<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 1-12175.
Sabre Holdings Corporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 75-2662240
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
</TABLE>
Registrant's telephone
number, including area code (817) 963-6400
The Sabre Group Holdings, Inc.
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No ___.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class A Common Stock, $.01 par value - 22,207,146 as of August 10, 1999
Class B Common Stock, $.01 par value - 107,374,000 as of August 10, 1999
<PAGE> 2
INDEX
SABRE HOLDINGS CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and December 31, 1998
Consolidated Statements of Income - Three and six months ended June
30, 1999 and 1998
Condensed Consolidated Statement of Stockholders' Equity -- Six
months ended June 30, 1999
Consolidated Statements of Cash Flows -- Six months ended June 30,
1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SABRE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 12,816 $ 8,008
Short-term investments 308,214 529,735
Accounts receivable, net 362,679 337,703
Receivable from affiliates, net 45,103 21,609
Prepaid expenses 28,182 21,559
Deferred income taxes 27,459 25,790
Total current assets 784,453 944,404
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements 329,990 329,497
Furniture, fixtures and equipment 43,005 40,286
Service contract equipment 545,040 550,951
Computer equipment 480,017 460,530
1,398,052 1,381,264
Less accumulated depreciation and
amortization (789,954) (737,488)
Total property and equipment 608,098 643,776
Investments in joint ventures 152,712 148,683
Deferred income taxes 1,677 ---
Other assets, net 321,259 189,954
TOTAL ASSETS $ 1,868,199 $ 1,926,817
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $136,728 $ 157,044
Accrued compensation and related benefits 73,708 93,708
Other accrued liabilities 280,939 150,058
Total current liabilities 491,375 400,810
Deferred income taxes --- 13,068
Pensions and other postretirement benefits 117,989 104,574
Other liabilities 166,527 136,749
Debenture payable to AMR --- 317,873
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value; 20,000
shares authorized; no shares issued --- ---
Common stock:
Class A: $0.01 par value; 250,000 shares
authorized; 23,798 and 23,706 shares
issued, respectively 238 237
Class B: $0.01 par value; 107,374 shares
authorized; 107,374 shares issued and
outstanding 1,074 1,074
Additional paid-in capital 600,676 599,087
Retained earnings 551,337 395,800
Less treasury stock at cost; 1,438 and
1,240 shares, respectively (61,017) (42,455)
Total stockholders' equity 1,092,308 953,743
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,868,199 $1,926,817
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES
Electronic Travel
Distribution $388,062 $338,513 $769,170 $683,542
Information Technology
Solutions 250,757 238,061 507,756 447,131
Total revenues 638,819 576,574 1,276,926 1,130,673
OPERATING EXPENSES
Cost of revenues
Electronic Travel
Distribution 250,661 221,041 503,427 448,322
Information Technology
Solutions 228,291 200,064 447,110 366,028
Selling, general and
administrative 63,919 46,218 118,373 92,605
Total operating expenses 542,871 467,323 1,068,910 906,955
OPERATING INCOME 95,948 109,251 208,016 223,718
OTHER INCOME (EXPENSE)
Interest income 8,203 5,493 15,308 12,330
Interest expense (4,496) (4,812) (9,706) (9,597)
Other - net 57 (14) 34,944 191
Total other income (expense) 3,764 667 40,546 2,924
INCOME BEFORE PROVISION FOR
INCOME TAXES 99,712 109,918 248,562 226,642
Provision for income taxes 36,249 41,395 92,370 86,331
NET EARNINGS $ 63,463 $ 68,523 $ 156,192 $ 140,311
EARNINGS PER COMMON SHARE DATA
Earnings per common
share, basic $ .49 $ .53 $ 1.20 $ 1.08
Earnings per common
share, diluted $ .48 $ .52 $ 1.19 $ 1.07
Common shares used in per
share calculations
Basic 129,692 130,056 129,725 130,215
Diluted 131,158 130,757 130,900 130,831
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 5
SABRE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999
(Unaudited) (In thousands)
<TABLE>
<CAPTION>
Class A Class B Additional
Common Common Paid-in Retained Treasury
Stock Stock Capital Earnings Stock
<S> <C> <C> <C> <C> <C>
Balance at December
31, 1998 $ 237 $ 1,074 $ 599,087 $ 395,800 $ (42,455)
Net earnings --- --- --- 156,192 ---
Issuance of Class A
Common Stock pursuant
to stock option,
restricted stock
incentive, stock
purchase and career
equity plans 1 --- (2,418) --- 12,982
Tax benefit from exercise
of employee stock options --- --- 4,007 --- ---
Repurchase of Company stock --- --- --- --- (31,544)
Unrealized loss on
investments, net of
deferred taxes --- --- --- (655) ---
Balance at June 30, 1999 $ 238 $ 1,074 $ 600,676 $ 551,337 $(61,017)
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 6
SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $156,192 $140,311
Adjustments to reconcile net earnings to cash
provided by operating activities
Depreciation and amortization 145,623 120,935
Deferred income taxes (12,001) (13,550)
Gain on sale of other investments (34,828) ---
Other (1,086) 3,094
Changes in operating assets and liabilities
Accounts receivable (21,628) (98,059)
Prepaid expenses (11,188) (4,243)
Other assets (6) 1,956
Accrued compensation and related benefits (20,000) (3,115)
Accounts payable and other accrued
liabilities (6,437) 31,828
Receivable from and payable to affiliates (23,501) (17,417)
Pensions and other postretirement benefits 13,415 11,513
Other liabilities 12,176 115
Cash provided by operating activities 196,731 173,368
INVESTING ACTIVITIES
Additions to property and equipment (85,570) (194,467)
Net decrease in short-term investments 220,358 206,551
Loan to affiliate (300,000) ---
Proceeds from sale of other investments 34,828 ---
Net investments in joint ventures 1,413 (137,590)
Other investing activities, net (23,892) (21,700)
Cash used for investing activities (152,863) (147,206)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,035 669
Proceeds from exercise of stock options 8,322 3,344
Purchases of treasury stock (29,779) (32,901)
Other financing activities, net (765) ---
Payment of Debenture payable to AMR (17,873) ---
Cash used for financing activities (39,060) (28,888)
Increase (decrease) in cash 4,808 (2,726)
Cash at beginning of the period 8,008 11,286
Cash at end of the period $12,816 $ 8,560
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 7
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL INFORMATION
Effective July 30, 1999, the name of the corporation was changed
from The Sabre Group Holdings, Inc. to Sabre Holdings Corporation.
Sabre Holdings Corporation is a holding company. Its sole direct
subsidiary is Sabre Inc., formerly The Sabre Group, Inc., which is
the successor to the businesses of The Sabre Group which were
previously operated as subsidiaries or divisions of American
Airlines, Inc. ("American") or AMR Corporation ("AMR"). The Sabre
Group was formed by AMR to capitalize on synergies of combining
AMR's information technology businesses under common management.
Unless otherwise indicated, references herein to the "Company"
include Sabre Holdings Corporation and its consolidated
subsidiaries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying unaudited consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, these financial statements contain all adjustments,
consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows
for the periods indicated. The preparation of financial statements
in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results may differ from these estimates. The
Company's quarterly financial data should be read in conjunction
with the consolidated financial statements of the Company for the
year ended December 31, 1998 (including the notes thereto), set
forth in The Sabre Group Holdings, Inc. Annual Report on Form 10-K.
RECLASSIFICATIONS - Certain reclassifications have been made to
the 1998 financial statements to conform to the 1999 presentation.
3. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income.
Statement 130 establishes rules for the reporting and display of
comprehensive income and its components. For the three and six
months ended June 30, 1999 and 1998, the differences between net
earnings and total comprehensive income were not material.
<PAGE> 8
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per common share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months Six months ended
ended June 30,
June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and
diluted earnings per
common share - net
earnings $ 63,463 $ 68,523 $ 156,192 $ 140,311
Denominator:
Denominator for basic
earnings per common
share - weighted-average
shares 129,692 130,056 129,725 130,215
Dilutive effect of stock
awards and options 1,466 701 1,175 616
Denominator for diluted
earnings per common
share - adjusted
weighted-average shares 131,158 130,757 130,900 130,831
Basic earnings per common
share $ .49 $ .53 $ 1.20 $ 1.08
Diluted earnings per
common share $ .48 $ .52 $ 1.19 $ 1.07
</TABLE>
5. SEGMENT REPORTING
The Company has two reportable segments: electronic travel
distribution and information technology solutions. The electronic
travel distribution segment distributes travel services to travel
agencies, corporate travel departments and individual consumers
("subscribers"). Through the Company's global distribution system,
subscribers can access information about and book reservations with
airlines and other providers of travel and travel-related products
and services. The information technology solutions segment
provides information technology services including software
development and consulting, transaction processing and
comprehensive information technology outsourcing to the travel and
transportation industries. The Company's reportable segments are
strategic business units that offer different products and services
and are managed separately because each business requires different
market strategies.
<PAGE> 9
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Selected information for the Company's two reportable segments for
the three and six months ended June 30, 1999 and June 30, 1998
follows (in thousands):
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues from external
customers:
Electronic Travel
Distribution $ 382,206 $ 336,983 $ 760,622 $ 680,579
Information Technology
Solutions 250,757 238,061 507,756 447,131
Total $ 632,963 $ 575,044 $1,268,378 $1,127,710
Equity in net income of
equity method
investees:
Electronic Travel
Distribution $ 5,856 $ 1,530 $ 8,548 $ 2,963
Operating income:
Electronic Travel
Distribution $ 100,058 $ 87,786 $ 194,072 $ 174,696
Information Technology
Solutions (2,054) 20,346 12,373 47,284
Net Corporate allocations (2,056) 1,119 1,571 1,738
Total $ 95,948 $ 109,251 $ 208,016 $ 223,718
</TABLE>
6. SIGNIFICANT TRANSACTIONS
At December 31, 1998, American owned approximately 3.1 million
depository certificates representing beneficial ownership of common
stock of Equant N.V. ("Equant"), a telecommunications company
affiliated with Societe Internationale de Telecommunications
Aeronatiques ("SITA"). Approximately 1.7 million of these
depository certificates were held by American for the economic
benefit of the Company.
In connection with a secondary offering of Equant common stock, in
February 1999, American liquidated approximately 923,000 depository
certificates. Approximately 490,000 of these certificates,
representing approximately 30% of the Company's interest at
December 31, 1998, were liquidated for the Company's benefit. The
Company received proceeds of approximately $35 million from the
transaction, resulting in a gain of approximately $35 million.
In July 1999, Equant officially notified the Company and American
of a reallocation, which had been previously anticipated, of
depository certificates among SITA members. Due to the Company's
significantly higher usage of the SITA network over the last four
years, the Company's interests in Equant increased substantially.
The reallocation was effective as of June 30, 1999. Accordingly,
as of that date, the number of depository certificates held by
American for the economic benefit of the Company increased to
approximately 3.5 million. At June 30, 1999, the estimated value of
these certificates was approximately $329 million based upon the
market value of Equant's publicly-traded common stock.
