separately from the Construction Plans, then the Construction Plans shall
include plans for installing telecommunications and computer cabling.
Within five (5) calendar days after Tenant has delivered to
Landlord a complete set of the Cabling Plans for the Premises, Landlord shall
review the Cabling Plans and (i) approve same in writing, (ii) approve same
with specific, written conditions, or (iii) disapprove same with specific,
written reasons for such disapproval. If Landlord fails to respond in writing
within such
EXHIBIT "D" - Page 2
<PAGE> 63
time period, then Landlord shall be deemed to have approved such Cabling Plans.
2.4 Tenant's Architect and Reed, Wells, Benson, Tenant's
engineers (the "Engineers") will prepare a complete set of construction
drawings with necessary specifications ("Construction Plans") for all of
Tenant's Work in the Premises. Tenant expects that the Construction Plans for
the Project will be prepared and submitted to Landlord for approval generally
on a pod by pod basis. Tenant will submit a complete set of construction
drawings with full specifications (the "Pod Plans") for each portion of the
Project for which Tenant requests Landlord's approval. Tenant shall state in
writing that it requests Landlord's approval of such Pod Plans. Once Tenant
has submitted Pod Plans for all work to be done in the Premises and Landlord
has approved such Pod Plans, then all such Pod Plans shall collectively
constitute the Construction Plans.
2.5 The Construction Plans for all Tenant Work (but which
Construction Plans may be submitted in segments referred to as Pod Plans as
provided above) will include necessary detail and finish drawings for all items
of construction, including without limitation, partitions, doors, reflected
ceiling plans, electrical switches and outlets, telephone and data systems,
chillers, satellite dishes, heating, ventilation and air conditioning equipment
and controls. Tenant understands that the Construction Plans are required to
be in compliance with the requirements for an HPR insurance rating in effect
for the Building and must not violate any applicable codes, rules, laws or
regulations, and agrees to make any changes and alterations to the Construction
Plans reasonably requested by Landlord to prevent any such violations.
Tenant's finish materials and sprinkler layout are subject to approval by
Landlord's insurance carrier.
(a) After completion of any set of Pod Plans,
Tenant shall submit a complete set of the Pod Plans to Landlord and
simultaneously to Landlord's engineer, BL&P Engineers, Inc., for approval.
Within five (5) business days after Tenant has delivered to Landlord and to
BL&P Engineers, Inc., a complete set of any such Pod Plans including, without
limitation, all information required under Section 2.5 of Exhibit D above for
same, Landlord shall review the Pod Plans and (i) approve same in writing, (ii)
approve same with specific, written conditions, or (iii) disapprove same with
specific, written reasons for such disapproval. Any disapproval or conditional
approval of part or all of such Pod Plans shall state in reasonable detail the
Reasonable Objections (as defined below) of Landlord. If Landlord fails to
respond in writing within such time period, then Landlord shall be deemed to
have approved such Pod Plans. In the event Landlord disapproves of any such
plans in accordance with (iii) above, if Landlord and Landlord's engineer have
not approved (or disapproved) of any revised plans submitted by Tenant to
Landlord and its engineer in accordance with the requirements of this
subparagraph within five
EXHIBIT "D" - Page 3
<PAGE> 64
(5) business days, then Landlord shall be deemed to have approved such revised
plans.
(b) Landlord's approval of any such Pod Plans
shall not be unreasonably withheld, delayed or conditioned, provided that the
withholding of approval for reasons of (i) violation of any applicable codes,
rules, laws or regulations, or (ii) rejection of Tenant's finish materials by
Landlord's insurance carrier, or (iii) demands on the Building's structural,
electrical, telecommunications, mechanical, plumbing, or HVAC systems greater
than that for which any such structure or system was designed, or (iv) an
adverse effect on the exterior appearance of the Building, including without
limitation, window coverings different from those currently in the Building, or
(v) items which would cause Landlord to lose the HPR insurance designation for
the Building or (iv) imposition of excessive restoration costs on Landlord upon
the expiration or termination of the Lease (individually or collectively, the
"Reasonable Objections"), shall be considered reasonable. The final plans and
specifications for all work to be done by Tenant within the Project, when
approved or deemed approved by Landlord, shall be referred to as the "Final
Plans."
(c) Any approval by Landlord of the Final Plans,
or any portion thereof shall not constitute a representation that such plans
and specifications comply with laws or are technically adequate.
2.6 All tenant improvement work, required by the Final
Plans, shall be called "Tenant Work" and, subject to Article 3, shall be at
Tenant's sole cost and expense. The Tenant Work shall be constructed by Tenant
materially in accordance with the Final Plans. All right, title and interest
to the Tenant Work is vested in Landlord.
3. Allowance.
Tenant shall be credited with an allowance (the "Allowance")
of Five Million Two Hundred Fifty Thousand Seven Hundred Ninety Eight and
No/100 Dollars ($5,250,798.00) against the cost of Tenant Work, as well as for
design, planning, demolition, fees, permits, wiring/cabling, construction,
construction management, purchase and installation of telecommunications
equipment and other materials, furniture acquisition for the Premises, and
other bona-fide move or construction related expenses.
4. Payment for Tenant Work.
4.1 Subject to Tenant's right to receive the Allowance,
Tenant agrees to pay for the cost of all Tenant Work required by the Final
Plans. Prior to March 15, 1996, Tenant shall submit to Landlord a written
estimate of the cost of Tenant Work for which Tenant expects to claim
reimbursement by Landlord from the
EXHIBIT "D" - Page 4
<PAGE> 65
Allowance, which estimate shall list the categories set forth in Section 3
above of this Exhibit "D" (e.g., Design - ($); Planning ($); etc.).
4.2 Tenant shall keep Landlord fully informed at all
times with respect to construction progress, which condition shall be met by
providing notices of the weekly meetings described in Section 2.2. As soon as
reasonably possible following April 1, May 1, June 1, and July 1, 1996, Tenant
shall prepare and submit to Landlord a statement, certified by Tenant to be
correct, showing, in reasonable detail the total actual cost of the Tenant Work
incurred by Tenant through such date for which Tenant is entitled to be
reimbursed from the Allowance ("Reimbursement Amount"), with supporting back-up
including lien releases and evidence of payment for all Tenant Work performed
through such date. The Reimbursement Amount claimed by Tenant on April 1,
1996, shall not exceed the lesser of (i) eighty percent (80%) of the amount
actually expended by Tenant's general contractor (not to exceed the amount paid
to such general contractor by Tenant) for Tenant Work through March 31, 1996,
or (ii) 25% of the Allowance; the Reimbursement Amount claimed by Tenant on May
1, 1996, shall not exceed the lesser of (x) eighty percent (80%) of the amount
actually expended by Tenant's general contractor (not to exceed the amount paid
to such general contractor by Tenant) for Tenant Work through April 30, 1996,
less any previously paid Reimbursement Amounts, or (y) 50% of the Allowance
less any previously paid Reimbursement Amounts; the Reimbursement Amount
claimed by Tenant on June 1, 1996, shall not exceed the lesser of (k) eighty
percent (80%) of the amount actually expended by Tenant's general contractor
(not to exceed the amount paid to such general contractor by Tenant) for Tenant
Work through May 31, 1996, less any previously paid Reimbursement Amounts or
(l) 80% of the Allowance less any previously paid Reimbursement Amounts; the
Reimbursement Amount claimed by Tenant on the later of (a) July 1, 1996, or (b)
the date of substantial completion of such Tenant Work shall not exceed the
unpaid balance of the Allowance. Landlord shall pay Tenant the applicable
Reimbursement Amount out of the Allowance within thirty (30) days after
Landlord's receipt of Tenant's statement with all necessary lien releases and
evidence of payment.
4.3 In the event that Tenant's expenses referenced in Section
3 above are less than the Allowance, any portion of the Allowance which remains
after payment of the Reimbursement Amount to Tenant shall be credited against
Tenant's Basic Rent during the first twelve months following the Rent
Commencement Date.
5. Construction.
Any general contractors and MEP subcontractors selected by
Tenant shall be approved by Landlord and after Landlord's approval such general
contractors and MEP subcontractors shall commence and diligently proceed to
construct and complete all Tenant Work. Notwithstanding the foregoing,
Landlord hereby
EXHIBIT "D" - Page 5
<PAGE> 66
approves Austin Commercial, Inc. as general contractor for the Tenant Work and
reserves the right to approve any subsequent general contractor or MEP
subcontractor, which approval shall not be unreasonably withheld or delayed.
Landlord shall have the right periodically to inspect the Premises
during the course of the construction of the Tenant Work for material
compliance of such construction with the specific Pod Plans and, upon
completion of all Tenant Work, the Final Plans.
6. Changes, Additions or Alterations.
If Tenant shall make any material change, addition or
alteration in the Final Plans, such material change, addition or alteration
shall be subject to the review and approval rights of Landlord set forth in
Section 2 above. Tenant shall advise Landlord of the date, time and place of
Tenant's weekly construction meetings and Landlord shall have the right to have
a representative present at such weekly meeting. Landlord will cooperate
reasonably with Tenant in reviewing Tenant's proposed change orders and
responding to Tenant's request for approval of such change order requests in an
effort to help Tenant maintain its work schedule, but Landlord shall retain its
review and approval rights under Section 2 above of this Exhibit D specifically
including, without limitation, the right to have five (5) business days to
review any changes to Pod Plans which Tenant designates as part of the
Construction Plans.
7. Reasonable Diligence.
Both Landlord and Tenant agree to use reasonable diligence in
performing all of their respective obligations and duties under this Agreement
for Construction and in proceeding with the construction and completion of the
Building and all Tenant Work in the Premises.
8. Access. Landlord shall not prevent Tenant's and Tenant's
general contractor's and subcontractors' access or interfere with access to the
Project.
9. As Built Plans. As soon as possible following completion of
the Tenant Work, but not more than ninety (90) days following such completion,
Tenant will furnish to Landlord "as-built" plans, certified to be correct by
Tenant's architect, for all of the Tenant Work.
10. Builder's Risk Insurance. Tenant shall cause its general
contractor to carry builder's risk insurance for all tenant improvements which
insurance shall be primary and, in the event of a casualty Tenant shall cause
its general contractor to rebuild any tenant improvements destroyed in such
casualty.