The Company's carrying value of these depository certificates was
nominal at June 30, 1999 and December 31, 1998. Any future disposal
of such depository certificates may result in additional gains to
the Company.
<PAGE> 10
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
On March 17, 1999, the Company and American entered into a short-
term credit agreement pursuant to which American could borrow from
the Company up to a maximum of $300 million. During the first half
of 1999, American borrowed $300 million under the short-term credit
agreement. As part of this agreement, the original credit
agreement entered into on July 1, 1996 between the Company and
American was modified to terminate American's ability to borrow
additional funds under that agreement. Subsequently, in June 1999,
the Company, AMR and American entered into an omnibus financing
agreement pursuant to which (a) the $300 million outstanding from
American under the short-term credit agreement was applied against
the $318 million debenture payable from the Company to AMR; (b) the
Company paid in June 1999 the remaining principal balance,
approximately $18 million, and all outstanding accrued interest
under the debenture; and (c) the Company and American renewed,
extended and reinstated American's ability to borrow funds under
the original credit agreement for an additional year to June 30,
2000. The renewed credit agreement allows the Company to borrow up
to $300 million and American to borrow up to $100 million to meet
short-term working capital requirements.
7. STOCK OPTIONS - US AIRWAYS, INC.
In January 1998, the Company entered into an information technology
services agreement with US Airways, Inc. ("US Airways"). In
connection with the agreement, the Company granted to US Airways
two tranches of stock options, each to acquire 3 million shares of
the Company's Class A Common Stock. The first tranche of options
became exercisable on June 30, 1999 and will expire December 31,
1999. The Company has recorded current and long-term liabilities
and a related deferred asset equal to the number of options
outstanding multiplied by the difference between the exercise price
of the options and the market price of the Company's Class A Common
Stock. The asset and liability are adjusted for changes in the
market price of the Company's stock at each month-end. As of June
30, 1999, the Company has current and long-term liabilities
relating to these options of approximately $125 million each and a
net deferred asset of approximately $216 million. The deferred
asset is being amortized over the eleven-year non-cancelable
portion of the agreement. For the six months ended June 30, 1999,
the Company recorded amortization expense of approximately $25
million related to these options.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS
SUMMARY The Company generates its revenue from providing electronic
travel distribution services and information technology solutions
services. During the six months ended June 30, 1999, the Company
generated approximately 60.2% of its revenue from electronic travel
distribution services and approximately 39.8% of its revenue from
information technology solutions services. The following table sets
forth revenues by affiliation as a percent of total revenues:
<TABLE>
<CAPTION>
Three months Six months ended
ended June 30,
June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Affiliation:
Unaffiliated Customers 75.5% 74.2% 75.8% 73.6%
Affiliated Customers 24.5 25.8 24.2 26.4
Total 100.0% 100.0% 100.0% 100.0%
</TABLE>
The Company's operating margins were 16.3% and 19.8% for the six
months ended June 30, 1999 and 1998, respectively. Gross margins for
electronic travel distribution and information technology solutions
were 34.5% and 11.9%, respectively, for the six months ended June 30,
1999, and 34.4% and 18.1%, respectively, for the six months ended
June 30, 1998.
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
ELECTRONIC TRAVEL DISTRIBUTION. Electronic travel distribution
revenues for the three months ended June 30, 1999 increased
approximately $49 million, 14.5%, compared to the three months ended
June 30, 1998, from $339 million to $388 million. The increase in
revenues was primarily due to growth in booking fees from associates
from $304 million to $341 million. The growth in booking fees was
driven by an increase in booking volumes and an overall increase in
the average price per booking charged to associates due to a price
increase implemented in February 1999. The increase in booking fee
revenues was also partially driven by increases in bookings made
through the Company's Travelocity.com online travel site ("the
Travelocity.com site"). Other revenues increased approximately $12
million primarily due to services provided to, and equity income
related to, the Company's joint ventures and revenues from sales of
miscellaneous products and services.
Cost of revenues for electronic travel distribution increased
approximately $30 million, 13.6%, from $221 million to $251 million.
This increase was primarily attributable to increased subscriber
incentives, salaries and benefits expenses, data processing costs and
product development expenses. Subscriber incentive expenses increased
in order to maintain and expand the Company's travel agency subscriber
base and to respond to competitive pressures. Salaries and benefits
increased primarily due to annual salary increases and increased
benefits costs. Data processing costs increased due to the growth in
bookings and transactions processed. Product development expenses
increased in order to support Company growth initiatives.
INFORMATION TECHNOLOGY SOLUTIONS. Revenues from information
technology solutions for the three months ended June 30, 1999
increased approximately $13 million, 5.5%, compared to the three
months ended June 30, 1998, from $238 million to $251 million.
Revenues from unaffiliated customers increased approximately $10
million, primarily due to services performed under various information
technology outsourcing agreements signed during 1998. Revenues from
affiliated customers increased approximately $3 million, primarily due
to new systems development services performed for AMR, offset by a
decrease in Year 2000 services performed for AMR.
<PAGE> 12
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Cost of revenues for information technology solutions increased
approximately $28 million, 14.0%, from $200 million to $228 million.
This increase was primarily attributable to an increase in salaries,
benefits and depreciation and amortization expenses, partially offset
by a decrease in contract labor expenses. Salaries and benefits
increased due to an increase in the average number of employees
necessary to support the Company's business growth and annual salary
increases. The increase in depreciation and amortization expense is
primarily due to the amortization of the deferred asset associated
with the stock options granted to US Airways. Contract labor
expenses decreased due to a planned reduction in contract labor
headcount.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $18 million, 39.1%, from $46 million
to $64 million primarily due to an increase in salaries, benefits and
employee related costs, advertising and miscellaneous selling
expenses. Salaries, benefits and employee related costs increased as a
result of sales growth initiatives and increased administrative
requirements to support the Company's growth. Advertising and
miscellaneous selling expenses increased in order to support the
Company's growth initiatives.
OPERATING INCOME. Operating income decreased $13 million, 11.9%, from
$109 million to $96 million. Operating margins decreased from 18.9%
in 1998 to 15.0% in 1999 due to an increase in revenues of 10.8% while
operating expenses increased 16.2%. The decline in operating margin is
primarily due to amortization expense related to the deferred asset
associated with the stock options granted to US Airways, continuation
of lower margin migration and conversion efforts on the US Airways'
agreement and increased expenses incurred to grow the information
technology outsourcing business.
INTEREST INCOME. Interest income increased by $3 million due
primarily to interest earned on the short-term loan receivable from
American.
INCOME TAXES. The provision for income taxes was $36 million and $41
million for the three months ended June 30, 1999 and 1998,
respectively. The decrease in the provision for income taxes
corresponds with the decrease in net income before the provision for
income taxes and a lower effective tax rate due primarily to increased
foreign tax benefits.
NET EARNINGS. Net earnings decreased $6 million, 8.7%, from $69
million to $63 million, due to the decrease in operating income
partially offset by the increase in interest income.
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
ELECTRONIC TRAVEL DISTRIBUTION. Electronic travel distribution
revenues for the six months ended June 30, 1999 increased
approximately $85 million, 12.4%, compared to the six months ended
June 30, 1998, from $684 million to $769 million. The increase was
primarily due to growth in booking fees from associates from $612
million to $684 million. The growth in booking fees was driven by an
increase in booking volumes and an overall increase in the average
price per booking charged to associates due to a price increase
implemented in February 1999. The increase in booking fee revenues was
also partially driven by increases in bookings made through the
Travelocity.com site. Other revenues increased $13 million primarily
due to services provided to, and equity income related to, the
Company's joint ventures and revenues from sales of miscellaneous
products and services.
Cost of revenues for electronic travel distribution increased
approximately $55 million, 12.3%, from $448 million to $503 million.
This increase was primarily attributable to increases in subscriber
incentives, salaries, benefits and data processing costs. Subscriber
incentive expenses increased in order to maintain and expand the
Company's travel agency subscriber base and to respond to competitive
pressures. Salaries and benefits increased due primarily to annual
salary increases and increased benefit costs. Data processing costs
increased due to the growth in bookings and transactions processed.
<PAGE> 13
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
INFORMATION TECHNOLOGY SOLUTIONS. Revenues from information
technology solutions for the six months ended June 30, 1999 increased
approximately $61 million, 13.6%, compared to the six months ended
June 30, 1998, from $447 million to $508 million. Revenues from
unaffiliated customers increased approximately $60 million, primarily
related to services performed under the information technology
services agreement with US Airways and services performed under other
information technology outsourcing agreements signed during 1998.
Revenues from affiliated customers increased approximately $1 million
due to new systems development services performed for AMR, offset by a
decrease in Year 2000 services performed for AMR.
Cost of revenues for information technology solutions increased
approximately $81 million, 22.1% from $366 million to $447 million.
This increase was primarily attributable to an increase in salaries,
benefits and employee related costs and depreciation and amortization
expenses. Salaries, benefits and employee related costs increased due
to an increase in the average number of employees necessary to support
the Company's business growth and annual salary increases. The
increase in depreciation and amortization expense is primarily due to
amortization of the deferred asset associated with the stock options
granted to US Airways, as well as the acquisition of information
technology assets to support the US Airways' agreement and other
normal additions and replacements. These increases were partially
offset by a decrease in depreciation expense due to the sale of data
center mainframe equipment to an unrelated party in October 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $25 million, 26.9%, from $93 million
to $118 million primarily due to an increase in salaries, benefits and
employee related costs, advertising and miscellaneous selling
expenses. Salaries, benefits and employee related costs increased as
a result of sales growth initiatives and increased administrative
requirements to support the Company's growth. Advertising and
miscellaneous selling expenses increased in order to support the
Company's growth initiatives.
OPERATING INCOME. Operating income decreased $16 million, 7.1%, from
$224 million to $208 million. Operating margins decreased from 19.8%
in 1998 to 16.3% in 1999 due to an increase in revenues of 12.9% while
operating expenses increased 17.9%. The decline in operating margin
is primarily due to amortization expense related to the deferred asset
associated with the stock options granted to US Airways, continuation
of lower margin migration and conversion efforts on the US Airways'
agreement and increased expenses incurred to grow the information
technology outsourcing business.
INTEREST INCOME. Interest income increased $3 million due primarily
to interest earned on the short-term loan receivable from American.
OTHER INCOME (EXPENSE). Other income (expense) increased $35 million
due to a gain on the liquidation, in February 1999, of Equant
depository certificates held by American for the economic benefit of
the Company.
INCOME TAXES. The provision for income taxes was $92 million and $86
million for the six months ended June 30, 1999 and 1998, respectively.
The increase in the provision for income taxes corresponds with the
increase in net income before the provision for income taxes,
partially offset by a lower effective tax rate due primarily to
increased foreign tax benefits.
NET EARNINGS. Net earnings increased $16 million, 11.4%, from $140
million to $156 million, primarily due to the gain from Equant,
partially offset by the decrease in operating income.
<PAGE> 14
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
OUTLOOK FOR THE REMAINDER OF 1999
For the remaining six months of 1999, the Company expects steady
growth in electronic travel distribution revenues and bookings,
including additional growth in bookings through the Travelocity.com
site. The Company also anticipates continued pressure on subscriber
incentive expenses and intends to manage such expenses to keep them
in line with market share gains. Furthermore, the Company expects to
continue to invest in emerging distribution channels and product
development.
For the year ending December 31, 1999, the Company anticipates that
revenues from information technology solutions activities will be the
same as or slightly higher than revenues for 1998. Revenues from the
Company's largest existing outsourcing customers will likely be down
the remainder of 1999 compared to the prior year as revenues
generated from the performance of Year 2000 services decline and
services under the US Airways contract move into a steady-state.
Although the Company is pursuing additional technology outsourcing
agreements, the timing and anticipated revenue growth from any new
contracts are uncertain.
In an effort to balance costs with revenue growth, and as a result of
certain inefficiencies uncovered after the Company's March 1999
reorganization, the Company is reviewing a number of alternatives
aimed at strategically managing costs and improving operating margins
in the latter half of 1999. Such alternatives may result in
headcount reductions in certain areas, reduced spending on
discretionary items, and prioritization and streamlining of current
development projects in order to focus resources on those that
provide the best long-term solution. The Company intends to
implement such measures without compromising the service levels or
commitments to its existing customers or reducing sales and marketing
efforts to continue to grow the outsourcing business.
<PAGE> 15
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES
The Company had substantial liquidity at June 30, 1999, with
approximately $321 million in cash and short-term investments and $293
million in working capital. At December 31, 1998, cash and short-term
investments and working capital were $538 million and $544 million,
respectively. The Company invests cash in short-term marketable
securities, consisting primarily of certificates of deposit, bankers'
acceptances, commercial paper, corporate notes and government notes.
The Company has historically funded its operations through cash
generated from operations. The Company's cash provided by operating
activities of $197 million and $173 million for the six months ended
June 30, 1999 and 1998, respectively, was primarily attributable to
net earnings before noncash charges.
Capital investments for the six months ended June 30, 1999 and 1998
were $108 million and $354 million, respectively. The Company has
estimated capital investments of approximately $185 million to $235
million for 1999.
On March 16, 1999, the Company's Board of Directors authorized,
subject to certain business and market conditions, the repurchase of
up to an additional 1 million shares of the Company's Class A Common
Stock. During the six months ended June 30, 1999, the Company
purchased approximately 545 thousand treasury shares at a cost of
approximately $32 million.
On March 17, 1999, the Company and American entered into a short-term
credit agreement pursuant to which American could borrow from the
Company up to a maximum of $300 million. During the first half of
1999, American borrowed $300 million under the short-term credit
agreement. As part of this agreement, the original credit agreement
entered into on July 1, 1996 between the Company and American was
modified to terminate American's ability to borrow additional funds
under that agreement. Subsequently, in June 1999, the Company, AMR
and American entered into an omnibus financing agreement pursuant to
which (a) the $300 million outstanding from American under the short-
term credit agreement was applied against the $318 million debenture
payable from the Company to AMR; (b) the Company paid in June 1999 the
remaining principal balance, approximately $18 million, and all
outstanding accrued interest under the debenture; and (c) the Company
and American renewed, extended and reinstated American's ability to
borrow funds under the original credit agreement for an additional
year to June 30, 2000. The renewed credit agreement allows the
Company to borrow up to $300 million and American to borrow up to $100
million to meet short-term working capital requirements.
On May 19, 1999, the Company's Board of Directors authorized the
Company to enter into a lease agreement for an existing office complex
being used by the Company in Southlake, Texas, and for adjacent land
and the development of a new office complex on that land. The Company
is currently negotiating the terms of the proposed lease and expects
to complete the transaction in August 1999. The Company expects the
aggregate principal amount of the transaction to be approximately
$210 million.
The Company expects that the principal use of funds in the foreseeable
future will be for capital expenditures, software product development,
acquisitions, new facility costs and working capital. Capital
expenditures will primarily consist of purchases of equipment for the
data center, as well as computer equipment to support (i) updating
existing subscriber equipment, (ii) expansion of the subscriber base
and (iii) new product capital requirements. The Company believes
available balances of cash and short-term investments combined with
cash flows from operations will be 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.
<PAGE> 16
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
YEAR 2000 COMPLIANCE
STATE OF READINESS. In 1995, the Company implemented a project (the
"Year 2000 Project") intended to ensure that hardware and software
systems operated or licensed in the Company's business, including
systems provided to its travel agency subscribers and its outsourcing
customers, are designed to operate and properly manage dates beyond
December 31, 1999 ("Year 2000 Compliant"). The Year 2000 Project
consists of six phases: (i) awareness, (ii) assessment,
(iii) analysis, design and remediation, (iv) testing and validation,
(v) quality assurance review (to ensure consistency throughout the
Year 2000 Project) and (vi) creation of business continuity strategy,
including contingency plans in the event of Year 2000 failures. In
developing the Company's proprietary software analysis, remediation
and testing methodology for Year 2000 compliance, it studied the best
practices of the Institute of Electrical and Electronics Engineers and
the British Standards Institution. The Company has assessed (i) its
over 1,000 information technology applications and operating systems
that will be utilized to process dates after December 31, 1999 ("IT
Systems") and (ii) its non-information technology systems, including
embedded technology, relating to security, elevator control, HVAC and
other systems ("Non-IT Systems").
IT Systems. The Company has completed the first three phases of the
Year 2000 Project for all of its IT Systems. The Company has
successfully completed the testing and validation phase and quality
assurance review phase for 99% of its IT applications, including its
computer reservations and flight operating system applications that
perform such "mission critical" functions as passenger bookings,
ticketing, passenger check-in, aircraft weight and balance, flight
planning and baggage and cargo processing. As of July 1, 1999,
approximately 43% of those IT Systems (including the Sabre computer
reservations systems) are already successfully processing Year 2000
dates in actual use. All software developed by the Company and
currently being marketed is Year 2000 Compliant. The Company has
installed Year 2000 Compliant hardware and software at substantially
all of its travel agency subscriber locations worldwide. The Company
estimates completing during the third quarter of 1999 the testing and
validation phase and quality assurance review phase for the remaining
1% of its IT Systems.
Non-IT Systems. The Company has completed the first five phases of
the Year 2000 Project for substantially all of its Non-IT Systems.
The Company believes that its business, financial condition and
results of operations would not be materially adversely affected, and
that it has adequate contingency plans to ensure business continuity,
if any of its Non-IT Systems are not Year 2000 Compliant.
Accordingly, the Company has primarily focused its Year 2000 Project
efforts on its IT Systems.
Third Party Services. The Company relies on third party providers for
many services, such as telecommunications, utilities, data and credit
card transaction processing. In providing services to the Company,
those providers depend on their hardware and software systems and, in
the case of telecommunications and data service providers, on
interfaces with the Company's IT Systems. The Company received
responses from substantially all of its 650 telecommunications and
data service providers, other than providers of discretionary data
services that would not materially adversely affect the Company's
business, financial condition and results of operations. Those
respondents assured the Company that their software and hardware are
Year 2000 Compliant.
The Company's business is particularly dependent on its ability to
transmit data on a worldwide basis through telecommunications
networks. For telecommunications network services, the Company relies
on third party service providers throughout the world, including AT&T,
SITA and MCI Worldcom. Many of those service providers rely on other
communications service providers that are located in less developed
countries and may have allocated limited resources to Year 2000
compliance. The failure of a segment of the telecommunications
network could disrupt the Company's ability to provide services to its
customers. Depending on its severity, a disruption could have a
material adverse affect on the Company's business, financial condition
and results of operations. The Company does not expect the Year 2000
issues it might encounter with third parties to be materially
different from those encountered by other information technology
companies, including the Company's competitors.
<PAGE> 17
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
COSTS OF YEAR 2000 PROJECT. The Company expects to incur significant
hardware, software and labor costs, as well as consulting and other
expenses, in its Year 2000 Project. The Company's total estimated
cost of the project is approximately $95 to $105 million, of which
approximately $92 million, cumulatively, was incurred as of June 30,
1999. The total costs include approximately $30 million for the
installation of Year 2000 Compliant hardware and software at travel
agency subscriber locations, approximately $31 million for the
Company's software applications, approximately $21 million related to
the Company's hardware and software infrastructure and approximately
$10 million for project management and other labor costs. Future
costs of the Year 2000 Project will primarily result from the
redeployment of information technology resources, although no
significant internal IT Systems projects are being deferred to further
the Year 2000 Project. The remaining costs primarily relate to the
ongoing upgrade of certain hardware and software that support the
Company's IT Systems; the analysis, testing and verification of the
Year 2000 readiness of third party service providers; and the
refinement of the Company's business continuity plans. Costs
associated with the Year 2000 project will be expensed as incurred and
will be paid from operating cash flows.
RISKS OF YEAR 2000 NON-COMPLIANCE. The economy in general, and the
travel and transportation industries in particular, may be adversely
affected by risks associated with the Year 2000. The Company's
business, financial condition, and results of operations could be
materially adversely affected if IT Systems that it operates or
licenses to third parties, or systems that are operated by other
parties with which the Company's IT Systems interface, are not Year
2000 Compliant in time. There can be no assurance that these systems
will continue to properly function and interface and will otherwise be
Year 2000 Compliant. Management believes that its most likely Year
2000 risks relate to the failure of third parties with whom it has
material relationships, particularly telecommunications network
providers, to be Year 2000 Compliant.
Although the Company is not aware of any threatened claims related to
the Year 2000, the Company may be subject to litigation arising from
such claims and, depending on the outcome, such litigation could have
a material adverse affect on the Company. There can be no assurance
that the Company's insurance coverage would be adequate to offset
these and other business risks related to the Year 2000 issue.
BUSINESS CONTINUITY PLANS. The Company has identified three potential
risk areas related to the Year 2000 and is developing and refining
plans to continue its business in the event of Year 2000 failures in
response to those risks. The Company believes that its most likely
Year 2000 risks relate to the failure of third parties with whom it
has material relationships, particularly telecommunications network
providers, to be Year 2000 Compliant. In response to this risk, the
Company has surveyed and collected information on the Year 2000
readiness of material external suppliers and is in the process of
collecting additional business continuity information from such
suppliers in order to effectively manage any failures. The second
risk area relates to the effective prioritization and management of
any Year 2000 failures. The Company is establishing an Enterprise
Command Center in order to prioritize issues, manage resources,
coordinate problem resolution and communicate status in the event of
Year 2000 failures. The third risk area relates to the failure of
critical internal business processes, services, systems and
facilities. The Company is developing business continuity plans to
manage potential internal Year 2000 failures. The Company's business
continuity plans include performing certain processes manually;
maintaining dedicated staff to be available at crucial dates to remedy
unforeseen problems; installing defensive code to protect real-time
systems from improperly formatted date data supplied by third parties;
repairing or obtaining replacement systems; and reducing or suspending
certain non-critical aspects of the Company's services or operations.
Because of the pervasiveness and complexity of the Year 2000 issue,
and in particular the uncertainty concerning the efforts and success
of third parties to be Year 2000 Compliant, the Company will continue
to refine its contingency plans during 1999.