EXHIBIT "D" - Page 6
<PAGE> 67
LANDLORD:
MAGUIRE/THOMAS PARTNERS - WESTLAKE/
SOUTHLAKE PARTNERSHIP, a Texas General
Partnership
By: MAGUIRE/THOMAS PARTNERS - DALLAS,
LTD., a California Limited
Partnership, a General Partner
By: MAGUIRE/THOMAS PARTNERS, INC.
A California Corporation
Its General Partner
By:
----------------------------
Name:
-----------------------
Title:
----------------------
TENANT:
AMERICAN AIRLINES, INC., a Delaware
corporation
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT "D" - Page 7
<PAGE> 68
EXHIBIT "E"
RULES AND REGULATIONS
1. Except as otherwise provided in the Lease or any exhibits
thereto, no sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Building without the written consent of Landlord first had and obtained.
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice, unless Landlord has given written consent,
without notice to and at the expense of Tenant. Landlord shall not be liable
in damages for such removal unless the written consent of Landlord has been
obtained.
Tenant shall not use any blinds, shades, awnings, or screens
in connection with any window or door of the Premises unless approved in
writing by Landlord. Tenant shall not use any window covering facing any
exterior glass surface other than the standard window covering established by
Landlord.
2. Tenant and its employees and any invitees of Tenant shall not
go upon the roof of the Building, except to install, maintain or repair any
satellite or related communications equipment installed on the roof and in such
event, such persons shall use due care not to damage the roof.
3. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys of offices, rooms and toilet rooms which shall have been
furnished to Tenant or which Tenant shall have made, and in the event of loss
of any keys so furnished, shall pay Landlord therefor. If Tenant shall alter
any lock or install any new or additional locks or any bolts on any door of the
Premises, then Tenant will provide Landlord a key or other means of access.
4. The toilet rooms, toilet, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by Tenant who, or whose employees or
invitees, shall have caused it.
5. Except for the Tenant Work and Tenant Alterations, Tenant
shall not mark, drive nails, screw or drill into the partitions, woodwork or
plaster or in any way deface the Premises or any part thereof except that
Tenant is allowed to place pictures, plaques and ordinary office decorations on
the walls. Tenant shall not overload any floor of the Premises.
EXHIBIT "E" - Page 1
<PAGE> 69
6. No hand trucks or vehicles (other than a wheelchair for an
individual) shall be used in passenger elevators. Any hand trucks permitted in
the Building must be equipped with soft rubber tires and side guards.
7. Landlord shall have the right to prescribe the weight, size
and position of all safes and other heavy equipment brought into the Building.
Safes or other heavy objects shall, if reasonably considered
necessary by Landlord, stand on a platform of such thickness as is necessary to
properly distribute the weight. Landlord will not be responsible for loss of
or damage to any such safe or property from any cause, and all damage done to
the Building by moving or maintaining any such safe or other property shall be
repaired by the expense of Tenant.
8. Except for janitorial employees of Tenant (but not third party
contractors), Tenant shall not employ any person or persons other than the
janitor of Landlord for the purpose of cleaning the Premises unless otherwise
agreed to by Landlord. Except with the written consent of Landlord no person
or persons other than those approved by Landlord shall be permitted to enter
the Building for the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness. Landlord shall not be responsible
to any Tenant for any loss of property on the Premises, however occurring, or
for any damage done to the effects of any Tenant by the janitor or any other
employee or other person.
9. Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in any manner offensive or objectionable to
Landlord by reason of noise, odors and/or vibrations, nor shall any animals
(other than as required for handicapped persons) or birds be brought in or kept
in or about the Premises or the Building.
10. The Premises shall not be used for the manufacture of
merchandise, for a warehouse, for lodging, or for any improper, objectionable
or immoral purpose.
11. Tenant shall not use or keep in the Premises or the Project
any kerosene, gasoline or inflammable or explosive or combustible fluid or
material.
12. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instructions from
the Landlord.
13. Landlord shall have the right to prohibit any advertising by
any tenant which, in Landlord's reasonable opinion, impairs the
EXHIBIT "E" - Page 2
<PAGE> 70
reputation of the Complex or its desirability as a location for offices, and
upon written notice from Landlord, any tenant shall refrain from or discontinue
such advertising.
14. Canvassing, soliciting and peddling outside the Building is
prohibited unless specifically approved by Landlord and Tenant shall cooperate
to prevent such activity.
15. Landlord reserves the right to rescind any of these rules and
regulations and to make such other further reasonable and non-discriminatory
rules and regulations as in its judgment shall from time to time be needed for
the safety, protection, care and cleanliness of the Building, the operation
thereof, the preservation of good order therein and the protection and comfort
of the tenants and their agents, employees and invitees, which rules and
regulations, ten (10) days after prior written notice thereof is given to a
tenant, shall be binding upon it in like manner as if originally herein
prescribed. No such change shall unreasonably interfere with Tenant's
permitted uses of the Project.
16. Tenant shall not allow its employees, business invitees, or
guests to possess handguns or other firearms, whether concealed or otherwise,
on the Premises or in the Complex.
17. No noxious or offensive activity or nuisance shall be allowed
in the Project.
EXHIBIT "E" - Page 3
<PAGE> 71
EXHIBIT "F"
PARKING AGREEMENT
Building: Southlake Building
Landlord: MAGUIRE/THOMAS PARTNERS Date of Lease:
WESTLAKE/SOUTHLAKE PARTNERSHIP January __, 1996
Tenant: AMERICAN AIRLINES, INC.
So long as the Lease of which this Parking Agreement ("Agreement") is a part
shall remain in effect, Tenant or persons permitted by Tenant shall have the
exclusive right to use 100% of the parking spaces in the Building parking
garage and/or the surface parking lots at the Project located on the land
described in Exhibit "A" attached hereto and, if added pursuant to the Lease,
the surface parking that may be constructed on the area shown in Exhibit J
(collectively, the "Parking Facilities"). Landlord shall be permitted to take
such reasonable actions as necessary to repair or maintain the Parking
Facilities or to construct such additional parking as contemplated by Section
16.24 of the Lease including temporarily closing any portion of the Facilities
necessary for such construction or maintenance.
Tenant shall not be charged for such parking spaces or additional spaces to be
constructed under Section 16.24 of the Lease except for the cost of such
construction pursuant to Section 16.24, during the primary term of the Lease.
Should Tenant desire to control parking access through the use of magnetic
parking cards or stickers, then Tenant shall pay the cost of installation for
any additional gates or other monitoring devices, and shall also pay the cost
of any magnetic cards or stickers necessary to implement such control.
The following rules and regulations are in effect until notice is given to
Tenant of any change. Landlord reserves the right to modify and/or adopt such
other reasonable and non-discriminatory rules and regulations for the parking
facilities as necessary for the operation of the parking facilities in
accordance with law. Landlord may refuse to permit any person who violates the
rules to park in the parking facilities, and any violation of the rules shall
subject the car to removal at car owner's expense.
EXHIBIT "F" - Page 1
<PAGE> 72
RULES AND REGULATIONS
1. The driveways, passages, exits, entrances, elevators and stairways
shall not be obstructed by anyone using the parking facilities other
than for ingress to or from his or her parking location.
2. All directional signs and arrows must be observed.
3. The speed limit shall be 5 miles per hour.
4. Parking is prohibited:
(a) in areas not striped for parking
(b) in aisles
(c) where "No Parking" signs are posted
5. No heavy equipment shall be brought into the Garage without approval
of Landlord, and Landlord shall have the right to prescribe the
weight, size and position of any such heavy equipment which is
allowed.
6. It is understood that all vehicles enter the parking facilities at
their own risk.
7. Tenant shall only use the Parking Facilities in the Project for its
employees who work in the Complex and Tenant's licensees and invitees,
but Tenant shall not use same for a park and ride facility.
LANDLORD:
MAGUIRE/THOMAS PARTNERS - WESTLAKE/
SOUTHLAKE PARTNERSHIP, a Texas General
Partnership
By: MAGUIRE/THOMAS PARTNERS - DALLAS,
LTD., a California Limited
Partnership, a General Partner
By: MAGUIRE/THOMAS PARTNERS, INC.
A California Corporation
Its General Partner
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
EXHIBIT "F" - Page 2
<PAGE> 73
TENANT:
AMERICAN AIRLINES, INC., a Delaware
corporation
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXHIBIT "F" - Page 3
<PAGE> 74
EXHIBIT "A"
Lot 1, Block B, of MTP-IBM Addition No. 1, City of Southlake, Texas, as filed
in Volume 388-211, Page 68-69 of the Map and Plat Records of Tarrant County,
Texas, and in Cabinet G, Page 208 of the Map and Plat Records of Denton County,
Texas.
EXHIBIT "F" - Page 4
<PAGE> 75
EXHIBIT "G"
PROJECT MAINTENANCE ASSOCIATION
The Project Maintenance Association (the "Association") is a
non-profit membership association, organized to impose upon all portions of the
Complex (as such term is defined in the Lease to which this Exhibit "G" is
attached) mutually beneficial restrictions providing for the repair and
maintenance necessary to preserve the uniform appearance, high quality and
usage of certain common areas of the Complex, and to provide other services
which are of benefit to more than one building in the Complex, including
security services, landscape maintenance, shuttle services, and such other
services as the directors of the Association determine to be necessary or
appropriate for the common benefit of more than one building in the Complex
("Common Benefit Services and Facilities"). Owners of real property in the
Complex are members of the Association.
The Association imposes annual assessments which are part of Operating
Expenses of buildings in the Complex to fund the costs of providing the Common
Benefit Services and Facilities including reasonable reserves if deemed
appropriate by the Association directors. Assessments will generally be made
based upon the ratio of the Rentable Area of each particular building to the
total Rentable Area of all substantially completed buildings in the Complex,
provided that no portion of the costs of providing the shuttle service will be
allocated to office buildings constructed within the Village Center portion of
the Complex, and further provided that if the Association directors determine
that a particular Common Benefit Service or Facility benefits certain of the
buildings in the Complex but not others, or determine that such benefits fall
disproportionately upon certain buildings in the Complex, then the Association
directors shall allocate the costs for any such particular Common Benefit
Service or Facility pursuant to a method of allocation which the Association
directors determine will more fairly match such costs to the benefits received
therefrom.
EXHIBIT "G" - Page 1
<PAGE> 76
SOLANA-SOUTHLAKE
STANDARD CLEANING SPECIFICATIONS
I. OFFICE AREAS
A. NIGHTLY SERVICE (Monday through Friday)
1. Empty all waste baskets and place for disposal in dumpster.
(Replace liners as needed.)