<PAGE> 18
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
INTEREST IN EQUANT
At December 31, 1998, American owned approximately 3.1 million
depository certificates representing beneficial ownership of common
stock of Equant N.V. ("Equant"), a telecommunications company
affiliated with SITA. Approximately 1.7 million of these depository
certificates were held by American for the economic benefit of the
Company.
In connection with a secondary offering of Equant common stock, in
February 1999, American liquidated approximately 923,000 depository
certificates. Approximately 490,000 of these certificates,
representing approximately 30% of the Company's interest at December
31, 1998, were liquidated for the Company's benefit. The Company
received proceeds of approximately $35 million from the transaction,
resulting in a gain of approximately $35 million.
In July 1999, Equant officially notified the Company and American of a
reallocation, which had been previously anticipated, of depository
certificates among SITA members. Due to the Company's significantly
higher usage of the SITA network over the last four years, the
Company's interests in Equant increased substantially. The
reallocation was effective as of June 30, 1999. Accordingly, as of
that date, the number of depository certificates held by American for
the economic benefit of the Company increased to approximately 3.5
million. At June 30, 1999, the estimated value of these certificates
was approximately $329 million based upon the market value of Equant's
publicly-traded common stock.
The Company's carrying value of these depository certificates was
nominal at June 30, 1999 and December 31, 1998. Any future disposal of
such depository certificates may result in additional gains to the
Company.
<PAGE> 19
SABRE HOLDINGS CORPORATION
CAUTIONARY STATEMENT
Statements in this report which are not purely historical facts,
including statements regarding the Company's anticipations, beliefs,
expectations, hopes, intentions or strategies for the future, may be
forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All forward looking
statements in this report are based upon information available to the
Company on the date of this report. The Company undertakes no
obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events or
otherwise. Any forward looking statements involve risks and
uncertainties that could cause actual events or results to differ
materially from the events or results described in the forward looking
statements. Readers are cautioned not to place undue reliance on
these forward looking statements.
Risks associated with the Company's forward looking statements
include, but are not limited to: risks related to the Company's
relationships with American and US Airways and their affiliates,
including risks that they may fail or otherwise become unable to
fulfill their principal obligations under any of the agreements with
the Company, or seek material changes in any of those agreements, or
terminate or determine not to renew any of the agreements; risks
associated with competition and technological innovation by
competitors, which could require the Company to reduce prices, to
change billing practices, to increase spending or marketing or product
development or otherwise to take actions that might adversely affect
its operations or earnings; risks related to the Company's technology,
such as a failure to timely achieve Year 2000 compliance or a failure
of third party suppliers to become Year 2000 Compliant and the outcome
of possible Year 2000 litigation involving the Company; risks related
to seasonality of the travel industry and booking revenues; risks of
the Company's sensitivity to general economic conditions and events
that affect airline travel and the airlines that participate in the
Sabre computer reservations system; risks of a natural disaster or
other calamity that may cause significant damage to the Company's data
center facility; risks associated with the Company's international
operations, such as currency fluctuations, imposition of additional
taxes, governmental approvals, tariffs and trade barriers; risks of
new or different legal and regulatory requirements; and risks
associated with the Company's growth strategy, including investments
in emerging markets and the ability to successfully conclude
alliances.
<PAGE> 20
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
BOOKING FEE DISPUTES
In June 1996, American Trans Air, Inc. ("ATA") filed a lawsuit against
American in the U.S. District Court for the Southern District of
Indiana, Indianapolis Division, seeking a refund of over $400,000 in
booking fees charged by The Sabre Group. In the Reorganization, the
Company became the successor in interest to American in the case.
Since June 1996, ATA has withheld payment of approximately $250,000 in
Sabre system booking fees. On August 12, 1998, the District Court
granted the Company's motion as to the definition of a "booking" and
the validity of the charges under the participation agreement. In
January 1999, the Company filed additional motions seeking to dismiss
the remaining issues in the case, which involve interpretation of the
U.S. Department of Transportation's CRS regulations. In August 1999,
the parties reached a settlement in principle of all claims.
WORLDSPAN DISPUTE
On January 9, 1998, Worldspan LP ("Worldspan"), the former provider of
computer reservation system services to ABACUS International Holdings
("ABACUS"), filed a lawsuit against the Company in the United States
District Court for the Northern District of Georgia, Atlanta Division,
seeking damages and an injunction, and alleging, among other things,
that the Company interfered with Worldspan's relationship with ABACUS,
violated the U.S. antitrust laws, and misappropriated Worldspan's
confidential information. The same day, Worldspan filed a parallel
lawsuit in the same court against ABACUS. On February 26, 1998, the
court denied Worldspan's motion for a preliminary injunction against
ABACUS. Thereafter, the court stayed the ABACUS case pending
arbitration between ABACUS and Worldspan. The arbitration concluded
on May 20, 1999. The Arbitration Tribunal has not yet issued a ruling
in the matter. Discovery continues in the case between Worldspan and
the Company. The Company believes that Worldspan's claims are without
merit and is vigorously defending itself. No trial date has been set.
INDIA TAX ISSUE
The tax authority in India recently asserted that the Company has a
taxable presence in India arising from the Company's relationship with
its Indian distributor. In March 1999, the Company received a $30
million USD tax assessment (including interest) for the two years
ending March 31, 1998. The Company is challenging the assessment on
the grounds that it does not have a taxable presence in India and,
even if it does, the assessment is based on incorrect data. The
United States government has intervened on behalf of the Company (and
other U.S. companies currently facing similar tax-related issues with
the Indian government). Pursuant to that process, the Indian tax
authority has stayed efforts to collect the assessment from the
Company. The Company has also appealed the validity and amount of the
assessment within the Indian tax authority. The Company believes that
the position of the Indian government is without merit and that it
will ultimately prevail either through the U.S.-India tax dispute
procedures or on its direct appeal.
<PAGE> 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The owners of 20,076,385 shares of Class A Common Stock and
107,374,000 shares of Class B Common Stock, representing more than 99%
of the voting power of all of the Company's shares issued and
outstanding at March 22, 1999, were represented at the regular annual
meeting of stockholders on May 19, 1999. Each share of Class A Common
Stock was entitled to one vote, and each share of Class B Common Stock
was entitled to ten votes, at the annual meeting.
Elected as directors of the Company for a three year term were Michael
J. Durham (1,093,745,926 votes in favor, 157,459 votes withheld), Bob
L. Martin (1,093,745,749 votes in favor, 157,636 votes withheld) and
Richard L. Thomas (1,093,743,759 votes in favor, 159,626 votes
withheld). Also continuing as directors were Gerard J. Arpey, Edward
A. Brennan, Donald J. Carty, Paul C. Ely, Jr., Dee J. Kelly, Anne H.
McNamara and Glenn W. Marschel, Jr.
The appointment of Ernst & Young LLP as independent auditors for the
Company for 1999 was ratified with 1,093,884,950 votes in favor, 7,545
votes against and 10,890 votes withheld. The amendment of the
Certificate of Incorporation to change the corporate name to Sabre
Holdings Corporation was ratified with 1,093,887,825 votes in favor,
3,695 votes against and 11,865 votes withheld. Also, the Amended and
Restated 1996 Long-Term Incentive Plan was approved with 1,085,319,005
votes in favor, 8,517,787 votes against and 66,593 votes withheld.
ITEM 5. OTHER INFORMATION
Effective on July 30, 1999, the legal name of The SABRE Group
Holdings, Inc. was changed to Sabre Holdings Corporation, and the name
of the Company's principal operating subsidiary, The Sabre Group,
Inc., was changed to Sabre Inc. The Company's stock ticker symbol on
the New York Stock Exchange continues to be TSG.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1999.
The following exhibits are included herein:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of
Registrant. (1)
3.2 Restated Bylaws of Registrant. (1)
3.3 Certificate of Amendment of Certificate of
Incorporation of The Sabre Group Holdings,
Inc.
4.1 Registration Rights Agreement between
Registrant and AMR Corporation. (1)
4.2 Specimen Certificate representing Class A
Common Stock. (1)
10.1 The Sabre Group Holdings, Inc. Amended and
Restated 1996 Long-Term Incentive Plan,
dated January 19, 1999. (2)
10.2 Promissory Note and Agreement, dated March
17, 1999 between American Airlines, Inc. and
The Sabre Group Holdings, Inc.
10.3 Omnibus Financing Agreement, dated as of
June 30, 1999, between American Airlines,
Inc.; The Sabre Group, Inc.; The Sabre Group
Holdings, Inc. and AMR Corporation.
10.4 Letter Amendment, dated April 21, 1999, to the
Management Services Agreement, dated as of July 1,
1996, between The Sabre Group, Inc. and American
Airlines, Inc.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule as of June 30, 1999.
27.2 Restated Financial Data Schedule as of June
30, 1998.
</TABLE>
(1)Incorporated by reference to Exhibits 3.1 through 4.2 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-09747).
(2)Incorporated by reference to Exhibit A to the Company's
definitive proxy statement with respect to the annual meeting of
stockholders on May 19, 1999.
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SABRE HOLDINGS CORPORATION
Date: August 16, 1999 BY: /s/ Jeffery M. Jackson
Jeffery M. Jackson
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 12,816
<SECURITIES> 308,214
<RECEIVABLES> 375,487
<ALLOWANCES> 12,808
<INVENTORY> 0
<CURRENT-ASSETS> 784,453
<PP&E> 1,398,052
<DEPRECIATION> 789,954
<TOTAL-ASSETS> 1,868,199
<CURRENT-LIABILITIES> 491,375
<BONDS> 0
0
0
<COMMON> 1,312
<OTHER-SE> 1,090,996
<TOTAL-LIABILITY-AND-EQUITY> 1,868,199
<SALES> 0
<TOTAL-REVENUES> 1,276,926
<CGS> 0
<TOTAL-COSTS> 950,537
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,706
<INCOME-PRETAX> 248,562
<INCOME-TAX> 92,370
<INCOME-CONTINUING> 156,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,192
<EPS-BASIC> 1.20
<EPS-DILUTED> 1.19
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
SABRE HOLDINGS CORPORATION
Sabre Holdings Corporation SUBSIDIARY
(All subsidiaries are wholly-owned unless otherwise noted in
parenthesis. Each subsidiary's subsidiaries outlined further below.)
Sabre Inc. (Delaware)
Sabre 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 Enterprises, Inc. (Delaware)
Sabre Inc. (Delaware)
Sabre Investments, Inc. (Delaware)
Sabre International, Inc. (Delaware)
Sabre International Holdings, Inc. (Delaware)
Sabre Limited (New Zealand)
Sabre Soluciones de Viaje S. de R.L. de C.V. (Mexico) (99%)
Sabre Technology Enterprises, Ltd. (Cayman Islands)
Sabre Technology Holland B.V. (The Netherlands)
SST Finance, Inc. (Delaware)
SST Holding, Inc. (Delaware)
TSGL, Inc. (Delaware)
The Sabre Group Sales (Barbados), Ltd.