2. Detail doors, walls & partition glass.
3. Sweep and/or dust mop all hard surface floors.
4. Spot clean or damp mop all stains on tile floors as needed.
5. Vaccuum all carpeted areas.
6. Spot minor stains on carpets, as needed.
7. Wash all drinking fountains.
8. Properly arranged chairs in offices and conference rooms.
9. Turn off all lights, leaving only designated lights on.
10. Secure all doors as directed.
11. Keep janitor closet clean and orderly.
B. WEEKLY SERVICES
1. Detail woodwork, walls, partitions.
2. Dust all picture frames, chair rungs and other requested office
furnishings.
C. MONTHLY SERVICES
1. Polish or clean door kick plates and thresholds.
2. Dust all door jambs.
3. Dust all high partitions and ledges.
4. Clean and refinish all resilient floors with slip retardant floor
finish.
5. Detail vacuum all carpeting and other hard to reach areas.
6. Vacuum or wash all return air vents.
D. QUARTERLY SERVICES
1. Vacuum all fabric furniture.
2. Wipe or wash vinyl furniture.
E. SEMI-ANNUALLY
1. Extract-clean carpet as needed.
EXHIBIT "H" - Page 1
<PAGE> 77
I. BREAKROOM AND KITCHEN AREA (excluding main cafeteria area)
A. NIGHTLY SERVICE (Monday through Friday)
1. Remove trash and place for disposal.
2. Wipe tables, chairs, counter tops and cabinet fronts.
3. Wash kitchen sinks.
4. Wipe coffee maker.
5. Wipe front of oven, refrigerator & dishwasher.
6. Dust window sills.
7. Dust mop floors.
8. Spot mop floor to remove spills, etc.
9. Spot clean doors and walls, etc.
B. MONTHLY SERVICES
1. Scrub and refinish all hard surface floors.
2. Dust, wash vinyl chairs, chair rungs and table pedestals.
III. REST ROOMS
A. NIGHTLY SERVICES (Monday through Friday)
1. Clean and sanitize all urinals, commodes and wash basins to include
all chrome fittings and bright work.
2. Clean mirrors and frames.
3. Wet mop floors.
4. Dust ledges and partitions.
5. Spot clean walls, doors and partitions.
6. Fill all dispensers from stock.
7. Empty and remove all trash from containers, clean exteriors of
containers.
8. Empty and sanitize all feminine napkin disposal units.
9. Report any fixtures not working properly.
10. Report any light fixtures burned-out.
B. MONTHLY SERVICES
1. Clean and/or polish all door kick plates and thresholds.
2. Dust all door jambs.
3. Machine scrub all floors.
4. Wash all walls and metal partitions.
IV. ELEVATOR LOBBIES & PUBLIC CORRIDORS
A. NIGHTLY SERVICES (Monday through Friday)
1. Sweep and/or dust mop all tile floors, spot clean all stains.
2. Vacuum all carpeted areas. Spot minor stains.
EXHIBIT "H" - Page 2
<PAGE> 78
3. Detail doors, walls, etc.
4. Secure all doors as directed.
5. Report any burned-out lights.
B. WEEKLY SERVICES
1. Spot wash all lobby walls and doors.
2. Polish or clean all door kick plates and thresholds.
3. Dust all door jambs, all artwork and picture frames.
4. Buff all lobby and corridor floors where tile is installed.
C. QUARTERLY SERVICES
1. Thoroughly scrub and finish all resilient floors with a slip
retardant floor finish.
2. Clean light diffusers.
V. DAY PORTER SERVICES (one porter)
A. DAILY (Monday through Friday)
1. Rest Rooms
a. Re-fill all dispensers
b. Spot clean, as needed.
c. Empty trash containers, as needed.
2. Breakroom (excluding main cafeteria area)
a. Spot clean, as needed.
b. Re-fill paper towel dispenser, as needed.
* Over-standard janitorial services are available upon request and are payable
monthly by tenant.
VI. WINDOW WASHING SPECIFICATIONS
A. Exterior Windows
1. Cleaned twice annually
B. Interior Windows
1. Cleaned once annually
EXHIBIT "H" - Page 3
<PAGE> 79
EXHIBIT "I"
HVAC SPECIFICATIONS
HVAC SPECIFICATIONS
Landlord shall provide or permit Tenant to provide a high quality
air-conditioning system on a year-round basis throughout the Premises.
Interior space shall be provided with thermostatically controlled zones. The
system is designed to maintain an average inside temperature of 75 degrees +/-2
degrees during summer outdoor temperatures of 99 degrees F.D.B. and 78 degrees
F.W.B. and 72 degrees +/-2 F.D.B. at winter outside temperatures of 19 degrees
F.D.B. and in accordance with an occupancy of one person per 250 square feet.
These temperatures are subject to the conditions and requirements of State and
Federal Energy Regulating Bodies for non-residential buildings (collectively,
"regulatory requirements"). If Landlord elects to allow Tenant to operate the
HVAC to the Premises, Tenant shall operate the HVAC within the foregoing design
parameters.
All conditions are 1989 ASHRAE Standard for energy conservation and
Building design.
EXHIBIT "I" - Page 1
<PAGE> 80
[SITE FOR CONSTRUCTION OF ADDITIONAL SURFACE PARKING SPACES - PICTURED]
EXHIBIT "J"
<PAGE> 81
EXHIBIT "K"
RENEWAL OPTIONS
1. Tenant or any assignee consented to by Landlord or deemed
consented to by Landlord under Section 11.01 of all of Tenant's interest under
this Lease, but not any other party, is granted the following five-year options
to extend the term of the Lease from the expiration of the initial term of the
Lease as set forth in Exhibit C for five years (the "First Renewal Term") and
from the expiration of the First Renewal Term of the Lease for one additional
five (5) year term (the "Second Renewal Term") (individually or collectively,
as appropriate from the context, the First Renewal Term and the Second Renewal
Term are referred to hereinafter as "Renewal Term"), pursuant to the terms and
conditions set forth hereinbelow provided (a) Tenant is not in default of the
Lease at the time of the exercise of its option beyond any applicable cure
period and (b) Tenant gives written notice to Landlord of its exercise of the
option to lease at least one (1) year prior to the commencement of such Renewal
Term of the Lease. The term of the Lease from the Commencement Date through
the Expiration Date as set forth in Exhibit C, is referred to herein as the
"initial term". Tenant must exercise an option for a Renewal Term for all the
space in the Building.
Each Renewal Term shall be upon the same terms and conditions
set forth in the Lease, except that annual Basic Rent shall be determined as
follows: (i) the expense stop ("Expense Stop") shall be (x) for the First
Renewal Term, Tenant's Non-Electrical Expenses as adjusted to reflect normal
office operations and hours of operation for the year 2005, and (y) for the
Second Renewal Term, Tenant's Non-Electrical Expenses as adjusted to reflect
normal office operations and hours of operation for the year 2010; and (ii) the
annual Basic Rent for the First Renewal Term and the Second Renewal Term shall
be equal to one hundred percent (100%) of the existing Fair Market Rent at the
time the renewal option is exercised.
Under all circumstances during the Term of this Lease, in
addition to all other payments to be made by Tenant, Tenant shall pay all of
Tenant's Electrical Expenses as defined in the Lease. Tenant's Expense Stop
set forth in Item 4b of the Form shall be deleted and replaced with the
appropriate Expense Stop determined as set forth above.
Landlord shall undertake a determination of the "Fair Market
Rent" for the Renewal Space. The "Fair Market Rent" shall mean the fair market
rental rate in effect, including concessions, if any, per square foot of
rentable area under comparable terms for similar space for similarly
creditworthy tenants then being offered for lease in the market composed of
Solana and/or the Las Colinas Urban Center. Landlord shall advise Tenant of
the Fair Market Rent for the Renewal Space within thirty (30) days after
Tenant's
EXHIBIT "K" - Page 1
<PAGE> 82
notification of its desire to exercise any of the renewal options for a Renewal
Term granted hereby. Tenant shall then have thirty (30) days after receipt of
Landlord's determination of Fair Market Rent for the Renewal Space to notify
Landlord of its acceptance or rejection of the Landlord's proposed Fair Market
Rent for the Renewal Space. In the event Tenant fails to so notify Landlord
within the thirty (30) day period, Tenant shall be deemed to have rejected the
Fair Market Rent for the Renewal Space proposed by Landlord and in such event,
the then existing term of the Lease shall absolutely and without further notice
expire, unless Tenant notifies Landlord in writing (the "Arbitration Notice")
within thirty (30) days after Tenant's receipt of Landlord's determination of
Fair Market Rent for the Renewal Space that it rejects such determination,
whereupon the Fair Market Rent shall be determined by arbitration in accordance
with the provisions of Section 8 below.
2. Arbitration.
2.1 Arbitration Matters. If Tenant gives the Arbitration
Notice, then the Fair Market Rent for the Renewal Space shall be determined by
arbitration in accordance with the provisions in Sections 2.2 through 2.6
below.
2.2 Appointment of Arbitrators. If Tenant sends the
Arbitration Notice as required in Section 1 above, Landlord and Tenant shall
each then appoint, in writing, one arbitrator within twenty (20) days following
the receipt of the Arbitration Notice and shall provide the name and address of
their respective arbitrator to the other party prior to the expiration of such
twenty (20) day period; provided, that if one party fails to provide the name
and address of its selected arbitrator within such twenty (20) day period, the
arbitrator selected by the other party shall act as the single arbitrator as if
both parties had agreed to the appointment of such arbitrator as provided
above. Unless only one arbitrator is authorized as provided in the immediately
foregoing sentence, the selected arbitrators shall then meet and appoint a
third arbitrator within ten (10) days following their appointment. If the two
(2) arbitrators are unable to agree upon a third arbitrator within such ten
(10) day period, then the third arbitrator shall be appointed as soon as
reasonably possible thereafter by a judge of a civil district court located in
Tarrant County, Texas, from a list of two arbitrators proposed by each of
Tenant and Landlord with both parties having the right to strike for any reason
one of the two arbitrators proposed by the other party so the final list for
submission to the judge will consist of two names from which the judge will
pick one, subject to the qualification requirements set forth below in Section
2.5. In the event of the failure, refusal or inability of any arbitrator to
act, a new arbitrator shall be appointed in his stead, which appointment shall
be made in the same manner as set forth above for the appointment of such
resigning arbitrator. The parties shall use all reasonable efforts to select
all arbitrators within thirty
EXHIBIT "K" - Page 2
<PAGE> 83
(30) days after the delivery of the Arbitration Notice. Immediately following
the selection of the final arbitrator, the arbitrators shall meet and, within
thirty (30) days following the final selection of the arbitrator(s), resolve
the matter by determining the Fair Market Rent for the Renewal Space.
2.3 Decisions of Arbitrators. Within ten (10) days following
the selection of the arbitrator(s), each party shall submit to such
arbitrator(s) such party's proposed Fair Market Rent for the Renewal Space (the
"Proposal") together with reasonable evidence supporting such Proposal. The
arbitrator(s) shall consider the Proposal submitted by Landlord and the
Proposal submitted by Tenant and formulate a decision based on such Proposals
within thirty (30) days after (i) the submission of the Proposals or (ii) the
expiration of the ten (10) days for such submission, but the arbitrator(s)
shall consider any Proposal submitted prior to formulating their decision even
if such Proposal is late. The power of the arbitrator(s) shall be exercised by
the concurrence of at least two (2) arbitrator(s), except that if only one
arbitrator is required, the decision of such arbitrator shall govern. The
arbitrator(s) shall have the authority to request additional facts or evidence
from each of the parties and, if such arbitrator(s) so require, a hearing to
present the same, but the arbitrator(s) shall not engage in their own
fact-finding. In the event of such a hearing, rules of evidence applicable to
judicial proceedings in Tarrant County, Texas, civil district courts shall
govern; however, evidence will be admitted or excluded in the sole discretion
of the arbitrator(s). The arbitrator(s) shall resolve the controversy and
shall sign a letter containing their decision, together with a brief statement
describing the rationale for such decision, in writing and deliver a copy
thereof to each of the parties personally or by registered or certified mail,
return receipt requested. If the arbitrator(s) fail to reach an agreement
during such thirty (30) day period, they may all be discharged by written
notice from either of the parties to the other, and new arbitration proceedings
by newly appointed arbitrators shall commence, which appointments shall be made
in the same manner as set forth above.
2.4 Costs. Each party shall pay the expense of the
arbitrator it selects and one-half of the third arbitrator's expense.
2.5 Qualifications. Each arbitrator shall be a real estate
broker or salesman licensed under the laws of the State of Texas for at least
the last ten (10) consecutive years and shall have been actively and
continuously engaged in leasing transactions involving office space in the
Dallas-Fort Worth Metroplex for the immediately preceding ten (10) year period.
No arbitrator may be or have been employed by either Landlord or Tenant in
connection with this Lease and no arbitrator may have any competing interest in
this transaction.
EXHIBIT "K" - Page 3
<PAGE> 84
3. Written Exercise. Tenant's exercise of the right to the First
Renewal Term and Second Renewal Term shall be by written notice to Landlord.
If exercised the parties will sign an amendment for the new Basic Rent for the
applicable Renewal Term.
4. Time of Essence. Time is of the essence in the exercise of
the options to lease provided herein, and the failure to timely and properly
exercise these renewal options would result in hardship and damage to Landlord.
Therefore, once Tenant fails to exercise any extension option or the Lease
terminates for any reason, all renewal options shall terminate absolutely
without further action by any party.
EXHIBIT "K" - Page 4
<PAGE> 85
EXHIBIT "L"
SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Gilchrist & Rutter
Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attention: Paul S. Rutter, Esq.
________________________________________________________________________________
SUBORDINATION
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
RESULTS IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING
SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR
LATER SECURITY INSTRUMENT.
THIS AGREEMENT is entered into by and among Tenant, Landlord, and
Beneficiary and affects the Property described in Exhibit "A" attached hereto.
The terms "Tenant," "Landlord," "Beneficiary," "Premises," "Lease," "Property,"
"Loan," "Note," "Mortgage" are defined in the Schedule of Definitions attached
hereto as Exhibit "B." This Agreement is entered into with reference to the
following facts:
A. Landlord and Tenant have entered into the Lease covering the
Premises on the Property.
B. Beneficiary has made the Loan to Landlord evidenced by the
Note, which Note is secured by the Mortgage covering the Property.
C. The parties hereto desire expressly to subordinate the Lease to
the lien of the Mortgage, it being a requirement of the Loan that the lien of
the Mortgage be unconditionally and at all times prior and superior to the
leasehold interests and estates created by the Lease.
D. Tenant has requested that Beneficiary agree not to disturb
Tenant's possessory rights in the Premises in the event Beneficiary should
foreclose the Mortgage; provided that Tenant attorns to Beneficiary or the
purchaser at any foreclosure or trustee's sale of the Property.
-1-
EXHIBIT "L"
<PAGE> 86
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Subordination.
Notwithstanding any to the contrary set forth in the Lease,
the Lease and the leasehold estate created thereby and all of Tenant's rights
thereunder shall be and shall at all times remain subject, subordinate and
inferior to the Mortgage and the lien thereof, and all rights of Beneficiary
thereunder and to any and all renewals, modifications, and extensions thereof.
2. Acknowledgement and Agreement by Tenant. Tenant acknowledges
and agrees that:
(a) Beneficiary, in making any disbursements to Landlord, is
under no obligation or duty to oversee or direct the application of the proceeds
of such disbursements.
(b) Tenant will not terminate or cancel the Lease or the
term thereof or claim partial or total eviction by reason of a default by
Landlord thereunder unless and until (i) Tenant has given written notice of such
act or omission to Landlord and Beneficiary, (ii) Landlord has failed to remedy
such act or omission within the applicable cure period set forth in the Lease
and (iii) Beneficiary has failed to remedy such act or omission within thirty
(30) days after the expiration of Landlord's cure period for such act or
omission; provided, however, that if such remedy cannot be reasonably completed
within such thirty (30) day period and Beneficiary begins such remedy within
such thirty (30) day period and diligently prosecutes such remedy to completion,
Tenant shall have no right to cancel or terminate the Lease. Beneficiary's cure
periods shall be subject to extension for "Force Majeure" delays, which shall
include any acts of God, riot or civil commotion, strikes, governmental
preemption, priorities or other controls in connection with a national or other
public emergency, or shortages of fuel, supplies or labor resulting therefrom,
or any other cause of any kind whatsoever which is beyond Beneficiary's
reasonable control.
(c) Tenant has notice that the Lease and the rent and all
other sums due thereunder have been assigned or are to be assigned to
Beneficiary as security for the Loan secured by the Mortgage. In the event that
Beneficiary, in accordance with Section 6 hereof, notifies Tenant in writing of
a default under the Mortgage and demands that Tenant pay its rent and all other
sums due under the Lease to Beneficiary, Tenant shall honor such demand and pay
its rent and all other sums due under the Lease directly to Beneficiary.
-2-
<PAGE> 87
(d) This Agreement satisfies any condition or requirement in
the Lease relating to the granting of a non-disturbance agreement.
3. Foreclosure and Sale.
(a) If the interests of Landlord under the Lease are
acquired by Beneficiary, by any person acting by, through or on behalf of
Beneficiary, or by any purchaser by foreclosure, by deed in lieu of foreclosure
or otherwise (collectively, "Beneficiary's Successor"): (i) the Lease shall not
terminate nor shall Tenant's right of possession be disturbed so long as Tenant
is not in default under the Lease beyond any notice or applicable grace period,
(ii) except as set forth in this Agreement, all rights of Tenant under the
Lease, including but not limited to the right to use and occupy the premises
described therein at the rental and upon the terms and conditions set forth in
the Lease and the right to exercise and enjoy all expansion and extension
options contained therein, shall continue in full force and effect and shall not
be terminated or affected in any way; (iii) Tenant shall be bound to Beneficiary
or Beneficiary's Successor under all the terms, covenants and conditions of the
Lease with the same force and effect as if Beneficiary or Beneficiary's
Successor were named landlord under the Lease; and (iv) Tenant shall attorn to
Beneficiary or Beneficiary's Successor as its Landlord, said attornment to be
effective and self-operative immediately upon Beneficiary or Beneficiary's
Successor succeeding to the interest of Landlord under the Lease without the
execution of any other instruments on the part of any party hereto.
(b) If Beneficiary or Beneficiary's Successor succeeds to
the interest of Landlord under the Lease, (herein a "Successor Landlord") such
party shall be bound to Tenant under all of the terms, covenants and conditions
of the Lease, including, without limitation, the rental and other sums payable
by Tenant thereunder, and Tenant shall, from and after such party's succession
to the interests of Landlord under the Lease, have the same rights under the
Lease and the same remedies against such party for the breach of the Lease that
Tenant would have had under the Lease against Landlord if such party had not
succeeded to the interests of Landlord; provided, however, that if such interest
is acquired by Beneficiary or Beneficiary's Successor, such party shall not be:
(i) liable for, or subject to any defenses or
enforcement of remedies based on any act or omission of a prior landlord
(including Landlord), provided, however, that the foregoing shall not relieve
Successor Landlord of any liability arising by reason of its acts or omissions
from and after the date of its succeeding to the interest of Landlord under the
Lease, including a continuation of the failure of a prior landlord (including
Landlord) to perform its obligations under the Lease, in which case, the
Successor Landlord upon receipt of
-3-
<PAGE> 88
notice of such continuation from Tenant, shall have a reasonable period of time
to remedy same, which period shall not in any event be less than the period
provided Landlord under the Lease to remedy such failure or thirty (30) days,
whichever is longer, and shall be subject to delays for Force Majeure events;
or
(ii) subject to any offsets which Tenant might have
against any prior landlord (including Landlord); or
(iii) bound by any rent or additional rent which
Tenant might have paid in advance to any prior landlord (including Landlord) for
a period in excess of one month or other prepaid charge which Tenant might have
paid in advance to any prior landlord (including Landlord) for a period in
excess of one (1) month; or
(iv) bound by any agreement, modification, or
surrender of the Lease, without the written consent of Beneficiary, except for
the Lease itself and the following agreements or modifications which may be
entered into between Landlord and Tenant without Beneficiary's consent: (A)
amendments to the Lease which are expressly entered into pursuant to the
provisions of the Lease or (B) amendments to the Lease of an administrative
nature relating to the ordinary course of operation or tenancy of the Premises
that do not materially and adversely affect the rights of Landlord, Beneficiary,
Beneficiary's Successor or Successor Landlord; or
(v) bound by any obligation of any landlord
(including Landlord) to make any payment to Tenant or to undertake or complete
any construction of any portion of the Premises or Property or be subject to any
offset, defense or enforcement of remedies arising from the failure of any
landlord (including Landlord) to do so, except that Successor Landlord shall be
liable for the timely return of any security deposit or other deposit actually
received by Successor Landlord and the payment to Tenant of any unpaid portion
of the Reimbursement Amount (as defined in the Lease) to the extent (a) Tenant
has notified Successor Landlord of Landlord's failure to pay such sum in
accordance with the terms of the Lease and (b) to the extent Tenant is due such
sum in accordance the terms of the Lease; or
(vi) obligated to repair, restore, replace or
rebuild any portion of the Premises in the case of damage or destruction of the
Premises or any part thereof due to fire or other casualty or to the effect of a
taking of a part of the Premises by exercise of power of eminent domain, beyond
such repair, restoration, replacement, or rebuilding which can reasonably be
accomplished from the net proceeds of any insurance or the net proceeds of any
condemnation award, as the case may be, actually received by or made available
to Successor Landlord.