Ticketnet Corporation (Canada)
Sabre Decision Technologies International, Inc. SUBSIDIARY
Airline Technology Services Mauritius Ltd. (Mauritius)
Sabre Group International Limited, formerly INHOCO 858 Limited (UK)
Sabre Decision Technologies (Australia) Pty Ltd.
Sabre International, Inc. SUBSIDIARIES
Sabre CIS Holdings, Inc. (Delaware)
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)
Sabre Italia S.r.l. (Italy) (99%)
Sabre Marketing Nederland B.V. (The Netherlands)
Sabre Norge AS (Norway)
Sabre Portugal Servicios LDA (Portugal) (99%)
<PAGE> 2
Sabre International, Inc. SUBSIDIARIES - Continued
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 Servicios LDA (Portugal) (1%)
Sabre Servicios Colombia LTDA (Colombia) (1%)
Sabre UK Marketing Ltd. (UK) (1%)
STIN Luxembourg S.A. (Luxembourg) (1%)
The Sabre Group International (Bahrain) W.L.L. (1%)
Sabre Soluciones de Viaje S. de R.L. de C.V. SUBSIDIARY
Sabre Informacion S.A. de C.V. (Mexico) (99%)
Sabre Technology Enterprises, Ltd. SUBSIDIARIES
Sabre Technology Enterprises II, Ltd. (Cayman Islands)
The Sabre Group International (Bahrain) W.L.L. (99%)
Sabre Technology Holland B.V. SUBSIDIARIES
Sabre Informacion S.A. de C.V. (Mexico) (1%)
Sabre Soluciones de Viaje S. de R.L. de C.V. (Mexico) (1%)
SST Holding, Inc. SUBSIDIARY
Sabre Sociedad Tecnologica S.A. (Mexico) (51%)
Sabre Sociedad Tecnologica S.A. SUBSIDIARY
Sabre Services Administration (Mexico)
TSGL, Inc. SUBSIDIARY
TSGL Holding, Inc. (Delaware)
Ticketnet Corporation SUBSIDIARY
148548 Canada, Inc. (Canada)
* All subsidiaries are wholly-owned unless otherwise noted in
parenthesis
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
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<PAGE> 1
PROMISSORY NOTE
AND AGREEMENT
$300,000,000 March 17, 1999
For value received, American Airlines, Inc., a Delaware
corporation ("American"), hereby promises to pay to The SABRE
Group Holdings, Inc., a Delaware corporation ("Holdings"), the
sum of Three Hundred Million Dollars ($300,000,000), or such
lesser amount as may be outstanding pursuant hereto, with
interest on the unpaid balance of such principal sum at the
Interest Rate (as hereinafter defined).
Section 1. Definitions. The following terms, as used
herein, shall have the following meanings:
(1) "Advances" means the two advances to be made by Holdings
hereunder as described in Section 3 hereof. "Advance" has a
corresponding meaning.
(2) "American" has the meaning set forth in the introductory
paragraph.
(3) "American Risk Component" has the meaning set forth in
Section 7(a) hereof.
(4) "AMR" has the meaning set forth in Section 2 hereof.
(5) "Bloomberg" has the meaning set forth in Section 7(a)
hereof.
(6) "Business Day" means any day other than a Saturday, Sunday
or a day on which banks located in New York, New York are
required or permitted to be closed.
(7) "Credit Agreement" has the meaning set forth in Section 2
hereof.
(8) "Equipment Trust Certificate" means equipment pass through
certificates or equipment trust certificates issued by American
as to which an 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.
(9) "Holdings" has the meaning set forth in the introductory
paragraph.
(10) "Interest Period" means each calendar month during the term
hereof during which principal of this Note is outstanding and any
portion of a calendar month during such period.
<PAGE> 2
(11) "Interest Rate" has the meaning set forth in Section 7
hereof.
(12) "Market Rates" has the meaning set forth in Section 7(a)
hereof.
(13) "Moody's" means Moody's Investors Services, Inc.
(14) "Note" means this Promissory Note.
(15) "Rating Agencies" means Moody's and 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 debt obligations, a nationally recognized
rating agency in the United States of American mutually
satisfactory to American and Holdings.
(16) "S&P" means Standard and Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc.
(17) "TSG" has the meaning set forth in Section 2 hereof.
(18) "TSG Excess Cash" means the aggregate amount of cash held by
TSG for itself and its wholly-owned subsidiaries, or expected to
be deposited in its cash account on such Business Day, that is
not needed to meet the daily cash requirements (including any
amounts TSG's lenders require it to maintain on deposit) of TSG
and its wholly-owned subsidiaries.
Section 2. Termination of TSG Obligations Under the
Credit Agreement. American, AMR Corporation, a Delaware
corporation ("AMR"), The SABRE Group, Inc., a Delaware
corporation ("TSG"), and Holdings are parties to that certain
Credit Agreement, dated as of July 1, 1996 (the "Credit
Agreement"). American, AMR, TSG and Holdings hereby agree that
all obligations of TSG pursuant to Section 2.02 of the Credit
Agreement, including, without limitation, TSG's obligation to
make any TSG Advance (as defined in the Credit Agreement), are
hereby terminated. Except as expressly amended by the foregoing
sentence, American, AMR, TSG and Holdings hereby affirm the terms
of the Credit Agreement as their legal and binding obligations.
Section 3. Advance. On or before 11:00 a.m. (New York,
New York time) on (a) March 17, 1999, or such other day as
American and Holdings shall agree, Holdings shall advance to
American the sum of Two Hundred Million Dollars ($200,000,000),
and (b) March 29, 1999, or such other day as American and
Holdings shall agree, Holdings shall advance to American the sum
of One Hundred Million Dollars ($100,000,000). American may
request a lesser amount under each Advance by a written notice to
Holdings given in the manner set forth herein. Holdings shall
make such Advances in U.S. dollars by wire transfer of
immediately available funds to American's account at The Chase
Manhattan Bank, N.A. (New York, New York) (ABA No. 021000021),
American Airlines, Inc. Account No. 910-1-019884, or such other
account as American may designate in writing to Holdings.
<PAGE> 3
Section 4. Liquidation Cost Reimbursement. American
agrees to reimburse Holdings for any losses equal to or in
excess of $10,000 that Holdings incurs in liquidating investments
in order to fund the Advances if it is reasonably necessary for
Holdings to liquidate such investments in order to fund the
Advances.
Section 5. Payment and Prepayment. The principal
balance of this Note shall be due and payable on June 30, 1999.
Interest on this Note accrued during each Interest Period but
unpaid shall be due and payable on the sixth Business Day after
the last day of such Interest Period (whether or not the
principal on which such interest accrued was paid or prepaid
during such Interest Period). American may prepay the principal
of this Note at any time and from time to time, in whole or in
part, without premium or penalty, upon one Business Day prior
notice to Holdings. American shall be required to pay accrued
interest on this Note through the date of any such prepayment in
arrears on the sixth Business Day after the last day of the
Interest Period in which such prepayment occurs as provided
above. All payments and prepayments by American hereunder shall
be made in U.S. dollars by wire transfer of immediately available
funds to Holdings' account at The Chase Manhattan Bank, N.A. (New
York, New York)(ABA No. 021000021), The SABRE Group Holdings,
Inc. Account No. 910-2-763654, or such other account as Holdings
may designate in writing to American. Any payment made on a day
other than a Business Day, or made after 1:00 p.m. (New York, New
York time) on a Business Day, shall be deemed to have been made
on the next succeeding Business Day.
Section 6. Holdings' Call Right. Holdings may require
American to prepay the principal amount of this Note at any time
upon ten Business Days' prior written notice given as provided in
Section 16. Such notice shall state the day upon which American
shall be required to prepay the principal amount of this Note,
which day shall be at least ten Business Days after receipt of
such notice by American. Interest on this Note through the date
of any such prepayment will be paid on the sixth Business Day
after the last day of the Interest Period in which such
prepayment occurs as set forth in Section 5 above.
Section 7. Interest. Interest shall accrue on the
principal sum from time to time outstanding hereunder at the
Interest Rate. The interest rate per annum for any Interest
Period shall equal the sum of the rates determined in subsections
7(a) and 7(b) below (the "Interest Rate"):
(a) An interest component to cover the incremental credit
risk assumed by Holdings in loaning money to American (the
"American Risk Component") equal to the difference between the
fair market sector curve rates (the "Market Rates") for
industrial securities with three month maturities as set forth in
Bloomberg's Financial Services ("Bloomberg") (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 American and Holdings) that sets fair market
sector curve rates in the United States of America shall apply)
at the end of the Interest Period
<PAGE> 4
(i) for securities with an S&P credit rating of "A" and (ii)
for securities with the credit rating assigned to American's
senior unsecured long term debt at the end of the Interest Period
by both Rating Agencies (if no such long term debt of American 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 American'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 subsection (c)
of this Section 7.
(b) 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.
(c) 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 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.
(d) No later than five Business Days after the last day of
each Interest Period, American shall provide Holdings, and
Holdings shall confirm, the Interest Rate for such Interest
Period and the calculation of interest accrued during such
Interest Period but unpaid. Interest shall be calculated on the
basis of a 365-day year for the actual number of days elapsed.
Section 8. Usury Savings Clause. 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 exceed the maximum
amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable in
excess of the maximum lawful amount, the interest payable shall
be reduced to the maximum amount permitted under applicable law;
and if from any circumstance Holdings 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 American. All interest paid or agreed to be paid
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. To the extent that TEX. REV. CIV. STAT. ANN.
art. 5069-1.04, as amended, is applicable to this Note, the
indicated rate ceiling specified in such article is the
applicable ceiling; provided that;
<PAGE> 5
if any applicable law permits greater interest, the law
permitting the greatest interest shall apply.
Section 9. Limitation of Liability. Neither party shall
have any liability under this Note (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 willful 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 9 shall survive any termination of this Note.
Section 10. Term. The term of this Note shall commence
on the date hereof and shall continue until all sums due and
owing hereunder have been paid in full.
Section 11. Dispute Resolution. All disputes under this
Note shall be resolved in the manner provided in Article 16 of
that certain Management Services Agreement, effective on July 1,
1996, between American and TSG, as it may be amended from time to
time, as if each of American and Holdings were party to such
agreement. If a dispute arises after June 30, 1999, such dispute
resolution procedures shall continue to apply regardless of the
status of the Management Services Agreement.
Section 12. Assignment. Neither party hereto may assign
this Note, or its rights or obligations hereunder, without the
prior written consent of the other party.
Section 13. Amendment. This Note may not be amended
except by a written instrument executed by both parties hereto.
Section 14. Waivers. Either party hereto may (a) extend
the time for performance of any of the obligations or other acts
of the other party or (b) waive compliance with any of the
agreements of the other party contained herein. No waiver of any
term of this Note shall be construed as a waiver of the same
term in any other situation or a waiver of any other term of this
Note. The failure of any party to assert any of its rights
hereunder will not constitute a waiver of any such rights.
Section 15. Severability. If any provision of this Note
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 Note shall nevertheless remain
in full force and effect.