4. Acknowledgement and Agreement by Landlord. Landlord, as
landlord under the Lease and mortgagor or trustee under the
-4-
<PAGE> 89
Mortgage, acknowledges and agrees for itself and its heirs, successors and
assigns that:
(a) This Agreement does not:
(i) constitute a waiver by Beneficiary of any of
its rights under the Mortgage; and/or
(ii) in any way release Landlord from its
obligations to comply with the terms, provisions, conditions, covenants,
agreements and clauses of the Mortgage;
(b) The provisions of the Mortgage remain in full force and
effect and must be complied with by Landlord; and
(c) In the event Beneficiary requires that Tenant pay its
rent to the Beneficiary, Tenant shall be authorized to do so without
investigating the propriety of the demand and shall in no event be liable to
Landlord for any rent it pays to the Beneficiary pursuant to such demand.
5. Agreement of Beneficiary. Beneficiary agrees and covenants,
provided Tenant is not in default beyond the applicable grace period provided
for in the Lease that:
(a) Tenant shall not be joined as an adverse or party
defendant in any action or proceeding which may be instituted or commenced by
Beneficiary to foreclose or enforce the Mortgage unless such joinder is
required by law, provided that such joinder shall not result in the termination
of the Lease or disturb the possession or use of the Premises by Tenant.
(b) Tenant shall not be evicted from the Premises nor shall
any of Tenant's rights under the Lease be affected or disturbed in any way by
reason of this subordination or any modifications of or default under the
Mortgage.
6. No Default. Beneficiary hereby represents that, as of the date
hereof, Landlord is current on all payments due Beneficiary under the Loan and
that no notice of default under the Loan has been sent to Landlord.
7. Notice.
Any notice, demand or request required hereunder shall be given
in writing (at the addresses set forth in Exhibit B attached hereto), by any of
the following means: (a) personal service; (b) telecopying; (c) United States
registered or certified, first class mail, return receipt requested, or (d)
recognized overnight courier service. Such addresses may be changed by notice
to the other parties given in the same manner as provided above. Any notice,
demand or request sent pursuant to either subsection (a) or (b) of the Section
6 shall be deemed received upon such personal service or upon dispatch by
-5-
<PAGE> 90
electronic means with an electronic confirmation of receipt, and, if sent
pursuant to either subsection (c) or (d) shall be deemed received upon
delivery.
8. Miscellaneous.
(a) This Agreement sets forth the entire agreement among the
parties hereto concerning the subject matter hereof and there are no other
agreements, contracts, promises, obligations or conditions by or among the
parties hereto concerning the subject matter hereof, except as expressly set
forth herein.
(b) Except as set forth herein, Beneficiary shall have no
obligations nor incur any liability with respect to any warranties of any nature
whatsoever, whether pursuant to the Lease or otherwise, including, without
limitation, any warranties respecting use, compliance with zoning, Landlord's
title, Landlord's authority, habitability, fitness for purpose or possession.
(c) In the event that Beneficiary shall acquire title to
the Premises or the Property, Beneficiary shall have no obligation, nor incur
any liability, beyond Beneficiary's then equity interest, if any, in the
Premises, and Tenant shall look exclusively to such equity interest of
Beneficiary, if any, in the Premises for the payment and discharge of any
obligations imposed upon Beneficiary hereunder or under the Lease, and
Beneficiary is hereby released and relieved of any other obligations hereunder
and under the Lease.
(d) This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and assigns;
provided however, that in the event of the assignment or transfer of the
interest of Beneficiary, then upon the express written assumption by the
assignee or transferee of Beneficiary's obligations hereunder, all obligations
and liabilities of Beneficiary under this Agreement accruing after the effective
date of the assignment or transfer shall terminate, and thereupon all such
obligations and liabilities shall be the responsibility of the party to whom
Beneficiary's interest is assigned or transferred.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
-6-
<PAGE> 91
(f) Until written demand is made by Beneficiary to Tenant in
accordance with the second sentence of Section 2(c) above, all rents and other
sums payable by Tenant under the Lease shall be payable by Landlord. Tenant
shall not be liable to Landlord for the sums paid to Beneficiary pursuant to
such demand.
IN WITNESS WHEREOF, the parties have executed this Subordination,
Non-Disturbance and Attornment Agreement as of _____________________, 199_.
LANDLORD:
MAGUIRE/THOMAS PARTNERS--WESTLAKE/SOUTHLAKE PARTNERSHIP
A Texas General Partnership
By: MAGUIRE/THOMAS PARTNERS-DALLAS, LTD.
a California limited partnership
General Partner
By: MAGUIRE/THOMAS PARTNERS, INC.
a California CORPORATION
General Partner
By:
---------------------------------
Its:
----------------------------
By: INTERNATIONAL BUSINESS MACHINES CORPORATION
a New York Corporation
General Partner
By:
----------------------------------
Its:
------------------------------
-7-
<PAGE> 92
TENANT:
AMERICAN AIRLINES, INC.
a Delaware corporation
By:
--------------------------------
Its:
---------------------------
BENEFICIARY:
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
By:
--------------------------------
Its:
---------------------------
-8-
<PAGE> 93
STATE OF CALIFORNIA }
} ss.
COUNTY OF LOS ANGELES }
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of MAGUIRE/THOMAS PARTNERS, INC., personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
STATE OF CALIFORNIA }
} ss.
COUNTY OF LOS ANGELES }
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of INTERNATIONAL BUSINESS MACHINES, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
-9-
<PAGE> 94
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of AMERICAN AIRLINES, INC., personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
-10-
<PAGE> 95
EXHIBIT "A" TO SUBORDINATION AGREEMENT
REAL PROPERTY DESCRIPTION
Lot 1, Block B, of MTP-IBM Addition No. 1, City of Southlake, Texas, as filed
in Volume 388-211, Page 68-69 of the Map and Plat Records of Tarrant County,
Texas, and in Cabinet G, Page 208 of the Map and Plat Records of Denton County,
Texas.
A-1
<PAGE> 96
EXHIBIT "B" TO SUBORDINATION AGREEMENT
SCHEDULE OF DEFINITIONS
"Beneficiary" shall mean The Sumitomo Bank, Limited, New York Branch.
Beneficiary's address for notice purposes is as follows:
The Sumitomo Bank, Limited, New York Branch
277 Park Avenue
New York, NY 10172
Attn: Manager, Structured Finance Department
"Mortgage" shall mean a first lien Master Deed of Trust, Security
Agreement, Assignment of Rents and Financing Statement dated as of June 29,
1987, encumbering the Property, executed by Landlord, as Mortgagor or Trustor,
to Robert Rendell, an individual, as trustee, in favor of Beneficiary, as
amended, securing repayment of the Loan evidenced by the Note, and recorded in
the records of Denton County, Texas and Tarrant County, Texas.
"Landlord" shall mean Maguire/Thomas Partners-Westlake/Southlake
Partnership, a partnership. Landlord's address for notice purposes is as
follows:
355 South Grand Avenue, Suite 4500
Los Angeles, CA 90071
Attn: President
"Lease" shall mean that certain Office Lease Agreement relating to the
Property, entered into by and among Landlord and Tenant, dated as of
___________, 199____.
"Loan" shall mean a first mortgage loan in an amount up to $45,000,000,
from Beneficiary to Landlord, pursuant to and for all purposes set forth in
that certain Secured Credit Agreement dated September 1, 1987, by and between
Landlord and The Sumitomo Bank, Limited, New York Branch.
"Note" shall mean that certain Non-Recourse Euro-Dollar Note executed
by Landlord in favor of Beneficiary, dated as of June 29, 1987 in the principal
amount of $45,000,000.
"Premises" shall have the same meaning as in the Lease.
"Property" shall mean the real property described in Exhibit "A"
attached hereto together with the improvements thereon.
"Tenant" shall mean American Airlines, Inc., a Delaware corporation.
Tenant's address for notice purposes is as set forth in the Lease.
B-1
<PAGE> 97
SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Gilchrist & Rutter
Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attention: Paul S. Rutter, Esq.
________________________________________________________________________________
SUBORDINATION
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
RESULTS IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING
SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR
LATER SECURITY INSTRUMENT.
THIS AGREEMENT is entered into by and among Tenant, Landlord, and
Beneficiary and affects the Property described in Exhibit "A" attached hereto.
The terms "Tenant," "Landlord," "Beneficiary," "Premises," "Lease," "Property,"
"Loan," "Note," "Mortgage" are defined in the Schedule of Definitions attached
hereto as Exhibit "B." This Agreement is entered into with reference to the
following facts:
A. Landlord and Tenant have entered into the Lease covering the
Premises on the Property.
B. Beneficiary has made the Loan to Landlord evidenced by the
Note, which Note is secured by the Mortgage covering the Property.
C. The parties hereto desire expressly to subordinate the Lease to
the lien of the Mortgage, it being a requirement of the Loan that the lien of
the Mortgage be unconditionally and at all times prior and superior to the
leasehold interests and estates created by the Lease.
D. Tenant has requested that Beneficiary agree not to disturb
Tenant's possessory rights in the Premises in the event Beneficiary should
foreclose the Mortgage; provided that Tenant attorns to Beneficiary or the
purchaser at any foreclosure or trustee's sale of the Property.
-1-
<PAGE> 98
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Subordination.
Notwithstanding anything to the contrary set forth in the Lease,
the Lease and the leasehold estate created thereby and all of Tenant's rights
thereunder shall be and shall at all times remain subject, subordinate and
inferior to the Mortgage and the lien thereof, and all rights of Beneficiary
thereunder and to any and all renewals, modifications, and extensions thereof.
2. Acknowledgement and Agreement by Tenant. Tenant acknowledges
and agrees that:
(a) Beneficiary, in making any disbursements to Landlord, is
under no obligation or duty to oversee or direct the application of the proceeds
of such disbursements.
(b) Tenant will not terminate or cancel the Lease or the term
thereof or claim partial or total eviction by reason of a default by Landlord
thereunder unless and until (i) Tenant has given written notice of such act or
omission to Landlord and Beneficiary, (ii) Landlord has failed to remedy such
act or omission within the applicable cure period set forth in the Lease and
(iii) beneficiary has failed to remedy such act or omission within thirty (30)
days after the expiration of Landlords cure period for such act or omission;
provided, however, that if such remedy cannot be reasonably completed within
such thirty (30) day period and Beneficiary begins such remedy within such
thirty (30) day period and diligently prosecutes such remedy to completion,
Tenant shall have no right to cancel or terminate the Lease. Beneficiary's cure
periods shall be subject to extension for "Force Majeure" delays, which shall
include any acts of God, riot or civil commotion, strikes, governmental
preemption, priorities or other controls in connection with a national or other
public emergency, or shortages or fuel, supplies or labor resulting therefrom,
or any other cause of any kind whatsoever which is beyond Beneficiary's
reasonable control.
(c) Tenant has notice that the Lease and the rent and all other
sums due thereunder have been assigned or are to be assigned to Beneficiary as
security for the Loan secured by the Mortgage. In the event that Beneficiary,
in accordance with Section 6 hereof, notifies Tenant in writing of a default
under the Mortgage and demands that Tenant pay its rent and all other sums due
under the Lease to Beneficiary, Tenant shall honor such demand and pay its rent
and all other sums due under the Lease directly to beneficiary.
-2-
<PAGE> 99
(d) This Agreement satisfies any condition or requirement
in the Lease relating to the granting of a non-disturbance agreement.
3. Foreclosure and Sale.
(a) If the interests of Landlord under the Lease are
acquired by Beneficiary, by any person acting by, through or on behalf of
Beneficiary, or by any purchaser by foreclosure, by deed in lieu of foreclosure
or otherwise (collectively, "Beneficiary's Successor"): (i) the Lease shall not
terminate nor shall Tenant's right of possession be disturbed so long as Tenant
is not in default under the Lease beyond any notice or applicable grace period,
(ii) except as set forth in this Agreement, all rights of Tenant under the
Lease, including but not limited to the right to use and occupy the premises
described therein at the rental and upon the terms and conditions set forth in
the Lease and the right to exercise and enjoy all expansion and extension
options contained therein, shall continue in full force and effect and shall not
be terminated or affected in any way; (iii) Tenant shall be bound to Beneficiary
or Beneficiary's Successor under all the terms, covenants and conditions of the
Lease with the same force and effect as if Beneficiary or Beneficiary's
Successor were named landlord under the Lease; and (iv) Tenant shall attorn to
Beneficiary or Beneficiary's Successor as its Landlord, said attornment to be
effective and self-operative immediately upon Beneficiary or Beneficiary's
Successor succeeding to the interest of Landlord under the Lease without the
execution of any other instruments on the part of any party hereto.
(b) If Beneficiary or Beneficiary's Successor succeeds to
the interest of Landlord under the Lease, (herein a "Successor Landlord") such
party shall be bound to Tenant under all of the terms, covenants and conditions
of the Lease, including, without limitation, the rental and other sums payable
by Tenant thereunder, and Tenant shall, from and after such party's succession
to the interests of Landlord under the Lease, have the same rights under the
Lease and the same remedies against such party for the breach of the Lease that
Tenant would have had under the Lease against Landlord if such party had not
succeeded to the interests of Landlord; provided, however, that if such interest
is acquired by Beneficiary or Beneficiary's Successor, such party shall not be:
(i) liable for, or subject to any defenses or
enforcement of remedies based on any act or omission of a prior landlord
(including Landlord), provided, however that the foregoing shall not relieve
Successor Landlord of any liability arising by reason of its acts or omissions
from and after the date of its succeeding to the interest of Landlord under the
Lease, including a continuation of the failure of a prior landlord (including
Landlord) to perform its obligations under the Lease, in which case, the
Successor Landlord upon receipt of
-3-
<PAGE> 100
notice of such continuation from Tenant, shall have a reasonable period of time
to remedy same, which period shall not in any event be less than the period
provided Landlord under the Lease to remedy such failure or thirty (30) days,
whichever is longer, and shall be subject to delays for Force Majeure events;
or
(ii) subject to any offsets which Tenant might have
against any prior landlord (including Landlord); or
(iii) bound by any rent or additional rent which
Tenant might have paid in advance to any prior landlord (including Landlord) for
a period in excess of one month or other prepaid charge which Tenant might have
paid in advance to any prior landlord (including Landlord) for a period in
excess of one (1) month; or
(iv) bound by any agreement, modification, or
surrender of the Lease, without the written consent of Beneficiary, except for
the Lease itself and the following agreements or modifications which may be
entered into between Landlord and Tenant without Beneficiary's consent: (A)
amendments to the Lease which are expressly entered into pursuant to the
provisions of the Lease (B) amendments to the Lease of an administrative nature
relating to the ordinary course of operation or tenancy of the Premises that do
not materially and adversely affect the rights of Landlord, Beneficiary,
Beneficiary's Successor or Successor Landlord; or
(v) bound by any obligation of any landlord
(including Landlord) to make any payment to Tenant or to undertake or complete
any construction of any portion of the Premises or Property or be subject to any
offset, defense or enforcement of remedies arising from the failure of any
landlord (including Landlord) to do so, except that Successor Landlord shall be
liable for the timely return of any security deposit or other deposit actually
received by Successor Landlord and the payment to Tenant of any unpaid portion
of the Reimbursement Amount (as defined in the Lease) to the extent (a) Tenant
has notified Successor Landlord of Landlord's failure to pay such sum in
accordance with the terms of the Lease and (b) to the extent Tenant is due such
sum in accordance the terms of the Lease; or
(vi) obligated to repair, restore, replace or rebuild
any portion of the Premises in the case of damage or destruction of the Premises
or any part thereof due to fire or other casualty or to the effects of a taking
of a part of the Premises by exercise of power of eminent domain, beyond such
repair, restoration, replacement, or rebuilding which can reasonably be
accomplished from the net proceeds of any insurance or the net proceeds of any
condemnation award, as the case may be, actually received by or made available
to Successor Landlord.
4. Acknowledgement and Agreement by Landlord. Landlord, as
landlord under the Lease and mortgagor or trustee under the
-4-
<PAGE> 101
Mortgage, acknowledges and agrees for itself and its heirs, successors and
assigns that:
(a) This Agreement does not:
(i) constitute a waiver by Beneficiary of any of
its rights under the Mortgage; and/or
(ii) in any way release Landlord from its
obligations to comply with the terms, provisions, conditions, covenants,
agreements and clauses of the Mortgage;
(b) The provisions of the Mortgage remain in full force and
effect and must be complied with by Landlord; and
(c) In the event Beneficiary requires that Tenant pay its
rent to the Beneficiary, Tenant shall be authorized to do so without
investigating the propriety of the demand and shall in no event be liable to
Landlord for any rent it pays to the Beneficiary pursuant to such demand.
5. Agreement of Beneficiary. Beneficiary agrees and covenants,
provided Tenant is not in default beyond the applicable grace period provided
for in the Lease that:
(a) Tenant shall not be joined as an adverse or party
defendant in any action or proceeding which may be instituted or commenced by
Beneficiary to foreclose or enforce the Mortgage unless such joinder is
required by law, provided that such joinder shall not result in the termination
of the Lease or disturb the possession or use of the Premises by Tenant.
(b) Tenant shall not be evicted from the Premises nor shall
any of Tenant's rights under the Lease be affected or disturbed in any way by
reason of this subordination or any modifications of or default under the
Mortgage.
6. No Default. Beneficiary hereby represents that, as of the date
hereof, Landlord is current on all payments due Beneficiary under the Loan and
that no notice of default under the Loan has been sent to Landlord.
7. Notice.
Any notice, demand or request required hereunder shall be given
in writing (at the addresses set forth in Exhibit B attached hereto), by any of
the following means: (a) personal service; (b) telecopying; (c) United States
registered or certified, first class mail, return receipt requested, or (d)
recognized overnight courier service. Such addresses may be changed by notice
to the other parties given in the same manner as provided above. Any notice,
demand or request sent pursuant to either subsection (a) or (b) of this Section
6 shall be deemed received upon such personal service or upon dispatch by
-5-
<PAGE> 102
electronic means with an electronic confirmation of receipt, and, if sent
pursuant to either subsection (c) or (d) shall be deemed received upon
delivery.
8. Miscellaneous.
(a) This Agreement sets forth the entire agreement among the
parties hereto concerning the subject matter hereof and there are no other
agreements, contracts, promises, obligations or conditions by or among the
parties hereto concerning the subject matter hereof, except as expressly set
forth herein.
(b) Except as set forth herein, Beneficiary shall have no
obligations nor incur any liability with respect to any warranties of any nature
whatsoever, whether pursuant to the Lease or otherwise, including, without
limitation, any warranties respecting use, compliance with zoning, Landlord's
title, Landlord's authority, habitability, fitness for purpose or possession.
(c) In the event that Beneficiary shall acquire title to
the Premises or the Property, Beneficiary shall have no obligation, nor incur
any liability, beyond Beneficiary's then equity interest, if any, in the
Premises, and Tenant shall look exclusively to such equity interest of
Beneficiary, if any, in the Premises for the payment and discharge of any
obligations imposed upon Beneficiary hereunder or under the Lease, and
Beneficiary is hereby released and relieved of any other obligations hereunder
and under the Lease.