Section 16. Notices. All notices and other
communications required or permitted hereunder to be given to or
made upon any party shall be in writing, shall be addressed as
provided below and shall be considered properly given and
received: (a) when delivered, if delivered in person;
<PAGE> 6
(b) one Business Day after dispatch, if dispatched by a
recognized express delivery service which provides signed
acknowledgments of receipt; (c) three Business Days after deposit
in the U.S. mail, if sent be certified or registered first class
mail, postage prepaid, return receipt requested; or (d) upon
completion of transmission and confirmation by the sender (by a
telephone call to a representative of the recipient or by machine
confirmation) that the transmission was received, if transmitted
by facsimile. For the purposes of notice, the addresses of the
parties shall be as set forth below; provided, however, that
either party shall have the right to change its address for
notice to any other location by giving at least three Business
Days' prior written notice to the other party in the manner set
forth above.
If to American: American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5501
Fort Worth, Texas 76155
Attention: Managing Director of Financial
Planning
Telecopier: (817) 967-1184
If to Holdings: The SABRE Group Holdings, Inc.
4255 Amon Carter Boulevard
Mail Drop 4224
Fort Worth, Texas 76155
Attention: Corporate Finance Manager
Telecopier: (817) 967-4911
Section 17. Headings. Section headings in this Note are
included herein for convenience of reference only and shall not
constitute a part of this Note for any other purpose.
Section 18. Governing Law. This Note 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 19. Counterparts. This Note 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.
IN WITNESS WHEREOF, American and Holdings, and, solely with
regard to Section 2 hereof, AMR and TSG, have caused this Note to
be executed as of the date first above written.
<PAGE> 7
AMERICAN AIRLINES, INC.
By: /s/ Jeffrey C. Campbell
Its: Vice President-Corporate
Development and Treasurer
THE SABRE GROUP HOLDINGS, INC.
By: /s/ Jeffery M. Jackson
Its: Chief Financial Officer and Treasurer
With respect to Section 2 only:
AMR CORPORATION
By: /s/ Gerard J. Arpey
Its: Senior Vice President-Finance
and Planning and Chief
Financial Officer
THE SABRE GROUP, INC.
By: /s/ Jeffery M. Jackson
Its: Senior Vice President and Chief
Financial Officer
<PAGE> 1
OMNIBUS FINANCING AGREEMENT
This Omnibus Financing Agreement (this "Agreement"), dated
as of June 30, 1999, is made by and among American Airlines,
Inc., a Delaware corporation ("American"), The SABRE Group, Inc.,
a Delaware corporation f/k/a TSG Corporation ("TSG"), The SABRE
Group Holdings, Inc., a Delaware corporation ("Holdings"), and
AMR Corporation, a Delaware corporation ("AMR").
WHEREAS, TSG owes certain monies to AMR evidenced by that
certain TSG Corporation Subordinated Debenture, dated July 2,
1996 (the "TSG Debenture"), entered into by TSG in favor of AMR;
and
WHEREAS, TSG would like to pay to AMR the total outstanding
principal balance of, all accrued but unpaid interest on, and
all other amounts owing pursuant to, the TSG Debenture, and to
cancel the TSG Debenture, on and as of June 30, 1999; and
WHEREAS, American owes certain monies to Holdings evidenced
by that certain Promissory Note and Agreement, dated March 17,
1999 (the "American Note"), entered into by and among American,
TSG, Holdings and AMR; and
WHEREAS, American would like to pay to Holdings the total
outstanding principal balance of the American Note on and as of
June 30, 1999 and all accrued but unpaid interest on the American
Note on and as of July 9, 1999, and would like to cancel the
American Note; and
WHEREAS, pursuant to the American Note, American, TSG,
Holdings and AMR agreed that all obligations of TSG pursuant to
Section 2.02 of that certain Credit Agreement, dated as of July
1, 1996 (the "Credit Agreement"), among American, AMR, TSG and
Holdings, were thereby terminated; and
WHEREAS, the parties hereto desire to reinstate the
obligations of TSG pursuant to Section 2.02 of the Credit
Agreement on and as of July 1, 1999, and to extend the term of
the Credit Agreement to June 30, 2000;
NOW, THEREFORE, in consideration of the foregoing and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follow:
Section 1. Payment on the TSG Debenture and Cancellation
Thereof. Notwithstanding the provision of the TSG Debenture
stating that the TSG Debenture may be prepaid on (and only on) an
Interest Payment Date (as defined in the TSG Indenture), on the
date hereof or such later date as the parties hereto shall agree
in writing (the "Closing Date"), TSG shall pay to AMR, in the
manner set forth in Section 3 hereof, the amount of
$322,183,884.99, being the total outstanding principal
<PAGE> 2
balance of, all outstanding interest on, and all other amounts
owing pursuant to, the TSG Debenture (the "TSG Outstanding
Amounts") and, upon receipt by AMR of such payment, the TSG
Outstanding Amounts shall be fully paid and the TSG Debenture
shall be canceled.
In connection with the foregoing, TSG hereby represents and
warrants on and as of the date hereof and as of the Closing Date
that full payment of amounts due for principal, premium, if any,
sinking funds and interest on Superior Indebtedness (as defined
in the TSG Debenture) has been made or duly provided for in money
or money's worth; and there has not been given under any Superior
Indebtedness or any agreement pursuant to which any Superior
Indebtedness is issued notice to TSG of any default or any
condition, event or act that, with lapse of time, would
constitute a default.
Section 2. Payment on the American Note and Cancellation
Thereof. (a) On the Closing Date, American shall pay to
Holdings, in the manner set forth in Section 3 hereto, the amount
of $300,000,000.00, being the total outstanding principal balance
of the American Note.
(b) On July 9, 1999, American shall pay to Holdings, in the
manner set forth in Section 3 hereto, all accrued but unpaid
interest on the American Note. Upon receipt by Holdings of such
payments, the American Note shall be fully paid and shall be
canceled.
Section 3. Method of Payment. The payment to be made by
TSG to AMR pursuant to Section 1 hereof and the payments to be
made by American to Holdings pursuant to Section 2 hereof shall
be made as follows:
(a) On the Closing Date TSG shall pay to AMR the TSG
Outstanding Obligations by (i) paying to AMR by wire
transfer of immediately available funds, the sum of
$22,183,884.99 and (ii) crediting the account of
Holdings the sum of $300,000,000.00;
(b) On the Closing Date, American shall pay to Holdings the
total outstanding principal balance of the American
Note by crediting the account of AMR the sum of
$300,000,000.00; and
(c) On July 9, 1999, American shall pay to Holdings all accrued
but unpaid interest on the American Note by paying to Holdings by
wire transfer of available funds the amount of such accrued but
unpaid interest.
Upon the making of the payments and credits set forth above,
the obligation of TSG to pay the TSG Outstanding Amounts pursuant
to Section 1 hereof and the obligations of American to pay the
principal amount of, and all accrued but unpaid interest on, the
American Note pursuant to Section 2 hereof shall be fully met.
The payment by wire transfer of immediately available funds
to be made by TSG to AMR
<PAGE> 3
as set forth in clause (i) of subsection (a) of this Section 3
shall be made by TSG to the account of AMR with The Chase
Manhattan Bank (New York, New York) (ABA No. 021000021), AMR
Corporation Account No. 910-2-478089, or such other account as
AMR may designate in writing to TSG.
The payment by wire transfer of immediately available funds
to be made by American to Holdings as set forth in subsection (c)
of this Section 3 shall be made by American to the account of
Holdings with Citibank N.A. (New York, New York) (ABA No.
021000089), The SABRE Group Holdings, Inc. Account No. 4078-8429,
or such other account as Holdings may designate in writing to
American.
Section 4. Reinstatement of the TSG Obligations under
the Credit Agreement. On and as of July 1, 1999, the provisions
of Section 2 of the American Note be and hereby are terminated
and the obligations of TSG pursuant to Section 2.02 of the Credit
Agreement, including, without limitation, TSG's obligation to
make any TSG Advance (as defined in the Credit Agreement), are
hereby fully and completely reinstated and shall be in full force
and effect on the terms set forth therein, as amended hereby.
Section 5. Amendments to the Credit Agreement. The
Credit Agreement be and hereby is amended as set forth below:
(a) Section 1.01(o) is hereby amended by inserting after
the words "Morgan Guaranty Trust Company of New York"
the words ", as amended from time to time".
(b) Section 2.05 is hereby amended by inserting in the
seventh sentence thereof after the words "under
the Debenture" the words "or the Debenture has
been canceled".
(c) Section 3.04 is hereby amended (i) by deleting the first
sentence and inserting in lieu thereof the following sentence:
"This Agreement commences on the date of this Agreement first set
forth above and will continue until June 30, 2000." and (ii)
deleting subclause (d) thereof and inserting in lieu thereof the
following: "(d) [Intentionally Omitted]".
Section 6. Closing. This Agreement shall become
effective upon the occurrence of the following:
(a) the execution and delivery to each of the parties hereto of
counterparts of this Agreement;
(b) the making of the payments required by Sections 1 and 2(a)
hereof in the manner set forth in Section 3 hereof;
<PAGE> 4
(c) the delivery by AMR to TSG of the originally executed TSG
Debenture marked "Canceled"; and
(d) the delivery by TSG and Holdings of each originally executed
American Note marked "Canceled".
Section 7. Dispute Resolution. All disputes under this
Agreement shall be resolved in the manner provided in Article 16
of that certain Management Services Agreement, effective on July
1, 1996, between American and TSG, as it may be amended from time
to time, as if each of American, TSG, Holdings and AMR were party
to such agreement. If a dispute arises after June 30, 1999, such
dispute resolution procedures shall continue to apply regardless
of the status of the Management Services Agreement.
Section 8. Assignment. No party hereto may assign this
Agreement, or its rights or obligations hereunder, without the
prior written consent of all other parties.
Section 9. Amendment. This Agreement may not be amended
except by a written instrument executed by all parties hereto.
Section 10. Waivers. The parties hereto may (a) extend
the time for performance of any of the obligations or other acts
of a party or (b) waive compliance with any of the agreements of
a party contained herein, in either case by written instrument
executed by all parties hereto. No waiver of any term of this
Agreement 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.
Section 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 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 13. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Texas, without giving effect to the principles of
conflict of laws of such State.
Section 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.
<PAGE> 5
IN WITNESS WHEREOF, American, TSG, Holdings and AMR have
caused this Agreement to be executed as of the date first above
written.
AMERICAN AIRLINES, INC.
By: /s/ Gerard J. Arpey
Its: Senior Vice President-Finance and Planning
and Chief Financial Officer
THE SABRE GROUP, INC.
By: /s/ Jeffery M. Jackson
Its: Executive Vice President and
Chief Financial Officer
THE SABRE GROUP HOLDINGS, INC.
By: /s/ Jeffery M. Jackson
Its: Executive Vice President,
Chief Financial Officer and Treasurer
AMR CORPORATION
By: /s/ Gerard J. Arpey
Its: Senior Vice President-Finance and Planning
and Chief Financial Officer
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE SABRE GROUP HOLDINGS, INC.
I, the undersigned, being the Corporate Secretary of The
Sabre Group Holdings, Inc., a Delaware corporation (the
"Corporation"), do hereby certify on behalf of the Corporation as
follows:
FIRST: That Article I of the Certificate of Incorporation
of the Corporation be, and it hereby is, amended
to read as follows:
"ARTICLE I
The name of the corporation (which
is hereinafter referred to as the
"Corporation") is:
Sabre Holdings Corporation"
SECOND: That the amendment set forth above (the
"Amendment") was duly adopted in accordance with
the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
THIRD: Pursuant to Section 103(d) of the General
Corporation Law of the State of Delaware, the
Amendment shall not be effective until July 30,
1999.
FOURTH: That the Corporation's capital shall not be
reduced under or by reason of the Amendment.
IN WITNESS WHEREOF, I have signed this certificate this 28th
day of June, 1999.
/s/ Andrew B. Steinberg
______________________________
Andrew B. Steinberg
Corporate Secretary
<PAGE>
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS
HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED
PORTIONS ARE
INDICATED IN THIS AGREEMENT WITH *[TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED].*
AmericanAirlines
The SABRE Group, Inc.
Attention: Mr. Michael J. Durham
P.O. Box 619615
MD 4204
D/FW Airport, Texas 75261-9615
The SABRE Group, Inc.
Attention: Mr. Andrew Steinberg
P.O. Box 619615
MD 4204
D/FW Airport, Texas 75261-9615
Re: Management Services Agreement, dated July 1, 1996, by
and between American Airlines, Inc. and The SABRE Group, Inc. (the
"Agreement")
Dear Sirs:
Pursuant to Section 2.2 of the above referenced Agreement, American
Airlines concurs with The SABRE Group, Inc.'s intention to renew the
Agreement for an additional successive one-year term beginning on July 1, 1999
and ending at 11:59 p.m. on June 30, 2000, unless terminated earlier by one or
both of the Parties in accordance with Article 13 of the Agreement.
Sincerely,
/S/ RANDY LEISER
Randy Leiser
Managing Director
Financial Planning
cc: Charles MarLett
Jeffery Jackson
Doug Herring
Hugh Jones
Girish Bachani
Veree Hawkins
<PAGE>
APPENDIX TO
THE MANAGEMENT SERVICES AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Tax Administration Service (Mandatory) 4
Human Resources Government Reporting Service (Mandatory) 6
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Payroll Production Service 9
Payroll Tax Accounting Service 10
Payroll: Accounting and Reconciliation 12
Disbursements Production Service 13
Human Resources Administration 14
Employee Relations Service 16
Medical Services 17
Corporate Finance Service 18
Tax Administration Services (Optional) 19
SABRE Supply Management Service 17
Corporate Security Service 18
Safety Administration Service 19
Business Insurance Administration Service 20
Corporate Affairs Service 21
MCLA Division Services 22
AMR China Service 23
Legal Services 24
Audit Service 26
Corporate Real Estate Service 27
Corporate Communications Service 29
Other Airline (OA) Personal Travel Administration Service 30
Other Airline (OA) Business Travel Administration Service 31
International Division Services 32
General Services Department 33
General Services' Pass-Through Expenses Service 34
Corporate Travel Desk Service 35
Printing Services 36
Facilities Maintenance-CPIV 37
Facilities Maintenance Pass-Through Expense Service 38
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
AA Corporate Apartment Service 40
AASSET Card 41
</TABLE>
<PAGE>
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) US 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) US federal and state income tax accounting and reporting
i) income tax account analysis
ii) tax provision accounting
C) US 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
TOTAL ESTIMATED COST FOR 1999: $58,435
FIXED AMOUNT FOR 1999: 17,635
HOURLY Rates during 1999:
Level 8 $115
Level 7 89
Level 6 77
Level 5 67
Level 4 57
Level 3 46
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.
<PAGE>
SCHEDULE II.
HUMAN RESOURCES GOVERNMENT REPORTING SERVICE (MANDATORY)
DESCRIPTION OF SERVICE: Tasks performed to ensure that the SABRE
Group is in compliance with US 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 1999: $96,137
MONTHLY INVOICED AMOUNT DURING 1999: 8,011
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 VP Human Resources (equaling
$2,318 for 1999), and will not vary with changes in the Service
Level of this Service.
<PAGE>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
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 for Domestic and Canadian
employees.
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.
G) Replying to all subpoenas and payroll related inquiries from
legal and law enforcement agencies.
ESTIMATED COST FOR 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
FIXED AMOUNT FOR 1999:[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
RATE DURING 1999:
Payroll Production tasks: [TEXT 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 VP & Controller. The Fixed Amount of the
Payroll 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.
<PAGE>
SCHEDULE VIII.
PAYROLL TAX ACCOUNTING SERVICE (UPDATED)
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.
E) 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.
ESTIMATED COST FOR 1999: [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
FIXED AMOUNT FOR 1999:[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
RATES DURING 1999:
A)Payroll Tax [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
B)Payroll Tax Reporting [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
C)Unemployment Tax [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
D)Payroll Tax Year End [TEXT 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 VP &
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.
<PAGE>
SCHEDULE IX.
PAYROLL: ACCOUNTING AND RECONCILIATION (UPDATED)
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA
Payroll Department for Accounting and Reconciliation will consist
of:
A) General accounting, reconciliation and research of payroll
account transactions including 401(k) and PAC contributions.
1) Reconciling the TSG related intercompany account within
thirty days of the month end and providing a copy of the reconciliation
to TSG.
2) AA Payroll reserves the right to charge TSG for
reconciling an out of balance in the TSG FICO where such out of balance
is not the result of error on the part of AA Payroll.
B) Processing, reconciliation, and the generation of checks for
payroll related disbursements.
C) Bank reconciliations, reporting, and clearing of prepaid
items for payroll and payroll related disbursements.
D) Relocation-Exchange of employee information with Cendant,
recording and payment of tax libility based on information
provided by Cendant, memo and expense document handling and
interface application maintenance.
E) Employment Receivables-The administration and collection of
balances from active employees for advances, uniforms, and salary
overpayments, check distribution special handling.
F) Employment and Salary Verification - Completion of the wage
and employment information requested by lending institutions.
ESTIMATED COST FOR 1999: $142,288
RATES DURING 1999:
A-C) General Accounting and Reconciliations $9,180 per month
D) Relocation $60.00 per unit
E) Employee Receivables/Special Handling $1.38 per unit
Project Management/Special Projects $37.50 per hour
FIXED AMOUNT FOR 1999: $185
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 VP & 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.
<PAGE>
SCHEDULE X.
DISBURSEMENTS PRODUCTION SERVICE
DESCRIPTION OF SERVICE: The Task to be performed by AA Corporate
Disbursements will consist of:
A) Usage of EDI Mailbox and translator, Federal Express
COST FOR 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
RATE DURING 1999:
A)EDI Mailbox usage and translator Federal Express: [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The Service described above will be performed
on a fixed-price basis. The fixed-price will be invoiced in
12 equal installments during the calendar year. The annual
price of the Disbursements Productions Service will include an
allocation of unmargined Private Payroll representing the
oversight responsibility of the VP & Controller [TEXT OMITTED
- CONFIDENTIAL TREATMENT REQUESTED].
<PAGE>
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. Service BB (Evaluating Employees and
their Performance/Progress) will expire on March 1, 1999; its
fixed price reflects only two months of service.
<TABLE>
<CAPTION>
Service DescriptionFixed Price
<S> <C>
A) Providing and Managing Health and Welfare Benefits$468,438
E) Support Staff Recruitment 58,607
G) Managing Employee Information and Documentation 965
(excluding ad-hoc queries after 3/1/98)
O) Providing Retirement Benefits 114,882
R) sHaRp TBD
S) Assuring AMR is in compliance 46,960
T) Providing and Managing Workers Compensation 66,739
U) Supporting International Locations (Benefit
Plan Renewal Administration) 18,176
W) Facilitating Management Career Moves 67,379
AA) Admin. Travel Policy (Listed for Admin. billing
purposes only. No additional charge for this
service is imposed in the Travel Privileges
Agreement) 29,925
BB) Evaluating Employees and their Performance/Progress 5,534
EE) Relocating Employees 31,556
FF) Admin. and Cost Control 42,696
GG) Employee Resource Center 158,235
</TABLE>
TOTAL FIXED PRICE FOR 1999: $1,163,164
MONTHLY INVOICED AMOUNT (JANUARY 1 - FEBRUARY 28):99,236
MONTHLY INVOICED AMOUNT (MARCH 1- DECEMBER 31): 96,469
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 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 VP Human Resources (equaling
$53,074 for 1999), 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).
<PAGE>
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 1999: $12,915
MONTHLY INVOICED AMOUNT DURING 1999: 1,076
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.
<PAGE>
SCHEDULE XIV.
MEDICAL SERVICES
DESCRIPTION OF SERVICE: AA Medical Department is responsible for
performing the following Tasks for the SABRE Group.
<TABLE>
<CAPTION>
Basic Tasks 1999 Rate
<S> <C>
A) Employee Assistance Program Services
(as required by the Federal Drugfree Workplace Act)
B) Full Sabre Employee Access to all AMR Preventive Healthcare
Programs
C) Family Medical Leave Act Application Processing and Program
Administration $ 1.21 per
month per
TSG employee
for all
basic tasks
D) Ergonomics Support Including Workstation Design and Other
OSHA-Required Ergonomics Services basic tasks
E) ADA-Related Ergonomic Accommodations Work
F) Occupational Healthcare Litigation Support
G) Full Access to all AMR Travel Medicine Databases, and
Applicable Occupational Healthcare Record Keeping (but not OSHA Log Record
keeping).
</TABLE>
<TABLE>
<CAPTION>
Tasks 1999 Rate
<S> <C>
A) New Hire Physicals-Non-Safety Sensitive $34
B) Clinic - Employee Visit 39
C) Employee Drug and Alcohol Testing 38
D) Other services will be provided to TSG on a
by-request basis (varies per service)
</TABLE>
ESTIMATED COST FOR 1999: $345,000
FIXED AMOUNT FOR 1999: 23,023
BASIS FOR PRICE: The Tasks to be performed are use-based. The
cost for basic services will be $1.21 per month per Sabre
employee, with employee count to be based on SABRE's physical
employee headcount on 1-1-99 (for Jan-Jun 1999 charges) and
7-1-99 (for Jul-Dec 1999 charges). 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 (equaling $23,023 for
1999) representing the oversight responsibility of the Sr. VP
Human Resources. 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. The estimate is
based on an average of 1998 actual charges.
<PAGE>
SCHEDULE XVI.
CORPORATE FINANCE SERVICE (UPDATED)
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA
Treasury Department until March 1, 1999 will consist of:
A) Coordination of Financing Decisions
B) Risk Assessment and Management
C) Financing Administration
FIXED PRICE FOR 1999: $5,256
MONTHLY INVOICED AMOUNT DURING 1999: 2,628
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 VP Corporate
Development & Treasury (equaling $418 for Jan - Feb 1999), and
will not vary with changes in the Service Level of this Service.
<PAGE>
SCHEDULE XVII.