(d) This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and assigns;
provided however, that in the event of the assignment or transfer of the
interest of Beneficiary, then upon the express written assumption by the
assignee or transferee of Beneficiary's obligations hereunder, all obligations
and liabilities of Beneficiary under this Agreement accruing after the effective
date of the assignment or transfer shall terminate, and thereupon all such
obligations and liabilities shall be the responsibility of the party to whom
Beneficiary's interest is assigned or transferred.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
-6-
<PAGE> 103
(f) Until written demand is made by Beneficiary to Tenant in
accordance with the second sentence of Section 2(c) above, all rents and other
sums payable by Tenant under the Lease shall be payable to Landlord. Tenant
shall not be liable to Landlord for the sums paid to Beneficiary pursuant to
such demand.
IN WITNESS WHEREOF, the parties have executed this Subordination,
Non-Disturbance and Attornment Agreement as of _____________________, 199_.
LANDLORD:
MAGUIRE/THOMAS PARTNERS-WESTLAKE/SOUTHLAKE PARTNERSHIP
A Texas General Partnership
By: MAGUIRE/THOMAS PARTNERS--DALLAS, LTD.
a California limited partnership
General Partner
By: MAGUIRE/THOMAS PARTNERS, INC.
a California Corporation
General Partner
By:
---------------------------------
Its:
-----------------------------
By: INTERNATIONAL BUSINESS MACHINES CORPORATION
a New York Corporation
General Partner
By:
----------------------------------
Its:
------------------------------
-7-
<PAGE> 104
TENANT:
AMERICAN AIRLINES, INC.
a Delaware corporation
By:
------------------------------
Its
---------------------------
BENEFICIARY:
THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY,
AS COLLATERAL AGENT FOR THE SUMITOMO BANK,
LIMITED, NEW YORK BRANCH
By:
------------------------------
Its
---------------------------
-8-
<PAGE> 105
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of MAGUIRE/THOMAS PARTNERS, INC., personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of INTERNATIONAL BUSINESS MACHINES, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
-9-
<PAGE> 106
STATE OF CALIFORNIA }
} ss.
COUNTY OF LOS ANGELES }
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of AMERICAN AIRLINES, INC., personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
STATE OF CALIFORNIA }
} ss.
COUNTY OF LOS ANGELES }
On _________________ before me, ___________________________, a Notary
Public in and for said County and State, personally appeared _________________,
of THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY, AS COLLATERAL AGENT FOR THE
SUMITOMO BANK, LIMITED, NEW YORK BRANCH, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
- ----------------------------------
Signature of Notary
[SEAL]
-10-
<PAGE> 107
EXHIBIT "A" TO SUBORDINATION AGREEMENT
REAL PROPERTY DESCRIPTION
Lot 1, Block B, of MTP-IBM Addition No. 1, City of Southlake, Texas, as filed
in Volume 388-211, Page 68-69 of the Map and Plat Records of Tarrant County,
Texas, and in Cabinet G, Page 208 of the Map and Plat Records of Denton County,
Texas.
A-1
<PAGE> 108
EXHIBIT "B" TO SUBORDINATION AGREEMENT
SCHEDULE OF DEFINITIONS
"Beneficiary" shall mean The Sumitomo Bank, Limited, Houston Agency, as
collateral agent for The Sumitomo Bank, Limited, New York Branch. Beneficiary's
address for notice purposes is as follows:
The Sumitomo Bank, Limited, Houston Agency
Nations Bank Center
Suite 1750
700 Louisiana
Houston, TX 77002
with a copy to:
The Sumitomo Bank, Limited, New York Branch
277 Park Avenue
New York, NY 10172
Attn: Manager, Structured Finance Department
"Mortgage" shall mean a Phase 1A Second Deed of Trust, Security
Agreement, Assignment of Rents and Financing Statement dated as of September 1,
1987, encumbering the Property, executed by Landlord, as Mortgagor, to Robert
Rendell, an individual, as trustee, in favor of Beneficiary, securing repayment
of the Loan evidenced by the Note, recorded in the records of Tarrant County,
Texas and Denton County, Texas.
"Landlord" shall mean Maguire/Thomas Partners-Westlake/Southlake
Partnership, a partnership. Landlord's address for notice purposes is as
follows:
355 South Grand Avenue, Suite 4500
Los Angeles, CA 90071
Attn: President
"Lease" shall mean that certain Office Lease Agreement relating to the
Property, entered into by and among Landlord and Tenant, dated as of
___________, 199____.
"Loan" shall mean a loan in an amount up to $217,000,000, from The
Sumitomo Bank, Limited, New York Branch, to Landlord, pursuant to and for all
purposes set forth in that certain Secured Letter of Credit and Revolving
Credit Agreement dated as of August 15, 1986, by and between Landlord and The
Sumitomo Bank, Limited, New York Branch, as amended, which loan is secured by,
among other things, a first lien Master Deed of Trust, Security Agreement,
Assignment of Rents, and Financing Statement dated as of August 15, 1986,
encumbering certain other property owned by Landlord, executed by Landlord, as
Mortgagor, to Robert Rendell, an individual, as trustee, in favor of
Beneficiary, for
B-1
<PAGE> 109
the benefit of The Sumitomo Bank, Limited, New York Branch, securing repayment
of the Loan evidenced by the Note, recorded in the records of Tarrant County,
Texas, as amended.
"Note" shall mean that ceratin Euro-Dollar Note and that certain
Domestic Note executed by Landlord in favor of Beneficiary, each dated as of
August 27, 1986.
"Premises" shall have the same meaning as in the Lease.
"Property" shall mean the real property described in Exhibit "A"
attached hereto together with the improvements thereon.
"Tenant" shall mean American Airlines, Inc., a Delaware corporation.
Tenant's address for notice purposes is as set forth in the Lease.
B-2
<PAGE> 110
EXHIBIT "M"
HAZARDOUS SUBSTANCES
Except general office supplies typically used in an office area in the
ordinary course of business, including, without limitation copier toner, liquid
paper, glue, ink, and cleaning solvents, and cafeteria and kitchen products
including cleaning items and solvents (collectively, "General Office Supplies")
for use in the manner for which they were designed, and in such amounts as may
be normal for the office business operations conducted by Tenant in the Project
and in amounts which do not require a permit for such General Office Supplies
so long as Tenant properly secures and stores such General Office Supplies,
neither Tenant nor its agents, employees, contractors, licensees, sublessees,
assignees, or concessionaires shall use, handle, store, generate, release or
dispose of any Hazardous Substances in, on, under or about the Premises. If
any Hazardous Substances are used, stored, generated, or released or disposed
of on or in the Project by Tenant or Tenant's agents, employees or contractors
in violation of applicable laws, or if the Project becomes contaminated in any
manner by Tenant or Tenant's agents, employees, subtenants, invitees or
contractors, Tenant shall indemnify, defend and hold harmless Landlord from and
against any and all claims, damages, fines, judgments, attorneys fees,
penalties, costs, liabilities or losses arising during or after the Term of
this Lease and arising as a result of such contamination, release, spill or
discharge. This indemnification includes any and all reasonable and necessary
costs incurred because of any investigation of an environmental act for which
Tenant is responsible that requires any cleanup, remediation, removal or
restoration mandated by federal, state or local agency or political
subdivision.
Landlord shall indemnify, defend and hold harmless Tenant from and
against any and all other claims, damages, fines, judgments, attorneys fees,
penalties, costs, liabilities or losses arising during or after the term of
this Lease which relate to the presence of Hazardous Substances in violation of
applicable laws in the Project to the extent, but only to the extent, caused by
Landlord, its agents, employees, invitees or contractors. Neither indemnity
set forth in this Exhibit "M" shall abrogate or otherwise limit Landlord's or
Tenant's other rights and remedies at law or in equity which are not set forth
herein.
Tenant and Landlord will each notify the other immediately upon
learning that any duty described in this Exhibit "M" of the Lease has been
violated; that there has been a release, discharge or disposal of any Hazardous
Substance on or about the Project; or that the Project is subject to any third
party claim or action, or threat thereof, because of an environmental condition
in or originating from the Project or arising in connection with the operation
of Tenant's business. Upon written notice from Landlord
EXHIBIT M - Page 1
<PAGE> 111
to Tenant, and following a reasonable period of time, Landlord will have the
right to perform the removal and abatement of any Hazardous Substances from the
Project, and all costs of abatement or removal of such Hazardous Substances to
the extent, but only to the extent, mandated by federal, state or local agency
or political subdivision, including environmental consultant fees, will be paid
by Tenant to the extent such abatement or removal is caused by Tenant or
Tenant's agents, employees, contractors, subtenants, or invitees.
As used herein, the words "Hazardous Substances" mean and include any
hazardous or toxic substance, material or waste (including constituents
thereof) which is or becomes regulated by Governmental Authorities, including
any material or substance which is (a) listed or defined as a "hazardous
waste", "extremely hazardous waste", "restricted hazardous waste", "hazardous
substance" or "toxic substance" or words of similar import under the
Environmental Law, (b) petroleum and its byproducts, (c) asbestos, radon gas,
urea formaldehyde foam insulation, (d) polychlorinated biphenyl, or (e)
designated as a hazardous or toxic substance or waste or words of similar
import by the Environmental Law; except that, notwithstanding the foregoing or
any other provision in this Exhibit M to the contrary, the words "Hazardous
Substances" shall not mean or include (i) contamination caused by normal
application of pesticides, fungicides or other agricultural products; (ii)
groundwater or surface water contamination which is below levels which would be
actionable under the Laws where action levels have been stated; (iii) any
amount of hazardous substances released which is below the "reportable
quantity" for that substance as defined in 42 U.S.C. 9602; (iv) a hazardous
substance that is located on or in a motor vehicle; or (v) General Office
Supplies. As used herein, the words "Environmental Laws" mean the Federal
Water Pollution Control Act (33 U.S.C. Section 1317, et seq.), the Federal
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended (42 U.S.C. Section 9601 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601, et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801, et seq.) or the Federal Clean Air Act (42 U.S.C. Section
7401, et seq.), and other applicable Laws of local, state and federal
governmental and quasi-governmental agencies, departments, commissions, boards
or bureaus ("Governmental Authorities") relating, directly or indirectly, to
the storage, use, manufacture, generation, transportation, discharge (including
release) or disposal of Hazardous Substances.
In the case of Hazardous Substance related matters, this Exhibit "M"
supersedes all other provision of the Lease.