TAX ADMINISTRATION SERVICES (OPTIONAL) (UPDATED)
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 1999 Estimate
<S> <C>
A) Sales/use, excise, property and
other transaction taxes $99,185
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 18,193
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 14,555
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>
TOTAL ESTIMATED COST FOR 1999: $131,971
FIXED AMOUNT FOR 1999: 16,431
HOURLY RATES DURING 1999:
Level 8 $115
Level 7 89
Level 6 77
Level 5 67
Level 4 57
Level 3 46
<PAGE>
TAX ADMINISTRATION SERVICES (CONTINUED)
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. 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 Services are dropped. The annual cost to provide each of
the services is the sum of the Fixed Amount and the usage at the
hourly rate.
<PAGE>
SCHEDULE XIX.
SABRE SUPPLY MANAGEMENT SERVICE
DESCRIPTION OF SERVICE: The SABRE Supply Management Services
that will continue are as follows:
<TABLE>
<CAPTION>
Service Price
<S> <C>
A) AAPICS $52,244
B) NATCOS $26,298
C) National Contract Purchasing $39,916
D) Diversified Supplier Program $31,206
</TABLE>
FIXED PRICE FOR 1999: $205,057
MONTHLY INVOICED AMOUNT DURING 1999: 17,088
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 VP Purchasing
(equaling $55,393 for 1999), and will not vary with changes in
the Service Level of this Service.
<PAGE>
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 1999: $255,434
MONTHLY INVOICED AMOUNT DURING 1999: 21,286
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. VP Corporate Services
(equaling $19,642 for 1999), and will not vary with changes in
the Service Level of this Service.
<PAGE>
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 1999: $16,260
MONTHLY INVOICED AMOUNT DURING 1999: 1,355
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.
<PAGE>
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 1999: $133,282
MONTHLY INVOICED AMOUNT DURING 1999: 11,107
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
VP Corporate Development & Treasury (equaling $2,528 for 1999),
and will not vary with changes in the Service Level of this
Service.
<PAGE>
SCHEDULE XXIV.
CORPORATE AFFAIRS SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA
Corporate Affairs until March 1, 1999 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 JAN - FEB 1999: $9,834
MONTHLY INVOICED FROM JAN - FEB 1999: 4,917
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 annual Price of
the Corporate Affairs Service will include an allocation of
unmargined Private Payroll representing the oversight
responsibility of the VP Corporate Affairs (equaling $9,232 for
Jan - Feb 1999).
<PAGE>
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 1999 PRICE
<S> <C>
A) Charge to the SABRE Group all expenses related
to SG employees remaining on the AA payroll in
Latin America and the Caribbean, including
transferred employees in Mexico and Peru. Pass-through Expense
B) Accounting Functions performed for The SABRE
Group , Inc. including its direct and indirect
subsidiaries, SABRE International, in the Caribbean
and Latin America (except in Ecuador and Nicaragua)
served as of the Effective Date of this
contract which consists of: $54,004
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
Attorney-in-Fact on Powers of Attorney in the following
countries: Pass- Through Expense
i) Costa Rica, Jamaica, Panama, Trinidad & Tobago,
Barbados, Grenada, Belize and Bermuda
</TABLE>
FIXED PRICE FOR SERVICE B DURING 1999: $54,004
MONTHLY INVOICED AMOUNT FOR SERVICE B DURING 1999: 4,500
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.
<PAGE>
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 1999: $125,000
ESTIMATED MONTHLY COST FOR 1999: 10,417
ANNUAL FIXED AMOUNT FOR 1999: 125,000
BASIS FOR PRICE: The Tasks to be performed are commission-
based. The monthly invoiced price will determined based on the
following commission schedule:
5% on license fees,
2% on consulting fees, and
2% on maintenance fees.
The fixed based portion ($100,000 for STIN and $25,000 for STS)
will be invoiced in 12 equal installments throughout the calendar
year.
<PAGE>
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
<PAGE>
LEGAL SERVICES (CONTINUED)
ESTIMATED COST FOR 1999: $192,000
ESTIMATED MONTHLY COST FOR 1999: 16,000
HOURLY RATES DURING 1999:
Associate General Counsel$163
Sr. Attorney 140
Attorney 132
Paralegal 72
FIXED AMOUNT FOR 1999: 55,393
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 VP
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.
<PAGE>
SCHEDULE XXIX.
AUDIT SERVICE
DESCRIPTION OF SERVICE: Conducting internal audits and
coordinating external audit functions.
ESTIMATED COST FOR 1999: $0
ESTIMATED MONTHLY COST FOR 1999: 0
HOURLY RATES DURING 1999:
IT Audits $100
Corporate Audits 73
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.
<PAGE>
SCHEDULE XXX
CORPORATE REAL ESTATE SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by AA
Corporate Real Estate will consist of the following listed below
for all international areas and the United States, except
Dallas/Fort Worth, Texas and Tulsa, Oklahoma areas. The Tasks to
be performed by AA Corporate Real Estate will consist of the
following listed below in the Dallas/Fort Worth, Texas and Tulsa
Oklahoma areas for any projects in process as of August 31, 1997
until the projects are completed.
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
ESTIMATED COST FOR 1999: $184,158
ESTIMATE OF MONTHLY COST FOR 1999: 15,347
HOURLY RATE DURING 1999: 90
FIXED AMOUNT FOR 1999: 12,727
<PAGE>
CORPORATE REAL ESTATE SERVICE (CONTINUED)
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. VP 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.
<PAGE>
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 1999: $0
ESTIMATE OF MONTHLY COST FOR 1999: 0
HOURLY RATES DURING 1999:
Management (level 6 and above) $97
Account Executive (level 3 - 5) 63
Jr. Account Executive (level 1 -2) 45
Support Staff 38
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.
<PAGE>
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 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1999: [TEXT 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 VP International Affairs [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED], and will not vary with
changes in the Service Level of this Service.
<PAGE>
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 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
INTERLINE TRAVEL EXPENSE FOR 1999: [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT: [TEXT 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 VP International Affairs [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED], and will not vary
with changes in the Service Level of this Service. [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED].
<PAGE>
SCHEDULE XXXIV.
INTERNATIONAL DIVISION SERVICES (REVISED)
DESCRIPTION OF SERVICE: The Services to be performed by AA
International Division from the London, UK office. Service (B)
Personnel (for all locations except Japan) will be discontinued
as of September 1, 1999. Human Resources support for Paris will
be discontinued on March 1, 1999. Human Resources support in
Frankfurt will be discontinued on May 1, 1999. The Services will
consist of the following for the existing geographical areas
served as of the Effective Date of the Management Services
Agreement (not including Madrid, Paris, Frankfurt, and
Stockholm):
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
C) EC Affairs
D) Purchasing
E) Pacific Sales
i) Interline Requests
ii) STIN Marketing
iii) STIN Related Issues with OALS
MONTHLY PRICE FOR JAN - FEB 1999: 53,997
MONTHLY PRICE FOR MAR - DEC 1999: 46,759
MONTHLY PRICE FOR MAY - SEP 1999: 34,725
MONTHLY PRICE FOR SEP - DEC 1999: 20,394
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.
<PAGE>
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
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, and Flight Academy/SOC
TOTAL FIXED PRICE FOR 1999: $485,502
MONTHLY INVOICED AMOUNT DURING 1999: 40,459
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.
<PAGE>
SCHEDULE XXXVI.
GENERAL SERVICES' PASS-THROUGH EXPENSES SERVICE (UPDATED)
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>
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.
</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 until
September 1, 1999: CPI, CPII, CPIV, CPV, Learning Center,
STIN, SRO, Flight Academy/SOC. After September 1, 1999,
American Airlines will reduce its support of Tasks (B) and (C)
and will only provide service to SABRE GROUP for these Tasks
at CPII and CPV. Tasks (A) and (D) will be unaffected.
TOTAL PASS-THROUGH EXPENSES FOR 1999:[TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
MONTHLY INVOICED AMOUNT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The SABRE Group portion of expenses incurred
by AA for General Services-related Subcontracted Services.
Tasks (A) and (D) are considered Fixed Price Services for the
purposes of the Agreement. The prices for Tasks (B) and (C) are
estimates based on current real-time charges. The prices for the
Services have been totaled, instead of stated separately, per
agreement by the Parties.
<PAGE>
SCHEDULE XXXVII.
CORPORATE TRAVEL DESK SERVICE
DESCRIPTION OF SERVICE: The Tasks to be performed by the AA
Flight Department will consist of the following except for Task
(B) which will be discontinued on March 1, 1999:
A) Booking of Hotels for Business Travel at Interline Rates
B) Booking of Rental Vehicles for Business Travel at Interline
Rates
FIXED PRICE FOR JAN - FEB 1999: [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
Monthly Invoiced Amount Jan - Feb: [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
FIXED PRICE FOR MAR - DEC 1999: [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED]
Monthly Invoiced Amount Mar - Dec: [TEXT 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 2 equal installments during January
and February and then 10 equal installments for the remainder
of 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 VP International Affairs [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED], and will not vary with changes in the
Service Level of this Service.
<PAGE>
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 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
ESTIMATED COST FOR 1999: [TEXT 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.
<PAGE>
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)
ESTIMATED MONTHLY COST FOR 1999: [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]
BASIS FOR PRICE: The price is based on AA Facilities Maintenance
Department's fully-allocated costs. [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED].
<PAGE>
SCHEDULE XLI.
FACILITIES MAINTENANCE PASS-THROUGH EXPENSE SERVICE
DESCRIPTION OF SERVICE: 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>
A) Hazardous Waste Removal Various Contractors
O) Security Services ABM Security Services
</TABLE>
TOTAL PASS-THROUGH EXPENSES FOR 1999:$ 337,335
BASIS FOR PRICE: The SABRE Group portion of expenses incurred
by AA for General Services-related Subcontracted Services. The
Service is a Fixed Price Service for the purposes of the
Agreement. The total Pass-Through Expense will be invoiced in 12
equal installments.
<PAGE>
SCHEDULE XLIV.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
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 1999: $33,356
MONTHLY INVOICED AMOUNT DURING 1999: 2,780
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.
<PAGE>
SCHEDULE XLVI.
AASSET CARD
DESCRIPTION OF SERVICE: The tasks to be performed by the AA
Credit Card Services Department will consist of:
A)Process all new applications, coordinate cancellations and
activations
B)Enter new cardholder numbers into the AACCTS database
C)Work directly with GE Capital and employees in resolving
collection problems, including payroll deduction if
necessary
D)Provide monthly AASSET card reports, and statistics in
exactly the same format as American
E)Coordinate with ATC to make requested report changes that do
not require programming dollars unless funded by SABRE
F)Coordinate with programmers any changes that SABRE Group
requests
G)Work with GE Capital to maintain the "good" working
relationship including tracking company credit limits,
collections and customer service
AA Credit Card Services will not do the following:
A)Pay for ANY programming changes
B)Continue to administer program if SABRE requested changes
result in significant deviation from AA policies and
procedures
FIXED PRICE FOR 1999: [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
MONTHLY INVOICED AMOUNT DURING 1999: [TEXT 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 Credit Card
Service's marginal costs, primarily salary and benefits. The
fixed price will be prorated and invoiced in equal monthly
installments (see above) during the calendar year.