EXHIBIT M - Page 2
<PAGE> 112
EXHIBIT "N"
RELEASE OF LEASE AND WAIVER OF CLAIM
Maguire/Thomas Partners-Westlake/Southlake Partnership, as Landlord,
and American Airlines, Inc., as Tenant, entered into that certain lease (the
"Lease") dated _____________ for premises within the Southlake Building located
on certain land more particularly described as Lot 1, Block B, of MTP-IBM
Addition No. 1, City of Southlake, Texas as filed in Volume 388-211, Page 68-69
of the Map and Plat Records of Tarrant County, Texas, and in Cabinet G, Page
208 of the Map and Plat Records of Denton County, Texas. Landlord and Tenant
agree that the Lease has expired or has been terminated pursuant to its terms
and Tenant hereby waives any claim of further right to occupy any space
pursuant to the Lease and the Memorandum of Lease previously filed by the
parties is hereby released.
"Tenant"
American Airlines, Inc.
By:
-------------------------------
Its:
------------------------------
"Landlord"
Maguire/Thomas Partners-Westlake/Southlake
Partnership
By: Maguire/Thomas Partners-Dallas, Ltd.
a California limited partnership,
General Partner
By: Maguire/Thomas Partners, Inc.,
a California corporation
General Partner
By:
-----------------------------
Its:
----------------------------
EXHIBIT N - Page 1
<PAGE> 113
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ____ day of
__________, 199_, by ________________________, ________________ of AMERICAN
AIRLINES, INC., a Delaware corporation, on behalf of said corporation.
[S E A L]
------------------------------------
My commission expires: Notary Public, State of
-------------
- ------------------------------
------------------------------------
Notary's name printed
STATE OF CALIFORNIA )
)
COUNTY OF _________ )
This instrument was acknowledged before me on the ____ day of
______________, 199_, by ________________________, ________________ of
Maguire/Thomas Partners, Inc., a California corporation, general partner of
Maguire/Thomas Partners - Dallas, Ltd., a California limited partnership,
general partner of Maguire/Thomas Partners - Westlake/Southlake Partnership, a
Texas general partnership, on behalf of such corporation as general partner of
such limited partnership as general partner of such general partnership.
[S E A L]
-------------------------------------
My commission expires: Notary Public, State of
--------------
- ------------------------------
-------------------------------------
Notary's name printed
EXHIBIT N - Page 2
<PAGE> 114
EXHIBIT "O"
MEMORANDUM OF LEASE
STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS THAT:
COUNTY OF TARRANT )
THIS MEMORANDUM OF LEASE AGREEMENT made this ___ day of _________,
1996, by and between MAGUIRE/THOMAS PARTNERS - WESTLAKE/SOUTHLAKE PARTNERSHIP
("Landlord") and AMERICAN AIRLINES, INC. ("Tenant"), for the purpose of setting
forth of record in Tarrant County, Texas, the fact that the undersigned
Landlord and Tenant have entered into a Office Lease Agreement (the
"Agreement") providing for the lease by Tenant from Landlord of certain office
space in a building located at 1 East Kirkwood Boulevard in the City of
Southlake, located in Tarrant County, Texas as more fully described on the
Exhibit A attached hereto and made a part hereof. Subject to the terms and
conditions of the Agreement, Landlord has agreed to grant to Tenant the rights
set forth therein.
The initial term of the Agreement expires on June 30, 2006. Subject
to the terms and conditions of the Agreement, Tenant may have up to two (2)
five year extensions of the initial term of the Agreement.
Copies of the Agreement are maintained at the following locations as
of the date of this Memorandum:
Landlord:
Maguire/Thomas Partners - Westlake/Southlake Partnership
Nine Village Circle, Suite 500
Westlake, Texas 76262
Tenant:
American Airlines, Inc.
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
Attn: Managing Director
Corporate Real Estate
WITNESS OUR HANDS this ___ day of January, 1996.
AMERICAN AIRLINES, INC.,
a Delaware corporation
By:
--------------------------------------------------
Printed Name:
----------------------------------------
Title:
-----------------------------------------------
EXHIBIT O - Page 1
<PAGE> 115
MAGUIRE/THOMAS PARTNERS - WESTLAKE/SOUTHLAKE
PARTNERSHIP, a Texas general partnership
By: Maguire/Thomas Partners - Dallas, Ltd., a
California limited partnership, general
partner
By: Maguire/Thomas Partners, Inc., a
California corporation, general
partner
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the ____ day of
______________, 199_, by ________________________, ________________ of AMERICAN
AIRLINES, INC., a Delaware corporation, on behalf of said corporation.
[S E A L]
-------------------------------------
My commission expires: Notary Public, State of
-------------
- -------------------------------
-------------------------------------
Notary's name printed
STATE OF CALIFORNIA )
)
COUNTY OF _________ )
This instrument was acknowledged before me on the ____ day of
______________, 199_, by ________________________, ________________ of
Maguire/Thomas Partners, Inc., a California corporation, general partner of
Maguire/Thomas Partners - Dallas, Ltd., a California limited partnership,
general partner of Maguire/Thomas Partners - Westlake/Southlake Partnership, a
Texas general partnership, on behalf of such corporation as general partner of
such limited partnership as general partner of such general partnership.
[S E A L]
-------------------------------------
My commission expires: Notary Public, State of
-------------
- -------------------------------
-------------------------------------
Notary's name printed
EXHIBIT O - Page 2
<PAGE> 116
After recording
return to:
Ed Walts
P.O. Box 50100
Dallas, Texas 75250
EXHIBIT O - Page 3
<PAGE> 117
EXHIBIT "A"
Lot 1, Block B, of MTP-IBM Addition No. 1, City of Southlake, Texas, as filed
in Volume 388-211, Page 68-69 of the Map and Plat Records of Tarrant County,
Texas, and in Cabinet G, Page 208 of the Map and Plat Records of Denton County,
Texas.
EXHIBIT O - Page 4
<PAGE> 118
[L1- MAP OF SALAMA/SOUTHLAKE - TENANT BUILD-OUT DOCUMENTS - FLOOR SPACE]
EXHIBIT 'A'
Page 1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
THE SABRE GROUP HOLDINGS, INC.
THE SABRE GROUP HOLDINGS, INC. SUBSIDIARIES
(EACH SUBSIDIARY'S SUBSIDIARIES OUTLINED FURTHER BELOW)*
The SABRE Group, Inc. (Delaware)
THE SABRE GROUP, INC. SUBSIDIARIES*
Axess International Network, Inc. (Japan) (25%)
ENCOMPASS Holding, Inc. (Delaware)
Prize Ltd. (Latvia) (50%)
SABRE Decision Technologies International, Inc. (Delaware)
SABRE Decision Technologies Licensing, Inc. (Delaware)
SABRE International Holdings, Inc. (Delaware)
SABRE International, Inc. (Delaware)
SST Finance, Inc. (Delaware)
SST Holding, Inc. (Delaware)
TSGL, Inc. (Delaware)
Ticketnet Corporation (Canada)
ENCOMPASS HOLDING, INC. SUBSIDIARY*
ENCOMPASS (partnership) (50%)
SABRE DECISION TECHNOLOGIES INTERNATIONAL, INC. SUBSIDIARY*
SABRE Decision Technologies (Australia) Pty Ltd.
SABRE INTERNATIONAL, INC. SUBSIDIARIES*
SABRE Belgium (Belgium) (99%)
SABRE Computer-Reservierungssystem GmbH (Austria)
SABRE Danmark ApS (Denmark)
SABRE Deutschland Marketing GmbH (Germany)
SABRE Deutschland Services GmbH (Germany)
SABRE Espana Marketing, S.A. (Spain) (99%)
SABRE Europe Management Services Ltd. (UK) (99%)
SABRE France Sarl (France)
SABRE Hellas SA (Greece)
SABRE Ireland Limited (Ireland)
<PAGE> 2
SABRE INTERNATIONAL, INC. SUBSIDIARIES* - CONTINUED
SABRE Italia S.r.l. (Italy) (99%)
SABRE Marketing Nederland B.V. (The Netherlands)
SABRE Norge AS (Norway) SABRE Portugal Servicos Lda (Portugal) (99%)
SABRE Servicios Colombia LTDA (Colombia) (99%)
SABRE Suomi Oy (Finland)
SABRE Sverige AB (Sweden)
SABRE UK Marketing Ltd. (UK) (99%)
STIN Luxembourg S.A. (Luxembourg) (99%)
SABRE INTERNATIONAL HOLDINGS, INC. SUBSIDIARIES*
SABRE Belgium (Belgium) (1%)
SABRE Espana Marketing, S.A. (Spain) (1%)
SABRE Europe Management Services Ltd. (UK) (1%)
SABRE Italia S.r.l. (Italy) (1%)
SABRE Portugal Servicos LDA (Portugal) (1%)
SABRE Servicios Colombia LTDA (Colombia) (1%)
SABRE UK Marketing Ltd. (UK) (1%)
STIN Luxembourg SA (Luxembourg) (1%)
SST HOLDING, INC. SUBSIDIARY*
SABRE Sociedad Technologica S.A. (Mexico) (50%)
SABRE SOCIEDAD TECHNOLOGICA S.A. SUBSIDIARY*
SABRE Services Administration (Mexico)
TSGL, INC. SUBSIDIARIES*
TSGL Holding, Inc. (Delaware)
TSGL-SCS, Inc. (Delaware)
TICKETNET CORPORATION SUBSIDIARY*
148548 Canada, Inc. (Canada)
* All subsidiaries are wholly-owned unless otherwise noted in parenthesis.
<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 Registration Statement on Form S-1 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
August 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM CONSOLIDATED
BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND STOCKHOLDER'S NET
INVESTMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1
REGISTRATION STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 94,861 187,089
<SECURITIES> 0 0
<RECEIVABLES> 143,794 214,004
<ALLOWANCES> 4,822 4,307
<INVENTORY> 0 0
<CURRENT-ASSETS> 271,223 449,578
<PP&E> 970,267 879,986
<DEPRECIATION> 589,549 533,740
<TOTAL-ASSETS> 729,406 855,821
<CURRENT-LIABILITIES> 218,585 225,756
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 432,137 551,187
<TOTAL-LIABILITY-AND-EQUITY> 729,406 855,821
<SALES> 0 0
<TOTAL-REVENUES> 1,529,616 838,289
<CGS> 0 0
<TOTAL-COSTS> 1,041,475 576,599
<OTHER-EXPENSES> 107,717 64,101
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 370,075 195,190
<INCOME-TAX> 144,224 76,140
<INCOME-CONTINUING> 225,851 119,050
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 225,851 119,050
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
